UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
FOURTH JOINT STATUS REPORT
Plaintiff Whitmore Aerospace LLC ("WAL"), by and through its counsel Calderwood & Harkness LLP, and Defendant Hargrove-Dalton Defense Systems, Inc. ("HDDS"), by and through its counsel Voss, Trager & Kendall LLP (collectively, the "Parties"), respectfully submit this Fourth 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.
The Court's stay order requires the Parties to file joint status reports every 120 days advising the Court of the status of the DCMA administrative review and any material developments bearing on the continuation of the stay. The Parties have previously filed three joint status reports, as follows: the First Joint Status Report, filed July 15, 2023 (Dkt. No. 37); the Second Joint Status Report, filed November 12, 2023 (Dkt. No. 39); and the Third Joint Status Report, filed March 11, 2024 (Dkt. No. 41). This Fourth Joint Status Report covers the period from March 11, 2024, through the date of this filing.
I. BACKGROUND AND PROCEDURAL HISTORY
The following summary of the background and procedural history of this action is provided for the Court's convenience and to place the current status update in context.
On November 28, 2022, WAL filed a Verified Complaint for Declaratory Judgment (Dkt. No. 1) seeking a declaration that Section 11.4 of the Teaming Agreement dated June 12, 2019 (the "Teaming Agreement"), between WAL and HDDS does not obligate WAL to indemnify HDDS for $14,726,583 in cost overruns identified in a Contracting Officer's Preliminary Determination ("COPD") issued on August 1, 2022, by Administrative Contracting Officer Lt. Col. Sandra M. Vickers, USAF, DCMA Northern Virginia.
On January 13, 2023, HDDS filed its Answer and Counterclaim (Dkt. No. 14), asserting a counterclaim for $14,726,583 in contractual indemnification, together with attorneys' fees and costs, under Section 11.6 of the Teaming Agreement. WAL filed its Reply to the Counterclaim on February 3, 2023 (Dkt. No. 18).
On February 10, 2023, WAL filed a Motion to Stay Proceedings Pending Conclusion of the DCMA Administrative Review (Dkt. No. 20), supported by the Declaration of Catherine Soo-Hyun Park, Vice President of Government Contracts & Compliance at WAL (Dkt. No. 20-1), and the Declaration of Priya Anand of Calderwood & Harkness LLP (Dkt. No. 20-2). Following the filing of WAL's motion, the Parties conferred and reached agreement regarding the appropriateness of a stay. On February 24, 2023, the Parties filed a Joint Stipulation and Proposed Order requesting that the Court stay the action (Dkt. No. 24).
On March 17, 2023, the Court (Brannigan, J.) entered an Order granting the stay (the "Stay Order") (Dkt. No. 34). In granting the stay, the Court found that: (a) the DCMA administrative proceeding would likely resolve or narrow the factual predicate for the indemnity dispute between the Parties; (b) the primary-jurisdiction doctrine counseled deference to the DCMA's administrative process, given the agency's specialized expertise in defense contract cost accounting and allocation; and (c) neither party opposed the stay. The Stay Order requires the Parties to file joint status reports every 120 days and to notify the Court promptly of any material developments in the administrative proceeding.
By way of further background, the cost overruns identified in the COPD relate to the Advanced Tactical Airframe Program ("ATAP") under Prime Contract No. FA8620-19-C-0337, awarded by the United States Air Force, Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, Ohio. Under the Prime Contract, HDDS serves as the prime contractor. WAL is HDDS's subcontractor and teaming partner, responsible for Work Package 4 ("WP-4"), which encompasses the design, engineering, and manufacture of titanium structural assemblies for the ATAP airframe. The Teaming Agreement governs the allocation of responsibilities, costs, and liabilities between WAL and HDDS with respect to their respective work packages under the Prime Contract.
The COPD issued by ACO Lt. Col. Vickers on August 1, 2022, identified total cost overruns of $14,726,583 across multiple work packages under the Prime Contract. Of that total, the COPD attributed $12,817,441 — representing approximately 87.03% of the total identified overruns — to WP-4, with the remaining $1,909,142 (approximately 12.97%) attributed to other work packages not assigned to WAL under the Teaming Agreement. The attribution of cost overruns to specific work packages, and the underlying cost accounting methodology employed by the COPD, are central to the indemnity dispute between the Parties in this action.
On October 15, 2022, HDDS filed a formal response to the COPD and a request for a Contracting Officer's Final Decision ("COFD") under the Contract Disputes Act, 41 U.S.C. §§ 7101–7109. As of the date of this filing, the COFD has not been issued.
II. STATUS OF THE DCMA ADMINISTRATIVE REVIEW
The Parties report the following with respect to the status of the DCMA administrative review:
The key development since the filing of the Third Joint Status Report is that DCMA has completed its field audit of the cost overruns under Prime Contract No. FA8620-19-C-0337. The field audit was conducted by DCMA field audit teams and addressed the allocation and substantiation of costs across the relevant work packages, including WP-4. The completion of the field audit represents a significant step in the administrative review process.
However, the cost analysis stemming from the field audit remains under internal legal review at DCMA headquarters. ACO Lt. Col. Sandra M. Vickers has not yet issued a Contracting Officer's Final Decision. No timeline for the issuance of the COFD has been communicated to either Party by the DCMA or by the Contracting Officer, notwithstanding informal inquiries made by counsel for both Parties.
Based on the information currently available to the Parties, the internal legal review at DCMA headquarters is ongoing, and there is no indication that a COFD is imminent. The Parties understand that DCMA's internal process requires review and concurrence by DCMA headquarters legal counsel before the ACO is authorized to issue a final decision. This internal review and concurrence process accounts for the continued delay in the issuance of the COFD and is consistent with the standard administrative procedures applicable to final decisions of this magnitude under the Contract Disputes Act.
The Parties will continue to monitor the progress of the DCMA administrative review and will promptly notify the Court of any material developments, including the issuance of the COFD or any indication from the DCMA or the Contracting Officer as to a timeline for the same.
III. STATUS OF THE LITIGATION
The action remains stayed in its entirety pursuant to the Court's Stay Order dated March 17, 2023 (Dkt. No. 34). No discovery has been conducted by either Party since the entry of the Stay Order. No motions are currently pending before the Court. No scheduling order has been entered in this matter. The case has been dormant since the entry of the stay, and neither Party has taken any action in the litigation beyond the filing of the required joint status reports.
IV. PARTIES' JOINT REQUEST
The Parties respectfully submit that the basis for the stay remains in full force and effect. The DCMA administrative review is ongoing. Although the field audit has been completed, the cost analysis derived from that audit remains under internal legal review at DCMA headquarters, and the Contracting Officer's Final Decision — which will address the factual predicate underlying the Parties' indemnity dispute, including the allocation and substantiation of cost overruns across the work packages under the Prime Contract — has not been issued. The considerations that supported the entry of the stay — namely, that the COFD will likely resolve or narrow the factual issues central to this litigation, that the primary-jurisdiction doctrine continues to counsel deference to the DCMA's administrative process, and that both Parties continue to support the stay — remain applicable.
Accordingly, 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 COFD.
The Parties will file the next joint status report within 120 days of the date of this filing — that is, on or before approximately November 6, 2024 — or sooner if there is a material development in the administrative proceeding warranting earlier notification to the Court.
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Dated: July 9, 2024
Respectfully submitted,
For Plaintiff Whitmore Aerospace LLC:
CALDERWOOD & HARKNESS LLP
By: /s/ Priya Anand
________________________________________
Priya Anand (Responsible Partner) Douglas Carmichael (Billing Partner) Patrick Gallagher (Lead Associate) Simone Laroche (Working Associate) 600 Lexington Avenue, 28th Floor New York, New York 10022 Telephone: (212) 555-7400 Facsimile: (212) 555-7401
Attorneys for Plaintiff Whitmore Aerospace LLC
For Defendant Hargrove-Dalton Defense Systems, Inc.:
VOSS, TRAGER & KENDALL LLP
By: /s/ Leonard Trager
________________________________________
Leonard Trager (Lead Partner) Megan Forsythe (Senior Associate) 900 17th Street NW, Suite 800 Washington, D.C. 20006 Telephone: (202) 555-3200 Facsimile: (202) 555-3201
Attorneys for Defendant Hargrove-Dalton Defense Systems, Inc.
CERTIFICATE OF SERVICE
I hereby certify that on July 9, 2024, the foregoing Fourth Joint Status Report was filed electronically via the Court's CM/ECF system, which will send notification of such filing to all counsel of record in this action. No party to this action requires service by any means other than electronic filing through the CM/ECF system.
/s/ Patrick Gallagher
________________________________________
Patrick Gallagher CALDERWOOD & HARKNESS LLP 600 Lexington Avenue, 28th Floor New York, New York 10022 Telephone: (212) 555-7400
WHITMORE AEROSPACE LLC,
<!-- indent:2 -->Plaintiff,<!-- /indent -->
Case No. 1:22-cv-10147-RMB
v.
Hon. Richard M. Brannigan
| HARGROVE-DALTON DEFENSE SYSTEMS, INC., | U.S. District Judge |
| <!-- indent:2 -->Defendant.<!-- /indent --> | Hon. Allison P. Kurtz |
U.S. Magistrate Judge