In the United States Court of Federal Claims No C (FILED UNDER SEAL: January 2, 2014)
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1 Case 1:13-cv JFM Document 31 Filed 01/02/14 Page 1 of 6 In the United States Court of Federal Claims No C (FILED UNDER SEAL: January 2, 2014) INCHCAPE SHIPPING SERVICES ) HOLDINGS LTD, et al., ) Plaintiffs, ) ) v. ) ) THE UNITED STATES, ) Defendant. ) ORDER On December 17, 2013, plaintiffs filed a motion for judgment on the administrative record. See Doc. 17. On January 2, 2014, the court heard argument on the motion, and considered whether temporary injunctive relief was appropriate under the circumstances. For the following reasons, the court finds such relief is warranted. I. BACKGROUND Plaintiffs Inchcape Shipping Services, LTD, Inchcape Shipping Services, Ltd. (Japan), Inchcape Shipping Services S.A., Inchcape Shipping Services Pty. Limited, Inchcape Shipping Services (Dubai) L.L.C., Inchcape Shipping Service, and Milne Servicios Maritimos S.A. (collectively referred to as Inchcape ), provide ship husbanding services to the United States Navy in a variety of international locations. See Doc at 12. Although Inchcape has a number of contracts with the United States, the current dispute arises in connection with the contract for services provided in Southwest Asia, contract number N D- A008. Inchcape conducted an internal audit of payments related to the Southwest Asia contract, and discovered a number of overpayments. See AR 205. The audit was completed on March 5, 2008, see id., but was not formally disclosed to the government until Inchcape was ordered to produce the audit report by order of the United States District Court for the District of Columbia, on November 21, 2012, see AR 217. The court noted in its order, however, that the government had 1
2 Case 1:13-cv JFM Document 31 Filed 01/02/14 Page 2 of 6 informally obtained a copy of the audit report from an unnamed source at some time prior to June 9, See AR 222. More than a year after the court order, on November 26, 2013, the Department of the Navy suspended Inchcape on the basis of disclosures contained in the audit report. See AR 258. Specifically, the Suspension and Debarment Official ( SDO ) found that Inchcape had failed to reconcile accounts properly and had failed to disclose its findings of overpayment from the audit report. See id. Inchcape now contests the propriety of its suspension. II. ANALYSIS At the January 2, 2014 hearing, the court considered granting temporary injunctive relief while it reviews the merits of this dispute. The court may grant such relief pursuant to Court of Federal Claims Rule 65, provided that the plaintiff establishes the following: (1) the likelihood of success on the merits; (2) the prospect of irreparable harm to plaintiff in the absence of injunctive relief; (3) the balance of the hardships weighs in plaintiff s favor, and (4) that the grand of relief is not contrary to the public interest. See Four Rivers Invs., Inc. v. United States, 77 Fed. Cl. 592, 594 (Fed. Cl. 2007), aff d sub nom., Four Rivers Invs., Inc. v. United States, 330 F. App x 919 (Fed. Cir. 2009). A. LIKELIHOOD OF SUCCESS ON THE MERITS In order for a suspension to be upheld, it must: (1) have been imposed on the basis of adequate evidence, and (2) be based on a determination that immediate action is necessary to protect the Government s interests. FAR (b)(1). The applicable regulation further requires that: [i]n assessing the adequacy of the evidence, agencies should consider how much information is available, how credible it is given the circumstances, whether or not important allegations are corroborated, and what inferences can reasonably be drawn as a result. This assessment should include an examination of basic documents such as contracts, inspection reports, and correspondence. See id. As noted above, the SDO based Inchcape s suspension on its purported failures to reconcile accounts properly and disclose findings of overbilling from the 2008 audit report. 2
3 Case 1:13-cv JFM Document 31 Filed 01/02/14 Page 3 of 6 1. Adequate Evidence The court has significant concerns as to whether the SDO s decision was based on adequate evidence. It is apparent from the suspension notice that the SDO s decision rested on two documents the Southwest Asia contract and the 2008 audit. See AR (The court notes, however, that several additional contracts, along with the November 2012 order from the United States District Court for the District of Columbia, were technically included in the SDO s file). It is equally apparent from plaintiff s filings that a myriad of additional, potentially relevant documents relating to both account reconciliation and disclosures of overbilling were in the Navy s possession at the time of the suspension, but were not considered. See generally exhibits to plaintiff s motion for judgment on the administrative record, Doc. 17. The existence of these documents, and the SDO s failure to examine them, raises serious doubts about the merits of the government s position. The FAR specifically states that the SDO should consider the body of available information, weigh its credibility, look for corroboration, and draw reasonable inferences in assessing the propriety of suspension. See FAR (b)(1). It does not appear that the SDO conducted any meaningful investigation of the matter, despite having had time to do so. 2. Immediate Need Even assuming that the suspension is based on adequate evidence, however, it appears unlikely that the government can demonstrate an immediate need to suspend Inchcape. The suspension notice states: Based on the Administrative Record before me, I find that protection of the Government s business interests requires the immediate suspension of the Inchcape Shipping Services companies pending completion of the Government s investigation and any ensuing legal proceedings. AR 259. This statement is conclusory, and has questionable support in the record. The government first learned of the audit at some time prior to June 9, It claims, however, that it was not permitted to make use of the information in the audit until the United States District Court for the District of Columbia issued its order on November 21, Assuming, arguendo, that the government was barred from using the information before the court order was entered, it waited more than a year to suspend Inchcape. This delay casts serious doubt on the government s claim that immediate action was necessary. 3
4 Case 1:13-cv JFM Document 31 Filed 01/02/14 Page 4 of 6 Furthermore, the FAR states that: The serious nature of debarment and suspension requires that these sanctions be imposed only in the public interest for the Government s protection and not for purposes of punishment. FAR 9.402(b). To the extent that the SDO was concerned about failures to reconcile or report overbilling during the period covered by the 2008 audit, it is not clear that there is any evidence of an ongoing threat against which the Government needed to be protected. There is no explanation in the record as to why this matter became an emergency in November As such, even though the SDO stated that her findings affected Inchcape s present responsibility, see AR 259, the suspension looks much more like a punishment than a protective measure. The court notes that motions to supplement the administrative record remain pending, and its decision on those motions may impact its view of the evidence when ruling on the merits. B. IRREPARABLE HARM It is clear that Inchcape is in danger of suffering irreparable harm as a result of the suspension. Inchcape regularly competes for a considerable number of government contracts, and alleges that it has at least six active bids pending, worth more than $186 million. See Doc at 42. Indeed, the government admitted at the hearing that Inchcape has already been barred from competition for the Singapore contract due to the suspension, and that the Rock Island contract is likely to be awarded in the next twenty-four hours. In addition, if injunctive relief is not granted, the government represented that Inchcape will be barred from competing for several more contracts that are expected to be awarded in January. Such lost opportunities to compete constitute irreparable harm. See Cardinal Maint. Serv., Inc. v. United States, 63 Fed. Cl. 98, 110 (2004) ( It is well settled that a party suffers irreparable injury when it loses the opportunity to compete on a level playing field with other bidders. ); CW Gov t Travel, Inc. v. United States, 110 Fed. Cl. 462, 494 (2013) ( The Court of Federal Claims has repeatedly held that a protester suffers irreparable harm if it is deprived of the opportunity to compete fairly for a contract. ). C. BALANCE OF HARDSHIPS While the risk to Inchcape of suffering irreparable harm from an unwarranted suspension, even for a short time, is potentially grave, the risk that the government will suffer from imposition of a temporary injunction is relatively 4
5 Case 1:13-cv JFM Document 31 Filed 01/02/14 Page 5 of 6 small. Inchcape may lose the ability to compete for contracts worth millions of dollars. If the suspension is warranted, however, the government risks only a short delay in suspending Inchcape following on the heels of its long delay in acting on the information in the 2008 audit. D. PUBLIC INTEREST Enjoining the enforcement of Inchcape s suspension during the time the court considers the merits of its motion for judgment on the administrative record is not against the public interest. In fact, it is in the public s interest to ensure that the government s suspension and debarment process is administered in a fair manner. To be sure, it is also in the public s interest to protect the government from dealing with companies who overbill and fail to properly reconcile accounts, but the limited scope of a temporary injunction is no great threat to the government s concern in this regard. III. TEMPORARY RESTRAINING ORDER Considering the foregoing, the court GRANTS plaintiff temporary injunctive relief. A. Terms of the Temporary Restraining Order The United States, or any agency or department thereof, is hereby enjoined from enforcing or implementing the suspension issued by the Department of the Navy against Inchcape Shipping Services, on November 26, 2013, for a period of fourteen days. This injunction may be extended for an additional fourteen days, pursuant to Court of Federal Claims Rule 65, if necessary to allow the court time to consider the merits of the parties claims. B. Security Court of Federal Claims Rule 65 states that the court may require the moving party to give security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained. The court sees no need for security in the instance, and the government agreed. Therefore, no security will be required. 5
6 Case 1:13-cv JFM Document 31 Filed 01/02/14 Page 6 of 6 SO ORDERED. s/ James F. Merow James F. Merow, Senior Judge United States Court of Federal Claims 6
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