Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 1 of 19 IN THE UNITED STATES COURT OF FEDERAL CLAIMS

Transcription

1 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 1 of 19 IN THE UNITED STATES COURT OF FEDERAL CLAIMS TEKTEL, INC., ) ) Plaintiff, ) ) v. ) No C ) (Judge Coster Williams) THE UNITED STATES, ) ) Defendant. ) \ DEFENDANT S RESPONSE TO THE COURT S REQUEST FOR SUPPLEMENTAL BRIEFING JOYCE R. BRANDA Acting Assistant Attorney General ROBERT E. KIRSCHMAN, JR. Director MARTIN F. HOCKEY JR. Assistant Director OF COUNSEL: AMANDA L. TANTUM Brenda Oswalt Trial Attorney Assistant General Counsel Civil Division Administrative Office of the U.S. Courts Commercial Litigation Branch One Columbus Circle, N.E. Department of Justice Washington, D.C P.O. Box 480 Ben Franklin Station Washington, D.C Tel: (202) January 12, 2015

2 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 2 of 19 TABLE OF CONTENTS PAGE Background...1 Argument...2 I. The History Of This Court s Review Of Contracting Officer s Decisions...2 II. The Wunderlich Act Applies Because, Assuming Arguendo That Tektel Was The Contractor, Its Rights To Seek Review Of The Purchase Orders Cancellation Matured Before The Wunderlich Act Was Repealed...7 III. Even If The Wunderlich Act s Savings Clause Did Not Apply Here, The Court Should Still Apply The Arbitrary And Capricious Standard Predating The Act...9 A. The Court And The Federal Circuit s Predecessor Applied The Arbitrary And Capricious Standard To Agency Contracting Decisions Long Before The Wunderlich Act s Passage And Should, Thus, Continue To Apply The Standard...9 B. Because It Existed At The Time The Purchase Orders Were Executed, The Wunderlich Act Was Incorporated Into Them And Reflects The Parties Understandings About The Proper Standard Of Review...10 Conclusion...13

3 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 3 of 19 TABLE OF AUTHORITIES CASES PAGE(S) Alvin, Ltd. v. United States Postal Serv., 816 F.2d 1562 (Fed. Cir. 1987) Cosmopolitan Mfg. Co. v. United States, 297 F.2d 546 (Ct. Cl. 1962)... 3, 9, 10 Cruz-Martinez v. Dep't of Homeland Sec., 410 F.3d 1366 (Fed. Cir. 2005) Essex Electro Engineers, Inc. v. United States, 702 F.2d 998 (Fed. Cir. 1983)... 5 Farmers' & Merchants' Bank v. Fed. Reserve Bank, 262 U.S. 649 (1923) Fujii & Co., Inc., 75-2 BCA (AGBCA Nov. 17, 1975)... 7 Giove v. Dep't of Transp., 230 F.3d 1333 (Fed. Cir. 2000) Gould, Inc. v. United States, 935 F.2d 1271 (Fed. Cir. 1991) H.B. Mac, Inc. v. United States, 153 F.3d 1338 (Fed. Cir. 1998) Hol-Gar Mfg. Corp. v. United States, 351 F.2d 972 (Ct. Cl. 1965) Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336 (Fed. Cir. 2000)... 5 Malone v. United States, 849 F.2d 1441 (Fed. Cir. 1988)... 8 Mitchell Canneries, Inc. v. United States, 77 F. Supp. 498 (Ct. Cl. 1948)... 3 National Movers Co., Inc. v. United States, 386 F.2d 999 (Ct. Cl. 1967)... 7 ii

4 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 4 of 19 Needles v. United States, 101 Ct. Cl. 535 (1944)... 3 Penner Installation Corp. v. United States, 89 F. Supp. 545 (Ct. Cl. 1950)... 3 Ripley v. United States, 223 U.S. 695, 32 S.Ct. 352, (56 L.Ed. 614)... 9, 10 S & E Contractors, Inc. v. United States, 406 U.S. 1 (1972)... 2, 3, 8 Sperient Corp., Inc. v. United States, 113 Fed. Cl. 1 (2013)... 8 Standard Oil Co. of California v. United States, 685 F.2d 1337 (Ct. Cl. 1982) SUFI Network Servs., Inc. v. United States, 108 Fed. Cl. 287 (2012),... 6 Tatelbaum v. United States, 749 F.2d 729 (Fed.Cir.1984)... 5 Tektel, Inc. v. United States, 116 Fed. Cl. 612 (2013)... 2, 7 Terminal Constr. Corp. v. United States, 1965 WL 8268 (Ct. Cl. 1965)... 4 United States v. Carlo Bianchi & Co., 373 U.S. 709 (1963)... 4 United States v. Joseph A. Holpuch Co., 328 U.S. 234 (1946)... 2, 3 United States v. Moorman, 338 U.S. 457 (1950)... 2 United States v. Utah Constr. & Mining Co., 384 U.S. 394 (1966)... 8 United States v. Wunderlich, 342 U.S. 98 (1951)... 3 iii

5 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 5 of 19 Vista Scientific Corp. v. United States, 808 F.2d 50 (Fed. Cir. 1986)... 3 STATUTES AND LEGISLATION 41 U.S.C , 8 41 U.S.C U.S.C , 7 Public Contracts Act, P.L. No , 7(b), 2010 H.R. 1107, 124 Stat. 3677, 3855 (Jan. 4, 2011)...5, 6, 8 Public Law , 1501, 2007 H.R (Dec. 26, 2007)...5 LEGISLATIVE HISTORY S. Rep. No. 1118, 95th Cong., 2d Sess. 16, reprinted in 1978 U.S.C.C.A.N H.R. Rep , 2009 WL (Mar. 23, 2009)...5, 6, 10 H.R. 6080, , 112th Cong., 2d Sess. (July 9, 2012)...6 OTHER AUTHORITIES Restatement (Second) of Contracts Frederick Claybrook, A Twice-Told Tale: The Strangely Repeated Story of Bad Faith in Government Contracts, Fed. Circuit Bar J. 35, 42 n.42 (2014)...6 Ralph L. Kissick, Commercial Space Launch Contracts Disputes & Remedies, 4 J.L. & Tech. 31 (1989) Joseph Sachter, "The Court of Federal Claims and the Wunderlich Act: Trends in Judicial Review," 15 Duke L.J. 372 (Spring 1966)... 2 iv

6 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 6 of 19 IN THE UNITED STATES COURT OF FEDERAL CLAIMS TEKTEL, INC., ) ) Plaintiff, ) ) v. ) No C ) (Judge Coster Williams) THE UNITED STATES, ) ) Defendant. ) DEFENDANT S RESPONSE TO THE COURT S REQUEST FOR SUPPLEMENTAL BRIEFING Pursuant to the Court s December 18, 2014 Order, defendant, the United States, respectfully submits this response to the Court s request for supplemental briefing during its telephonic status conference with the parties on October 27, On the teleconference, the Court questioned whether the standard of review of the Wunderlich Act, 41 U.S.C , would apply, given the repeal of the Act on January 4, For the reasons explained below, the Court should apply the arbitrary and capricious standard, as explained in our motion for judgment on the administrative record, and should dismiss Tektel s amended complaint. BACKGROUND The United States District Court for the Northern District of Illinois issued two purchase orders upon which Tektel bases its complaint and claim for termination costs. The first was issued on September 29, 2009, for maintenance services. Appx (Purchase Order #O (Sept. 29, 2009)). The second was issued October 13, 2009, for an upgrade to the district court s telephone system. Appx. 6-7 (Purchase Order # (Oct. 13, 2009)). Both list as the applicable contract GS-35F-0140L, the GSA Schedule Contract with Nortel. See Appx.1 2 (Purchase Order #O (Sept. 29, 2009)); Appx Appx. refers to pages within the appendix to this supplemental brief.

7 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 7 of 19 (Purchase Order # (Oct. 13, 2009)). 2 On March 18, 2010, the district court canceled the purchase orders. Tektel, Inc. v. United States, 116 Fed. Cl. 612, 620 (2013). The Court concluded, in a November 22, 2013 opinion, that the district court s purchase orders constituted contracts between the district court and Tektel. Id. at 626. ARGUMENT I. The History Of The Court s Review Of Contracting Officer s Decisions The Supreme Court explained in United States v. Moorman, 338 U.S. 457 (1950), that contractual provisions making an agency contracting officer s decision final as to a contractor s dispute have long been used by the Government. No congressional enactment condemns their creation or enforcement. Id. at 460. The Court explained that [a]s early as 1878 this Court emphatically authorized enforcement of contractual provisions vesting final power in a District Quartermaster to fix distances, not clearly defined in the contract, on which payment for transportation was based. Id. Governmental bodies include in their contracts a form of arbitration provision the disputes clause. Joseph Sachter, The Court of Federal Claims and the Wunderlich Act: Trends in Judicial Review, 15 Duke L.J. 372, 373 (Spring 1966) (hereinafter Sachter). Disputes clauses are intended to provide a quick and efficient administrative remedy. S & E Contractors, Inc. v. United States, 406 U.S. 1, 1414 (1972). Such clauses create[] a mechanism whereby adjustments may be made and errors corrected on an administrative level, thereby permitting the Government to mitigate or avoid large damage claims that might otherwise be created. United States v. Joseph A. Holpuch Co., 328 U.S. 234, (1946) 2 Our June 6, 2014 motion for judgment on the administrative record provides a full summary which we do not repeat here of the facts of this case reflected in the record before the contracting officer. Def. Mot. for J. (June 6, 2014). 2

8 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 8 of 19 (citation omitted). The disputes clause mechanism, moreover, is exclusive in nature, meaning that [s]olely through its operation may claims be made and adjudicated as to matters arising under the contract. Id. By entering into a contract containing such a clause, [t]he contractor has ceded his right to seek immediate judicial redress for his grievances. S & E Contractors, 406 U.S. at Prior to any legislation addressing the standard of review for contract disputes under a disputes clause, the Court s predecessor applied the arbitrary and capricious standard of review to review decisions reached by agency boards of contract appeals or by the agency head or his representative. See Cosmopolitan Mfg. Co. v. United States, 297 F.2d 546 (Ct. Cl. 1962). In a series of decisions in the late 1940 s, the Court s predecessor routinely considered whether such decisions evidenced arbitrary or capricious decision-making, particularly if the Court found no substantial evidence to support the decision. See, e.g., Penner Installation Corp. v. United States, 89 F. Supp. 545, 547, 549 (Ct. Cl. 1950); Mitchell Canneries, Inc. v. United States, 77 F. Supp. 498, (Ct. Cl. 1948); Needles v. United States, 101 Ct. Cl. 535, (1944). In 1951, in United States v. Wunderlich, 342 U.S. 98 (1951), however, the Supreme Court held that procurement agencies could exact a contractor s acquiescence in contract clauses making agency board s decisions final both as to fact and law and, thereby, preclude judicial review of their decisions relating to contract disputes, except as to fraud issues. Vista Scientific Corp. v. United States, 808 F.2d 50, 51 (Fed. Cir. 1986). As the Federal Circuit has explained, [t]his result was not deemed desirable by Congress, which enacted the Wunderlich Act, so called, to overturn the decision above cited of that name. Id.; S&E Contractors, 406 U.S. at (same). The Wunderlich Act, Appx. 17, 3 did not, however, provide contractors with a 3 Appx refers to pages within the appendix to this supplemental brief. 3

9 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 9 of 19 remedy or augment the Court s jurisdiction, as it merely confirmed the standard of review previously employed by the Court: The power to appeal to the Court of Claims a decision of the federal agency under a disputes clause in a contract which the agency is authorized to make is not to be found in the Wunderlich Act and its underlying legislative history. S&E Contractors, 406 U.S. at 1418 (emphasis added). Under the terms of the Wunderlich Act, agency decisions, reviewed by agency boards, were final as to fact issues so far as supported by substantial evidence and not arbitrary or capricious. See, e.g., id. Agency decisions were accorded no finality on questions of law, although legal findings could be made. Id. In United States v. Carlo Bianchi & Co., 373 U.S. 709 (1963), the Supreme Court explained that the Wunderlich Act restricted this Court to a purely appellate function in disputes clause cases. Id. at Wunderlich Act review employs the same standards used in the Administrative Procedures Act and other similar statutes, meaning that the Court could not take any testimony itself, nor make any fact findings. 4 Id. 4 Despite the Supreme Court s clear instruction, some decisions of the Court s predecessor following the Bianchi decision nonetheless allowed for the possibility of de novo review. Sachter, 15 Duke L.J. at 380. In certain decisions in the 1960 s, the Court s predecessor determined that if the Government did not object to a de novo trial, this would constitute a waiver. Id. To the extent that the Court might find that such an objection is required, we make a formal objection here to a de novo trial. Further, if the Court found that the reasoning in these decisions applies here, they conclude that the contractor can also waive its rights if any to a de novo trial, and Tektel has done so here. For example, in Terminal Constr. Corp. v. United States, 1965 WL 8268 (Ct. Cl. 1965), after the parties agreed to rely upon the record which had been presented before the ASBCA, [t]his agreement was carried out, and it provided the basis for the report of the trial commissioner. Therefore, plaintiff [wa]s not, at this stage, entitled to a trial de novo because [p]laintiff waived any rights to a trial in this court. Id. at *4. Likewise, here, Tektel agreed, in the parties joint proposed schedule, that the contracting officer should reach a decision on Tektel s claim for termination costs, which the Court could then review under the arbitrary and capricious standard. Joint Proposed Schedule (Jan. 6, 2014); see also Am. Compl. 10, Prayer for Relief (a). Tektel thus waived any ability to request a de novo trial. 4

10 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 10 of 19 Subsequently, Congress established a new legal framework for resolving such disputes, the Contract Disputes Act of 1978 (CDA), 41 U.S.C. 601, et seq., which superseded the Wunderlich Act, with only certain narrow exceptions. See Essex Electro Engineers, Inc. v. United States, 702 F.2d 998, 1002 (Fed. Cir. 1983). Most importantly, the CDA only applied when the contracting entity in question was within the executive branch, leaving the Wunderlich Act applicable to the judiciary and legislative branches. 5 See Tatelbaum v. United States, 749 F.2d 729, 730 (Fed.Cir.1984). Where, as here, the CDA does not apply and a cognizable disputes clause envisions a specific contractual remedy, a claimant generally must exhaust that remedy before seeking judicial redress. Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336, (Fed. Cir. 2000). The Wunderlich Act was temporarily repealed, with a savings clause, in the 2010 recodification of Title 41. P.L. No , 2010 HR 1107, 124 Stat. 3677, 3859 (Jan. 4, 2011). The House Report related to the 2010 recodification explained that this legislation s intent is to comply with the standard set forth in 2 U.S.C. 285b(1), that this restatement of existing law shall conform to the understood policy, intent, and purpose of the Congress in the original enactments, with such amendments and corrections as will remove ambiguities, contradictions, and other imperfections. H.R. Rep , 2009 WL , at *2 (Mar. 23, 2009) (emphasis added) (internal quotations omitted). The report clarified that [i]n restating existing law, this bill consolidates various provisions of law which have been enacted separately over a period of many 5 Congress excluded agencies within the judicial and legislative branches from the CDA s coverage because acquisition activity by these agencies is relatively small, and subjecting them to regulations promulgated by the executive branch could raise constitutional questions under the separation of powers' doctrine. S. Rep. No. 1118, 95th Cong., 2d Sess. 16, reprinted in 1978 U.S.C.C.A.N Public Law , 1501, 2007 H.R (Dec. 26, 2007), has since established a Contract Appeals Board for entities within the legislative branch and made certain parts of the CDA applicable to these appeals, while excluding others. 5

11 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 11 of 19 years, reorganizing them, conforming style and terminology, modernizing obsolete language, and correcting drafting errors. These changes are not intended to have substantive effect, or to impair in any way the precedential value of earlier judicial decisions or other interpretations. This bill is intended to restate existing law without substantive change. That enactment of a bill such as this does not make substantive change in the law, absent an unequivocal expression of Congressional intent to make such a change, has been repeatedly held in numerous cases[.] Id. This repeal was apparently based on the false assumption that the CDA was applicable to all types of Government contracts. See Frederick Claybrook, A Twice-Told Tale: The Strangely Repeated Story of Bad Faith in Government Contracts, Fed. Circuit Bar J. 35, 42 n.42 (2014) (hereinafter Claybrook). The drafters of the 2010 recodification of Title 41 seem to have believed that the Wunderlich Act provisions were obsolete following the CDA s passage in 1978, and their continued inclusion resulted from a drafting error[]. See H.R. Rep , 2009 WL , at *2. The House of Representatives reenacted and recodified the Wunderlich Act in its 2012 technical amendments to the title 41 recodification, making it applicable again to public contracts not subject to chapter 71 of... title 41 [the Contract Disputes Act,] H.R. 6080, , 112th Cong., 2d Sess. (July 9, 2012), but the Senate has not acted on the measure, see, e.g., Claybrook at 42 n.42. The Act repealing the Wunderlich Act included a savings clause, providing that the Wunderlich Act still governs rights and duties that matured, penalties that were incurred and proceedings that were begun before the Wunderlich Act was repealed. Public Contracts Act, P.L. No , 7(b), 2010 HR 1107, 124 Stat. 3677, 3855 (Jan. 4, 2011); see also SUFI Network Servs., Inc. v. United States, 108 Fed. Cl. 287, 296 (2012), aff d in part, vacated in part, & reversed in part on other grounds, 755 F.3d 1305 (Fed. Cir. 2014). 6

12 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 12 of 19 II. The Wunderlich Act Applies Because, Assuming Arguendo That Tektel Was The Contractor, Its Rights To Seek Review Of The Purchase Orders Cancellation Matured Before The Wunderlich Act Was Repealed We have previously explained our disagreement with the Court s conclusion that Tektel the Authorized GSA Schedule Partner (AGSP) of the GSA Schedule contractor, Nortel Networks, Inc., 6 Tektel, 116 Fed. Cl. at 617 became a contractor when issued a purchase order under the GSA Schedule Contract. 7 Id. at 626. Assuming, however, that the purchase order constituted a contract, Tektel s rights and duties matured when the district court cancelled the purchase orders and, therefore, the Wunderlich Act still governs. As noted above, the Public Contracts Act of January 4, 2011, repealed the Wunderlich Act, as well as other provisions from 41 U.S.C. 601 to 13 (related to the Contract Disputes Act). The Public Contract Act s savings clause, however, provided that these provisions still govern rights and duties that matured, penalties that were incurred and proceedings that were 6 As the Court acknowledged, the GSA Schedule Contract, under which the purchase order was placed, stated that an AGSP could [p]lace orders and accept payment in the name of the Contractor, in care of the dealer and was clear that [a]n agreement between a Contractor and its dealers pursuant to this procedure will not establish privity of contract between dealers and the Government, Tektel, 116 Fed. Cl. at 616. Further, the agreement between Nortel and Tektel, allowing Tektel to use Nortel-manufactured equipment at prices established by Nortel on the Schedule Pricelist, explained that this agreement did not create privity of contract between Tektel and the Government. Id. at The contracting officer has explained that this was not her view of the district court s relationship with Tektel. In her April 4, 2014 decision, the contracting officer explained, based upon her understanding of the purchase orders at issue, the purchase orders were issued against the GSA Schedule Contract, that [t]he actual contractor is Nortel, and that Tektel was Nortel s Authorized Dealer (referred to as an AGSP). Appx. 11. In addition, she and that Tektel acknowledged in its bankruptcy filings that Nortel was the contractor and, thus, was the party that could file a claim in order to assist Tektel in recovering its costs. Id. The contracting officer like a board of contract appeals had the authority to determine the existence or nonexistence of a contract since such a determination is a necessary predicate to the resolution of Tektel s dispute. See, e.g., Fujii & Co., Inc., 75-2 BCA (AGBCA Nov. 17, 1975). National Movers Co., Inc. v. United States, 386 F.2d 999, (Ct. Cl. 1967), a precedential decision by this Court s predecessor, held that a board s factual findings relating to the formation of a contract are final if supported by substantial evidence. This reasoning likewise applies to the contracting officer s factual findings described above. 7

13 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 13 of 19 begun before their repeal. Public Contracts Act, P.L. No , 7(b), 2010 H.R. 1107, 124 Stat. 3677, 3855 (Jan. 4, 2011). In Sperient Corp., Inc. v. United States, 113 Fed. Cl. 1 (2013), the Court explained that the Public Contract Act s savings clause applied to rights and duties that matured, penalties that were incurred, and proceedings that were begun before the date of enactment of [the 2011] Act, including in the case before it, related to contracts entered into between 2007 and 2009 and a 2012 decision to disallow the plaintiff s claimed costs. Id. at 3. Similarly, in the present case, Tektel s purchase orders pre-date the Wunderlich Act s repeal, as does the Government claim at issue the decision to terminate those purported contracts. See, e.g., Malone v. United States, 849 F.2d 1441, 1443 (Fed. Cir. 1988). Here, there was no need for the contracting officer s decision to be reviewed by a board of contract appeals before Tektel could seek review of the decision in this Court because no such board exists for the judiciary. Cf. S & E Contractors, 406 U.S. at 1414 (noting that because no board of contract appeals existed, the agency had decided the claim prior to the contractor seeking review by the Claims Court). The Wunderlich Act also recognized that decisions that the Court could review would be made by the head of any department or agency or his duly authorized representative or board. 41 U.S.C. 321 (emphasis added), Appx. 17. The need to obtain board review if a board exists is an issue related to exhaustion of administrative remedies, rather than an issue that has any bearing on the proper standard of review. United States v. Utah Constr. & Mining Co., 384 U.S. 394,414 (1966); see also id. at 402 (discussing requirement of exhaustion of remedies). The Court s analysis, therefore, is not affected by the fact that a board of contract appeals did not review, nor was one available to review, the contracting officer s decision. As described above, the standard applicable to the Court s review, 8

14 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 14 of 19 post-bianchi, of contracting officer s decisions under disputes clauses is the arbitrary and capricious standard. The Court should, thus, conclude that the Wunderlich Act s standard still applies in this case. III. Even If The Wunderlich Act s Savings Clause Did Not Apply Here, The Court Should Still Apply The Arbitrary And Capricious Standard Predating The Act Even if the savings clause did not apply, the Court should still decide Tektel s amended complaint applying the arbitrary and capricious standard. A. The Court And The Federal Circuit s Predecessor Applied The Arbitrary And Capricious Standard To Agency Contracting Decisions Long Before The Wunderlich Act s Passage And Should, Thus, Continue To Apply The Standard The arbitrary and capricious standard of review set forth in the Wunderlich Act pre-dated that Act and were merely reinstated by the Act to counteract the Supreme Court s Wunderlich decision. The repeal of the Act, therefore, does not alter the standard of review that the Court should apply. The Federal Circuit s predecessor made clear, in Cosmopolitan Manufacturing, that the arbitrary and capricious standard of review applied to contracting officers decisions before the Wunderlich Act and that the Act did nothing more than... restore that standard, 297 F.2d at 548. The court noted that Congress expressed this purpose in the report accompanying the Wunderlich bill: A principal change which the amendment (which became the Wunderlich Act) effects... is to restore the standards of review based on arbitrariness and capriciousness. These have long been recognized as constituting a sufficient basis for judicial review of administrative decisions, a reference to capricious action on the part of a Government contracting official vested with discretionary power of decision being found as early as 1911 in the decision of the Supreme Court in Ripley v. United States, (223 U.S. 695, 32 9

15 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 15 of 19 S.Ct. 352, (56 L.Ed. 614)). * * * There is a wealth of judicial precedent behind these standards of review and it is the committee s belief that they should not be abandoned. Id. at 549 (quoting H.R. 1380, 83d Cong., 2d Sess.) (emphasis added). The Wunderlich Act was enacted to overcome the effect of the Supreme Court s Wunderlich decision, which had precluded the long-recognized judicial review under this standard. Id. (quoting H.R. 1380, 83d Cong., 2d Sess.). Even though the Wunderlich Act was mistakenly repealed, the arbitrary and capricious standard in place prior to its passage still applies. Further, as explained in expressions of Congressional intent related to the repeal, the Wunderlich Act s repeal was not intended to have substantive effect, or to impair in any way the precedential value of earlier judicial decisions or other interpretations but, instead, was intended to restate existing law without substantive change. H.R. Rep , 2009 WL , at *2. The mistaken repeal, therefore, was not intended to alter the standard applicable in a case like this. The Court should, thus, find that it should apply the arbitrary and capricious standard to the agency s decision regardless of the Wunderlich Act s repeal. B. Because It Existed At The Time The Purchase Orders Were Executed, The Wunderlich Act Was Incorporated Into Them And Reflects The Parties Understandings About The Proper Standard Of Review In addition, even if the Court finds the savings clause did not apply, the Court should apply the Wunderlich Act because it existed at the time that the purchase orders at issue were executed. 8 The Supreme Court has explained: 8 The repeal of the Wunderlich Act arguably could give new life to the Supreme Court s Wunderlich decision, making decisions of agency contracting officer and boards unreviewable except in cases of fraud. As explained here, however, the parties understood that the arbitrary and capricious standard of review codified by the Wunderlich Act would be applied to any disputes on review by a court of competent jurisdiction. The parties intention and 10

16 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 16 of 19 Laws which subsist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part of it, as fully as if they had been expressly referred to or incorporated in its terms. This principle embraces alike those laws which affect its construction and those which affect its enforcement or discharge. Farmers' & Merchants' Bank v. Fed. Reserve Bank, 262 U.S. 649, 660 (1923); see also Alvin, Ltd. v. United States Postal Serv., 816 F.2d 1562, 1567 (Fed. Cir. 1987). The disputes clause that is part of the purchase orders states that the district court s contracting officers are authorized to decide or settle all claims. See Appx. 3. Such a decision by a contracting officer shall be considered the final determination of the agency. See Appx. 3. Likewise, the disputes clause, in Clause 7-235(c) incorporated in both purchase orders, see Appx. 2, 7 provides for a decision by the contracting officer, following the filing of a claim with her, as the only relief available to a claimant: Contracting officers are authorized to decide or settle all disputes under the clause.... The determination of the contacting officer shall be considered the final determination of the judiciary unless overturned by a court of competent jurisdiction. See Appx. 8-9, (c), (d). The disputes clause, thus, acknowledged that a court could review the contracting officer s decision and, possibly, overturn it, as provided by the application of the Wunderlich Act s standards. Id. The disputes clause s language plainly does not anticipate a de novo decision on a breach of contract claim, ignoring the agency s decisionmaking. Indeed, one commentator has opined that language like that in the purchase orders disputes clause that the final agency decision will be conclusive as to all issues and binding on the parties unless overturned by a court of competent jurisdiction indicates that the arbitrary and capricious standard would be applied in this Court s review, under the provisions of understanding at the time of execution of the purchase orders should govern the orders interpretation. 11

17 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 17 of 19 the Wunderlich Act. Ralph L. Kissick, Commercial Space Launch Contracts Disputes & Remedies, 4 J.L. & Tech. 31, (1989). In addition, the disputes clause reflects the parties understanding and intention at the time the purchase orders were executed. This understanding was that the contracting officer s decision was final, but could be reviewed by a court and overturned pursuant to the existing statute the Wunderlich Act. [M]eaning can almost never be plain except in a context. Cruz- Martinez v. Dep t of Homeland Sec., 410 F.3d 1366, 1371 (Fed. Cir. 2005) (quoting Restatement (Second) of Contracts 212, cmt. b (1981)). A statute may be part of the surrounding circumstances that are material in interpreting what the parties meant when they entered into their contract. See 3 Corbin on Contracts 551. The Court should give the language in the disputes clause the interpretation that a reasonably intelligent person acquainted with the contemporaneous circumstances would and construe them using business sense including the existing standards of review, familiar to reasonable and prudent Government contractors. Giove v. Dep t of Transp., 230 F.3d 1333, (Fed. Cir. 2000); Hol-Gar Mfg. Corp. v. United States, 351 F.2d 972, 975 (Ct. Cl. 1965); H.B. Mac, Inc. v. United States, 153 F.3d 1338, 1345 (Fed. Cir. 1998). The Court should interpret the purchase orders in a manner that does not leave the references to a court overturn[ing] an agency decision inexplicable, void, or superfluous. Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. Cir. 1991). The parties conduct subsequent to entering into the purchase orders also demonstrates their intent and understanding of the purchase orders. Standard Oil Co. of California v. United States, 685 F.2d 1337, 1345 (Ct. Cl. 1982). The parties joint proposed schedule for a contracting officer s decision and briefing upon this decision, as well as Tektel s amended complaint, sought review of its claim by the contacting officer under an arbitrary and capricious 12

18 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 18 of 19 standard, demonstrating that Tektel, like the district court, understood that this standard applied to its claim. Joint Proposed Schedule (Jan. 6, 2014); see also Am. Compl. at 2, The agency likewise understood that the contracting officer had the responsibility to issue a decision that could be reviewed by the Court; if a breach of contract claim was, instead, the proper procedure, her decision would have been unnecessary. The Court should, thus, conclude that the arbitrary and capricious standard preexisting and codified in the Wunderlich Act applies in this case. CONCLUSION For the reasons outlined above, defendant respectfully requests that this Court review the contracting officer s decision applying the arbitrary and capricious standard and, for the reasons explained in our briefing on our motion for judgment on the administrative record, grant the United States judgment on the administrative record and dismiss Tektel s amended complaint. 13

19 Case 1:11-cv MCW Document 104 Filed 01/12/15 Page 19 of 19 Respectfully submitted, JOYCE R. BRANDA Acting Assistant Attorney General ROBERT E. KIRSCHMAN, JR. Director s/ Martin F. Hockey, Jr. MARTIN F. HOCKEY JR. Assistant Director OF COUNSEL: s/ Amanda L. Tantum AMANDA L. TANTUM Brenda Oswalt Trial Attorney Assistant General Counsel Civil Division Administrative Office of the U.S. Courts Commercial Litigation Branch One Columbus Circle, N.E. Department of Justice Washington, D.C P.O. Box 480 Ben Franklin Station Washington, D.C Tel: (202) January 12, 2015 Attorneys for Defendant 14

20 Case 1:11-cv MCW Document Filed 01/12/15 Page 1 of 19 APPENDIX

21 Case 1:11-cv MCW Document Filed 01/12/15 Page 2 of 19 INDEX TO THE APPENDIX TO DEFENDANT S RESPONSE TO THE COURT S REQUEST FOR SUPPLEMENTAL BRIEFING Page(s) Purchase Order #O (Sept. 29, 2009)...1 Purchase Order # (Oct. 13, 2009).6 Disputes Clause, Clause 7-235, within the Judiciary Procurement Program Procedures (JP3), (effective October February 2010)....8 Contracting Officer s Decision (Apr. 4, 2014)..11 Wunderlich Act, 68 Stat. 81 (May 11, 1954).17

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38 Case 1:11-cv MCW Document Filed 01/12/15 Page 19 of STAT.] PUBLIC LAW 357--MAY 11, ';RELEASE OF PATIENTS "SEe For purposes of this Act, all individual shall be deemed cured of his addiction and rehabilitated if tl_e Surgeon General determines that he has received the maximum benefits of treatment and care by the Service for his addiction or if the Surgeon General determines that his further treatment and care for such purpose would be detrimental to the interests of the " -_er vi ce. " Approved May 8, Public Law 356 CHAPTER 199 AN ACT To lmrmtt revlow of decisions of the lmads of departments, or their representatives or boards, involving qut,sthm.u arising under Government contracts. Be it enacted bg the Senate and House of Representatives of the United b'tates o/ Ame_qca in Congress a_sembled_ That no l)rovision of any contract entered into by the United States, relating to the finality or conclusiveness of any decision of the head of any department or a_ency or his duly authorized representative or baard in a dispute in'_'olv'ing a question arising under such contract, shall be pleaded in any suit now filed or to be filed as limiting judicial review of any such decision to cases where fraud by such official or his said re resentative or board is alleged : Provided, however, That any such d_epision shall be. final and conclusive unless the same is fradulent or capricious or arbitrary or so gro_isly erroneous as necessarily to imply bad faith, or is not supported by substantial evidence. Sr.c. 2. No Government contract shall contain a provision making final on a question of law the decision of any administrative official, repre_ntative, or boj_rd. Approved May 11_ May II, 1954 (_overl-,rnun t cot'_ t_ts. Judicial review, Public Law 357 CHAPTER 200 AN ACT Making stlpplemental appropriations for the flm'al year ending June 30, 195-1, and for other purposes. Be it enacted by the Senate and tlouse of_ Representatlves of the nlted,_ tates o/america in Gonffress o_asembled_ That the following sums are approl)riated, out of any money in the Treasury not otherwise appropriated, to supply supplemental appropriations (this A.ct may be cited as the "Third Supplemental Appropriation Act_ 1954;') for the fiscal year ending June 30_ 1954, and for other purposes, namely : CHAPTER I Mr#" I1, 19$4 H R. 145t_ Third Suppl o. mental P4ppropr ls_- tlon Act DISTRICT OF COLUMBIA COmPENSATIoN AND RETIREMENT FUND ExPENSEs DISTRICT GOVERNMENT RETIREMENT AND RELIEF FU2'qi)S For an additional amount for "District govermnent retirement and relief funds", $P20, O--55--pt.l--_