Algese 2 S.C.A.R.L. v. United States

In the United States Court of Federal Claims
No. 15-1279C
(Filed Under Seal: August 18, 2016)
(Reissued for Publication: August 26, 2016)
************************************** *
*
ALGESE 2 s.c.a.r.l., *
*
Plaintiff, *
*
v. * Motion for Stay Pending
* Appeal; Factors to be
THE UNITED STATES, * Considered; Analysis of
* Likelihood of Success on the
Defendant, * Merits; Irreparable Harm;
* Balance of Harms to
and * Government; Effect on Public
* Interest.
LOUIS BERGER AIRCRAFT SERVICES, *
INC., *
*
Defendant-Intervenor. *
*
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Kristen E. Ittig, with whom were Christopher R. Yukins and Lauren J. Schlanger, Arnold
& Porter LLP, Washington, D.C., for Plaintiff.
Daniel S. Herzfeld, with whom were Benjamin C. Mizer, Principal Deputy Assistant
Attorney General, Robert E. Kirschman, Jr., Director, and Douglas K. Mickle, Assistant
Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice,
Washington, D.C., Scott E. Miller and Eva Escalante, Counsel, Naval Supply Systems
Command, Department of the Navy, for Defendant.
David M. Nadler, with whom were Adam Proujansky, David Y. Yang, and Philip E.
Beshara, Blank Rome LLP, Washington, D.C., for Defendant-Intervenor.
OPINION AND ORDER1
WHEELER, Judge.
Plaintiff, Algese 2 s.c.a.r.l. (“Algese”), requests a stay pending its appeal of this
Court’s July 21, 2016 judgment, in favor of the Government, lifting the permanent
injunction and allowing the Government to proceed with the contract award to Defendant-
Intervenor Louis Berger Aircraft Services. After considering the parties’ positions, the
Court determines that Algese is unlikely to succeed on the merits of its appeal.
Additionally, both the Government and the public interest would be harmed by granting
the stay pending appeal given the termination of the bridge contract between the
Government and Louis Berger Aircraft Services. For these reasons, Plaintiff’s motion to
stay pending appeal is DENIED.
Background
Algese filed a post-award bid protest challenging the Navy’s award of a contract for
air terminal and ground handling services at Naval Station Rota, Spain to Louis Berger
Aircraft Services on the basis that Louis Berger Aircraft Services materially misrepresented
and concealed its parent corporation’s public corruption and fraud. Algese 2 s.c.a.r.l. v.
United States, 125 Fed. Cl. 431 (2016). On March 4, 2016, the Court found for Algese and
set aside the Navy’s award to Louis Berger Aircraft Services. Id. at 445. On March 28,
2016, the Government filed a motion for reconsideration of the Court’s opinion and order.
In response, the Court vacated its judgment and remanded the case to the Navy for further
consideration. Algese 2 v. United States, --- Fed. Cl. ---, 2016 WL 4098754. After
considering approximately 2,500 pages of new information, the Navy affirmed its award
to Louis Berger Aircraft Services as consistent with the goals of the anti-corruption
program. Id. at 3. The Court reviewed and deferred to the Navy’s assertion and lifted the
permanent injunction on July 21, 2016. Id. at 11.
Algese filed an appeal to the Court of Appeals for the Federal Circuit on August 1,
2016. In addition, on August 8, 2016, Algese filed a motion to stay judgment pending
appeal with this Court. The parties have now fully briefed Plaintiff’s motion to stay
judgment pending appeal.
1
The Court issued this decision under seal on August 18, 2016 and invited the parties to submit proposed
redactions of any competitive-sensitive, proprietary, confidential, or other protected information on or
before August 25, 2016. By that date, none of the parties proposed redactions. Thus, the Court reissues
the opinion in its entirety for publication.
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Discussion
Pursuant to RCFC Rule 62(c), the Court has the authority to grant an injunction
pending an appeal. Pursuant to Rule 62(c), “[w]hile an appeal is pending from an
interlocutory order or final judgment that grants, dissolves, or denies an injunction, the
court may suspend, modify, restore or grant an injunction on terms for bond or other terms
that secure the opposing party’s rights.” The movant carries the burden of persuasion
because an injunction is “‘an extraordinary and drastic remedy.’” OAO Corp. v. United
States, 49 Fed. Cl. 478, 480 (2001) (internal quotation omitted).
In determining whether to grant an injunction, the Court must consider the following
four factors: “(1) whether the movant has made a strong showing that it is likely to succeed
on the merits; (2) whether the movant will be irreparably injured absent an injunction; (3)
whether issuance of the injunction will substantially injure the other interested parties; and
(4) where the public interest lies.” Standard Havens Prods., Inc. v. Gencor Indus., Inc.,
897 F.2d 511, 512 (Fed. Cir. 1990) (quoting Hilton v. Braunskill, 481 U.S. 770, 776
(1987)). The four factors do not have equal weight and cannot be “reduced to a set of rigid
rules.” Id. at 512-13 (quoting Hilton, 481 U.S. at 776). Even if a movant cannot
demonstrate a strong showing of possible success on the merits, a demonstration that there
is a substantial case on the merits and that the “balance of hardships tips decidedly toward
plaintiff” will suffice to grant the injunction. Akima Intra-Data, LLC v. United States, 120
Fed. Cl. 25, 28 (2015) (quoting Charlie’s Girls, Inc. v. Revlon, Inc., 483 F.2d 953, 954 (2d
Cir. 1973)). Thus, in order to be successful, a movant must show either that it has a “strong
likelihood of success on appeal” or that it has a “substantial case on the merits” and that
the other three factors weigh in movant’s favor. Standard Havens Prods., 897 F.2d at 513
(quoting Hilton, 481 U.S. at 778). Here, Algese has shown neither a strong likelihood of
success nor a substantial case on the merits. Moreover, the balance of harms and public
interest weigh strongly in favor of the Government.
1. Likelihood of Success on the Merits
“[A]n issue of first impression weighs in favor of finding a ‘substantial case on the
merits,’ though not decisively.” Akima, 120 Fed. Cl. at 28 (citing Jacobson v. Lee, 1 F.3d
1251 (Fed. Cir. 1993)). On appeal, Algese makes three claims, all of which it asserts are
matters of first impression. Accordingly, if Algese successfully demonstrates issues of
first impression, and can show that the equitable factors weigh in its favor, then the stay
should be granted.
First, Algese claims that whether the Court is “required” to defer to the agency
determination on bidder responsibility is a question of first impression when that agency
“ignored the Court’s prior determinations of fact and law.” Pl.’s Reply at 4. Algese claims
the contracting officer’s new findings upon remand “directly contradicted the factual and
legal conclusions of the Court’s decision of March 4, 2016.” Id. at 5.
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The appropriate legal standard for review of agency responsibility decisions is
“considerable” and “wide” deference. Bender Shipbuilding & Repair Co. v. United States,
297 F.3d 1358, 1362 (Fed. Cir. 2002); Impressa Construzioni Geom. Domenico Garufi v.
United States, 283 F.3d 1324, 1334-35 (Fed. Cir. 2001). Specifically, “[s]ection 706 of the
APA provides, in relevant part, that a ‘reviewing court shall . . . hold unlawful and set aside
agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.’” Centech Grp., Inc. v. United States,
554 F.3d 1029, 1037 (Fed. Cir. 2009). Historically, courts have found agency procurement
processes arbitrary and capricious when the agency “entirely failed to consider an
important aspect of the problem, offered an explanation for its decision that runs counter
to the evidence before the agency, or is so implausible that it could not be ascribed to a
difference in view or the product of agency expertise.” Motor Vehicle Mfrs. Ass’n of U.S.,
Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).
Algese claims that the Court erred by deferring to the Navy’s determinations upon
remand because those determinations overruled the findings of the Court. Pl.’s Reply at 6.
However, the Court did not blindly defer to the Navy’s determination. It reviewed the
determination in light of a newly informed administrative record and found the
determination reasonable. The Court explicitly noted that the appropriate standard was one
of rational review and applied that standard in this case approximately twenty times in light
of that new information. See Algese 2, 2016 WL 4098754 at *3, *6-10. Moreover, the
Navy clearly did not ignore the Court’s opinion. The Court allowed for disagreement with
its opinion, so long as the Navy explained why it came to a different conclusion. The Navy
produced approximately 2,500 pages of new information supporting its responsibility
decision. The extensive remand Administrative Record meets the burden of explanation
placed upon the Navy by this Court. While Algese asserts that the Navy overruled the
Court’s findings, the Navy instead offered new factual information relevant to its
determination. The ways in which courts have held agency procurement decisions arbitrary
and capricious do not apply to this case. See Motor Vehicle Mfrs., 463 U.S. at 43. The
Navy did not “entirely fail” to consider Louis Berger Aircraft Services’ past record, offer
an explanation that is inconsistent with the evidence before it, or render an implausible
decision. Id.
Importantly, the Court vacated its judgment on March 29, 2016, when it remanded
the case to the Navy. A vacated judgment has no preclusive force, and the decisions upon
which the judgment was based can be reconsidered. Exxon Corp. v. United States, 931
F.2d 874, 877 (Fed. Cir. 1991). One goal of the remand was to allow the Navy to consider
whether new information supported a conclusion different from the Court’s determination.
The Court allowed for the Navy to disagree with its findings so long as the Navy explained
how it reached a different conclusion. Given this, holding the Navy to all of the Court’s
prior determinations would make such a remand purposeless.
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For all these reasons, Algese has not established a substantial case on the merits as
to its first purported issue.
Second, Algese claims that the Court’s deference to the Navy’s determination
violates administrative law because the Navy “ignored” Louis Berger Aircraft Services’
past record of poor integrity. Pl.’s Reply at 8. The Government claims that the past record
of poor integrity only implicated Louis Berger Aircraft Services’ affiliates, which had no
meaningful involvement in the contract, and not Louis Berger Aircraft Services. Def.’s
Response at 11. According to Algese, Louis Berger as a whole suffered from broader
“business ethics failures in the broader Louis Berger compliance system” that directly
affect Louis Berger Aircraft Services. Pl.’s Reply at 8. The issue is whether the
Government’s determination that Louis Berger Aircraft Services did not have an adverse
record amounts to ignoring Louis Berger Aircraft Services’ record.
The past record of an affiliate of the bidder is only relevant to the award if the
affiliate will have meaningful involvement with the contract. Linc Gov’t Servs., LLC v.
United States, 96 Fed. Cl. 672, 722 (2010). An agency’s determination of what is relevant
in the record is owed deference by courts. Glenn Defense Marine (Asia), PTE Ltd. v.
Unites States, 720 F.3d 901, 911 (Fed. Cir. 2013). The Navy considered Louis Berger
Aircraft Services’ past performance and found no adverse history of poor integrity. It
further determined that the poor record of Louis Berger Aircraft Services’ affiliates was
not relevant to the responsibility decision because the affiliates would have no meaningful
involvement with the contract. Def.’s Response at 11. The Government does not assert
that Louis Berger has no integrity concerns, but that those integrity concerns do not
preclude Louis Berger Aircraft Services from performing the contract. Algese suggests
that finding a portion of the record irrelevant constitutes ignoring it, but it does not. In
order to make this determination, the Navy had to consider the records of employees and
determine whether they were relevant. This determination simply does not amount to
ignoring the issue. Therefore, Algese has not established a substantial case on the merits
as to its second purported issue.
Third, Algese claims that the Court erred in granting the Government’s motion to
dismiss Count III of the amended complaint. Algese asserts unfair and unequal
procurement processes based upon a comparison of the government’s discussions with
Louis Berger Aircraft Services in the Sigonella procurement and with Algese in the Rota
procurement. Pl.’s Reply at 10. During Sigonella, the Navy informed Louis Berger
Aircraft Services that it would need to lower its price in order to succeed in its bid, but the
Navy did not inform Algese of its need to lower its bid in the Rota procurement. On
February 8, 2016, the Court granted the Government’s motion to dismiss because
considering the claim would have required the Court to review government action that was
not before it and, thus, was not within its jurisdiction. Dkt. No. 58. Algese claims that it
can demonstrate the Navy’s unequal and unfair practice without reference to the Sigonella
procurement. Pl.’s Mot. at 10. Algese also claims merely showing that the Navy’s
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behavior during the Sigonella procurement was abnormal is sufficient to sustain its claim.
Pl.’s Reply at 10.
The Court agrees with the Defendant and Defendant-Intervenor that Algese has not
demonstrated how such a claim of unequal treatment could be sustained without reference
to the Sigonella procurement, which is the basis for the purportedly unfair treatment.
Algese even includes a table comparing the language of the two procurement processes as
evidence of the unequal treatment. In response, Algese claims that the only relevance of
the Sigonella procurement process is to show that “it was not normal for the Navy’s
contracting officer to provide pricing information to one offeror that made it almost certain
that the favored offeror would win. . . .” Pl.’s Reply at 10. This response also is unlikely
to succeed. The FAR allows agencies to engage in discussions with offerors regarding
price and does not require agencies to engage in similar discussions with all offerors. 48
C.F.R. § 15.306(d). There is no requirement of normality or uniformity in discussions with
offerors. Algese has failed to show that it has a substantial case on the merits as to its third
purported issue.
2. Irreparable Harm
Algese claims it will be irreparably harmed by the lost opportunity to compete on a
level playing field for the contract. Pl.’s Reply at 12. Its sole evidence is that the Court
already found irreparable harm due to the unfair procurement process in its March 4, 2016
decision. Algese 2, 125 Fed. Cl. at 445. However, the facts that led the Court to conclude
that there had been an unfair procurement process were re-evaluated during the Navy
remand and accounted for in this Court’s July 21, 2016 opinion. The Court found the
Navy’s procurement process consistent with the goals of the anti-corruption program, so
the loss of opportunity to compete on a level playing field is no longer relevant. Algese 2,
2016 WL 4098754 at *11. The loss of a contract is not enough without more to show
irreparable harm or warrant a stay pending appeal. Akima, 120 Fed. Cl. at 28 (citing
CRAssociates, Inc. v. United States, 103 Fed. Cl. 23, 26 (2012)). Thus, Algese has not
demonstrated irreparable harm.
3. Balance of Harms
The Court must weigh the hardships a plaintiff would suffer absent an injunction
against the harm such an injunction would inflict on the Government. Sheridan Corp. v.
United States, 94 Fed. Cl. 663, 670 (2010). For a bid protest, the harm suffered by the
Government needs to be exceptional to warrant a denial of injunctive relief. PGBA, LLC.
V. United States, 57 Fed. Cl. 655, 663 (2003).
The Government argues that it would be significantly harmed by an injunction
pending appeal because its bridge contract with Louis Berger Aircraft Services expired on
July 31, 2016, and re-processing a new bridge contract would be very costly and threaten
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the functioning of Naval Station Rota. Def.’s Response at 15. The bridge contract expired
on July 31, 2016 and could have been renewed. However, relying upon the Court’s July
21, 2016 judgment in its favor and the fact that the Navy could not have both a bridge
contract and the protested contract in place at the same time, the Navy elected not to renew
the bridge contract and initiated the contract in question to begin on August 1, 2016. Algese
argues that the Government took advantage of the expiration date of the bridge contract to
“silence the whistleblower” and should have elected to renew the bridge contract. Pl.’s
Reply at 11.
This Court previously found that the Government had not shown that it would suffer
exceptional harm by an injunction due to the presence of a bridge contract to maintain
continuous services at Rota. Algese 2, 125 Fed. Cl. at 445. However, that fact has now
changed. There is no currently existing bridge contract to maintain continuous services at
Rota. Rota serves a vital role in the military operations in Europe, North Africa and the
Middle East and the Government would surely be harmed by an interruption in Rota’s
srvices. Def.’s Response at 15-16. If the stay pending appeal is granted, the Government
would be forced to undergo competition for a new bridge contract which may be laborious
and result in the disruption of service at Rota. Def.’s Response at 17.
Algese’s claim that the Government acted suspiciously in quickly terminating the
bridge contract and simply could have renewed the contract to maintain the status quo is
irrelevant for the sake of evaluating whether the Government will be harmed by a stay
pending appeal. The Government, albeit acting very quickly, terminated the bridge
contract and initiated the new contract within the limits of the law. The lack of a currently
enforceable bridge contract significantly increases the harm the Government would suffer
both in the potential disruption of Naval Station Rota and the cost of procuring a new bridge
contract. For these reasons, the balance of harms weighs in favor of denying the stay
pending appeal.
4. Harm to Public Interest
The public has a strong interest in maintaining the integrity of the procurement
process. Sys. Appl’n & Techs., Inc. v. United States, 100 Fed. Cl. 687, 721 (2011). The
Court’s March 4, 2016 decision found that the public’s interest in maintaining the integrity
of the procurement process weighed in favor of Algese. Now, two things have changed.
First, the Navy’s remand decision, which the Court found reasonable, shows that the
procurement process did not lack integrity. Second, the absence of a bridge contract now
makes an injunction a threat to national security and international stability. When national
security is at issue, the interest of maintaining a competitive procurement process is
outweighed. McAfee, Inc. v. United States, 111 Fed. Cl. 696, 715 (2013). Rota is a central
asset to both national military operations and international organizations such as NATO
and the United Nations. See Def.’s Response at 15-16. Moreover, the Government is
concerned that negotiating a bridge contract, and any associated delay, will cause unrest
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among the 172 Spanish employees who already sabotaged equipment and went on strike
during previous labor negotiations in 2013. Id. at 16-17. The risk posed to the proper
functioning of the nation’s military bases outweighs the public interest in maintaining the
integrity of the procurement process, especially given that such integrity is also protected
by the appeals process. The public’s interest in maintaining national security strongly
weighs in favor of denying Plaintiff’s motion for a stay pending appeal.
Conclusion
Under the current circumstances, injunctive relief is not proper in this case. Algese
fails to demonstrate that the four necessary factors weigh in its favor. Algese is unlikely
to succeed on the merits. In addition, the equitable considerations do not weigh in Algese’s
favor. Instead, the equitable considerations support denying the stay in order to prevent
substantial hardship to the Government and to protect the public interest.
For these reasons, Algese’s motion to stay judgment pending appeal is DENIED.
This decision is filed under seal. On or before August 25, 2016, counsel for the
parties shall carefully review this opinion for competition-sensitive, proprietary,
confidential or other protected information and submit to the Court any proposed
redactions to this opinion before it is released for publication. The parties are requested to
minimize their requested redactions so that the Court may publish as much of the decision
as possible.
IT IS SO ORDERED.
s/ Thomas C. Wheeler
THOMAS C. WHEELER
Judge
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