UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
THIRD JOINT STATUS REPORT
Plaintiff Whitmore Aerospace LLC ("WAL") and Defendant Hargrove-Dalton Defense Systems, Inc. ("HDDS") (collectively, the "Parties"), by and through their respective undersigned counsel, respectfully submit this Third Joint Status Report to the Court pursuant to the Court's Order dated March 17, 2023 (Dkt. No. 34), which stayed this action pending 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 directed the Parties to file joint status reports at intervals of no greater than one hundred and twenty (120) days so that the Court may remain apprised of the progress of the administrative proceeding. This is the third such joint status report filed by the Parties. The first joint status report was filed on July 15, 2023 (Dkt. No. 37), and the second joint status report was filed on November 12, 2023 (Dkt. No. 40). The Parties state as follows:
I. BACKGROUND AND PROCEDURAL HISTORY
1. On November 28, 2022, WAL commenced this action by filing a Verified Complaint for Declaratory Judgment (Dkt. No. 1). The Complaint seeks a declaration that Section 11.4 of the Teaming Agreement dated June 12, 2019, between WAL and HDDS (the "Teaming Agreement") does not obligate WAL to indemnify HDDS for $14,726,583 in cost overruns identified in the Contracting Officer's Preliminary Determination ("COPD") issued by DCMA on August 1, 2022, under Prime Contract No. FA8620-19-C-0337. Prime Contract No. FA8620-19-C-0337 relates to the Advanced Tactical Airframe Program ("ATAP"), a multi-year defense procurement initiative administered by the United States Air Force.
2. On January 13, 2023, HDDS filed its Answer and Counterclaim (Dkt. No. 12). In its Counterclaim, HDDS asserts a claim for contractual indemnification in the amount of $14,726,583, together with attorneys' fees and costs, under Section 11.6 of the Teaming Agreement. HDDS alleges that Section 11.4 of the Teaming Agreement unambiguously requires WAL, as the responsible subcontractor for Work Package 4 (titanium structural assemblies), to indemnify HDDS for cost overruns attributable to WAL's scope of work under the ATAP program.
3. On February 3, 2023, WAL filed its Reply to HDDS's Counterclaim (Dkt. No. 17), denying that the Teaming Agreement imposes an indemnity obligation on WAL under the circumstances presented and raising various affirmative defenses.
4. On February 10, 2023, WAL filed a Motion to Stay Proceedings Pending Conclusion of the DCMA Administrative Review (Dkt. No. 19). HDDS did not oppose the motion, and the Parties thereafter filed a Joint Stipulation on February 24, 2023 (Dkt. No. 22), confirming their mutual consent to a stay of this action.
5. On March 17, 2023, the Court entered an Order granting the stay (Dkt. No. 34) (the "Stay Order"). In the Stay Order, 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, particularly with respect to the allocation and characterization of cost overruns under the Prime Contract; (b) the primary-jurisdiction doctrine counseled deference to the DCMA's specialized administrative process for adjudicating government contract cost disputes; and (c) neither party opposed the stay and both parties represented that the stay would serve the interests of judicial economy and efficiency. The Stay Order further directed the Parties to file joint status reports with the Court at intervals not to exceed one hundred and twenty (120) days, commencing from the date of the Stay Order.
II. STATUS OF THE DCMA ADMINISTRATIVE REVIEW
6. The DCMA administrative review of cost overruns arising under Prime Contract No. FA8620-19-C-0337 remains pending and has not yet concluded. As of the date of this Third Joint Status Report, the Administrative Contracting Officer ("ACO") has not issued a Contracting Officer's Final Decision ("COFD").
7. As previously reported, HDDS submitted a formal written response to the COPD and a request for issuance of a COFD with the DCMA on October 15, 2022. That request remains under active review by ACO Lt. Col. Sandra M. Vickers, USAF, assigned to the DCMA Northern Virginia office. The Parties understand that the DCMA review process involves a comprehensive cost analysis and field audit of the $14,726,583 in total identified cost overruns under the ATAP program. The scope of the DCMA's analysis encompasses, among other things, the proper allocation of cost overruns between Work Package 4 — which involved titanium structural assemblies performed by WAL as a subcontractor and which accounts for approximately $12,817,441, or 87.03%, of the total identified cost overruns — and other work packages under the Prime Contract, which account for approximately $1,909,142, or 12.97%, of the total identified cost overruns.
8. As of the date of this report, the DCMA field audit remains ongoing. The Parties have been informed that the audit involves a detailed review of incurred costs, labor hour allocations, material procurement records, and subcontractor performance data. Neither Party has received any formal or informal indication from the DCMA or from ACO Lt. Col. Vickers as to a specific timeline or anticipated date for issuance of the COFD.
9. The Parties note that, since the filing of the Second Joint Status Report on November 12, 2023, there have been no material developments in the DCMA administrative proceeding. The Parties have continued to cooperate with the DCMA review process as required and have responded to all information requests issued by the ACO's office in connection with the ongoing field audit.
III. REQUEST TO CONTINUE THE STAY
10. The Parties jointly represent to the Court that the basis for the stay — namely, the pendency of the DCMA administrative review and the anticipated issuance of a COFD by the ACO — continues to exist. The administrative proceeding has not concluded, and no COFD has been issued.
11. The Parties continue to believe, consistent with the Court's findings in the Stay Order, that the DCMA administrative proceeding remains the most efficient and appropriate vehicle for resolving or substantially narrowing the factual predicate underlying the Parties' indemnity dispute in this action. The COFD, once issued, is expected to provide a definitive determination regarding the amount, allocation, and characterization of the cost overruns under the Prime Contract, which in turn will directly inform the scope and merit of the Parties' respective claims and defenses in this litigation.
12. Accordingly, both Parties respectfully request that the Court maintain the stay of this action in effect pending the conclusion of the DCMA administrative review and the issuance of a COFD by the Administrative Contracting Officer. The Parties submit that continuing the stay will promote judicial economy, avoid the risk of inconsistent determinations, and conserve the resources of both the Court and the Parties.
13. Pursuant to the Court's Stay Order, the Parties will file their next joint status report within one hundred and twenty (120) days of the date of this report, on or before approximately July 9, 2024, or sooner if there is a material development in the DCMA administrative proceeding warranting the Court's attention.
IV. CONCLUSION
For the foregoing reasons, the Parties respectfully submit this Third Joint Status Report and request that the Court maintain the stay of this action in effect. The Parties will continue to monitor the DCMA administrative review and will promptly notify the Court of any material developments, including the issuance of a COFD or any other significant change in the status of the administrative proceeding.
Dated: March 11, 2024 New York, New York
Respectfully submitted,
FOR PLAINTIFF WHITMORE AEROSPACE LLC:
CALDERWOOD & HARKNESS LLP 600 Lexington Avenue, 28th Floor New York, New York 10022 Telephone: (212) 558-4000 Facsimile: (212) 558-3588
By: /s/ Priya Anand
________________________________________
Priya Anand (PA-2187) Patrick Gallagher (PG-7463)
Attorneys for Plaintiff Whitmore Aerospace LLC
FOR DEFENDANT HARGROVE-DALTON DEFENSE SYSTEMS, INC.:
VOSS, TRAGER & KENDALL LLP 900 17th Street NW, Suite 800 Washington, D.C. 20006 Telephone: (202) 429-3000 Facsimile: (202) 429-3100
By: /s/ Leonard Trager
________________________________________
Leonard Trager (LT-4019) Megan Forsythe (MF-6821)
Attorneys for Defendant Hargrove-Dalton Defense Systems, Inc.
CERTIFICATE OF SERVICE
I hereby certify that on March 11, 2024, I caused the foregoing Third Joint Status Report to be electronically filed with the Clerk of the Court via the Court's Case Management/Electronic Case Filing ("CM/ECF") system, which will send automatic electronic notification of such filing to all counsel of record in this matter, including:
Leonard Trager Megan Forsythe Voss, Trager & Kendall LLP 900 17th Street NW, Suite 800 Washington, D.C. 20006 Attorneys for Defendant Hargrove-Dalton Defense Systems, Inc.
Priya Anand Patrick Gallagher Calderwood & Harkness LLP 600 Lexington Avenue, 28th Floor New York, New York 10022 Attorneys for Plaintiff Whitmore Aerospace LLC
/s/ Priya Anand
________________________________________
Priya Anand CALDERWOOD & HARKNESS LLP
WHITMORE AEROSPACE LLC,
| <!-- indent:2 -->Plaintiff,<!-- /indent --> | Case No. 1:22-cv-10147-RMB |
| <!-- indent:1 -->v.<!-- /indent --> | Hon. Richard M. Brannigan |
U.S. District Judge
HARGROVE-DALTON DEFENSE SYSTEMS, INC.,
Hon. Allison P. Kurtz
<!-- indent:2 -->Defendant.<!-- /indent -->