1019-00005 · Whitmore Aerospace LLC · Analysis

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT

TO: Priya Anand, Partner

FROM: Patrick Gallagher, Associate

DATE: January 18, 2023

RE: Analysis of Defendant's Answer and Counterclaim — Whitmore Aerospace LLC v. Hargrove-Dalton Defense Systems, Inc., No. 1:22-cv-10147-RMB (S.D.N.Y.)

CC: Douglas Carmichael, Partner; Simone Laroche, Associate

I. Introduction and Purpose

On January 13, 2023, Hargrove-Dalton Defense Systems, Inc. ("HDDS") filed its Answer and Counterclaim in the above-captioned declaratory judgment action pending before the Honorable Richard M. Brannigan, United States District Judge, in the United States District Court for the Southern District of New York. HDDS is represented by Leonard Trager (lead partner) and Megan Forsythe (senior associate) of Voss, Trager & Kendall LLP ("VTK"), located at 900 17th Street NW, Suite 800, Washington, D.C. 20006. VTK is a well-known defense-industry-focused litigation firm, and we have encountered both Trager and Forsythe in prior government contracting disputes; their filings are characteristically detailed and aggressive, and the present filing is no exception.

This memorandum provides a comprehensive analysis of HDDS's Answer and Counterclaim, evaluates each of HDDS's affirmative defenses and the legal and factual bases of the counterclaim, assesses Whitmore Aerospace LLC's ("WAL") available defenses to the counterclaim, and recommends a strategy for WAL's Reply to the Counterclaim, which is due February 3, 2023, under Federal Rule of Civil Procedure 12(a)(1)(B) (providing twenty-one days from service of the counterclaim to file a responsive pleading). In addition, this memorandum addresses certain coordination items related to the DCMA administrative review, insurance coverage, lender notification obligations, and financial statement treatment of the counterclaim.

II. Procedural Background

WAL filed its Verified Complaint for Declaratory Judgment on November 28, 2022, asserting a single count under the Declaratory Judgment Act, 28 U.S.C. §§ 2201–2202. The Complaint was verified by Marcus Whitmore, President and Chief Executive Officer of WAL, and is supported by exhibits including the Teaming Agreement, the DCMA Contracting Officer's Preliminary Determination ("COPD"), the September 9, 2022 indemnification demand letter from HDDS, and related correspondence.

The Complaint seeks three specific declarations from the Court:

1. First Declaration: That Section 11.4 of the Teaming Agreement dated June 12, 2019, between HDDS and WAL, does not obligate WAL to indemnify HDDS for the cost overruns identified in the COPD dated August 1, 2022, issued by Administrative Contracting Officer Lt. Col. Sandra M. Vickers of the Defense Contract Management Agency ("DCMA");

2. Second Declaration: That even if Section 11.4 applies, WAL's indemnification obligation extends only to overruns "caused by" WAL's acts or omissions, and that the cost overruns at issue were caused by HDDS and/or force-majeure events beyond WAL's control; and

3. Third Declaration: That HDDS's indemnification demand of $14,726,583 is overbroad because it includes $1,909,142 in cost overruns attributable to non-Work-Package-4 activities for which WAL bears no contractual responsibility.

The case was assigned to Judge Brannigan upon filing and referred to Magistrate Judge the Honorable Allison P. Kurtz for pretrial matters. HDDS was served on December 23, 2022, through its registered agent for service of process. Pursuant to Federal Rule of Civil Procedure 12(a)(1)(A), HDDS's response to the Complaint was due on or before January 13, 2023, and HDDS timely filed its Answer and Counterclaim on that date. The Answer consists of a point-by-point response to the fifty-three numbered paragraphs of WAL's Complaint, five affirmative defenses, and a single-count counterclaim for contractual indemnification.

No initial pretrial conference has yet been scheduled by the Court, and no case management order has been entered. We anticipate that Judge Brannigan's chambers will issue a scheduling order shortly after the pleadings close.

III. Summary of HDDS's Answer

HDDS's Answer tracks each numbered paragraph of WAL's Complaint. Below is a summary of the material admissions, denials, and affirmative defenses, along with our preliminary analysis.

A. Admissions

HDDS makes several important admissions that narrow the range of contested issues in the case:

Jurisdiction and Venue. HDDS admits that this Court has subject-matter jurisdiction under 28 U.S.C. § 1332(a) based on diversity of citizenship. Specifically, HDDS admits that it is a Delaware corporation with its principal place of business in Bethesda, Maryland, and that WAL is a Virginia limited liability company with its principal place of business in Chantilly, Virginia. HDDS further admits that the amount in controversy exceeds $75,000, exclusive of interest and costs. With respect to venue, HDDS 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, which designates the courts located in Manhattan, New York as the exclusive forum for any dispute arising out of or relating to the Teaming Agreement. These admissions eliminate any threshold jurisdictional or venue challenges.

Existence of the Teaming Agreement. HDDS admits the existence and execution of the Teaming Agreement dated June 12, 2019, between HDDS, as Team Lead, and WAL, as Team Member. HDDS further admits the general structure of the teaming arrangement, under which HDDS serves as the prime contractor on Prime Contract No. FA8620-19-C-0337 (the Advanced Tactical Airframe Program, or "ATAP") and WAL performs as a major subcontractor responsible for Work Package 4 ("WP-4"), which encompasses the design, fabrication, and delivery of titanium structural assemblies, including the wing-box substructure, center fuselage longerons, and bulkhead fittings.

Prime Contract Terms. HDDS admits that the Prime Contract is a cost-plus-incentive-fee ("CPIF") contract with a target cost of $412 million, a target fee of eight percent ($32.96 million), a ceiling price of $470 million, and a share ratio of 70/30 (government/contractor) for cost overruns and 60/40 (government/contractor) for cost underruns. These admissions regarding the prime-contract structure are relevant because they establish the framework within which the parties' subcontractor indemnification obligations are assessed.

COPD Issuance and Demand. HDDS admits that the DCMA COPD dated August 1, 2022 identified $14,726,583 in total cost overruns on the ATAP program. HDDS further admits that it sent an indemnification demand letter to WAL on September 9, 2022, demanding payment of the full $14,726,583 in cost overruns identified in the COPD. These admissions confirm the factual predicate for the present dispute and corroborate the documentary evidence already in the record.

Pre-Litigation Dispute Resolution. HDDS admits the sequence of pre-litigation dispute resolution steps alleged in the Complaint. Specifically, HDDS admits that: (i) two senior executive meetings were held — the first on September 30, 2022, between Marcus Whitmore (CEO of WAL) and William Fong (Executive Vice President, Defense Programs, HDDS), and the second on October 14, 2022; (ii) WAL submitted a written proposal for non-binding mediation on October 21, 2022, pursuant to the dispute escalation procedures set forth in Section 17.1 of the Teaming Agreement; and (iii) HDDS declined mediation in a letter dated October 28, 2022. These admissions are significant because they establish that WAL complied with the contractual dispute resolution prerequisites before filing this action and that HDDS chose to forego the mediation option that the Teaming Agreement contemplates.

B. Denials

HDDS's denials focus on the merits of the indemnification dispute and set the stage for the contested issues in the case:

Scope of Section 11.4(b) — Causation Standard. HDDS denies WAL's characterization that Section 11.4(b) requires causation attributable solely to WAL's "acts or omissions." HDDS contends that the indemnification clause broadly covers "any claim by the U.S. Government that costs incurred under Team Member's Work Package are unallowable, unreasonable, or otherwise subject to disallowance." HDDS's reading of the clause emphasizes the breadth of the triggering language — i.e., "any claim" — and appears to downplay the limiting causation clause ("to the extent such claim is caused by Team Member's acts or omissions"). This competing interpretation of Section 11.4(b) lies at the heart of the case and will require careful contract construction analysis under New York law. As discussed further below, we believe WAL's reading of the clause is more consistent with the plain text and with New York's strict-construction doctrine for indemnification provisions.

Preliminary Nature of the COPD. HDDS denies that the COPD's preliminary nature excuses WAL's indemnification obligation. HDDS argues that Section 11.4(b) is triggered by any government "claim" of cost disallowance, not solely by a formal disallowance or final decision of the contracting officer. HDDS characterizes the COPD as a "claim" within the meaning of the Teaming Agreement, notwithstanding its express designation as a "Preliminary Determination." This is a significant interpretive dispute because the COPD, by its own terms, states that it is subject to further review and that the contracting officer's final decision ("COFD") has not yet been issued. We believe WAL has a strong argument that the COPD does not constitute a "claim" sufficient to trigger the indemnification obligation, particularly given that the COFD process remains ongoing.

Causation — HDDS's Conduct and Force Majeure. HDDS denies that WAL's cost overruns were caused by HDDS-supplied engineering specifications, HDDS's late delivery of government-furnished equipment ("GFE"), or force-majeure events. HDDS instead attributes the overruns entirely to WAL's own performance deficiencies under WP-4. As discussed in greater detail in Section IV.B below, the causation dispute will be the central factual battleground in this case, and each of the four cost-overrun components ($4.2 million for titanium price escalation, $5.1 million for rework, $2.3 million for schedule delays, and $1.2 million for ECP implementation costs) will require individualized factual development.

Overbreadth of the Demand. HDDS denies that its indemnification demand is overbroad, contending that the full $14,726,583 — including the $1,909,142 in non-WP-4 overruns — relates to or arises out of WAL's performance of Work Package 4. HDDS's theory is that the non-WP-4 overruns were caused by cascading downstream effects of WAL's WP-4 performance failures, and therefore fall within the scope of Section 11.4. This argument is addressed in detail in Section IV.B.3 and Section V.B below.

C. Affirmative Defenses

HDDS asserts five affirmative defenses, each of which is analyzed below.

1. Failure to State a Claim / No Justiciable Controversy (First Affirmative Defense)

HDDS argues that WAL's declaratory judgment action is premature because the DCMA administrative review is ongoing and no Contracting Officer's Final Decision ("COFD") has been issued. HDDS contends that no actual controversy exists under 28 U.S.C. § 2201 until costs are formally disallowed through a COFD, and that the COPD — as a preliminary determination — does not create a sufficiently concrete dispute to satisfy the case-or-controversy requirement of Article III.

Analysis: This defense is somewhat internally inconsistent with HDDS's own conduct and pleading posture. HDDS sent WAL an indemnification demand for $14,726,583 on September 9, 2022 — a demand that by its nature presupposes an existing, present obligation on WAL's part to indemnify HDDS. HDDS has now filed a compulsory counterclaim seeking that same amount in damages. It strains credulity for HDDS to simultaneously demand payment from WAL, assert a counterclaim seeking that payment, and also contend that no justiciable controversy exists. We should highlight this tension prominently in the Reply and in opposition to any potential motion to dismiss.

Moreover, the Second Circuit has consistently held that a declaratory judgment action is ripe where the parties have taken adverse positions on a concrete legal question and where the resolution of that question will have practical consequences for the parties. See, e.g., Sterling Reach Partners LLC v. Already, LLC, 663 F.3d 89, 95–96 (2d Cir. 2011); Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 411 F.3d 384, 388 (2d Cir. 2005). HDDS's own September 9, 2022 demand letter — which demanded immediate payment of $14,726,583 and reserved all rights to pursue litigation — creates the actual controversy that Section 2201 requires.

Additionally, to the extent HDDS argues that the DCMA administrative process must run its course before this Court can adjudicate the contractual indemnification dispute between the private parties, we note that the DCMA review concerns the government's determination of cost allowability under the prime contract — a determination that is distinct from the private contractual question of indemnification obligations between HDDS and WAL under the Teaming Agreement. The district court has jurisdiction over the parties' contract dispute regardless of the status of the government's administrative review, although the practical wisdom of deferral (via a stay) is a separate question addressed in Section VI.C below.

Assessment: This defense is weak on its own terms and is undermined by HDDS's counterclaim.

2. Waiver / Estoppel (Second Affirmative Defense)

HDDS contends that WAL waived its right to contest indemnification by (a) failing to timely object to the COPD cost allocation and (b) continuing performance under the Teaming Agreement after the COPD was issued on August 1, 2022.

Analysis: This defense is weak on the facts and the law. WAL is a subcontractor and has no privity of contract with the United States Government. The COPD was issued by ACO Lt. Col. Sandra M. Vickers and was directed to HDDS as the prime contractor under Prime Contract No. FA8620-19-C-0337. WAL had no independent right or obligation to respond to the COPD, nor was it a party to the DCMA administrative process. It was HDDS — not WAL — that filed the request for a Contracting Officer's Final Decision with DCMA on October 15, 2022. WAL cannot have "waived" its right to contest an indemnification demand by failing to take action with respect to a government determination to which it was not a party.

As to the contention that WAL waived its rights by continuing performance under the Teaming Agreement after the COPD issued, this argument conflates WAL's ongoing contractual performance obligations with its right to contest a disputed indemnification demand. Continued performance does not constitute acquiescence to an indemnification demand, particularly where — as here — WAL promptly initiated dispute resolution by arranging the September 30, 2022 senior executive meeting and subsequently proposed mediation. Under New York law, waiver requires the intentional relinquishment of a known right, and the facts here are inconsistent with any such intentional relinquishment. See, e.g., Fundamental Portfolio Advisors, Inc. v. Tocqueville Asset Mgmt., L.P., 7 N.Y.3d 96, 104 (2006) (waiver must be established by clear and unmistakable conduct).

Assessment: This defense is weak and should be challenged in the Reply.

3. Unclean Hands (Third Affirmative Defense)

HDDS alleges that WAL's own performance failures caused the cost overruns, including non-conforming machining tolerances leading to $5.1 million in rework, and that WAL cannot seek equitable relief while responsible for the underlying harm.

Analysis: This affirmative defense is essentially a merits argument repackaged as a traditional equitable defense. HDDS is asserting that WAL's own misconduct — specifically, its alleged failure to meet machining tolerances on the titanium structural assemblies — caused the very cost overruns that WAL seeks a declaration it need not indemnify. While the underlying factual allegations are relevant to the causation dispute, framing them as an "unclean hands" defense is misplaced for at least two reasons.

First, a declaratory judgment action is not purely equitable in nature. The Declaratory Judgment Act authorizes relief in both legal and equitable contexts, and the underlying claim here — contractual indemnification — sounds in law, not equity. The unclean hands doctrine is an equitable defense that has limited applicability in actions at law. See, e.g., PenneCom B.V. v. Ashgrove & Co., 372 F.3d 488, 493 (2d Cir. 2004) (noting the "historic restriction of the unclean hands doctrine to equitable claims").

Second, even if the defense were procedurally proper, the causation question is the heart of the dispute on the merits, not a collateral equitable consideration. Whether WAL's performance caused the cost overruns is the central factual question under Section 11.4(b). Recasting this question as an "unclean hands" defense does not add anything to HDDS's position; it merely reframes the same factual allegations in different doctrinal clothing.

Assessment: This defense should be challenged as procedurally improper and substantively duplicative of HDDS's merits position. We may consider a motion to strike under Rule 12(f) if it becomes a source of confusion, though typically such motions are disfavored.

4. Failure to Mitigate (Fourth Affirmative Defense)

HDDS asserts that WAL failed to take reasonable steps to mitigate cost overruns, including: (a) failing to secure alternative titanium supply sources when raw-material prices escalated (the $4.2 million titanium price component), and (b) failing to implement corrective machining processes in a timely manner (relating to the $5.1 million rework component).

Analysis: This defense has somewhat more factual traction than the others, particularly with respect to the titanium price escalation component. If WAL had the ability to lock in supply contracts or to secure alternative titanium sources at lower prices and failed to do so, HDDS could argue that some portion of the $4.2 million in escalated material costs was avoidable. We will need to develop the factual record on this point during discovery, including WAL's procurement documentation, correspondence with titanium suppliers, and contemporaneous analysis of market conditions.

That said, WAL's position is that the titanium price escalation was a force-majeure event driven by global supply-chain disruptions — likely including the well-documented post-COVID supply disruptions in the aerospace-grade titanium market — that were beyond WAL's control. If the price escalation qualifies as a force-majeure event, then the failure-to-mitigate defense loses much of its force, because a party's obligation to mitigate is ordinarily limited to reasonable steps, and a force-majeure event may render alternative sourcing impractical or impossible.

With respect to the corrective machining processes, this allegation overlaps with the rework causation dispute. If the rework was necessitated by deficiencies in HDDS-supplied engineering specifications — rather than by WAL's own manufacturing processes — then HDDS cannot argue that WAL failed to mitigate damages that were attributable to HDDS's conduct.

Assessment: This defense requires further factual development. WAL's mitigation efforts regarding titanium procurement and corrective machining should be thoroughly documented and organized for discovery. We should work with the client to compile a comprehensive mitigation chronology.

5. Contractual Indemnification Obligation Bars Declaratory Relief (Fifth Affirmative Defense)

HDDS argues that WAL's indemnification obligation under Section 11.4 is clear and unambiguous and that declaratory relief is inappropriate where the contract's plain language resolves the dispute without need for judicial construction.

Analysis: This is a merits defense dressed as a jurisdictional or procedural objection. HDDS's argument is essentially that because the indemnification clause is (in HDDS's view) unambiguous, there is no genuine dispute requiring declaratory relief. This argument misapprehends the purpose of the Declaratory Judgment Act. The very existence of competing interpretations of Section 11.4(b) — including the meaning of "claim," the scope of the causation requirement, and the applicability of the clause to a preliminary determination — demonstrates that a genuine controversy exists. If the clause were truly unambiguous, one would expect the parties to agree on its meaning; their disagreement is precisely what makes declaratory relief appropriate.

Moreover, the Declaratory Judgment Act vests district courts with discretion to entertain declaratory judgment actions; it does not require the court to decline relief merely because one party believes its interpretation of the contract is correct. Under the Second Circuit's factors for evaluating whether to exercise declaratory judgment jurisdiction, the existence of a pending related proceeding in another forum (here, the DCMA administrative review) is relevant but not dispositive, and the need to settle uncertainty in a disputed contractual relationship weighs in favor of exercising jurisdiction. See Dow Jones & Co. v. Harrods Ltd., 346 F.3d 357, 359–60 (2d Cir. 2003).

Assessment: This defense lacks merit and should be challenged in the Reply and in opposition to any motion to dismiss.

IV. Analysis of HDDS's Counterclaim

A. Overview of the Counterclaim

HDDS asserts a single counterclaim for contractual indemnification under Section 11.4 of the Teaming Agreement. The counterclaim is styled as "Count I — Breach of Contract: Contractual Indemnification" and seeks the following relief:

(a) A judgment against WAL in the amount of $14,726,583, representing the full amount of the cost overruns identified in the COPD, plus prejudgment interest at the statutory rate under New York law (currently nine percent per annum under N.Y. C.P.L.R. § 5004);

(b) An award of reasonable attorneys' fees and litigation costs pursuant to Section 11.6 of the Teaming Agreement, which provides that "the prevailing party in any dispute relating to indemnification obligations under this Article XI shall be entitled to recover its reasonable attorneys' fees and costs of litigation"; and

The counterclaim is compulsory under Federal Rule of Civil Procedure 13(a) because it arises out of the same transaction or occurrence as WAL's declaratory judgment action — namely, the Teaming Agreement, WAL's performance of Work Package 4, and the COPD cost-overrun dispute. This is not surprising and was anticipated in our Preliminary Case Assessment Memorandum dated November 7, 2022.

B. Key Allegations in the Counterclaim

1. Triggering of Section 11.4(b)

HDDS alleges that the DCMA COPD constitutes a "claim by the U.S. Government that costs incurred under Team Member's Work Package are unallowable, unreasonable, or otherwise subject to disallowance" within the meaning of Section 11.4(b). HDDS characterizes the COPD as a formal government action that identifies specific costs as subject to disallowance and that satisfies the triggering conditions of the indemnification clause.

Analysis: The COPD is expressly styled as a "Preliminary Determination" and states on its face that it is issued "for review and comment" by the prime contractor prior to the issuance of a final decision. HDDS's characterization of the COPD as a "claim" within the meaning of Section 11.4(b) is therefore debatable. The term "claim" in the context of government contracting typically refers to a formal demand for relief — either a contractor claim under the Contract Disputes Act, 41 U.S.C. § 7103, or a government claim in the nature of a final decision demanding payment or performance. A preliminary determination that is expressly subject to further review and revision arguably does not rise to the level of a "claim."

Moreover, even if the COPD is deemed sufficient to trigger Section 11.4(b), the causation element of the clause — "to the extent such claim is caused by Team Member's acts or omissions" — remains a factual question that cannot be resolved on the pleadings. HDDS's counterclaim does not (and cannot, at the pleading stage) establish that the cost overruns identified in the COPD were in fact "caused by" WAL's acts or omissions as opposed to HDDS's own conduct or force-majeure events.

2. Causation — The Four Components

HDDS alleges that all cost overruns were caused by WAL's acts or omissions in performing Work Package 4. The counterclaim identifies four specific cost-overrun components, which collectively account for $12,800,000 of the $14,726,583 total. (The remaining $1,926,583 is not individually itemized in the counterclaim.) Each component and WAL's anticipated response are discussed below.

Titanium Raw-Material Cost Escalation ($4.2 million). HDDS contends that WAL failed to lock in supply contracts for aerospace-grade titanium and that WAL bore the risk of material pricing under WP-4. HDDS characterizes this as a procurement failure by WAL that is squarely within WAL's scope of responsibility.

WAL's position is that the titanium price escalation was a force-majeure event driven by global supply-chain disruptions, including well-documented market conditions affecting the aerospace-grade titanium supply chain during the relevant period. WAL will further argue that the Teaming Agreement allocates material pricing risk in a manner that accounts for extraordinary market conditions, and that WAL was not contractually obligated to hedge or lock in material prices for the duration of the program. The allocation of material procurement risk under the Teaming Agreement and any applicable subcontract terms (particularly the WP-4 Task Order and Statement of Work) will require careful analysis.

Rework Due to Non-Conforming Machining Tolerances ($5.1 million). HDDS contends that WAL's manufacturing processes failed to meet the engineering specifications provided, resulting in non-conforming parts that required extensive rework. This is the largest single cost-overrun component and will likely be the most hotly contested factual issue in the case.

WAL's position is that the rework was attributable to deficiencies in HDDS-supplied engineering specifications, including specifications that were changed mid-stream after WAL had commenced production. WAL will point to contemporaneous correspondence in which WAL's engineering team flagged specification ambiguities and inconsistencies with the HDDS technical team, and to instances where HDDS issued revised specifications after WAL had already tooled and begun machining operations. WAL's quality control documentation — including inspection reports, non-conformance reports ("NCRs"), and corrective action reports ("CARs") — will be critical to establishing that the machining tolerance failures were traceable to specification issues rather than to WAL's processes.

Schedule Delays Causing Idle-Labor Charges ($2.3 million). HDDS contends that WAL's production delays caused cascading schedule impacts that resulted in $2.3 million in idle-labor charges across the ATAP program. HDDS's theory is that WAL's late delivery of titanium structural assemblies disrupted the integrated master schedule, causing downstream work stoppages on HDDS's own assembly operations.

WAL's position is that the schedule delays resulted primarily from HDDS's late delivery of government-furnished equipment ("GFE"), which WAL required in order to complete certain assembly and integration tasks on WP-4. WAL will argue that correspondence and delivery receipts show that HDDS failed to deliver GFE items on time, and that these delays — not WAL's production performance — were the proximate cause of the schedule disruptions. WAL will need to develop a detailed schedule-impact analysis, likely with the assistance of a scheduling expert, to demonstrate the causal chain between HDDS's GFE delivery failures and the idle-labor charges.

Engineering Change Proposal Implementation Costs ($1.2 million). HDDS contends that the engineering change proposals ("ECPs") at issue were necessitated by WAL's design deviations from the approved baseline and that the costs of implementing those ECPs are therefore attributable to WAL.

WAL's position is that the ECPs were initiated by HDDS and/or the government — not by WAL — and that WAL was directed to implement the changes pursuant to contractual change-order provisions. Change-order documentation, including the ECP origination forms, government direction memos, and WAL's cost proposals for the ECPs, will be critical to resolving this dispute. If the ECPs were government-directed, the costs of implementation should be borne by the government (under the prime contract's changes clause) and/or by HDDS (as the party that flowed down the direction to WAL), not by WAL.

Summary Assessment: These are factual disputes that will require extensive documentary evidence and possibly expert testimony to resolve. The discovery phase will be critical, and we should begin preparing targeted document requests and interrogatories focused on each of the four cost-overrun components. We should also begin identifying potential expert witnesses, including a government-contracts cost-accounting expert (to opine on the proper allocation of cost overruns under FAR Part 31) and, potentially, a metallurgical or manufacturing process expert (to address the machining tolerance and specification issues).

3. Full Amount of COPD — Inclusion of Non-WP-4 Overruns ($1,909,142)

HDDS demands $14,726,583 — the full COPD amount — not merely the $12,817,441 (87.03%) that the COPD attributed to Work Package 4. HDDS alleges that the remaining $1,909,142 (12.97%), which the COPD attributes to other work packages, is also attributable to cascading effects of WAL's WP-4 performance failures. Specifically, HDDS contends that WAL's schedule delays and specification non-conformances caused downstream cost impacts on Work Packages 2 (avionics integration) and 5 (final assembly and integration), which are performed by other team members or by HDDS itself.

Analysis: This is a significant overreach and represents one of WAL's strongest arguments on the counterclaim. The COPD itself — issued by ACO Lt. Col. Sandra M. Vickers — expressly allocates costs by work package. The COPD attributes $12,817,441 to WP-4 and $1,909,142 to other work packages. The COPD does not attribute the non-WP-4 overruns to WAL's performance, nor does it identify a causal nexus between WAL's WP-4 activities and the overruns on other work packages.

HDDS's attempt to attribute the non-WP-4 overruns to WAL has no support in the COPD and would require HDDS to independently prove — through documentary evidence and likely through expert testimony — that the $1,909,142 in non-WP-4 overruns was in fact caused by WAL's conduct. This burden is heightened by the fact that Section 11.4 of the Teaming Agreement limits the indemnification obligation to claims arising from "Team Member's Work Package" — a defined term that refers specifically to WP-4. Even under the broadest reading of the clause, it is difficult to see how overruns on work packages that are not within WAL's scope of work can be characterized as arising from "Team Member's Work Package."

As discussed in Section V.B below, this issue is a strong candidate for partial summary judgment at the appropriate stage of the proceedings.

4. Attorneys' Fees Under Section 11.6

HDDS claims entitlement to attorneys' fees and litigation costs as the prevailing party under Section 11.6 of the Teaming Agreement.

Analysis: Section 11.6 is a bilateral fee-shifting provision — it entitles the "prevailing party" in any indemnification dispute to recover reasonable attorneys' fees and costs. This means that if WAL prevails on its declaratory judgment claim and defeats HDDS's counterclaim, WAL will be entitled to recover its own attorneys' fees and litigation costs from HDDS. The bilateral nature of this provision cuts both ways and should factor into our settlement analysis. It increases the stakes for both parties and may provide useful leverage in settlement discussions.

The amount of HDDS's attorneys' fees incurred to date is unknown, but VTK's billing rates are likely comparable to our own. Based on the complexity of the case and the filing of the Answer and Counterclaim, HDDS has likely incurred fees in the range of $150,000–$250,000 to date, though this is speculative. As the case progresses through discovery and motions practice, both sides' accumulated fees will increase substantially, which further underscores the value of early resolution if favorable terms can be achieved.

C. Amount in Controversy

HDDS's counterclaim seeks $14,726,583 in indemnification plus attorneys' fees and prejudgment interest. The following additional considerations bear on WAL's overall financial exposure:

WAL's maximum theoretical exposure under the Teaming Agreement is governed by Section 11.5, which caps liability for indemnification claims at 120% of the value of the applicable work package. WP-4 has a stated value of $74,160,000, yielding a maximum cap of $88,992,000 (120% × $74,160,000). The actual claimed amount of $14,726,583 is well within that cap, and the cap is therefore not a defense to the current claim amount, though it may become relevant if HDDS were to attempt to increase its claim.

The counterclaim does not seek punitive or consequential damages, which is consistent with the Teaming Agreement's limitations-of-liability provisions. Section 12.1 of the Teaming Agreement contains a mutual waiver of consequential, incidental, and punitive damages, and HDDS's counterclaim does not seek to circumvent that waiver.

V. Evaluation of WAL's Defenses to the Counterclaim

WAL has multiple defenses available to it in responding to HDDS's counterclaim. The principal defenses are discussed below.

A. Causation Defense (Section 11.4(b) — "caused by Team Member's acts or omissions")

The causation defense is WAL's core defense and the central issue in the case. Section 11.4(b) limits WAL's indemnification obligation to claims "to the extent such claim is caused by Team Member's acts or omissions." WAL must demonstrate that the cost overruns identified in the COPD were not caused by its own acts or omissions but rather by HDDS's conduct (including specification deficiencies and GFE delivery failures) and by force-majeure events (including global titanium supply-chain disruptions).

This defense implicates factual questions that will require extensive documentary and testimonial proof. The key factual areas requiring development during discovery include:

(a) Titanium Price Escalation ($4.2 million): WAL's force-majeure characterization of the price escalation; the state of the global aerospace-grade titanium market during the relevant period; WAL's procurement practices and any efforts to lock in pricing or secure alternative supply sources; the allocation of material procurement risk under the Teaming Agreement, the WP-4 Task Order, and any applicable subcontract purchase orders; and any communications between HDDS and WAL regarding material pricing assumptions and risk allocation.

(b) Rework / Non-Conforming Machining Tolerances ($5.1 million): The sufficiency and completeness of the engineering specifications supplied by HDDS; any mid-stream specification changes issued by HDDS or directed by the government; WAL's manufacturing processes and quality control documentation (including NCRs, CARs, and first-article inspection reports); correspondence between WAL's engineering team and HDDS's technical team regarding specification ambiguities or inconsistencies; and any post-rework analyses identifying the root cause of the tolerance failures.

(c) Schedule Delays / Idle-Labor Charges ($2.3 million): The timeline of HDDS's delivery of government-furnished equipment to WAL; correspondence and delivery receipts regarding late GFE deliveries; the integrated master schedule and critical-path analysis showing the causal chain between GFE delays and WAL's production schedule; and any schedule-impact analyses prepared by either party during the relevant period.

(d) ECP Implementation Costs ($1.2 million): The origination and authorization of the ECPs at issue (i.e., whether they were government-directed, HDDS-initiated, or WAL-initiated); ECP origination forms and approval documentation; the contractual change-order provisions governing ECP implementation and cost allocation; WAL's cost proposals for the ECPs; and any correspondence between WAL, HDDS, and the government regarding the ECPs.

We should begin preparing targeted discovery requests — including document requests and interrogatories — focused on each of these four areas. In addition, we should identify and begin vetting potential expert witnesses, including a government-contracts cost-accounting expert and, potentially, a manufacturing process or metallurgical expert.

B. Overbreadth Defense (Non-WP-4 Overruns — $1,909,142)

As discussed in Section IV.B.3 above, the COPD allocates $1,909,142 to non-WP-4 work packages. Section 11.4 of the Teaming Agreement limits indemnification to claims arising from "Team Member's Work Package," which is defined by reference to WP-4. WAL has no responsibility for cost overruns on other work packages, and HDDS's attempt to attribute those overruns to WAL through a "cascading effects" theory has no support in the COPD and would require HDDS to carry an independent burden of proof on proximate causation.

Even if HDDS could establish that some portion of the non-WP-4 overruns was "caused by" WAL's delays or performance issues, the burden of proving that causal nexus rests on HDDS, and the COPD itself does not support such an attribution. The COPD is the government's own contemporaneous allocation of costs by work package, prepared by the ACO with access to the relevant cost and accounting data, and it does not identify any causal connection between WAL's WP-4 activities and the overruns on other work packages.

Recommendation: This is a strong candidate for partial summary judgment. At the appropriate stage of the proceedings — likely after initial documentary discovery but before the close of fact discovery — we should move for partial summary judgment on the ground that WAL has no indemnification obligation for the $1,909,142 in non-WP-4 overruns as a matter of law. This would reduce WAL's exposure from $14,726,583 to $12,817,441 at the outset, and would frame the remaining dispute more narrowly for trial.

C. Ripeness / Prematurity Defense

The COPD is a preliminary determination; no costs have been formally disallowed, and no COFD has been issued. HDDS filed its request for a COFD with DCMA on October 15, 2022, but the COFD has not yet been issued and there is no indication from DCMA as to when it will be issued. Until the COFD issues, the COPD remains a preliminary administrative finding that is subject to revision, modification, or withdrawal.

WAL's position is that Section 11.4(b) requires a "claim by the U.S. Government" — and that the COPD, as a preliminary determination, does not constitute a formal "claim" sufficient to trigger the indemnity obligation. The Contracting Officer's Final Decision will determine whether any costs are actually disallowed and in what amount. Until that determination is made, the amount of any indemnification obligation (if any) is inherently uncertain and speculative.

This defense also supports WAL's anticipated motion to stay the action pending the conclusion of the DCMA administrative review. The primary-jurisdiction doctrine provides a basis for deferral to DCMA's administrative expertise on the question of cost-overrun allocation, and the ripeness considerations reinforce the argument that judicial resolution of the indemnification dispute would be premature while the underlying government determination remains pending.

D. Force Majeure

The Teaming Agreement contains a force-majeure provision (Section 15.3, to be confirmed in a full review of the executed agreement) that excuses performance to the extent that non-performance is caused by events beyond a party's reasonable control. The titanium raw-material cost escalation driven by global supply-chain disruptions — including disruptions attributable to the COVID-19 pandemic's lasting effects on the aerospace supply chain, geopolitical tensions affecting titanium-producing regions, and documented shortages of aerospace-grade titanium alloy — may qualify as a force-majeure event under the Teaming Agreement's force-majeure clause.

WAL should argue that the $4.2 million titanium price escalation component was caused by a force-majeure event that rendered it impracticable (or at least unreasonable) for WAL to procure titanium at the prices assumed in its original cost estimates. If the force-majeure defense is sustained as to this component, it would reduce WAL's potential indemnification exposure by $4.2 million.

Even absent a specific contractual force-majeure clause, New York law recognizes defenses of impossibility and commercial impracticability under certain circumstances. However, the bar for commercial impracticability under New York law is high, and courts generally require a showing that the event was unforeseeable and that the party seeking relief took all reasonable steps to avoid or mitigate the impact. See, e.g., Kel Kim Corp. v. Central Markets, Inc., 70 N.Y.2d 900, 902 (1987). Given the availability of a contractual force-majeure provision, we should primarily rely on the contract rather than on common-law impracticability.

E. Governing Law Considerations

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 principles of conflicts of law. This choice-of-law provision is enforceable and will govern the interpretation of the indemnification provisions at issue.

New York law provides WAL with an important interpretive advantage. New York courts construe indemnification clauses strictly against the party seeking indemnification. See, e.g., Hooper Assocs., Ltd. v. AGS Computers, Inc., 74 N.Y.2d 487, 491–92 (1990) ("A party is entitled to full contractual indemnification provided that the 'intention to indemnify can be clearly implied from the language and purposes of the entire agreement and the surrounding facts and circumstances.'" (emphasis in original)). Under this doctrine, indemnification agreements are "not to be extended by interpretation or implication beyond their expressed terms" and are "strictly construed to avoid reading into them a duty which the parties did not intend to be assumed." Id.

The causation requirement in Section 11.4(b) — "to the extent such claim is caused by Team Member's acts or omissions" — should be read narrowly under New York law, consistent with the strict-construction principle. HDDS's attempt to read the clause broadly to encompass any government identification of cost overruns, regardless of causation, runs contrary to the clause's express causation limitation and to New York's interpretive framework for indemnification provisions. We should emphasize this point in the Reply and in any subsequent motion practice.

VI. Recommended Strategy for Reply to Counterclaim

A. Timing

WAL's Reply to the Counterclaim is due February 3, 2023, which is twenty-one days from the date of service of the Answer and Counterclaim on January 13, 2023, pursuant to Federal Rule of Civil Procedure 12(a)(1)(B). We do not anticipate requesting an extension of time; the issues are sufficiently well-defined to permit preparation of the Reply within the allotted period.

B. Recommended Approach

The Reply to the Counterclaim should be drafted to accomplish the following objectives:

1. Deny Material Allegations. The Reply should deny each material allegation in the counterclaim, including:

• Deny that WAL caused the cost overruns identified in the COPD;

• Deny that the full $14,726,583 is attributable to WAL's performance of WP-4;

• Deny that Section 11.4(b) has been triggered by the COPD, which is a preliminary determination and not a formal "claim" within the meaning of the Teaming Agreement;

• Deny that HDDS is entitled to indemnification for the $1,909,142 in non-WP-4 overruns; and

• Deny that HDDS is the prevailing party or is entitled to attorneys' fees under Section 11.6.

2. Assert Affirmative Defenses. The Reply should assert the following affirmative defenses to the counterclaim:

(a) Failure to Satisfy the Causation Requirement of Section 11.4(b). WAL's indemnification obligation, if any, extends only to cost overruns "caused by" WAL's own acts or omissions. The cost overruns at issue were caused by HDDS's conduct — including specification deficiencies, mid-stream specification changes, and late delivery of government-furnished equipment — and by force-majeure events, not by WAL's acts or omissions.

(b) Overbreadth — Inclusion of Non-WP-4 Overruns. HDDS's demand for $14,726,583 includes $1,909,142 in cost overruns that the COPD attributes to work packages other than WP-4. WAL has no indemnification obligation under Section 11.4 for overruns on non-WP-4 work packages, and the inclusion of these amounts in HDDS's counterclaim is unsupported by the COPD and by the Teaming Agreement.

(c) Force Majeure / Commercial Impracticability. The titanium raw-material cost escalation that accounts for $4.2 million of the claimed overruns was caused by force-majeure events — specifically, global supply-chain disruptions affecting the aerospace-grade titanium market — that were beyond WAL's reasonable control.

(d) Ripeness / Prematurity. HDDS's counterclaim is premature because the DCMA administrative review is ongoing, no Contracting Officer's Final Decision has been issued, and no costs have been formally disallowed. The COPD is a preliminary determination that is subject to revision or withdrawal, and HDDS's indemnification claim is not ripe for adjudication until the COFD issues.

(e) Failure to Mitigate (HDDS's Own Failures). HDDS failed to take reasonable steps to mitigate the cost overruns for which it now seeks indemnification, including by failing to properly manage government-furnished equipment delivery schedules, failing to provide adequate and timely engineering specifications, and failing to coordinate engineering changes in a manner that minimized cost impacts.

(f) Set-Off. To the extent any indemnification obligation exists, it should be reduced by amounts attributable to HDDS's own acts or omissions, including specification deficiencies, late GFE delivery, and HDDS-initiated engineering changes.

3. Preserve Right to Seek Attorneys' Fees. The Reply should expressly preserve WAL's right to seek attorneys' fees and litigation costs under Section 11.6 of the Teaming Agreement in the event that WAL is the prevailing party in this action. Section 11.6 is a bilateral provision, and WAL's potential entitlement to fee recovery should be asserted early and preserved throughout the proceedings.

4. Do Not Assert a Counterclaim at This Stage. At this time, we do not recommend that WAL assert an affirmative counterclaim against HDDS for breach of the Teaming Agreement. WAL's Verified Complaint for Declaratory Judgment already seeks the relief that WAL needs — a declaration that it is not obligated to indemnify HDDS. Asserting an affirmative breach-of-contract counterclaim against HDDS at this stage could complicate our motion-to-stay strategy, because an affirmative claim by WAL seeking damages from HDDS would be harder to reconcile with a request that the Court defer to the DCMA administrative process. We should revisit this question after the DCMA administrative review concludes and after the COFD issues, at which point WAL may have a basis for affirmative claims depending on the outcome of the COFD.

C. Motion to Stay

Separately from the Reply to the Counterclaim, we should begin preparing a motion to stay the action pending the conclusion of the DCMA administrative review and the issuance of the Contracting Officer's Final Decision. The stay motion serves WAL's interests for several reasons:

• The COFD will resolve critical factual questions — including the final amount of any cost disallowance and the allocation of that disallowance among work packages — that bear directly on the indemnification dispute;

• The primary-jurisdiction doctrine supports deferral to DCMA's administrative expertise on cost-overrun allocation and cost-allowability determinations;

• A stay avoids the risk of inconsistent determinations, where this Court might adjudicate the indemnification dispute based on the COPD only to have the COFD reach a materially different conclusion on cost allocation; and

• A stay conserves judicial and party resources by avoiding potentially unnecessary discovery and motion practice on facts that may be superseded by the COFD.

Notably, HDDS's own First Affirmative Defense — which asserts that WAL's action is premature because the DCMA administrative review is ongoing — suggests that HDDS may not oppose a stay, or at least would have difficulty doing so without contradicting its own pleading. We should be prepared to cite HDDS's own ripeness defense in support of the stay motion.

We recommend filing the motion to stay on or about February 10, 2023, shortly after the Reply to the Counterclaim is filed. The motion should be supported by two declarations: (i) a factual declaration from Catherine Soo-Hyun Park, WAL's Director of Government Contract Compliance, providing background on the DCMA administrative review process, the status of the COFD request, and the anticipated timeline for the COFD; and (ii) a procedural and counsel declaration from Priya Anand attaching relevant correspondence and identifying the procedural posture of the case. Simone and I will begin drafting the motion and supporting materials in the first week of February.

VII. Coordination Items

A. Ashford & Reeves LLP

WAL is represented by Harold Reeves and Natalie Cheng of Ashford & Reeves LLP in connection with the DCMA administrative review and COFD process. Their work is complementary to our litigation efforts but involves a separate engagement focused on government-contract regulatory matters. We should coordinate with Ashford & Reeves on the following items:

• DCMA Administrative Review Status: Obtain an update on the current status of the DCMA administrative review and HDDS's COFD request filed on October 15, 2022. Specifically, we need to understand (a) whether DCMA has assigned the COFD request to a reviewing officer; (b) the anticipated timeline for the issuance of the COFD; (c) whether DCMA has requested any additional information or documentation from HDDS; and (d) whether there have been any material developments in the review since our last update.

• DCMA Correspondence and Audit Communications: Request copies of any DCMA correspondence, audit reports, incurred-cost audit findings, or other communications that may bear on the counterclaim allegations. In particular, any documents that shed light on the COPD's allocation of cost overruns among work packages — and any indication of DCMA's reasoning regarding causation — would be valuable.

• Information Sharing Protocol: Establish a regular cadence for information sharing between our team and Ashford & Reeves to ensure that developments in the DCMA process are promptly communicated and factored into the litigation strategy. We recommend a bi-weekly status call or email update.

B. Insurance

The filing of HDDS's counterclaim increases the importance of obtaining a definitive coverage determination from Meridian Surety & Insurance Group ("Meridian"). The relevant insurance history is as follows:

WAL tendered the HDDS indemnification demand to Meridian on September 22, 2022, under both its Directors & Officers liability policy (Policy No. MSI-DO-2022-07814, $10 million aggregate limit, $250,000 retention) and its Commercial General Liability policy (Policy No. MSI-CGL-2021-33291, $25 million aggregate limit, $500,000 self-insured retention). Meridian acknowledged receipt and issued a reservation-of-rights letter dated November 1, 2022, which reserves Meridian's rights with respect to two coverage issues:

(a) The contractual-liability exclusion (Exclusion (b) of the standard CGL form), which excludes coverage for liability assumed under a contract or agreement; and

(b) The government-contract exclusion (Endorsement GC-04), which excludes coverage for losses arising out of the performance of a government contract or subcontract.

Meridian is not currently providing a defense to WAL or funding the declaratory judgment action. Given that HDDS has now filed a counterclaim seeking $14,726,583 plus attorneys' fees — converting the dispute from a declaratory judgment action into an active litigation with a quantified damages demand — we recommend a follow-up with Rachel Underwood at Meridian pressing for a definitive coverage determination. The filing of the counterclaim materially changes the posture of the case and may affect Meridian's coverage analysis, particularly with respect to the D&O policy and any "wrongful act" or "management decision" coverage triggers.

If Meridian ultimately denies coverage, we may need to advise the client on the potential for a separate coverage action against Meridian, which would be governed by the terms of the applicable policies and by New York insurance law. We should also consider whether additional insurance carriers should be put on notice.

C. Lender Notification

WAL provided notice to Ridgeline National Bank, N.A. ("Ridgeline") on two prior occasions in connection with this dispute:

(a) September 28, 2022 — Initial Notice under Section 6.07(b) of the $75 million revolving credit facility between WAL and Ridgeline (the "Credit Agreement"), which requires prompt written notice of any litigation, arbitration, or governmental investigation that could reasonably be expected to result in a Material Adverse Effect; and

(b) December 5, 2022 — Supplemental Notice regarding the filing of the declaratory judgment action.

The filing of HDDS's counterclaim does not independently trigger a new notice obligation under Section 6.07(b) because it arises from the same dispute that was previously disclosed. However, the counterclaim does formalize HDDS's $14,726,583 demand as a litigated claim — as opposed to an unlitigated demand — and converts WAL's posture from plaintiff in a DJ action to both plaintiff and defendant. We should confirm with Gregory Poole (WAL's General Counsel) and Elaine Whitmore (WAL's Chief Financial Officer) whether supplemental disclosure to Ridgeline is advisable as a matter of prudence, even if not strictly required. A brief supplemental notice describing the counterclaim and WAL's assessment of the merits would be the most conservative approach.

D. Financial Statement Treatment

The counterclaim formalizes HDDS's $14,726,583 demand as a litigated claim, which has implications for WAL's financial reporting. Pinnacle Advisory Partners LLC (Thomas Brennan, CPA, engagement partner) serves as WAL's independent auditor and should be apprised of the counterclaim filing for purposes of the FY 2022 audit and the ASC 450 (Contingencies) contingent-liability assessment.

The current assessment — reached in consultation with Pinnacle during the preliminary audit discussions — classifies the HDDS indemnification contingency as "reasonably possible" but not "probable" within the meaning of ASC 450-20. Under ASC 450-20-50-3, a reasonably possible contingent liability must be disclosed in the notes to the financial statements but is not required to be accrued. The filing of the counterclaim does not necessarily change this analysis, because the probability of an unfavorable outcome depends on the merits of WAL's defenses (which remain strong) rather than on the procedural posture of the dispute. However, the counterclaim filing should be flagged for Pinnacle's consideration to ensure that the disclosure in the notes to the financial statements accurately reflects the current status of the litigation.

We should coordinate with Patrick or the client to ensure that Pinnacle receives notice of the counterclaim filing promptly, ideally before the end of January 2023.

VIII. Recommended Next Steps and Timeline

The following table summarizes the key action items, responsible persons, and target dates:

IX. Conclusion

HDDS's Answer and Counterclaim are largely as anticipated in our Preliminary Case Assessment Memorandum dated November 7, 2022. The Answer contains no major surprises, and the affirmative defenses range from weak (ripeness/justiciable controversy and waiver/estoppel) to moderately concerning (failure to mitigate). The counterclaim seeks $14,726,583 in contractual indemnification plus attorneys' fees under Section 11.6 of the Teaming Agreement.

WAL has strong defenses to the counterclaim, particularly on the following grounds:

• Causation: The cost overruns were caused by HDDS's specification deficiencies, late GFE delivery, and government-directed engineering changes — not by WAL's acts or omissions.

• Overbreadth: HDDS's inclusion of $1,909,142 in non-WP-4 overruns is unsupported by the COPD and by the Teaming Agreement, and is a strong candidate for partial summary judgment.

• Ripeness/Prematurity: The COPD is a preliminary determination; no costs have been formally disallowed, and the COFD process remains pending.

• Force Majeure: The $4.2 million titanium price escalation was caused by global supply-chain disruptions beyond WAL's control.

The Reply to the Counterclaim should be filed by the February 3, 2023 deadline, followed promptly by the motion to stay on or about February 10, 2023. We should also proceed with the coordination items identified in Section VII — particularly the follow-up with Meridian on coverage and the coordination with Ashford & Reeves on the DCMA administrative review status.

I am happy to discuss this memorandum and the recommended strategy at your convenience. Please let me know if you would like to schedule a team call before I begin drafting the Reply.

This memorandum is protected by the attorney-client privilege and the attorney work product doctrine. It is intended solely for the use of the addressees and should not be disclosed to any third party without the prior written consent of counsel.

Action Item	Responsible	Target Date
Draft Reply to Counterclaim	P. Gallagher, S. Laroche	January 25, 2023 (initial draft)
Review and revise Reply	P. Anand	January 30, 2023
File Reply to Counterclaim	P. Gallagher	February 3, 2023 (deadline)
Begin drafting Motion to Stay	S. Laroche, P. Gallagher	February 1, 2023
File Motion to Stay	P. Gallagher	On or about February 10, 2023
Coordinate with Ashford & Reeves on DCMA status	S. Laroche	Ongoing (bi-weekly updates)
Follow up with Meridian on coverage determination	P. Anand	February 2023
Notify Pinnacle Advisory Partners of counterclaim filing	P. Gallagher / client	January 2023
Confirm lender-notice sufficiency with client	D. Carmichael	January 2023
Begin preparing targeted discovery requests	S. Laroche, P. Gallagher	February 2023 (following Reply filing)
Identify and vet potential expert witnesses	P. Anand, P. Gallagher	February–March 2023

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
TO: Priya Anand, Partner
FROM: Patrick Gallagher, Associate
DATE: January 18, 2023
RE: Analysis of Defendant's Answer and Counterclaim — Whitmore Aerospace LLC v. Hargrove-Dalton Defense Systems, Inc., No. 1:22-cv-10147-RMB (S.D.N.Y.)
CC: Douglas Carmichael, Partner; Simone Laroche, Associate
I. Introduction and Purpose
On January 13, 2023, Hargrove-Dalton Defense Systems, Inc. ("HDDS") filed its Answer and Counterclaim in the above-captioned declaratory judgment action pending before the Honorable Richard M. Brannigan, United States District Judge, in the United States District Court for the Southern District of New York. HDDS is represented by Leonard Trager (lead partner) and Megan Forsythe (senior associate) of Voss, Trager & Kendall LLP ("VTK"), located at 900 17th Street NW, Suite 800, Washington, D.C. 20006. VTK is a well-known defense-industry-focused litigation firm, and we have encountered both Trager and Forsythe in prior government contracting disputes; their filings are characteristically detailed and aggressive, and the present filing is no exception.
This memorandum provides a comprehensive analysis of HDDS's Answer and Counterclaim, evaluates each of HDDS's affirmative defenses and the legal and factual bases of the counterclaim, assesses Whitmore Aerospace LLC's ("WAL") available defenses to the counterclaim, and recommends a strategy for WAL's Reply to the Counterclaim, which is due February 3, 2023, under Federal Rule of Civil Procedure 12(a)(1)(B) (providing twenty-one days from service of the counterclaim to file a responsive pleading). In addition, this memorandum addresses certain coordination items related to the DCMA administrative review, insurance coverage, lender notification obligations, and financial statement treatment of the counterclaim.
II. Procedural Background
WAL filed its Verified Complaint for Declaratory Judgment on November 28, 2022, asserting a single count under the Declaratory Judgment Act, 28 U.S.C. §§ 2201–2202. The Complaint was verified by Marcus Whitmore, President and Chief Executive Officer of WAL, and is supported by exhibits including the Teaming Agreement, the DCMA Contracting Officer's Preliminary Determination ("COPD"), the September 9, 2022 indemnification demand letter from HDDS, and related correspondence.
The Complaint seeks three specific declarations from the Court:
1. First Declaration: That Section 11.4 of the Teaming Agreement dated June 12, 2019, between HDDS and WAL, does not obligate WAL to indemnify HDDS for the cost overruns identified in the COPD dated August 1, 2022, issued by Administrative Contracting Officer Lt. Col. Sandra M. Vickers of the Defense Contract Management Agency ("DCMA");
2. Second Declaration: That even if Section 11.4 applies, WAL's indemnification obligation extends only to overruns "caused by" WAL's acts or omissions, and that the cost overruns at issue were caused by HDDS and/or force-majeure events beyond WAL's control; and
3. Third Declaration: That HDDS's indemnification demand of $14,726,583 is overbroad because it includes $1,909,142 in cost overruns attributable to non-Work-Package-4 activities for which WAL bears no contractual responsibility.
The case was assigned to Judge Brannigan upon filing and referred to Magistrate Judge the Honorable Allison P. Kurtz for pretrial matters. HDDS was served on December 23, 2022, through its registered agent for service of process. Pursuant to Federal Rule of Civil Procedure 12(a)(1)(A), HDDS's response to the Complaint was due on or before January 13, 2023, and HDDS timely filed its Answer and Counterclaim on that date. The Answer consists of a point-by-point response to the fifty-three numbered paragraphs of WAL's Complaint, five affirmative defenses, and a single-count counterclaim for contractual indemnification.
No initial pretrial conference has yet been scheduled by the Court, and no case management order has been entered. We anticipate that Judge Brannigan's chambers will issue a scheduling order shortly after the pleadings close.
III. Summary of HDDS's Answer
HDDS's Answer tracks each numbered paragraph of WAL's Complaint. Below is a summary of the material admissions, denials, and affirmative defenses, along with our preliminary analysis.
A. Admissions
HDDS makes several important admissions that narrow the range of contested issues in the case:
Jurisdiction and Venue. HDDS admits that this Court has subject-matter jurisdiction under 28 U.S.C. § 1332(a) based on diversity of citizenship. Specifically, HDDS admits that it is a Delaware corporation with its principal place of business in Bethesda, Maryland, and that WAL is a Virginia limited liability company with its principal place of business in Chantilly, Virginia. HDDS further admits that the amount in controversy exceeds $75,000, exclusive of interest and costs. With respect to venue, HDDS 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, which designates the courts located in Manhattan, New York as the exclusive forum for any dispute arising out of or relating to the Teaming Agreement. These admissions eliminate any threshold jurisdictional or venue challenges.
Existence of the Teaming Agreement. HDDS admits the existence and execution of the Teaming Agreement dated June 12, 2019, between HDDS, as Team Lead, and WAL, as Team Member. HDDS further admits the general structure of the teaming arrangement, under which HDDS serves as the prime contractor on Prime Contract No. FA8620-19-C-0337 (the Advanced Tactical Airframe Program, or "ATAP") and WAL performs as a major subcontractor responsible for Work Package 4 ("WP-4"), which encompasses the design, fabrication, and delivery of titanium structural assemblies, including the wing-box substructure, center fuselage longerons, and bulkhead fittings.
Prime Contract Terms. HDDS admits that the Prime Contract is a cost-plus-incentive-fee ("CPIF") contract with a target cost of $412 million, a target fee of eight percent ($32.96 million), a ceiling price of $470 million, and a share ratio of 70/30 (government/contractor) for cost overruns and 60/40 (government/contractor) for cost underruns. These admissions regarding the prime-contract structure are relevant because they establish the framework within which the parties' subcontractor indemnification obligations are assessed.
COPD Issuance and Demand. HDDS admits that the DCMA COPD dated August 1, 2022 identified $14,726,583 in total cost overruns on the ATAP program. HDDS further admits that it sent an indemnification demand letter to WAL on September 9, 2022, demanding payment of the full $14,726,583 in cost overruns identified in the COPD. These admissions confirm the factual predicate for the present dispute and corroborate the documentary evidence already in the record.
Pre-Litigation Dispute Resolution. HDDS admits the sequence of pre-litigation dispute resolution steps alleged in the Complaint. Specifically, HDDS admits that: (i) two senior executive meetings were held — the first on September 30, 2022, between Marcus Whitmore (CEO of WAL) and William Fong (Executive Vice President, Defense Programs, HDDS), and the second on October 14, 2022; (ii) WAL submitted a written proposal for non-binding mediation on October 21, 2022, pursuant to the dispute escalation procedures set forth in Section 17.1 of the Teaming Agreement; and (iii) HDDS declined mediation in a letter dated October 28, 2022. These admissions are significant because they establish that WAL complied with the contractual dispute resolution prerequisites before filing this action and that HDDS chose to forego the mediation option that the Teaming Agreement contemplates.
B. Denials
HDDS's denials focus on the merits of the indemnification dispute and set the stage for the contested issues in the case:
Scope of Section 11.4(b) — Causation Standard. HDDS denies WAL's characterization that Section 11.4(b) requires causation attributable solely to WAL's "acts or omissions." HDDS contends that the indemnification clause broadly covers "any claim by the U.S. Government that costs incurred under Team Member's Work Package are unallowable, unreasonable, or otherwise subject to disallowance." HDDS's reading of the clause emphasizes the breadth of the triggering language — i.e., "any claim" — and appears to downplay the limiting causation clause ("to the extent such claim is caused by Team Member's acts or omissions"). This competing interpretation of Section 11.4(b) lies at the heart of the case and will require careful contract construction analysis under New York law. As discussed further below, we believe WAL's reading of the clause is more consistent with the plain text and with New York's strict-construction doctrine for indemnification provisions.
Preliminary Nature of the COPD. HDDS denies that the COPD's preliminary nature excuses WAL's indemnification obligation. HDDS argues that Section 11.4(b) is triggered by any government "claim" of cost disallowance, not solely by a formal disallowance or final decision of the contracting officer. HDDS characterizes the COPD as a "claim" within the meaning of the Teaming Agreement, notwithstanding its express designation as a "Preliminary Determination." This is a significant interpretive dispute because the COPD, by its own terms, states that it is subject to further review and that the contracting officer's final decision ("COFD") has not yet been issued. We believe WAL has a strong argument that the COPD does not constitute a "claim" sufficient to trigger the indemnification obligation, particularly given that the COFD process remains ongoing.
Causation — HDDS's Conduct and Force Majeure. HDDS denies that WAL's cost overruns were caused by HDDS-supplied engineering specifications, HDDS's late delivery of government-furnished equipment ("GFE"), or force-majeure events. HDDS instead attributes the overruns entirely to WAL's own performance deficiencies under WP-4. As discussed in greater detail in Section IV.B below, the causation dispute will be the central factual battleground in this case, and each of the four cost-overrun components ($4.2 million for titanium price escalation, $5.1 million for rework, $2.3 million for schedule delays, and $1.2 million for ECP implementation costs) will require individualized factual development.
Overbreadth of the Demand. HDDS denies that its indemnification demand is overbroad, contending that the full $14,726,583 — including the $1,909,142 in non-WP-4 overruns — relates to or arises out of WAL's performance of Work Package 4. HDDS's theory is that the non-WP-4 overruns were caused by cascading downstream effects of WAL's WP-4 performance failures, and therefore fall within the scope of Section 11.4. This argument is addressed in detail in Section IV.B.3 and Section V.B below.
C. Affirmative Defenses
HDDS asserts five affirmative defenses, each of which is analyzed below.
1. Failure to State a Claim / No Justiciable Controversy (First Affirmative Defense)
HDDS argues that WAL's declaratory judgment action is premature because the DCMA administrative review is ongoing and no Contracting Officer's Final Decision ("COFD") has been issued. HDDS contends that no actual controversy exists under 28 U.S.C. § 2201 until costs are formally disallowed through a COFD, and that the COPD — as a preliminary determination — does not create a sufficiently concrete dispute to satisfy the case-or-controversy requirement of Article III.
Analysis: This defense is somewhat internally inconsistent with HDDS's own conduct and pleading posture. HDDS sent WAL an indemnification demand for $14,726,583 on September 9, 2022 — a demand that by its nature presupposes an existing, present obligation on WAL's part to indemnify HDDS. HDDS has now filed a compulsory counterclaim seeking that same amount in damages. It strains credulity for HDDS to simultaneously demand payment from WAL, assert a counterclaim seeking that payment, and also contend that no justiciable controversy exists. We should highlight this tension prominently in the Reply and in opposition to any potential motion to dismiss.
Moreover, the Second Circuit has consistently held that a declaratory judgment action is ripe where the parties have taken adverse positions on a concrete legal question and where the resolution of that question will have practical consequences for the parties. See, e.g., Sterling Reach Partners LLC v. Already, LLC, 663 F.3d 89, 95–96 (2d Cir. 2011); Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 411 F.3d 384, 388 (2d Cir. 2005). HDDS's own September 9, 2022 demand letter — which demanded immediate payment of $14,726,583 and reserved all rights to pursue litigation — creates the actual controversy that Section 2201 requires.
Additionally, to the extent HDDS argues that the DCMA administrative process must run its course before this Court can adjudicate the contractual indemnification dispute between the private parties, we note that the DCMA review concerns the government's determination of cost allowability under the prime contract — a determination that is distinct from the private contractual question of indemnification obligations between HDDS and WAL under the Teaming Agreement. The district court has jurisdiction over the parties' contract dispute regardless of the status of the government's administrative review, although the practical wisdom of deferral (via a stay) is a separate question addressed in Section VI.C below.
Assessment: This defense is weak on its own terms and is undermined by HDDS's counterclaim.
2. Waiver / Estoppel (Second Affirmative Defense)
HDDS contends that WAL waived its right to contest indemnification by (a) failing to timely object to the COPD cost allocation and (b) continuing performance under the Teaming Agreement after the COPD was issued on August 1, 2022.
Analysis: This defense is weak on the facts and the law. WAL is a subcontractor and has no privity of contract with the United States Government. The COPD was issued by ACO Lt. Col. Sandra M. Vickers and was directed to HDDS as the prime contractor under Prime Contract No. FA8620-19-C-0337. WAL had no independent right or obligation to respond to the COPD, nor was it a party to the DCMA administrative process. It was HDDS — not WAL — that filed the request for a Contracting Officer's Final Decision with DCMA on October 15, 2022. WAL cannot have "waived" its right to contest an indemnification demand by failing to take action with respect to a government determination to which it was not a party.
As to the contention that WAL waived its rights by continuing performance under the Teaming Agreement after the COPD issued, this argument conflates WAL's ongoing contractual performance obligations with its right to contest a disputed indemnification demand. Continued performance does not constitute acquiescence to an indemnification demand, particularly where — as here — WAL promptly initiated dispute resolution by arranging the September 30, 2022 senior executive meeting and subsequently proposed mediation. Under New York law, waiver requires the intentional relinquishment of a known right, and the facts here are inconsistent with any such intentional relinquishment. See, e.g., Fundamental Portfolio Advisors, Inc. v. Tocqueville Asset Mgmt., L.P., 7 N.Y.3d 96, 104 (2006) (waiver must be established by clear and unmistakable conduct).
Assessment: This defense is weak and should be challenged in the Reply.
3. Unclean Hands (Third Affirmative Defense)
HDDS alleges that WAL's own performance failures caused the cost overruns, including non-conforming machining tolerances leading to $5.1 million in rework, and that WAL cannot seek equitable relief while responsible for the underlying harm.
Analysis: This affirmative defense is essentially a merits argument repackaged as a traditional equitable defense. HDDS is asserting that WAL's own misconduct — specifically, its alleged failure to meet machining tolerances on the titanium structural assemblies — caused the very cost overruns that WAL seeks a declaration it need not indemnify. While the underlying factual allegations are relevant to the causation dispute, framing them as an "unclean hands" defense is misplaced for at least two reasons.
First, a declaratory judgment action is not purely equitable in nature. The Declaratory Judgment Act authorizes relief in both legal and equitable contexts, and the underlying claim here — contractual indemnification — sounds in law, not equity. The unclean hands doctrine is an equitable defense that has limited applicability in actions at law. See, e.g., PenneCom B.V. v. Ashgrove & Co., 372 F.3d 488, 493 (2d Cir. 2004) (noting the "historic restriction of the unclean hands doctrine to equitable claims").
Second, even if the defense were procedurally proper, the causation question is the heart of the dispute on the merits, not a collateral equitable consideration. Whether WAL's performance caused the cost overruns is the central factual question under Section 11.4(b). Recasting this question as an "unclean hands" defense does not add anything to HDDS's position; it merely reframes the same factual allegations in different doctrinal clothing.
Assessment: This defense should be challenged as procedurally improper and substantively duplicative of HDDS's merits position. We may consider a motion to strike under Rule 12(f) if it becomes a source of confusion, though typically such motions are disfavored.
4. Failure to Mitigate (Fourth Affirmative Defense)
HDDS asserts that WAL failed to take reasonable steps to mitigate cost overruns, including: (a) failing to secure alternative titanium supply sources when raw-material prices escalated (the $4.2 million titanium price component), and (b) failing to implement corrective machining processes in a timely manner (relating to the $5.1 million rework component).
Analysis: This defense has somewhat more factual traction than the others, particularly with respect to the titanium price escalation component. If WAL had the ability to lock in supply contracts or to secure alternative titanium sources at lower prices and failed to do so, HDDS could argue that some portion of the $4.2 million in escalated material costs was avoidable. We will need to develop the factual record on this point during discovery, including WAL's procurement documentation, correspondence with titanium suppliers, and contemporaneous analysis of market conditions.
That said, WAL's position is that the titanium price escalation was a force-majeure event driven by global supply-chain disruptions — likely including the well-documented post-COVID supply disruptions in the aerospace-grade titanium market — that were beyond WAL's control. If the price escalation qualifies as a force-majeure event, then the failure-to-mitigate defense loses much of its force, because a party's obligation to mitigate is ordinarily limited to reasonable steps, and a force-majeure event may render alternative sourcing impractical or impossible.
With respect to the corrective machining processes, this allegation overlaps with the rework causation dispute. If the rework was necessitated by deficiencies in HDDS-supplied engineering specifications — rather than by WAL's own manufacturing processes — then HDDS cannot argue that WAL failed to mitigate damages that were attributable to HDDS's conduct.
Assessment: This defense requires further factual development. WAL's mitigation efforts regarding titanium procurement and corrective machining should be thoroughly documented and organized for discovery. We should work with the client to compile a comprehensive mitigation chronology.
5. Contractual Indemnification Obligation Bars Declaratory Relief (Fifth Affirmative Defense)
HDDS argues that WAL's indemnification obligation under Section 11.4 is clear and unambiguous and that declaratory relief is inappropriate where the contract's plain language resolves the dispute without need for judicial construction.
Analysis: This is a merits defense dressed as a jurisdictional or procedural objection. HDDS's argument is essentially that because the indemnification clause is (in HDDS's view) unambiguous, there is no genuine dispute requiring declaratory relief. This argument misapprehends the purpose of the Declaratory Judgment Act. The very existence of competing interpretations of Section 11.4(b) — including the meaning of "claim," the scope of the causation requirement, and the applicability of the clause to a preliminary determination — demonstrates that a genuine controversy exists. If the clause were truly unambiguous, one would expect the parties to agree on its meaning; their disagreement is precisely what makes declaratory relief appropriate.
Moreover, the Declaratory Judgment Act vests district courts with discretion to entertain declaratory judgment actions; it does not require the court to decline relief merely because one party believes its interpretation of the contract is correct. Under the Second Circuit's factors for evaluating whether to exercise declaratory judgment jurisdiction, the existence of a pending related proceeding in another forum (here, the DCMA administrative review) is relevant but not dispositive, and the need to settle uncertainty in a disputed contractual relationship weighs in favor of exercising jurisdiction. See Dow Jones & Co. v. Harrods Ltd., 346 F.3d 357, 359–60 (2d Cir. 2003).
Assessment: This defense lacks merit and should be challenged in the Reply and in opposition to any motion to dismiss.
IV. Analysis of HDDS's Counterclaim
A. Overview of the Counterclaim
HDDS asserts a single counterclaim for contractual indemnification under Section 11.4 of the Teaming Agreement. The counterclaim is styled as "Count I — Breach of Contract: Contractual Indemnification" and seeks the following relief:
(a) A judgment against WAL in the amount of $14,726,583, representing the full amount of the cost overruns identified in the COPD, plus prejudgment interest at the statutory rate under New York law (currently nine percent per annum under N.Y. C.P.L.R. § 5004);
(b) An award of reasonable attorneys' fees and litigation costs pursuant to Section 11.6 of the Teaming Agreement, which provides that "the prevailing party in any dispute relating to indemnification obligations under this Article XI shall be entitled to recover its reasonable attorneys' fees and costs of litigation"; and
(c) Such other and further relief as the Court deems just and proper.
The counterclaim is compulsory under Federal Rule of Civil Procedure 13(a) because it arises out of the same transaction or occurrence as WAL's declaratory judgment action — namely, the Teaming Agreement, WAL's performance of Work Package 4, and the COPD cost-overrun dispute. This is not surprising and was anticipated in our Preliminary Case Assessment Memorandum dated November 7, 2022.
B. Key Allegations in the Counterclaim
1. Triggering of Section 11.4(b)
HDDS alleges that the DCMA COPD constitutes a "claim by the U.S. Government that costs incurred under Team Member's Work Package are unallowable, unreasonable, or otherwise subject to disallowance" within the meaning of Section 11.4(b). HDDS characterizes the COPD as a formal government action that identifies specific costs as subject to disallowance and that satisfies the triggering conditions of the indemnification clause.
Analysis: The COPD is expressly styled as a "Preliminary Determination" and states on its face that it is issued "for review and comment" by the prime contractor prior to the issuance of a final decision. HDDS's characterization of the COPD as a "claim" within the meaning of Section 11.4(b) is therefore debatable. The term "claim" in the context of government contracting typically refers to a formal demand for relief — either a contractor claim under the Contract Disputes Act, 41 U.S.C. § 7103, or a government claim in the nature of a final decision demanding payment or performance. A preliminary determination that is expressly subject to further review and revision arguably does not rise to the level of a "claim."
Moreover, even if the COPD is deemed sufficient to trigger Section 11.4(b), the causation element of the clause — "to the extent such claim is caused by Team Member's acts or omissions" — remains a factual question that cannot be resolved on the pleadings. HDDS's counterclaim does not (and cannot, at the pleading stage) establish that the cost overruns identified in the COPD were in fact "caused by" WAL's acts or omissions as opposed to HDDS's own conduct or force-majeure events.
2. Causation — The Four Components
HDDS alleges that all cost overruns were caused by WAL's acts or omissions in performing Work Package 4. The counterclaim identifies four specific cost-overrun components, which collectively account for $12,800,000 of the $14,726,583 total. (The remaining $1,926,583 is not individually itemized in the counterclaim.) Each component and WAL's anticipated response are discussed below.
Titanium Raw-Material Cost Escalation ($4.2 million). HDDS contends that WAL failed to lock in supply contracts for aerospace-grade titanium and that WAL bore the risk of material pricing under WP-4. HDDS characterizes this as a procurement failure by WAL that is squarely within WAL's scope of responsibility.
WAL's position is that the titanium price escalation was a force-majeure event driven by global supply-chain disruptions, including well-documented market conditions affecting the aerospace-grade titanium supply chain during the relevant period. WAL will further argue that the Teaming Agreement allocates material pricing risk in a manner that accounts for extraordinary market conditions, and that WAL was not contractually obligated to hedge or lock in material prices for the duration of the program. The allocation of material procurement risk under the Teaming Agreement and any applicable subcontract terms (particularly the WP-4 Task Order and Statement of Work) will require careful analysis.
Rework Due to Non-Conforming Machining Tolerances ($5.1 million). HDDS contends that WAL's manufacturing processes failed to meet the engineering specifications provided, resulting in non-conforming parts that required extensive rework. This is the largest single cost-overrun component and will likely be the most hotly contested factual issue in the case.
WAL's position is that the rework was attributable to deficiencies in HDDS-supplied engineering specifications, including specifications that were changed mid-stream after WAL had commenced production. WAL will point to contemporaneous correspondence in which WAL's engineering team flagged specification ambiguities and inconsistencies with the HDDS technical team, and to instances where HDDS issued revised specifications after WAL had already tooled and begun machining operations. WAL's quality control documentation — including inspection reports, non-conformance reports ("NCRs"), and corrective action reports ("CARs") — will be critical to establishing that the machining tolerance failures were traceable to specification issues rather than to WAL's processes.
Schedule Delays Causing Idle-Labor Charges ($2.3 million). HDDS contends that WAL's production delays caused cascading schedule impacts that resulted in $2.3 million in idle-labor charges across the ATAP program. HDDS's theory is that WAL's late delivery of titanium structural assemblies disrupted the integrated master schedule, causing downstream work stoppages on HDDS's own assembly operations.
WAL's position is that the schedule delays resulted primarily from HDDS's late delivery of government-furnished equipment ("GFE"), which WAL required in order to complete certain assembly and integration tasks on WP-4. WAL will argue that correspondence and delivery receipts show that HDDS failed to deliver GFE items on time, and that these delays — not WAL's production performance — were the proximate cause of the schedule disruptions. WAL will need to develop a detailed schedule-impact analysis, likely with the assistance of a scheduling expert, to demonstrate the causal chain between HDDS's GFE delivery failures and the idle-labor charges.
Engineering Change Proposal Implementation Costs ($1.2 million). HDDS contends that the engineering change proposals ("ECPs") at issue were necessitated by WAL's design deviations from the approved baseline and that the costs of implementing those ECPs are therefore attributable to WAL.
WAL's position is that the ECPs were initiated by HDDS and/or the government — not by WAL — and that WAL was directed to implement the changes pursuant to contractual change-order provisions. Change-order documentation, including the ECP origination forms, government direction memos, and WAL's cost proposals for the ECPs, will be critical to resolving this dispute. If the ECPs were government-directed, the costs of implementation should be borne by the government (under the prime contract's changes clause) and/or by HDDS (as the party that flowed down the direction to WAL), not by WAL.
Summary Assessment: These are factual disputes that will require extensive documentary evidence and possibly expert testimony to resolve. The discovery phase will be critical, and we should begin preparing targeted document requests and interrogatories focused on each of the four cost-overrun components. We should also begin identifying potential expert witnesses, including a government-contracts cost-accounting expert (to opine on the proper allocation of cost overruns under FAR Part 31) and, potentially, a metallurgical or manufacturing process expert (to address the machining tolerance and specification issues).
3. Full Amount of COPD — Inclusion of Non-WP-4 Overruns ($1,909,142)
HDDS demands $14,726,583 — the full COPD amount — not merely the $12,817,441 (87.03%) that the COPD attributed to Work Package 4. HDDS alleges that the remaining $1,909,142 (12.97%), which the COPD attributes to other work packages, is also attributable to cascading effects of WAL's WP-4 performance failures. Specifically, HDDS contends that WAL's schedule delays and specification non-conformances caused downstream cost impacts on Work Packages 2 (avionics integration) and 5 (final assembly and integration), which are performed by other team members or by HDDS itself.
Analysis: This is a significant overreach and represents one of WAL's strongest arguments on the counterclaim. The COPD itself — issued by ACO Lt. Col. Sandra M. Vickers — expressly allocates costs by work package. The COPD attributes $12,817,441 to WP-4 and $1,909,142 to other work packages. The COPD does not attribute the non-WP-4 overruns to WAL's performance, nor does it identify a causal nexus between WAL's WP-4 activities and the overruns on other work packages.
HDDS's attempt to attribute the non-WP-4 overruns to WAL has no support in the COPD and would require HDDS to independently prove — through documentary evidence and likely through expert testimony — that the $1,909,142 in non-WP-4 overruns was in fact caused by WAL's conduct. This burden is heightened by the fact that Section 11.4 of the Teaming Agreement limits the indemnification obligation to claims arising from "Team Member's Work Package" — a defined term that refers specifically to WP-4. Even under the broadest reading of the clause, it is difficult to see how overruns on work packages that are not within WAL's scope of work can be characterized as arising from "Team Member's Work Package."
As discussed in Section V.B below, this issue is a strong candidate for partial summary judgment at the appropriate stage of the proceedings.
4. Attorneys' Fees Under Section 11.6
HDDS claims entitlement to attorneys' fees and litigation costs as the prevailing party under Section 11.6 of the Teaming Agreement.
Analysis: Section 11.6 is a bilateral fee-shifting provision — it entitles the "prevailing party" in any indemnification dispute to recover reasonable attorneys' fees and costs. This means that if WAL prevails on its declaratory judgment claim and defeats HDDS's counterclaim, WAL will be entitled to recover its own attorneys' fees and litigation costs from HDDS. The bilateral nature of this provision cuts both ways and should factor into our settlement analysis. It increases the stakes for both parties and may provide useful leverage in settlement discussions.
The amount of HDDS's attorneys' fees incurred to date is unknown, but VTK's billing rates are likely comparable to our own. Based on the complexity of the case and the filing of the Answer and Counterclaim, HDDS has likely incurred fees in the range of $150,000–$250,000 to date, though this is speculative. As the case progresses through discovery and motions practice, both sides' accumulated fees will increase substantially, which further underscores the value of early resolution if favorable terms can be achieved.
C. Amount in Controversy
HDDS's counterclaim seeks $14,726,583 in indemnification plus attorneys' fees and prejudgment interest. The following additional considerations bear on WAL's overall financial exposure:
WAL's maximum theoretical exposure under the Teaming Agreement is governed by Section 11.5, which caps liability for indemnification claims at 120% of the value of the applicable work package. WP-4 has a stated value of $74,160,000, yielding a maximum cap of $88,992,000 (120% × $74,160,000). The actual claimed amount of $14,726,583 is well within that cap, and the cap is therefore not a defense to the current claim amount, though it may become relevant if HDDS were to attempt to increase its claim.
The counterclaim does not seek punitive or consequential damages, which is consistent with the Teaming Agreement's limitations-of-liability provisions. Section 12.1 of the Teaming Agreement contains a mutual waiver of consequential, incidental, and punitive damages, and HDDS's counterclaim does not seek to circumvent that waiver.
V. Evaluation of WAL's Defenses to the Counterclaim
WAL has multiple defenses available to it in responding to HDDS's counterclaim. The principal defenses are discussed below.
A. Causation Defense (Section 11.4(b) — "caused by Team Member's acts or omissions")
The causation defense is WAL's core defense and the central issue in the case. Section 11.4(b) limits WAL's indemnification obligation to claims "to the extent such claim is caused by Team Member's acts or omissions." WAL must demonstrate that the cost overruns identified in the COPD were not caused by its own acts or omissions but rather by HDDS's conduct (including specification deficiencies and GFE delivery failures) and by force-majeure events (including global titanium supply-chain disruptions).
This defense implicates factual questions that will require extensive documentary and testimonial proof. The key factual areas requiring development during discovery include:
(a) Titanium Price Escalation ($4.2 million): WAL's force-majeure characterization of the price escalation; the state of the global aerospace-grade titanium market during the relevant period; WAL's procurement practices and any efforts to lock in pricing or secure alternative supply sources; the allocation of material procurement risk under the Teaming Agreement, the WP-4 Task Order, and any applicable subcontract purchase orders; and any communications between HDDS and WAL regarding material pricing assumptions and risk allocation.
(b) Rework / Non-Conforming Machining Tolerances ($5.1 million): The sufficiency and completeness of the engineering specifications supplied by HDDS; any mid-stream specification changes issued by HDDS or directed by the government; WAL's manufacturing processes and quality control documentation (including NCRs, CARs, and first-article inspection reports); correspondence between WAL's engineering team and HDDS's technical team regarding specification ambiguities or inconsistencies; and any post-rework analyses identifying the root cause of the tolerance failures.
(c) Schedule Delays / Idle-Labor Charges ($2.3 million): The timeline of HDDS's delivery of government-furnished equipment to WAL; correspondence and delivery receipts regarding late GFE deliveries; the integrated master schedule and critical-path analysis showing the causal chain between GFE delays and WAL's production schedule; and any schedule-impact analyses prepared by either party during the relevant period.
(d) ECP Implementation Costs ($1.2 million): The origination and authorization of the ECPs at issue (i.e., whether they were government-directed, HDDS-initiated, or WAL-initiated); ECP origination forms and approval documentation; the contractual change-order provisions governing ECP implementation and cost allocation; WAL's cost proposals for the ECPs; and any correspondence between WAL, HDDS, and the government regarding the ECPs.
We should begin preparing targeted discovery requests — including document requests and interrogatories — focused on each of these four areas. In addition, we should identify and begin vetting potential expert witnesses, including a government-contracts cost-accounting expert and, potentially, a manufacturing process or metallurgical expert.
B. Overbreadth Defense (Non-WP-4 Overruns — $1,909,142)
As discussed in Section IV.B.3 above, the COPD allocates $1,909,142 to non-WP-4 work packages. Section 11.4 of the Teaming Agreement limits indemnification to claims arising from "Team Member's Work Package," which is defined by reference to WP-4. WAL has no responsibility for cost overruns on other work packages, and HDDS's attempt to attribute those overruns to WAL through a "cascading effects" theory has no support in the COPD and would require HDDS to carry an independent burden of proof on proximate causation.
Even if HDDS could establish that some portion of the non-WP-4 overruns was "caused by" WAL's delays or performance issues, the burden of proving that causal nexus rests on HDDS, and the COPD itself does not support such an attribution. The COPD is the government's own contemporaneous allocation of costs by work package, prepared by the ACO with access to the relevant cost and accounting data, and it does not identify any causal connection between WAL's WP-4 activities and the overruns on other work packages.
Recommendation: This is a strong candidate for partial summary judgment. At the appropriate stage of the proceedings — likely after initial documentary discovery but before the close of fact discovery — we should move for partial summary judgment on the ground that WAL has no indemnification obligation for the $1,909,142 in non-WP-4 overruns as a matter of law. This would reduce WAL's exposure from $14,726,583 to $12,817,441 at the outset, and would frame the remaining dispute more narrowly for trial.
C. Ripeness / Prematurity Defense
The COPD is a preliminary determination; no costs have been formally disallowed, and no COFD has been issued. HDDS filed its request for a COFD with DCMA on October 15, 2022, but the COFD has not yet been issued and there is no indication from DCMA as to when it will be issued. Until the COFD issues, the COPD remains a preliminary administrative finding that is subject to revision, modification, or withdrawal.
WAL's position is that Section 11.4(b) requires a "claim by the U.S. Government" — and that the COPD, as a preliminary determination, does not constitute a formal "claim" sufficient to trigger the indemnity obligation. The Contracting Officer's Final Decision will determine whether any costs are actually disallowed and in what amount. Until that determination is made, the amount of any indemnification obligation (if any) is inherently uncertain and speculative.
This defense also supports WAL's anticipated motion to stay the action pending the conclusion of the DCMA administrative review. The primary-jurisdiction doctrine provides a basis for deferral to DCMA's administrative expertise on the question of cost-overrun allocation, and the ripeness considerations reinforce the argument that judicial resolution of the indemnification dispute would be premature while the underlying government determination remains pending.
D. Force Majeure
The Teaming Agreement contains a force-majeure provision (Section 15.3, to be confirmed in a full review of the executed agreement) that excuses performance to the extent that non-performance is caused by events beyond a party's reasonable control. The titanium raw-material cost escalation driven by global supply-chain disruptions — including disruptions attributable to the COVID-19 pandemic's lasting effects on the aerospace supply chain, geopolitical tensions affecting titanium-producing regions, and documented shortages of aerospace-grade titanium alloy — may qualify as a force-majeure event under the Teaming Agreement's force-majeure clause.
WAL should argue that the $4.2 million titanium price escalation component was caused by a force-majeure event that rendered it impracticable (or at least unreasonable) for WAL to procure titanium at the prices assumed in its original cost estimates. If the force-majeure defense is sustained as to this component, it would reduce WAL's potential indemnification exposure by $4.2 million.
Even absent a specific contractual force-majeure clause, New York law recognizes defenses of impossibility and commercial impracticability under certain circumstances. However, the bar for commercial impracticability under New York law is high, and courts generally require a showing that the event was unforeseeable and that the party seeking relief took all reasonable steps to avoid or mitigate the impact. See, e.g., Kel Kim Corp. v. Central Markets, Inc., 70 N.Y.2d 900, 902 (1987). Given the availability of a contractual force-majeure provision, we should primarily rely on the contract rather than on common-law impracticability.
E. Governing Law Considerations
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 principles of conflicts of law. This choice-of-law provision is enforceable and will govern the interpretation of the indemnification provisions at issue.
New York law provides WAL with an important interpretive advantage. New York courts construe indemnification clauses strictly against the party seeking indemnification. See, e.g., Hooper Assocs., Ltd. v. AGS Computers, Inc., 74 N.Y.2d 487, 491–92 (1990) ("A party is entitled to full contractual indemnification provided that the 'intention to indemnify can be clearly implied from the language and purposes of the entire agreement and the surrounding facts and circumstances.'" (emphasis in original)). Under this doctrine, indemnification agreements are "not to be extended by interpretation or implication beyond their expressed terms" and are "strictly construed to avoid reading into them a duty which the parties did not intend to be assumed." Id.
The causation requirement in Section 11.4(b) — "to the extent such claim is caused by Team Member's acts or omissions" — should be read narrowly under New York law, consistent with the strict-construction principle. HDDS's attempt to read the clause broadly to encompass any government identification of cost overruns, regardless of causation, runs contrary to the clause's express causation limitation and to New York's interpretive framework for indemnification provisions. We should emphasize this point in the Reply and in any subsequent motion practice.
VI. Recommended Strategy for Reply to Counterclaim
A. Timing
WAL's Reply to the Counterclaim is due February 3, 2023, which is twenty-one days from the date of service of the Answer and Counterclaim on January 13, 2023, pursuant to Federal Rule of Civil Procedure 12(a)(1)(B). We do not anticipate requesting an extension of time; the issues are sufficiently well-defined to permit preparation of the Reply within the allotted period.
B. Recommended Approach
The Reply to the Counterclaim should be drafted to accomplish the following objectives:
1. Deny Material Allegations. The Reply should deny each material allegation in the counterclaim, including:
• Deny that WAL caused the cost overruns identified in the COPD;
• Deny that the full $14,726,583 is attributable to WAL's performance of WP-4;
• Deny that Section 11.4(b) has been triggered by the COPD, which is a preliminary determination and not a formal "claim" within the meaning of the Teaming Agreement;
• Deny that HDDS is entitled to indemnification for the $1,909,142 in non-WP-4 overruns; and
• Deny that HDDS is the prevailing party or is entitled to attorneys' fees under Section 11.6.
2. Assert Affirmative Defenses. The Reply should assert the following affirmative defenses to the counterclaim:
(a) Failure to Satisfy the Causation Requirement of Section 11.4(b). WAL's indemnification obligation, if any, extends only to cost overruns "caused by" WAL's own acts or omissions. The cost overruns at issue were caused by HDDS's conduct — including specification deficiencies, mid-stream specification changes, and late delivery of government-furnished equipment — and by force-majeure events, not by WAL's acts or omissions.
(b) Overbreadth — Inclusion of Non-WP-4 Overruns. HDDS's demand for $14,726,583 includes $1,909,142 in cost overruns that the COPD attributes to work packages other than WP-4. WAL has no indemnification obligation under Section 11.4 for overruns on non-WP-4 work packages, and the inclusion of these amounts in HDDS's counterclaim is unsupported by the COPD and by the Teaming Agreement.
(c) Force Majeure / Commercial Impracticability. The titanium raw-material cost escalation that accounts for $4.2 million of the claimed overruns was caused by force-majeure events — specifically, global supply-chain disruptions affecting the aerospace-grade titanium market — that were beyond WAL's reasonable control.
(d) Ripeness / Prematurity. HDDS's counterclaim is premature because the DCMA administrative review is ongoing, no Contracting Officer's Final Decision has been issued, and no costs have been formally disallowed. The COPD is a preliminary determination that is subject to revision or withdrawal, and HDDS's indemnification claim is not ripe for adjudication until the COFD issues.
(e) Failure to Mitigate (HDDS's Own Failures). HDDS failed to take reasonable steps to mitigate the cost overruns for which it now seeks indemnification, including by failing to properly manage government-furnished equipment delivery schedules, failing to provide adequate and timely engineering specifications, and failing to coordinate engineering changes in a manner that minimized cost impacts.
(f) Set-Off. To the extent any indemnification obligation exists, it should be reduced by amounts attributable to HDDS's own acts or omissions, including specification deficiencies, late GFE delivery, and HDDS-initiated engineering changes.
3. Preserve Right to Seek Attorneys' Fees. The Reply should expressly preserve WAL's right to seek attorneys' fees and litigation costs under Section 11.6 of the Teaming Agreement in the event that WAL is the prevailing party in this action. Section 11.6 is a bilateral provision, and WAL's potential entitlement to fee recovery should be asserted early and preserved throughout the proceedings.
4. Do Not Assert a Counterclaim at This Stage. At this time, we do not recommend that WAL assert an affirmative counterclaim against HDDS for breach of the Teaming Agreement. WAL's Verified Complaint for Declaratory Judgment already seeks the relief that WAL needs — a declaration that it is not obligated to indemnify HDDS. Asserting an affirmative breach-of-contract counterclaim against HDDS at this stage could complicate our motion-to-stay strategy, because an affirmative claim by WAL seeking damages from HDDS would be harder to reconcile with a request that the Court defer to the DCMA administrative process. We should revisit this question after the DCMA administrative review concludes and after the COFD issues, at which point WAL may have a basis for affirmative claims depending on the outcome of the COFD.
C. Motion to Stay
Separately from the Reply to the Counterclaim, we should begin preparing a motion to stay the action pending the conclusion of the DCMA administrative review and the issuance of the Contracting Officer's Final Decision. The stay motion serves WAL's interests for several reasons:
• The COFD will resolve critical factual questions — including the final amount of any cost disallowance and the allocation of that disallowance among work packages — that bear directly on the indemnification dispute;
• The primary-jurisdiction doctrine supports deferral to DCMA's administrative expertise on cost-overrun allocation and cost-allowability determinations;
• A stay avoids the risk of inconsistent determinations, where this Court might adjudicate the indemnification dispute based on the COPD only to have the COFD reach a materially different conclusion on cost allocation; and
• A stay conserves judicial and party resources by avoiding potentially unnecessary discovery and motion practice on facts that may be superseded by the COFD.
Notably, HDDS's own First Affirmative Defense — which asserts that WAL's action is premature because the DCMA administrative review is ongoing — suggests that HDDS may not oppose a stay, or at least would have difficulty doing so without contradicting its own pleading. We should be prepared to cite HDDS's own ripeness defense in support of the stay motion.
We recommend filing the motion to stay on or about February 10, 2023, shortly after the Reply to the Counterclaim is filed. The motion should be supported by two declarations: (i) a factual declaration from Catherine Soo-Hyun Park, WAL's Director of Government Contract Compliance, providing background on the DCMA administrative review process, the status of the COFD request, and the anticipated timeline for the COFD; and (ii) a procedural and counsel declaration from Priya Anand attaching relevant correspondence and identifying the procedural posture of the case. Simone and I will begin drafting the motion and supporting materials in the first week of February.
VII. Coordination Items
A. Ashford & Reeves LLP
WAL is represented by Harold Reeves and Natalie Cheng of Ashford & Reeves LLP in connection with the DCMA administrative review and COFD process. Their work is complementary to our litigation efforts but involves a separate engagement focused on government-contract regulatory matters. We should coordinate with Ashford & Reeves on the following items:
• DCMA Administrative Review Status: Obtain an update on the current status of the DCMA administrative review and HDDS's COFD request filed on October 15, 2022. Specifically, we need to understand (a) whether DCMA has assigned the COFD request to a reviewing officer; (b) the anticipated timeline for the issuance of the COFD; (c) whether DCMA has requested any additional information or documentation from HDDS; and (d) whether there have been any material developments in the review since our last update.
• DCMA Correspondence and Audit Communications: Request copies of any DCMA correspondence, audit reports, incurred-cost audit findings, or other communications that may bear on the counterclaim allegations. In particular, any documents that shed light on the COPD's allocation of cost overruns among work packages — and any indication of DCMA's reasoning regarding causation — would be valuable.
• Information Sharing Protocol: Establish a regular cadence for information sharing between our team and Ashford & Reeves to ensure that developments in the DCMA process are promptly communicated and factored into the litigation strategy. We recommend a bi-weekly status call or email update.
B. Insurance
The filing of HDDS's counterclaim increases the importance of obtaining a definitive coverage determination from Meridian Surety & Insurance Group ("Meridian"). The relevant insurance history is as follows:
WAL tendered the HDDS indemnification demand to Meridian on September 22, 2022, under both its Directors & Officers liability policy (Policy No. MSI-DO-2022-07814, $10 million aggregate limit, $250,000 retention) and its Commercial General Liability policy (Policy No. MSI-CGL-2021-33291, $25 million aggregate limit, $500,000 self-insured retention). Meridian acknowledged receipt and issued a reservation-of-rights letter dated November 1, 2022, which reserves Meridian's rights with respect to two coverage issues:
(a) The contractual-liability exclusion (Exclusion (b) of the standard CGL form), which excludes coverage for liability assumed under a contract or agreement; and
(b) The government-contract exclusion (Endorsement GC-04), which excludes coverage for losses arising out of the performance of a government contract or subcontract.
Meridian is not currently providing a defense to WAL or funding the declaratory judgment action. Given that HDDS has now filed a counterclaim seeking $14,726,583 plus attorneys' fees — converting the dispute from a declaratory judgment action into an active litigation with a quantified damages demand — we recommend a follow-up with Rachel Underwood at Meridian pressing for a definitive coverage determination. The filing of the counterclaim materially changes the posture of the case and may affect Meridian's coverage analysis, particularly with respect to the D&O policy and any "wrongful act" or "management decision" coverage triggers.
If Meridian ultimately denies coverage, we may need to advise the client on the potential for a separate coverage action against Meridian, which would be governed by the terms of the applicable policies and by New York insurance law. We should also consider whether additional insurance carriers should be put on notice.
C. Lender Notification
WAL provided notice to Ridgeline National Bank, N.A. ("Ridgeline") on two prior occasions in connection with this dispute:
(a) September 28, 2022 — Initial Notice under Section 6.07(b) of the $75 million revolving credit facility between WAL and Ridgeline (the "Credit Agreement"), which requires prompt written notice of any litigation, arbitration, or governmental investigation that could reasonably be expected to result in a Material Adverse Effect; and
(b) December 5, 2022 — Supplemental Notice regarding the filing of the declaratory judgment action.
The filing of HDDS's counterclaim does not independently trigger a new notice obligation under Section 6.07(b) because it arises from the same dispute that was previously disclosed. However, the counterclaim does formalize HDDS's $14,726,583 demand as a litigated claim — as opposed to an unlitigated demand — and converts WAL's posture from plaintiff in a DJ action to both plaintiff and defendant. We should confirm with Gregory Poole (WAL's General Counsel) and Elaine Whitmore (WAL's Chief Financial Officer) whether supplemental disclosure to Ridgeline is advisable as a matter of prudence, even if not strictly required. A brief supplemental notice describing the counterclaim and WAL's assessment of the merits would be the most conservative approach.
D. Financial Statement Treatment
The counterclaim formalizes HDDS's $14,726,583 demand as a litigated claim, which has implications for WAL's financial reporting. Pinnacle Advisory Partners LLC (Thomas Brennan, CPA, engagement partner) serves as WAL's independent auditor and should be apprised of the counterclaim filing for purposes of the FY 2022 audit and the ASC 450 (Contingencies) contingent-liability assessment.
The current assessment — reached in consultation with Pinnacle during the preliminary audit discussions — classifies the HDDS indemnification contingency as "reasonably possible" but not "probable" within the meaning of ASC 450-20. Under ASC 450-20-50-3, a reasonably possible contingent liability must be disclosed in the notes to the financial statements but is not required to be accrued. The filing of the counterclaim does not necessarily change this analysis, because the probability of an unfavorable outcome depends on the merits of WAL's defenses (which remain strong) rather than on the procedural posture of the dispute. However, the counterclaim filing should be flagged for Pinnacle's consideration to ensure that the disclosure in the notes to the financial statements accurately reflects the current status of the litigation.
We should coordinate with Patrick or the client to ensure that Pinnacle receives notice of the counterclaim filing promptly, ideally before the end of January 2023.
VIII. Recommended Next Steps and Timeline
The following table summarizes the key action items, responsible persons, and target dates:
IX. Conclusion
HDDS's Answer and Counterclaim are largely as anticipated in our Preliminary Case Assessment Memorandum dated November 7, 2022. The Answer contains no major surprises, and the affirmative defenses range from weak (ripeness/justiciable controversy and waiver/estoppel) to moderately concerning (failure to mitigate). The counterclaim seeks $14,726,583 in contractual indemnification plus attorneys' fees under Section 11.6 of the Teaming Agreement.
WAL has strong defenses to the counterclaim, particularly on the following grounds:
• Causation: The cost overruns were caused by HDDS's specification deficiencies, late GFE delivery, and government-directed engineering changes — not by WAL's acts or omissions.
• Overbreadth: HDDS's inclusion of $1,909,142 in non-WP-4 overruns is unsupported by the COPD and by the Teaming Agreement, and is a strong candidate for partial summary judgment.
• Ripeness/Prematurity: The COPD is a preliminary determination; no costs have been formally disallowed, and the COFD process remains pending.
• Force Majeure: The $4.2 million titanium price escalation was caused by global supply-chain disruptions beyond WAL's control.
The Reply to the Counterclaim should be filed by the February 3, 2023 deadline, followed promptly by the motion to stay on or about February 10, 2023. We should also proceed with the coordination items identified in Section VII — particularly the follow-up with Meridian on coverage and the coordination with Ashford & Reeves on the DCMA administrative review status.
I am happy to discuss this memorandum and the recommended strategy at your convenience. Please let me know if you would like to schedule a team call before I begin drafting the Reply.
This memorandum is protected by the attorney-client privilege and the attorney work product doctrine. It is intended solely for the use of the addressees and should not be disclosed to any third party without the prior written consent of counsel.
Action Item | Responsible | Target Date
Draft Reply to Counterclaim | P. Gallagher, S. Laroche | January 25, 2023 (initial draft)
Review and revise Reply | P. Anand | January 30, 2023
File Reply to Counterclaim | P. Gallagher | February 3, 2023 (deadline)
Begin drafting Motion to Stay | S. Laroche, P. Gallagher | February 1, 2023
File Motion to Stay | P. Gallagher | On or about February 10, 2023
Coordinate with Ashford & Reeves on DCMA status | S. Laroche | Ongoing (bi-weekly updates)
Follow up with Meridian on coverage determination | P. Anand | February 2023
Notify Pinnacle Advisory Partners of counterclaim filing | P. Gallagher / client | January 2023
Confirm lender-notice sufficiency with client | D. Carmichael | January 2023
Begin preparing targeted discovery requests | S. Laroche, P. Gallagher | February 2023 (following Reply filing)
Identify and vet potential expert witnesses | P. Anand, P. Gallagher | February–March 2023

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