Level 3 Communications, LLC v. United States ( 2018 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
LEVEL 3 COMMUNICATIONS, LLC,
Plaintiff
v.
UNITED STATES,
Defendant-Appellant
VERIZON DEUTSCHLAND GMBH,
Defendant
ROBERT C. BIGLER,
Sanctioned Party-Appellant
______________________
2017-1924, 2017-2068
______________________
Appeals from the United States Court of Federal
Claims in No. 1:16-cv-00829-SGB, Chief Judge Susan G.
Braden.
______________________
Decided: January 30, 2018
______________________
WILLIAM ERNEST HAVEMANN, Civil Division, Appellate
Staff, United States Department of Justice, Washington,
DC, argued for defendant-appellant and sanctioned party-
2 LEVEL 3 COMMUNICATIONS, LLC v. UNITED STATES
appellant. Also represented by CHAD A. READLER, SCOTT
R. MCINTOSH.
______________________
Before PROST, Chief Judge, SCHALL, and TARANTO,
Circuit Judges.
SCHALL, Circuit Judge.
DECISION
Defendant the United States (“the government”) and
Department of Justice attorney Robert C. Bigler appeal
the March 16, 2017 order of the United States Court of
Federal Claims. In that order, the court, relying on its
inherent authority, sanctioned the government and Mr.
Bigler for violating their duty of candor to the court. See
Level 3 Commc’ns, LLC v. United States, 131 Fed. Cl. 73
(2017) (“Sanctions Order”). We reverse.
DISCUSSION
I.
On August 28, 2015, the Defense Information Systems
Agency (“DISA”), an agency within the Department of
Defense, issued Solicitation HC1021–15–T–3033 (“the
Solicitation”). Under the Solicitation, DISA sought to
lease access to an upgraded telecommunications circuit
between Germany and Kuwait for use by the military for
an indefinite term. Sanctions Order, 131 Fed. Cl. at 75.
Although the Solicitation is not part of the record before
us, it is undisputed that it required bidders to deliver a
completed circuit to DISA prior to the beginning of the
lease term. Performance under the contract thus involved
two phases: (1) a period specified by the bidder prior to
the lease term—known as “lead time”—during which the
successful bidder would develop the circuit (“Phase 1”);
and (2) the lease term itself (“Phase 2”), which was ex-
pected to last 60 months. At the time the Solicitation was
LEVEL 3 COMMUNICATIONS, LLC v. UNITED STATES 3
issued, Level 3 Communications, LLC (“Level 3”) was the
incumbent contractor.
On March 8, 2016, DISA awarded the contract to Ver-
izon Deutschland GmbH (“Verizon”). Sanctions Order,
131 Fed. Cl. at 75. After Level 3 filed an administrative
protest with the Government Accountability Office
(“GAO”) on March 14, the contracting officer issued a
stop-work order requiring Verizon not to perform under
the contract while GAO resolved the dispute. On June 21,
GAO denied Level 3’s protest. In re Level 3 Commc’ns
LLC, B-412854, 2016 WL 3568223, at *7 (Comp. Gen
June 21, 2016). Following the GAO decision, the contract-
ing officer lifted the stop-work order on June 29. Id.
Shortly thereafter, Verizon began developing its circuit,
as contemplated by Phase 1 of the contract. In its bid,
Verizon had stated that it would require a 150-day lead
time to prepare a completed circuit and deliver it to DISA.
Due to the three-month delay that resulted from the
contracting officer’s stop-work order, Verizon’s 150-day
lead time contemplated having the circuit ready for
delivery on December 1, 2016.
Level 3 filed a complaint in the Court of Federal
Claims on July 12, 2016, in which it challenged the award
of the contract to Verizon. Sanctions Order, 131 Fed. Cl.
at 75. That same day, it moved for a preliminary injunc-
tion, and one day later it sought a temporary restraining
order. Id. In its filings, Level 3 asked the court to “enjoin
[DISA] from continuing performance of the Verizon con-
tract award,” App. 70, and it stated that preliminary
relief was needed because DISA “was moving forward
with performance of the [c]ontract by Verizon,” App. 72.
At a telephone status conference on August 1, the
court inquired about the status of contract performance.
Mr. Bigler, counsel for the government, advised the court
that, after the issuance of the GAO decision on June 21,
the contracting officer had lifted the stop-work order
4 LEVEL 3 COMMUNICATIONS, LLC v. UNITED STATES
around June 28 and that Verizon had begun its prepara-
tions to set up the circuit for DISA. App. 194. Through
discussion with the court, counsel for Level 3 and Mr.
Bigler explained that Verizon was currently working on
Phase 1 of the contract, for which it would be paid a fee,
so that it would be able to start Phase 2, contract perfor-
mance, on December 1. App. 202–06. It also was ex-
plained to the court that, if it ultimately ruled in favor of
Level 3 and Level 3 thereafter were awarded the contract,
“a period of 60 months service would be anticipated.”
App. 204. Based upon what had been said at the status
conference, the court decided not to issue a temporary
restraining order and instead ordered merits briefing on
an expedited schedule. App. 218.
Thereafter, Level 3 and the government cross-moved
for judgment on the administrative record. On August 23,
2016, the government filed its opposition to Level 3’s
motion and its own cross-motion. Pertinent to the matter
now before us, in its August 23 filing, the government,
through Mr. Bigler, stated: “[A]s a result of Level 3’s
unsuccessful GAO protest, Verizon’s new circuit will not
be operational until December 1, 2016.” App. 122.
On September 15, 2016, the court convened oral ar-
gument on the parties’ cross-motions for judgment on the
administrative record. Sanctions Order, 131 Fed. Cl. at
75. In the course of the proceedings, the court asked
government counsel about the status of Verizon’s perfor-
mance under the contract. Mr. Bigler responded that
Verizon was “preparing to perform” and explained that
this involved setting up the circuit and testing it to make
sure that it worked. App. 259–60. In response to a fur-
ther question from the court, Mr. Bigler stated that
Verizon would be ready on December 1 to provide the
“larger circuit” than the one DISA currently was leasing.
App. 261.
LEVEL 3 COMMUNICATIONS, LLC v. UNITED STATES 5
On November 9, 2016, the court, through an email
from its law clerk, asked the parties whether Verizon still
intended to commence performance on December 1.
Responding on behalf of the government, Mr. Bigler
informed the court that Verizon had completed the circuit
earlier than expected, that the government had accepted
the circuit, and that the government had begun using the
circuit on November 1. Sanctions Order, 131 Fed. Cl. at
76–77. Thus, Phase 2 of the contract commenced a month
ahead of schedule.
The court convened a hearing on November 14, 2016.
After referring to what had transpired at the September
15 hearing, the court addressed Mr. Bigler, stating, “It
was the Court’s impression that what I allowed you to do
until the decision [on the parties’ cross-motions] was to
get out was to basically get—hire subcontractors to get
ready to perform on December 1st. It appears that the
government went on ahead and performed in any event.”
App. 286. Saying it felt that the government had misin-
formed it, the court stated, “I am going to recommend
sanctions, Rule 11 sanctions against the
[g]overnment . . . .” App. 287. Following the hearing, the
court issued an order temporarily restraining DISA from
allowing Verizon to continue performance under the
contract. App. 23.
On December 5, 2016, the court issued an order sus-
taining Level 3’s bid protest and enjoining DISA from
allowing Verizon to continue to perform under the con-
tract. 1 At the conclusion of its order, the court ordered
the government “to show cause why the [g]overnment’s
written and oral representations to the court that perfor-
1 In due course, DISA solicited revised bids from all
the offerors who had bid on the original contract. On
June 16, 2017, Verizon was again awarded the contract.
Corrected Appellants Br. 14 n.3.
6 LEVEL 3 COMMUNICATIONS, LLC v. UNITED STATES
mance of the contract with Verizon would not commence
until December 1, 2016 does not violate RCFC 11(b).”
App. 51. 2 We understand the words “written and oral
representations to the court” to have been references by
the court to the statement quoted above from the govern-
ment’s August 23 filing and to the statements made by
Mr. Bigler on August 1 and September 15, all to the effect
that Phase 2 contract performance would not commence
until December 1, 2016.
On March 16, 2017, the court issued the Sanctions
Order. Although the court declined to sanction either the
government or Mr. Bigler under RCFC 11(b), relying on
its inherent authority, it ruled that the government and
Mr. Bigler had violated their duty of candor to the court.
Sanctions Order, 131 Fed. Cl. at 85. The duty of candor is
embodied in the Model Rules of Professional Conduct,
Rule 3.3 (“Candor Toward the Tribunal”). Rule 3.3(a)(1)
provides that “[a] lawyer shall not knowingly . . . make a
false statement of material fact or law to a tribunal or fail
to correct a false statement of material fact or law previ-
ously made to the tribunal by the lawyer[.]” The court
found that this rule had been violated because the gov-
ernment had misrepresented to the court that contract
performance would not begin until December 1, 2016,
when in fact it commenced on November 1, 2016. Sanc-
tions Order, 131 Fed. Cl. at 83. This “misrepresentation
was exacerbated,” the court wrote, “by the [g]overnment’s
failure to inform the court—at least on November 1,
2016—that Verizon completed work on the circuit and
turned it over to DISA.” Id. At the conclusion of its order,
the court identified Mr. Bigler by name, suggested that he
was responsible for the ethical breach, and stated that
Mr. Bigler’s Department of Justice supervisor was author-
2 Court of Federal Claims Rule 11 tracks Rule 11 of
the Federal Rules of Civil Procedure.
LEVEL 3 COMMUNICATIONS, LLC v. UNITED STATES 7
ized to determine whether any further sanction against
Mr. Bigler was warranted. Id. at 85.
As noted, both the government and Mr. Bigler appeal
the Sanctions Order. We have jurisdiction because the
order represents a formal reprimand of Mr. Bigler for
attorney misconduct. See Precision Specialty Metals, Inc.
v. United States, 315 F.3d 1346, 1352–53 (Fed. Cir.
2003). 3
II.
We review an order imposing sanctions under the
abuse of discretion standard. 1-10 Indus. Assocs., LLC v.
United States, 528 F.3d 859, 867 (Fed. Cir. 2008) (citing
Precision Specialty Metals, 315 F.3d at 1354). A court
abuses its discretion if the order imposing sanctions is
based on “an erroneous view of the law or on a clearly
erroneous assessment of the evidence.” Precision Special-
ty Metals, 315 F.3d at 1354 (quoting Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 405 (1990)).
Federal courts possess certain “inherent power,” not
conferred by rule or statute, “to manage their own affairs
so as to achieve the orderly and expeditious disposition of
cases.” Link v. Wabash R. Co., 370 U.S. 626, 630–31
(1962). That authority includes “the ability to fashion an
appropriate sanction for conduct which abuses the judicial
process.” Chambers v. NASCO, Inc., 501 U.S. 32, 44–45
(1991). The Supreme Court has emphasized, however,
that a court’s inherent powers “must be exercised with
restraint and discretion.” Id. at 44. Indeed, “[w]ithout a
finding of fraud or bad faith whereby the ‘very temple of
justice has been defiled,’ a court enjoys no discretion to
employ inherent powers to impose sanctions.” Amsted
Indus., Inc. v. Buckeye Steel Castings, Co., 23 F.3d 374,
3 Verizon and Level 3 have chosen not to participate
in the appeal. Corrected Appellants Br. 14.
8 LEVEL 3 COMMUNICATIONS, LLC v. UNITED STATES
378 (Fed. Cir. 1994) (citing Chambers, 501 U.S. at 50–51;
Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S.
240, 258–59 (1975)). “Bad faith is not simply bad judg-
ment or negligence, but rather it implies the conscious
doing of a wrong because of dishonest purpose or moral
obliquity; . . . it contemplates a state of mind affirmatively
operating with furtive design or ill will.” United States v.
Gilbert, 198 F.3d 1293, 1299 (11th Cir. 1999) (quoting
BLACK’S LAW DICTIONARY 139 (6th ed. 1990)) (internal
quotation marks omitted). Finally, before being sanc-
tioned, an attorney “must receive specific notice of the
conduct alleged to be sanctionable and the standard by
which that conduct will be assessed, and opportunity to be
heard on [the] matter.” Ted Lapidus, S.A. v. Vann, 112
F.3d 91, 97 (2d Cir. 1997); see also United States v. Melot,
768 F.3d 1082, 1085 (10th Cir. 2014); In re DeVille, 361
F.3d 539, 548 (9th Cir. 2004).
III.
On appeal, the government contends, on behalf of it-
self and Mr. Bigler, that the Court of Federal Claims
abused its discretion in using its inherent authority to
impose sanctions. The government argues that this is so
because the court did not make the required finding of
fraud or bad faith against either the government or Mr.
Bigler and because, in any event, there is no support in
the record for such a finding. The government also argues
that the court deprived both it and Mr. Bigler of due
process because the order to show cause stated that the
court was contemplating Rule 11 sanctions, but did not
mention the possible use of its inherent authority, and did
not mention that the imposition of sanctions was contem-
plated against Mr. Bigler individually. See Corrected
Appellants Br. 14–16. For the following reasons, we hold
that the record in this case does not support the imposi-
tion of sanctions. The Court of Federal Claims therefore
erred in sanctioning the government and Mr. Bigler. In
LEVEL 3 COMMUNICATIONS, LLC v. UNITED STATES 9
view of our disposition of the case, it is not necessary for
us to address the government’s due process argument.
Central to the issue before us are the telephone status
conference held on August 1, 2016, the government’s filing
of August 23, 2016, and the hearing convened on Septem-
ber 15, 2016. As seen, on August 1, the parties explained
to the court that Verizon was working on Phase 1 of the
contract, doing what it had to do in order to be able to
begin performance of Phase 2 on December 1, 2016.
Thereafter, in its August 23 filing, the government repre-
sented that Verizon’s circuit would not be operational
until December 1. And subsequently, at the September
15 hearing, the focus of the court’s discussion with Mr.
Bigler was on the question of what Verizon had been
doing since August 1. Mr. Bigler informed the court that
Verizon was “preparing to perform,” by which he meant
that Verizon was in the process of setting up the circuit
and testing it to make sure that it worked, so that Phase
2 contract performance could begin on December 1.
Thereafter, upon learning that Verizon had in fact
completed its Phase 1 work early and had commenced
Phase 2 performance on November 1 without notice from
the government to the court or Level 3, the court, on
November 14, expressed its displeasure with the govern-
ment and Mr. Bigler. It stated that it had been the
court’s “impression” at the conclusion of the proceedings
on September 15 that all that would happen until the
court decided the cross-motions was Verizon’s continuing
Phase 1 work. The court stated at the November 14
proceedings that, under these circumstances, it believed
that it had been misled by the government and Mr.
Bigler. The order to show cause followed. As seen, the
focus of the order to show cause was upon “the
[g]overnment’s written and oral representations that
performance of the contract with Verizon would not
commence until December 1.” App. 51.
10 LEVEL 3 COMMUNICATIONS, LLC v. UNITED STATES
The concern expressed by the court on November 14 is
understandable. The government should have informed
Level 3 and the court that Verizon had completed the
Phase 1 work early and that Phase 2 performance was
about to begin. Nevertheless, we do not believe that the
record reveals a sufficient basis for finding “the conscious
doing of wrong because of dishonest purpose or moral
obliquity” that is required in order to support the imposi-
tion of sanctions under the court’s inherent authority.
We say this for several reasons. As to Phase 1 work,
Mr. Bigler, as well as Level 3 itself, expressly indicated,
correctly, that “performance” of that part of the contract
was in fact under way. As to Phase 2, Mr. Bigler did
make a representation—that Phase 2 would not begin
before December 1—that turned out in retrospect to be
incorrect. But nothing in the record suggests that, when
Mr. Bigler made the statements he did on August 1,
August 23, and September 15, he believed they were not
correct or he was attempting to deceive the court. And
there is no basis in the several colloquies with the court,
which were not entirely clear as to exactly what contract
“performance” was being discussed in particular passages,
for finding any clear agreement by the parties and the
court as to what was to happen if the time came for a
transition from Phase 1 to Phase 2. Moreover, the August
1 colloquy indicated agreement by the government and
Level 3 that, even if Phase 2 were to begin, Level 3 would
still anticipate a full 60 month service period were it to
win the bid protest and then be awarded the contract in
place of Verizon. In short, based upon the record before
us, we are unable to conclude that the government,
through Mr. Bigler, could be found to have knowingly and
intentionally made misrepresentations to the court as to
when Phase 2 contract performance would start or to have
acted with a dishonest purpose or other bad faith in
failing to update the information on November 1.
LEVEL 3 COMMUNICATIONS, LLC v. UNITED STATES 11
CONCLUSION
For the foregoing reasons, the Sanctions Order is re-
versed.
REVERSED
COSTS
No costs.