UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
SIXTH JOINT STATUS REPORT PURSUANT TO THE COURT'S MARCH 17, 2023 ORDER STAYING PROCEEDINGS
Plaintiff Whitmore Aerospace LLC ("WAL"), by and through its attorneys Calderwood & Harkness LLP, and Defendant Hargrove-Dalton Defense Systems, Inc. ("HDDS"), by and through its attorneys Voss, Trager & Kendall LLP, respectfully submit this Sixth Joint Status Report pursuant to the Court's Order dated March 17, 2023 (Dkt. 34), which stayed this action pending the conclusion of the administrative review by the Defense Contract Management Agency ("DCMA") of cost-overrun claims under Prime Contract No. FA8620-19-C-0337 and directed the parties to file joint status reports every one hundred twenty (120) days.
This is the sixth such report filed by the parties since entry of the stay. The prior five joint status reports were filed on July 15, 2023 (Dkt. 36); November 12, 2023 (Dkt. 38); March 11, 2024 (Dkt. 40); July 9, 2024 (Dkt. 42); and November 6, 2024 (Dkt. 44). The parties state as follows:
I. Background
For the Court's convenience, the parties provide a brief recitation of the procedural and factual background of this matter.
On November 28, 2022, WAL filed a Verified Complaint for Declaratory Judgment (Dkt. 1), seeking 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 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. 12), asserting a counterclaim seeking $14,726,583 in contractual indemnification, plus attorneys' fees, pursuant to Section 11.6 of the Teaming Agreement. WAL filed its Reply to the Counterclaim on February 3, 2023 (Dkt. 18).
On February 10, 2023, WAL filed a Motion to Stay Proceedings Pending Completion of DCMA Administrative Review (Dkt. 22). Thereafter, the parties conferred and reached agreement on the terms of a proposed stay. On February 24, 2023, the parties filed a Joint Stipulation and Proposed Order to Stay (Dkt. 28).
On March 17, 2023, the Court entered an Order (Dkt. 34) granting the stay. In doing so, the Court found that: (a) the pending DCMA administrative proceeding would likely resolve or substantially narrow the factual predicate for the indemnity dispute between the parties; (b) the primary-jurisdiction doctrine counseled deference to DCMA's specialized expertise in contract cost analysis and cost-overrun allocation under government contracts; and (c) neither party opposed the stay. The stay order directs the parties to file joint status reports every 120 days to keep the Court apprised of the status of the DCMA proceedings and this litigation.
The underlying dispute arises from DCMA's review of cost overruns on the Advanced Tactical Airframe Program ("ATAP") under Prime Contract No. FA8620-19-C-0337, a cost-plus-incentive-fee contract between HDDS, as prime contractor, and the United States Air Force, Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, Ohio. The ATAP program involves the development and limited-rate initial production of advanced tactical airframe components for next-generation combat aircraft platforms. Under the Teaming Agreement, WAL serves as a major subcontractor to HDDS on the ATAP program, responsible for, among other things, the design, fabrication, and delivery of titanium structural assemblies designated as Work Package 4.
The COPD issued by ACO Lt. Col. Vickers on August 1, 2022, identified $14,726,583 in total cost overruns on the ATAP program during the base period of performance. Of that total, the COPD attributed $12,817,441 — representing approximately 87.03% of the total overruns — to Work Package 4 (titanium structural assemblies), which falls within WAL's scope of work under the Teaming Agreement. The remaining overruns were attributed to other work packages performed directly by HDDS or by other subcontractors.
On October 15, 2022, HDDS filed a formal response to the COPD and submitted a request for a Contracting Officer's Final Decision ("COFD") with DCMA. In its response, HDDS disputed certain aspects of the COPD's cost allocation methodology and the classification of particular cost categories. The COFD remains pending as of the date of this filing.
II. Status of the DCMA Administrative Review
As of the date of this report, ACO Lt. Col. Sandra M. Vickers has not issued a Contracting Officer's Final Decision with respect to the cost overruns identified in the COPD under Prime Contract No. FA8620-19-C-0337.
As previously reported in the parties' Fourth Joint Status Report (filed July 9, 2024, Dkt. 42), DCMA completed its field audit of costs incurred under the Prime Contract. The field audit was conducted by the Defense Contract Audit Agency ("DCAA") at DCMA's request and encompassed a comprehensive review of direct and indirect costs charged to the ATAP program during the base period of performance. The resulting DCMA cost analysis has been under internal legal review at DCMA headquarters, Fort Lee, Virginia, since that time.
The parties understand, based on publicly available information and communications received in the ordinary course of contract administration, that the internal legal review at DCMA headquarters is ongoing. However, neither party has received any indication from DCMA as to a projected timeline for the issuance of the COFD. The parties have made informal inquiries through their respective contracting representatives, but DCMA has not provided a date by which it anticipates the COFD will be issued.
Importantly, neither party has received any interim communications from DCMA suggesting a material change in the scope or methodology of the cost analysis since the last status report filed on November 6, 2024 (Dkt. 44). To the best of the parties' knowledge, the DCMA review continues to focus on the same categories of cost overruns identified in the original COPD, including raw-material cost escalation for titanium alloy procurement, fabrication rework costs, schedule-delay-related costs, and costs associated with the implementation of engineering change proposals ("ECPs") during the base period.
The parties also note that the base period of performance under the Prime Contract concluded on August 31, 2024. However, the cost-overrun review pertains exclusively to costs incurred during the base period and remains an active administrative matter within DCMA's jurisdiction. The conclusion of the base period of performance does not affect the pendency of the administrative review or the anticipated issuance of the COFD.
III. Status of This Litigation
This action has been stayed since the Court's entry of its Order on March 17, 2023 (Dkt. 34), and the case remains dormant. No discovery has been taken by either party. No motions are pending before the Court or the Magistrate Judge. No scheduling order has been entered, and no pretrial conference has been held or scheduled. No party has sought to lift or modify the stay at any point during its pendency.
This is the sixth joint status report filed by the parties since the entry of the stay order. Each of the five prior reports — filed on July 15, 2023 (Dkt. 36); November 12, 2023 (Dkt. 38); March 11, 2024 (Dkt. 40); July 9, 2024 (Dkt. 42); and November 6, 2024 (Dkt. 44) — reported to the Court that the DCMA administrative review remained pending and that no material change in the status of the review had occurred since the prior filing. The same remains true as of the date of this Sixth Joint Status Report.
IV. The Parties' Joint Position
The parties respectfully submit that the basis for the stay — the pendency of the DCMA administrative review and anticipated issuance of the Contracting Officer's Final Decision — remains in full effect. The DCMA has not yet concluded its internal legal review of the cost analysis, and the COFD has not been issued.
The parties continue to believe that the COFD, when issued, is expected to resolve or materially narrow the factual predicate for the indemnity dispute that is the subject of this litigation. Specifically, the COFD is expected to address: (a) the allocation of cost overruns as between Work Package 4 and other work packages under the ATAP program; (b) the root causes of the cost overruns, including titanium raw-material cost escalation, fabrication rework attributable to engineering and manufacturing tolerances, schedule delays arising from supply-chain disruptions and government-directed modifications, and costs associated with the implementation of ECPs issued by the Air Force during the base period of performance; and (c) the allowability of the costs at issue under applicable Federal Acquisition Regulation cost principles and the terms of the Prime Contract. Resolution of these factual and regulatory questions by DCMA will substantially inform — and may effectively determine — the parties' respective rights and obligations under Section 11.4 of the Teaming Agreement.
Both parties continue to believe that maintaining the stay serves the interests of judicial economy and avoids the risk of duplicative or inconsistent proceedings. The parties further submit that the continued stay is consistent with the primary-jurisdiction rationale underlying the Court's March 17, 2023 Order. DCMA possesses specialized expertise in the administration of defense contracts, cost-overrun analysis, and the application of FAR cost principles that is directly relevant to the factual and regulatory questions at the heart of this dispute. Deferring to DCMA's administrative determination before proceeding with litigation in this Court remains the most efficient course for all parties and for the Court.
Accordingly, the parties respectfully request that the stay remain in effect.
V. Next Status Report
Pursuant to the Court's March 17, 2023 Order (Dkt. 34), the next joint status report is due 120 days from the date of this filing, on or about July 4, 2025. Because July 4, 2025, is a federal holiday (Independence Day), and July 5, 2025, and July 6, 2025, fall on a Saturday and Sunday respectively, the parties will file the Seventh Joint Status Report on the next business day, Monday, July 7, 2025, in compliance with Fed. R. Civ. P. 6(a)(1)(C).
The parties will promptly notify the Court in the event that the COFD is issued or any other material development occurs in the DCMA administrative review before the next scheduled status report. In the event the COFD is issued prior to July 7, 2025, the parties will confer promptly regarding the appropriate next steps in this litigation and will submit a joint letter or status report to the Court within fourteen (14) days of the issuance of the COFD, or at such earlier time as the Court may direct.
VI. Request for Relief
WHEREFORE, the parties respectfully request that the Court:
1. Maintain the stay of proceedings in this action pending the conclusion of the DCMA administrative review and the issuance of the Contracting Officer's Final Decision under Prime Contract No. FA8620-19-C-0337; and
2. Take no further action at this time.
Respectfully submitted,
Dated: March 6, 2025
FOR PLAINTIFF WHITMORE AEROSPACE LLC:
CALDERWOOD & HARKNESS LLP
By: /s/ Priya Anand
________________________________________
Priya Anand (PA-4827) 600 Lexington Avenue, 28th Floor New York, New York 10022 Telephone: (212) 556-4100
Email: panand@calderwoodharkness.com
Douglas Carmichael (DC-7291) Patrick Gallagher (PG-1053) Simone Laroche (SL-8764) Additional Counsel of Record
FOR DEFENDANT HARGROVE-DALTON DEFENSE SYSTEMS, INC.:
VOSS, TRAGER & KENDALL LLP
By: /s/ Leonard Trager
________________________________________
Leonard Trager (admitted pro hac vice) 900 17th Street NW, Suite 800 Washington, D.C. 20006 Telephone: (202) 833-6200
Email: ltrager@vtklegal.com
Megan Forsythe (admitted pro hac vice) Additional Counsel of Record
CERTIFICATE OF SERVICE
I hereby certify that on March 6, 2025, a true and correct copy of the foregoing Sixth Joint Status Report Pursuant to the Court's March 17, 2023 Order Staying Proceedings was electronically filed with the Clerk of Court via the Court's CM/ECF system, which will send a Notice of Electronic Filing to all counsel of record who are registered CM/ECF users. No party requires service by alternative means.
/s/ Priya Anand
________________________________________
Priya Anand CALDERWOOD & HARKNESS LLP 600 Lexington Avenue, 28th Floor New York, New York 10022 Telephone: (212) 556-4100
Email: panand@calderwoodharkness.com
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 |
United States District Judge
HARGROVE-DALTON DEFENSE SYSTEMS, INC.,
Hon. Allison P. Kurtz
<!-- indent:2 -->Defendant.<!-- /indent -->