Contract analysis

1. This is a declaratory judgment action arising from a dispute over the interpretation and application of an indemnification clause contained in a teaming agreement between an aerospace subcontractor and a prime defense contractor. The dispute concerns the scope and applicability of the indemnification obligation that the prime contractor seeks to impose upon the subcontractor in connection with cost overruns identi

2. HDDS has demanded that WAL indemnify it for the full $14,726,583 in cost overruns identified in a preliminary DCMA determination issued on August 1, 2022, despite the fact that: (a) the indemnification clause at issue, Section 11.4(b) of the Teaming Agreement, requires that the overruns be "caused by" WAL's acts or omissions; (b) the cost overruns were caused by HDDS's own conduct — including the provision of defi

3. WAL brings this action to seek a declaration of its rights and obligations under the Teaming Agreement to resolve this actual, justiciable controversy, which has caused and continues to cause WAL substantial uncertainty and concrete financial harm, including mandatory disclosure obligations to WAL's lender and insurer, contingent-liability treatment in WAL's financial statements, and the ongoing burden of an unres

II. THE PARTIES A. Plaintiff Whitmore Aerospace LLC

4. WAL is a Virginia limited liability company organized and existing under the laws of the Commonwealth of Virginia, with its principal place of business at 4200 Commerce Park Drive, Suite 600, Chantilly, Virginia 20151. All members of WAL are citizens of the Commonwealth of Virginia for purposes of diversity jurisdiction under 28 U.S.C. § 1332.

5. WAL was founded in 2006 by Marcus J. Whitmore and Elaine Whitmore, both citizens of Virginia. Since its founding, WAL has specialized in precision-machined turbine components, integrated propulsion sub-assemblies, and structural airframe parts for military and commercial aerospace platforms. WAL operates manufacturing facilities in Chantilly, Virginia, and Huntsville, Alabama, with additional engineering offices i

6. WAL employs approximately 1,400 people across its facilities and reported annual revenue of approximately $287 million for fiscal year 2022. WAL's workforce includes approximately 450 skilled machinists, 120 quality assurance engineers, and 90 design and manufacturing engineers, many of whom hold security clearances at the SECRET level or above.

7. WAL holds an active facility security clearance at the SECRET level, issued by the Defense Counterintelligence and Security Agency ("DCSA"), and has served as a subcontractor on over 30 Department of Defense programs since 2009, including programs administered by the U.S. Air Force, the U.S. Navy, and the Defense Advanced Research Projects Agency ("DARPA"). DCMA Northern Virginia, located at 14501 George Carter Wa

8. WAL's registered agent in the Commonwealth of Virginia is CT Statutory Services, 4701 Cox Road, Suite 285, Glen Allen, Virginia 23060. B. Defendant Hargrove-Dalton Defense Systems, Inc.

9. HDDS is a corporation organized and existing under the laws of the State of Delaware, with its principal place of business at 1100 Garrison Boulevard, Suite 2200, Bethesda, Maryland 20817. HDDS is therefore a citizen of both Delaware and Maryland for purposes of diversity jurisdiction under 28 U.S.C. § 1332.

10. HDDS is a prime defense contractor specializing in systems integration, avionics, advanced electronic warfare systems, and airframe manufacturing for the United States Department of Defense and allied foreign governments. HDDS employs approximately 12,500 people across its domestic and international operations and reported annual revenue of approximately $3.4 billion for fiscal year 2022. HDDS is one of the large

11. 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 is the program at the center of the dispute giving rise to this action. As the prime contractor, HDDS bears overall responsibility for the management, integration, and delivery of all work performed under the Prime Contract, including the coordination and oversight of al

12. This Court has subject-matter jurisdiction pursuant to 28 U.S.C. § 1332(a) because there is complete diversity of citizenship between the parties — WAL is a Virginia limited liability company whose members are all citizens of Virginia, and HDDS is a Delaware corporation with its principal place of business in Maryland — and the amount in controversy exceeds $75,000, exclusive of interest and costs. Specifically,

13. This Court also has jurisdiction pursuant to 28 U.S.C. §§ 2201 and 2202, the Declaratory Judgment Act, to declare the rights, status, and other legal relations of the parties in this case of actual controversy. As set forth more fully below, a real and substantial controversy exists between the parties regarding WAL's obligations, if any, under the indemnification provisions of the Teaming Agreement, and a declar

14. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b)(1) because HDDS maintains a substantial presence in this District, including a regional office in New York, New York, and transacts significant business here. Venue is also independently proper pursuant to the forum-selection clause in Section 18.2 of the Teaming Agreement, which provides that "[a]ny action or proceeding arising out of or relating t

IV. FACTUAL ALLEGATIONS A. The Prime Contract

15. On or about September 1, 2019, the United States Air Force, acting through the Air Force Life Cycle Management Center ("AFLCMC") at Wright-Patterson Air Force Base, Ohio, awarded HDDS Prime Contract No. FA8620-19-C-0337 for the Advanced Tactical Airframe Program ("ATAP"). The award followed a full and open competitive procurement process in which HDDS was selected from among four competing offerors, and in which

16. The ATAP program involves the design, development, and initial low-rate production of advanced titanium-composite hybrid airframe structures for next-generation tactical aircraft. The program represents one of the Air Force's highest-priority advanced materials initiatives and is intended to develop manufacturing processes and production capabilities for integrating high-performance titanium alloy components with

17. The Prime Contract is a cost-plus-incentive-fee ("CPIF") contract with a target cost of $412,000,000, a target fee of 8% ($32,960,000), a ceiling price of $470,000,000, and a share ratio of 70/30 (government/contractor) for cost overruns above the target cost and 60/40 (government/contractor) for cost underruns below the target cost. The CPIF contract structure was selected by the Air Force to account for the sub

18. The base period of performance under the Prime Contract runs from September 1, 2019, through August 31, 2024, a period of five years. The Prime Contract includes two one-year options for additional low-rate production and transition to full-rate production, which, if exercised, would extend the period of performance through August 31, 2026. As of the date of this filing, neither option has been exercised.

19. The Program Executive Officer for the ATAP program is Colonel Brian T. Matsuda, USAF, assigned to AFLCMC at Wright-Patterson Air Force Base, Ohio. The Administrative Contracting Officer ("ACO") responsible for contract administration of the Prime Contract is Lieutenant Colonel Sandra M. Vickers, USAF, assigned to DCMA Northern Virginia. Lt. Col. Vickers is the ACO who issued the Contracting Officer's Preliminary

20. On June 12, 2019, approximately two and one-half months before the award of the Prime Contract, WAL and HDDS executed a Teaming Agreement (the "Teaming Agreement" or the "Agreement") under which HDDS, designated as the "Team Lead," and WAL, designated as the "Team Member," agreed to collaborate on the ATAP program. The Teaming Agreement was negotiated over a period of approximately four months, during which the p

21. Under the Teaming Agreement, WAL was designated to perform Work Package 4 ("WP-4"), which encompasses the fabrication and delivery of titanium structural assemblies for the ATAP program, including wing-box substructure components, center fuselage longerons, and bulkhead fittings. WP-4 is one of seven work packages under the ATAP program, each assigned to HDDS or one of its subcontractors. WP-4 represents the high

22. WAL's share of the Prime Contract target cost under WP-4, as set forth in Exhibit B to the Teaming Agreement, is 18%, or $74,160,000 (calculated as $412,000,000 multiplied by 0.18). This figure represents the target cost for WAL's work and forms the basis for the Teaming Agreement's cost-sharing and indemnification provisions. WAL's subcontract under the ATAP program is structured as a cost-reimbursement subcontr

23. Section 18.1 of the Teaming Agreement provides that the Agreement "shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts-of-law principles thereof." Accordingly, the interpretation of the indemnification clause at issue in this action is governed by New York law. C. The Indemnification Clause (Section 11.4)

24. Section 11.4 of the Teaming Agreement, titled "Team Member Indemnification," is the indemnification provision at the center of this dispute. Section 11.4 provides, in pertinent part: "Team Member shall indemnify, defend, and hold harmless Team Lead from and against any and all Losses arising out of or relating to (a) Team Member's negligent acts or omissions, willful misconduct, or material breach of this Agreeme

25. Critically, Section 11.4(b) contains an express causation limitation that confines WAL's indemnification obligation to government claims that are "caused by Team Member's acts or omissions." This causation requirement is not a mere formality; it is a substantive limitation that the parties specifically negotiated during the formation of the Teaming Agreement. As alleged more fully below, the cost overruns at issu

26. In addition to the causation limitation in Section 11.4(b), the Teaming Agreement contains a separate aggregate liability cap in Section 11.5, which provides that "Team Member's aggregate liability under this Section 11 shall not exceed one hundred twenty percent (120%) of the value of Team Member's Work Package." Applying this formula, WAL's maximum aggregate indemnification liability under Section 11, if any ob

27. On August 1, 2022, ACO Lt. Col. Sandra M. Vickers issued a Contracting Officer's Preliminary Determination ("COPD") with respect to cost overruns identified on the ATAP program. The COPD, designated DCMA Document No. COPD-FA8620-22-001, identifies total cost overruns of $14,726,583 across multiple work packages under the Prime Contract. The COPD was issued to HDDS as the prime contractor and was provided to WAL b

28. The COPD attributed $12,817,441 (approximately 87.03%) of the total cost overruns to WP-4, the titanium structural assembly work package performed by WAL, and $1,909,142 (approximately 12.97%) of the total cost overruns to other work packages unrelated to WAL's scope of work. The non-WP-4 overruns were attributed to Work Package 2 (avionics integration, performed by HDDS internally) and Work Package 5 (composite

29. According to the narrative analysis contained in the COPD, the WP-4 cost overruns were caused by four principal factors, each of which the COPD identifies and quantifies: (i) Titanium raw-material cost escalation: approximately $4,200,000 in cost growth attributable to the significant increase in the market price of aerospace-grade titanium alloys (Ti-6Al-4V and Ti-5Al-5V-5Mo-3Cr) during the 2020–2022 period, dri

30. The COPD issued by Lt. Col. Vickers is expressly designated as a preliminary determination only. The COPD states on its face that it "does not constitute a final decision of the Contracting Officer" and that HDDS has the right to submit a written response before any Contracting Officer's Final Decision ("COFD") is issued. As of the date of this filing, DCMA has not issued a COFD under the Contract Disputes Act, 4

31. On October 15, 2022, HDDS filed a formal written response to the COPD and a request for the issuance of a COFD with DCMA, in which HDDS contested certain aspects of the COPD's analysis and requested adjustments to the preliminary cost-overrun figures. The administrative review process at DCMA is ongoing, and the ultimate amount of any cost overruns, if any, that may be formally determined to exist remains uncerta

32. WAL alleges, upon personal knowledge of its officers, employees, and agents who participated in the performance of WP-4, and upon information and belief as to matters based on HDDS's actions and communications, that the WP-4 cost overruns identified in the COPD were not caused by WAL's acts or omissions within the meaning of Section 11.4(b) of the Teaming Agreement, but rather were caused by circumstances attribu

33. Titanium raw-material cost escalation (approximately $4,200,000): The dramatic escalation in the global price of aerospace-grade titanium during the 2020–2022 period was driven by extraordinary supply-chain disruptions and geopolitical factors that constituted force-majeure events under any reasonable interpretation of that term. These factors include the COVID-19 pandemic, which caused prolonged shutdowns at maj

34. Rework due to non-conforming machining tolerances (approximately $5,100,000): The extensive rework that gave rise to this category of cost overruns was necessitated not by deficiencies in WAL's manufacturing processes, but by deficiencies in the engineering specifications and technical data packages provided by HDDS to WAL. WAL manufactured the titanium structural assemblies — including wing-box substructure comp

35. Schedule delays and idle-labor charges (approximately $2,300,000): The schedule delays that gave rise to approximately $2,300,000 in idle-labor charges were caused by HDDS's late delivery of government-furnished equipment ("GFE") that WAL required to commence and continue production operations under WP-4. Specifically, HDDS was responsible under the Teaming Agreement (Section 5.4) for the timely provision of cert

36. Engineering change proposal implementation costs (approximately $1,200,000): The engineering change proposals that gave rise to approximately $1,200,000 in implementation costs were directed by the U.S. Air Force through HDDS pursuant to the Changes clause incorporated into the Prime Contract (FAR 52.243-1). Specifically, Engineering Change Proposals ECP-ATAP-031, ECP-ATAP-042, and ECP-ATAP-056 were initiated by

37. On September 9, 2022, HDDS, acting through its Vice President and Associate General Counsel, Katherine M. Stanton, sent WAL a formal indemnification demand letter (the "Demand Letter") demanding that WAL indemnify HDDS for the full $14,726,583 in cost overruns identified in the COPD, pursuant to Section 11.4 of the Teaming Agreement. The Demand Letter stated that HDDS "hereby demands that [WAL] indemnify, defend,

38. HDDS's indemnification demand is improper and overbroad for at least three independent reasons: (a) The Demand Letter seeks indemnification for the full $14,726,583 identified in the COPD, which includes $1,909,142 in cost overruns attributable to Work Package 2 (avionics integration) and Work Package 5 (composite panel fabrication) — work packages that are entirely outside WAL's scope of responsibility under the

39. Consistent with the dispute-resolution procedures set forth in Section 18.3 of the Teaming Agreement, which requires that the parties engage in good-faith senior executive negotiations before resorting to litigation, WAL engaged in such negotiations with HDDS. Specifically, WAL's Chief Executive Officer and Managing Member, Marcus J. Whitmore, and HDDS's Senior Vice President, Contracts and Procurement, William F

40. On October 21, 2022, WAL, through its counsel at Calderwood & Harkness LLP, sent a written proposal to HDDS's counsel offering to participate in non-binding mediation to resolve the indemnification dispute, as contemplated by Section 18.3 of the Teaming Agreement, which provides that if senior executive negotiations fail to resolve a dispute, "the parties may submit the dispute to non-binding mediation before a n

41. On October 28, 2022, HDDS, through its counsel, declined WAL's mediation proposal. HDDS took the position that the mediation clause in Section 18.3 is permissive, noting that it uses the word "may" rather than "shall," and asserted that HDDS was not obligated to participate in mediation. HDDS further stated that it would "reserve all rights and remedies" under the Teaming Agreement and applicable law, including t

42. Having exhausted the contractual dispute-resolution steps that HDDS was willing to undertake, and having been unable to resolve the indemnification dispute through negotiation or alternative dispute resolution, WAL now seeks judicial resolution of the parties' dispute through this action for declaratory judgment.

43. An actual, justiciable controversy exists between WAL and HDDS regarding WAL's obligations, if any, under Section 11.4 of the Teaming Agreement. The parties are in direct and irreconcilable disagreement regarding the interpretation and application of Section 11.4 to the facts and circumstances of the COPD and the ATAP program cost overruns. HDDS has asserted that WAL is obligated to indemnify HDDS for the full $1

44. HDDS has asserted a present, concrete demand for $14,726,583 in indemnification from WAL through the Demand Letter dated September 9, 2022. HDDS's demand is not contingent on future events; it is a present, unconditional assertion of WAL's indemnification obligation. WAL disputes that any indemnification obligation has been triggered under Section 11.4 of the Teaming Agreement and, in the alternative, disputes th

45. The controversy is ripe for judicial determination. HDDS's Demand Letter creates an immediate and concrete injury to WAL's legal and financial interests that extends beyond the indemnification dispute itself. Specifically: (a) WAL is required under Section 6.07(b) of its $75,000,000 senior secured revolving credit facility with Ridgeline National Bank, N.A., to promptly disclose any claims, demands, or threatened

46. A declaratory judgment will serve a useful purpose in resolving this controversy and providing certainty to both parties regarding their rights and obligations under the Teaming Agreement. A declaration from this Court will enable the parties to plan their affairs, resolve their financial reporting obligations, and, if necessary, engage in further proceedings with the benefit of a definitive interpretation of the

VI. COUNT I — DECLARATORY JUDGMENT (28 U.S.C. §§ 2201–2202)

47. WAL re-alleges and incorporates by reference the allegations set forth in Paragraphs 1 through 46 of this Verified Complaint as if fully set forth herein.

48. Pursuant to 28 U.S.C. §§ 2201 and 2202, WAL is entitled to a declaration of its rights and legal relations with respect to HDDS's indemnification demand under Section 11.4 of the Teaming Agreement dated June 12, 2019. An actual controversy exists between the parties within the meaning of the Declaratory Judgment Act, and a declaratory judgment will serve a useful purpose in terminating the uncertainty and controv

49. WAL respectfully requests that this Court enter a declaratory judgment declaring that: (a) Section 11.4 of the Teaming Agreement does not obligate WAL to indemnify HDDS for the cost overruns identified in the DCMA Contracting Officer's Preliminary Determination dated August 1, 2022, because: (i) the cost overruns were not "caused by" WAL's acts or omissions within the meaning of Section 11.4(b), as the cost overr

VII. PRAYER FOR RELIEF WHEREFORE, Plaintiff Whitmore Aerospace LLC respectfully requests that this Court:

1. Enter a declaratory judgment in favor of WAL and against HDDS consistent with the declarations sought in Paragraphs 49(a), (b), and (c) of Count I above, declaring that WAL has no obligation to indemnify HDDS under Section 11.4 of the Teaming Agreement for the cost overruns identified in the DCMA Contracting Officer's Preliminary Determination dated August 1, 2022;

2. Award WAL its reasonable attorneys' fees and costs incurred in this action, to the extent permitted by applicable law or by the terms of the Teaming Agreement, including but not limited to Section 18.5 of the Teaming Agreement, which provides that the prevailing party in any action arising under the Agreement shall be entitled to recover its reasonable attorneys' fees and costs from the non-prevailing party;

3. Grant such other and further relief as this Court deems just and proper in the circumstances of this case.

VIII. DEMAND FOR JURY TRIAL Plaintiff Whitmore Aerospace LLC hereby demands a trial by jury on all issues so triable in this action, pursuant to the Seventh Amendment to the United States Constitution and Rule 38 of the Federal Rules of Civil Procedure. VERIFICATION STATE OF VIRGINIA COUNTY OF FAIRFAX I, Marcus J. Whitmore, being duly sworn, depose and state as follows: