[00:00:30] Speaker 01:
The next argued case is number 18-1721, ACISCC-JV against the United States.

[00:00:38] Speaker 01:
Mr. Pennington.

[00:00:42] Speaker 07:
Good morning, Your Honor.

[00:00:44] Speaker 07:
I'm Walt Pennington on behalf of Arwand Road and Construction Company.

[00:00:48] Speaker 07:
The interveners, ACISCC-JV, admitted on page 13 of their brief that they have no legal capacity under Delaware law and should not be heard here today.

[00:01:00] Speaker 07:
This case is about fairness.

[00:01:02] Speaker 07:
The United States entered into over $100 million of construction contracts with companies that had no more than a few million in revenue.

[00:01:11] Speaker 07:
They waived the Miller Act bonds, knew that subcontractors, like my client, Arwand, were not paid by the prime contractor, violated their duty to, their regulatory duty to require the prime to settle with all the subcontractors, settled with the prime contractor,

[00:01:30] Speaker 07:
to avoid its liability for known unpaid subcontractors in a no-cost settlement, and have never satisfied the accord, because as Arwand admitted on page 13 of its brief, there was no legally competent party to pay.

[00:01:47] Speaker 02:
Whatever happened with respect to the damages that the District of Delaware awarded in 2016?

[00:01:52] Speaker 02:
They remain unsatisfied.

[00:01:55] Speaker 02:
OK, because this entity doesn't have

[00:01:59] Speaker 02:
any ongoing existence or what?

[00:02:03] Speaker 07:
There's no ongoing existence, so we have no idea where those assets are.

[00:02:12] Speaker 07:
And since the companies lacked capacity to receive the satisfaction, if there was any payment made, it was an accidental payment where the United States has the right to recover that money.

[00:02:29] Speaker 07:
So the duty to pay the satisfaction still remains.

[00:02:36] Speaker 07:
So if that satisfaction still remains, then the basis of my client's claim is that it's entitled to receive that satisfaction now that it stands in the place as the trustee of these defunct companies and as the assignee of all of their rights under the contract.

[00:02:55] Speaker 07:
So for those two reasons, that satisfaction

[00:03:00] Speaker 07:
is due and should be paid to Arwand.

[00:03:06] Speaker 07:
The Court of Federal Claims has jurisdiction.

[00:03:11] Speaker 07:
The Court of Federal Claims held that it had no jurisdiction because the claims between the complaint that Arwand filed and the initial claims were the same.

[00:03:24] Speaker 07:
However, in looking at Arwand's complaint,

[00:03:28] Speaker 07:
All of the claims that arose, arose after those initial claims were resolved.

[00:03:35] Speaker 07:
And here the court, in its order, made no overlapping comparison.

[00:03:40] Speaker 07:
The court just said, the claims are the same.

[00:03:44] Speaker 07:
But if you look at the claim count one of Arwan's complaint, it is for satisfaction.

[00:03:52] Speaker 07:
So if I'm asking for satisfaction of an accord that happened as a result of the claim,

[00:03:58] Speaker 07:
That is a specific example of how there could not have been a new overlap.

[00:04:03] Speaker 05:
This is count one you're talking about.

[00:04:05] Speaker 07:
This is count one.

[00:04:07] Speaker 07:
The other counts are similar.

[00:04:08] Speaker 07:
So count one is premised on the settlement being a valid settlement, right?

[00:04:16] Speaker 05:
Correct.

[00:04:16] Speaker 05:
And then the other counts are premised on the settlement being an invalid settlement?

[00:04:23] Speaker 05:
Is that fair to say?

[00:04:28] Speaker 07:
Counts four and five are related to that.

[00:04:32] Speaker 07:
So those are related to... Two, right?

[00:04:37] Speaker 05:
Okay, let's just go with four and five for now.

[00:04:40] Speaker 07:
So some of them are related to the United States exercise of its economic power to force this prime to settle to the disadvantage of the subcontractors.

[00:04:52] Speaker 07:
I believe count four is reach of its regulatory duty.

[00:04:57] Speaker 07:
So under 48 CFR 52.249-2, it requires a prime contractor to settle with its subcontractor.

[00:05:10] Speaker 02:
But the relief being sought in those counts is the invalidation of the settlement agreement, right?

[00:05:18] Speaker 07:
The relief sought is to allow the subcontractors who have not been paid to proceed

[00:05:25] Speaker 02:
So for example... Right, but in order to get there, you have to have a basis to say that the subcontractor is not bound by the settlement agreement, right?

[00:05:35] Speaker 07:
I'm sorry, I'm confused on your question.

[00:05:41] Speaker 02:
When you say that you want to proceed, how do you get to being allowed to proceed but for invalidating the settlement agreement?

[00:05:49] Speaker 07:
So Your Honor, if I look at 48 CFR 49108.6, what that

[00:05:57] Speaker 07:
federal regulation provides is that the United States and a prime contractor, I apologize, let me take a step back, the prime contractor is required to settle with all of its subcontractors before sending its final settlement proposal to the United States.

[00:06:19] Speaker 07:
In the event that the United States, that the prime contractor, for whatever reason, cannot settle with one or more of its subcontractors,

[00:06:28] Speaker 07:
49.108-6 provides that the United States can then accept that subcontract, settle the remaining claims.

[00:06:41] Speaker 07:
So here, those remaining claims remain viable if they have not already been settled, because the United States remains liable under that regulation.

[00:06:51] Speaker 07:
Right.

[00:06:51] Speaker 05:
Does that count three?

[00:06:54] Speaker 05:
OK.

[00:06:55] Speaker 02:
You're at 2, 4, and 5, right?

[00:06:57] Speaker 02:
You're talking about 2, 4, and 5?

[00:06:58] Speaker 02:
I mean, four and five is what you're focusing on right now, right?

[00:07:05] Speaker 07:
Yes.

[00:07:05] Speaker 07:
So five is the economic dress.

[00:07:08] Speaker 07:
I believe that four is the breach of the, the United States breach of its own regulatory duty.

[00:07:15] Speaker 02:
Right.

[00:07:15] Speaker 02:
But, okay, so you have to have a theory of liability, which is what you're talking about.

[00:07:22] Speaker 02:
But then what is the remedy assuming that theory of liability is a viable one?

[00:07:28] Speaker 07:
So the theory of the remedy is that the claims that were not settled because the government breached its regulatory duty are still able to proceed.

[00:07:41] Speaker 02:
But you're saying they weren't settled, which means to the extent that the settlement agreement on its face purports to cover them, you would have to set the settlement agreement aside, right?

[00:07:53] Speaker 07:
Your Honor, respectfully on that point, I would disagree with you because the settlement agreement

[00:07:58] Speaker 07:
settles the claims of the prime contractor.

[00:08:02] Speaker 07:
And so the prime contractor is required to settle its claims of the subcontractors.

[00:08:09] Speaker 07:
If those claims have not been settled, they still remain viable.

[00:08:16] Speaker 07:
So here, and this is where 49108-6 comes in, because here the

[00:08:26] Speaker 07:
United States can enter into a settlement with a prime contractor, and those other claims of subcontractors that were not settled remains.

[00:08:36] Speaker 07:
And so that's really the position that we're in today.

[00:08:42] Speaker 05:
Why doesn't the election doctrine just force you to go back to the board with that kind of a claim?

[00:08:50] Speaker 05:
Because it's the same facts.

[00:08:55] Speaker 05:
ACI first filed its claim at the board.

[00:08:59] Speaker 05:
It was all about trying to get money for partial completion of the contract, among other contracts.

[00:09:08] Speaker 05:
And that partial completion was predicated on the work that the subcontractors did.

[00:09:15] Speaker 05:
And so now you're saying, well, your subcontractor claim is still alive, even in the face of that settlement.

[00:09:25] Speaker 05:
But that settlement was based, at least in part, on the work that the subcontractors had done.

[00:09:33] Speaker 05:
So why wouldn't the election doctrine tell us, OK, to the extent your theory is what you're telling us, that you should be really before the board under the election doctrine?

[00:09:48] Speaker 07:
Your Honor, I'd like to respond to your question and save a little bit of my time, because I see that I'm at 5.50 remaining.

[00:09:54] Speaker 07:
On the election doctrine,

[00:09:56] Speaker 07:
There's two parts.

[00:09:58] Speaker 07:
So the election doctrine, the Court of Federal Claims made two findings related to that.

[00:10:06] Speaker 07:
So one was related to the initial petition that R-WAND filed to compel a final decision.

[00:10:14] Speaker 07:
No final decision was made on R-WAND's claim.

[00:10:17] Speaker 07:
On the second issue, which is the one that the government has made, that because those initial claims were filed in the

[00:10:26] Speaker 07:
before the ASBCA that therefore these claims on the election doctrine it has to be on the same set of transactional facts but here we really have a different set of transactional facts and even if that is the case the claims that our wand has let's say for example on the satisfaction of satisfaction of the accord should still be allowed to proceed in the

[00:10:55] Speaker 07:
in the Court of Federal Claims, and then under 41 USC 71, I think it's 7103, you can have a consolidation of those cases.

[00:11:04] Speaker 05:
But here, it's not the same... Is there anything stopping you from pursuing these claims at the Board?

[00:11:13] Speaker 07:
Well, I think, now I think there would be, there really would be an election doctrine, which is my client has pursued, has

[00:11:23] Speaker 05:
It was dismissed because of the election doctrine.

[00:11:29] Speaker 07:
But the election.

[00:11:33] Speaker 07:
So at the inception of the case, my client would have had the right to either pursue that case in the ASBCA or in the Court of Federal Claims.

[00:11:40] Speaker 05:
Here's another question I have.

[00:11:44] Speaker 05:
You are here on behalf of Arwent.

[00:11:48] Speaker 05:
But you're really here stepping in the shoes of ACI.

[00:11:52] Speaker 05:
You're the trustee of ACI.

[00:11:56] Speaker 05:
And then your counts two through five are seeking all these things.

[00:12:02] Speaker 05:
But I don't see how there's an injury in fact as to ACI with respect to all those counts two through five.

[00:12:10] Speaker 05:
In counts two through five, you're really trying to get things that benefit Arwin, the subcontractor.

[00:12:20] Speaker 05:
You're the trustee for ACI, but I don't see how any of these counts, what you're claiming and what you're seeking are actually directly benefiting ACI.

[00:12:28] Speaker 05:
It's all for benefiting really you yourself, Arwen.

[00:12:33] Speaker 05:
So it's this strange scenario to me where it feels like, I mean, pardon the crude analogy, but Arwen's like this creature that has now inhabited this host called ACI and now

[00:12:48] Speaker 05:
you have taken over ACI's brain and it's forcing ACI to do all these things, not really to benefit ACI, but really to benefit you yourself, the foreign organism that's now inhabiting the host.

[00:13:01] Speaker 05:
Do you see my question?

[00:13:04] Speaker 05:
I do, Your Honor.

[00:13:05] Speaker 05:
I guess what I'm wondering is why is there something here in counts two and five that you're seeking that actually benefits the party and name ACI?

[00:13:18] Speaker 05:
You're here really to benefit somebody else, which is Arwent.

[00:13:24] Speaker 05:
So is there really a case in controversy between ACI and the government?

[00:13:30] Speaker 07:
There is, Your Honor.

[00:13:31] Speaker 07:
At the same time, I'm looking at my time and I have two minutes.

[00:13:34] Speaker 01:
Could I?

[00:13:34] Speaker 01:
Please answer your question.

[00:13:36] Speaker 01:
This is important.

[00:13:36] Speaker 07:
And I've got another question too, so go.

[00:13:40] Speaker 07:
So on that issue, it appears that

[00:13:47] Speaker 07:
Arwand is inhabiting this body, is the analogy that you made.

[00:13:53] Speaker 07:
But what's happening is Arwand is asserting the rights that ACI should have asserted the whole time.

[00:14:00] Speaker 07:
So here, when the government enters into a contract, it could say, we're only going to have one prime contractor, and we're not going to allow any subcontractors.

[00:14:12] Speaker 07:
And so then it's only these two relationships.

[00:14:15] Speaker 07:
But here what the United States does is it says,

[00:14:17] Speaker 07:
We're going to enter into a contract with a prime contractor.

[00:14:20] Speaker 07:
We're going to allow that prime contractor to enter into subcontracts.

[00:14:23] Speaker 07:
We're going to require that the government name all of those subcontractors.

[00:14:28] Speaker 07:
We're going to require that the prime settle with all of those subcontractors.

[00:14:35] Speaker 07:
So here, had the prime actually fulfilled its duty, settled with all of the subcontractors, there wouldn't be this assertion that

[00:14:45] Speaker 07:
Arwand is now trying to get rights that it didn't otherwise have.

[00:14:50] Speaker 07:
It would have gotten the rights.

[00:14:51] Speaker 05:
I understand Arwand's motivation.

[00:14:53] Speaker 05:
What's ACI's motivation?

[00:14:55] Speaker 05:
What's the injury to ACI here that you're trying to remedy?

[00:15:01] Speaker 05:
Because you're really here standing in the shoes of ACI.

[00:15:05] Speaker 02:
Let me piggyback on that.

[00:15:06] Speaker 02:
ACI entered into a settlement agreement with the government, right?

[00:15:10] Speaker 07:
It did, yes.

[00:15:11] Speaker 02:
Right.

[00:15:11] Speaker 02:
And in that settlement agreement, it agreed to convert the termination to a termination for convenience, right?

[00:15:18] Speaker 02:
Yes.

[00:15:19] Speaker 02:
And where there's a termination for convenience, ACI cannot seek recovery for subcrime charges.

[00:15:26] Speaker 02:
Isn't that right?

[00:15:30] Speaker 07:
That is not correct, Your Honor.

[00:15:32] Speaker 07:
Respectfully, I disagree with the court.

[00:15:33] Speaker 07:
So in the termination for convenience, the termination for convenience settlement proposal

[00:15:40] Speaker 07:
and this is even on the settlement proposal form, you have to list out the settlement that you've made with every single subcontractor.

[00:15:49] Speaker 07:
So the prime contractor, in the letter that goes out from the United States to the prime contractor, it says, we're terminating your contractor for convenience.

[00:16:02] Speaker 07:
Terminate all your subcontracts with all of your subcontractors, and you must settle with all subcontractors.

[00:16:09] Speaker 07:
Right.

[00:16:10] Speaker 07:
The prime contractor.

[00:16:12] Speaker 07:
Right.

[00:16:13] Speaker 07:
So then the United States has told the prime, you must settle.

[00:16:18] Speaker 07:
Then from that point, there's a regulatory duty for the prime to settle with each and every one of the subcontractors and then include that settlement proposal, include the total of those settlements on its final proposal to the government.

[00:16:37] Speaker 07:
Here, they're entering into a

[00:16:40] Speaker 07:
settlement proposal, I think a few of them were no-cost settlement proposals, but in each of those cases, they did not settle with the subcontractor.

[00:16:50] Speaker 02:
But why is that the government's responsibility as opposed to the prime's responsibility?

[00:16:57] Speaker 07:
Well, the government also has that regulatory duty to, and in this case, the United States agreed, I believe it's

[00:17:10] Speaker 07:
to other contracting parties, which I think is 48 CFR 4103.

[00:17:17] Speaker 07:
So it allowed this prime to have other subcontractors.

[00:17:21] Speaker 07:
Here in this case, and this was attached to the motion for summary judgment, and it's alleged in the complaint, the subcontractors were slowing work on the project.

[00:17:35] Speaker 07:
They told the government that they were not paid.

[00:17:40] Speaker 07:
The government told the prime, this is taking up too much of our time in dealing with these subcontractors because they are contacting us about the payments that they say or do.

[00:17:52] Speaker 07:
Prove to us that you have paid that money.

[00:17:56] Speaker 07:
No proof was provided.

[00:17:57] Speaker 07:
Then the United States said, you've submitted claims, you've submitted invoices.

[00:18:02] Speaker 07:
We're withholding those payments until you prove that all of your subcontractors are satisfied.

[00:18:08] Speaker 07:
Even before these settlements were entered, the United States knew that there were known unpaid subcontractors and then knowingly entered into a settlement agreement that voided all of those claims of subcontractors.

[00:18:28] Speaker 07:
It knew that they were unpaid, but didn't require the prime to settle with them.

[00:18:34] Speaker 01:
Let's hear from the other side, and we'll save you some rebuttal.

[00:18:38] Speaker 01:
Let's see.

[00:18:40] Speaker 01:
Mr. Scavetti, you've divided your time, or have you divided the issues?

[00:18:46] Speaker 06:
No, Your Honor.

[00:18:46] Speaker 06:
We've divided our time, but not the issues.

[00:18:48] Speaker 06:
I'll address all the issues from the government.

[00:18:52] Speaker 06:
May it please the court, the court should affirm the decision of the trial court, because the court correctly concluded that it doesn't have jurisdiction to entertain the appellant's suit.

[00:19:01] Speaker 06:
And that's for several reasons.

[00:19:03] Speaker 06:
First, the settlement agreement with the prime contractors moots

[00:19:08] Speaker 06:
continued litigation on the subjects of that settlement, which are, as Judge Shen pointed out, the costs for partial costs of partial completion on the terminations for default and convenience.

[00:19:21] Speaker 05:
How much money was the settlement for?

[00:19:23] Speaker 06:
There was settlements of a variety of different... It was all rolled up, I thought, into one number.

[00:19:30] Speaker 06:
I don't have that number at the... Well, was it ever paid to ACI?

[00:19:34] Speaker 06:
Indeed, Your Honor.

[00:19:35] Speaker 06:
The record reflects, if nothing else, by the

[00:19:38] Speaker 06:
dismissals of the ASPCA that the settlement agreement was satisfied and then the board dismissed the complaints pursuant to those settlements as they were fully executed.

[00:19:50] Speaker 06:
And so any continued... So how much was paid?

[00:19:54] Speaker 06:
There's nothing in the record to determine exactly other than the settlement agreement which is in the record at the supplemental appendix that the government provided in the first starting with supplemental appendix one

[00:20:10] Speaker 06:
and continuing to Supplemental Appendix 9, that's the settlement agreement, which goes through these contracts, several of which, as have been pointed out, were no-cost terminations for convenience.

[00:20:21] Speaker 06:
And then there's a total, here it is, Your Honor, on Supplemental Appendix 6, a total payment of $1.7 and change million that was made to the prime contractors.

[00:20:32] Speaker 05:
So you'd agree that if that $1.6 million had never been paid yet,

[00:20:38] Speaker 05:
then Arwon, as through that assignment, judicial assignment, would be the one that now would get to collect that $1.6 million.

[00:20:49] Speaker 06:
Well, Arwon's argument on that point.

[00:20:52] Speaker 05:
The hypothetical.

[00:20:52] Speaker 05:
Is that right, though?

[00:20:57] Speaker 06:
Arwon's argument on count one depends on their assertion that the party who received the settlement had no authorization to do so.

[00:21:05] Speaker 06:
The problem with that argument for Arwon

[00:21:07] Speaker 06:
is that the same infirmity on which they relied to make that point took place before the settlement agreement was entered into in the first place.

[00:21:14] Speaker 06:
So if they're correct that this infirmity prevented the ability to receive satisfaction on the part of counsel for these entities, then it also prevented those entities from entering into the contract in the first place, in which case the only remedy which they haven't seeked at any point would be rescission of that contract or invalidation of that contract

[00:21:32] Speaker 06:
rather than a different party getting to collect on the contract in the first place.

[00:21:36] Speaker 02:
Well, that's what I am trying to figure out.

[00:21:37] Speaker 02:
I had thought that's what they wanted in Counts 4 and 5, is precision in the contract.

[00:21:43] Speaker 06:
That would make sense, given that they're alleging economic duress, for example.

[00:21:46] Speaker 06:
But if you look at the relief requested in Count 5, they say, economic duress, therefore, pay us $2.

[00:21:52] Speaker 06:
something million, which makes no logical sense, of course.

[00:21:55] Speaker 06:
If they're saying that the contract is invalid because economic duress was applied,

[00:21:59] Speaker 06:
then the remedy would be to invalidate that contract, not to pay that contract again to a different party.

[00:22:05] Speaker 06:
And that's the problem that's consistent throughout R1's arguments here.

[00:22:08] Speaker 06:
They want to take the benefits of the settlement agreement and say, pay us the money, but just pay a different party than you already paid.

[00:22:14] Speaker 02:
So the government's position is the money was paid to JV.

[00:22:19] Speaker 06:
Yes, Your Honor.

[00:22:20] Speaker 02:
And that money was never paid over to any subcontractors.

[00:22:25] Speaker 06:
the JV's business with its subcontractors.

[00:22:27] Speaker 06:
So as is clear to the court and the trial court's opinion, there's no privity of contract and never was between the government and any subcontractor, including R-WAND.

[00:22:35] Speaker 06:
So the remedy, if R-WAND was not paid by the prime contractors, is to do what R-WAND did, which is to sue the prime contractor in district court and obtain a judgment, which they have done.

[00:22:45] Speaker 02:
So they're just out of luck.

[00:22:47] Speaker 06:
They're out of luck to the extent they've successfully sued and they have a judgment.

[00:22:50] Speaker 06:
If they're unable to collect that judgment,

[00:22:53] Speaker 06:
It's a sympathetic position to be in, but it doesn't mean that the government has to, again, satisfy an agreement that it has already satisfied.

[00:23:00] Speaker 06:
They have no rights against the government, which the trial court found.

[00:23:04] Speaker 06:
They are in the position of a subcontractor.

[00:23:05] Speaker 06:
Now, they refer to some regulatory duties, which just, first of all, do not apply.

[00:23:11] Speaker 05:
The purpose of that... Just to finish up on Count 1, even if Count 1 is based on a mistaken premise,

[00:23:20] Speaker 05:
You know, their view is the money was never actually paid.

[00:23:23] Speaker 05:
And so through this judicial assignment, now they're the party that gets to collect that money from the government.

[00:23:30] Speaker 05:
Wouldn't that claim be allowed to go forward?

[00:23:33] Speaker 05:
Or at least it shouldn't be dismissed under mootness.

[00:23:37] Speaker 05:
I mean, it might be able to very easily prove that, well, in fact, the money was paid.

[00:23:42] Speaker 05:
And so the judicial assignment is worth nothing.

[00:23:45] Speaker 06:
The substance of Count 1, as with Count 5 and some other arguments, is that

[00:23:50] Speaker 06:
there was no capacity to accept that payment.

[00:23:54] Speaker 06:
If that logic holds, again, that invalidates the entire agreement.

[00:23:57] Speaker 06:
So what that leaves Count 1 is a claim which was never made, so it could never be analyzed by the trial court, because it's not what R1 presented.

[00:24:04] Speaker 06:
But had they, for example, hypothetically presented a claim for rescission of that contract, there would still be no jurisdiction.

[00:24:11] Speaker 02:
But what about a claim to enforce the contract?

[00:24:14] Speaker 02:
So you say the money was paid, but there's nothing in the record to indicate that the money was paid.

[00:24:20] Speaker 06:
Again, so the court has correctly identified that now, because of the assignments, Arwanda alleges that it stands in the shoes of ACI.

[00:24:30] Speaker 06:
But the whole argument that they're making is a capacity argument, which if the court were to credit their argument, would invalidate the settlement agreement altogether and leave the court in a position where the only remedy it could give would be rescission.

[00:24:46] Speaker 06:
Unfortunately, although the Court of Federal Claims can, in certain circumstances, order rescission, it doesn't have jurisdiction to give only an equitable remedy, which, of course, rescission is.

[00:24:56] Speaker 06:
Now, typically, where you have rescission, the court can then consider, well, in light of this rescission, can we give money damages?

[00:25:02] Speaker 06:
Unfortunately, in this case, because of the election doctrine, the court cannot do that, because if that... I don't understand that.

[00:25:08] Speaker 02:
On account one, we're talking about a settlement agreement that didn't exist at the time of any proposed

[00:25:15] Speaker 02:
reported election.

[00:25:17] Speaker 06:
Right?

[00:25:17] Speaker 02:
But if that settlement agreement were to be invalidated, Your Honor, then we would be left with... But even if it's not, under Count 1, what they're seeking is, what I read they're seeking under Count 1, is the possibility of enforcing that settlement.

[00:25:32] Speaker 02:
So how is that, how is there an election to not go forward with a settlement that was entered into after

[00:25:39] Speaker 02:
the date of the supposed election.

[00:25:42] Speaker 06:
The election would take place, the election doctrine comes into play with regard to count one only if that settlement agreement is invalidated.

[00:25:50] Speaker 02:
So you still haven't answered my question.

[00:25:51] Speaker 02:
Is there anything in the record to show that the government made any payments at all under that settlement?

[00:25:58] Speaker 06:
The only evidence in the record that we can point to is the dismissals by the ASPCA.

[00:26:02] Speaker 06:
So typically, a dismissal takes place after a settlement is concluded, which typically is done

[00:26:09] Speaker 06:
after payment is made.

[00:26:10] Speaker 06:
So a party doesn't usually agree to a voluntary dismissal of its suit.

[00:26:14] Speaker 02:
I mean, you would think the government would have evidence of any payment, right?

[00:26:17] Speaker 02:
This is a big payment.

[00:26:20] Speaker 02:
Maybe not big enough.

[00:26:20] Speaker 06:
Presumably that would be the case.

[00:26:21] Speaker 06:
It's not in front of the court here.

[00:26:22] Speaker 06:
As a reminder, the trial court issued its decision before the government filed anything in this case.

[00:26:28] Speaker 06:
So there was no opportunity that the government had at that point to put that in the record.

[00:26:33] Speaker 06:
But the record does establish that the settlement was made and that the ASBCA dismissed pursuant to that settlement.

[00:26:39] Speaker 06:
Moreover, the other issue with Count 1, which we've mentioned, is that the whole logic of Count 1 is not that there was no payment ever made.

[00:26:46] Speaker 06:
That's not what Count 1 alleges.

[00:26:48] Speaker 06:
Count 1 alleges that there was payment made to the wrong party because that party had no authority under Delaware law to accept satisfaction of the agreement.

[00:26:57] Speaker 06:
The problem is, if you credit that argument, if the court were to give the benefit of the doubt to the allegation of the complaint, it would mean that the settlement agreement was invalid, not that the

[00:27:08] Speaker 06:
Settlement agreement remains valid and the government has to pay again because it's potentially paid the wrong party.

[00:27:13] Speaker 06:
And so that leaves us with the possibility of precision which would be barred from jurisdiction in the court because the result of that would be whatever liability under the contract which has already been put into the ASPCA by the prior election of the primes.

[00:27:26] Speaker 06:
So under any logical outcome of the allegations that are made in the complaint, the cases either moot, precluded under race judicata or

[00:27:36] Speaker 06:
barred by the election doctrine from jurisdiction of the trial court.

[00:27:44] Speaker 05:
I almost think I need a letter for you to repeat all of that.

[00:27:47] Speaker 06:
I'm happy to repeat it.

[00:27:48] Speaker 06:
There's a lot of moving parts.

[00:27:51] Speaker 06:
But the issue is, again, you've got moodness from anything that stems from the case because it was settled.

[00:27:57] Speaker 06:
If the settlement agreement is invalid, then of course the moodness argument no longer applies.

[00:28:02] Speaker 06:
But that's when the election doctrine comes in.

[00:28:04] Speaker 06:
Because as the trial court was clear,

[00:28:06] Speaker 06:
ARWAD can't sue the government for anything.

[00:28:08] Speaker 06:
There's no privity of contract.

[00:28:09] Speaker 06:
So it has to be standing in the shoes of the prime, saying under these government contracts, we are entitled to some payment for partial work that we've done.

[00:28:18] Speaker 06:
If the settlement agreement is invalidated, then all that's left is a claim by the primes, hey, you need to pay us for this partial work that was done.

[00:28:25] Speaker 06:
However, the primes have already elected to pursue those suits in the ASBCA when they filed their contract appeals there.

[00:28:32] Speaker 06:
in prior years.

[00:28:33] Speaker 06:
And so that's why the election doctrine bars it.

[00:28:36] Speaker 06:
So whichever way the court reads the allegations in Arwan's complaint, the result is it's barred either by the election doctrine or it's moot or it's precluded.

[00:28:47] Speaker 06:
For these reasons, the United States respectfully requests that the court affirm the decision of the trial.

[00:28:59] Speaker 01:
So who are you representing?

[00:29:00] Speaker 04:
The intervenors, appellees, ACI, SECJV and ACI, SECJV.

[00:29:06] Speaker 02:
And how do you have standing to do that when the appellants are standing in the shoes of this entity?

[00:29:15] Speaker 02:
What are you?

[00:29:16] Speaker 02:
What's left?

[00:29:17] Speaker 04:
Well, may it please the court, Your Honor.

[00:29:18] Speaker 04:
This is a very interesting question.

[00:29:20] Speaker 04:
It is an interesting question.

[00:29:20] Speaker 04:
And I do recognize that it's an unusual situation, even though the

[00:29:25] Speaker 04:
the JV, and I'll use the JV for brevity reasons to mean both of the parties, are canceled under Delaware law, it does not mean that they do not have an interest in the case.

[00:29:36] Speaker 04:
What's happening here is that our one subcontractor is trying to come in and usurp the JV's rights and also to undo what the JV has already done in agreement with the government.

[00:29:47] Speaker 02:
So you are not a legal entity that has any legal right to sue or be sued, right?

[00:29:53] Speaker 04:
Respectfully, Your Honor, I would disagree with this in the sense that even though it is a canceled entity, the entity can revive at any time.

[00:30:01] Speaker 04:
Tomorrow, if the JV wanted to, it could issue a certificate of revival in Delaware.

[00:30:06] Speaker 02:
And what that would mean is that any... Well, they're not going to do that because if they revive in Delaware, they're going to have to pay the judgment against them in Delaware.

[00:30:14] Speaker 02:
Right?

[00:30:14] Speaker 02:
I mean, it's pretty convenient that you want to be here and make an argument to us

[00:30:19] Speaker 02:
and say, well, we might revive at some point.

[00:30:22] Speaker 02:
But then you tell the Delaware court that you don't have to pay a judgment because you don't exist.

[00:30:28] Speaker 02:
Right?

[00:30:29] Speaker 04:
Your Honor, for that and for other reasons, no, no.

[00:30:31] Speaker 04:
You are on the right track here, Your Honor.

[00:30:35] Speaker 04:
I would not advise my client to revive an entity solely to combat some potentially or arguably frivolous lawsuit.

[00:30:45] Speaker 02:
How was that a frivolous lawsuit for the subcontractors to seek payment from the prime that hired them?

[00:30:53] Speaker 04:
Your Honor, I'm really specifically referring to the situation that we're in right now.

[00:30:58] Speaker 02:
I don't even understand why you're here defending the government.

[00:31:01] Speaker 02:
It doesn't even make any sense.

[00:31:03] Speaker 04:
Well, Your Honor, for one, the subcontractor is trying to undo an agreement that the prime had with the government.

[00:31:12] Speaker 04:
And we felt compelled to

[00:31:15] Speaker 04:
Right.

[00:31:16] Speaker 02:
So did you get paid by the government, all this money?

[00:31:20] Speaker 04:
The majority of the money hasn't paid, Your Honor.

[00:31:22] Speaker 02:
Has been paid.

[00:31:23] Speaker 04:
Hasn't paid.

[00:31:23] Speaker 02:
Right.

[00:31:24] Speaker 02:
And so you didn't pass any of that money on to your subcontractors.

[00:31:27] Speaker 04:
That is incorrect.

[00:31:29] Speaker 04:
Some of the money that was pursuant to the settlement agreement, assigned to the subcontractors in the settlement agreement were paid.

[00:31:36] Speaker 04:
R1 was not part of the settlement agreement.

[00:31:40] Speaker 02:
So R1 was a subcontract that you hired and you've paid them nothing.

[00:31:44] Speaker 04:
That is also incorrect, Your Honor.

[00:31:46] Speaker 04:
They haven't paid something.

[00:31:47] Speaker 02:
But that was before the contract was terminated.

[00:31:50] Speaker 02:
Correct.

[00:31:51] Speaker 02:
Right.

[00:31:52] Speaker 02:
So since the termination of the contract, you've paid them nothing.

[00:31:55] Speaker 03:
That is correct.

[00:31:55] Speaker 02:
And there's a judgment against you in Delaware saying you have to pay them and you haven't paid them anything.

[00:32:00] Speaker 03:
That is correct.

[00:32:02] Speaker 02:
Right.

[00:32:02] Speaker 02:
And so you're here saying, don't go after the government for any of this money because we don't want you to.

[00:32:08] Speaker 02:
I don't even understand.

[00:32:10] Speaker 02:
This is surreal, really.

[00:32:11] Speaker 02:
This is

[00:32:12] Speaker 02:
This is worse than that, you know, the hydro-heated thing, that headed thing that Judge Chen was worried about.

[00:32:19] Speaker 02:
This makes absolutely no sense to me.

[00:32:23] Speaker 02:
If they have money to pay a lawyer to stand here, then why don't they pay their subcontractors or pay the judgment that's against them in Delaware?

[00:32:32] Speaker 04:
Your Honor, I think what's important to understand is that the entity still has some rights.

[00:32:37] Speaker 04:
And if Orwang were to succeed in this... Why do you care if

[00:32:43] Speaker 02:
they go after the government on an alternative legal theory.

[00:32:47] Speaker 04:
If the entity were to ever revive, this would come back and hurt them.

[00:32:52] Speaker 05:
Is it that if the settlement somehow gets voided, then JV would have to return the money that was paid over by the government?

[00:33:04] Speaker 04:
I would disagree with that, Judge Shen.

[00:33:07] Speaker 05:
I think what's important to- That's one thing I could understand why you might have an interest.

[00:33:12] Speaker 05:
You don't want to have to fork over the money that you collected through the settlement and that you're hiding from your subcontractors.

[00:33:19] Speaker 05:
But what other purpose for why you're here trying to defend the settlement?

[00:33:25] Speaker 04:
Well, I think you touched on this earlier when you were speaking with Mr. Pennington.

[00:33:32] Speaker 04:
And that's this idea about the trusteeship.

[00:33:37] Speaker 04:
R1 is here purportedly on behalf of the JV.

[00:33:43] Speaker 04:
However, all of R1's actions are contrary to interest of the JV.

[00:33:48] Speaker 02:
Yeah, but you have an attack to the trusteeship and you can't, right?

[00:33:50] Speaker 04:
We have not.

[00:33:53] Speaker 04:
It is an option for us in Delaware court.

[00:33:55] Speaker 02:
So what you're saying here is that you're in a no-lose situation.

[00:33:58] Speaker 02:
You can't possibly have any problem here.

[00:34:01] Speaker 02:
Even if the settlement gets set aside, you wouldn't have to pay back anything.

[00:34:05] Speaker 02:
So you're sitting in the catbird seat.

[00:34:07] Speaker 02:
You don't have to pay your judgment.

[00:34:09] Speaker 02:
You don't have to worry about paying any money back.

[00:34:11] Speaker 02:
But you want to be here just to nicely defend the government?

[00:34:16] Speaker 04:
It is not simply just to defend the government, Your Honor.

[00:34:19] Speaker 04:
It is also defending the interests of the JV.

[00:34:21] Speaker 04:
The trustee is here.

[00:34:23] Speaker 02:
But you've told us, you just told Judge Chen you don't have any interest.

[00:34:26] Speaker 02:
You just told them that there's no way you could have to pay this money back, even if the settlement gets set aside.

[00:34:35] Speaker 04:
Those are some state issues, Your Honor, that I do not think was that issue at the Court of Federal Claims and was not considered in terms of the reasons why Judge Wheeler dismissed the case.

[00:34:47] Speaker 02:
The issues that he was really dealing with were... So who is your, as counsel, who is your contract with?

[00:34:58] Speaker 04:
You mean as counsel, who is my contract with?

[00:35:00] Speaker 04:
Right.

[00:35:01] Speaker 04:
Who am I actually representing?

[00:35:02] Speaker 00:
Yeah.

[00:35:02] Speaker 04:
I am representing the JV

[00:35:04] Speaker 04:
But it doesn't exist.

[00:35:06] Speaker 04:
It is currently canceled, Your Honor.

[00:35:07] Speaker 02:
Right.

[00:35:08] Speaker 02:
So you can't enter into a contract with it by law.

[00:35:12] Speaker 02:
So who's your contract with?

[00:35:14] Speaker 02:
You have to have a contract to be a lawyer.

[00:35:16] Speaker 04:
The member who is the former member of the LLC, he is a sole 100% interest owner in the LLC.

[00:35:25] Speaker 04:
We represent him and the JV.

[00:35:28] Speaker 02:
So you can't represent the JV.

[00:35:31] Speaker 02:
So you're here on behalf of an individual

[00:35:33] Speaker 02:
who is not a party to this proceeding.

[00:35:36] Speaker 02:
Is that what you're telling me?

[00:35:38] Speaker 04:
Your Honor, the subcontractor R1 sued ACISCC, ACISCC, JV LLC.

[00:35:46] Speaker 04:
Those were the named parties that R1 cited, and we're here representing them because we do believe that they have interests.

[00:35:52] Speaker 02:
So you're representing an individual who's not a named entity, not a named party to this lawsuit, right?

[00:36:01] Speaker 04:
They have the right to revive in Delaware.

[00:36:02] Speaker 02:
This isn't complicated.

[00:36:02] Speaker 02:
This is like first year law school, OK?

[00:36:05] Speaker 02:
You're representing an individual who is not a named party to this lawsuit.

[00:36:11] Speaker 02:
And you put on your intervener status that you're representing an entity that doesn't exist.

[00:36:19] Speaker 04:
Respectfully, Your Honor, we would disagree with that.

[00:36:21] Speaker 04:
It's not that the entity doesn't exist.

[00:36:22] Speaker 04:
It's just that it's canceled.

[00:36:24] Speaker 04:
And again, we could revive the entity.

[00:36:26] Speaker 04:
If tomorrow we were to file a lawsuit.

[00:36:27] Speaker 02:
You can't sue and be sued if you're canceled.

[00:36:31] Speaker 02:
Period.

[00:36:33] Speaker 02:
Right?

[00:36:37] Speaker 04:
Your Honor, I suppose you may be right there.

[00:36:40] Speaker 04:
On this issue of who we are actually representing, Your Honor, if you would like, I can always file and be happy to a supplemental brief on that issue specifically.

[00:36:47] Speaker 04:
I don't think we need it.

[00:36:50] Speaker 05:
So what's at stake for your client that doesn't exist?

[00:36:59] Speaker 05:
Well, Your Honor, one.

[00:37:00] Speaker 05:
What if we let Arlen go forward?

[00:37:02] Speaker 04:
What do you lose?

[00:37:04] Speaker 04:
What's it to you?

[00:37:05] Speaker 04:
It would be one undoing the work and the agreement that the client had with the government.

[00:37:12] Speaker 04:
Well, certainly there are some reputational issues.

[00:37:15] Speaker 04:
If the entity were to ever revive, that is something that they would have to deal with.

[00:37:26] Speaker 01:
OK.

[00:37:26] Speaker 01:
I think we can move on.

[00:37:27] Speaker 01:
Let's have some.

[00:37:28] Speaker 01:
Thank you, Your Honor.

[00:37:36] Speaker 07:
Thank you, Your Honor.

[00:37:37] Speaker 05:
Did you ever think through what is the injury to the canceled entity, ACI and JV, that's identified in counts two through five?

[00:37:49] Speaker 05:
What is the injury, in fact, there to ACI, JV?

[00:37:53] Speaker 07:
So the injury is that

[00:37:58] Speaker 07:
Its interest has to be measured the same as all of its subcontractors.

[00:38:04] Speaker 07:
And here, all of the remaining unpaid subcontractors have not been paid.

[00:38:09] Speaker 07:
So from the government's perspective, the government was required to protect all of that entity.

[00:38:21] Speaker 05:
I'm sorry.

[00:38:23] Speaker 05:
You're here as the trustee for ACIJV.

[00:38:27] Speaker 05:
So you're here to represent the interests of ACIJV, which doesn't exist, doesn't have the capacity to sue or be sued.

[00:38:37] Speaker 05:
That's another problem.

[00:38:38] Speaker 02:
And why wouldn't one of their interests be not paying anything to their subcontractors?

[00:38:51] Speaker 07:
Within the regulations, there's really a unified interest.

[00:38:55] Speaker 07:
So from the trustee's perspective, the trustee is to act fairly with all of the parties.

[00:39:05] Speaker 07:
So this would be not only the prime, but also with the subcontractors.

[00:39:09] Speaker 07:
So here, as a condition of settling the agreement, the prime must settle with all of the subcontractors.

[00:39:20] Speaker 07:
So the interest that the prime has, the interest that the trustee has, is to ensure that all of those subs are treated fairly.

[00:39:30] Speaker 07:
And that could be one of two methods.

[00:39:33] Speaker 02:
But you're not seeking to set aside the settlement.

[00:39:36] Speaker 07:
No, Your Honor, I don't believe that we have to under 49.108-6, which for... You're just trying to say we should be allowed to have more money to pass on, separate and apart from our settlement?

[00:39:52] Speaker 07:
Well, I think there's, if I could, I believe there's two parts to that.

[00:39:58] Speaker 07:
The first part is, is that as the trustee, the trustees role is to make sure that those subs are paid and the judgments of the, of the judgment creditor, judgment debtor are paid.

[00:40:15] Speaker 07:
The under 49-108-6, the trustee still has the right to assert those claims

[00:40:22] Speaker 07:
that have never been resolved.

[00:40:27] Speaker 07:
This case, I believe, presents the first one I found related to the government's defensive use of a canceled corporation.

[00:40:38] Speaker 07:
In the case law that I found up to now, in each of the cases in either the board or the court of federal claims, the United States is saying,

[00:40:52] Speaker 07:
that corporation, that entity can't bring this claim because they're canceled.

[00:40:58] Speaker 07:
The company then revives, and then there's an issue about where does the case stand.

[00:41:02] Speaker 07:
This is the first one that I found where it's really been the reverse, where it is the company, the assignee or trustee saying, we have the right to proceed, and the government's saying, no, no, no.

[00:41:20] Speaker 07:
That cancellation does not matter because even though you're canceled, we made a payment and we're still entitled to show that that payment was made to the proper party, even though that entity was canceled.

[00:41:37] Speaker 01:
The payment, we're in litigation.

[00:41:40] Speaker 01:
And so this payment, I mean, this is all very strange and these stories just don't harmonize.

[00:41:48] Speaker 01:
but it does seem clear there were settlements with the subcontractors.

[00:41:53] Speaker 01:
Once this litigation is over, the money will be paid, whether it's paid from the Judgment Fund or something else.

[00:42:00] Speaker 01:
I really do have trouble trying to understand what's left.

[00:42:07] Speaker 07:
Well, Your Honor, in this particular case, and I apologize, my time has expired.

[00:42:13] Speaker 01:
Please answer that question.

[00:42:16] Speaker 07:
In this case,

[00:42:18] Speaker 07:
The prime contractor only settled with some subcontractors.

[00:42:22] Speaker 01:
But the claims that you're raising now for the first time were not before the court of federal claims, were they?

[00:42:33] Speaker 07:
Count three, which is Arwan's claim, was a claim that was filed to the contracting officer.

[00:42:42] Speaker 07:
No decision was ever entered.

[00:42:43] Speaker 07:
And I believe that that is count three.

[00:42:47] Speaker 07:
counts would be for, as the trustee, to assert those rights of the other subcontractors who have been unpaid.

[00:42:56] Speaker 00:
OK.

[00:42:57] Speaker 00:
Any more questions?

[00:42:58] Speaker 02:
I'm not in a sci-fi movie like Judge Chen.

[00:43:01] Speaker 02:
I feel like I'm in a Fellini movie.

[00:43:03] Speaker 01:
This is ridiculous.

[00:43:04] Speaker 01:
My question for you is, any more questions?

[00:43:08] Speaker 01:
Any more questions?

[00:43:09] Speaker 07:
Thank you, Your Honor.

[00:43:10] Speaker 01:
All right, thank you.

[00:43:11] Speaker 01:
The case is taken under submission, and thanks to all of you.

[00:43:15] Speaker 03:
All rise.