ARMED SERVICES BOARD OF CONTRACTAPPEALS Appeal of--

Public Warehousing Company K.S.C.

Under Contract No. SP0300-03-D-306l

APPEARANCES FORTHE APPELLANT: ) ) ) ) )

APPEARANCES FORTHE GOVERNMENT: ASBCA No. 57510

Michael R. Charness, Esq. Adrianne Goins, Esq. Elizabeth Krabill Mcintyre, Esq. Ryan D. Stalnaker, Esq. Bryan T. Bunting, Esq.

Vinson & Elkins, L.L.P. Washington, DC

Daniel K. Poling, Esq.

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

Trial Attorneys DLATroop Support Philadelphia, PA

OPINION BYADMINISTRATIVE JUDGE O'CONNELL ON THE GOVERNMENT'S MOTION FOR LEAVE TO AMEND ANSWER AND MOTION TO DISMISS WITHOUT PREJUDICE, OR IN THE ALTERNATIVE, TO STAY

This appeal is before the Board on the government's motionto amend its
answer and motion to dismiss without prejudice, or in the alternative, to stay. Appellant, Public Warehousing Company K.S.C. (PWC), opposes the motions. We grantthe motion to amend, deny the motion to dismiss, and grant the alternative motion to stay, for one year.
STATEMENT OF FACTS (SOF) FORPURPOSES OF THE MOTIONS

1. From 2003 through 20I0, PWC contracted with the DefenseLogistics Agency (DLA) to distribute food and otherproducts to military customers in Iraq, Kuwait, and elsewhere in the Middle East as part ofthe Prime VendorProgram. PWC performed this workpursuant to three contracts: SP0300-03-D-306l (PV-1); SPM300-05-D-3ll 9 (PV Bridge); and SPM300-05-D-3128 (PV-2). This appealconcerns only the earliestperiod ofperformance ofPV-1 between 2003 and 2004 underModification 2. (App. opp'n at 5)

2. These contracts have produced a great deal oflitigation between the parties. This is at least the eighth panel decision involvingjustthe PV-1 contract.* In this opinion, we will describe only those facts necessary for the pending motions.

3. The contractprovided for charges based on a minimum three-day round trip by PWC'strucks, with per day charges for trips overthe three-day minimum. In late 2004, PWC "discovered"that it had not billed the government for 779 trucktrips that had departed between October 2003 and September 2004. (App. opp'n at 8)

4. The parties made some attempt to resolve the charges but on 21 September 2009, appellant submitted a certified claim to the contracting officer. PWC re-submitted the claim on 16 November 2010 because the person who had certified the claim lacked authority. (App. opp'n at 9; R4, tab 18)

5. In November 2009, a grandjuryin the Northern District ofGeorgia issued
an indictment against PWC for various fraud offenses arising from the contract at issue. That case is still pending.

6. The contracting officer did not issue a final decision (app. opp'n at 9). On 27 January 2011, PWC filed this appeal. AfterPWC filed its complaint on 3 March 2011, the government filed an answer on 21 April 2011 and a supplemental answer on 31 October 2011.

7. In the pending motions, DLA seeks leave to amendto assert affirmative defenses offirst material breach and laches. PWC does not dispute thatthe government's proposed first material breach defenses are based on allegations in the indictment. Forexample, both the indictment and one ofthe proposed affirmative defenses allege that PWC overchargedthe governmentby failing to purchase food from
a vendor with a lower pricebecause that vendor did notprovide PWC a prompt payment discount, and that PWC misrepresented to the government thattherequested vendor's

*PWC, ASBCA No. 56022, 15-1BCAif36,062

PWC, ASBCA No. 57510, 13 BCAif 35,314 PWC, ASBCA No. 56022, 13 BCAif 35,201 PWC, ASBCANo. 56022, 11-2 BCAif 34,788 PWC, ASBCA No. 56116, 09-2 BCAif 34,264 PWC, ASBCA No. 56116, 09-1BCAif34,038 PWC, ASBCANo. 56116, 08-1 BCAif 33,787

2price was higherthan the vendor PWC used. (Compare gov't mot., ex. 4 at 31-32, and
ex. 6 at 24-25)

8. In its proposed laches defense, the government contends that PWC unreasonably delayed submitting its claim and asserts that, to the extent that DLA sufferedprejudice as a result ofdelay, the claim is barred by }aches (gov't mot., ex. 4 at 36).

DECISION

I. Motion to Amend

Under Board Rule 6(d), we "maypermit eitherparty to amend its pleading upon conditions fair to both parties." In exercising our discretion underthis rule, the Board has looked to Rule 15 ofthe Federal Rules ofCivil Procedure. FED. R. CIV. P. 15(a)(2) provides that "(t]he court should freely grant leave whenjustice so requires."

In Foman v. Davis, 371U.S.178, 182 (1962), the Supreme Court held that:

In the absence ofany apparent or declared reason
- such as undue delay, bad faith or dilatory motive on the part ofthe movant, repeated failure to cure deficiencies by amendments previously allowed, undueprejudiceto the opposing party by virtue ofallowance ofthe amendment, futility ofamendment, etc.

- the leave sought should, as the rules require, be "freely given." Recently, in Public Warehousing CompanyK.S.C., ASBCA No. 58088, 16-1BCAif36,555 (an appeal on the PV-2 contract), we granted the government leave to amend its answer to assert affirmative defenses, including first material breach defenses similarto those DLA seeks to add to this appeal. We rule once again that, although the government could have acted more quickly to seek leave to amend, on balance the equities favor granting the government's motion with respect to first material breach, which is the focus ofthe government's motion. On the otherhand, the government does not explain why we should grant leave to add a laches defense,
nor does it explain why it waited so longto seek leave to addthis defense. We deny the motion with respect to that defense. The balance ofthis opinion relates only to the first material breach defenses.

In its opposition to DLA's motion, PWC'sprimary contention involves the length oftime that both its claim and the appeal have been pending. Based on PWC's representation thatthe claim involves trucktrips that departed between October2003 and September 2004 (SOF if 3), we agree thatthe underlying events occurred quite a long time ago and that there are significant concerns about fading memories and stale

3evidence. Moreover, this appeal has been pending since January 2011 and is now more than six years old.
However, PWC must accept responsibility for much ofthe passage oftime. PWC controlledwhen it submitted its claim to the contracting officer and chose to wait until nearly six years after the underlying events began to submit that claim, and
more than seven years until it submitted a claim certifiedby an authorized official (SOF 

### ii 4).

With respectto the time thatthis appeal has been pending, in our November 2016 decision involving ASBCANo. 58088, we observed that close examination ofthe docket indicated that there had been little activity and that bothparties prioritized other appeals involving the prime vendor contracts. PWC, 16-1 BCA

### ii 36,555 at 178,042. PWC contends that this does not hold true for this appeal. We agree in part because there has been more activity in this appeal than there had been in ASBCA No. 58088. But PWC introduces this argument in its briefby stating that "PWCtook [another appeal, ASBCANo. 56022] to trial...and immediately after thattrial proceeded to press forward in this Appeal" (app. opp'n at 1).

We will accept this representation as true for purposes ofthis motion, butthe hearing in ASBCA No. 56022 tookplace in July 2014. ByPWC's own admission it only "proceededto press forward" in this appeal when it had beenpending for 3.5 years. This is confirmed by examination ofour docket. During the early stages ofthis appeal, the parties filed a number of joint status reports in which they informed the Boardthat they had chosen to prioritize other appeals. For example, in a 15 June 2012joint status report submittedby PWC, the parties informed the Boardthatthey "havebeen focusing their activities on PWC's other appeals, which have entailed continuing discovery in ASBCA No. 56022, litigatingthe government's motion to dismiss in ASBCA No. 58078, and preparing the pleadings and appeal file in ASBCA No. 58088." They further stated that, 18 months after filing, they still needed to confer on a schedule. Thus, PWC can hardly place all ofthe blame on DLA for the length oftime thatthis appeal has beenpending. The bottom line from ourperspective is that for the period from October 2003 to July 2014, PWC must accept its share ofthe responsibility for the lapse oftime.

We conclude, as we did in ourNovember 2016 decision in ASBCA No. 58088, that the government would have been wiserto seek leave to amend its answer earlier, after the Board's 23 September 2014 decision in Laguna Construction Co., ASBCA No. 58324, 14-1 BCA

### ii 35,748. In that appeal, we granted the government summary judgmentbased on a first material breach defense afterthe contractor's officials pied guilty in a district court to taking kickbacks. But we also recognize that the government knew that Laguna had appealed that decision to the Federal Circuit. Until the court of appeals issued its opinion in Laguna Construction Co. v. Carter, 828 F.3d 1364

4(Fed. Cir. 2016), the government did not know that the first material breach defense would remain viable. Moreover, Laguna arose from guilty pleas by the contractor's officials. By contrast, PWC's district court criminal case remains pending (SOF**~** 6). Accordingly, as we did in ourNovember 2016 opinion in ASBCA No. 58088, we find that the government's delay in seeking leave to amend its answer is at leastpartially excused by the uncertainty in the law offirst material breach and the unresolved district court criminal case.
We also recognize that the government waited more than five months after the Federal Circuit's decision in Laguna before filing the pending motions. Under ordinary circumstances, this would have been a significant consideration in favor of denying leave to amend. But the totality oflitigation on the prime vendor contracts, leads us to a different conclusion. Specifically, in ASBCANo. 59020 (which involves all three prime vendor contracts) DLA filed an amended answer as ofright that raised the first material breach defense on 22 July 2016, one week afterthe Federal Circuit's decision in Laguna. DLA then filed a motion to dismiss or stay that appeal due to the criminal case on 17 August 2016. Similarly, in ASBCANo. 58088 the government filed a motion to amend its answerto add affirmative defenses on 31 August 2016 and
a similar motion to dismiss on 30 September 2016. With this many related motions pending thatrequiredpanel decisions, it was reasonable for the governmentto wait until the Boardhad resolved the motions in one ofthe other appeals before it filed the pending motions.

PWC cites several Federal Circuit cases in which the court ofappeals affirmed a lower court's denial ofa motion seeking leave to amend. In the process, it mischaracterizes ourNovember 2016 opinion in ASBCA No. 58088 as ignoring Federal Circuit and Supreme Courtprecedent thatprovide for denial ofleave to amend based on delay alone. Despite PWC's contentions, we analyzed the delays in ASBCA No. 58088 and, as in the present appeal, we found thatthe government could have moved to amend more quickly but we also considered the pendency ofthe Laguna appeal to the Federal Circuit, the pending district court criminal case, and a largely inactive docket that indicated that both parties had focused on other appeals. PWC, 16-1 BCA**~** 36,555 at 178,042-43.

The Federal Circuit cases that PWC relies on in support ofits contention that delay alone is enough to deny the motion to amend involved extreme delays that were entirely the responsibility ofthe party seeking leave to amend, which we have found not to be the case here. PWC relies most heavily on Te-MoakBands ofWestern Shoshone Indians of Nevada v. UnitedStates, 948 F.2d 1258 (Fed. Cir. 1991) in which the plaintiffs sought leave to file additional accounting exceptions after an eight-year delay caused by a breakdown in the relationship between the plaintiffs and their attorneys, and which were based on information that the plaintiffs possessed before the delay. The Federal Circuit found this delay to be entirely the fault ofthe plaintiffs and

5held thatthe non-movingparty had suffered an undue delay. Id. at 1262-63. Similarly, PWC's reliance on CencastServices, L.P. v. UnitedStates, 729 F.3d 1352 (Fed. Cir. 2013) is misplaced because the court ofappeals found that the plaintiffmade
a late attempt to introduce a new legal theory that it had known about for 15 years but had failed to raise, including during a five-year period in which it couldhave sought leave to amend its pleadings. Id. at 1364.

PWC also contends that it will be prejudiced ifwe grant leave to DLA to introduce new issues into the appeal so many years afterthe filing. PWC contends that discovery is far along (although DLA disputes this) and that it will have to invest significant additional resources to conduct new discovery ifwe allow the amendment. These concerns are not unfounded but in ourview must be considered along with several other factors.

In weighing a motion to amend, a tribunal must consider the hardship to the movingparty ifleave to amend is denied, the reason the moving party failed to include the material in the original pleading, and the injustice resulting to the party opposing the motion should it be granted. Childers v. Mineta, 205 F.R.D. 29, 32 (D.D.C. 2001) (citing 6 CHARLES ALAN WRIGHT, ARTHURR. MILLER & MARY KAY KANE, FEDERAL PRACTICEAND PROCEDURE§ 1487 (3d ed.)). With respectto the first ofthese considerations, the governmentwill beprejudiced ifleave to amend is denied because this is the only opportunity it will have to defend PWC's contract claims. As for the second, we have already determinedthatthe governmenthad at least some basis for waiting to file the proposed amendment.
Third, PWC's concerns about the prejudice causedby a need to conduct additional discovery are speculative in light ofour decision to stay this case for one year, as discussed in part II below. Bythat point, the criminal case may be at or near resolution. Ifthat case is dismissed orPWC is found not guilty, the government's first material breach defense may not be viable and may not need to be addressed. See Laguna, 828 F.3d at 1368-69. Onthe otherhand, ifthe district court case results in a guiltyplea ora guilty verdict, that may be ground for summary disposition ofthis case. Id. Accordingly, there is a substantial chance that allowingthe amendment at this stage either will not make this appeal more complicated ormay actually simplify it.

DLA's motion for leave to amend its answer to assert first material breach defenses is granted. Its motion withrespect to laches is denied. We accept the proposed answer as filed, except the laches defense is stricken.

6II. Motion to Dismiss or Stay

We recently denied two DLA motions to dismiss PWC appeals due to the criminal case but granted its alternative motion to stay (for one year). PWC, ASBCA No. 58088, 17-1BCA,36,589;PWC, ASBCA No. 59020, 17-1 BCA

, 36,630. As in those appeals, DLA has submitted a letter from the United States Attorney for the Northern District ofGeorgia, John A. Horn, requesting that DLA seek dismissal or stay ofthis appeal (mot., ex. 10). OurrecentPWCdecisions identifythe applicableprecedent and explain our attempts to balance the interests ofthe government in the criminal case and PWC in proceeding with these appeals. We do not believe that it is necessary to go through that analysis again at length. As in those two appeals, we conclude that it is not appropriate to dismiss this appeal but we will stay it for one yearto allow the criminal case toproceed.

In our 8December2016 decision in ASBCA No. 58088, we identified four opinions from the Federal Circuit and its predecessor court, the Court ofClaims, that demonstrate that ourreviewing court generally has been amenable to requests for a stay when there is a parallel criminal matter. Peden v. UnitedStates, 512 F.2d 1099 (Ct. Cl. 1975); Litton Systems, Inc. v. UnitedStates, 215 Ct. Cl. 1056 (1978); Luigi Goldstein, Inc. v. UnitedStates, 217 Ct. Cl. 733 (1978); andAfro-Lecon, Inc. v. UnitedStates, 820 F.2d 1198, 1202 (Fed. Cir. 1987). Otherthan a passing reference to Afro-Lecon, PWC fails to cite these cases and thus does not contend that we misunderstood or misappliedthem in some way. Instead, PWC spends a considerable amount ofspace discussing Board appeals where we declined to dismiss or stay an appeal (app. opp'n at 34-37). BAESys. Tactical Vehicle Sys. LP, ASBCANo. 59491, 16-1BCA,36,450;KelloggBrown & RootServices, Inc., ASBCA Nos. 57530, 58161, 16-1BCA,36,449;KelloggBrown & RootServices, Inc., ASBCA Nos. 56358, 57151, 11-1BCA,34,614;Suh'dutsing Technologies, LLC, ASBCANo. 58760, 15-1BCA,36,058; TRW, Inc., ASBCA Nos. 51172, 51530, 99-2 BCA, 30,407. Butnone ofthese appeals involved aparallel criminal case. Accordingly, we believe thatthe precedential decisions from the Federal Circuit and the Court ofClaims are the controlling cases. And, as we observed in ourDecember 2016 opinion, those cases demonstrate that "ithas long been the practice to 'freeze' civil proceedings when a criminal prosecution involving the same facts is warming up or under way." PWC, 17-1 BCA,36,589 (citing Peden, 512 F.2d at 1103).

PWC also requests that, ifwe determine that a stay is in order, we allow PWC to move forward with discovery, dispositive motions, and a hearing on its affirmative claims, staying only the government's first material breach defenses (app. opp'n at 37). We do not believe that this is the appropriate way to proceed. We are not as optimistic
as PWC thatthe discovery issues can be so easily separated. As the Federal Circuit

7explained inA.fro-Lecon, "[t]hebroad scope ofcivil discovery maypresentto boththe prosecution, and attimes the criminal defendant, an irresistible temptationtouse that discovery to one's advantage in the criminal case."Afro-Lecon, 820 F.2d at 1203. And, as we have observed, PWC has ahistory ofattemptingtotake advantage ofcivil discovery to aid its position in the criminal case. 

### PWC,**17-1BCA~36,589** at 178,208. Moreover, webelievethat conducting a hearing where we cannotconsider the government's affirmative defenses wouldbe an inefficient use ofourresources.
We deny DLA'smotion to dismiss but grant its motionto stay for one year. The appeal is stayed for one year from the date ofthis opinion.

Dated: 21 March 2017

I concur 

# /;77 //,t:///

AdministrativeJudge Acting Chairman Armed Services Board ofContractAppeals

# 0v)~<J(f).

# 0**(~~** MICHAELN. O'CONNELL , AdministrativeJudge Armed Services Board ofContractAppeals

RICHARD SHACKLEFORD AdministrativeJudge Vice Chairman Armed Services Board ofContractAppeals

I certifythatthe foregoing is a true copy ofthe Opinion and Decision ofthe Armed ServicesBoard ofContractAppeals inASBCANo. 57510, Appeal ofPublic Warehousing Company K.S.C., rendered in conformance withthe Board's Charter.

Dated:



### 8 JEFFREYD. GARDIN Recorder, Armed Services Board ofContractAppeals