UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
FIFTH JOINT STATUS REPORT
Pursuant to the Order of this Court dated March 17, 2023 (ECF No. 24), granting a stay of 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, the parties respectfully submit this Fifth Joint Status Report for the Court's consideration. The March 17, 2023 Order directs the parties to file a joint status report every one hundred and twenty (120) days, updating the Court on the status of the DCMA administrative review and any other developments material to this litigation.
This report is submitted jointly by Plaintiff Whitmore Aerospace LLC ("Whitmore" or "WAL"), by and through its counsel of record, Calderwood & Harkness LLP, and by Defendant Hargrove-Dalton Defense Systems, Inc. ("HDDS"), by and through its counsel of record, Voss, Trager & Kendall LLP. The parties have conferred in good faith regarding the matters addressed herein and are in agreement as to the representations made in this filing.
I. BACKGROUND AND PROCEDURAL HISTORY
To orient the Court, the parties provide the following summary of the procedural history of this action.
On November 28, 2022, Whitmore commenced this action by filing a Verified Complaint for Declaratory Judgment (ECF No. 1), seeking a declaration that Section 11.4 of the Teaming Agreement dated June 12, 2019, entered into between Whitmore and HDDS in connection with the Advanced Tactical Airframe Program ("ATAP"), does not obligate Whitmore to indemnify HDDS for the sum of $14,726,583 in cost overruns identified in DCMA's Contracting Officer's Preliminary Determination ("COPD") dated August 1, 2022. The Verified Complaint alleges, among other things, that the cost overruns at issue are attributable to design specification changes directed by the Government and to HDDS's own programmatic decisions as prime contractor, and that such overruns fall outside the scope of Whitmore's indemnification obligations under the Teaming Agreement.
On January 13, 2023, HDDS filed its Answer and Counterclaim (ECF No. 8), denying the material allegations of the Verified Complaint and asserting a counterclaim against Whitmore for $14,726,583 in contractual indemnification, together with attorneys' fees and costs, pursuant to Sections 11.4 and 11.6 of the Teaming Agreement. HDDS's counterclaim alleges that Whitmore, as the principal subcontractor responsible for the airframe composite manufacturing work packages under the ATAP, bears contractual responsibility for the cost overruns identified in the COPD. On February 3, 2023, Whitmore filed its Reply to the Counterclaim (ECF No. 12), denying the material allegations thereof.
On February 10, 2023, Whitmore filed a Motion to Stay Proceedings Pending Completion of Administrative Review (ECF No. 14), arguing that the DCMA administrative review of the cost-overrun claims under Prime Contract No. FA8620-19-C-0337 would likely resolve or substantially narrow the factual and legal issues underlying the parties' dispute. On February 24, 2023, the parties filed a Joint Stipulation to Stay (ECF No. 18), indicating that HDDS did not oppose the requested stay and that both parties agreed a stay would serve the interests of judicial economy and avoid the risk of inconsistent determinations.
On March 17, 2023, the Court entered an Order granting the stay (ECF No. 24). In its Order, the Court found that: (a) the DCMA administrative proceeding would likely resolve or narrow the factual predicate for the indemnity dispute between the parties, including the critical question of the proper allocation of cost overruns among the Government, the prime contractor, and the subcontractor; (b) the primary-jurisdiction doctrine counseled deference to the DCMA's specialized expertise in defense contract cost accounting and allocation; and (c) neither party opposed the stay. The Court further directed the parties to file a joint status report every 120 days, advising the Court of the status of the administrative review and any other material developments.
Since entry of the stay, the parties have filed four prior joint status reports, as follows:
1. First Joint Status Report — filed July 15, 2023 (ECF No. 26);
2. Second Joint Status Report — filed November 12, 2023 (ECF No. 28);
3. Third Joint Status Report — filed March 11, 2024 (ECF No. 30); and
4. Fourth Joint Status Report — filed July 9, 2024 (ECF No. 32).
This Fifth Joint Status Report is timely filed within the 120-day interval prescribed by the Court's March 17, 2023 Order, the prior report having been filed on July 9, 2024.
II. STATUS OF THE DCMA ADMINISTRATIVE REVIEW
The parties respectfully update the Court on the status of the DCMA administrative review as follows.
HDDS, in its capacity as the prime contractor under Prime Contract No. FA8620-19-C-0337 (the ATAP), filed a formal response and request for a Contracting Officer's Final Decision ("COFD") with DCMA on October 15, 2022. In that submission, HDDS disputed the allocation of cost overruns set forth in the COPD dated August 1, 2022, and requested that the Administrative Contracting Officer issue a final decision determining the proper allocation of the $14,726,583 in identified cost overruns among the Government, HDDS as prime contractor, and Whitmore as the principal subcontractor for the airframe composite manufacturing work packages. The Administrative Contracting Officer assigned to the matter is Lt. Col. Sandra M. Vickers, USAF, DCMA Northern Virginia.
As reported in the Fourth Joint Status Report filed on July 9, 2024, DCMA completed its field audit of costs under Prime Contract No. FA8620-19-C-0337. That field audit involved a comprehensive review of cost accounting records, work-package deliverables, change-order documentation, and related materials submitted by both HDDS and Whitmore. The cost analysis resulting from the field audit was thereafter transmitted to DCMA headquarters for internal legal review, a step that is customary prior to the issuance of a COFD in matters involving disputed cost-overrun allocations of this magnitude.
As of the date of this filing, November 6, 2024, ACO Lt. Col. Vickers has not issued a COFD. The parties understand that the DCMA cost analysis remains under internal legal review at DCMA headquarters. Neither party has received any formal or informal indication from DCMA, from ACO Lt. Col. Vickers, or from any other DCMA official, as to a specific anticipated date for issuance of the COFD. The parties have made reasonable inquiries of DCMA regarding the timeline for the COFD but have not received a definitive response.
The parties acknowledge that the timing of the issuance of a COFD is within the sole discretion of the Contracting Officer and that neither party has the ability to compel or accelerate the administrative process. The parties will continue to monitor the status of the DCMA administrative review and will promptly advise the Court upon the issuance of the COFD or upon the occurrence of any other material development in the administrative proceeding.
III. STATUS OF LITIGATION
This case remains stayed in its entirety pursuant to the Court's Order dated March 17, 2023 (ECF No. 24). No discovery of any kind has been conducted. No motions are pending before the Court. No scheduling order is in effect, and no case management conference has been scheduled.
All pleadings remain as filed. The operative pleadings in this action are: (1) Whitmore's Verified Complaint for Declaratory Judgment, filed November 28, 2022 (ECF No. 1); (2) HDDS's Answer and Counterclaim, filed January 13, 2023 (ECF No. 8); and (3) Whitmore's Reply to Counterclaim, filed February 3, 2023 (ECF No. 12). No amendments to the pleadings have been sought or made since entry of the stay.
There are no other matters requiring the Court's attention at this time.
IV. PARTIES' JOINT REQUEST
The parties respectfully represent to the Court that the basis for the stay entered on March 17, 2023 — namely, the pendency of the DCMA administrative review and the anticipated issuance of a COFD by ACO Lt. Col. Vickers with respect to the allocation of cost overruns under Prime Contract No. FA8620-19-C-0337 — continues to exist. The considerations that originally supported the stay, including the likelihood that the COFD will resolve or narrow the factual predicate for the parties' indemnity dispute and the applicability of the primary-jurisdiction doctrine, remain fully applicable.
Accordingly, the parties jointly and respectfully request that the Court maintain the stay in effect pending the conclusion of the DCMA administrative review and the issuance of a COFD by the Administrative Contracting Officer.
The parties will file their next joint status report within 120 days of the date of this filing, on or before approximately March 6, 2025, unless the DCMA administrative review concludes sooner. In the event that the COFD is issued prior to the next scheduled status report, the parties will promptly notify the Court of such development and will confer in good faith regarding next steps, including a proposed schedule for resuming litigation, lifting the stay, and proceeding with discovery and any dispositive motions. The parties anticipate that, upon issuance of the COFD, they will be in a position to propose a comprehensive case management plan for the Court's consideration.
RESPECTFULLY SUBMITTED,
For Plaintiff Whitmore Aerospace LLC:
CALDERWOOD & HARKNESS LLP
By: ________
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
Counsel for Plaintiff Whitmore Aerospace LLC
For Defendant Hargrove-Dalton Defense Systems, Inc.:
VOSS, TRAGER & KENDALL LLP
By: ________
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
Counsel for Defendant Hargrove-Dalton Defense Systems, Inc.
Dated: November 6, 2024
CERTIFICATE OF SERVICE
I hereby certify that on November 6, 2024, the foregoing Fifth Joint Status Report was filed electronically with the Clerk of Court via the Court's CM/ECF system, which will automatically generate and send electronic notification of such filing to all counsel of record in this action, including the following:
Leonard Trager, Esq. Megan Forsythe, Esq. Voss, Trager & Kendall LLP 900 17th Street NW, Suite 800 Washington, D.C. 20006 Counsel for Defendant Hargrove-Dalton Defense Systems, Inc.
________________________________________
Priya Anand CALDERWOOD & HARKNESS LLP 600 Lexington Avenue, 28th Floor New York, New York 10022 Counsel for Plaintiff Whitmore Aerospace LLC
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