Public Warehousing Company K.S.C.

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of-- )
)
Public Warehousing Company K.S.C. ) ASBCA No. 58078)
Under Contract No. SPM300-05-D-3128 )
APPEARANCES FOR THE APPELLANT: Michael R. Charness, Esq.
BryanT. Bunting, Esq.
Jamie F. Tabb, Esq.
Vinson & Elkins LLP
Washington, DC
APPEARANCES FOR THE GOVERNMENT: Daniel K. Poling, Esq.
DLA Chief Trial Attorney
John F. Basiak, Jr., Esq.
Kristin K. Bray, Esq.
Trial Attorneys
Elizabeth Amato-Radley, Esq.
Assistant Counsel
DLA Troop Support
Philadelphia, PA
OPINION BY ADMINISTRATIVE JUDGE TING ON THE GOVERNMENT'S
MOTION TO DISMISS PURSUANT TO BOARD RULE 30
In the Board's 12 November 2013 decision on jurisdiction, we rejected Defense
Supply Center Philadelphia's (DSCP) alternate argument to dismiss this appeal pending
the outcome of the criminal and civil fraud cases in the District Court. We did so because
DSCP failed to make out a clear case of hardship and inequities in being required to go
forward. Public Warehousing Company K.S.C., ASBCA No. 58078, 13 BCA ~ 35,460
(PWC). Through DSCP's new motion to dismiss, the U.S. Attorney for the Northern
District of Georgia has explained that proceeding with ASBCA No. 58078 would
compromise and interfere with ongoing criminal proceedings in the District Court.
DSCP's motion this time is based on Board Rule 30. As an alternative, DSCP has moved
to stay discovery in ASBCA No. 58078 pending the resolution of the criminal case. By
Discovery Order No. 1, we stayed discovery pending our decision on DSCP's motion to
dismiss. For reasons stated below, we grant DSCP's motion and dismiss this appeal
without prejudice under Rule 30.
STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION
Background
1. In 2003, DSCP, now known as Defense Logistics Agency Troop Support (DLA
Troop Support), awarded a "Prime Vendor" contract (PV1 Contract) to Public
Warehousing Company K.S.C. (PWC) to deliver subsistence items to U.S. and Allied
forces in Kuwait and Qatar (SOF ~ 2). 1 The contract was amended in June 2003 adding
the "Iraq Deployment Zone" requiring PWC to make deliveries 'to additional Authorized
Customers in active combat zones. Under the contract, PWC was to be reimbursed for
the cost of food plus a distribution price, including profit. (SOF ~ 3)
2. DSCP continued the PV1 Contract with PWC through a bridging contract (PV
Bridge Contract) from February 2005 to mid-December 2005 (SOF ~ 4). In July 2005,
DSCP awarded Contract No. SPM300-05-D-3128 (PV2 Contract) to PWC. The PV2
Contract included an 18-month base year and 3 options. PWC began performance of the
PV2 Contract in December, 2005. DSCP exercised all three options extending the PV2
Contract to 4 December 2010. In all, PWC performed the PV1, PV Bridge, and PV2
Contracts continuously for approximately seven and a half years. (SOF ~ 5)
3. Unlike the PV1 and the PV Bridge Contracts, the PV2 Contract contained a
"PERFORMANCE BASED DISTRIBUTION FEES" clause (PBDF clause) whose
purpose was to incentivize PWC to perform "at an optimal level" to achieve "customer
satisfaction" (SOF ~ 6). The PBDF clause established a six-month fee review cycle (SOF
~ 7). Depending upon whether PWC's performance was rated as "Excellent," "Good,"
"Fair," or "Poor" in accordance with the standards prescribed in the PBDF clause, PWC
could receive an increase in distribution fee, a decrease in distribution fee, or the standard
distribution fee (SOF ~~ 6, 8).
4. A rating of "Excellent," "Good," "Fair," or "Poor" depends on two factors:
PWC's (1) fill rate and (2) current Contractor Performance Assessment Report (CPAR)
rating. An "Excellent" or "Good" rating requires the CO to determine that she "'would
definitely,' award to this vendor today given that I had the choice." A "Fair" rating
requires the CO to determine that she '"probably would not,' award to this vendor today
given that I had the choice." A "Poor" rating requires the CO to determine that she
"'probably would not' or 'would not,' award to this vendor today given that I had the
choice." (SOF ~ 8)
1
Citations to SOFs in the sections before the "DECISION" portion of this opinion are to
the SOFs in the Board's 12 November 2013 decision published at 13 BCA
~ 35,460. References to SOFs in the "DECISION" portion of this opinion are to
the SOFs in this opinion.
2
5. In November 2005, a few weeks before the end of the PV Bridge Contract,
Kamal Mustafa Al-Sultan, a former PWC employee, filed under seal a complaint in the
name of the United States, a False Claims Act (FCA) suit, 31 U.S.C. § 3732(a), in the
United District Court for the Northern District of Georgia. The FCA complaint
contained, inter alia, allegations relating to PWC's pricing practices with one of its local
market ready items (LMRI) suppliers - The Sultan Center (TSC). The complaint
remained under seal until November 2009. (SOF ~ 18) Also in November 2005, the
government opened an investigation of PWC concerning allegations of overcharging,
kickbacks, and security issues (SOF ~ 23).
6. On 27 April2009, while PWC was performing Option 2 ofthe PV2 Contract,
contracting officer Linda L. Ford (CO Ford) received a $119 million certified claim from
PWC. The claim alleged that DSCP breached the PV2 Contract in failing to assess
PWC's performance every six months for awarding PBDF. (SOF ~ 37) Since no CPAR
was issued under the PV2 Contract, PWC contended that "DSCP should have awarded
the PBDF to PWC based on the fill rate metric alone." Public Warehousing Company,
K.S.C., ASBCA No. 56888, compl. ~ 61. Thus, the $119 million claim assumed PWC
was entitled to an increase in distribution fees from December 2005 through December
2008 (compl., tab 28 at 10). CO Ford acknowledged that no CPARs had been performed
because there was an on-going fraud investigation and, because the Department of Justice
(DOJ) had not made available the information developed, she had insufficient
information to evaluate PWC's performance. CO Ford's letter said that she expected to
issue a decision on the claim on or before 3 December 2009. (SOF ~ 38) In July 2009,
PWC appealed to the Board on the basis that its claim should be deemed denied and an
appeal authorized pursuant to 41 U.S.C. § 7103(f)(5). The Board granted DSCP's motion
to dismiss for lack of jurisdiction holding that, given the complexity of the PV2 Contract
CPAR/PBDF assessments, the CO's commitment to issuing a decision by a specific date
-3 December 2009- was reasonable. Public Warehousing Company, 09-2 BCA
~ 34,265.
The Superseding Indictment before the District Court
7. Less than two months after the Board dismissed ASBCA No. 56888, a grand
jury in the Northern District of Georgia returned a six-count indictment on 9 November
2009 charging that PWC conspired to defraud the United States in the bidding process for
the PV2 Contract and in overcharging the United States during the execution of the PV1,
PV Bridge and the PV2 Contracts. Three months later, a grand jury in the Northern
District of Georgia returned a Superseding Indictment (indictment) on 9 February 2009
charging PWC with the same six counts and adding Agility DGS Logistics Services
Company and Agility Holdings, Inc., as defendants. (Mot. to dismiss, tab 1 at 2, ~ 1)
3
8. Count I of the indictment alleges that PWC violated 18 U.S.C. § 1031 and
18 U.S.C. § 1001 in connection with its efforts to procure the award ofthe PV2 Contract
(mot. to dismiss, tab 1 at 2, ~ 2).
9. Count II of the indictment alleges that PWC violated 18 U.S.C. § 1031,
18 U.S.C. § 1001, 18 U.S.C. § 287, and 18 U.S.C. § 1343 in overcharging the
government in PWC's performance of the PV1, PV Bridge and PV2 Contracts by (1)
failing to purchase less expensive products because the vendor did not offer prompt
payment discounts; (2) generating fraudulent billings by improperly charging the
government for certain warehousing and distribution costs; (3) manipulating and inflating
prices from distributors or vendors; (4) failing to return, and fraudulently concealing
rebates, allowances, and discounts attributable to orders by the government under the
contracts; and (5) reducing the pack size of the products to increase distribution fees
claimed from the government (mot. to dismiss, tab 1 at 2, ~ 3).
10. Count III of the indictment alleges that PWC violated 18 U.S.C. § 1031 by
overcharging the government for distribution fees by asking vendors to reduce the pack
size of products during the performance of the PV1 Contract (mot. to dismiss, tab 1 at 2,
~ 4).
11. Count IV of the indictment alleges that PWC violated 18 U.S.C. § 1031 by
generating fraudulent billings by improperly charging the government for certain
warehousing and distribution costs during the performance of the PV2 Contract (mot. to
dismiss, tab 1 at 2, ~ 5).
12. Counts V and VI allege that PWC violated 18 U.S.C. §§ 1343 and 2, by using
wire communications with vendors as part of its scheme to generate fraudulent billings
by improperly charging the government for certain warehousing and distribution costs
during the performance of the PV2 Contract (mot. to dismiss, tab 1 at 3, ~ 6).
The Qui Tam Action before the District Court
13. On 13 November 2009, the United States intervened in part and declined to
intervene on part in the qui tam action filed by Kamal Mustafa Al-Sultan. United States
ex. ref. Kamal At-Sultan v. The Public Warehousing Company, K.S. C., a/k/a Agility, and
The Sultan Center Food Products Company, K.S.C., No. 1:05-CV-2968. On 5 January
2011, the United States filed an amended complaint against PWC alleging six counts of
violations of the False Claims Act, fraud, payment by mistake, unjust enrichment, and
breach of contract. On 17 January 20 13, the civil action in the District Court was
administratively closed, subject to reopening by motion of any party, pending the
resolution of an appeal in the Kuwait Court of Appeals. (Mot. to dismiss, tab 1 at 3, ~ 7)
4
14. CO Ford did not issue her decision on PWC's $119 million claim on
3 December 2009 as promised. She notified PWC that in light of the pending civil and
criminal cases, she would issue her decision on or before 21 May 2010. Using the same
justifications and projecting a date on or before which she expected to issue a decision,
CO Ford put off issuing her decision for over four years. Her 14 December 2011 letter -
the seventh and last letter - stated that she expected to issue her decision on or before
8 June 2012. By notice dated 13 Apri12012, nearly 11 months after it filed its amended
($158 million) and recertified claim, PWC appealed again pursuant to 41 U.S.C.
§ 7103(f)(5) on the basis that the CO had failed to issue a decision within the time period
required. It filed its complaint at the same time. The Board docketed the appeal as
ASBCA No. 58078.
PWC's Prosecutorial Misconduct Case in the District Court
15. As a part of its defense against the Superseding Indictment, PWC's defense
attorneys 2 filed in the United States District Court for the Northern District of Georgia on
21 February 2012 a motion to dismiss the indictment based on prosecutorial misconduct.
The motion was accompanied by a supporting memorandum and requested an evidentiary
hearing. (Gov't 11 May 2012 (first) mot. to dismiss, tab 11) The misconducts, PWC
alleges the government attorneys and agents committed, include:
• improperly pressured DSCP' s lead contracting officer to
change her positive evaluation of PWC - stating that she
would "definitely award the contract to PWC again" if
given the chance - into a qualified "might or might not
award" evaluation, because her favorable endorsement
would have negatively affected the Government's
investigation;
• instructed DSCP not to perform contractually mandated
performance assessment reports and evaluations, which
would have entitled PWC to a $160 million bonus, and
thus, may have undermined the Government's
investigation;
• interfered with the routine administration of the PV
Contracts in order to prevent PWC and DSCP from
resolving contractual disputes and interpretation issues[.]
(!d. at 2)
2
Skadden, Arps, Slate, Meagher & Flom LLP represents PWC in the District Court
criminal case.
5
16. On the second point above, PWC's prosecutorial misconduct memorandum
explains: "While the prosecution could not keep PWC from reaching the minimum
97.5% fill rate ... it could prevent PWC from achieving the requisite 'would definitely
award' CPAR evaluation." The memorandum alleges "[r]ather than risk having the
Philadelphia Supply Center provide PWC with a 'would definitely award'
recommendation, the prosecution simply directed DSCP to stop completing CPAR
evaluations altogether." (First mot. to dismiss, tab 11 at 28) The memorandum
continued stating: "To date ... Ms. Ford has yet to issue a final decision on PWC's claim
- which now stands at nearly $160 million excluding interest - and has extended the time
in which she expects to issue a final decision on at least six occasions" (id. at 29).
17. The DSCP employees alleged to have been involved in the issue of whether
the prosecution pressured DSCP to alter the positive evaluations ofPWC's performance
include COs Ford and Dlugokecki; DSCP's internal fraud counsel, Aditya McDuffy;
DSCP's section chief and CO Ford's immediate supervisor, Gary Shifton; DSCP's Chief
of Overseas Prime Vendor Program, Gordon Ferguson; and DLA Assistant General
Counsel, Normand Lussier (first mot. to dismiss, tab 11 at 16-18, 20). Among those
alleged to have been involved in the issue of whether the prosecution prevented DSCP
from completing additional PBDF performance evaluations include COs Ford and
Dlugokecki (id. at 28, 29).
PWC's Complaint before the Board
18. PWC's complaint in ASBCA No. 58078 summarized its case before the
Board as follows:
Beginning in 2005, and continuing through the date of
this Complaint, with the acquiescence or approval of the
Contracting Officers ("COs"), government officials employed
by the Department of Defense ("DoD"), including DSCP, and
the Department of Justice ("DoJ") conspired and acted in
concert to intentionally deprive PWC of its rights under
Contract No. SPM300-05-D-3128 (the "Contract" or the
"PV2 Contract"), breaching the Contract's express and
implied terms, and violating regulatory duties. In particular,
DSCP was obligated to periodically fairly and objectively
evaluate PWC's performance of the Contract. Based on those
objective evaluations, PWC could receive additional
payments in the form of higher distribution prices or fees.
Rather than fairly and objectively evaluating PWC's
performance, the COs, at the direction ofDoJ officials and
others, never issued any objectively honest evaluations, nor
6
authorized any additional payments. Had DoJ officials and
others not interfered with PWC's contractual rights, and had
the COs fulfilled their independent contractual and regulatory
duties, DSCP would have issued evaluations entitling PWC to
nearly $160 million in additional distribution fee payments.
In this Appeal, PWC seeks the $158,979,385.06 it is owed in
additional distribution fee payments, plus interest.
(Compl. at 1-2)
19. PWC's complaint repeatedly alleges elsewhere that DOJ interfered with
DSCP's administration of the PV2 Contract: PWC alleges that DSCP's failure to
properly evaluate PWC for a PBDF under the PV2 Contract was the direct result of the
interference of DOJ officials with routine government contract administration (compl.
~ 43); that a senior DOJ official increasingly intruded into DSCP's day-to-day operations
of the PV2 Contract (compl. ~53); and that DSCP officials were aware that they were not
fulfilling their contractual obligation and the reason DSCP did not evaluate PWC for
PBDFs was due to the DOJ official's direction (compl. ~ 94).
20. PWC's complaint in ASBCA No. 58078 sets out two counts: Count I seeks
relief based on "BREACH OF CONTRACT." PWC contends that "(t]he Contract
required DSCP to evaluate PWC every six months for the purpose of determining
whether PWC was entitled to the PBDF" (compl. ~ 136), and "DSCP has failed to
comply with its contractual obligations because of the existence of a DoJ investigation,
and the active interference ofDoJ officials" (compl. ~ 138). Count II seeks reliefbased
on DSCP's alleged "BREACH OF THE IMPLIED DUTIES OF COOPERATION,
NON-INTERFERENCE WITH WORK, AND GOOD FAITH AND FAIR DEALING."
PWC contends that DSCP breached the contract by "(1) failing to fulfill its contractual
duties; (2) interfering with PWC's performance; and (3) conspiring to deprive PWC of its
ability to reap the full benefits of the Contract" (compl. ~ 148).
Board Proceedings in ASBCA No. 5807821. The Board docketed PWC's 13 April2013 appeal as ASBCA No. 58078 on
the basis that the CO had failed to issue a decision on PWC's $158 million claim. On
11 May 2012, DSCP moved to dismiss the appeal (first mot. to dismiss). It made two
arguments: First, DSCP argued that the CO's 14 December 2011 letter stating that she
"expect[s] to issue a final decision on the claim on or before Friday, June 8, 2012," was
in compliance with 41 U.S.C. § 7103(f)(2)(B) because she "pinpointed a particular date
within which a decision would be issued" (first mot. to dismiss at 16-17). Second, DSCP
argues that PWC's appeal was premature and the CO's failure to issue a final decision
was reasonable so long as the civil qui tam and the criminal cases were pending in the
District Court (id. at 6, 17-18).
7
22. In our decision issued on 12 November 2013, we rejected both arguments.
We held the CO's qualified commitment to issue her decision on 8 June 2012 conditioned
upon the District Court rendering a decision on whether PWC committed fraud did not
comply with the requirement of 41 U.S.C. § 7103(t)(2)(B) and established case law. We
held also that despite the criminal and civil fraud cases pending before the District Court,
we have jurisdiction to interpret the PBDF clause and to determine what adjustments, if
any, PWC was entitled to under that clause. We said that, contrary to the established case
law for suspension or dismissal of a case pending the resolution of civil and criminal
cases in court, "the DOJ has not asked that Board adjudication ... be suspended or
dismissed ... pending resolution of the fraud cases in the District Court. Nor has the DOJ
or DSCP shown that Board adjudication of the contract rights of the parties will interfere
or prejudice the criminal and civil actions in the District Court." PWC, 13 BCA ~ 35,460
at 173,897.
PWC's Discovery in the Board Case
23. Shortly after the Board issued its decision on jurisdiction in ASBCA
No. 58078, PWC's counsel 3 before the Board served DSCP with discovery requests (mot.
to dismiss, tabs 4, 5). In reviewing PWC's discovery requests, we find numerous
requests seeking information relating to PWC's prosecutorial misconduct defense in the
District Court. For example, a number ofPWC's discovery requests seek information
relating to (1) communications between DoD agencies (DLA, DSCP, DCIS, OIG,
CENTCOM) and DOJ (USAO, FBI) concerning the evaluations ofPWC, the CPAR
process, or PBDFs (mot. to dismiss, tab 4 at 9, interrogatory no. 21); (2) DSCP's
employees' expressions of concern over alleged involvement or interference by DoD and
DOJ in the interpretation, administration, and performance of the PV Contracts (id. at 10,
interrogatory no. 25); (3) the identification of all individuals involved in the CO's
decision not to issue any CPARs for the PV2 Contract (id. at 14, interrogatory no. 53);
and (4) communications and meetings between DoD and DOJ leading up to DSCP's
decision not to complete any CPARs for the PV2 Contract (id. at 14-17, interrogatory
nos. 54, 60, 62, 68).
24. Other interrogatories broadly included subject matters (distribution fees,
discounts and rebates) in the Superseding Indictment. For example, PWC's discovery
requests seek ( 1) communications between DoD and DOJ regarding the "pricing,
delivered cost, distribution fees, discounts, rebates, sheltered income, case breaking, or
suppliers" (mot. to dismiss, tab 4 at 17, interrogatory no. 69); and (2) identification of any
investigation of other PV Contractors by DoD and DOJ "regarding pricing, delivered
cost, distribution fees, discounts, rebates, sheltered income, case breaking, or suppliers of
3
At the Board, PWC is represented by Vinson & Elkins LLP in Washington, DC.
8
local market ready items, fresh fruits and vegetables, bakery items, or dairy products" (id.
at 21, interrogatory no. 91).
Recent Filings with the District Court and the Board
25. Believing that the Board's decision supports their position, PWC's defense
attorneys in the District Court filed a supplemental brief on 4 December 2013 in support
of its 2012 motion to dismiss the indictment for prosecutorial misconduct (mot. to
dismiss, tab 6). As reflected in its supplemental brief, PWC read the Board's
12 November 2013 decision on jurisdiction as strong support of its argument that the
prosecutors committed misconduct in pressuring DSCP COs to downgrade its PV Bridge
Contract CPAR and to issue no CP ARs under the PV2 Contract (id. at 2). PWC viewed
the Board's decision on jurisdiction in the context of"due process" violations in the
criminal case (id. at 5-7).
26. On 7 January 2014, DOJ moved the District Court seeking an expedited
consideration of its earlier motion to enjoin PWC from using civil discovery at the Board
to gather evidence for the criminal case and to suppress any evidence so derived (mot. to
dismiss, tab 7). By way of background, DOJ's initial motion to enjoin PWC from using
civil discovery to gather evidence for the criminal case was filed in the District Court in
June 2012. That motion stemmed from the deposition of CO Ford in ASBCA No. 56022- a case unrelated to the criminal or civil fraud cases pending before the District Court -
in March 2012. Contrary to the parties' prior agreement to stay clear ofthe civil and
criminal fraud cases before the District Court, it was discovered that PWC's counsel at
the Board was live-streaming CO Ford's deposition to PWC's criminal defense counsel.
It remains unclear whether PWC's defense counsel participated in the deposition
electronically. See The Public Warehousing Company, ASBCA No. 56022, 13 BCA
~ 35,201. In the Board's subsequent ruling on certain questions posed but left
unanswered by CO Ford at the deposition, the Board provided the following general
ruling, among others, in its Discovery Order No. 1 on 7 June 2012:
4. Given the criminal and civil fraud cases pending
before the District Court in Atlanta, and given the
prosecutorial misconduct case before that Court, any inquiry
which encroaches or appear[ s] to encroach on the issues
raised in those cases, are unnecessary and counterproductive
for purposes of proceeding with ASBCA No. 56022.
27. In a letter dated 15 January 2014 to DSCP counsel of record in the Board
case, the United States Attorney for the Northern District of Georgia wrote that in
reviewing PWC's discovery requests in the Board case she was concerned that PWC
"will use the proceedings before the Armed Service[ s] Board of Contract Appeals ... to
further its aims in the criminal matter, and that further civil discovery in ASBCA
9
No. 58078 will compromise the ongoing criminal prosecution." The U.S. Attorney asked
DLA to seek a Rule 30 dismissal without prejudice in ASBCA No. 58078 "in light of the
ongoing criminal matter or, in the alternative, a stay pending the resolution of the
criminal matter." (Mot. to dismiss, tab 1 at 1)
28. The U.S. Attorney's letter points out that PWC's complaint in the Board case
as well as the discovery recently filed show that PWC seeks to litigate before the Board
the same issues currently pending in the District Court: PWC's motion to dismiss the
indictment alleges that DOJ committed misconduct by pressuring DSCP to change its
evaluation ofPWC, and to refrain from performing CPAR evaluations to preclude PWC
from receiving distribution fees it might otherwise be entitled to under the contract PBDF
clause; and PWC's complaint in ASBCA No. 58078 alleges the same facts in support of
its breach claims. The U.S. Attorney points out that PWC even referred to documents the
government produced in the criminal case in its complaint filed at the Board. (Mot. to
dismiss, tab 1 at 4, ,-r 13)
29. The U.S. Attorney's letter points out also that PWC's discovery in ASBCA
No. 58078 further supports overlapping issues in the criminal case: PWC had filed a
Motion to Compel Production of Communications Between the Prosecution and
DSCP/DLA in the criminal case arguing that the information is necessary to understand
the internal and external influences experienced by DSCP contracting personnel in the
administration of the PV Contracts; and PWC seeks the same discovery in ASBCA
No. 58078. Since PWC's motion to compel is still pending before the District Court, the
U.S. Attorney asserts that "PWC's discovery requests effectively would circumvent the
District Court's consideration of substantially similar discovery requests." (Mot. to
dismiss, tab 1 at 4-5, ,-r,-r 19, 21)
30. In addition to the pending motion to dismiss for prosecutorial misconduct case
PWC filed in defense of the criminal case, the U.S. Attorney points out that PWC also
seeks to discover at the Board "the solicitation of the PV-11 contract, the costs of the PV
Contracts, and the interpretation of contract terms related to pricing, delivered costs,
delivered fees, and discounts, [which] go to the heart of the fraud claims at issue in the
criminal case." (Mot. to dismiss, tab 1 at 6, ,-r 26) The U.S. Attorney's letter states that in
filing a supplemental brief in the District Court arguing that the Board decision on
"contract and jurisdictional issues" supports its case on prosecutorial misconduct is
further proof that PWC is using civil proceedings to bolster its defenses in the pending
criminal case (id., ,-r 28).
31. The U.S. Attorney's letter requests that the Board dismiss ASBCA No. 58078pending resolution of the criminal case based on ( 1) the "indefinite resolution" of the
motions before the District Court (i.e., PWC's motion for prosecutorial misconduct and
its motion to compel discovery, and DOJ's motion to enjoin PWC from using civil
discovery at the Board to gather evidence for the criminal case and to suppress evidence
10
so derived) and (2) "the inordinate length of time that may be required to resolve the
criminal matter as a whole" (mot. to dismiss, tab 1 at 9, ~ 45). In the alternative, the U.S.
Attorney requests a stay of discovery in ASBCA No. 58078 "pending the resolution of
the criminal matter" (id. at 10, ~ 46).
32. Forwarding the U.S. Attorney's letter, DSCP on 17 January 2014 moved to
dismiss ASBCA No. 58078 without prejudice pursuant to Rule 30, or in the alternative,
to stay proceedings in ASBCA No. 58078 pending resolution of the criminal matter.
Upon receipt ofDSCP's motion, the Board by letter dated 23 January 2014 directed
PWC's Board counsel to respond by 21 February 2014. Separately, the Board issued
Discovery Order No. 1 staying discovery in ASBCA No. 58078, "effective immediately,"
pending a ruling on DSCP's present motion to dismiss.
DECISION
We address first PWC's opposition to DSCP's current motion to dismiss based on
Rule 30 which PWC refers to as DSCP's second motion to dismiss. PWC contends this
second motion was strategically planned "as part of a scheme to delay the administration
of justice" with successive motions (opp'n at 4, 5). PWC also contends that DSCP's
current Rule 30 motion "is inextricably intertwined with the comity issue decided in the
First Motion" (opp'n at 8).
We do not believe DSCP deliberately reserved its Rule 30 dismissal as a part of its
litigation strategy to take a second shot at delaying proceedings. Although DSCP could
have moved for a Rule 30 dismissal initially, we believe it simply focused on other issues
and arguments. In our first decision, we did not extensively discuss the comity issue for
two reasons: First, as PWC observes, "DLA offered a less than compelling rendition of
the comity argument" (opp'n at 8), stating simply that "the contracting officer should
seek to avoid meddling in a matter before a United States District Court and avoid
making a separate decision on whether PWC committed fraud" (first mot. to dismiss,
gov't 20 July 2012 reply to app. opp'n at 9; PWC, 13 BCA ~ 35,460 at 173,898).
Second, contrary to the position it now takes, in its opposition to DSCP's first motion to
dismiss, PWC took the position that DSCP's "entire comity argument on the so-called
'first-to-file' rule ... simply does not apply to these proceedings," because "comity
becomes relevant only when the courts are presented with the same lawsuit, not merely
some overlapping issues" (first mot. to dismiss, app. opp'n at 15). PWC never argued
what it now argues- that "Rule 30 ... essentially enshrines the doctrine of comity" (opp'n
at 8). It is more likely that DSCP' s current motion to dismiss is in response to the reason
the Board gave for denying DSCP's first motion to dismiss: "We have received no
indication from the DOJ that for the CO to fulfill her contractual obligations under the
terms of the PV2 Contract would interfere or prejudice the ongoing civil and criminal
cases before the District Court." PWC, 13 BCA ~ 35,460 at 173,898.
11
We address next DSCP's motion to dismiss pursuant to Rule 30. The Constitution
does not require a stay of civil proceedings pending the outcome of criminal proceedings.
Afro-Lecon, Inc. v. United States, 820 F.2d 1198, 1202 (Fed. Cir. 1987); Securities and
Exchange Commission v. Dresser Industries, Inc., 628 F.2d 1368, 1375 (D.C. Cir. 1980),
cert. denied, 449 U.S. 993 (1980). Courts have long recognized, however, that there is "a
clear-cut distinction between private interests in civil litigation and the public interest in a
criminal prosecution, between a civil trial and a criminal trial, and between the Federal
Rules of Civil Procedure and the Federal Rules of Criminal Procedure." Campbell v.
Eastland, 307 F.2d 478, 487 (5th Cir. 1962), cert. denied, 371 U.S. 955 (1963); United
States v. Kordel, 397 U.S. 1, 12 n.27 (1970). In civil cases, for example, depositions may
be taken as a matter of right by notice without permission of the court. FED. R. CIV. P.
30. In criminal cases, depositions can only be taken by order of the court, and on notice
to all parties and under "exceptional situations." FED. R. CRIM. P. 15. Moreover, except
as permitted, the FED. R. CRIM. P. 16(a)(2) does not authorize the discovery of reports,
memoranda, or other internal government documents made by an attorney for the
government or other government agent in connection with investigating or prosecuting
the case.
Recognizing the rules governing criminal discovery are far more restrictive than
those provided in the Federal Rules of Civil Procedure, "[a] litigant should not be
allowed to make use of the liberal discovery procedures applicable to a civil suit as a
dodge to avoid the restrictions on criminal discovery" in obtaining evidence that litigant
would not otherwise be entitled to for use in a criminal suit. Campbell, 307 F .2d at 487.
Courts are given discretion to stay civil proceedings, postpone civil discovery, or impose
protective orders and conditions when the interests of justice so require. Dresser
Industries, 628 F.2d at 1375. The exercise of discretion must be made in the light ofthe
particular circumstances of the case. /d.
As the situation now stands, there are parallel proceedings at the Board and at the
District Court: At the Board, the central issue for resolution in ASBCA No. 58078 is
whether DSCP breached the PV2 Contract in refusing to issue CPAR evaluations without
which PWC's distribution fees could not be adjusted as provided under the PBDF clause.
At the District Court, in moving to dismiss the indictment on the basis of prosecutorial
misconduct, PWC has put in issue whether government attorneys and agents committed
misconduct by pressuring the CO and other DSCP personnel to refrain from performing
the contractually mandated performance evaluations (CPARs) to deprive additional
distribution fees PWC arguably would receive. Thus, even though PWC seeks different
relief at the Board (breach damages) and at the District Court (dismissal of the indictment
for prosecutorial misconduct), establishing the underlying cause or causes of the alleged
12
breach and the alleged prosecutorial misconduct will necessarily involve the use of the
same witnesses and documents. 4
Recent discovery requests filed by PWC in ASBCA No. 58078 confirm that its
breach claim at the Board and its prosecutorial misconduct defense at the District Court
are inseparable: In ASBCA No. 58078, PWC requests information and documents
relating to (1) communications between DoD agencies (DLA, DSCP, DCIS, OIG,
CENTCOM) and DOJ (USAO, FBI) concerning the evaluations ofPWC, the CPAR
process, or PBDFs; (2) DSCP's employees' expressions of concern over alleged
involvement or interference by DoD and DOJ in the interpretation, administration and
performance of the PV Contracts; (3) the identification of all individuals involved in the
CO's decision not to issue any CPARs for the PV2 Contract; and (4) communications and
meetings between DoD and DOJ leading up to DSCP's decision not to complete any
CPARs for the PV2 Contract (SOF -,r 23). Additionally, we are told that PWC has filed a
Motion to Compel Production of Communications Between the Prosecution and
DSCP/DLA. With that motion still pending in the District Court, we agree with the U.S.
Attorney that PWC's discovery requests at the Board, if allowed, "effectively would
circumvent the District Court's consideration of substantially similar discovery requests."
(SOF -,r 29)
That PWC's criminal defense attorneys would read the Board's decision on
jurisdiction as support for "due process" violations and file a supplemental brief to its
motion to dismiss for prosecutorial misconduct in the District Court, further highlights
the overlapping nature of the cases at the Board and at the District Court.
Leaving aside its prosecutorial misconduct defense in the District Court, PWC's
recent discovery requests at the Board broadly inquired into areas relating to pricing,
delivered costs, distribution fees, discounts, rebates and local market ready item (LMRI)
suppliers under the PV Contracts (SOF -,r 24 ). These matters coincide with the matters
that are the bases ofthe six-count indictment (SOF -,r-,r 8-12).
Conceding they are interrelated, PWC argues that the District Court cases can
proceed in that court focusing on the legal impact of the conduct of DOJ prosecutors, and
the Board case can proceed focusing on the legal impact of the conduct ofDLA
contracting officials (opp'n at 14). We have considered the imposition of protective
orders as a way forward in ASBCA No. 58078. Since DSCP attorneys are not totally
familiar with the prosecutors' case, we are persuaded that it would impose an impossible
burden on DSCP attorneys to protect DOJ's interests in Board proceedings. Furthermore,
with PWC pushing the envelope of permissible discovery, and with DOJ and DSCP
4
With the criminal case taking center stage, we need not consider the consequences of
proceeding at the Board in relation to the District Court qui tam case which was
administratively closed (SOF -,r 13 ).
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trying to contain discovery at every tum, navigating the fine line between what goes on at
the Board and what goes on in the District Court will be extraordinarily onerous, if not
outright impossible. We believe the risks of going forward under a protective order far
outweigh any benefits that can be reaped.
In addition to potentially compromising the criminal case in the District Court
based on overlapping issues, the U.S. Attorney requests that in light of the indefinite
resolution of various motions still pending in the District Court- PWC's motion for
prosecutorial misconduct and its motion to compel discovery, and DOJ's motion to
enjoin PWC from using civil discovery before the Board to gather evidence for the
criminal case - and the inordinate length of time that may be required to resolve the
criminal matter as a whole, that ASBCA No. 58078 be dismissed without prejudice
pursuant to Board Rule 30, and in the alternative, discovery in ASBCA No. 58078 be
stayed pending the resolution of the criminal matter (mot. to dismiss, tab 1 at 9-10, ,-[,-[ 45,
46).
Board Rule 30 allows us to suspend proceedings for good cause. The Rule also
states that the Board may, at its discretion dismiss appeals without prejudice where the
suspension has continued or may continue for an inordinate length of time. Dismissal
without prejudice under Rule 30 would be deemed to be with prejudice unless either
party or the Board acts within three years to reinstate the appeal.
The authority of the ASBCA Judge "is no different from that of federal trial courts
which, by virtue of their case management authority, are given broad discretion to
manage the litigation on their dockets." Metadure Corp. v. United States, 6 Cl. Ct. 61, 67
(1984); Turbomach, ASBCA No. 30799, 87-2 BCA ,-[ 19,756 at 99,953 ("this Board has
the inherent power to control the discovery process in appeals before it").
The Fifth Circuit Court of Appeals has said: "Administrative policy gives priority
to the public interest in law enforcement. This seems so necessary and wise that a trial
judge should give substantial weight to it in balancing the policy against the right of a
civil litigant to a reasonably prompt determination of his civil claims or liabilities."
Campbell, 307 F.2d at 487; Palm Springs General Trading and Contracting
Establishment, ASBCA No. 56290 et al., 10-1 BCA ,-[ 34,406 at 169,867 (we dismissed
the three appeals without prejudice because to proceed with overlapping issues would
interfere with the District Court case and would be counterproductive in terms of time
and effort). The criminal case in the District Court does not end with obtaining the
indictment more than four years ago or the exchange of over 27 million pages of
documents (opp'n at 2). We know there are pending motions before the court covering
substantially similar issues before the Board. And, from where we sit, we can only
assume that the criminal case is proceeding to trial. Moreover, the speed of resolution of
the criminal case is entirely beyond our control. This factor also weighs in favor of
dismissing ASBCA No. 58078 without prejudice. WEDJ/Three C's, Inc., ASBCA
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Nos. 53747, 53756, 05-2 BCA ~ 33,070 at 163,898 (Rule 30 dismissal warranted when
course of events not within the Board's control and may continue for an indefinite length
of time.).
Given the public policy granting priority to the public interest in law enforcement,
the overlapping nature of the issues in ASBCA No. 58078 and those in the criminal case
in the District Court and the potential for compromising DOJ' s criminal prosecution and
possibly interfering with the District Court's rulings and decisions in being required to go
forward, we conclude that DOJ and DSCP have made out a clear case for dismissal
without prejudice under Rule 30.
CONCLUSION
For the reasons stated, ASBCA No. 58078 is dismissed without prejudice pursuant
to Rule 30. Either party has three years from the date of this decision to move to reinstate
this appeal or this dismissal will be deemed to be with prejudice.
Dated: 10 April2014
.,
•
Administrative Judge
Armed Services Board
of Contract Appeals
I concur I concur
~~~ ~KLEFORD-
Administrative Judge Administrative Judge
Acting Chairman Vice Chairman
Armed Services Board Armed Services Board
of Contract Appeals of Contract Appeals
15
I certify that the foregoing is a true copy of the Order of Dismissal of the Armed
Services Board of Contract Appeals in ASBCA No. 58078, Appeal of Public
Warehousing Company K.S.C., rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
16