Raytheon Company ( 2016 )

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeals of -- )
)
Raytheon Company ) ASBCA Nos. 57743, 57798, 58280
)
Under Contract No. N00024-04-C-6101 )
APPEARANCES FOR THE APPELLANT: Karen L. Manos, Esq.
John W.F. Chesley, Esq.
Gibson, Dunn & Crutcher LLP
Washington, DC
APPEARANCES FOR THE GOVERNMENT: E. Michael Chiaparas, Esq.
DCMA Chief Trial Attorney
Stephen R. Dooley, Esq.
Senior Trial Attorney
Alexander M. Healy, Esq.
Kathleen P. Malone, Esq.
Trial Attorneys
Defense Contract Management Agency
Boston, MA
OPINION BY ADMINISTRATIVE JUDGE SCOTT
ON THE PARTIES' MOTIONS TO STRIKE
In ASBCA No. 57443, at issue, Raytheon Company (Raytheon) appealed under
the Contract Disputes Act, 41 U.S.C. §§ 7101-7109, from the Defense Contract
Management Agency's (DCMA's) corporate administrative contracting officer's
(CACO's) final decision demanding the return of government payments of allegedly
expressly unallowable costs and assessing penalties and interest against Raytheon for
including the costs in its corporate incurred cost proposal for 2004 (2004 Corporate
Proposal). In addition to cost allowability questions, the appeal focuses upon Federal
Acquisition Regulation (FAR) 42.709-5(c)'s penalty waiver provisions. 1
1
In the other captioned appeals, Raytheon was assessed penalties and interest for
including alleged expressly unallowable costs in the incurred cost proposals of its
Integrated Defense Systems business segment for 2004 and 2005. It determined
not to contest the non-waiver of penalties, but it continues to advocate that the
costs in question are not expressly unallowable and thus not subject to penalties
(app. pre-hearing br. at 9 n.4).
The Board held a hearing on entitlement during which appellant moved to strike
certain testimony by the CACO and related evidence on the ground that they contradicted
a pre-hearing interrogatory response by the government. The parties briefed the motion
after the hearing and, at appellant's request, the Board heard oral argument. 2 In its
response to appellant's motion, the government moved to strike certain materials
proffered by appellant in support of its motion, described below.
STATEMENT OF FACTS FOR PURPOSES OF THE MOTIONS TO STRIKE
Appellant's first discovery requests in question, dated 17 February 2012, asked the
government to produce all documents in connection with its decision to impose penalties
regarding the costs included in Raytheon's 2004 Corporate Proposal (app. mot., ex. 1 at
41, Request No. 7). Interrogatories included the following:
Interrogatory No. 12 asked for the identification of all prior government audits or
reviews related to Raytheon Corporate' s purported noncompliance with Cost Accounting
Standard (CAS) 405 (Accounting for Unallowable Costs), from 1 January 2002 through
1 September 2005 (app. mot. ex. 1 at 16). On 16 May 2012, the government responded:
The Government is currently aware of the following Audit
Reports which specifically concern Raytheon Corporate's
compliance with CAS 405 between January 1, 2002 and
September 1, 2005: Audit Report No. 2671-2006A19200008
(dated October 30, 2006); and Audit Report
No. 2671-2007A19200002 (dated September 24, 2007).
(App. supp. R4, tab 682 at 33) The government describes the referenced 24 September
2007 report, which it included in its supplemental Rule 4 file (tab 285), as the "Incentive
Compensation CAS 405 Audit Report" (gov't opp'n at 23, 25). ·
Interrogatory No. 20 asked:
a. Do you agree that for the period of January 1, 2004
through May 31, 2005, Raytheon's corporate finance function
had appropriate policies and personnel training and an
internal control and review system that provided assurance
that unallowable costs subject to penalties were precluded
2 At the oral argument the Board stated that it would include its decision on the motion to
strike as part of its post-hearing decision. However, it is now apparent that it will
be more efficient, and will not delay the Board's post-hearing decision, if the
Board decides the motion to strike first.
2
from being included in its indirect incurred cost rate
proposals?
(App. mot., ex. I at 20)
Interrogatory No. 23 asked:
a. Explain under what circumstances a contractor may
include expressly unallowable costs in its final indirect cost
rate proposals, but obtain a waiver under FAR 42.709-5(c).
b. State with specificity each and every fact, factor,
criteria, or other piece of information on which Respondent
relies in assessing a contractor's request for a waiver under
FAR 42.709-5(c).
(App. mot., ex. I at 22) In response to a government objection, by letter dated 15 June
2012, appellant stated:
Raytheon clarifies this interrogatory for the Government ....
[E]xplain why a waiver was not granted to Raytheon under
FAR 42. 709-5( c) for each cost in dispute in this litigation.
Raytheon further requests that the Government respond to
subpar[t] (b ) .. .in full.
(App. mot., ex. 2 at 15)
On 16 August 2012, the government responded to appellant's restatement of
Interrogatory No. 23(a) as follows in relevant part:
The Government construes Raytheon's revised Interrogatory
No. 23 to seek information concerning the factors taken into
account by the relevant contracting officers [COs] when
considering whether it was appropriate to waive the penalties
applicable to the Corporate ... CY 2004 Indirect Cost
Proposa[l]. Our supplemental response identifies factors that
the [COs] took into account when considering whether waiver
of the penalties applicable to the CY 2004 Proposa[l] was
appropriate; it does not necessarily constitute a description of
the Government's contentions in these appeals or an
exclusive list of all possible bases that could support the
3
determination that Raytheon is not entitled to a waiver of the
penalties applicable to its CY 2004 Proposa[l].
(App. supp. R4, tab 690 at 2-3) The government discussed factors that CACO Dowd had
considered in concluding that Raytheon would not be entitled to a waiver under
FAR 42.709-S(c), including: "Mr. Dowd considered Raytheon's recurring inclusion of
these unallowable costs in its proposals as indicative of systematic and continuing
deficiencies in its internal controls and a lack of proper care" (id. at 6).
Regarding Interrogatory No. 23(b ), the government stated in relevant part:
In deciding to assess penalties against Raytheon and in
consideration of any request for waiver made by Raytheon,
Mr. Dowd ... relied upon Raytheon Corporate's ... various Final
Certified Incurred Cost Proposals that included unallowable
costs, the various DCAA [Defense Contract Audit Agency]
Audit Reports which determined that Raytheon had included
unallowable costs in its Proposals, DCAA Audit Reports
finding that Raytheon's internal controls were deficient in
some respects, documentation and correspondence
concerning the negotiation of Raytheon's Certified Incurred
Cost Proposals ....
(App. supp. R4, tab 690 at 8)
On 3 October 2012 appellant deposed CACO Dowd, who testified:
A. Yes, We have several CAS non-compliances, you
know, that we are dealing with... So with those things in
place, like I say, I would have to say we're working those
non-compliances and inadequate system issues on a fairly
regular basis.
Q. And under what circumstances could it be
inadvertent?
A. Again, in my mind, I have to take a look at the
entire situation. Again, we have the system issues, we have a
number of CAS non-compliances, including a CAS 405
4
non-compliance for 2006, so in my mind I couldn't say it was
inadvertent.
Q. And do you look at CAS 405-CAS non-
compliances, generally?
A. Yes.
Q. And with regard to expressly unallowable costs, which
CAS provision would you look at to determine whether there are
relevant non-compliances in your decision to waive penalties.
A. I would consider other outstanding CAS 405
non-compliances ....
Q. And so for expressly unallowable costs, so you
would look at CAS 405 non-compliances, correct?
A. Correct.
Q. So is it true that any outstanding CAS non-
compliances would be considered relevant to your decision,
whether to waive a penalty on an expressly unallowable costs?
A. Yes.
Q. And if a contractor had to satisfy you, if in 2004,
Raytheon sought to satisfy you as to the fact that it deserved a
penalty waiver, what kind of showing would Raytheon need
to make?
A. I don't think they could in 2004, because as we
said before, we had issues with their systems, as well as we
had issues with, you know, there was a CAS 405
5
non-compliance, and in regard to the 2006 cost and we had
other CAS non-compliances outstanding as well.
A. I think if we had all of our systems, you know,
were adequate, we had squared away all of our CAS
non-compliances, specifically the CAS 405 non-compliance,
if all of those had been taken care of, you know, that would,
you know, lead a long way towards me feeling more likely to
waive penalties, but again, I would have to consider, you
know, the specific circumstances, and stuff at the time ....
(Gov't opp'n, ex. G-1 at 28, 35, 43-44, 229-31)
CACO Dowd further testified in his deposition, in response to questioning whether
CAS non-compliances listed in an audit report dated 27 April 2006 were considered in
his decision not to waive penalties:
I would have considered the outstanding CAS 405
non-compliances and issues with CAS that were on the streets
at the time. I mean that would have been part of my overall
decision not to waive penalties.
(Gov't opp'n, ex. G-1 at 239)
On 4 October 2012 appellant deposed Rodger Christiansen, DCMA Raytheon's
corporate contract specialist and DCMA's chief negotiator for Raytheon's 2004
Corporate Proposal, who testified that he had drafted the CO's final decision (COFD) at
issue (gov't opp'n at 17). He further testified:
Q. But yet you considered this subsequent CAS 405
non-compliance?
A. That's correct.
Q. And would you say that the subsequent CAS
405 non-compliance was determinative of your decision to
impose penalties?
A. It was one of the factors considered to assess the
penalty.
6
Q. What other factors were considered in assessing
penalties in 2004?
A. We also had on the street at the time and another
CAS 405 on the incentive comp.
Q. Incentive comp, there were no incentive comp
issues - by incentive comp you mean what exactly?
A. Raytheon's incentive compensation plan for
bonuses and performance bonuses and so forth. I am not
familiar. I know that there has been some sort of discussions
on differences and equivalents on other areas, but the
specifics of that audit report I am not familiar with.
Q. Were there any other factors?
A. Not to my knowledge. There could have been. My
recollection is the principal one was the CAS 405 report.
Q. So to recap, I asked you for the factors, the
reasons why you issued penalties in the 2004 case and you
said there was a CAS 405 non-compliance report for the
calendar year 2006 year issue that related to some of the
costs that were included in 2004, for example, the
recruiting reminder items?
A. That was one example, yes.
Q. You mentioned there was another CAS 405
non-compliance report that was issued related to incentive
compensation costs?
A. That's correct.
(Gov't opp'n, ex. G-2 at 49-52)
7
Appellant's second set of discovery requests, dated 12 November 2012, asked for
all documents, including audit reports, COFDs, CAS noncompliance findings, CAS 405
noncompliances and DCAA indirect cost/ other direct cost audit reports relied upon by
DCMA (including Messrs. Dowd or Christiansen) in DCMA's decision to impose
penalties on Raytheon's 2004 Corporate Proposal (app. mot., ex. 3 at 16, Requests
Nos. 53, 54). It also asked for all documents reflecting the reasons DCMA imposed
penalties on the proposal (id. at 18, Request No. 69).
On 20 February 2013, the government agreed to identify the audit reports
CACO Dowd had considered in reaching his decision that Raytheon was not entitled to a
penalty waiver (see app. mot., ex. 5 at 10; app. supp. R4, tab 701at13).
In its 15 April 2013 third supplemental response to appellant's interrogatories, the
government stated regarding Interrogatory No. 20(a):
The Government answers sub-part (a) to this
interrogatory in the negative. At the time Mr. Dowd issued
his final decision, there were several DCAA audit reports in
existence that identified problems in Raytheon's policies,
personnel training, or internal control and review system
related to excluding unallowable costs subject to penalty from
its Corporate proposals. These included the following DCAA
audit reports: [eight reports listed].
In addition, Mr. Dowd had recently issued a final
decision dated January 10, 2011, in which he found that
Raytheon had included expressly unallowable incentive
compensation in its Corporate proposals since CY 2002.
Subsequently, shortly after the May 2011 final decision at issue
in this case, Mr. Dowd issued another final decision finding
that Raytheon had included certain expressly unallowable costs
associated with Raytheon's "Long Term Performance Plan" in
its Corporate proposals since CY 2004. These expressly
unallowable costs included "dividend equivalent" payments,
which Raytheon did not contest. These additional instances of
Raytheon including expressly unallowable costs in its
Corporate proposals also indicated that its policies, personnel
training, and/or internal control and review system related to
excluding unallowable costs were lacking.
8
(App. supp. R4, tab 701at6-7) (Emphasis added) The eight audit reports the government
listed did not include the two audit reports at issue in appellant's motion to strike.
The government stated in relevant part regarding Interrogatory No. 23:
The Government's supplemental response to
Interrogatory No. 23 is given in accordance with Raytheon's
restatement of subpart (a), which requests an explanation for
why Raytheon was not granted a waiver of penalties under
FAR 42.709-5(c) with respect to the specific costs in dispute
in ASBCA No[]. 57743 .... The Government construed
Raytheon's revised Interrogatory No. 23 to seek information
concerning the factors taken into account by the relevant
[COs] when considering whether it was appropriate to waive
the penalties applicable to the Corporate and IDS CY 2004
Indirect Cost Proposa[l]. Our supplemental responses identify
factors that the [CO] took into account when considering
whether waiver of the penalties applicable to the CY 2004
Proposa[l] was appropriate; they do not necessarily constitute
a description of the Government's contentions in these appeals
or an exclusive list of all possible bases that could support the
determination that Raytheon is not entitled to a waiver of the
penalties applicable to its CY 2004 Proposa[l].
(App. supp. R4, tab 701 at 12) The government identified the same eight audit reports it
had listed in response to Interrogatory No. 20(a). The government does not now dispute
appellant's contention that they "reported upon alleged events and conditions that
occurred in 2006 and later," which post-dated the 2004 Corporate Proposal in question
(app. mot. at 5-6).
In the government's pre-hearing brief, dated 25 April 2013, over a year before the
October 2014 hearing, it repeated its response to Interrogatory No. 20(a). It stated that,
prior to the COFD at issue, Mr. Dowd had recently issued a COFD that Raytheon had
included expressly unallowable incentive compensation in its Corporate proposals since
2002 and that, shortly after the COFD at issue, he had issued another COFD finding that
Raytheon had included expressly unallowable costs in its Corporate proposals since 2004,
including dividend equivalents payments. (Gov't pre-hearing br. at 76-77)
The government alleges, without contradiction, that, "since 2004, there have been
only two CAS 405 noncompliances that resulted in CACO Dowd issuing COFDs against
Raytheon Corporate," apparently referring to the decisions identified in its response to
interrogatory No. 20(a) and in its pre-hearing brief (gov't opp'n at 20). It states that these
9
CAS 405 final decisions found that "incentive compensation" and "dividend equivalents"
costs included in Raytheon's yearly incurred cost proposals were "expressly unallowable"
(id.). The government also asserts, without contradiction, that Raytheon had copies of the
two audit reports at issue in appellant's motion to strike, which were addressed in the two
COFDs (gov't opp'n at 4).
On 6 March 2014 appellant filed a Motion In Limine to Exclude Evidence of
Alleged Post-Certification Control Deficiencies. It asked the Board "to exclude all
documents and testimony, from the Rule 4 File and at the hearing, concerning alleged
control deficiencies at Raytheon post-dating the May 31, 2005 submission of Raytheon's
[2004 Corporate Proposal]" (gov't opp'n, ex. G-3 at 1). The motion covered 11 audit
reports, including the Incentive Compensation CAS 405 Audit Report referred to above,
which is the subject of other appeals currently before the Board (supp. R4, tab 285; gov't
opp'n at 25, ex. G-3 at 4-5, ex. G-5 at 7). Appellant acknowledged that this audit report
and two others in the government's supplemental Rule 4 file, which it had inadvertently
included as part of its motion in limine, concerned 2004 and prior year costs, but it
advocated excluding them on other grounds. (Gov't opp'n, ex. G-5 at 4 n.2)
The government's 28 March 2014 response to appellant's motion in limine stated:
Mr. Dowd also considered other internal control
deficiencies of which he was aware, including Raytheon's
inclusion of several other expressly unallowable costs in its
proposals on a recurring basis. [Citations omitted]
Curiously, we note that several of the "post-
certification" CAS noncompliances cited in Raytheon's
motion and considered by the CACO actually concern
noncompliances that occurred during and after FY2004,
including during the period (January - June 2005), when
Raytheon was preparing its FY2004 incurred cost proposal,
and were also included in that proposal. For example,
Mr. Dowd was aware when he determined that a waiver was
not appropriate that, since at least 2002, Raytheon had been
including expressly unallowable incentive compensation costs
for unallowable activity in its proposals. He was also aware
that, since 2004, Raytheon had been including expressly
unallowable "dividend equivalent payments[") (see FAR
31.205-6(i)(2)) in its proposals. Raytheon has accepted
Mr. Dowd's CAS 405 noncompliance determination and has
10
paid the penalties on these dividend equivalent payments, so
there need be no time-consuming debate about them. There
are more examples. [Footnote omitted]
(Gov't resp. at 5, 8) (Emphasis added)
Appellant replied in support of its motion in limine that CACO Dowd's deposition
testimony demonstrated with "crystal clarity" that his "refusal to waive penalties was
premised upon alleged 'CAS non-compliances outstanding' at the time of his 2011
COFD, in particular a report pertaining to '2006 costs"' (gov't opp'n, ex. G-5 at 3).
In a teleconference on 29 April 2014, oral argument was held on Raytheon's
motion in limine to exclude evidence of alleged control deficiencies that occurred after it
submitted its Corporate 2004 Proposal on 31 May 2005, and on a government motion in
limine to exclude the evidence of appellant's proffered expert, Darrell Oyer.
Contemporaneously, appellant kept a record of the oral argument that is essentially
undisputed in relevant respects (app. reply, ex. 15). During the argument appellant
specified the documents that its motion was intended to cover, which did not include the
Incentive Compensation CAS 405 Audit Report and other documents originally included
by mistake (id. at 8 and see above). Appellant's record states that:
Judge Melnick [asked] whether Dowd considered any of
these documents in making his decision not to waive the
penalties at issue, and [appellant's counsel] responded that he
did, clarifying that he specifically referenced Tab 292, the
CAS 405 noncompliance relating to 2006 costs.
(Id. at 9) Judge Melnick denied both motions (Bd. corr., 1 May 2014 memo. of
conference call) 3
On 21 October 2014, at the hearing, CACO Dowd testified in response to a
question by government counsel as follows in relevant part:
Q.
Can you tell me, Mr. Dowd, in considering whether
Raytheon could satisfy you that the [waiver criteria in FAR
42.709-5(c)(l)] are met, what factors did you consider?
A.
3
The appeal was reassigned to Judge Cheryl Scott prior to the hearing.
11
Secondly, we had two [CAS} 405 noncompliances out
there that we were addressing, the first one being it was for
dividend [equivalents}. You know Raytheon conceded that
and ultimately paid the government...for dividend
equivalents. I believe it started roughly in the 2006 time
frame forward and I want to say that it was for the 2004 to
2006 long-term conformance plan I believe is how Raytheon
identifies it.
But anyway, I issued a demand letter to them for those
dividend equivalents and Raytheon paid them. So, that
concerned me.
We have another CAS 405 that issued in the same time
frame for what I called incentive compensation. It was
Raytheon pulled out the labor and some fringe costs for this
unallowable activity that they pulled out of their incurred cost
submission but they didn't pull out the associated incentive
compensation associated with that.
(Tr. 6/252-53) (Emphasis added) At this point appellant moved to strike and oral
argument ensued.
At the time of oral argument, while not entirely clear, government counsel
apparently thought that the Incentive Compensation CAS 405 audit report had been
among the audit reports listed in the government's supplemental interrogatory responses
and that only one audit report had been omitted. Counsel believed that it had been
omitted because there had been no CAS 405 audit report on the dividend equivalents
issue. Rather a CAS 415 (Accounting for the Cost of Deferred Compensation) audit had
been "dispositioned" (tr. 6/256, 263), and the government's concerns later evolved into
the CAS 405 matters addressed in the COFD on dividend equivalents, issued on 2 June
2011. (See tr. 6/255-57, 263-64; gov't opp'n at 31-32)
Post-hearing briefing on appellant's motion to strike and the additional oral
argument ensued. Appellant moves to strike from the hearing record and post-hearing
briefing: CACO Dowd's hearing testimony at transcript 6/252, line 6, through transcript
61279, line 3; transcript 7/5, line 4 through transcript 7/48, line 4; ex. A-20 (5 July 2011
letter from Raytheon to CACO Dowd concerning, inter alia, his COFD on dividend
equivalents, and proffering payment); appellant's expert Oyer's hearing testimony at
transcript 10/67, line 4, through transcript 10/78, line 4; and ex. G-3 (the latter COFD).
12
The government moves to strike appellant's inclusion of excerpts from otherwise
sealed materials in a Court of Federal Claims proceeding, unrelated to the instant appeal,
in which current government counsel were not involved, that include statements by the
judge concerning the government's attempted submission of an errata sheet to CACO
Dowd's deposition transcript in that proceeding.
THE PARTIES' CONTENTIONS
Appellant notes that, before the hearing, in its ultimate response to interrogatory
No. 23, the government named the factors considered by CACO Dowd in his decision to
assess, and not waive, penalties upon Raytheon arising from allegedly expressly
unallowable costs included in its 2004 Corporate Proposal, submitted on 31 May 2005.
The response stated that CACO Dowd had considered eight DCAA audit reports.
Appellant asserts that each of those reports concerns purported "control deficiencies" that
occurred after 31 May 2005 and were not a relevant consideration for a CO making a
waiver determination under FAR 42.709-5(c) (app. mot. at 1-2).
Appellant contends that, after the government learned of its position concerning
relevance, CACO Dowd changed his factual position, but the government did not notify
appellant or amend its interrogatory response. Appellant alleges that it was not until
CACO Dowd was on the witness stand at the hearing that he stated he had relied upon
two additional audit reports, which involved alleged CAS 405 noncompliances pertaining
to the dividend equivalents issue, said to date back to 2004 and the incentive
compensation issue, said to date back to 2002 (app. mot. at 6). Appellant states that the
dividend equivalents audit report was not produced in discovery (id. at 7).
Appellant asserts that the government's response to interrogatory No. 23 is a
"judicial admission" that bars CACO Dowd's allegedly contradictory hearing testimony
and warrants granting its motion to strike the testimony and exhibits identified above.
Appellant further contends that, apart from the judicial admissions doctrine, the Board
should grant its motion to strike as a sanction against the government for its alleged
failures to supplement its interrogatory No. 23 response and to produce "critical
documents" pertaining to CACO Dowd's testimony that were responsive to Raytheon's
discovery requests, apparently referring to the two allegedly "previously undisclosed"
incentive compensation and dividend equivalents audit reports and the associated COFDs
(app.mot.at 11,ex. 7(tr. 7/31-32)).
The government opposes appellant's motion to strike on the ground that appellant
had prior notice of CACO Dowd' s disputed hearing testimony because: ( 1) the
government's discovery responses and deposition testimony by Messrs. Dowd and
Christiansen made it clear that CACO Dowd considered the two CAS 405
noncompliances in reaching his COFD at issue; (2) the government's failure to list two
13
audit reports in its interrogatory response was inadvertent, plus one of them was included
in the government's supplemental Rule 4 file and appellant already had a copy of both of
them; (3) CACO Dowd's reliance upon those noncompliances was plainly disclosed in
the government's pre-hearing brief; and (4) appellant conceded at the oral argument on
its motion in limine that CACO Dowd had considered the Incentive Compensation CAS
405 audit report in connection with the COFD at issue and Judge Melnick's denial of that
motion disposes of appellant's current motion to strike. Appellant disputes this.
The government also contends that there was no binding judicial admission; even
if there were a judicial admission, the Board should permit the government to withdraw
and correct its interrogatory response; sanctions are not warranted; and appellant's
motion to strike is "'moot" because, in an abuse of discretion review, the Board must
consider all reasonable bases for the CACO's decision (opp'n at 44).
DISCUSSION
We first consider the government's contention that Judge Melnick's denial of
appellant's motion in limine is dispositive of its current motion to strike because, if it
were, we need go no further. However, Judge Melnick's succinct order, and essentially
undisputed portions of appellant's record of the oral argument before him (see app. reply,
ex. 15 at 8-9), do not lead to the conclusion the government advocates.
Regarding appellant's claim that the government is bound by judicial admissions,
there is a distinction between evidentiary admissions and judicial admissions:
When the term admission is used without any
qualifying adjective, the customary meaning is an evidentiary
admission, that is, words in oral or written form or conduct of
a party or a representative offered in evidence against the
party. Evidentiary admissions are to be distinguished from
judicial admissions. Judicial admissions are not evidence at
all. Rather, they are formal concessions in the pleadings in
the case or stipulations by a party or its counsel that have the
effect of withdrawing a fact from issue and dispensing wholly
with the need for proof of the fact. Thus, the judicial
admission, unless allowed by the court to be withdrawn, is
conclusive in the case, whereas the evidentiary admission is
not conclusive but is always subject to contradiction or
explanation.
McCORMICK ON EVIDENCE, vol. 2, § 254 at 142 (4th ed. 1992) (footnotes omitted).
14
The United States Court of Appeals for the Federal Circuit recently stated:
Although this circuit has had limited opportunities to address
the doctrine, it is clear from other circuits that judicial
admissions, which "have the effect of withdrawing a fact
from issue and dispensing wholly with the need for proof of
the fact," are limited to formal admissions made in, for
example, a complaint, answer, or pretrial order.
Reliable Contracting Group, LLC v. Department of Veterans Affairs, 779 F.3d 1329,
1334 (Fed. Cir. 2015) (citations omitted). Other circuits have applied strict prerequisites
for a finding that a judicial admission has occurred. For example, the First Circuit states:
Unlike ordinary admissions, which are admissible but
can be rebutted by other evidence, judicial admissions are
conclusive on the party making them. Because of their
binding consequences, judicial admissions generally arise
only from deliberate voluntary waivers that expressly concede
for the purposes of trial the truth of an alleged fact. Although
there is a limited class of situations where, because of the
highly formalized nature of the context in which the statement
is made, a judicial admission can arise from the "involuntary"
act of a party, considerations of fairness dictate that this class
of "involuntary" admissions be narrow. Similarly,
considerations of fairness and the policy of encouraging
judicial admissions require that trial judges be given broad
discretion to relieve parties from the consequences of judicial
admission in appropriate cases.
United States v. Belculfine, 527 F.2d 941, 944 (1st Cir. 1975) (citations omitted). The
Third Circuit notes that, "to be binding, judicial admissions must be unequivocal." Glick
v. White Motor Co., 458 F.2d 1287, 1291 (3rd Cir. 1972). The Sixth Circuit refers to
"deliberate waivers of the right to present evidence" and quotes Belculjine in its
description of judicial admissions. McDonald v. General Motors Corp., 110 F.3d 337,
340 (6th Cir. 1997). The Seventh Circuit refers to a judicial admission as "a clear,
deliberate and unambiguous concession" and an "intentional waiver." United States v.
Cunningham, 405 F .3d 497, 504 (7th Cir. 2005); see similarly McCaskill v. SCI
Management Corp., 298 F.3d 677, 682 (7th Cir. 2002) (to be sufficient to constitute a
judicial admission there must be a "deliberate, clear, and unambiguous statement
evincing an intentional waiver").
15
While "[j]udicial admissions can be made at any stage of a litigation," Defoe
Shipbuilding Co., ASBCA No. 17095, 74-1BCAii10,537 at 49,907, the parties disagree
as to whether interrogatory responses can constitute judicial admissions. The government
contends, among other things, that they are not formal pleadings and they give rise, at
most, to an evidentiary admission as to which the responding party is free to introduce
additional or contrary evidence at trial, citing, e.g., Bradley v. Allstate Insurance Co., 620
F.3d 509, 527 n.21 (5th Cir. 2010) ("interrogatory responses are not binding judicial
admissions") (gov't opp'n at 33-35).
Appellant responds that there is a split in authority as to whether interrogatory
responses constitute judicial admissions, citing, e.g., Spectrum Sciences and Software,
Inc. v. United States, 98 Fed. Cl. 8, 27 (2011) ("a response to a contention interrogatory is
a judicial admission"), but it alleges that the Board has so treated them (app. reply at 14).
However, the two Board cases to which appellant cites for this proposition do not support
it. In Polote Corp., ASBCA No. 31115, 86-1 BCA ii 18,640, ajf'd on recon., 1986
ASBCA LEXIS 802 (12 March 1986), there was no clear discussion of a "judicial"
admission in an interrogatory response. Rather, the Board, on reconsideration, discussed
an evidentiary admission by a party-opponent under FED. R. EVID. 801. In Allied
Materials and Equipment Co., ASBCA No. 17318, 75-1BCAii11,150 at 53,067,
appellant "filed comprehensive pleadings and made extensive requests for admissions
and interrogatories which have provided the Board with a nearly comprehensive record of
admitted facts undisputed by the parties." The Board stated that one of the appellant's
monetary claims was allowed as the result of "Government judicial admissions," id. at
53,085, but it appeared to cite to government responses to requests for admissions and to
the hearing transcript. Regardless, there was no specific finding that interrogatory
responses were judicial admissions.
We conclude that, although the government's supplemental response to
interrogatory No. 23 was inadvertently incomplete, it did not make any binding judicial
admissions. There were no clear, deliberate and unambiguous concessions and
intentional waivers of its right to present evidence concerning audit reports or other
information upon which CACO Dowd is alleged to have relied in his determination not to
grant penalty waivers to Raytheon. In fact, considering the government's response to
Interrogatory No. 23 as a whole; its responses to Interrogatories No. 12 and 20(a);
Messrs. Dowd's and Christiansen's deposition testimony; and the government's
pre-hearing brief, appellant was on notice prior to the hearing that, in arriving at his
COFD at issue, CACO Dowd considered alleged CAS 405 noncompliances, including in
the incentive compensation and dividend equivalents areas, pertinent to time periods prior
to 2006.
16
Moreover, we do not find evidentiary sanctions against the government to be
warranted. It is up to the Board in its sound discretion to determine what evidence is
admissible and the weight to be given it. Laguna Construction Co., ASBCA No. 58324.
14-1BCAii35,748 at 174,947 (addressing appellant's motion to strike); Board Rules
10(c), 11 (d), 13(d). We will consider the omission of the two audit reports from the
government's response to Interrogatory No. 23, to the extent relevant, in weighing the
government's evidence.
In view of our decision, we do not reach the government's arguments that it
should be allowed to withdraw and correct its response to Interrogatory No. 23 and that
appellant's motion is '"moot."
Turning to the government's motion to strike, the excerpts from the unrelated
Court of Federal Claims proceeding that appellant would have us consider are not
relevant to our decision on appellant's motion to strike. We grant the government's
motion.
DECISION
We deny appellant's motion to strike and grant the government's motion to strike.
Dated: 29 March 2016
inistrative Judge
:Armed Services Board
of Contract Appeals
I concur I concur
RICHARD SHACKLEFORD
Administrative Judge
Vice Chairman
Armed Services Board
of Contract Appeals
17
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. 57743, 57798, 58280,
Appeals of Raytheon Company, rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
18