[00:00:08] Speaker 04:
Okay, our second case this afternoon is number 16-2589, Security Force International versus United States, Mr. Pleybrook.

[00:00:25] Speaker 05:
Thank you, Your Honor.

[00:00:26] Speaker 05:
Good afternoon.

[00:00:28] Speaker 05:
The trial court correctly found the termination for convenience to be a breach.

[00:00:33] Speaker 05:
That breach, which

[00:00:35] Speaker 05:
involved eliminating well over half of the contract value was obviously material, and Secura Force expressly reserved its right to claim breach remedies.

[00:00:45] Speaker 05:
As a result, the government cannot rely on an alleged later breach by Secura Force to justify its default of the remainder of the contract.

[00:00:54] Speaker 02:
Is there any testimony by any of Secura Force's Kuwaiti or Iraqi contacts at the trial?

[00:01:04] Speaker 05:
There was not.

[00:01:06] Speaker 05:
There was testimony by both government representatives who spoke with them and a SecureForce employee who spoke with them.

[00:01:15] Speaker 02:
So there's no direct evidence from the Kuwaitis or the Iraqis demonstrating that the cancellation of the contracts for the State Department sites affected SecureForce's ability to secure fuel for the remaining CLIN.

[00:01:33] Speaker 05:
There was lots of evidence on that, Your Honor, that was admissible and admitted about the effects that the determination... So there's evidence directly from the Kuwaitis or the Iraqis?

[00:01:45] Speaker 05:
As I just said, Your Honor, right.

[00:01:46] Speaker 05:
There was not a witness who was one of the Kuwaiti subcontractors or from Kuwait.

[00:01:51] Speaker 02:
So everything that you've got, as far as I could see, looking over the testimony, was hearsay.

[00:01:56] Speaker 05:
Is it not?

[00:01:57] Speaker 05:
It was not.

[00:01:58] Speaker 05:
A lot of it was admissions, including by the government's own witness who was described as the most knowledgeable person

[00:02:04] Speaker 05:
involved in the Middle East.

[00:02:06] Speaker 02:
His testimony was that he... Would you agree that the testimony by your witnesses about their contacts with, for example, the Kuwaitis was entirely hearsay?

[00:02:18] Speaker 05:
No.

[00:02:19] Speaker 05:
And it was admitted at trial, so it was admissible evidence, and it hasn't been challenged as being inadmissible.

[00:02:26] Speaker 02:
So it was actually... Was there any consideration of the Federal Corrupt Practices Act?

[00:02:32] Speaker 02:
in relation to the claims that the Kuwaiti royal family had to be involved in this sort of activity.

[00:02:42] Speaker 05:
There was no discussion of that during the trial, Your Honor, or in the briefing for that matter.

[00:02:47] Speaker 04:
Your contention with respect to the termination for convenience is basically that it was unlawful because the individual contracting officer did make the decision and that the decision was instead made by one of her superiors, correct?

[00:03:02] Speaker 05:
We don't know who it was made by, and that was one of the reasons it was an abuse of discretion and unlawful, but that's the one that the trial court relied upon, Your Honor.

[00:03:12] Speaker 04:
Okay.

[00:03:12] Speaker 04:
So why is it that there should be a difference in the law here between terminations for convenience and terminations for default, since our cases are quite clear that in the default context, it doesn't make any difference what the subjective determination was.

[00:03:28] Speaker 04:
It depends on an assessment of objective facts,

[00:03:32] Speaker 05:
Those default cases are dealing with a situation in which the contracting officer has already made a decision that's in the best interest to terminate.

[00:03:40] Speaker 05:
That's the whole decision here for a convenience termination.

[00:03:44] Speaker 05:
But in default context, there's another issue that has to be made, which is, was the contractor in material breach?

[00:03:51] Speaker 04:
I'm not sure that I understand your answer.

[00:03:53] Speaker 04:
Should the same rule apply to convenience and default terminations or not?

[00:03:58] Speaker 05:
It applies in part.

[00:04:00] Speaker 05:
It does not apply when you're talking about the unique decision that has to be made in a default determination about whether there was a material breach of the contract by the contractor.

[00:04:08] Speaker 05:
In that situation, even if the CO relied on the wrong one, and it's determined that there was another material breach, whether known or unknown, then it can be sustained.

[00:04:21] Speaker 04:
But they're both the same.

[00:04:22] Speaker 04:
In the default context, the subjective views of the contracting officer are irrelevant, right?

[00:04:27] Speaker 05:
Yes, you have to go to the objective evidence, and you do in a T for C as well.

[00:04:31] Speaker 05:
Is the answer yes?

[00:04:33] Speaker 05:
Yes, and it has, that's the same in a T for C in that the decision by the contracting officer, although discretionary, has to be based on objectively reliable facts.

[00:04:45] Speaker 05:
That was not true here in multiple respects.

[00:04:49] Speaker 04:
But why should we care what the subjective views of the contracting officer were?

[00:04:55] Speaker 04:
if the objective evidence supports the legitimacy of a termination for convenience.

[00:05:00] Speaker 05:
The law is clear under both default and convenience terminations that in making that best value determination that a contracting officer has to apply an independent judgment to that determination.

[00:05:17] Speaker 02:
What about Empire Energy absent bad faith they say?

[00:05:22] Speaker 02:
the subjective knowledge of the contracting officer is irrelevant.

[00:05:26] Speaker 02:
Are you alleging bad faith?

[00:05:28] Speaker 02:
I'm not saying... No, no, don't talk when I talk.

[00:05:30] Speaker 02:
Excuse me.

[00:05:31] Speaker 02:
Are you alleging bad faith here?

[00:05:35] Speaker 05:
I'm alleging that there... No, I'm looking to the objective facts.

[00:05:39] Speaker 05:
No, the answer is you're not alleging bad faith, right?

[00:05:42] Speaker 05:
No, she said not make an independent determination as the record says.

[00:05:45] Speaker 04:
So you're not claiming bad faith, correct?

[00:05:47] Speaker 05:
That is not bad faith.

[00:05:48] Speaker 05:
That's not doing your job.

[00:05:50] Speaker 04:
No, but you're not

[00:05:52] Speaker 05:
arguing bad faith, correct?

[00:05:54] Speaker 05:
Correct.

[00:05:56] Speaker 05:
But she didn't do her job.

[00:05:57] Speaker 01:
I understand that your argument is that for terminations of convenience, as opposed to a termination for fault, that what the contracting officer does has to really exercise the discretion to determine that it really is for the convenience of the government.

[00:06:16] Speaker 01:
But having said that, even if that's true,

[00:06:19] Speaker 01:
Why does it have to be the individual contracting officer as opposed to a contracting officer who, in this case, was new to the job, who is consulting with her supervisor for purposes of making that determination?

[00:06:32] Speaker 05:
There's nothing wrong, Your Honor, with a contracting officer seeking the advice and counsel of others.

[00:06:39] Speaker 05:
However, the case law is very clear that after doing that, they must come to an independent determination themselves.

[00:06:44] Speaker 01:
That was not done here.

[00:06:46] Speaker 01:
The government ultimately has to make the decision, correct?

[00:06:50] Speaker 05:
that the government has to act through someone.

[00:06:54] Speaker 01:
And the FAR makes very clear... It seems like an artificial construct that the Court of Claims has put onto the exercise.

[00:07:02] Speaker 01:
You've got a contracting officer.

[00:07:04] Speaker 01:
All she said was ultimately she consulted with her supervisor, so she felt it was ultimately her supervisor's decision.

[00:07:10] Speaker 01:
That doesn't mean she wasn't in agreement with it.

[00:07:13] Speaker 01:
It doesn't mean she didn't advise with respect to it.

[00:07:16] Speaker 01:
I mean, and there are, as Judge Steig points out, objective facts that would support the conclusion that it was at least a reasonable determination that in those circumstances, it was for the government's convenience because of the delay in seeking the waiver.

[00:07:31] Speaker 05:
There were no objective facts that supported it, Your Honor.

[00:07:35] Speaker 01:
Well, they had to get the fuel there, right?

[00:07:39] Speaker 05:
Well, of course.

[00:07:40] Speaker 05:
But they had to get a waiver, right?

[00:07:42] Speaker 05:
I'm sorry, Your Honor.

[00:07:43] Speaker 05:
They had to get a waiver, right?

[00:07:44] Speaker 05:
They did have to get a waiver.

[00:07:46] Speaker 05:
And the reason, the only reason the government supports the termination of inconvenience now is it says, oh, it's going to take four to six weeks, or three to four weeks rather to get a waiver.

[00:07:56] Speaker 05:
That comes from a superior superior to the CO who during trial admitted that she didn't ask and she'd never done this process before.

[00:08:06] Speaker 05:
The testimony of the one person who had, the deputy director of DLA said, I've done this multiple times.

[00:08:11] Speaker 05:
It takes one week to get a waiver.

[00:08:14] Speaker 05:
And then you have, Your Honor, the duty as set out in Rockies Express and other cases to facilitate performance of the contractor.

[00:08:25] Speaker 05:
And in Rockies Express, they found a material breach when the government did not get a waiver.

[00:08:33] Speaker 04:
Rockies didn't find a termination for convenience to be a breach, right?

[00:08:39] Speaker 05:
It was a situation in which

[00:08:41] Speaker 05:
They refused to enter into a contract.

[00:08:44] Speaker 04:
Wait, wait, wait.

[00:08:45] Speaker 04:
The answer is yes, it didn't involve a termination for convenience.

[00:08:48] Speaker 05:
It was a directly analogous situation, Your Honor, in which they refused.

[00:08:51] Speaker 04:
But you've got to answer the questions.

[00:08:53] Speaker 04:
It did not involve it.

[00:08:54] Speaker 04:
The answer is it did not involve a termination for convenience, right?

[00:08:57] Speaker 05:
It involved it in the... Yes, it did not involve that, right?

[00:09:01] Speaker 05:
Not totally, Your Honor.

[00:09:03] Speaker 05:
It was talking about doing a follow-on contract as required by a preliminary contract.

[00:09:10] Speaker 05:
But the follow-on contract, they refused to enter into it because they didn't have a termination for convenience clause.

[00:09:17] Speaker 05:
That's why termination comes into play.

[00:09:20] Speaker 05:
And the court found that it was a breach because they didn't try to get a waiver of having a termination for convenience clause in those contracts, even if it had been required.

[00:09:31] Speaker 01:
Let's look to the issue of materiality.

[00:09:34] Speaker 01:
I mean, the court also found that ultimately, the government was

[00:09:40] Speaker 01:
within its discretion to terminate the contracted total and that there was no material breach because you wouldn't have been able to supply the fuel anyway even if they've gotten the waiver.

[00:09:55] Speaker 05:
Right.

[00:09:55] Speaker 05:
And we know that we have attacked that on clear error standard, but it's also irrelevant as a matter of law.

[00:10:05] Speaker 05:
Materiality is not the same thing as causation.

[00:10:08] Speaker 05:
the trial court put up a standard of saying, is it going to, does the first breach prevent them from performing?

[00:10:15] Speaker 05:
That is not the legal standard.

[00:10:18] Speaker 05:
And you can see that in Laguna Construction.

[00:10:20] Speaker 05:
You can see it in Christopher Village.

[00:10:23] Speaker 05:
You can see it in Sun Studge.

[00:10:24] Speaker 05:
You can see it in Restatement Section 237.

[00:10:27] Speaker 05:
Let me just read you from Christopher Village.

[00:10:30] Speaker 01:
If we were to agree that the

[00:10:34] Speaker 01:
government was within its rights to terminate the other four CLINs because you didn't perform, right?

[00:10:40] Speaker 01:
The other four contracts, right?

[00:10:43] Speaker 05:
I'm sorry.

[00:10:43] Speaker 01:
If we were to agree that the government was within its rights to terminate the contract to the extent that there were sites for the security that were not DOD sites, for state that were not DOD sites.

[00:11:02] Speaker 05:
Well, the government claims there are all Department of State sites.

[00:11:07] Speaker 01:
The ones that were left.

[00:11:09] Speaker 05:
No, all.

[00:11:09] Speaker 05:
But they all had military personnel there as well, which was another objective fact that was wrong.

[00:11:18] Speaker 01:
I thought the government's position was that the reason they had to seek waivers on the other two was because those were DOD sites.

[00:11:25] Speaker 05:
Well, no, not exactly.

[00:11:27] Speaker 05:
that they had to seek waiver because there were no DOD personnel stationed there as well as State Department personnel.

[00:11:33] Speaker 05:
And that is objectively wrong as well, as both the State Department personnel and Mr. Doolin both testified that, yes, there were military personnel stationed there.

[00:11:47] Speaker 01:
Let's simplify this.

[00:11:49] Speaker 01:
If the four other sites that you did not perform for, okay?

[00:11:56] Speaker 01:
Okay, six.

[00:11:57] Speaker 01:
Well, there's six total, right?

[00:11:59] Speaker 05:
Eight total.

[00:11:59] Speaker 01:
Eight total.

[00:11:59] Speaker 01:
But the six sites that you did not perform for.

[00:12:01] Speaker 01:
If those sites, if we conclude the government was within its discretion to terminate the contract, and it was not a breach of contract for them to do it because you didn't perform, then what benefit do you get from arguing about the termination for convenience with respect to the other two sites?

[00:12:18] Speaker 05:
Well, just as I was reading from, well, maybe I didn't get to it, Christopher Village, quote,

[00:12:25] Speaker 05:
a later breach is justified by the other party's prior failure.

[00:12:29] Speaker 05:
That's what the contract law is.

[00:12:32] Speaker 05:
It's a law that's been applied in multiple cases, Christopher.

[00:12:35] Speaker 04:
But in this case, you never asserted at the time that your performance was excused by the termination for convenience, did you?

[00:12:44] Speaker 05:
Yes, we did, Your Honor, because we said even before they, even when they told us they might do this, we put them on notice that if we would be considering

[00:12:54] Speaker 05:
this a breach and would be pursuing breach remedies.

[00:12:59] Speaker 05:
And then right after the edit, we said this termination for convenience is not appropriate in this situation.

[00:13:03] Speaker 05:
And the reason we're continuing, though, is because of the continue to work clause in the disputes clause, which otherwise we'd breach if we didn't continue while the dispute was resolved.

[00:13:13] Speaker 04:
Well, my question was a little different.

[00:13:15] Speaker 04:
You didn't say at the time that the termination for convenience occurred that you wanted out of the contract.

[00:13:23] Speaker 04:
that you elected, this is an election of remedies issue, you elected to terminate the contract.

[00:13:29] Speaker 05:
We did not use those expressed words.

[00:13:32] Speaker 05:
We basically said we were performing under protest.

[00:13:37] Speaker 04:
Maybe so, but you didn't say the government's alleged breach with respect to the termination for convenience allows us to

[00:13:48] Speaker 04:
reject the contract and determine it and not to perform under it, correct?

[00:13:52] Speaker 05:
That's exactly what it means when you say we will pursue our breach remedies.

[00:13:56] Speaker 05:
That's what, that's one of your breach remedies.

[00:13:58] Speaker 04:
You didn't, you never suggested that you would stop performing because you wanted to reject the contract.

[00:14:05] Speaker 05:
We didn't use those exact words.

[00:14:07] Speaker 04:
You never expressed that concept.

[00:14:09] Speaker 05:
Yes we did.

[00:14:10] Speaker 04:
How could that be?

[00:14:11] Speaker 04:
You kept saying that you were going to perform and that you needed more time.

[00:14:15] Speaker 05:
We said we were continuing to perform because the continue to work clause requires us to do so.

[00:14:21] Speaker 05:
And we said we were going to pursue our breach remedies, which includes being able to quit once that's been resolved.

[00:14:29] Speaker 04:
Okay.

[00:14:29] Speaker 04:
Before you sit down, I want to ask you a couple of questions about this security issue.

[00:14:35] Speaker 04:
And there's been a lot of discussion about what the original contract required

[00:14:41] Speaker 04:
in the way of government escorts of the tanker convoys.

[00:14:47] Speaker 04:
My understanding is that these issues were resolved by mod two where the government said it would provide security through the end of the year, correct?

[00:14:59] Speaker 05:
They were resolved only in minor part for a few days.

[00:15:04] Speaker 04:
For a few days?

[00:15:05] Speaker 04:
I thought mod two said they would provide security through the end of the year.

[00:15:10] Speaker 05:
It's a three-year contract.

[00:15:11] Speaker 05:
They were going to provide it for a few more months, they said.

[00:15:13] Speaker 04:
But then within two weeks, they said... Okay, but I'm just trying to understand what the contention is.

[00:15:18] Speaker 04:
That Mod 2 resolved the question of whether the government had to provide security through the end of the year, correct?

[00:15:25] Speaker 05:
They explicitly admitted that they had to provide it through the end of the year.

[00:15:29] Speaker 04:
Okay.

[00:15:30] Speaker 05:
That doesn't take care of the other years.

[00:15:31] Speaker 05:
And then that was on October 12th, I think.

[00:15:34] Speaker 05:
On October 24th, they sent an email saying, contracting officer did, saying,

[00:15:39] Speaker 05:
We no longer have security lined up for you.

[00:15:42] Speaker 05:
Well, they said they were looking for alternative solutions.

[00:15:45] Speaker 05:
Right.

[00:15:45] Speaker 05:
And they never got back to us and said they had any.

[00:15:48] Speaker 02:
Where in the briefs did you argue that the State Department sites were actually military sites?

[00:15:57] Speaker 05:
What we argue is that there were military personnel stationed at, for instance, the embassy.

[00:16:04] Speaker 05:
So?

[00:16:06] Speaker 05:
So that by itself, under the

[00:16:08] Speaker 05:
the Defense Federal Acquisition Regulation gave Deputy Director Doolan the authority to waive the TAA requirement.

[00:16:20] Speaker 02:
But the requirement still applies.

[00:16:22] Speaker 05:
The requirement what, Your Honor?

[00:16:23] Speaker 02:
Still applies, unless it's waived.

[00:16:27] Speaker 02:
Those are State Department sites, not military sites.

[00:16:31] Speaker 05:
It's a question of whether military people are stationed there, and they were.

[00:16:36] Speaker 05:
Deputy Director Doolin and his waiver did it for the entire contract.

[00:16:41] Speaker 05:
And so he did provide the waiver.

[00:16:45] Speaker 05:
They were only arguing about it now saying, well, he didn't have authority to do that, when in fact he did because the troops were stationed there.

[00:16:52] Speaker 05:
Thank you, Your Honors.

[00:16:55] Speaker 04:
We'll give you two minutes for a bottle.

[00:16:59] Speaker 04:
Thank you, Your Honors.

[00:17:03] Speaker 04:
OK, Ms.

[00:17:03] Speaker 04:
McCarthy.

[00:17:04] Speaker 00:
Good afternoon, Your Honors.

[00:17:05] Speaker 00:
May I please look court?

[00:17:07] Speaker 00:
In its very belatedly certified claim submitted to the contracting officer, Secure First is seeking $47 million for contract.

[00:17:16] Speaker 04:
This is the jurisdictional issue?

[00:17:17] Speaker 00:
Yes, in which it failed to deliver a drop of oil to the government.

[00:17:21] Speaker 00:
It's seeking $47 million in a contract that existed for a little over two months in which it failed to deliver a drop of... It never sought to terminate the contract, did it?

[00:17:31] Speaker 00:
Pardon me?

[00:17:32] Speaker 02:
It never sought to terminate the contract.

[00:17:36] Speaker 00:
No.

[00:17:37] Speaker 04:
On the jurisdictional issue, do you agree that they can assert the termination for convenience theory as a defense?

[00:17:47] Speaker 00:
If it's a non-monetary claim.

[00:17:49] Speaker 00:
What they presented here, this claim was always presented as a monetary claim.

[00:17:52] Speaker 04:
In the very first page... So as a defense, there's no jurisdictional issue?

[00:17:58] Speaker 00:
So long as they're not presenting an affirmative... As long as they're not trying to recover money.

[00:18:02] Speaker 00:
Yes.

[00:18:03] Speaker 00:
They can't come back and do what they're doing here, which is assert

[00:18:06] Speaker 04:
What your contention is here that while this can serve as a defense to the termination for default, they can't assert it as an affirmative claim because they didn't go to the contract and quantify it.

[00:18:19] Speaker 02:
Exactly.

[00:18:19] Speaker 02:
They didn't attempt to reopen.

[00:18:22] Speaker 02:
They didn't attempt to adjust, am I correct, the terms?

[00:18:28] Speaker 00:
I'm sorry.

[00:18:30] Speaker 02:
They neither attempted to adjust the terms of the contract or reopen the contract.

[00:18:36] Speaker 02:
And again, I'm speaking to jurisdiction right there, i.e., non-monetary versus monetary.

[00:18:42] Speaker 00:
That's correct.

[00:18:43] Speaker 00:
The trial court cited this court's decision to align a tax system to suggest that a contractor can present a non-monetary claim, and that can later present a monetary claim.

[00:18:53] Speaker 00:
But what the court was talking about in that case was a claim in which there's an ongoing situation in which a non-monetary claim can ripen into a monetary claim.

[00:19:02] Speaker 00:
Here, assuming the termination for convenience

[00:19:06] Speaker 00:
occurred in September of 2011.

[00:19:08] Speaker 00:
There was nothing more that needed to happen in order for SecureForce to figure out what its alleged breach damages were, to the extent it believed that the termination for convenience was a breach.

[00:19:18] Speaker 01:
There was a lot of back and forth in the briefs.

[00:19:21] Speaker 01:
There was a lot of discussion in the court of claim's decision about the dispute as to where this fits in, in terms of did that initial mention of the termination for convenience in the complaint

[00:19:35] Speaker 01:
really assert a termination of convenience claim or simply allude to the fact that something is out there as a potential defense.

[00:19:43] Speaker 01:
But even putting that aside, isn't the narrower argument, the one that you have on jurisdiction, actually your cleaner argument, which is they didn't really assert a non-monetary claim or a valid non-monetary claim?

[00:19:57] Speaker 01:
That's different from that whole page after page after page of debate.

[00:20:02] Speaker 04:
Well, that's not quite true, right?

[00:20:05] Speaker 04:
As I understand it, you're distinguishing between their claim for declaratory judgment, which they sought to ripen into a monetary claim.

[00:20:15] Speaker 04:
And ultimately, I guess they did make a monetary claim to the contract.

[00:20:19] Speaker 04:
Yes.

[00:20:19] Speaker 04:
You're saying there's no jurisdiction over that.

[00:20:21] Speaker 04:
But in so far as they are saying the default termination was improper because of this prior material breach, that is appropriate.

[00:20:31] Speaker 04:
That's not outside the jurisdiction, right?

[00:20:33] Speaker 00:
So long as it's not an affirmative claim in which they're asking for a declaration that they're entitled to monetary damages, which they did in both.

[00:20:41] Speaker 00:
So yes, Your Honor, if they had said, OK, we just wanted to get out from under this termination for cause, we believe that there was a prior material breach.

[00:20:50] Speaker 04:
So we have to decide the termination for convenience issue in connection with the defense.

[00:20:56] Speaker 00:
Well, the problem in this case is from day one, their termination

[00:21:03] Speaker 04:
Oh, wait.

[00:21:04] Speaker 04:
Forget about their monetary claim.

[00:21:06] Speaker 04:
Let's suppose you're right, that they can't, that this, to some extent, they are seeking a declaration because they want money, and that they can't assert a monetary claim because they didn't properly present that to the contracting officer before it came to court.

[00:21:21] Speaker 03:
Correct.

[00:21:21] Speaker 03:
That's our view under their package.

[00:21:22] Speaker 04:
Let's assume you're right about that.

[00:21:24] Speaker 04:
Okay.

[00:21:24] Speaker 04:
But then they say, well, we're still asserting the termination for convenience as a defense to the default termination.

[00:21:31] Speaker 04:
They're saying that a full termination was improper because of this prior material breach.

[00:21:35] Speaker 04:
We have jurisdiction over that, right?

[00:21:37] Speaker 00:
To consider that as a defense, but they've waived any ability to come back and do what they've done now, which is trying to monitor.

[00:21:44] Speaker 00:
Right.

[00:21:44] Speaker 03:
I understand.

[00:21:45] Speaker 00:
Yes.

[00:21:45] Speaker 00:
Yes.

[00:21:46] Speaker 00:
Yes.

[00:21:46] Speaker 00:
I think the law is clear in that.

[00:21:48] Speaker 00:
But we believe that the trial court erred here because this was directly controlled by Maripakis, which Secure Forits doesn't even cite in its brief.

[00:21:57] Speaker 00:
And the basis on which the trial court attempted to distinguish Maripakas was not a principal basis.

[00:22:04] Speaker 04:
But we have other more recent cases that have distinguished that case.

[00:22:10] Speaker 04:
A fraud defense or something like that doesn't have to be presented to the contracting officer.

[00:22:14] Speaker 04:
A defense which doesn't require discretionary decision by the contracting officer doesn't have to be presented to the contracting officer, right?

[00:22:22] Speaker 00:
Right.

[00:22:22] Speaker 00:
In this case, they needed to, in order for the court to consider this claim, because the hazard is that we're in a situation where we're now having a quantum... Yeah, I understand your argument.

[00:22:37] Speaker 04:
They can't do that.

[00:22:38] Speaker 00:
Okay.

[00:22:38] Speaker 00:
If I may, I would like to address the substantive issue, which was the trial court's fundamental misapprehension of the role of a contracting officer in federal contracting.

[00:22:51] Speaker 00:
And I think this is not unique to secure force.

[00:22:54] Speaker 00:
I think that the trial court began to err by relying on an improper framework and another court of federal claims decision in Tigard's form.

[00:23:04] Speaker 00:
This court, almost 20 years ago, resolved the basis on which a discretionary decision merely to terminate the contract, whether for convenience or whether for default, and McDonnell Douglas

[00:23:17] Speaker 00:
this court address the issue of what constitutes an abuse of discretion?

[00:23:21] Speaker 00:
What are the bases under which the contracting officer's feelings connected?

[00:23:25] Speaker 00:
We don't hear about the subjective determination.

[00:23:27] Speaker 00:
Exactly.

[00:23:27] Speaker 00:
For instance, in McDonnell Douglas, the contracting officer in that case did not want to terminate the contract.

[00:23:37] Speaker 00:
He wanted to work out a solution with the contractors.

[00:23:41] Speaker 00:
The segregated defense overruled him.

[00:23:44] Speaker 01:
But we've always said you have to make that

[00:23:47] Speaker 01:
the contracting officer has to make a considered decision, or there has to be a considered decision.

[00:23:53] Speaker 01:
In other words, let me give you an example.

[00:23:56] Speaker 01:
You can't just say, termination for convenience, and then later find out that maybe that was justified, even though it didn't appear to be justified at the time, or you never determined whether it was justified.

[00:24:08] Speaker 01:
I mean, there still has to be a determination.

[00:24:10] Speaker 00:
Without question, Your Honor.

[00:24:12] Speaker 00:
that the question is, what is the contracting officer?

[00:24:15] Speaker 00:
The contracting officer, especially under the Contracts Disputes Act, but even this is even addressed in the Wunderlich Act cases, which are the exclusive cases in which the trial court relied, for this notion that there's something special about a contracting officer working in isolation.

[00:24:31] Speaker 00:
In this case, in Schlesinger, a court of claims decision which was binding on the trial court in this case, in Schlesinger, which was a termination for default case, in that case,

[00:24:39] Speaker 00:
the Court of Claims broadened the notion of where is the abdication of responsibility to make an independent decision.

[00:24:47] Speaker 00:
And in that case, the Court of Claims made it clear it wasn't simply the contractor.

[00:24:50] Speaker 00:
It was the contracting officer's supervisor.

[00:24:52] Speaker 00:
It was broader.

[00:24:53] Speaker 00:
And then in the legislative history of the contractor's dispute sex, it makes it clear that these decisions by government are made by a group of people.

[00:25:01] Speaker 00:
There's nothing singular or special about the exact contract officer.

[00:25:05] Speaker 00:
The facts in this case are even more extreme, because a joint appendix

[00:25:09] Speaker 00:
3552, sorry, my glasses are in my hand.

[00:25:14] Speaker 00:
On September 23rd, three days before the contracting officer, Ms.

[00:25:18] Speaker 00:
Watson, issued or signed the termination of convenience, her supervisor, Ms.

[00:25:25] Speaker 00:
Sheppard, also a warranted contracting officer, who incidentally was the same warranted contracting officer who executed the termination for cause in this case, that very same person wrote secure force a letter explaining to secure force

[00:25:37] Speaker 00:
that the government had decided that it was going to terminate these three contract line items for its convenience because the Clintons were mistakenly awarded in violation of the Trade Agreements Act and not just Ms.

[00:25:51] Speaker 00:
Sheppard, but also the management team and the contract team and the DLA had made a discretionary decision for which it incidentally bargained.

[00:26:00] Speaker 04:
In fact, you needed a waiver for all of these locations, right?

[00:26:03] Speaker 04:
Not just for the

[00:26:06] Speaker 04:
the ones that didn't have a military presence.

[00:26:09] Speaker 04:
So the question is, what the government decided was it was too much trouble to get a waiver that would require the US Trade Representative to pass on it, right?

[00:26:21] Speaker 00:
Your Honor, I would say it was an eminently reasonable decision that was certainly committed to under the Termination and Convenience Clause.

[00:26:29] Speaker 00:
Going to the United States Trade Representative, which, by the way, as your Honors know, is a part of the executive office of the White House,

[00:26:36] Speaker 00:
For a DLA commander to say, oh, I want to go to the US chair and say, oh, we goofed here, and ask for waive, that's a very serious decision that is committed to the discretion of officials much higher than this first-year contract.

[00:26:51] Speaker 01:
Do you understand the Court of Claims to have drawn a line to say that even if someone else in the government made this considered decision, that if the contracting officer herself

[00:27:02] Speaker 01:
didn't exercise independent discretion that it's always a breach?

[00:27:07] Speaker 00:
Yes, and that's absolutely wrong.

[00:27:10] Speaker 00:
It's fundamentally contrary to this court's president, McDonnell Douglas.

[00:27:13] Speaker 00:
Again, the contrary... I don't think you have to go further.

[00:27:16] Speaker 02:
I mean, you have case authority.

[00:27:18] Speaker 02:
I don't know why you're citing ledge history.

[00:27:21] Speaker 00:
You have directly unplanned cases.

[00:27:23] Speaker 00:
Well, we feel very strongly about this.

[00:27:25] Speaker 04:
And again, this is... Suppose here what had happened was that the government, instead of

[00:27:30] Speaker 04:
terminating part of the contract for convenience had said we're going to terminate the whole contract for convenience because we have to get waivers with respect to each one of these sites.

[00:27:40] Speaker 04:
Would that have been permissible?

[00:27:42] Speaker 00:
Yes, it would have been permissible because then the Trade Agreements Act is a law and the waiver should be the exception to the rule.

[00:27:52] Speaker 04:
Even though it was contemplated at the time of contract formation under my hypothetical that there would be a waiver for the military sites?

[00:27:59] Speaker 00:
Well, the DLA authority, I switch, I'd like to keep closely to the facts of this case.

[00:28:05] Speaker 04:
Well, no, no, you're not entitled to do that.

[00:28:07] Speaker 04:
You have to answer my hypothetical.

[00:28:09] Speaker 00:
Hypothetically, it could be, but these types of businesses... It could be a breach.

[00:28:14] Speaker 00:
No, it would not be a breach because... Well, so what happens?

[00:28:17] Speaker 04:
So the contractor just says, we're terminating the whole contract because we have to get waivers.

[00:28:22] Speaker 04:
And the contractor says, but you knew you had to get a waiver and everybody contemplated that you would get a waiver.

[00:28:28] Speaker 04:
And so why are you suddenly terminating for convenience when you knew that this had to be done in the first place?

[00:28:33] Speaker 00:
Well, that would be a much harder case.

[00:28:35] Speaker 00:
That would be closer to Torrancella.

[00:28:38] Speaker 00:
But then I think the court would have to look and see, well, why would the agency behave in such an irrational manner?

[00:28:44] Speaker 01:
Again, this is- Is there evidence in the record that there was an immediacy for purposes of the need for the fuel?

[00:28:55] Speaker 00:
Absolutely, yes.

[00:28:56] Speaker 00:
This was a very compressed period of time.

[00:28:58] Speaker 00:
This was during the time of the status, where there is contemplated there would be a status of forces agreement, which never came to fruition.

[00:29:05] Speaker 00:
That's why the estimates of requirements were much higher than they ended up being during contract performances.

[00:29:10] Speaker 00:
It was a very compressed, dynamic situation in which all of the assumptions were changing very quickly.

[00:29:15] Speaker 00:
I'd like to get back to, I feel like I haven't fully answered Judge Dyck's question.

[00:29:21] Speaker 00:
A termination for convenience is something that the government is a substantive contract that's enjoyed by the contract.

[00:29:30] Speaker 00:
When Secure first entered into its contract, it assumed the risk that it would have to be able to perform if the government elected to terminate provisions, contract line items, some are nearly all of them, it still had the promise that it would be able to perform.

[00:29:48] Speaker 00:
the remainder of the balance.

[00:29:49] Speaker 00:
That was the assumption of the risk.

[00:29:50] Speaker 00:
This is something that occurs.

[00:29:52] Speaker 04:
When there is a... But the cases contemplate, put aside bad faith, there's no allegation of that here.

[00:29:58] Speaker 04:
But the cases seem to contemplate there can be cases in which termination for convenience

[00:30:04] Speaker 04:
is an abuse of discretion.

[00:30:05] Speaker 04:
I guess I'm trying to understand under what circumstances that would be true.

[00:30:08] Speaker 00:
Well, I can give you, Your Honor, perhaps an extreme one.

[00:30:11] Speaker 00:
If a contracting officer goes to a bar at night and then in a blackout terminates all of his contracts and the next morning says, I don't know what happened, that would be an abuse of discretion.

[00:30:21] Speaker 00:
That is extreme.

[00:30:22] Speaker 00:
That is very extreme.

[00:30:26] Speaker 00:
How about we try something in the middle?

[00:30:31] Speaker 00:
It's really a decision that is... I'm sure I'm not coming up with a bet.

[00:30:40] Speaker 02:
Your abuse of discretion would be the bribery cases coming out of the Far East.

[00:30:45] Speaker 00:
Well, I'm trying to distinguish that from bad faith, because a lot of the abuse of discretion bleeds into bad faith.

[00:30:52] Speaker 00:
And government officials behave with regularity.

[00:30:57] Speaker 00:
The important point I want to make, and I see that I'm running out of time, is that under no circumstances is an abuse of discretion determined by a staffing decision made within a contracting office.

[00:31:10] Speaker 00:
The fact that Ms.

[00:31:10] Speaker 00:
Shepard assigned the execution of this mod after a group of people have made a considered decision, that is not a breach of contract.

[00:31:20] Speaker 00:
That is not enough to set aside the government's very substantial

[00:31:25] Speaker 00:
a bargain for a right to terminate these contract line items for convenience, and there just isn't any objective evidence of an abuse of discretion.

[00:31:33] Speaker 00:
And it certainly, as a matter of law, would not be the vision of the contracting officer embraced by the Court of Federal Claims, both in this case and in TigerSwan, and embraced by the Secure Force here.

[00:31:46] Speaker 04:
Let me ask you to turn for a moment to the security issue.

[00:31:49] Speaker 04:
Yes.

[00:31:49] Speaker 04:
So do you agree that Mod 2 obligated the government to provide security through the end of the year?

[00:31:55] Speaker 04:
And what they're saying is that there was an email that was sent that said, we're not going to do this.

[00:32:02] Speaker 04:
We're looking for alternative solutions, correct?

[00:32:06] Speaker 00:
It was an email that said that, yes, it was not a repudiation.

[00:32:10] Speaker 00:
It was anything but a repudiation.

[00:32:11] Speaker 00:
It was an acknowledgment that they were looking for alternative solutions because it was a very dynamic situation.

[00:32:16] Speaker 00:
The government, of course, did not anticipate having to provide security.

[00:32:20] Speaker 00:
by executing a bilateral mod.

[00:32:22] Speaker 00:
By the way, this was a bilateral mod.

[00:32:23] Speaker 00:
SecureForce conceded that a contract before the date of the modification necessarily did not include security.

[00:32:30] Speaker 00:
The government agreed to buy the security against the wishes of the State Department.

[00:32:35] Speaker 04:
But I guess the problem that I see is that email left them a little bit in limbo in the sense that you said, the government said it wasn't going to provide security.

[00:32:44] Speaker 04:
It said we're looking for alternative solutions, but it didn't promise to perform its part of the bargain.

[00:32:50] Speaker 00:
If the government promised to really look at government had multiple, this is a defense logistics agency and they know all about logistics and they provide security all the time.

[00:32:59] Speaker 00:
They have a lot of backups and they, it's just that the first line option that they had didn't pan out.

[00:33:06] Speaker 00:
They were giving them notes, they were giving secure first notice of that, but they certainly had a lot of alternatives that they were working on and that is well within the ability of the defense logistics agency.

[00:33:15] Speaker 00:
I see that.

[00:33:16] Speaker 04:
Okay.

[00:33:17] Speaker 04:
Well, we'll give you a minute for rebuttal on the jurisdictional issue.

[00:33:21] Speaker 04:
Mr. Claybrook.

[00:33:27] Speaker 05:
Thank you, Your Honor.

[00:33:31] Speaker 05:
You know, it has to be an independent decision by the contracting officer, the one who is specified in the Federal Acquisition Regulation.

[00:33:37] Speaker 04:
Where does the statute or the regulation says that it has to be by the particular contracting officer instead of by the office?

[00:33:43] Speaker 05:
It's, once we cite it in our brief, it's bar section.

[00:33:48] Speaker 04:
Wait, wait.

[00:33:49] Speaker 04:
The termination for convenience clause refers to action by the government, right?

[00:33:56] Speaker 04:
It doesn't specify the contracting officer.

[00:34:01] Speaker 05:
It says the government and then the federal acquisition regulation in sections 1.602-1a, 12.403b, and 49.101a specifies that it's the contracting officer who must make that determination.

[00:34:18] Speaker 05:
If you want to say, okay, it's just a whole mass... In their sole responsibility or after consultation with their... They may consult with others, but at the end, they have to make an independent determination.

[00:34:30] Speaker 05:
That's what the case law says.

[00:34:31] Speaker 02:
Does it say independent?

[00:34:32] Speaker 02:
Where does it say independent in there?

[00:34:34] Speaker 02:
It says they make that determination, right?

[00:34:36] Speaker 05:
It's their responsibility to make the determination.

[00:34:39] Speaker 05:
I don't have the exact quote in my head, Your Honor.

[00:34:41] Speaker 05:
I apologize.

[00:34:43] Speaker 05:
But the case law consistently says

[00:34:47] Speaker 05:
New York shipbuilding is the closest to these facts, that it must be an independent determination by the one who specified who has to make it.

[00:34:56] Speaker 05:
And the government defended in that case by saying, oh, the person who made the call really knew a lot more about it than the person who was specified in the contract had to make the call.

[00:35:06] Speaker 02:
Your client knew perfectly well that it was at least a fluid situation in which a SOFA might be negotiated

[00:35:15] Speaker 02:
And then again, it might not be negotiated.

[00:35:17] Speaker 05:
There was nothing fluid about the fact that we were going to propose fuel from Kuwait.

[00:35:22] Speaker 02:
That was known from the early... You're not answering my question in the slightest, are you?

[00:35:27] Speaker 05:
I was trying to, Your Honor.

[00:35:28] Speaker 05:
You want to repeat it?

[00:35:29] Speaker 05:
I'll try again.

[00:35:30] Speaker 02:
Sure.

[00:35:31] Speaker 02:
At the end of the year, a time was coming out when the United States, without a SOFA, would have to withdraw from Iraq.

[00:35:39] Speaker 02:
And your client was well aware that a SOFA had not yet been negotiated.

[00:35:43] Speaker 02:
Isn't that correct?

[00:35:45] Speaker 05:
Yes.

[00:35:46] Speaker 02:
Thank you.

[00:35:50] Speaker 05:
My point, Your Honor, is there's a reference.

[00:35:53] Speaker 05:
Well, let me go back to New York shipbuilding.

[00:35:57] Speaker 05:
The case law there makes it very clear it's the contracting officer who has to make the independent determination.

[00:36:02] Speaker 05:
It cites 17 other cases for this proposition.

[00:36:05] Speaker 05:
Schlesinger did not change that rule.

[00:36:08] Speaker 05:
As a matter of fact, it said, well, yeah, okay, it says government.

[00:36:11] Speaker 04:
What did New York shipbuilding involve?

[00:36:14] Speaker 04:
What did New York Shipbuilding involve?

[00:36:16] Speaker 05:
It involved a situation in which there was a termination and it was not made by... Termination for convenience or default?

[00:36:28] Speaker 05:
Was it default?

[00:36:29] Speaker 05:
Convenience.

[00:36:31] Speaker 05:
But it was not made by the, and I apologize, Your Honor, I should know that, but it's escaping me right now.

[00:36:37] Speaker 04:
Is this case cited in your brief?

[00:36:39] Speaker 05:
Yes, Your Honor.

[00:36:41] Speaker 05:
And we rely on it quite heavily.

[00:36:43] Speaker 05:
It's not responded to at all by the government.

[00:36:47] Speaker 05:
New York Shipbuilding, I think it's in footnote five, lists 17 other prior cases that says it has to be the contracting officer who makes the decision, the one who's supposed to... What page of your brief is this on?

[00:37:01] Speaker 05:
It's going to be in our opposition brief because it's responding to... It's in the yellow brief.

[00:37:09] Speaker 05:
It's paged as 20 through 24, Your Honor.

[00:37:21] Speaker 05:
21 through 24.

[00:37:23] Speaker 05:
But the main discussion is on 23 and 24.

[00:37:43] Speaker 05:
I just wanted to, can you continue your honor?

[00:37:49] Speaker 05:
I did want to respond to this idea that everything was fluid and they didn't know about Kuwait, that we're going to supply from Kuwait.

[00:37:55] Speaker 05:
It was a purpose from the start that there'd be a southern, we'd be able to bring in fuel from the south, southern ground line of communications and all that.

[00:38:04] Speaker 05:
And it was known that we were going to do it from Kuwait.

[00:38:08] Speaker 05:
And Amendment 3, which is back in January or so of 2011,

[00:38:13] Speaker 05:
It talks about moving fuel in from Kuwait and saying that's okay.

[00:38:18] Speaker 05:
We received confirmation in June before we submitted our offer that bringing fuel in from Kuwait was all right.

[00:38:24] Speaker 04:
And so when you look... I think we're about out of time.

[00:38:26] Speaker 04:
Okay.

[00:38:27] Speaker 04:
Thank you, Mr. Kleber.

[00:38:27] Speaker 04:
Thank you, Your Honor.

[00:38:29] Speaker 04:
Mr. McCarthy, you have one minute if you need it on the jurisdictional issue.

[00:38:32] Speaker 04:
I'm not sure he mentioned the jurisdictional issue.

[00:38:35] Speaker 04:
I did not.

[00:38:37] Speaker 04:
Then you don't have any more time.

[00:38:39] Speaker 04:
If I could just...

[00:38:40] Speaker 04:
You have to talk only about the jurisdictional issue, and he didn't mention it, so you don't have any rebuttal.

[00:38:46] Speaker 00:
What about the kind judging officer?

[00:38:47] Speaker 00:
The role of the kind judging officer?

[00:38:49] Speaker 04:
That's part of the original appeal.

[00:38:51] Speaker 00:
No, it's part of our cross-appeal.

[00:38:54] Speaker 04:
That's not an appropriate cross-appeal, because it doesn't change the scope of the judgment.

[00:38:59] Speaker 04:
OK?

[00:39:00] Speaker 04:
Thank both counsel.

[00:39:01] Speaker 04:
The case is submitted.