Court Opinion

ID: 5116474
Source: CourtListenerOpinion
Date Created: 2021-10-06 19:00:30.911197+00
Date Added: 2024-06-11T08:21:57.319323
License: Public Domain

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).
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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

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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.

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                                     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

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