ARMED SERVICES BOARD OF CONTRACTAPPEALS Appeal of

-- ) ) Public Warehousing Company, K.S.C. ) ) Under Contract No. SPM300-05-D-3128 )

APPEARANCES FORTHE APPELLANT:

APPEARANCES FORTHE GOVERNMENT: ASBCA No. 58088

Michael R. Charness, Esq. Bryan T. Bunting, Esq. Elizabeth Krabill Mcintyre, Esq.

Vinson & Elkins LLP Washington, DC

Daniel K. Poling, Esq.

DLA ChiefTrial Attorney John F. Basiak, Jr., Esq. Keith J. Feigenbaum, Esq. Kari L. Scheck, Esq.

DLA Troop Support Philadelphia, PA

OPINION BYADMINISTRATIVE JUDGE O'CONNELL ON THE GOVERNMENT'S MOTION TO DISMISS

The government moves to dismiss this appeal without prejudice pending the resolution ofa criminal case against appellant in the Northern District ofGeorgia. In the alternative, the government requests a stay. We deny the motion to dismiss but grant the motion to stay.
STATEMENT OF FACTS (SOF) FORPURPOSES OF THE MOTION

1. The "primevendor" contract at issue in this appeal, as well as 2 earlier prime vendor contracts awarded to appellant, have thus far been the subject ofat least 11 panel decisions by the Board. 1 In this opinion, we will describe only those facts necessary for the pending motion.

1Pub. Warehousing Co., ASBCA No. 56116, 08-1BCA,33,787 (PWCI)

Pub. Warehousing Co., ASBCA No. 56116, 09-1BCA,34,038 (PWCII) Pub. Warehousing Co., ASBCA No. 56116, 09-2 BCA,34,264 (PWCIll) Pub. Warehousing Co., ASBCA No. 56888, 09-2 BCA,34,265 (PWCIV) Pub. Warehousing Co., ASBCA No. 56022, 13 BCA, 35,201 (PWC V) Pub. Warehousing Co., ASBCA No. 57510, 13 BCA,35,314 (PWC VJ) Pub. Warehousing Co., ASBCA No. 58078, 13 BCA, 35,460 (PWC VII)2. In July 2005, the Defense Logistics Agency (DLA) awarded Public Warehousing Company, K.S.C. (PWC) Contract No. SPM300-05-D-3128 (the PVII contract) to deliver food, beverages and related items to military units and other authorized customers in Iraq (compl. iJ 6; gov't mot. at 2).

3. PWC transported the food and other items on trucks that traveled in convoys. 

### It contends that in December2007 U.S. military personnel began requiring it to provide extra semi-trucktractors (bobtails) not required bythe contract; thebobtails
were used to recover appellant's assets as well as the assets ofother contractors in the convoys when they experiencedbreakdowns or otherproblems duringthe trips. (Compl. 

### iii! 12, 16-17) Appellant contends that it hadno choice butto comply because the governmentwould nothave allowed its trucks in the convoys (id. 

### iii! 17-18).

4. On 24 October2011, PWC submitted a certified claim to the contracting officer seeking about $7.5 million (R4, tab 44). The contracting officerdid not issue a final decision and on 20 April 2012 PWC filed this appeal based on a deemed denial.

5. On 8 November 2016, we grantedthe government leave to amend its answer to plead affirmative defenses offraud in the inducement, first material breach, sovereign acts doctrine, political question doctrine, assumption ofrisk, and failure to mitigate. PWC, ASBCA No. 58088 (PWCXI).

6. Seven years earlier, November 2009, a grandjury 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.

7. The superseding indictment in that case charges PWC with major fraud againstthe United States, wire fraud, and conspiracyto commit major fraud. The· government'stheories include allegations that PWC misrepresentedthe expected prices ofa market basket ofgoods in submitting its proposal for the contract and that it overchargedthe government in a variety ofways, including: the use ofcostliervendors thatprovided PWC a promptpayment discount; improperly charging the government for warehousing and distribution costs; inflatingprices from distributors and vendors; improperly retainingrebates, allowances and discounts; and reducing the pack size of products to increase distribution fees. (Gov't mot. at 6-7; app. opp'n at 6-7)

Pub. Warehousing Co., ASBCA No. 58078, 14-1 BCA

### ii 35,574 (PWC VIII) Pub. Warehousing Co., ASBCANo. 56022, 15-1 BCA

### ii 36,062 (PWCIX) Pub. Warehousing Co., ASBCANo. 59020, 16-1BCAiJ36,366 (PWCX) Pub. Warehousing Co., ASBCANo. 58088, slip op. (8 Nov. 2016) (PWCXI) 2DECISION

The Constitution does not require a stay ofcivil proceedings pendingthe outcome ofcriminal proceedingsbut a tribunal has the discretion to stay the civil proceeding, postpone civil discovery, or imposeprotective orders and conditions. Afro-Lecon, Inc. v. UnitedStates, 820 F.2d 1198, 1202 (Fed. Cir. 1987). The decision to stay aproceeding is made on a case-by-case basis, using a flexible approach that balances the parties' interests. Id.

The parties are in general agreement with respect to the factors that we consider in determining whetherthis appeal should be dismissed or stayed based upon potential interference with criminal proceedings (gov't mot. at 9; app. opp'n at 13-14).

These factors include: (1) whetherthe facts, issues, and witnesses in both proceedings are substantially similar; (2) whetherthe on-going investigations wouldbe compromised in going forward with the case; (3) whether the proposed stay couldharm the non-moving party; and (4) whetherthe duration ofthe requested stay is reasonable.
PWC, ASBCA No. 56116,**08-1BCA~33,787** at 167,227 (PWC I) (citing, inter alia, Landis v. NorthAmerican Co., 299 U.S. 248, 254-55 (1936)).

A review ofthe precedent ofthe Court ofAppeals for the Federal Circuit, and its predecessor court, the Court ofClaims,2 indicates that ourreviewing court has generally been amenable to requests for a stay when there is aparallel criminal matter. A briefreview ofprecedent, starting with the Supreme Court's decision in Landis, will be helpful in considering this motion.

As we observed above, Landis has informed the standard that we apply. However, it is important to considerLandis in its proper context becausethe Supreme Court's decision arose from a much different set offacts than we have in this appeal. Specifically, the core issue was whetherthe Public Utility Holding Company Act of 1935 was constitutional. Landis, 299 U.S. at 249. At one time the government faced 47 lawsuits in 13 districts on this issue. Id. at 252. The question before the Court was whetherthe plaintiffs in one case could be forced to stand aside, through ajudicially imposed stay, while another district courtresolved a similarcase involving other

2 In South Corp. v. UnitedStates, 690 F.2d 1368, 1370 (fed. Cir. 1982), the Federal Circuit adopted as precedentthe decisions ofthe Court ofClaims issued before the close ofbusiness on 30 September 1982. Decisions ofthe Court ofClaims are, therefore, binding on the Board.3companies. Id. at 249-55. Thus, there were no pending criminal actions against the respondents that the Courthad to factor into its analysis. Notwithstandingthis distinction, the Supreme Court made several important statements in Landis. The Court explained that a tribunal has the inherent power to control its docket by issuing stays, which require weighing competing interests and maintaining an even balance. The proponent ofthe stay must make out a clear case of hardship or inequity in going forward ifthere is even a fair possibility thatthe stay will
cause damage to someone else. The Court held that "[e]specially in cases of extraordinary public moment, the individual may be required to submit to delay not immoderate in extent and not oppressive in its consequences ifthe public welfare or convenience will thereby be promoted." Stays ofan indefinite duration are an abuse ofdiscretion in the absence ofapressing need; a stay must be kept in the bounds of moderation. 299 U.S. at 254-56.

Peden v. UnitedStates, 512 F.2d 1099 (Ct. Cl. 1975), is a step closerto the facts in this appeal. In Peden, a workerwho had been removed from government employment soughtreview ofthat decision at the Civil Service Commission (CSC). The CSC suspendedproceedings in the case for about 20 months because ofa district court criminal case based on the same facts that led to his removal. In consideringthis delay, the Court ofClaims stated: "ithas long been the practiceto 'freeze' civil proceedings when a criminal prosecution involving the same facts is warming up or under way." Id. at 1103. Such a freeze, "rises out ofa sense that deferrable civil proceedings constitute improper interference with the criminal proceedings ifthey chum overthe same evidentiary material." The Court ofClaims upheld the propriety ofthe stay. Id. at 1103-04.

In Litton Systems, Inc. v. UnitedStates, 215 Ct. Cl. 1056 (1978), the Board conducted a hearing that resulted in a monetary award to the appellant. The appellant later filed suit in the Court ofClaims to obtain payment ofthe award. On the same day, a grandjuryreturned an indictment againstthe appellant for submission ofa false claim. The governmentrelied on the criminal case to file affirmative defenses, a counterclaim, and a special plea in fraud at the Court ofClaims. The District Court later dismissed the indictment for prosecutorial misconduct, which the government appealed to the Fourth Circuit. Id. at 1056-57.

In analyzing whetherproceedings should be stayedpendingresolution ofthe criminal charges, the Court ofClaims observed that determining**w~ether** the claim
was false would require a great deal ofoverlap ofwitnesses and otherevidence with the criminal prosecution ifit was revived by the Fourth Circuit. It also observed that the "possible pendency ofparallel civil and criminal proceedings involving at least many ofthe same matters cautions us to try to be sure that the broader discovery permissible in civil proceedings is not unnecessarily used to compromise parallel criminal proceedings." Litton, 215 Ct. Cl. at 1057-58 (citingPeden, 512 F.2d at 1104).

4Based on these considerations, as well as comity for the Fourth Circuit and the clarification that could be provided by its decision, the Court ofClaims held thatthe
case should be stayed until the Fourth Circuitruled. At that time, the issue as to whetherthe case should be stayed for the duration ofthe criminal proceedings could be examined. Litton, 215 Ct. Cl. at 1057-58.

In Luigi Goldstein, Inc. v. UnitedStates, 217 Ct. Cl. 733 (1978), the Court of Claims affirmed atrialjudge's order suspendingproceedings because ofa criminal matter. In Goldstein, however, the criminal matter was still at the grandjury investigation stage; no indictment had even been issued. The Court ofClaims did not explain its reasoning in depth but, citingPeden and Litton, it again stated that it was "reluctantto require the Governmentto proceed in civil litigation whenrelated criminal procedures are still in progress." Id. at 734. Finally, inAfro-Lecon, the Federal Circuit vacated an order ofthe General Services Board ofContractAppeals denying a request for a stay during the pendency ofparallel criminal proceedings. The twist in this case was that it was the contractor that requested the stay after its officers, former employees and consultants were advised by counsel not to participate in discovery to avoid incriminating themselves. Afro-Lecon, 820 F.2d at 1200. The court ofappeals remanded the caseto the board, directing it to apply a flexible approach that balanced the needs ofboth parties. Id. at 1202-07.- The court did so while observing the potential that broad civil discovery rules may be used by both sides to gain an improper advantage in the criminal case. Id. at 1203-04 (citing, inter alia, Peden); see Skip Kirchdorfer, Inc., ASBCA Nos. 32637, 35074,**89-1BCA~21,193** at 106,955.

With this precedent in mind, we return to the four factors identified in PWCI:

Factor I: Similar Facts, Issues, Witnesses

In support ofits motion, the government has submitted a letterto DLA from John A. Hom, the United States Attorney for the Northern District ofGeorgia, dated 30 September 2016 (gov'tmot., ex. 1), in which Mr. Homrequests that DLA move to dismiss this appeal pending the outcome ofthe criminal case. In this letter, Mr. Hom contends that the affirmative defenses pied by DLAin this appeal "encompass identical issues as the pending criminal case" in the district court (gov'tmot. at 7). Similarly, the government contends in its briefthatthe conduct it alleges in its affirmative defenses is "indistinguishable" from the conduct alleged in the superseding indictment (gov'tmot. at 10). For example, it states in its fraud-in-the-inducement defense that PWC submitted marketbasket data and invoices in its proposal that were artificially low, knowingthat they would rise post-award, which is the same conduct alleged in count one ofthe superseding indictment (id.). In addition, DLA states that its first material breach defenses are substantially similar to the indictment. For example, the government contends in both that PWC overcharged the governmentby
5failing to purchase less expensive products than it was instructed to purchase because the vendor did not provide PWC apromptpayment discount. (Id.) See PWCXI.

PWC contends that the affirmative defenses are not similarto the criminal case. Itbases this contention on the requirement that the governmentprove specific intent in the criminal case, which, according to PWC, the government does not have toprove at the Board in connection with its affirmative defenses (app. opp'n at 13-14). PWC also points out that its constructive change claim concerningthe bobtails is unrelated to the criminal case orthe fraud-in-the-inducement and first material breach affirmative defenses (id. at 14-15). However, PWC does not appearto dispute that the affirmative defenses and the criminal case involve the same basic facts and witnesses.

We agree with the government that there is a great deal ofsimilarity between the criminal case and its fraud-in-the-inducement and first material breach affirmative defenses. Indeed, the government seems to have used the indictment as a model in crafting its affirmative defense. Thus, for example, both the Board and the district courtwould be called upon to adjudicate the government's contentions that PWC submitted artificially low market basket pricing in its proposal to obtainthe contract, which would involve the same or very similar facts and the same or substantially overlapping witnesses. See PWCXI. Moreover, even ifwe credit PWC's argument that the criminal case is distinct because the government must prove a specific intent to defraud, we do not believe that this changes the fact that the issues in the two cases are similar. As the government observes in its reply, even ifits affirmative defenses at the Board do not require it to prove specific intent, it has alleged in those affirmative defenses that PWC acted with knowledge and intent. Forexample, it alleges in paragraph 5 ofits affirmative defenses that PWC knew thatthe prices it was submitting were artificially low (reply at 5). Thus, we agree with the government that
even ifthe precise elements ofthe affirmative defenses do not line up with the criminal offenses, the alleged criminal intent ofPW C's officers and directors are relevant to this appeal. Accordingly, we conclude that there is sufficient similarity offacts, witnesses and issues that this factor weighs in favor ofthe government.

Factors II & III: Balancingthe Harms

Bothparties contend that they will be harmed ifthe Board does not issue a decision in its favor. The government is primarily concernedthat PWC will use the much more liberal discovery available at the Board to its advantage. Echoingthe decisions in Peden, Litton, Goldstein, andAfro-Lecon, DLA and U.S. Attorney Hom contend that PWC will gain an inappropriate advantage ifit can use the civil discovery rules to circumventthe limitations on criminal discovery in the district court. U.S. Attorney Hom also contends that, due to the similarity in facts, witnesses,

6and issues in the two cases, it would be virtually impossibleto contain discovery in this appeal so that it does not impactthe criminal case (gov'tmot., ex. 1at 5).

The government also contends that ourearlier decisions show that the threat of Board discovery prejudicingthe government in the criminal case is notjusta theoretical problem. Thus, in PWCI, we granted a government motionto stay to allow the Department ofJustice to completethe criminal investigation. In that decision we stated "[i]t is clearto us
...that PWC'sprimary purpose in wishingto proceed with the appeal is to use the Board's decision to influence the direction ofthe on-going investigations, and to help its position in potential settlement discussions." PWCI, 08-1BCAii33,787 at 167,229. Similarly, in ASBCANo. 56022, 13 BCA

### ii35,201 (PWC V), the government moved to dismiss ortoplace limitations on depositions after PWC was found tobe live streamingthe contracting officer's deposition to PWC's criminal counsel, who apparently were sending questions for appellant's counsel to ask the contracting officer. The Board denied the motion to dismiss butplaced limits on the depositions going forward.

PWC counters by more or less statingthat the cat is out ofthe bagwith respect to discovery. Itobserves thatthe governmenthas already produced 24 million pages ofdocuments in the criminal case and states that, unless the government is withholding exculpatory materials, "whateverharm broad discovery might have causedthe criminal case is a moot issue atthis point" (app. opp'n at 17). Moreover, the government states in its briefthat PWC has already deposed five witnesses, including two ofthe contracting officers (gov'treply at 9 n.1).

In light ofthese significant arguments from appellant, the Board conducted a status conference on 10 November 2016 to getmore information concerningthe status ofdiscovery (see Bd. corr. ltr. dtd. 14 November 2016). The parties reported that significant discovery has taken place, including depositions oftwo contracting officers. However, the parties have not conducted discovery onthe affirmative defenses. Rather, discovery would be expanded due to the Board grantingthe government leave to amend to add these affirmative defenses. Thus, the danger of civil discoveryprejudicingthe criminal case still exists.

PWC also contendsthat it will be prejudiced by a delay caused by dismissal or a stay. It observes that evidence may become stale orunavailable andthatwitnesses' memories will dim orthe witnesses will become unavailable (app. opp'n at 20-21).

PWC's concerns are indeed significant, but it shares in the blame for this matter dragging out for so long. As we found, the government began requiring bobtails nearly four years before PWC submitted its claim (SOF iii! 3, 4). Moreover, as we determined in our opinion onthe government's motion to amend, the docket in this appeal has been mostly quiet since PWC filed it in April 2012, with bothparties

7seemingly content to concentrate on the litigation ofother appeals. PWCXI, ASBCA No. 58088 (8 Nov. 2016).

In light ofthe Court ofClaims and Federal Circuit's decisions in Peden, Litton, Goldstein, andAfro-Lecon, we are reluctant to force the government to continue with discovery in this appeal while the criminal proceedings are pending. This is even more so where, as discussed above, PWC has some history oftrying to use discovery in Board appeals to gain an advantage in the criminal case. We conclude that the balance ofharms weighs in favor ofthe government.

FactorIV: Duration

In his non-final report and recommendation on PWC's venue motions in the criminal case issued on 28 September 2016, Magistrate Judge AlanJ. Baverman, in response to a government statement thattrial was "imminent,"wrote: "the Court is
now in position to roll out rulings on dispositive and non-dispositive motions, but trial will not likely occuruntil next year" (gov't mot., ex. 5 at 40-41). We construe this statement to mean that there is areasonable chance that the criminal case will reach trial in 2017.
After considering the various contentions ofthe parties, including the government's concern aboutprejudicing the criminal case and PWC's concern that this appeal will grow stale ifit is dismissed, we believe thatthe best way to balance the parties' competing interests is to stay this appeal for a limited period oftime to allow the criminal case to proceed. Accordingly, we will stay this appeal for one year from the date ofthis decision. At the expiration ofthat year, the parties shall file ajoint status report suggesting further proceedings. Ifthe criminal case is resolved before that time, the parties shall file the status report within two weeks ofthe conclusion of the criminal case.
CONCLUSION

The government's motion to dismiss is denied. The government's alternate motion to stay is granted, for one year from the date ofthis decision.

Dated: 8 December 2016

(Signatures continued)
8

# ~Jio~~~ Administrative Judge Armed Services Board ofContract AppealsI concur

# ~~ER~ Administrative Judge Acting Chairman Armed Services Board ofContractAppeals I concur

Administrative Judge Vice Chairman Armed Services Board ofContractAppeals

I certify that the foregoing is a true copy ofthe Opinion and Decision ofthe Armed Services Board ofContract Appeals in ASBCA No. 58088, Appeal ofPublic Warehousing Company, K.S.C., rendered in conformance with the Board's Charter.

Dated:

9 JEFFREY D. GARDIN Recorder, Armed Services Board ofContract Appeals