[00:00:18] Speaker 02:
Our next case this morning is number 15-5017, American government properties versus United States.

[00:00:46] Speaker 02:
Mr. Meier.

[00:00:47] Speaker 03:
Thank you, Your Honor.

[00:00:49] Speaker 03:
That pleases the court.

[00:00:51] Speaker 03:
The issue in this appeal is whether or not trial court erred in dismissing the plaintiff's claim because of the alleged violation of the Anti-Assignment Act.

[00:01:04] Speaker 03:
We submit that the court did in fact err.

[00:01:10] Speaker 03:
What we had here was a reorganization.

[00:01:14] Speaker 03:
And the Contracts Act does not

[00:01:18] Speaker 03:
applying to reorganizations.

[00:01:22] Speaker 01:
I think what we need to do is look at... Why isn't New Iberia and American government properties to different corporate entities?

[00:01:31] Speaker 03:
They are.

[00:01:33] Speaker 03:
And there were different ownership.

[00:01:36] Speaker 03:
Two entities.

[00:01:37] Speaker 02:
With different ownership.

[00:01:39] Speaker 03:
Well, no.

[00:01:41] Speaker 03:
When this contract was assigned

[00:01:45] Speaker 03:
New Iberia was a wholly owned subsidiary of American government properties.

[00:01:52] Speaker 03:
There were no different owners coming into this situation.

[00:01:57] Speaker 02:
American government properties, as it would... When did the different ownership come in?

[00:02:02] Speaker 03:
Well, the different ownership was simply two of the owners withdrew.

[00:02:09] Speaker 03:
We never had new people coming into this situation.

[00:02:12] Speaker 02:
When did they withdraw?

[00:02:13] Speaker 03:
They would draw in 2007.

[00:02:14] Speaker 02:
And when was the new entity created?

[00:02:19] Speaker 02:
2005.

[00:02:20] Speaker 03:
And it was in 2005 when the contract was assigned to New Liberia.

[00:02:27] Speaker 03:
The reason American government properties would do this is because the banks would typically require this.

[00:02:34] Speaker 00:
I'm confused.

[00:02:35] Speaker 00:
I thought that you asserted that it was in April 2007.

[00:02:38] Speaker 00:
When New Iberia sent a letter to the government entitled Lesser Change American Government Property in New Iberia.

[00:02:46] Speaker 00:
I thought that was in April 2007.

[00:02:47] Speaker 00:
Am I misremembering my facts?

[00:02:51] Speaker 00:
So I don't think that the transfer occurred in 2005.

[00:02:55] Speaker 00:
I think that's when the government executed the lease with AGP.

[00:02:59] Speaker 00:
But I have in my records that you, the new Iberia, sent a letter to the government with a lesser change in April 2007.

[00:03:05] Speaker 00:
So I'm just wondering about the timing that Judge Dyke's asking you about, about the change in ownership.

[00:03:10] Speaker 03:
Well, the joint appendix, page 316, if I can get that in there as well.

[00:03:35] Speaker 03:
This was a letter to the government back in December 19, 2005.

[00:03:41] Speaker 03:
Page 316, did you say?

[00:03:44] Speaker 00:
Yes.

[00:03:45] Speaker 02:
Yeah, well, that suggests a new Iberia was created in 2005, but it doesn't suggest when the before the assignment took place.

[00:03:58] Speaker 03:
The assignment took place when it was created, and I'm just

[00:04:06] Speaker 03:
because it was created in August of 2005.

[00:04:13] Speaker 00:
But don't you need the government to sign and agree to the assignment?

[00:04:17] Speaker 00:
There's a rule, you can't just reassign government contracts, right?

[00:04:21] Speaker 03:
If it's part of a reorganization, yes.

[00:04:24] Speaker 03:
And I think the case that I would direct the Court's attention to

[00:04:29] Speaker 03:
is the Johnson Controls case, because what happened in Johnson Controls... Before you get into that, when did this... I think we're trying to figure out what the timeline is.

[00:04:38] Speaker 02:
When did the reported assignment take place?

[00:04:42] Speaker 03:
That took place in August 2005, and if you look at Joint Appendix 230, the assignment is there.

[00:04:57] Speaker 00:
I don't have a page 230.

[00:05:02] Speaker 03:
And 230 is the date of the actual assignment of the least following the creation of New Iberia as a subsidiary of American government property.

[00:05:27] Speaker 02:
So what you're arguing is at that time it was a wholly unsubstitiary, even though the ownership changed later.

[00:05:34] Speaker 03:
Well, when we talk about ownership change, I think we've got to distinguish between two things.

[00:05:38] Speaker 02:
Well, some people withdrew.

[00:05:39] Speaker 02:
That's an ownership change, isn't it?

[00:05:42] Speaker 03:
Yes, to that extent, yes.

[00:05:43] Speaker 03:
We didn't have any new people coming in.

[00:05:46] Speaker 03:
Two people withdrew in 2007.

[00:05:49] Speaker 03:
But when they withdrew in 2007, nothing was happening with respect to the lease.

[00:05:55] Speaker 03:
The lease wasn't being reassigned.

[00:05:57] Speaker 03:
to a stranger or to a new person.

[00:06:00] Speaker 03:
And I think you also have to look at one of the purposes of the act, and that's so that the government knows who it's dealing with and there's some continuity there.

[00:06:15] Speaker 03:
The government at all times during this process was dealing with, I'll call him Vic Blackman, he was the manager.

[00:06:26] Speaker 03:
Basically, everything that took place in this contract, the construction of this building, took place through Vic Blackman.

[00:06:36] Speaker 03:
The Bartons had nothing to do with that.

[00:06:38] Speaker 03:
Jim and Greg, his son, had nothing to do with the construction contract.

[00:06:43] Speaker 03:
As a matter of fact, when a contractor gets a contract, they have to send a list of all the people, the key people, that are going to be involved in that contract.

[00:06:56] Speaker 02:
So what cases suggest that you can set up a subsidiary, transfer the contract to it without the approval of the government?

[00:07:07] Speaker 03:
Well, the Johnson Control case says that that is a reorganization and that the Contracts Act does not apply to reorganizations.

[00:07:21] Speaker 03:
The Johnson's case, Johnson Control's case,

[00:07:27] Speaker 03:
Right at the beginning, it gives a fact pattern.

[00:07:31] Speaker 03:
It says back in 1980, Airways established a new 100% subsidiary pause and then transferred the contract into pause.

[00:07:44] Speaker 03:
First paragraph of the facts.

[00:07:49] Speaker 03:
The case then goes on and it identifies that as a transfer

[00:07:53] Speaker 03:
by operation of law because it is a reorganization.

[00:07:58] Speaker 03:
And then later on in the case, it says transfers or assignments occurring by operation of law are exempt from the Act's application and it cites Seaboard.

[00:08:09] Speaker 00:
What was the nature?

[00:08:10] Speaker 00:
Johnson is your key case, right?

[00:08:13] Speaker 03:
Yeah.

[00:08:13] Speaker 00:
What was the nature of what constituted a reorganization in Johnson?

[00:08:19] Speaker 03:
Johnson started out with

[00:08:23] Speaker 03:
Airways, Pan-American Airways.

[00:08:28] Speaker 03:
Pan-American Airways had a contract with the government.

[00:08:33] Speaker 03:
And Pan-American Airways then created a 100% owned subsidiary.

[00:08:41] Speaker 03:
That was, for the purpose of the case, referred to as POS, the acronym.

[00:08:47] Speaker 03:
They then transferred the contract that they had down

[00:08:52] Speaker 03:
to the subsidiary.

[00:08:54] Speaker 03:
Now, at a later point in time, and this was done in 1980, and the contract they were signing was a contract of 1978.

[00:09:03] Speaker 03:
Then later, in September of 84, they created another entity that became the parent of both Airways and Paul.

[00:09:18] Speaker 02:
Johnson controls the Court of Federal Claims case, right?

[00:09:22] Speaker 03:
Yes.

[00:09:23] Speaker 02:
Well, that's not binding on it.

[00:09:25] Speaker 03:
I understand it's not binding on it.

[00:09:26] Speaker 02:
What case of ours has said that you can be assigned to a wholly owned subsidiary without government approval?

[00:09:41] Speaker 03:
I don't know about the wholly owned subsidiary, but the Supreme Court case in Siebel

[00:09:52] Speaker 03:
I don't think it mentions a wholly owned subsidiary, but it does point out Seaboard Air, which is a U.S.

[00:10:04] Speaker 03:
Supreme Court decision, says the Contract Act does not apply to reorganizations.

[00:10:12] Speaker 00:
Well, in fact, didn't the government admit that in this case?

[00:10:14] Speaker 00:
In the red leaf at 24, the Anti-Assignment Act do not cover assignments by operation of law, for example, transfers pursuant to a merger.

[00:10:22] Speaker 00:
acquisition, consolidation, or similar reorder that do not result in the change in equitable ownership.

[00:10:27] Speaker 03:
Yes.

[00:10:29] Speaker 03:
And that goes all the way back to the Seaborr case, which is an old case, I believe.

[00:10:34] Speaker 02:
Yeah, but that's the question is whether this falls into the reorganization category, whether the creation of a new corporation as a subsidiary and the assignment to it is covered by that.

[00:10:49] Speaker 03:
Well, again, recognizing that Johnson Controls is not binding on this court, Johnson Controls identifies the creation of a subsidiary and then transfer to it as a reorganization.

[00:11:08] Speaker 01:
The Court of Federal Claims, though, wasn't persuaded what was the error in their reasoning and its reasoning for rejecting your conception of Johnson Controls.

[00:11:19] Speaker 03:
I think the Court of Claims looked at it from the standpoint of, and the government was focusing on this voluntary transfer.

[00:11:33] Speaker 03:
And much of the government's brief looks at this being a voluntary transfer.

[00:11:38] Speaker 03:
And then the cases that they cite that say voluntary transfers are bad things and violations of the Act are actually voluntary transfers of claims.

[00:11:48] Speaker 03:
not voluntary transfers of a contract.

[00:11:53] Speaker 03:
And when you look at a voluntary transfer, if it's part of a reorganization and you still... That's why operation of law and the reorganization.

[00:12:04] Speaker 03:
That's correct.

[00:12:05] Speaker 02:
So the Court of Fair O'Clem is making a distinction between things that happen by operation of law outside of the control of the contractor and things where the contractor is voluntarily doing it.

[00:12:19] Speaker 03:
through claims, gave some lit service to Johnson and talked about it, but then kind of ignored the facts of Johnson and somehow, I think, lost over it and simply said, you know, we have a violation of the Act here.

[00:12:34] Speaker 03:
And that's part of our argument in this appeal.

[00:12:38] Speaker 03:
We have a reorganization that... Well, it's not a reorganization.

[00:12:44] Speaker 02:
It's a creation of a new subsidiary.

[00:12:51] Speaker 03:
That is part of a reorganization structure.

[00:12:55] Speaker 03:
Again, the LC communications case is also not a federal court of claims, but it says, operation of law, our general applies to situations for all intents and purposes.

[00:13:11] Speaker 03:
The contract with the government continues in essentially the same entity, which has undergone a change.

[00:13:19] Speaker 03:
in its corporate form or its ownership.

[00:13:24] Speaker 03:
I would suggest the creation of a subsidiary and a transfer by the parent of some of its assets into that subsidiary is a reorganization.

[00:13:36] Speaker 02:
Why shouldn't you ask the government for permission if you're voluntarily changing the ownership to a subsidiary corporation, which as in this case,

[00:13:46] Speaker 02:
then the actual ownership, the beneficial ownership, did change later on.

[00:13:50] Speaker 02:
Why shouldn't you get the government's approval for that?

[00:13:54] Speaker 03:
Well, getting it would be nice.

[00:13:57] Speaker 03:
I mean, there's a procedure for a novation, and the government in this case basically agreed to the transfer and sent us two novation forms, SLA 3,

[00:14:09] Speaker 01:
The government claims that they never got them back.

[00:14:11] Speaker 01:
To be more precise, they agreed assuming all the parties involved signed an ovation agreement.

[00:14:16] Speaker 01:
That's correct.

[00:14:17] Speaker 01:
That's correct.

[00:14:17] Speaker 01:
And then there's no evidence in the record that all parties... Well, the government clearly... There's no record that the government never signed it.

[00:14:24] Speaker 01:
Right.

[00:14:25] Speaker 01:
That's correct.

[00:14:26] Speaker 01:
That's my point.

[00:14:27] Speaker 01:
And then I think there's no evidence that any party on your side witnessed the signatures on your end, right?

[00:14:35] Speaker 03:
That's correct.

[00:14:37] Speaker 01:
Okay.

[00:14:37] Speaker 03:
The parties signed it.

[00:14:39] Speaker 03:
They weren't witnessed.

[00:14:41] Speaker 01:
By the time there was all this discussion about having signatures on an ovation agreement, which was 2007, right?

[00:14:50] Speaker 03:
Yes.

[00:14:51] Speaker 01:
At that time, the owners then of New Iberia were different, or at least overlapping, but not completely identical with the owners of

[00:15:06] Speaker 01:
American government property.

[00:15:08] Speaker 01:
Is that right?

[00:15:11] Speaker 01:
I thought you told me that Barton left in 2007.

[00:15:14] Speaker 03:
Yes, and the novations were in 2007 also.

[00:15:17] Speaker 03:
I'm not certain as to... Right.

[00:15:20] Speaker 01:
There was one novation agreement that was sent to American government properties in November of 2007.

[00:15:27] Speaker 01:
That would have been after... And then there was another one that was sent in January 2008.

[00:15:33] Speaker 03:
So they both have been after the Bartons left.

[00:15:35] Speaker 01:
Right.

[00:15:36] Speaker 01:
So at that point, there was not a complete match on ownership of the two entities.

[00:15:44] Speaker 03:
That's correct.

[00:15:45] Speaker 03:
There would not have been a complete match.

[00:15:47] Speaker 03:
The essential people to those contracts, which were listed out to the government when they got the contract, and which Mr. Klingman went through in the deposition of Vic Blackman, all remained.

[00:16:00] Speaker 03:
The Bartons never really had anything to do with the construction of that building.

[00:16:06] Speaker 03:
their role would have come in at a later point in time.

[00:16:10] Speaker 03:
They run a property management company and they had 60, 70 different properties that had been, I'm out of time, 60, 70 different properties that were under lease to the government.

[00:16:24] Speaker 01:
But part of the contract was not just constructing a building, but it was also leasing the property.

[00:16:29] Speaker 03:
That is correct.

[00:16:31] Speaker 03:
The Bartons do not own all the properties that they lease to the government.

[00:16:36] Speaker 03:
Sometimes they work on a contract basis with other owners.

[00:16:42] Speaker 02:
Okay, Mr. Meier, we're out of time.

[00:16:44] Speaker 02:
We'll give you two minutes for a rebuttal.

[00:16:49] Speaker 02:
Mr. Klingman?

[00:17:01] Speaker 04:
May it please the court?

[00:17:03] Speaker 04:
The decision of the Court of Federal Claims should be affirmed.

[00:17:06] Speaker 00:
Why don't we focus on really the only issue that we talked about with appellants, and that is, what is the nature of a reorganization that would qualify for the anti-assignment?

[00:17:22] Speaker 00:
So what do you believe?

[00:17:25] Speaker 00:
Anti-Simon X does not cover assignments for operational law, for example, transfers pursuant to a merger, acquisition, consolidation, or similar reorganization that does not result in a change in equitable ownership of the claim or contract.

[00:17:39] Speaker 04:
Similar reorganization and essentially reorganization does not involve a voluntary transfer of a single asset to an organization with different equitable owners and different financial... Different equitable owners.

[00:17:49] Speaker 00:
What does that mean?

[00:17:50] Speaker 00:
If at the time of the transfer, the ownership entities were identical, wouldn't then have different equitable owners, would it?

[00:17:56] Speaker 04:
At the time of the transfer, if the owners were identical, then under that circumstance,

[00:18:04] Speaker 04:
arguably the equitable owners would be the same and arguably that that may have occurred at the actual time.

[00:18:10] Speaker 00:
Let's assume that at 2005 there was a transfer.

[00:18:14] Speaker 00:
Let's assume that it's my understanding at that time the exact same ownership entities owned both of these companies.

[00:18:23] Speaker 00:
Is that correct?

[00:18:24] Speaker 05:
That's correct.

[00:18:24] Speaker 00:
Okay.

[00:18:25] Speaker 00:
So then what is the government's position?

[00:18:27] Speaker 00:
Would it still

[00:18:28] Speaker 00:
would this not qualify as the appropriate sort of reorganization?

[00:18:31] Speaker 00:
Because I don't see in your brief where you've made this argument.

[00:18:35] Speaker 00:
I don't see where you've said transfer to a wholly owned subsidiary isn't the sort of reorganization that qualifies for anti-assignment.

[00:18:44] Speaker 04:
Am I wrong?

[00:18:45] Speaker 04:
The government's position is that, and that's not the case here, but the government's position is that might be a closer case, but you still would need... Why isn't that the case?

[00:18:55] Speaker 04:
It's not the case here, Your Honor, because for several reasons.

[00:18:58] Speaker 04:
One is that there's a voluntary transfer of a single asset, namely a lease with the government, to a newly formed... As opposed to all the assets?

[00:19:06] Speaker 04:
As opposed to all the assets, as in the Jonathan Control case of a division or a portion of a company to a wholly owned subsidiary.

[00:19:14] Speaker 04:
Also in Jonathan Control, the transfer or organization agreed to remain liable.

[00:19:20] Speaker 04:
on the contract.

[00:19:20] Speaker 04:
We do not have that here.

[00:19:22] Speaker 04:
We have no evidence that AGP agreed to remain liable on the contract so that it could say a couple of years later transfer the 100% ownership in the subsidiary to individuals, which is exactly what happened here.

[00:19:37] Speaker 04:
AGP had no agreement to remain liable.

[00:19:39] Speaker 00:
No, but that's not what happened in 2005.

[00:19:42] Speaker 00:
It wasn't transferred to individuals.

[00:19:44] Speaker 00:
It was transferred to a company that had identical ownership in 2005.

[00:19:49] Speaker 04:
At that point, that is correct that the sole owner of New Iberia SSA was the AGP.

[00:19:55] Speaker 04:
However, there was a voluntary transfer of a single asset as opposed to all of the assets of a division.

[00:20:01] Speaker 04:
So there's no corporate organization here.

[00:20:03] Speaker 02:
So is that the difference or is there other differences?

[00:20:05] Speaker 04:
One difference, Your Honor, is that there is a voluntary transfer of a single asset so that there is a full... Are there other differences besides that?

[00:20:12] Speaker 04:
Another difference is that AGT did not agree to remain liable on the contract.

[00:20:16] Speaker 00:
It simply transferred the asset... I don't see your brief at pages 23 through 27 as articulating a requirement of retained liability, nor do I understand any of the cases

[00:20:31] Speaker 00:
cited as calling out that requirement.

[00:20:34] Speaker 00:
Is that something the government now believes in oral argument for the first time is an additional requirement to meet the Anti-Assignment Act?

[00:20:41] Speaker 04:
Your Honor, it's simply a distinction.

[00:20:44] Speaker 00:
I don't want to know about distinctions.

[00:20:45] Speaker 00:
I'm asking you what is required under law for this to occur.

[00:20:50] Speaker 00:
And you're just pointing out to me random distinctions among random cases, none of which is actually in your race.

[00:20:55] Speaker 00:
So I want to know precisely what the government's position is

[00:21:00] Speaker 00:
on what kind of reorganization qualify or don't qualify under the Anti-Assignment Act.

[00:21:09] Speaker 00:
Page 24 in your red brace is where you started.

[00:21:12] Speaker 00:
You said the Anti-Assignment Act do not cover assignments by operation of law, for example.

[00:21:20] Speaker 04:
to a merger, acquisition, consolidation, or similar reorganization.

[00:21:24] Speaker 00:
So in your view, this isn't a similar reorganization because a wholly owned subsidiary is just not the same thing as a merger, acquisition, consolidation?

[00:21:33] Speaker 04:
Well, Your Honor, that will be a closer take, but that's not what we have here.

[00:21:37] Speaker 04:
We have, it's when initially we had a wholly owned subsidiary, but before the nomination agreement was ever contemplated, before the draft agreement was ever sent,

[00:21:46] Speaker 04:
I knew I'd already have to say was no longer a wholly owned subsidiary of AGP.

[00:21:51] Speaker 04:
That is understood and that's in the record.

[00:21:52] Speaker 04:
So that is our position here.

[00:21:55] Speaker 02:
I can understand your position.

[00:21:57] Speaker 02:
You're saying there's a difference between selecting out one government contract and transferring that to a newly owned subsidiary as opposed to changing the corporate form of the entire company.

[00:22:09] Speaker 04:
That is also our position, Your Honor.

[00:22:11] Speaker 02:
And so why should it make a difference that it's

[00:22:15] Speaker 02:
one asset as opposed to all the corporate assets.

[00:22:18] Speaker 04:
Because all of the cases that we've cited and that plaintiffs or appellants have cited for the proposition that a reorganization may not fall under the offices of the NYSIMA Act, all involve what may be referred to as an involuntary transfer of

[00:22:40] Speaker 04:
a contract or a claim as a single asset within a larger transfer to division or a portion of a company, a merger of two companies, an acquisition of a single company, a spinoff of, as I said, a division of a company.

[00:22:55] Speaker 04:
So that is one difference.

[00:22:56] Speaker 04:
That is mentioned in page 24 of our brief.

[00:23:00] Speaker 04:
In contrast to transfer of operations of law absent government agreements, the acts preclude voluntary assignments of the sort here.

[00:23:09] Speaker 04:
And then we point out that the lease was not assigned pursuant to a merger acquisition consolidation or that type of change of organizational structure.

[00:23:18] Speaker 04:
We go on to point out that the owners were different.

[00:23:21] Speaker 00:
No, you don't want to point out you actually, or other change in organizational structure in which the same owners remain responsible for the lease.

[00:23:30] Speaker 00:
What I found very confusing about your brief is that you focus throughout this entire section on who owns the new company.

[00:23:39] Speaker 00:
Look, I mean, you conditioned this notion of what kind of change in organizational structure would be sufficient.

[00:23:46] Speaker 00:
The only condition you placed on it is if the same owners are responsible for the lease.

[00:23:50] Speaker 00:
And here we have that.

[00:23:51] Speaker 00:
And look at you keep saying, no, you say that's not true.

[00:23:54] Speaker 00:
Look at the next sentence.

[00:23:55] Speaker 00:
Instead, appellants voluntarily transferred the lease to a distinct organization with different owners.

[00:24:00] Speaker 00:
without informing the government they had done so.

[00:24:03] Speaker 00:
Well, at the time of the transfer, technically it looks like they had the same owners, not different owners.

[00:24:08] Speaker 00:
Your next sentence, because appellants voluntarily transferred the lease to a distinct organization with substantially different ownership, the purported assignment voided the lease pursuant to the Contract Act.

[00:24:18] Speaker 00:
Do you see how you have focused throughout this entire brief on the notion of distinct ownership?

[00:24:24] Speaker 00:
But now your argument seems to be morphing into something different in oral argument because it's apparent that there isn't different ownership.

[00:24:31] Speaker 00:
I'm not saying your new argument is wrong, but it sure as heck ain't what you focused on in your briefs.

[00:24:37] Speaker 00:
That's correct.

[00:24:38] Speaker 04:
We did not focus on the argument about whether a single asset can transfer to a single subsidiary.

[00:24:45] Speaker 04:
could fall outside of the restrictions of the NX.

[00:24:49] Speaker 00:
Is there anything in here that says transferring a single asset to a new holding on subsidiary?

[00:24:54] Speaker 00:
Does the word single asset or individual asset or anything like that appear in here, in this brief, anywhere?

[00:25:01] Speaker 04:
I do not recall for certain whether it appears in our brief.

[00:25:05] Speaker 00:
Isn't that where it should be, if it's the government's argument on what it constitutes to not be part of the anti-assignment clause?

[00:25:10] Speaker 00:
Shouldn't it somewhere appear in the brief?

[00:25:12] Speaker 00:
Well, generally our... Because the only thing that appears is this constant focus on change in ownership, which isn't true here.

[00:25:19] Speaker 00:
At the time of their alleged assignment, there was no change in ownership.

[00:25:23] Speaker 00:
So if that's the criteria, which is the main criteria you focus on throughout, then they've satisfied it.

[00:25:30] Speaker 04:
That is, if that is the full focus, but that was not the focus either of the appellant's brief or a substantive arboretum.

[00:25:36] Speaker 04:
The arboretum was responding to the appellant's brief, which the appellant has the burden of proof on an appeal.

[00:25:42] Speaker 04:
So we were responding to the arguments made by appellants, one of which was that there was never a change of ownership.

[00:25:48] Speaker 04:
The government always had the same owners, the same managers, and the appellants went on to cite Third Circuit cases as well as chocolate controls and some other court or federal clinic presidents.

[00:25:59] Speaker 04:
and not President Siddiqui or other Court of Federal Claims cases.

[00:26:05] Speaker 02:
Let's focus on why there should be a difference between a situation in which there's a transfer of all the assets and the transfer of a single asset.

[00:26:14] Speaker 02:
How is the government disadvantaged, potentially, in a situation in which there's a single asset transfer which is peeled off of the whole company, transferred to a subsidiary?

[00:26:26] Speaker 02:
How is the government disadvantaged by that?

[00:26:29] Speaker 04:
Well, the governance is advantageous because in that case we have a clear attempt to assign a single asset, a single contract, or a single claim, and that clearly is the purview of the Anti-Assignment Act, in this case the Assignment of Contract Act, which precludes the assignment of a single contract to a distinct entity without informing the government and obtaining either innovation agreements or a clear assent

[00:26:58] Speaker 04:
to the assignment.

[00:27:00] Speaker 04:
So the operation of law exception is meant to be a very narrow exception, which was, as Posey has pointed out, started with the Seaboard, a Supreme Court case, and a number of cases afterwards dealing with corporates.

[00:27:14] Speaker 02:
Is there just a risk with the transfer of a single asset that a different group of people may be responsible for the contract as opposed to the way it was before?

[00:27:23] Speaker 04:
That certainly is one of the risks here, and that's exactly what occurred here.

[00:27:27] Speaker 04:
that whether or not in the beginning, at the actual moment of transfer, New Iberia SSA was a wholly-owned subsidiary of AGP, subsequently AGP walked away.

[00:27:40] Speaker 00:
But what if it had stayed the same?

[00:27:42] Speaker 00:
What if the ownership never changed?

[00:27:45] Speaker 00:
You got beneficial facts in that.

[00:27:47] Speaker 00:
In 2007, you have two people left, right?

[00:27:51] Speaker 00:
That's it, on New Iberia.

[00:27:53] Speaker 00:
But AGP is still fully stocked with all the same people.

[00:27:56] Speaker 00:
So you do have a change in ownership.

[00:27:58] Speaker 00:
What if that hadn't happened?

[00:28:00] Speaker 00:
And what if today New Iberia was still a wholly owned subsidiary with identity of ownership?

[00:28:06] Speaker 00:
What would your argument be then?

[00:28:08] Speaker 04:
Again, that would be a closer case, but our position is that would still be a violation of the Assignment of Contracts Act because it was a voluntary assignment to an entity that was created... Well, is it a merger of voluntary acts?

[00:28:21] Speaker 04:
And mergers a voluntary act in which two companies combine all of their assets, not simply for the purpose of assigning a single government contract without getting the government's approval.

[00:28:33] Speaker 00:
Throughout pages 27 and 28, you articulate for me the policy rationale behind the anti-assignment clause.

[00:28:40] Speaker 00:
And you say it's all about making sure the government knows with whom it's dealing.

[00:28:45] Speaker 00:
The Anti-Assignment Act establishes the government has the right to contract with whom it wishes and to know with whom it's contracting.

[00:28:51] Speaker 00:
And then you have this very rhetorical comment about, as two appellants are harassing the government, yada, yada, yada.

[00:29:00] Speaker 00:
So if the whole point is simply for the government to get to choose with whom it contracts and to know with whom it's contracting, if there was an identity of ownership in the new Iberia and

[00:29:14] Speaker 00:
AGP companies, the government would still know with whom it was contracting and would have chosen the people with whom it contracted.

[00:29:20] Speaker 00:
What would be the difference?

[00:29:21] Speaker 04:
It would know with whom it was contracting so long as all of that was, who it was contracting with was disclosed.

[00:29:28] Speaker 04:
As long as AGP or the transfer and transferee in the hypothetical case had disclosed to the government that the transfer had taken place.

[00:29:38] Speaker 04:
the same management, the same financial resources are available to both parties, but we still have a long series going on at this point about the same management and financial resources.

[00:29:46] Speaker 02:
But if there's an entire transfer of a business, it's the same management and the same resources, regardless of the ownership, whereas in the case of an individual transfer, it's not necessarily the same management and the same resources.

[00:29:59] Speaker 04:
That's correct, Your Honor.

[00:30:02] Speaker 02:
That's correct.

[00:30:02] Speaker 04:
So again, I do think we did address the distinction between voluntary and involuntary transfers, but in this case we clearly have the situation where a single entity transferred its ownership to what initially was a wholly owned subsidiary and then the corporate parent walked away and we had far fewer financial resources available and a different management structure.

[00:30:32] Speaker 04:
after the middle of 2007.

[00:30:35] Speaker 04:
And by the way, the felons did not inform the government of that transition.

[00:30:40] Speaker 00:
That can't be it.

[00:30:41] Speaker 00:
I don't know why you keep going back to these points that you could tell that I'm very unhappy with.

[00:30:45] Speaker 00:
It can't be that in 2007, if the transfer took place in 2005, that in 2007 there was a change in either the financial or the managerial structure of New Iberia that somehow now moots whether or not it was a valid transfer in 2005.

[00:30:59] Speaker 00:
That can't be the case, because what, AGP, people could walk away, right?

[00:31:02] Speaker 00:
The contract would still exist with AGP.

[00:31:05] Speaker 00:
If there was no transfer here to begin with, the finances of the company could change, the ownership could change over time after the time of execution of the contract.

[00:31:15] Speaker 00:
So it just can't be the fact that these people walked away years later that is what is the crux of why you should prevail.

[00:31:23] Speaker 04:
That there's a distinction, Your Honor, between a single corporation holding a government contract being the counterpart to a government contract and changing ownership through time, which is not addressed by any statute that I'm aware of, and a transfer, an assignment, which on its face violates

[00:31:41] Speaker 04:
the assignment of contracts.

[00:31:42] Speaker 02:
What you're saying is at the time of the transfer, the management and the resources were not transferred.

[00:31:47] Speaker 02:
They remained with the old company, and there was a new company created for this single contract.

[00:31:51] Speaker 02:
It's not a question of the ownership being different, because as Judge Moore points out, the ownership didn't change until later.

[00:32:00] Speaker 02:
Your concerns go beyond the ownership.

[00:32:02] Speaker 04:
Absolutely, Your Honor.

[00:32:03] Speaker 04:
Our concerns go to the financial responsibility and financial backing of the contract.

[00:32:08] Speaker 04:
And as the court of federal claims,

[00:32:11] Speaker 04:
correctly pointed out in its decision, and this is actually in its decision in the related case of HOMA versus the United States, which the court incorporated fully into its decision in this case, that the plaintiff has neither alleged nor presented evidence suggesting that HOMA, or in this case the New Hungary SSA, maintains the same management outside of the commonality of Mr. Blackman and several other owners common to both companies.

[00:32:40] Speaker 04:
or the same financial wherewithal to perform the contract.

[00:32:45] Speaker 04:
The government lost assurance that the resources of AGP would be available to complete the project should the GSA be forced to seek a revenue for breach.

[00:33:03] Speaker 02:
So I have one question.

[00:33:04] Speaker 02:
If you thought the 2005 transfer was permissible in the assignment of contracts, why did you seek innovation in 2007 which will allow this new company to be substituted?

[00:33:18] Speaker 03:
That was simply their policy to do so.

[00:33:21] Speaker 03:
A couple of points that I think need to be made.

[00:33:26] Speaker 03:
First of all, the idea that AGP

[00:33:30] Speaker 03:
didn't agree to remain liable is a fallacy.

[00:33:34] Speaker 03:
AGP signed the agreement and by law it simply remained liable under that contract.

[00:33:42] Speaker 03:
It couldn't extract itself from that liability simply by going through this reorganization.

[00:33:49] Speaker 03:
As far as the assets that were transferred,

[00:33:58] Speaker 03:
You have to view this in the context of when this transfer took place.

[00:34:02] Speaker 03:
The only asset that was there was a management company to perform the contract care tax, which was going to perform the contract for New Siberia and also the contract.

[00:34:15] Speaker 03:
The financing hadn't been put in place yet.

[00:34:18] Speaker 03:
The financing that eventually went in place was with New Liberia.

[00:34:23] Speaker 03:
So all the resources

[00:34:25] Speaker 03:
and assets with respect to this particular contract ended up in New Iberia.

[00:34:31] Speaker 03:
The other thing I think, and I realize Johnson Controls is not binding on this court, but it was the government that made those arguments in Johnson Controls.

[00:34:45] Speaker 03:
It wasn't the third party.

[00:34:47] Speaker 03:
The government was making the arguments that this was a reorganization.

[00:34:53] Speaker 03:
And when they cited the fact, this was the government's position.

[00:34:57] Speaker 03:
And I find it, you know, somewhat disconcerting that it's taking a different argument in this case.

[00:35:04] Speaker 03:
But there was the government that made those arguments.

[00:35:08] Speaker 02:
And finally... So they say it was the transfer of a single contract to Johnson Controls, right?

[00:35:15] Speaker 03:
It was one contract in Johnson Controls.

[00:35:18] Speaker 02:
Not only one contract?

[00:35:19] Speaker 03:
Yes.

[00:35:20] Speaker 03:
They reference it as

[00:35:23] Speaker 03:
an ETR contract that was entered into in 1978 and that was in 1980 transferred into the wholly owned subsidiary that Johnston Controls set up.

[00:35:37] Speaker 03:
And I think it also has to recognize that subsequent to this, in 1984, there was a new person come into play.

[00:35:46] Speaker 03:
There was a change in ownership.

[00:35:50] Speaker 03:
That's when Johnston Controls actually came into

[00:35:53] Speaker 03:
The picture is in 1984.

[00:35:54] Speaker 02:
Okay, Mr. Clinton, I think we're about out of time.

[00:35:58] Speaker 02:
Thank you for your attention.

[00:36:00] Speaker 02:
Thank both counsel.

[00:36:01] Speaker 02:
The case is submitted.