UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
WHITMORE AEROSPACE LLC,
Plaintiff,
v.
HARGROVE-DALTON DEFENSE SYSTEMS, INC.,
Defendant.
Case No. 1:22-cv-10147-RMB
Hon. Richard M. Brannigan United States District Judge
Hon. Allison P. Kurtz United States Magistrate Judge
SECOND JOINT STATUS REPORT
PRELIMINARY STATEMENT
Plaintiff Whitmore Aerospace LLC ("WAL") and Defendant Hargrove-Dalton Defense Systems, Inc. ("HDDS") (collectively, the "Parties"), by and through their respective undersigned counsel, hereby jointly submit this Second Joint Status Report pursuant to the Court's Order dated March 17, 2023 (ECF No. 24), which stayed this action pending the conclusion of the administrative review by the United States Department of Defense, Defense Contract Management Agency ("DCMA") of cost-overrun claims arising under Prime Contract No. FA8620-19-C-0337 and which requires the Parties to file a joint status report every 120 days updating the Court on the status of the administrative proceedings and this action.
This is the second joint status report filed in accordance with the Court's Order. The first joint status report was timely filed on July 15, 2023 (ECF No. 26). As set forth more fully below, the DCMA administrative review remains ongoing, no Contracting Officer's Final Decision has been issued, and the Parties jointly request that the Court maintain the stay of this action.
Counsel for Plaintiff Whitmore Aerospace LLC are Priya Anand and Douglas Carmichael of Calderwood & Harkness LLP, 600 Lexington Avenue, 28th Floor, New York, New York 10022. Counsel for Defendant Hargrove-Dalton Defense Systems, Inc. are Leonard Trager and Megan Forsythe of Voss, Trager & Kendall LLP, 900 17th Street NW, Suite 800, Washington, D.C. 20006.
BACKGROUND AND PROCEDURAL HISTORY
On November 28, 2022, WAL commenced this action by filing a Verified Complaint for Declaratory Judgment (ECF No. 1) pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201–2202. In its Verified Complaint, WAL seeks a declaration from this Court that Section 11.4 of the Teaming Agreement dated June 12, 2019, entered into between WAL and HDDS in connection with the Advanced Tactical Airframe Program ("ATAP"), does not obligate WAL to indemnify HDDS for $14,726,583 in cost overruns identified by DCMA in a Contracting Officer's Preliminary Determination ("COPD") dated August 1, 2022.
On January 13, 2023, HDDS filed its Answer and Counterclaim (ECF No. 9). In its Counterclaim, HDDS seeks $14,726,583 in contractual indemnification from WAL for the cost overruns at issue, together with attorneys' fees and costs incurred in enforcing the indemnification obligation, which HDDS asserts are recoverable under Section 11.6 of the Teaming Agreement. WAL filed its Reply to HDDS's Counterclaim on February 3, 2023 (ECF No. 14), thereby closing the pleadings.
On February 10, 2023, WAL filed a Motion to Stay Proceedings Pending Conclusion of the DCMA Administrative Review (ECF No. 16), supported by the Declaration of Catherine Soo-Hyun Park, Vice President of Government Contracts & Compliance at WAL (ECF No. 16-1), and the Declaration of Priya Anand (ECF No. 16-2). The Park Declaration described the nature and expected scope of the ongoing DCMA field audit and administrative review process, and the Anand Declaration addressed the procedural posture of the case and the legal basis for the requested stay.
On February 24, 2023, the Parties filed a Joint Stipulation and Proposed Order to Stay Proceedings (ECF No. 19), reflecting their mutual agreement that a stay pending the DCMA administrative review would serve the interests of judicial economy and avoid the risk of duplicative or inconsistent factual determinations.
On March 17, 2023, the Court entered its Order granting the stay (ECF No. 24). In granting the stay, the Court found that: (a) the DCMA administrative proceeding would likely resolve or substantially narrow the factual predicate for the indemnity dispute between the Parties, including the underlying determination of whether and to what extent cost overruns were properly allocable to the ATAP work packages performed by WAL as a subcontractor under the Teaming Agreement; (b) the primary-jurisdiction doctrine counseled deference to the DCMA administrative process, given the technical complexity of the cost-accounting issues involved and the specialized expertise of the DCMA in auditing and adjudicating cost-overrun claims under government contracts; and (c) neither party opposed the stay. The Court's Order requires the Parties to file joint status reports every 120 days, updating the Court on the status of the DCMA administrative review and the Parties' respective positions regarding the continuation of the stay.
STATUS OF THE DCMA ADMINISTRATIVE REVIEW
The DCMA administrative review at issue in this action arises from the Contracting Officer's Preliminary Determination ("COPD") issued on August 1, 2022, by Administrative Contracting Officer Lt. Col. Sandra M. Vickers, USAF, of DCMA Northern Virginia. The COPD identified a total of $14,726,583 in cost overruns on the ATAP under Prime Contract No. FA8620-19-C-0337. The COPD set forth the DCMA's preliminary findings regarding the allocation of those cost overruns among the various work packages performed under the Prime Contract, including work packages performed by WAL as a subcontractor to HDDS under the Teaming Agreement.
Following issuance of the COPD, HDDS submitted a formal response and request for a Contracting Officer's Final Decision ("COFD") to DCMA on October 15, 2022. In its response, HDDS provided detailed cost-accounting data and supporting documentation addressing each line item of the COPD and requested that ACO Lt. Col. Vickers issue a COFD resolving the cost-overrun determinations on a final basis.
As of the date of this filing, November 12, 2023, ACO Lt. Col. Vickers has not issued a COFD. The DCMA field audit of the cost overruns under Prime Contract No. FA8620-19-C-0337 remains ongoing. The Parties understand from their respective contacts with DCMA — including communications by HDDS's government contracts counsel with the DCMA Northern Virginia field office and communications by WAL's internal Government Contracts & Compliance department with the DCMA audit team — that the field audit has not yet been completed. The Parties further understand that the issuance of the Contracting Officer's Final Decision remains pending and that the COFD will not be issued until the field audit is concluded. No specific timeline for the completion of the field audit or the issuance of the COFD has been communicated to either Party by DCMA.
The Parties are not aware of any material change in the status of the DCMA administrative review since the filing of the first joint status report on July 15, 2023. Both Parties continue to cooperate with the DCMA audit process and to respond to information requests from the DCMA audit team as they are received.
STATUS OF THIS ACTION
This action remains stayed in its entirety pursuant to the Court's March 17, 2023 Order (ECF No. 24). No discovery has been conducted, no motions are pending before the Court, and no scheduling order or case management plan has been entered. The pleadings are closed, consisting of the Verified Complaint (ECF No. 1, filed November 28, 2022), the Answer and Counterclaim (ECF No. 9, filed January 13, 2023), and the Reply to Counterclaim (ECF No. 14, filed February 3, 2023).
The first joint status report was timely filed on July 15, 2023 (ECF No. 26), in compliance with the Court's 120-day reporting requirement. This Second Joint Status Report is likewise timely filed, as it falls within the 120-day period following the first report.
REQUEST TO MAINTAIN THE STAY
The Parties jointly and respectfully request that the Court maintain the stay of this action pending the conclusion of the DCMA administrative review and the issuance of the Contracting Officer's Final Decision.
The reasons supporting the stay, as articulated by the Court in its March 17, 2023 Order, remain fully applicable. The DCMA field audit is ongoing, and the Contracting Officer's Final Decision, once issued, is expected to resolve or significantly narrow the factual issues underlying the indemnity dispute between the Parties — including, most critically, the determination of the amount and allocation of cost overruns properly attributable to WAL's subcontract work packages under the Teaming Agreement. A COFD addressing these matters will provide a factual foundation that is directly relevant to the Parties' competing claims and defenses in this action and will likely facilitate a more focused and efficient adjudication of the remaining legal issues, including the interpretation and application of Sections 11.4 and 11.6 of the Teaming Agreement.
Neither Party seeks to lift the stay at this time. Both Parties agree that the continuation of the stay serves the interests of judicial economy and is consistent with the principles underlying the primary-jurisdiction doctrine upon which the Court relied in entering the stay.
NEXT JOINT STATUS REPORT
Pursuant to the Court's March 17, 2023 Order, the Parties will file their next joint status report on or before the date that is 120 days from the date of this filing, which would be approximately March 11, 2024. The Parties will promptly notify the Court in the event of any material development in the DCMA administrative review prior to that date, including the issuance of a Contracting Officer's Final Decision.
CONCLUSION
The Parties respectfully submit this Second Joint Status Report for the Court's information. The DCMA administrative review remains pending, no Contracting Officer's Final Decision has been issued, and the Parties continue to believe that the stay of this action is warranted. The Parties jointly and respectfully request that the stay remain in effect pending the conclusion of the DCMA administrative review and the issuance of the COFD, and that the Court take no further action at this time.
Dated: November 12, 2023 New York, New York
FOR PLAINTIFF WHITMORE AEROSPACE LLC:
CALDERWOOD & HARKNESS LLP
By: ________
Priya Anand Douglas Carmichael
600 Lexington Avenue, 28th Floor New York, New York 10022 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 panand@calderwoodharkness.com dcarmichael@calderwoodharkness.com
Attorneys for Plaintiff Whitmore Aerospace LLC
FOR DEFENDANT HARGROVE-DALTON DEFENSE SYSTEMS, INC.:
VOSS, TRAGER & KENDALL LLP
By: ________
Leonard Trager Megan Forsythe
900 17th Street NW, Suite 800 Washington, D.C. 20006 Telephone: (202) 331-7200 Facsimile: (202) 331-7250 ltrager@vtklegal.com mforsythe@vtklegal.com
Attorneys for Defendant Hargrove-Dalton Defense Systems, Inc.
CERTIFICATE OF SERVICE
I, Priya Anand, hereby certify that on November 12, 2023, the foregoing Second Joint Status Report was filed with the Clerk of Court via the Court's CM/ECF electronic filing system, which will automatically serve electronic notification of such filing on all attorneys of record who have registered to receive electronic notices in this case, including:
Leonard Trager Megan Forsythe Voss, Trager & Kendall LLP 900 17th Street NW, Suite 800 Washington, D.C. 20006 ltrager@vtklegal.com mforsythe@vtklegal.com
Counsel for Defendant Hargrove-Dalton Defense Systems, Inc.
________________________________________
Priya Anand CALDERWOOD & HARKNESS LLP 600 Lexington Avenue, 28th Floor New York, New York 10022