Public Warehousing Company, K.S.C.
Docket: ASBCA 58088
Decision date: 2016-11-08

ARMED SERVICES BOARD OF CONTRACT APPEALS 
Appeal of --
Public Warehousing Company, K.S.C. 
Under Contract No. SPM300-05-D-3128 
APPEARANCES FOR THE APPELLANT: 
) 
) 
) 
) 
) 
APPEARANCES FOR THE GOVERNMENT: 
ASBCA No. 58088 
Michael R. Charness, Esq. 
Bryan T. Bunting, Esq. 
Elizabeth Krabill Mcintyre, Esq. 
Vinson & Elkins, L.L.P 
Washington, DC 
Daniel K. Poling, Esq. 
DLA Chief Trial Attorney 
John F. Basiak, Jr., Esq. 
Keith J. Feigenbaum, Esq. 
Kari L. Scheck, Esq. 
DLA Troop Support 
Philadelphia, PA 
OPINION BY ADMINISTRATIVE JUDGE O'CONNELL 
ON THE GOVERNMENT'S MOTION FOR LEA VE TO AMEND 
The government has filed a motion seeking leave to amend its answer 
to plead 
affirmative defenses of fraud in the inducement, first material breach, sovereign acts 
doctrine, political question doctrine, assumption of risk, and failure to mitigate. We grant 
the motion. 
STATEMENT OF FACTS FOR PURPOSES OF THE MOTION 
I. Public Warehousing Company, K.S.C. (PWC) performed the subsistence prime 
vendor contract referenced above, which required it to deliver food, beverages and related 
items to military units and other authorized customers in Iraq (comp!.~ 6; gov't SOF ~ 3). 
2. PWC transported the food and other items on trucks that traveled in convoys. 
It contends that, starting in December 2007, U.S. military personnel required it to provide 
extra semi-truck tractors ("bobtails") on the convoys; the bobtails were used to recover 
appellant's assets as well as the assets of other contractors. (Comp!.~~ 12, 16-17) 
Appellant contends that it had no choice but to comply because the government would 
not have allowed its trucks in the convoy (id. ~~ 17-18). 
I 

3. On 24 October 2011, PWC submitted a certified claim to the contracting officer 
seeking about $7.5 million. 
4. In its proposed fraud in the inducement defense, the government contends that 
PWC obtained the contract by submitting artificially low prices in its proposal that rose 
significantly after award (proposed amended answer at 12-13 ). The government seeks 
to add four first material breach defenses, namely: systemic overcharging by not 
purchasing from requested/preferred vendors; manipulation and inflation of delivered 
price through the use of the company Interchange Port Services; manipulation and 
inflation of delivered price by concealing discounts and allowances; and failure to pass 
on rebates and discounts (id. at 13-18). The government also seeks to add affirmative 
defenses based on the sovereign acts and political question doctrines, as well as 
assumption of risk, and failure to mitigate (id. at 18-20). 
5. In November 2009, a grand jury in the Northern District of Georgia issued an 
indictment against PWC for various fraud offenses arising from the contract at issue. 
That case is still pending. The government's proposed fraud in the inducement and 
first material breach affirmative defenses appear to be based on the allegations in the 
indictment (gov't reply, ex. 1). For example, count one of the indictment alleges a 
scheme to obtain the contract by submitting artificially low prices in PWC's proposal 
with the recognition that the prices were not realistic (id. at 12-20), which is similar to 
the government's proposed first affirmative defense in this appeal. 
6. Appellant filed this appeal on 20 April 2012. The Defense Logistics Agency 
(DLA) filed its answer on 13 July 2012. DLA was aware of the indictment at the time it 
filed its answer (gov't reply at 9). 
DECISION 
Under Board Rule 6( d), we "may permit either party to amend its pleading upon 
conditions fair to both parties." In 
exercising our discretion under this rule, the Board has 
looked to Rule 15 of the Federal Rules of Civil Procedure. FED. R. CIV. P. 15(a)(2) 
provides that "[t]he court should freely grant leave when justice so requires." 
In Foman v. Davis, 371 U.S. 178, 182 (1962), the Supreme Court held that: 
In the absence of any apparent or declared reason - such as 
undue delay, bad faith or dilatory motive on the part of the 
movant, repeated failure to cure deficiencies by amendments 
previously allowed, undue prejudice to the opposing party by 
virtue of allowance of the amendment, futility of amendment, 
etc. - the leave sought should, as the rules require, be "freely 
given." 
2 

In this motion, the primary questions are whether there has been undue delay on 
the part of the government and whether appellant has been prejudiced. Because appellant 
filed this appeal more than two years after the indictment, the government could have 
raised these affirmative defenses in its July 2012 answer. Thus, there has been a delay 
of over four years. By way of excuse, the government offers two reasons. First, there 
have been several other appeals involving DLA and PWC that have required a great 
deal of work by DLA attorneys in recent years (gov't mot. at 9-11). Second, it contends 
that until the Court of Appeals for the Federal Circuit issued its decision in Laguna 
Construction Co. v. Carter, 828 F.3d 1364 (Fed. Cir. 2016), the law with respect to first 
material breach was unsettled and that it filed its motion to amend roughly six weeks 
after the Federal Circuit issued that decision. DLA contends that it was not in a position 
to file the affirmative defenses until either Laguna or the criminal case had been resolved. 
(Gov't reply at 9) 
While we believe that DLA could have acted more quickly to seek leave to plead 
these affirmative defenses, an examination of the entire record of litigation between DLA 
and PWC on this contract leads us to conclude that PWC 
has not been prejudiced by any 
delay. The record demonstrates that the government's interest in preventing appeals at 
the Board from interfering with the criminal case and, consequently, using that as a basis 
to stay or dismiss appeals on the same contract, has long been known, as follows: 
• In Public Warehousing Co., K.S.C., ASBCA No. 56116, 08-1BCAii33,787, 
we granted a government motion to stay to allow the Department of Justice to 
complete the criminal investigation. In that decision we found that "[i]t is clear to 
us ... that PWC's primary purpose in wishing to proceed with the appeal is to use 
the Board's decision to influence the direction of the on-going investigations, and 
to help its position in potential settlement discussions." Id. at 167,229. 
• In The Public Warehousing Co., ASBCA No. 56022, 13 BCA ii 35,201, the 
government moved to dismiss or to place limitations on depositions after PWC 
was found to be live streaming the contracting officer's deposition to PWC's 
criminal counsel, who apparently were sending questions for appellate counsel to 
ask 
the contracting officer. The Board denied the motion to dismiss but placed 
limits on the depositions going forward. 
• In Public Warehousing Co., K.S.C., ASBCA No. 58078, 14-1BCAii35,574, we 
dismissed without prejudice an appeal by PWC after the United States Attorney 
for the Northern District of Georgia requested that DLA seek dismissal due to his 
concern that proceeding with that appeal would compromise and interfere with the 
ongoing criminal case. 
• Finally, in PWC's appeal docketed as ASBCA No. 59020, the government 
amended its answer as a matter of right on 22 July 2016 to assert affirmative 
defenses of fraud in the inducement and first material breach. 
3 I I 

In Laguna Construction Co., ASBCA No. 58324, 13 BCA ~ 35,464, we observed 
that the relevant factor is not prejudice but "undue prejudice." We held that appellant 
could not claim surprise when the government had filed an affirmative defense of fraud in 
an earlier appeal on the same contract. Id. Given the history we outlined above, PWC 
could not have been surprised by the government seeking leave to amend its answer to 
assert affirmative defenses. 
Further, we agree with the government that its delay in filing these affirmative 
defenses is excused at least in part by the still pending criminal case and the appeal to the 
Federal Circuit of our decision in Laguna, in which we granted the government summary 
judgment due to the contractor's first material breach. The Federal Circuit affirmed our 
decision on 15 July 2016, Laguna, 828 F .3d 1364, which removed one layer of 
uncertainty. The government sought leave to amend in August 2016, the month 
following the issuance of Laguna. Thus, the government moved promptly after the 
Federal Circuit issued its decision. 
PWC makes a number of contentions in its opposition. First, it contends that DLA 
is acting in bad faith and for dilatory reasons. It contends that DLA is not just seeking to 
amend its answer but to "put a stop" to the appeal. In fact, after PWC filed its opposition, 
DLA filed a motion to dismiss without prejudice pending resolution of the criminal case, 
or to stay, under Board Rule 18. Thus, while it is true that DLA is seeking to put a stop 
to this appeal, at least temporarily, we do not consider this to be bad faith. Rather, DLA 
is seeking an application of the Board's existing rules. 
Second, PWC contends that DLA is guilty of undue delay, and that it "tarried for 
over four years before proffering its amendment" (app. resp. at 2). We addressed this 
above. We add 
one further point. In addition to the pendency of the criminal case and 
the Laguna Federal Circuit appeal, examination of the docket in this appeal supports the 
government's contention that the parties have been focused on other appeals, which 
helps explain the length of time this appeal has been pending. Other than a notice of 
appearance, neither party filed anything that brought this appeal closer to resolution for 
the more than two-year period from 25 September 2012 until 26 November 2014, when 
PWC filed a motion to compel. Other than briefing the motion to compel, there were no 
filings in 2015 either. The docket indicates that the parties prioritized other appeals. 
Third, PWC contends that the addition of these affirmative defenses to this case 
will require additional discovery and likely will require postponement of the hearing. 
However, PWC is already facing the same fraud in the inducement and first material 
breach defenses on this same contract in ASBCA No. 59020. Thus, it likely will have 
to do much of this discovery anyway. Moreover, while a postponement of the hearing 
would not be optimal, the events at issue stem back to December 2007; a short to 
moderate postponement of the hearing is unlikely to make much difference in our view. 
4 I t j, 
l 

Fourth, PWC contends that the government has waived the affirmative defenses by 
continuing performance of the contract after it was on notice of the acts that it now 
contends were fraud and/or breach. However, we cannot determine whether this is 
correct without plunging into the facts. The merits hearing will be the time and place to 
do that, not the government's motion for leave to amend. 
CONCLUSION 
The government's motion for leave to amend is granted. We accept the proposed 
answer as filed. 
Dated: 8 November 2016 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
fl4 ~:n c/ ·c~""YJ 
MICHAEL N. O'CONNELL 
Administrative Judge 
Armed Services Board 
of Contract Appeals 
I concur\ 
( 
I 
'1 
RICHARD SHACKLEFORD 
Administrative Judge 
Vice Chairman 
Armed Services Board 
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 No. 58088, Appeal of Public 
Warehousing Company, K.S.C., rendered in conformance with the Board's Charter. 
Dated: 
5 
JEFFREY D. GARDIN 
Recorder, Armed Services 
Board of Contract Appeals