Contract analysis

I. Jurisdictional and Party Allegations

1. In response to Paragraph 1 of the Counterclaim, WAL admits that this Court has subject-matter jurisdiction over the claims asserted in the Counterclaim pursuant to 28 U.S.C. § 1332 (diversity of citizenship), as the amount in controversy exceeds Seventy-Five Thousand Dollars ($75,000.00), exclusive of interest and costs, and complete diversity exists between the parties. WAL further admits that this Court has juri

2. In response to Paragraph 2 of the Counterclaim, WAL admits that venue is proper in the Southern District of New York pursuant to the forum-selection clause set forth in Section 18.2 of the Teaming Agreement dated June 12, 2019 (the "Teaming Agreement"), by which the parties consented to the exclusive jurisdiction and venue of the federal and state courts located in the Borough of Manhattan, City and State of New Y

3. In response to Paragraph 3 of the Counterclaim, WAL admits that HDDS is a corporation organized and existing under the laws of the State of Delaware, with its principal place of business located at 1100 Garrison Boulevard, Suite 2200, Bethesda, Maryland 20817.

4. In response to Paragraph 4 of the Counterclaim, WAL admits that Whitmore Aerospace LLC is a limited liability company organized and existing under the laws of the Commonwealth of Virginia, with its principal place of business located at 4200 Commerce Park Drive, Suite 600, Chantilly, Virginia 20151.

5. In response to Paragraph 5 of the Counterclaim, WAL admits that the Teaming Agreement was executed on June 12, 2019, between HDDS (in the capacity of "Team Lead") and WAL (in the capacity of "Team Member"). WAL further states that the Teaming Agreement is a written document that speaks for itself, and WAL respectfully refers the Court to the full text of the Teaming Agreement for a complete and accurate statement

6. In response to Paragraph 6 of the Counterclaim, WAL admits that HDDS is the prime contractor under U.S. Air Force Prime Contract No. FA8620-19-C-0337 for the Advanced Tactical Airframe Program ("ATAP"), which was awarded by the Air Force Life Cycle Management Center ("AFLCMC"), Wright-Patterson Air Force Base, Ohio. WAL lacks sufficient knowledge or information to admit or deny any characterizations of the terms o

7. In response to Paragraph 7 of the Counterclaim, WAL admits that the Prime Contract is a cost-plus-incentive-fee ("CPIF") contract with a target cost of Four Hundred Twelve Million Dollars ($412,000,000.00), a target fee of eight percent (8%) (i.e., Thirty-Two Million Nine Hundred Sixty Thousand Dollars ($32,960,000.00)), and a ceiling price of Four Hundred Seventy Million Dollars ($470,000,000.00). WAL further adm

8. In response to Paragraph 8 of the Counterclaim, WAL admits that its scope of work under the Teaming Agreement encompasses Work Package 4 ("WP-4"), which involves the fabrication and delivery of titanium structural assemblies, including wing-box substructure, center fuselage longerons, and bulkhead fittings. WAL further admits that WP-4 represents approximately eighteen percent (18%) of the target cost under the Pr

9. In response to Paragraph 9 of the Counterclaim, WAL admits the existence of Section 11.4 (Indemnification) in the Teaming Agreement. WAL states that Section 11.4 is a written contractual provision that speaks for itself, and WAL respectfully refers the Court to the full text of Section 11.4 for a complete and accurate statement of its terms and conditions. WAL specifically denies any characterization of Section 11

10. In response to Paragraph 10 of the Counterclaim, WAL admits the existence of Section 11.5 (Limitation of Liability) in the Teaming Agreement, which provides that WAL's aggregate liability under Section 11 shall not exceed one hundred twenty percent (120%) of the value of WAL's Work Package, calculated as Eighty-Eight Million Nine Hundred Ninety-Two Thousand Dollars ($88,992,000.00). WAL states that Section 11.5 i

11. In response to Paragraph 11 of the Counterclaim, WAL admits the existence of Section 11.6 of the Teaming Agreement, which addresses the recovery of attorneys' fees under certain circumstances. WAL states that Section 11.6 is a written contractual provision that speaks for itself, and WAL respectfully refers the Court to the full text of Section 11.6 for a complete and accurate statement of its terms and condition

12. In response to Paragraph 12 of the Counterclaim, WAL admits that Section 18.1 of the Teaming Agreement provides that the Teaming Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflicts-of-law principles.

II. Factual Allegations Regarding the DCMA COPD and Cost Overruns

13. In response to Paragraph 13 of the Counterclaim, WAL admits that on August 1, 2022, the Defense Contract Management Agency ("DCMA") Administrative Contracting Officer, Lt. Col. Sandra M. Vickers, USAF, issued a Contracting Officer's Preliminary Determination (the "COPD") identifying Fourteen Million Seven Hundred Twenty-Six Thousand Five Hundred Eighty-Three Dollars ($14,726,583.00) in cost overruns on the ATAP p

14. In response to Paragraph 14 of the Counterclaim, WAL admits that the COPD attributed Twelve Million Eight Hundred Seventeen Thousand Four Hundred Forty-One Dollars ($12,817,441.00), representing approximately eighty-seven and three hundredths percent (87.03%) of the identified cost overruns, to WP-4 (titanium structural assemblies), and One Million Nine Hundred Nine Thousand One Hundred Forty-Two Dollars ($1,909,

15. In response to Paragraph 15 of the Counterclaim, WAL denies that it is responsible for the entirety of the Fourteen Million Seven Hundred Twenty-Six Thousand Five Hundred Eighty-Three Dollars ($14,726,583.00) in cost overruns identified in the COPD. WAL specifically denies that it bears any responsibility whatsoever for the One Million Nine Hundred Nine Thousand One Hundred Forty-Two Dollars ($1,909,142.00) attri

16. In response to Paragraph 16 of the Counterclaim, WAL denies HDDS's characterization of the root causes of the WP-4-related cost overruns to the extent such characterization attributes all overruns to WAL's acts or omissions. WAL avers that, according to the narrative section of the COPD itself, the cost overruns attributed to WP-4 include the following approximate categories and amounts: (a) Approximately Four Mi

17. In response to Paragraph 17 of the Counterclaim, WAL denies that the COPD constitutes a final or binding determination of cost disallowance under the Contract Disputes Act, 41 U.S.C. § 7101 et seq., or otherwise. WAL avers that the COPD, by its own terms, is a preliminary determination subject to further administrative review and adjudication. WAL further avers that HDDS itself has contested the COPD by filing a

18. In response to Paragraph 18 of the Counterclaim, WAL denies the allegations contained therein to the extent they assert that WAL's acts or omissions "caused" the cost overruns identified in the COPD within the meaning of Section 11.4(b) of the Teaming Agreement. WAL further states that it lacks sufficient knowledge or information to admit or deny specific internal HDDS cost-accounting allocations referenced in Pa

19. In response to Paragraph 19 of the Counterclaim, WAL denies the allegations contained therein to the extent they assert that WAL's acts or omissions "caused" the cost overruns identified in the COPD within the meaning of Section 11.4(b) of the Teaming Agreement. WAL further states that it lacks sufficient knowledge or information to admit or deny specific internal HDDS cost-accounting allocations and methodologie

20. In response to Paragraph 20 of the Counterclaim, WAL denies the allegations contained therein to the extent they assert that WAL's acts or omissions "caused" the cost overruns identified in the COPD within the meaning of Section 11.4(b) of the Teaming Agreement. WAL further states that it lacks sufficient knowledge or information to admit or deny specific internal HDDS cost-accounting allocations and methodologie

21. In response to Paragraph 21 of the Counterclaim, WAL denies the allegations contained therein. WAL specifically denies that all WP-4-related cost overruns are attributable to WAL's acts or omissions. WAL avers that the causation analysis required under Section 11.4(b) of the Teaming Agreement demands a showing that the cost overruns were "caused by Team Member's acts or omissions," a showing that HDDS has not mad

22. In response to Paragraph 22 of the Counterclaim, WAL denies the allegations contained therein. WAL specifically denies any assertion that HDDS's internal cost-allocation methodology is dispositive of the causation inquiry under Section 11.4(b) of the Teaming Agreement. WAL further avers that HDDS's attempt to shift the entirety of the WP-4-related cost overruns to WAL ignores the substantial role played by HDDS's

23. In response to Paragraph 23 of the Counterclaim, WAL denies the allegations contained therein. WAL incorporates by reference its responses to Paragraphs 16, 21, and 22 above.

24. In response to Paragraph 24 of the Counterclaim, WAL denies the allegations contained therein. WAL incorporates by reference its responses to Paragraphs 16, 21, and 22 above.

25. In response to Paragraph 25 of the Counterclaim, WAL denies the allegations contained therein. WAL avers that neither the COPD nor any other document or determination establishes that all WP-4-related cost overruns are attributable solely to WAL's acts or omissions, and WAL denies that HDDS has satisfied or can satisfy the causation prerequisite to indemnification under Section 11.4(b) of the Teaming Agreement.

III. Allegations Regarding Pre-Litigation Dispute Resolution

26. In response to Paragraph 26 of the Counterclaim, WAL admits that Section 18.3 of the Teaming Agreement establishes a tiered dispute-resolution procedure consisting of: (i) senior executive negotiation for a period of thirty (30) calendar days following written notice of a dispute; (ii) followed by non-binding mediation administered by the American Arbitration Association under its Commercial Mediation Procedures;

27. In response to Paragraph 27 of the Counterclaim, WAL admits that WAL's Chief Executive Officer, Marcus J. Whitmore, and HDDS's Senior Vice President of Programs, William Fong, met on September 30, 2022, and again on October 14, 2022, for the purpose of conducting senior executive negotiations as contemplated by Section 18.3 of the Teaming Agreement. WAL admits that no resolution of the parties' dispute was reache

28. In response to Paragraph 28 of the Counterclaim, WAL admits that, following the unsuccessful senior executive negotiations, WAL proposed mediation of the parties' dispute by letter dated October 21, 2022, consistent with Section 18.3 of the Teaming Agreement. WAL further admits that HDDS declined WAL's mediation proposal by letter dated October 28, 2022.

29. In response to Paragraph 29 of the Counterclaim, WAL denies the allegations contained therein to the extent HDDS characterizes WAL as having failed to engage in good-faith dispute resolution or as having otherwise frustrated the dispute-resolution process contemplated by Section 18.3 of the Teaming Agreement. WAL avers that it was WAL — not HDDS — that proposed mediation in accordance with the Teaming Agreement's

30. In response to Paragraph 30 of the Counterclaim, WAL admits that HDDS sent a formal indemnification demand letter to WAL on September 9, 2022, demanding payment of Fourteen Million Seven Hundred Twenty-Six Thousand Five Hundred Eighty-Three Dollars ($14,726,583.00). WAL denies that it is obligated to indemnify HDDS in the amount demanded or in any amount, for the reasons set forth herein and in WAL's Affirmative

IV. Count I — Breach of Contract / Contractual Indemnification

31. In response to Paragraph 31 of the Counterclaim, WAL denies that it has breached any obligation under Section 11.4 of the Teaming Agreement or any other provision of the Teaming Agreement. WAL specifically denies that its refusal to pay HDDS's indemnification demand constitutes a breach of contract.

32. In response to Paragraph 32 of the Counterclaim, WAL denies that Section 11.4 of the Teaming Agreement requires WAL to indemnify HDDS for the full Fourteen Million Seven Hundred Twenty-Six Thousand Five Hundred Eighty-Three Dollars ($14,726,583.00) identified in the COPD, or for any portion thereof. WAL avers that the indemnification obligation under Section 11.4(b) is expressly limited to claims that are "caused

33. In response to Paragraph 33 of the Counterclaim, WAL denies that its acts or omissions caused the cost overruns identified in the COPD. WAL denies that the indemnification obligation under Section 11.4(b) of the Teaming Agreement has been triggered. WAL incorporates by reference its responses to Paragraphs 15, 16, and 21 through 25 above.

34. In response to Paragraph 34 of the Counterclaim, WAL denies that HDDS has suffered any "Losses" as that term is defined in the Teaming Agreement that are indemnifiable under Section 11.4. WAL avers that the COPD is a preliminary determination, that no costs have been formally disallowed by the Contracting Officer or any appellate tribunal, and that the administrative review process remains pending. Accordingly, H

35. In response to Paragraph 35 of the Counterclaim, WAL denies all allegations contained therein to the extent they assert WAL's liability for the cost overruns identified in the COPD or otherwise. WAL denies that HDDS is entitled to indemnification from WAL under Section 11.4 or any other provision of the Teaming Agreement.

36. In response to Paragraph 36 of the Counterclaim, WAL denies all allegations contained therein. WAL incorporates by reference its responses to the preceding paragraphs.

37. In response to Paragraph 37 of the Counterclaim, WAL denies all allegations contained therein. WAL incorporates by reference its responses to the preceding paragraphs.

38. In response to Paragraph 38 of the Counterclaim, WAL denies all allegations contained therein. WAL incorporates by reference its responses to the preceding paragraphs.

39. In response to Paragraph 39 of the Counterclaim, WAL denies that HDDS is entitled to recover attorneys' fees under Section 11.6 of the Teaming Agreement or otherwise. WAL avers that the attorneys'-fees provision of Section 11.6, properly construed, does not entitle HDDS to fees under the circumstances of this case, where WAL has not breached the Teaming Agreement and the Counterclaim is without merit.

40. In response to Paragraph 40 of the Counterclaim and the prayer for relief contained therein, WAL denies that HDDS is entitled to any of the relief requested, including without limitation: (a) contractual indemnification in the amount of Fourteen Million Seven Hundred Twenty-Six Thousand Five Hundred Eighty-Three Dollars ($14,726,583.00) or any other amount; (b) attorneys' fees; (c) costs; (d) pre-judgment or post

Section 11.4(b) of the Teaming Agreement limits WAL's indemnification obligation to claims by the United States Government that costs incurred under the Prime Contract are "unallowable, unreasonable, or otherwise subject to disallowance, to the extent such claim is caused by Team Member's acts or omissions" (emphasis added). The phrase "to the extent such claim is caused by Team Member's acts or omissions" imposes a