BAE Systems Land & Armaments L.P. ( 2021 )


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  •                    ARMED SERVICES BOARD OF CONTRACT APPEALS
    Appeals of -                                )
    )
    BAE Systems Land & Armaments L.P.           )   ASBCA Nos. 62703, 62704
    )
    Under Contract No. W56HZV-05-G-0005         )
    APPEARANCE FOR THE APPELLANT:                   David Z. Bodenheimer, Esq.
    Nichols Liu LLP
    Washington, DC
    APPEARANCES FOR THE GOVERNMENT:                 Scott N. Flesch, Esq.
    Army Chief Trial Attorney
    Robert B. Neill, Esq.
    Harry M. Parent III, Esq.
    MAJ Nichole M. Venious, JA
    Trial Attorneys
    OPINION BY ADMINISTRATIVE JUDGE STINSON ON THE
    GOVERNMENT’S MOTION TO STRIKE AFFIRMATIVE DEFENSE OF LACHES
    Pending before the Board is the Department of the Army’s motion to strike the
    affirmative defense of laches, which appellant BAE Systems Land & Armaments L.P.
    (BAE Systems) asserts in its complaint. The government’s motion to strike is set forth in
    its answer to the complaint. Appellant filed a brief opposing the government’s motion,
    and the government filed a reply brief. For the reasons set forth below, we grant the
    government’s motion.
    STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION
    1. On March 31, 2005, the Army Contracting Command, Detroit Arsenal (ACC -
    DTA), entered into a Basic Ordering Agreement (BOA) with BAE Systems wherein all
    orders placed under the BOA “constitute individual contracts” (R4, tab 1 at 1, 11).
    2. On July 26, 2006, the Army awarded Delivery Order No. 0009 in the amount of
    $192,628,556, for remanufacture of Bradley Fighting Vehicles and acquisition of TOW
    Missile Control Systems (R4, tab 2 at 1, 3, 6-7, 27). 1 On July 12, 2007, the Army issued
    Modification No. 05 to Delivery Order No. 0009 in the amount of $404,307,844, for the
    remanufacture of an additional 172 Bradley Fighting Vehicles (R4, tab 3 at 1-3).
    1   “TOW” is an anti-tank, tube-launched, optically-tracked, wire-guided missile system.
    Hughes Aircraft Co., ASBCA No. 30570, 
    90-2 BCA ¶ 22,780
     at 114,411.
    3. In 2007, BAE Systems submitted to the government a giveback proposal for
    Delivery Order No. 0009, which appellant subsequently updated (compl. ¶ 33). In 2014,
    the parties negotiated a settlement of that giveback proposal (compl. ¶ 34). 2 In 2015, the
    Defense Contract Audit Agency (DCAA) issued post-award audit reports regarding both
    Delivery Order No. 0009 and Modification No. 05 (compl. ¶¶ 39-40, 89-91).
    4. On September 15, 2020, Contracting Officer Scott L. Follen (ACC – Warren)
    issued a demand letter and final decision seeking payment of $3,224,623, plus interest,
    “for defective pricing as a result of BAE Systems’ non-compliance with 10 USC 2306a,
    Cost or Pricing Data,” during negotiation of Delivery Order No. 0009 (R4, tab 41 at 3).
    On October 15, 2020, BAE systems filed a notice of appeal of that final decision pursuant
    to the Contract Disputes Act (CDA), 41 U.S.C. § 7104(a), and on October 21, 2020, the
    Board issued a “Notice of Docketing” designating the appeal as ASBCA No. 62703.
    5. On September 22, 2020, Mr. Follen issued a demand letter and final decision
    seeking $9,450,215, plus interest, “for defective pricing as a result of BAE Systems’
    non-compliance with 10 USC 2306a, Cost or Pricing Data,” during negotiation of
    Modification No. 05 to Delivery Order No. 0009 (R4, tab 42 at 3). On October 15, 2020,
    BAE Systems filed a notice of appeal of that final decision pursuant to the CDA, and on
    October 21, 2020, the Board issued a “Notice of Docketing” designating the appeal as
    ASBCA No. 62704.
    6. Appellant filed its complaint on January 19, 2021, asserting, in part, that the
    government’s “defective pricing claims for Delivery Order 0009 and Modification 05 are
    barred by the doctrine of laches” (compl. ¶ 144). Appellant also asserts that the
    government’s claims are barred by the six-year statute of limitations set forth in the CDA,
    41 U.S.C. § 7103 (compl. ¶ 139). As to both affirmative defenses, appellant alleges that
    “[b]ased upon Army knowledge, DCAA audits, and BAE Systems’ disclosures between
    2006 and 2013, the Government knew, or should have known, the basis for any potential
    defective pricing claims for Delivery Order 0009 and Modification 05 not later than
    2013” (compl. ¶¶ 139, 141).
    7. In support of its assertion of laches as an affirmative defense, appellant
    alleges that the government “unreasonably delayed by waiting until September 2020 to
    make its defective pricing claims for Delivery Order 0009 and Modification 05”
    (compl. ¶¶ 141-142). BAE Systems also alleges it “has been prejudiced by the Army’s
    delays in making its defective pricing claims for Delivery Order 0009 and
    Modification 05” (compl. ¶ 143). Appellant’s complaint includes allegations of
    2   The government avers that the giveback proposal settlement was negotiated between
    December 2, 2014, and February 9, 2015 (answer ¶ 37).
    2
    prejudice that the government “has failed to preserve records relating to the negotiation
    of Delivery Order 0009” (compl. ¶ 77).
    8. Appellant’s complaint also asserts the affirmative defense of accord and
    satisfaction, alleging “[a]fter DCAA performed an audit and the Army conducted
    negotiations regarding BAE Systems’ Giveback proposals for Delivery Order 0009, the
    Army and BAE Systems executed a modification resolving potential defective pricing,
    thus barring the Army’s claims for defective pricing relating to Delivery Order 0009”
    (compl. ¶ 146).
    9. The government filed its answer to the complaint on April 16, 2021, which
    included a motion to strike appellant’s affirmative defense of laches (answer at 81,
    Part III). Appellant filed its brief in opposition to the government’s motion on May 17,
    2021, and the government filed its reply brief on June 16, 2021.
    DECISION
    I.     Burdens of Proof
    Although the government bears the burden of proof on its claim of defective
    pricing, Alloy Surfaces Co., Inc., ASBCA No. 59625, 
    20-1 BCA ¶ 37,574
     at 182,443,
    BAE Systems filed the complaint in these appeals, asserting the doctrine of laches as an
    affirmative defense to the government’s claims (SOF ¶ 6). 3 As its proponent, BAE
    Systems bears the burden of proving its affirmative defense. Bridgestone Firestone
    Research, Inc. v. Automobile Club De L'Ouest De La France, 
    245 F.3d 1359
    , 1361 (Fed.
    Cir. 2001).
    II.    The Government’s Motion to Strike
    Our Board Rules do not address motions to strike. Fru-Con Const. Corp.,
    ASBCA Nos. 53544, 53794, 
    03-2 BCA ¶ 32,275
     at 159,673. Although we look to the
    Federal Rules of Civil Procedure for guidance, as an administrative tribunal, we are not
    bound by them. Supreme Foodservice GmbH, ASBCA No. 57884 et al., 
    16-1 BCA ¶ 36,426
     at 177,580. Pursuant to FED. R. CIV. P. 12(f), a “court may strike from a
    pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous
    matter.” “The applicable legal standard in considering a motion to strike pursuant to
    3   Appellant’s inclusion in its complaint of an affirmative defense to the government’s
    claims is in keeping with the requirements of Board Rule 6(b) (requiring the
    government to “set forth simple, concise, and direct statements of the
    Government’s defenses to each claim asserted by the appellant, including any
    affirmative defenses”) and FED. R. CIV. P. 8(c)(1) (providing that affirmative
    defenses, including laches, must be stated in a party’s response to a pleading).
    3
    FED. R. CIV. P. 12(f) is whether the pleading asserts an ‘insufficient defense.’” Kellogg
    Brown & Root Services, ASBCA No. 56358 et al., 
    17-1 BCA ¶ 36,779
     at 179,247. “Only
    if a defense is insufficient as a matter of law will it be stricken.” 
    Id.
    As a tribunal, we have “considerable discretion in deciding such a motion.” ASCT
    Group, Inc., ASBCA No. 61955, 
    20-1 BCA ¶ 37,540
     at 182,289 (citing Godfredson v.
    JBC Legal Group, 
    387 F. Supp. 2d 543
    , 547-48 (E.D.N.C. 2005)). A motion to strike is
    properly granted where we lack jurisdiction to consider the allegations asserted. Alfajer,
    Ltd., ASBCA No. 62125, 
    20-1 BCA ¶ 37,660
     at 182,859 (granting motion to strike where
    the Board did not possess jurisdiction over claim in quantum meruit).
    III. The Contention of the Parties
    The government argues that the “Supreme Court has definitely and repeatedly held
    that a governing statute of limitations precludes a party from asserting a laches defense”
    (answer at 82). In support of its motion, the government cites SCA Hygiene Prods.
    Aktiebolag v. First Quality Baby Prods., LLC, 580 U.S. ___, 
    137 S. Ct. 954
     (2017), and
    Petrella v. Metro-Goldwyn-Mayer, Inc., 
    572 U.S. 663
     (2014). Noting that the CDA
    contains a six-year statute of limitations governing such appeals, 41 U.S.C. §
    7103(a)(4)(A), the government asserts that “[t]o comply with Supreme Court precedent,
    the Board has no choice but to strike the affirmative defense of laches” (answer at 83).
    In opposing the government’s motion, appellant argues that “the Army has not
    shown that BAE Systems' laches defense is certain to fail; as such, the Board should deny
    the Army's motion to strike BAE Systems’ affirmative defense of laches” (app. resp.
    at 2). Appellant asserts, inter alia, that it “has not found any cases applying Petrella or
    its progeny to a defective pricing claim before the Board, nor has the Army cited any
    such case” (id.). Appellant asserts also that motions to strike are not favored, and that
    striking the affirmative defense of laches at this point in the proceedings is premature
    (app. resp. at 1, 6).
    IV. Supreme Court Precedent Dictates that the Affirmative Defense of Laches is
    No Longer Viable in Appeals of CDA Claims
    Laches is an equitable doctrine developed by courts “to protect defendants against
    ‘unreasonable, prejudicial delay in commencing suit.’” SCA Hygiene, 580 U.S. at ___,
    
    137 S. Ct. 954
     at 960 (quoting Petrella, 572 U.S. at 667). Six days after completion of
    the parties’ briefing on the government’s motion to strike, this Board issued a decision in
    Lockheed Martin Aeronautics Co., ASBCA No. 62209, 
    21-1 BCA ¶ 37,886
     at 183,992,
    granting Lockheed’s motion for partial summary judgment on the issue of laches. The
    Board held that the Supreme Court’s decisions in SCA Hygiene and Petrella precluded
    4
    the affirmative defense of laches in CDA appeals, and that laches no longer remains an
    allowable affirmative defense. 
    Id. 4
    Both SCA Hygiene and Petrella stand for the proposition “that laches is not an
    available defense where there is a legislatively-enacted statute of limitations.” Lockheed,
    
    21 BCA ¶ 37,886
     at 183,996. As noted above, Congress enacted a six-year statute of
    limitations governing CDA appeals. 41 U.S.C. § 7103(a)(4)(A).5 In Lockheed, we
    heeded the Supreme Court’s warning in SCA Hygiene, “that it is inappropriate for a judge
    to allow an equitable doctrine such as laches to limit a party’s rights where that party
    complied with a Congressionally-enacted statute of limitations,” and that judges should
    not be allowed “to usurp Congressional power by permitting parties continued reliance on
    laches where the controlling statute set a time limit.” 
    21-1 BCA ¶ 37,886
     at 183,996
    (citing SCA Hygiene, 580 U.S. at ___, 
    137 S. Ct. at 960-61
    ). Allowing appellant to
    maintain a defense of laches here would be an inappropriate usurpation of Congressional
    power to statutorily establish a limitation period for the assertion of CDA claims, and we
    decline appellant’s invitation to do so.
    Although our decision in Lockheed concerned the government’s assertion of
    laches as an affirmative defense to a contractor claim, our reasoning in Lockheed likewise
    applies to appellant’s assertion of laches as an affirmative defense to a government claim.
    The CDA statute of limitations, which continues as a time bar to claims that were not
    presented within the defined period, applies equally to contractor and government claims.
    41 U.S.C. § 7103(a)(4) (“[e]ach claim by a contractor against the Federal Government
    relating to a contract and each claim by the Federal Government against a contractor
    relating to a contract shall be submitted within 6 years after the accrual of the claim”); see
    McDonnell Douglas Servs., Inc., ASBCA No. 56568, 
    10-1 BCA ¶ 34,325
     at 169,529
    (dismissing government’s defective pricing claim as time barred under CDA’s statute of
    limitations). Congress having provided a statute of limitations for CDA claims, precludes
    us from invoking the doctrine of laches or deciding an appeal based upon that doctrine,
    regardless of the party that asserts it as an affirmative defense. Moreover, it remains an
    affirmative defense before the Board. Lockheed, 
    21-1 BCA ¶ 37,886
     at 183,995 (citing
    Kamaludin Slyman CSC, ASBCA No. 62006 et al., 
    21-1 BCA ¶ 37,849
    ).
    4 In Lockheed, appellant requested, in the alternative, that the Board strike the
    government’s assertion of laches as an affirmative defense. Because the Board
    granted appellant partial summary judgment on the issue of laches, the Board
    found it unnecessary to address appellant’s motion to strike. 
    21-1 BCA ¶ 37,886
    at 183,998 n.1.
    5 Congress added the six-year statute of limitations to the CDA with enactment of the
    Federal Acquisition and Streamlining Act of 1994, Pub. L. No. 103–355,
    § 2351(a), 108 Stat. 3243, 3322 (1994). The limitation period is applicable to
    contracts entered into on or after October 1, 1995. 48 C.F.R. § 33.206(a) (“6-year
    time period does not apply to contracts awarded prior to October 1, 1995”).
    5
    In support of appellant’s argument that it should be allowed to proceed with its
    defense of laches, appellant suggests that the government failed to maintain certain
    records relevant to these appeals (app. resp. at 2). Appellant argues that the resulting
    alleged prejudice justifies our not striking appellant’s affirmative defense at this stage of
    the litigation (app. resp. at 2). 6 Quoting Petrella, appellant states that “[i]n extraordinary
    circumstances, [] the consequences of a delay in commencing suit may be of sufficient
    magnitude to warrant, at the very outset of the litigation, curtailment of the relief
    equitably awardable” (app. resp. at 2 (quoting 572 U.S. at 685) (bracketed omission
    provided by appellant)). Thus, according to appellant, “while laches may not prevent
    adjudication during a statutory of limitations period, it may still affect the relief granted”
    (app. resp. at 2 (citing Petrella, 572 U.S. at 685)).
    The Supreme Court’s decision in Petrella is unequivocal: “in the face of a statute
    of limitations enacted by Congress, laches cannot be invoked to bar legal relief.” 572
    U.S. at 679. Whether there exist extraordinary circumstances that might affect the relief
    granted does not support a finding that laches, as an affirmative defense, survives the
    government’s motion to strike. Indeed, the decisions cited by the Supreme Court in
    Petrella as representing “extraordinary circumstances” did not apply laches as a bar to
    the suit, but rather simply limited the type of relief awarded. See, e.g., Petrella, 572 U.S.
    at 685-86 (discussing, inter alia, Chirco v. Crosswinds Communities, Inc., 
    474 F.3d 227
    ,
    235-36 (6th Cir. 2007) (order mandating destruction of housing project unenforceable
    where owners of copyrighted architectural design who were aware of infringing project
    delayed filing suit until project substantially constructed and partially occupied)).
    Appellant likewise argues that its defense of laches should not be stricken at this
    juncture in the proceedings because it “is necessarily intertwined with its claim that the
    Army has failed to preserve negotiation records” (app. resp. at 2). However, appellant is
    not foreclosed from seeking other appropriate relief based upon the alleged harm it
    claims to have experienced; it simply may not rely upon the defense of laches in this
    litigation to underpin the relief it seeks. 7 Indeed, as noted above, appellant’s complaint
    asserts the statute of limitations as an affirmative defense to the government’s claims
    (SOF ¶ 6). The unavailability of laches as a defense does not somehow limit appellant’s
    6 Prejudice to the party asserting the defense of laches is one of two factors the proponent
    must establish to prevail on a defense of laches. Sihota v. Internal Revenue
    Service, 
    908 F.3d 1284
    , 1291 (Fed. Cir. 2018) (citation omitted).
    7 BAE Systems alleges “that due to the Army's loss, deletion and/or destruction of
    relevant records, the Army will not be able to establish nondisclosure and/or lack
    of government knowledge and, as such, its defective pricing claims must be denied
    for lack of proof” (app. resp. at 6). Appellant is not somehow foreclosed from
    making this argument simply because the affirmative defense of laches is not
    available to it in these appeals.
    6
    ability to pursue its statute of limitations defense. At bottom, Supreme Court precedent,
    and our decision in Lockheed, makes clear that because Congress has instituted a CDA
    statute of limitations, we do not have the authority to issue a decision barring the
    government’s claims based upon laches. Whether the government’s claims are timely-
    filed depends upon the government’s compliance with the statute of limitations, not
    application of the equitable doctrine of laches.
    Citing Board precedent, appellant notes that motions to strike an affirmative
    defense “are not favored and will be denied if the defense fairly presents a question of
    law or fact” (app. resp. at 1 (quoting Niking Corp., ASBCA No. 60731, 
    17-1 BCA ¶ 36,639
     at 178,450 (additional citation omitted))). Appellant notes also that “a defense
    is good unless it appears to a certainty that [the opposing party] would succeed despite
    any state of facts which could be proved in support of the defense” (app. resp. at 1
    (quoting Niking, 
    17-1 BCA ¶ 36,639
     at 178,450 (additional citation omitted))).
    Unfortunately for appellant, no matter what facts appellant could establish in support of
    its affirmative defense, with the addition by Congress of a statute of limitations for CDA
    appeals, the defense of laches is now foreclosed by Congressional statutory mandate.
    7
    CONCLUSION
    Exercising our considerable discretion in deciding motions to strike pursuant to
    FED. R. CIV. P. 12(f), we find appellant’s affirmative defense of laches insufficient as a
    matter of law and grant the government’s motion to strike. We have carefully considered
    appellant’s remaining arguments and are not persuaded by them. The affirmative defense
    of laches is not properly available as a defense to the government’s affirmative CDA
    claims, and is stricken from appellant’s complaint.
    Dated: September 23, 2021
    DAVID B. STINSON
    Administrative Judge
    Armed Services Board
    of Contract Appeals
    I concur                                          I concur
    RICHARD SHACKLEFORD                               OWEN C. WILSON
    Administrative Judge                              Administrative Judge
    Acting Chairman                                   Vice Chairman
    Armed Services Board                              Armed Services Board
    of Contract Appeals                               of Contract Appeals
    I certify that the foregoing is a true copy of the Opinion and Decision of the
    Armed Services Board of Contract Appeals in ASBCA Nos. 62703, 62704, Appeals of
    BAE Systems Land & Armaments L.P., rendered in conformance with the Board’s
    Charter.
    Dated: September 27, 2021
    PAULLA K. GATES-LEWIS
    Recorder, Armed Services
    Board of Contract Appeals
    8