[00:00:02] Speaker 05:
The first case for argument this morning is 151053 Army v. Kellogg Brown and Root Services.

[00:00:10] Speaker 05:
Mr. Prouty, whenever you're ready.

[00:00:19] Speaker 01:
Good morning, Your Honor.

[00:00:20] Speaker 01:
As I may have pleased the Court, there are two issues in this appeal today.

[00:00:24] Speaker 01:
And the principal issue is whether a contractor should be able to get around contract revisions

[00:00:30] Speaker 01:
which forbids the arming of contractor or subcontractor employees by the simple expedience of hiring a subcontractor whose duty is to use weapons.

[00:00:39] Speaker 01:
Although this may seem to be a facile or trivial formulation of the issue, it is precisely what the board held when it determined that the use of private security contractors

[00:00:48] Speaker 01:
was created under the contract.

[00:00:49] Speaker 01:
Notwithstanding the portions of the contract, it precluded the use of arms by contract personnel.

[00:00:55] Speaker 06:
Mr. Browning, what is the status of appeal 58583?

[00:01:02] Speaker 06:
It is state-directed.

[00:01:03] Speaker 06:
It's the breach part of the case.

[00:01:07] Speaker 01:
Yes, right.

[00:01:07] Speaker 01:
I'm sorry.

[00:01:08] Speaker 01:
I didn't need to over-speak.

[00:01:09] Speaker 01:
No, no, no.

[00:01:09] Speaker 01:
It's been state.

[00:01:10] Speaker 01:
Essentially, 58583, as you know, was brought shortly before the hearing on the consolidated cases here.

[00:01:18] Speaker 01:
And it would stay basically pending the resolution of this appeal because, of course, if this appeal is resolved in KBR's favor, the breach doesn't matter.

[00:01:27] Speaker 01:
But if this bill is not resolved in KBR's favor, resolved in the government's favor, then the breach might become relevant.

[00:01:34] Speaker 06:
And would the consequence of a finding of breach in that case be that the government would lose the total, what is it, $55 million?

[00:01:46] Speaker 01:
I wouldn't go that far, Your Honor.

[00:01:47] Speaker 01:
It would be the first step towards that.

[00:01:49] Speaker 01:
Because the argument has to be that there's a cardinal, there's a breach, it's a material breach, and that the proper result of that breach is to excuse the arming of KBR and its subcontractors.

[00:02:00] Speaker 06:
There's a remedy for the breach.

[00:02:01] Speaker 01:
Precisely.

[00:02:02] Speaker 01:
And there's been no finding that that's a proper remedy.

[00:02:04] Speaker 01:
So there'd have to be two steps taken at that appeal, the breach, and then finding out the proper remedy for the breach with KBR and Armisen.

[00:02:12] Speaker 05:
Now let me ask you, just because there are four different numbered appeals here, and there's some disagreement, it seems, in the breach, perhaps, perhaps not, about whether or not the statute of limitations question, it's your view, is it not,

[00:02:27] Speaker 05:
only one of those appeals was resolved or disposed of by the statute of limitations?

[00:02:33] Speaker 01:
I would say so, Your Honor, that's right.

[00:02:34] Speaker 05:
Okay, so that, even if we, if that were agreeable but nothing else was, so the remaining appeals would all be subject to being put in a pot with this breach of contract case, right?

[00:02:44] Speaker 05:
It's the same issue and the same money that's at stake.

[00:02:47] Speaker 01:
It is the same money at stake, Your Honor.

[00:02:48] Speaker 01:
The breach of contract is simply sort of a backup theory.

[00:02:52] Speaker 01:
I don't want to put words in cave your wrist now, but those certainly explain it better than I will.

[00:02:55] Speaker 01:
to support their challenge to the government's intimidation in this case.

[00:03:05] Speaker 06:
But it seems to me it's really, as I read the record in this case, it's really the core of the case.

[00:03:10] Speaker 06:
The whole problem was the government, by their theory, failed to provide protection.

[00:03:18] Speaker 06:
They took measures of protecting themselves and protecting the government supply lines, in effect, and that it was justified to do so.

[00:03:26] Speaker 06:
And it seems to me that we're dealing with something that's not

[00:03:30] Speaker 06:
peripheral, but it's not the core of the case on this appeal.

[00:03:34] Speaker 06:
And it's frustrating in looking at this appeal that we have only a part of the appeal, in effect, before us.

[00:03:42] Speaker 01:
Sure.

[00:03:42] Speaker 01:
Well, of course, we cannot change the procedure.

[00:03:46] Speaker 01:
At this point, the procedural posture of the case of border contract appeals.

[00:03:50] Speaker 01:
And essentially, when the prior breach theory came to the forefront just before the hearing,

[00:03:57] Speaker 01:
other words that no, we're not going to go there because it would change the complexion of the hearing.

[00:04:02] Speaker 01:
It basically said for the reasons stated by the government and its opposition to the notion of bringing 5-8, 5-8-3 into these hearings.

[00:04:09] Speaker 01:
We'll do that one later.

[00:04:10] Speaker 01:
So, but first and foremost,

[00:04:13] Speaker 01:
There's the question of the interpretation of the contract.

[00:04:16] Speaker 01:
And that's what this appeal is primarily about.

[00:04:18] Speaker 01:
Also, of course, the statute of limitations for a smaller number.

[00:04:20] Speaker 05:
I know, but just to stay on this point for me.

[00:04:22] Speaker 05:
Oh, of course you're on it.

[00:04:23] Speaker 05:
Because it is obviously troubling.

[00:04:25] Speaker 05:
Because it seems to me, even if we were to agree with you on this reach of contract, I guess I'm having a hard time thinking about the board.

[00:04:33] Speaker 05:
Because there are pages and pages and pages of fact finding here.

[00:04:37] Speaker 05:
That fact finding may still be relevant, if not even dispositive, of the contract claims.

[00:04:43] Speaker 05:
So I don't know what the board does with that.

[00:04:46] Speaker 05:
If we reverse or vacate or whatever the ultimate conclusion here, I don't know what they take away with respect to all this fact-finding that's been done.

[00:04:56] Speaker 01:
What they can do is they can apply that to the case that's been stated.

[00:05:00] Speaker 01:
And to be really clear, when the army opposed at the eve of the hearing to bring in the arguments in 58583,

[00:05:09] Speaker 01:
They said it's because it's unfair, we're not prepared to basically fight this battle right now, we need more time.

[00:05:16] Speaker 01:
In other words, did you write army?

[00:05:17] Speaker 01:
Now, the board did make some fact finding that appears to be about that issue to some degree.

[00:05:22] Speaker 05:
I understand what you're saying, but there were several ways to go.

[00:05:26] Speaker 05:
I appreciate that, that you said it wasn't enough time, and the board certainly agreed that they couldn't prepare.

[00:05:32] Speaker 05:
Of course, we wouldn't necessarily be here if the board had just stated the earlier appeal and said we're going to give enough time so that we can do it.

[00:05:38] Speaker 05:
Let's go back to your very first sentence, which I recall you used the word forbid, the contract forbidden.

[00:05:44] Speaker 05:
What was a little odd to me in the briefing was you ultimately get to that.

[00:05:48] Speaker 05:
But for example, in gray, when you're first talking about the contract, it's characterized as the contract discouraged or strongly discouraged the use.

[00:05:58] Speaker 01:
Yes, Your Honor.

[00:05:59] Speaker 05:
To me, there's a lot of distance between a contract arguably discouraging something or forbidding something.

[00:06:06] Speaker 01:
Sure.

[00:06:06] Speaker 01:
Let me step back a moment then.

[00:06:07] Speaker 01:
It must have been in my part, and I apologize.

[00:06:10] Speaker 01:
The point is the doctrinal doctrine, the army's doctrine, is that we do not want

[00:06:14] Speaker 01:
subcontractor or contractor employees to be armed because that changed their status under law of armed conflict and Geneva Convention concerns.

[00:06:22] Speaker 01:
Basically, there are a number of doctrinal documents that are incorporated into the contract, and they say contractors are commanders.

[00:06:29] Speaker 01:
Commanders are discouraged from allowing contractors to be armed, et cetera.

[00:06:34] Speaker 01:
Now again, that's discouraged, but that sets the stage for the later portions of the contract.

[00:06:40] Speaker 01:
In particular, I'm thinking about section plus H21,

[00:06:44] Speaker 01:
which talks about where contractors may be armed.

[00:06:49] Speaker 01:
In H-21, and that's the 200 Penn X-155, and it's called Weapons of Training, and the portion I'll read to you is, where the contractor employees will be permitted to carry a government furnished weapon for self-defense purposes in the area of operations is in the discretion of the theater commander.

[00:07:07] Speaker 01:
However, contractor personnel will not possess personally owned firearms in the AO, which is the area of operations.

[00:07:14] Speaker 01:
The government may at its discretion issue weapons and ammunition for M9 pistols for self-defense to contract employees.

[00:07:22] Speaker 01:
So what H21 does in combination with also H16, which says that protection of the contract employees is responsibility of the government, is to forbid sort of the self-help of the KBR used here.

[00:07:35] Speaker 03:
In general, order 1A works in your favor too, doesn't it?

[00:07:39] Speaker 01:
Indeed.

[00:07:39] Speaker 03:
That says prohibition.

[00:07:41] Speaker 01:
It is a prohibition.

[00:07:44] Speaker 01:
There's no personally-owned or privately-owned weapon.

[00:07:46] Speaker 01:
And that gets you there.

[00:07:48] Speaker 01:
All those things give a coherent view, coherent with the doctrine, which is that contractor employees are basically persons accompanying the force, civilians accompanying the force.

[00:08:03] Speaker 01:
And we do not want to do anything to risk their protections

[00:08:08] Speaker 01:
under law of armed conflict.

[00:08:09] Speaker 03:
But the board stated that providing PFCs here, their own PFCs was reasonable and certainly sounds reasonable.

[00:08:21] Speaker 03:
What were they supposed to do?

[00:08:23] Speaker 03:
Not provide the materials for the fighting troops or to go without protection?

[00:08:30] Speaker 01:
Well, there are a number of alternatives.

[00:08:31] Speaker 01:
In the first instance, it's not as if the army were required

[00:08:35] Speaker 01:
KBR or its subcontractors to go by themselves through Iraq.

[00:08:40] Speaker 01:
There was a convoy system which was used.

[00:08:44] Speaker 01:
Now, of course, when the insurgency began in mid-2003, we said this

[00:08:50] Speaker 01:
It took a while for everybody to get accustomed to that and get squared away, but they did.

[00:08:54] Speaker 01:
And the Congress has to work well.

[00:08:55] Speaker 05:
Yeah, but do you understand why this is kind of maddening, your arguments here, including your other argument, the argument in the brief, which is, well, they could have delayed it until they could get it.

[00:09:05] Speaker 05:
I mean, that's, you criticize the board in your brief, as I recall, suggesting, well, they looked at the facts, and they were just so outraged by what's going on here.

[00:09:14] Speaker 05:
And they wanted, you know, these people were just acting to save their own lives and protect themselves.

[00:09:19] Speaker 05:
And so they were swayed by that.

[00:09:21] Speaker 04:
Frankly, shouldn't they be?

[00:09:23] Speaker 04:
I mean, you can say now that, well, they have other options.

[00:09:26] Speaker 04:
Really?

[00:09:27] Speaker 04:
Really?

[00:09:28] Speaker 01:
Really, Your Honor.

[00:09:29] Speaker 01:
And I'll give one clear demonstration that's true.

[00:09:33] Speaker 01:
Not every subcontractor got PSCs, and they did their jobs.

[00:09:38] Speaker 01:
One of the documents we cited over

[00:09:40] Speaker 05:
was uh... you know what was the life lost with respect to contractor employers and these PSAs through the relevant period of 2003 to 2006.

[00:09:49] Speaker 01:
There was no single number of the records that I saw.

[00:09:52] Speaker 05:
I actually thought there was something on the record, 64.

[00:09:54] Speaker 01:
There were PSAs, but again, remember your honor, it's not as if the Army was saying go without any protection

[00:10:02] Speaker 01:
or give PSCs, the Army provided protection.

[00:10:05] Speaker 06:
The board found, and the record certainly seems to support, the notion that there were many instances, and sometimes extended instances, in which the Army was not providing protection.

[00:10:16] Speaker 06:
But nonetheless, the contractor was requiring the contractors to provide the services under the contract.

[00:10:23] Speaker 06:
So there, what's their option?

[00:10:26] Speaker 01:
Well, the option is, what they did, and there is more in Winston cited in our briefs,

[00:10:31] Speaker 01:
where the Army, where KBR said, look, it's not safe, we're not sending anybody.

[00:10:36] Speaker 01:
They could do that, and they did do that.

[00:10:39] Speaker 01:
And when they did that, the Army understood it, and they established the convoys, and they took the convoys, and they went out, and they gave KBR and subcontractors the protection.

[00:10:48] Speaker 01:
But of course, these are all issues for 58583.

[00:10:52] Speaker 01:
which are not before the court right now.

[00:10:54] Speaker 01:
The issue really is simply the contract interpretation.

[00:10:57] Speaker 05:
Can I just go back to that one?

[00:11:00] Speaker 05:
Of course you can.

[00:11:01] Speaker 05:
We were discussing it before.

[00:11:02] Speaker 05:
Did anybody suggest to the board, was it on the table that maybe you want to delay the trial with respect to these appeals pending the other one?

[00:11:11] Speaker 05:
Or was it just the binary choice of whether we go on or whether we don't, you know?

[00:11:16] Speaker 01:
Well, as far as I know, it's hard to understand.

[00:11:19] Speaker 01:
Basically, cave yard came in,

[00:11:21] Speaker 01:
a month before the hearing and said, we want to add this.

[00:11:24] Speaker 01:
And they said, we can't add this because it's so much of the either trial.

[00:11:28] Speaker 01:
And the board, of course, had the option to say, well, let's add it a month or two later or three months or whatever number is right.

[00:11:34] Speaker 01:
Or KBR could have said, hey, look, we want to add 58583.

[00:11:38] Speaker 01:
Let's extend this for a month or two.

[00:11:40] Speaker 01:
And there's no indication that that happened.

[00:11:42] Speaker 01:
So we are presented with the square issue before us, which is, what does the contract actually say?

[00:11:48] Speaker 01:
And KBR

[00:11:50] Speaker 01:
knew it could modify the contract EPSC and there was effort indications they discussed it but you can't do the self-help of ignoring the contract when it says you cannot do this.

[00:12:04] Speaker 06:
What do you say

[00:12:06] Speaker 06:
As to the provision that's exerted on JA-14, and it's quoted by the board, where the CPA authorized the possession and use of firearms and military weapons, including private security firms.

[00:12:23] Speaker 01:
Right.

[00:12:23] Speaker 01:
The CPA authorized that.

[00:12:25] Speaker 01:
But the CPA wasn't damning to change the lockout contract.

[00:12:29] Speaker 01:
It was a restricted lockout contract.

[00:12:32] Speaker 01:
you can have private security contractors in Iraq.

[00:12:34] Speaker 01:
And we've never denied that there were private security contractors in Iraq.

[00:12:37] Speaker 01:
Obviously, there were.

[00:12:39] Speaker 01:
But there were different contracts.

[00:12:41] Speaker 01:
There were reconstruction contracts, which do not have the same sorts of issues with law of armed conflict.

[00:12:48] Speaker 01:
There were multiple other contracts out there which had their own provisions, allowances, and recognition of the appropriateness or non-appropriateness of DSCs.

[00:12:58] Speaker 01:
This contract did not, and the CPA did not,

[00:13:01] Speaker 05:
The argument is that this affects how we're going to interpret whether or not the contract at issue here covers these people, right?

[00:13:14] Speaker 05:
Because this, at least what the board said about this, is Section 3, distinguish possession of firearms by private security firms from possession by other groups or individuals.

[00:13:25] Speaker 05:
So if that is the case, and if that's the way that we approach this, that PSAs are kind of treated as a different category, then why should that differentiation not be applicable to the contract we're construing here?

[00:13:36] Speaker 01:
Because it was a different party construing the contract.

[00:13:40] Speaker 01:
It wasn't the army with whom a law cap contract was made.

[00:13:43] Speaker 01:
And this is only, at most, it goes to CPA General Order 1, or CENTCOM General Order 1A.

[00:13:50] Speaker 01:
It does not go to H21.

[00:13:52] Speaker 01:
It doesn't appear to change it, but it doesn't talk about the lockout contract.

[00:13:56] Speaker 01:
It doesn't talk about the notion of contractors who are traveling with the force as a contract, as civilians accompanying the force rather, which is what we had in the lockout contract.

[00:14:10] Speaker 06:
Commander O'Donnell's testimony, which is exerted on J832, about the absence of any reference in the contract, the contracted security and his statement that there was no rule and therefore people were doing what they were.

[00:14:27] Speaker 01:
Well, Kurt, Mr. O'Donnell did say that there is no reference to PSEs because there is no reference to PSEs.

[00:14:35] Speaker 01:
because it doesn't say private security contractors, but later on in the same, as we discussed in our brief, I can find the number for you.

[00:14:43] Speaker 01:
Basically, the next step of his testimony was, but you still couldn't have them, even though it didn't say PSDs, basically it's not allowed in the contract because we're the ones who are to provide force protection for the contractors.

[00:14:56] Speaker 01:
So even the person cited and quoted at length by the board,

[00:15:00] Speaker 01:
That is a out-of-context quote.

[00:15:03] Speaker 01:
If you're to keep on reading the very next thing he said in response to the judge, oh no, you can't.

[00:15:09] Speaker 06:
So your take on this final sentence in that paragraph 64 is that when he said there's no rule and people are doing what they want, your take is that they were doing what they want contrary to the contract.

[00:15:21] Speaker 01:
Absolutely.

[00:15:21] Speaker 06:
Which seems a little inconsistent with the idea there's no rule.

[00:15:25] Speaker 01:
Well,

[00:15:27] Speaker 01:
I think that if you were to read the entire context of this quote, but you still couldn't have it.

[00:15:35] Speaker 01:
You were saying that people were doing things they shouldn't do.

[00:15:39] Speaker 05:
Remember, the same people... Well, except if you read right before the quote, at least the contract, the board's characterization of what he was saying is even stronger.

[00:15:48] Speaker 05:
There were no theater written policies or procedures regarding contractors carrying art.

[00:15:53] Speaker 01:
And obviously, that's not correct, because H-21 talks about how you carry arms.

[00:15:58] Speaker 01:
These, again, theater policies, which are basically across the board for all of Iraq, and not just for the lockout contract, but also for the different kinds of contracts out there that would not invoke the same law of armed conflict concerns.

[00:16:17] Speaker 01:
Yes, there were private security contractors.

[00:16:20] Speaker 01:
That was fine.

[00:16:21] Speaker 01:
We're not saying that those private security contractors should not have been there.

[00:16:25] Speaker 05:
We know about the cases before Ross, the appeals.

[00:16:28] Speaker 05:
We know about this contract case.

[00:16:30] Speaker 05:
You know, the Supreme Court decided a KBR case last week.

[00:16:32] Speaker 05:
Yes, Your Honor.

[00:16:33] Speaker 05:
Is there other litigation out there that is related in some way, shape, or form to this question of PSEs and their compensation?

[00:16:41] Speaker 01:
I'm not aware of any, Your Honor.

[00:16:44] Speaker 01:
I will say that at one point, there was a fraud case brought, but that has been dismissed.

[00:16:50] Speaker 01:
So under the false pay attack.

[00:16:53] Speaker 01:
So I believe that this is it as far as matters involving payment for private security contractors.

[00:17:05] Speaker 05:
Thank you.

[00:17:10] Speaker 05:
Mr. Workmaster?

[00:17:12] Speaker 02:
Yes.

[00:17:12] Speaker 02:
Good morning, Your Honors.

[00:17:13] Speaker 02:
May it please report.

[00:17:14] Speaker 02:
I'm Jason Workmaster with Covington and Burling, with me at Council Tables, Alex Suria also with my firm.

[00:17:21] Speaker 02:
And I want to go right to the question that Your Honor asked about breach.

[00:17:25] Speaker 02:
And that obviously is the question that undergirds the whole case.

[00:17:30] Speaker 05:
But it's not before us.

[00:17:32] Speaker 05:
Can I just stop you?

[00:17:34] Speaker 05:
You mentioned you were from Covington and Burlington.

[00:17:37] Speaker 05:
We would submit, Your Honor, that the question of breach was before the Board.

[00:17:49] Speaker 02:
It was tried at trial for six weeks.

[00:17:53] Speaker 02:
The parties briefed it extensively in their post-hearing briefing.

[00:17:58] Speaker 02:
We put those pages into the Joint Appendix.

[00:18:01] Speaker 02:
we argued in our brief that under the doctrine of prior material breach, any of these alleged, you know, Mr. Prouty's argument about restraints on the use of private security, even if there were any, which we deny, we were excused from complying with them because of the government's prior material comprehensive breach of its obligation to provide force protection.

[00:18:19] Speaker 05:
But wait a minute, you have this other case pending below.

[00:18:21] Speaker 05:
You brought this other case, so you recognize there was a distinction between what this issue is about on appeal here and what is at stake in that other case, right?

[00:18:30] Speaker 02:
The other case that was brought, Asserts Breach, the only reason that that case was brought was to avoid any question about the board's jurisdiction over this prior material breach argument.

[00:18:47] Speaker 02:
There is no question that the prior material breach issue, the question of whether

[00:18:53] Speaker 02:
The government breached this obligation to provide force protections was squarely within the case from the moment we filed the first appeal back in 2008.

[00:19:01] Speaker 02:
The parties both understood that.

[00:19:04] Speaker 02:
Discovery was comprehensive, covered the issue.

[00:19:08] Speaker 05:
And then when we got to trial I'm not the board understands that there is another case and the board has stated our position had been when this issue was briefed before trial and

[00:19:27] Speaker 02:
that this was just a paperwork issue.

[00:19:29] Speaker 02:
This changed nothing substantive about the trial, and then when we went to trial, it in fact did not.

[00:19:34] Speaker 06:
Well, but the board, I know that you assert in your brief that the board actually ruled on this issue, and you cite pages 38 to 39 of the JA, but I read those paragraphs over a couple of times, and I don't see that as a ruling on this issue.

[00:19:49] Speaker 06:
It's a ruling, it seems to me, on the reasonableness of the amount

[00:19:53] Speaker 06:
that was expended on the PSCs, not a ruling that there was both breach and a permissible remedy for the breach, which was exercised by KBR.

[00:20:05] Speaker 06:
So as I read this, this issue is not before us in this appeal, contrary to your assertion in the brief.

[00:20:14] Speaker 02:
And on that honor, I don't have anything else to say on this other while it is in the pre-harp position.

[00:20:19] Speaker 06:
Am I missing something about these two paragraphs on 38 and 39 in which the board actually says there was breach and it was permissible remedy?

[00:20:29] Speaker 02:
I would point your honor to on JA 38, the last full paragraph, the first sentence of the last full paragraph.

[00:20:39] Speaker 02:
A proponent of the evidence shows

[00:20:41] Speaker 02:
that during the year 2003-2006, the force protection provided by the government... I'm sorry, are you on 38?

[00:20:46] Speaker 06:
38, yes, Your Honor.

[00:20:47] Speaker 06:
The beginning of the last full paragraph.

[00:20:50] Speaker 02:
Yes, the beginning of the last full paragraph.

[00:20:52] Speaker 02:
A preponderance of the evidence shows that during the years 2003-2006, the force protection provided by the government for Contract 7 was not commensurate with the threat

[00:21:03] Speaker 02:
or with the protection provided to DOD civilians.

[00:21:05] Speaker 02:
That language, commensurate with the threat, or with the protection provided to DOD civilians, tracks exactly to the language of the contract.

[00:21:13] Speaker 02:
And so the board here is finding that the government failed to meet that obligation under the contract.

[00:21:19] Speaker 02:
That's a breach.

[00:21:20] Speaker 06:
Well, that would certainly be an unhelpful finding if it were in the other case, but unhelpful to the government.

[00:21:29] Speaker 06:
But I'm not seeing them as ultimately saying, and therefore there's a breach remediable by the self-help measures that were employed by KBR.

[00:21:41] Speaker 02:
Your Honor, if you would turn to the next page.

[00:21:46] Speaker 02:
And this is the board responding to the government's argument that everybody should have just waited around.

[00:21:51] Speaker 02:
Fortunately, this is the first full sentence at the top of J839.

[00:21:55] Speaker 02:
Fortunately for the troops that depended on KVRS and its subcontractors for their life support and other logistical support services, KVRS and its subcontractors did not adopt the attitude now suggested by the government as their only remedy.

[00:22:10] Speaker 05:
for the government's failures to provide force protection.

[00:22:14] Speaker 05:
Usually you look at the end of the paragraph to see what the conclusion is, and on the first paragraph you directed our attention to, the last sentence says, almost like accordingly, although they didn't use the word accordingly, on this record we conclude that the conditions prevailing, blah blah blah, the use of PSEs was reasonable if that term is defied.

[00:22:33] Speaker 05:
So they're clearly deciding the issue that we all understand here.

[00:22:36] Speaker 05:
And similarly,

[00:22:39] Speaker 05:
They...

[00:22:41] Speaker 05:
I think the conclusion in the other paragraph you directed us to, it goes to the question of whether they were prohibited by the terms of the contract.

[00:22:50] Speaker 05:
So you're right about those findings, and those findings, as Judge Bryson suggests, may be pretty helpful on the other case.

[00:22:58] Speaker 05:
But I guess I'm having the trouble he is in finding out that that was really a ruling on that question.

[00:23:05] Speaker 02:
Understood.

[00:23:06] Speaker 02:
And I agree that the decision could be clearer on this issue.

[00:23:10] Speaker 05:
And so I want to defend what the board did, which you spent not that much paper in your brief doing.

[00:23:18] Speaker 05:
But what do you say to the discussion you were having with your friend about the terms of the contract?

[00:23:24] Speaker 02:
On the terms of the contract, as Your Honor pointed out, it was clear.

[00:23:32] Speaker 02:
On just the question of reading H-21, the various arming regulations that the government cites,

[00:23:40] Speaker 02:
They're talking about the carrying of weapons by individuals.

[00:23:44] Speaker 02:
They're talking about personal carrying of weapons.

[00:23:45] Speaker 02:
And as Commander O'Donnell testified at trial, Commander O'Donnell was not just anybody.

[00:23:53] Speaker 02:
The government called him as their witness.

[00:23:55] Speaker 02:
He was a lawyer for CENTCOM, who spent time working on these very issues during the relevant time period.

[00:24:02] Speaker 02:
And as the board found, he testified that there was that all of the

[00:24:09] Speaker 02:
regulations the government is signing.

[00:24:11] Speaker 02:
We're not addressing the issue that's presented by... Can I ask you?

[00:24:14] Speaker 05:
I'm not understanding it, so let me be clear.

[00:24:16] Speaker 05:
H-21, are you saying that there's a distinction between... They're clearly talking about contractors carrying weapons for self-defense.

[00:24:26] Speaker 05:
Yeah.

[00:24:26] Speaker 05:
So are you saying that somebody carrying a weapon for self-defense purposes is something other than the PSCs?

[00:24:35] Speaker 05:
Because they weren't

[00:24:36] Speaker 05:
operating and carrying weapons for self-defense?

[00:24:38] Speaker 02:
Yes, Your Honor.

[00:24:39] Speaker 05:
They were engaged in protecting others?

[00:24:41] Speaker 02:
Yes, Your Honor.

[00:24:42] Speaker 06:
So, I suppose that KDR had authorized itself and itself had an extra person on every truck who was carrying a rifle.

[00:24:55] Speaker 06:
Would that be okay under the contract in your view?

[00:24:58] Speaker 06:
The truck driver presumably can't carry a cycle.

[00:25:01] Speaker 06:
Suppose that they did have an extra person they put on every truck who's carrying a rifle.

[00:25:08] Speaker 06:
Is that okay under the contract?

[00:25:10] Speaker 02:
I would say that's kind of it.

[00:25:12] Speaker 02:
That was actually something in the various negotiations that the government sliced.

[00:25:16] Speaker 02:
That was actually something that was discussed, arming the truck drivers, having a cable employee on the truck.

[00:25:21] Speaker 06:
Would that be consistent with the contract prohibitions against personally owned weapons?

[00:25:29] Speaker 02:
For that kind of use, that would be the kind of use I would say is contemplated by H-21.

[00:25:33] Speaker 06:
But that is a different... You're saying there's a difference between

[00:25:37] Speaker 06:
the subcontractors putting one of their extra employees on the truck versus having a contract with somebody who puts an extra employee on each truck?

[00:25:47] Speaker 02:
I'm saying there's a difference between hiring a private security company.

[00:25:51] Speaker 02:
For example, in the courthouse.

[00:25:53] Speaker 02:
If the courthouse

[00:25:54] Speaker 02:
if the court were to determine to arm the employees who work here on a personal basis, they could carry a gun.

[00:26:02] Speaker 02:
That is a different thing than if the courthouse were to decide collectively to hire a private security company.

[00:26:08] Speaker 02:
The policy considerations there are different.

[00:26:12] Speaker 05:
Is this due to self-defense?

[00:26:14] Speaker 05:
Like if an employee wants to bring a gun because they're scared and they want to be able to protect themselves in case anything goes awry versus

[00:26:22] Speaker 05:
are telling them they should all have it for purposes of protecting us?

[00:26:27] Speaker 02:
That is a different thing.

[00:26:27] Speaker 02:
And a private security company that is in business to make profit on the protection of others is a different thing than an individual employee carrying a gun for personal use.

[00:26:38] Speaker 05:
And that, Your Honor, I would... Does the board ever go there?

[00:26:41] Speaker 02:
I mean, does the board really make that... The board in its... In fact, the board in its

[00:26:51] Speaker 05:
What Judge Gray cited earlier seemed to kind of a little support that, just because it distinguishes between the groups and so forth.

[00:26:59] Speaker 05:
But I didn't.

[00:27:01] Speaker 02:
Yes.

[00:27:01] Speaker 02:
And the board, early in 2012, and I don't have the JA site in front of me, in 2012, there was a pretrial motion where the contract interpretation issue was litigated.

[00:27:15] Speaker 02:
And the government moved for reconsideration, and the board issued

[00:27:19] Speaker 02:
a decision in June of 2012, June 25, 2012.

[00:27:24] Speaker 02:
And in footnote one, the board makes the distinction between arming KVRS employees and retaining a professional private armed security company having its own employees.

[00:27:36] Speaker 02:
The board made that very distinction in footnote one on page two.

[00:27:40] Speaker 02:
And then as the, back to the fundamental problem that happened here, when the KVR and the government found itself in the middle,

[00:27:49] Speaker 02:
of an insurgency that had not been contemplated by the parties, by the contract provisions to which they agreed.

[00:27:55] Speaker 02:
And I think you can see from the board decision, the regulators in country were playing catch up with what was happening on the field.

[00:28:02] Speaker 02:
You had 30,000 PSCs in country, and the CPA, the Coalition Provisional Authority, is trying to figure out how to regulate them in late 2003.

[00:28:11] Speaker 02:
And the CPA order number three on JA14 makes the same distinction.

[00:28:17] Speaker 02:
That's the language your honor was reading.

[00:28:20] Speaker 02:
Private security, in paragraph two of CPA order number three addresses private security firms.

[00:28:27] Speaker 02:
Private security firms may be licensed by the Ministry of the Interior to possess and use licensed firearms in the course of their duties, including in public places.

[00:28:35] Speaker 02:
That's paragraph two.

[00:28:37] Speaker 05:
How do we know?

[00:28:38] Speaker 05:
I think one of the arguments your friend had about the relevance of this provision was that it wasn't incorporated in the contract.

[00:28:45] Speaker 02:
The government, in fact, at one point argued this provision was incorporated into the contract.

[00:28:49] Speaker 02:
The government argued back, if you look back at the decision in April of 2012 where the parties litigated the question of contract interpretation, the government relied on CPA order number three and said that this licensing requirement was another provision that we should have complied with.

[00:29:08] Speaker 02:
The government abandoned that at trial, but their position was that CPA order number three bound the contract.

[00:29:14] Speaker 06:
Well, that could be true, but that's like saying that well, the laws of the District of Columbia bind you in addition to any contract you may have with me.

[00:29:24] Speaker 06:
But the question really is, is this provision really an amendment in effect to the contract?

[00:29:34] Speaker 06:
And what the government is saying, and I'd like your response to it, is no, all this is saying is that

[00:29:39] Speaker 06:
private security firms may be licensed by the government, but that doesn't have anything to do with whether, under your particular contract, you could hire private security companies.

[00:29:53] Speaker 02:
A couple of things, Your Honor.

[00:29:54] Speaker 02:
The first is the government's position was that this had contractual effect.

[00:29:59] Speaker 02:
That was their position.

[00:30:00] Speaker 02:
I understand what Mr. Prouty is saying now would be somewhat different than that, but that was their position, that we were contractually bound by this.

[00:30:06] Speaker 02:
It wasn't just like being bound by the laws of the state.

[00:30:09] Speaker 06:
But even that wouldn't get you where you need to go, right?

[00:30:13] Speaker 06:
Because it just says you can get licensed, but it doesn't say that you're permitted under this particular contract.

[00:30:19] Speaker 06:
So you both have to get licenses, and you have to get some kind of leave under the contract.

[00:30:25] Speaker 02:
But what I think this demonstrates is that when the regulators got to addressing the issue, they understood there was a difference between retaining a private security company.

[00:30:35] Speaker 02:
That's addressed in paragraph two.

[00:30:37] Speaker 02:
And once a private security firm is licensed,

[00:30:40] Speaker 02:
They're licensed to carry firearms.

[00:30:41] Speaker 02:
That would be every employee.

[00:30:42] Speaker 02:
So there's one piece of paper.

[00:30:43] Speaker 02:
There's the license to the private security company.

[00:30:46] Speaker 02:
That covers the employees.

[00:30:48] Speaker 02:
Paragraph, and that concept is nowhere in the contract.

[00:30:53] Speaker 02:
Getting a piece of paper to say, I can go out and hire, KVR can go out and hire a private security company.

[00:30:58] Speaker 02:
That concept is nowhere in the contract.

[00:31:01] Speaker 02:
The concept that may be in the contract is paragraph three.

[00:31:05] Speaker 02:
Individuals may be authorized to possess firearms for personal use

[00:31:09] Speaker 02:
by obtaining authorization from the Ministry of Interior.

[00:31:11] Speaker 02:
That's an individual piece of paper.

[00:31:13] Speaker 02:
That could be lots of pieces of paper.

[00:31:15] Speaker 02:
At most, the authorities, the governments rely on the contractual authorities, H-21, the Army regulations, et cetera.

[00:31:21] Speaker 02:
At most, they address that issue of getting a piece of paper for an individual to carry on for personal use.

[00:31:27] Speaker 02:
They do not address getting a piece of paper for KBR or any of its subs to hire a private security contractor.

[00:31:38] Speaker 05:
You do have a footnote, I think it's footnote 12 in red that talks about the statute of limitations question and broadly suggests in that footnote that if we affirm the board's ruling on the statute of limitations question, it will slide across the board to everything.

[00:31:57] Speaker 02:
Yes, Your Honor.

[00:31:58] Speaker 05:
Yes, you're on a pretty sweeping statement and particularly appearing in a footnote and I agree doesn't spend a lot of time responding to that.

[00:32:05] Speaker 05:
I think they do respond though and say that's not correct.

[00:32:07] Speaker 05:
Are you still adhering to that view?

[00:32:09] Speaker 02:
We do and the basis for it is that the board and its decision, when it gets to talking about the government, there's a single government claim that's issued in this case.

[00:32:19] Speaker 02:
It's for 55 million dollars.

[00:32:21] Speaker 02:
Is the subject

[00:32:22] Speaker 02:
of the contracting officer's January 2013 final decision.

[00:32:25] Speaker 02:
There's only one final decision of issue in this case.

[00:32:27] Speaker 02:
That's it.

[00:32:28] Speaker 02:
And the government, in that single final decision, asserted a single claim for $55 million.

[00:32:34] Speaker 02:
And the board recognized that's what happened on JA 36.

[00:32:37] Speaker 06:
But the government, I take it, has already gotten $44 million.

[00:32:41] Speaker 02:
Roughly.

[00:32:42] Speaker 02:
Roughly.

[00:32:43] Speaker 06:
So its assertion of $55 million is really not an assertion for an affirmative remedy of $55 million.

[00:32:50] Speaker 06:
It wants to keep the 44 and get the 11 extra.

[00:32:53] Speaker 06:
So that claim may be articulated in terms of 55, but it's really only about the $11 million, isn't it?

[00:33:01] Speaker 02:
Well, except for the contracting officer's final decision didn't just assert $11 million.

[00:33:09] Speaker 02:
The contracting officer's January 2013 final decision covered everything, covered every penny that's in dispute.

[00:33:16] Speaker 06:
Presumably, in case something goes wrong with the Senate's sentence.

[00:33:19] Speaker 06:
I mean, they're covering themselves both ways, but that doesn't seem to me to give you a right to say, well, since they've lost on the limitations of their affirmative claim, they can't keep the setups.

[00:33:31] Speaker 06:
Because the setups, you have to come in and make claims for them, which you have.

[00:33:35] Speaker 02:
We have.

[00:33:36] Speaker 02:
On that point, Your Honor, our position is that regardless, the government engaged in self-help on the 44 billion.

[00:33:45] Speaker 02:
engaging in self-help did not transform what was and always has been a government claim against us and our claim against the government simply because we had to file a claim to try and get the money back.

[00:33:57] Speaker 06:
But that's very typical in set-off situations, isn't it?

[00:33:59] Speaker 06:
I mean that there is a set-off and the contractor ends up, even though the contractor was paid but then there was a set-off, the contractor has to come forward with an action in the BCA to recover

[00:34:12] Speaker 02:
The mere fact that we were in the position of being the appellant at the board to determine whose claim this whole dispute involves.

[00:34:26] Speaker 02:
we would suggest requires a substantive analysis of who's asking really for things to be changed.

[00:34:32] Speaker 02:
It's the government's claim against us.

[00:34:33] Speaker 02:
The government claims we improperly use and build for private security.

[00:34:37] Speaker 02:
It's their claim against us.

[00:34:39] Speaker 02:
They're the ones that wanted to change the status quo back in 2007.

[00:34:42] Speaker 02:
The fact that they were able to engage in self-help doesn't change, in our view, that this was always the government's claim.

[00:34:49] Speaker 02:
It remains the government's claim.

[00:34:50] Speaker 02:
And then in January 2013, the government treated it as its own claim, covered the entire $55 million

[00:34:56] Speaker 02:
And the board on JA-36 recognized that the government, that the contracting officers found a decision of 30 January 2013 asserting a government claim of $55,625,915.

[00:35:10] Speaker 05:
Yeah, but you know, I'm guessing the board didn't think that it had dismissed all.

[00:35:15] Speaker 02:
No, the board did not.

[00:35:17] Speaker 02:
The board only dismissed

[00:35:19] Speaker 06:
So you're not making any kind of collateral stop all claim or anything like that.

[00:35:23] Speaker 06:
You're saying that they wrote $55 million on their claim and had they written $11 million you wouldn't be the sergeant, right?

[00:35:31] Speaker 02:
That is correct.

[00:35:34] Speaker 02:
I see that my time has expired.

[00:35:36] Speaker 02:
Thank you.

[00:35:47] Speaker 01:
On the statute of limitations issue, which is how we ended the argument for Mr. Workmaster, suggested plainly the notion that there was $44 million at stake before the government filed its claim in January of 2013, and suddenly by virtue of filing that claim in 2013, if that were in fact late, which of course we demonstrated it was not, that all $55 million dollars, then the $44 million that was already at stake

[00:36:15] Speaker 01:
would go away, it's just nonsensical.

[00:36:17] Speaker 01:
I mean, it's the notion that there was an appeal that had been going on for many, many years at the Board of Contract Appeals, and that, in that case, that became nothing.

[00:36:29] Speaker 01:
And it was late, and it was approved to statute of obligations by virtue of the later filed member claim, which, of course, it didn't.

[00:36:35] Speaker 01:
There was $11 million extra brought in that claim.

[00:36:38] Speaker 01:
And that was the issue.

[00:36:39] Speaker 01:
And that is, of course, one of the matters who brought in this appeal

[00:36:42] Speaker 01:
I didn't discuss it at length or actually at all in our opening part of the argument, frankly, because I was responding to Your Honor's other questions that were more pressing.

[00:36:49] Speaker 01:
But of course, we had no intention of waiving the arguments for which I refer the court to the priest.

[00:36:53] Speaker 01:
But I won't expound them because it would be unfair of Mr. Workmaster.

[00:36:56] Speaker 01:
With respect to the notion that the CPA overrode the limitations of the contract by its general order three, allowing private security contracts, plainly, that was not the case.

[00:37:08] Speaker 01:
For the very reasons Judge Bryson set out.

[00:37:10] Speaker 01:
The CPA was mixed with the government of Iraq at the time and said, yes, there can be PSCs.

[00:37:15] Speaker 01:
If they exist, they have to follow these rules.

[00:37:20] Speaker 01:
But that doesn't say that a contract, you're still able to under contract possess those PSCs.

[00:37:26] Speaker 01:
Because the CPA was not the contracting official for the law cap free contract, which of course is the contracted issue here.

[00:37:34] Speaker 01:
The interesting argument that Mr. Workmaster makes and that the board sort of followed is that

[00:37:40] Speaker 01:
Well, we, for doctrinal reasons, we don't want other people to be armed.

[00:37:44] Speaker 01:
We don't want other people to be doing the job of protecting our contractors and our contractor employees who are accompanying the force.

[00:37:53] Speaker 01:
We want to have a, we want to be the exclusive providers of security for these people.

[00:38:01] Speaker 01:
But nevertheless, if you bring in somebody who is going to be a super armed contractor, that's going to be okay.

[00:38:08] Speaker 01:
It just doesn't make sense.

[00:38:10] Speaker 01:
If individuals cannot carry weapons, if the contract says, you cannot have employees who carry weapons, you certainly can't get around that by saying, we're going to hire somebody whose employees carry weapons.

[00:38:21] Speaker 01:
Because, of course, the prohibitions against people being armed also apply to subcontract employees, and private security contractors have weapons.

[00:38:29] Speaker 01:
Case 5A5A3 was brought in front of the board by KBR to put squarely before it the issues about a prior material breach.

[00:38:38] Speaker 01:
That case is not before us right now.

[00:38:40] Speaker 01:
The case before us is the case involving what the contract permitted.

[00:38:45] Speaker 01:
If they're permitted to have weapons because of a breach, the board must make those findings, and they have not made those findings.

[00:38:52] Speaker 01:
For those reasons, the proper result of this case is reversing the board's determination that the lockout contract permitted use of PSEs, finding this wrong, that they did not permit use of PSEs, remanding the statute of limitations issue

[00:39:07] Speaker 01:
to determine whether or not we'll be using the proper test as you articulate in our briefs, and allowing the board to do what it wishes and feels appropriate and proper in 58583.

[00:39:16] Speaker 01:
Thank you.

[00:39:18] Speaker 05:
Thank you.

[00:39:19] Speaker 05:
We thank both counsel, and the case is submitted, and we're going to adjourn briefly before we move to the other cases.