Ingalls Shipbuilding, Inc. v. U.S.

• Citation: 857 F.2d 1448
• Decision Date: 29 September 1988
• Docket Number: No. 88-1203,88-1203
• Parties: , 11 Fed.R.Serv.3d 1342, 35 Cont.Cas.Fed. (CCH) 75,565 INGALLS SHIPBUILDING, INC., Plaintiff-Appellee, v. The UNITED STATES, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

Page 1448

857 F.2d 1448

57 USLW 2248, 11 Fed.R.Serv.3d 1342,

35 Cont.Cas.Fed. (CCH) 75,565

INGALLS SHIPBUILDING, INC., Plaintiff-Appellee, v. The UNITED STATES, Defendant-Appellant.

No. 88-1203.

United States Court of Appeals Federal Circuit.

Sept. 29, 1988.

Suggestion for Rehearing In Banc Declined Jan. 17, 1989.

David V. Anthony, Pettit & Martin, Washington, D.C., argued for plaintiff-appellee. With him on the brief were Gregory A. Smith, Paul C. Fuener and Maryanne R. Lavan. Also on the brief were Norman L. Roberts, William J. Powers, Jr. and N. French Caldwell, Ingalls Shipbuilding, Inc., Pascagoula, Miss.

Helene M. Goldberg, Senior Trial Counsel, Commercial Litigation Branch, Dept. of Justice, Washington, D.C., argued for defendant-appellant. With her on the brief were John R. Bolton, Asst. Atty. Gen., David M. Cohen, Michael F. Hertz, Directors and Robert L. Ashbaugh, Deputy Director.

Before ARCHER and MAYER, Circuit Judges, and BALDWIN, Senior Circuit Judge.

MAYER, Circuit Judge.

OPINION

This is an appeal from a decision of the United States Claims Court, 13 Cl.Ct. 757 (1987), which, as a discovery sanction under RUSCC 37(b)(2)(A), precluded the government from introducing any evidence that the Ingalls Shipbuilding Division of Litton Systems, Inc. (Litton) engaged in fraud in establishing its claim for an equitable adjustment on its government contract to construct nuclear submarines, and entered judgment for Litton. We reverse.

Background

This case has a long and complex history which began in 1968 when Litton and the United States Navy entered into a contract to construct three nuclear attack submarines. In 1970, Litton submitted a claim to the government contracting officer seeking approximately $34 million for additional costs allegedly incurred as a result of government delays. The contracting officer issued a decision that awarded Litton a $3.8 million equitable adjustment, but denied the remainder of its claim. Litton then appealed to the Armed Services Board of Contract Appeals (ASBCA), which, after a sixty-nine day trial, awarded Litton a $17,361,586 equitable adjustment. Ingalls Shipbuilding Div., Litton Sys., Inc., 76-1 BCA p 11,851 (ASBCA 1976). Pursuant to an agreement between Litton and the government, the full amount of the ASBCA award was conditionally paid to Litton pending review in the Claims Court, ^* as permitted by S & E Contractors, Inc. v. United States, 406 U.S. 1, 15, 92 S.Ct. 1411, 1419, 31 L.Ed.2d 658 (1972).

Soon thereafter, the government began a series of grand jury investigations into Litton's claim. On April 6, 1977, a grand jury indicted Litton on one count of submitting a false claim. The same day, Litton filed suit in the Claims Court seeking enforcement of the ASBCA award. In response, the government filed a counterclaim and special plea in fraud, arguing that the ASBCA award was subject to forfeiture under 28 U.S.C. Sec. 2514.

Litton then submitted a set of interrogatories to secure specific information about the government's fraud allegations. The government timely responded to the interrogatories, but its answers were deemed inadequate by Litton. Accordingly, Litton moved for discovery sanctions or, in the alternative, to compel the government to respond more fully. In a one-sentence order, the Claims Court ruled that Litton's motion was "allowed as to the second alternative."

Shortly thereafter, the civil action in the Claims Court was stayed pending resolution of the criminal proceedings. The criminal case was dismissed for prosecutorial misconduct by the District Court for the Eastern District of Virginia, but on appeal, that decision was reversed. United States v. Litton Sys., Inc., 573 F.2d 195 (4th Cir.1978). Following remand and transfer to the District Court for the Southern District of Mississippi, the case was dismissed for failure to prosecute because of a five-year delay following indictment. That decision was reversed on appeal as well. United States v. Litton Sys., Inc., 722 F.2d 264 (5th Cir.1984).

The criminal trial proceeded, and in December 1984, Litton was found not guilty of criminal fraud. Following the acquittal, the government requested additional time to decide whether it would continue to defend against enforcement of the ASBCA award in this case. After an eight-month review of the evidence, the government elected to proceed.

On August 1, 1985, a status conference was held before the Claims Court. Principal among the matters discussed was the government's still outstanding interrogatory answers. In response to questioning by the court, Litton acknowledged that it had obtained much of the government's evidence of fraud during the criminal trial. Further, it said that it doubted "discovery would be extensive in any sense," and that it did not want the government to provide any information that it already had. On the other hand, Litton expressly said it wanted the government to provide it with certain information, particularly about the alleged fraud before the ASBCA. Litton asked the court to require the government to comply with the 1977 order compelling it to respond more fully to Litton's interrogatories. The court observed that when the civil proceedings were reactivated the order to compel discovery went "into effect by its own force;" it issued an order, dated August 9, 1985, stating that by September 4, 1985, the government was required to provide more complete responses to the nine interrogatories that were the subject of the 1977 order.

The government filed a set of supplemental answers to the interrogatories, but Litton again found them inadequate, and filed a motion for sanctions under RUSCC 37(b)(2)(A). It also argued that the Claims Court had no jurisdiction over the government's counterclaim and special plea in fraud, and that because the civil fraud statute was punitive, the trial of the civil case would result in double jeopardy.

The court rejected the jurisdictional challenge and did not reach the constitutional argument, but it granted Litton's motion for sanctions. According to the court, the government's interrogatory answers were overly broad, evasive and incomplete. "The interrogatories in question here were designed to find out exactly what the fraud was.... It is clear then that when allegations of fraud are in the air the alleging party has a duty to inform the opposing party of the exact actions which are allegedly fraudulent. This requirement is not satisfied by broad assertions that all is fraudulent; rather, specific facts must be averred so that the allegedly fraudulent party can present facts to deal with these charges." 13 Cl.Ct. at 768-69.

The Claims Court determined that the government's inadequate discovery responses were not due to "personal contumacious behavior by ... counsel," and it found no evidence that "the government had material indicating fraud and didn't provide it." Instead, the court faulted the government for "attempt[ing] to present a case of fraud where evidence for that case clearly does not exist." In the court's view, there was a "basic lack of any foundation for [the government's] claim other than institutional momentum." Id. at 769.

As a sanction, the court precluded the government from proving any of its claims of fraud. This was tantamount to dismissal because fraud was the government's only defense to the finality of the ASBCA decision. Accordingly, the court entered judgment in favor of Litton for $17,361,586.

Discussion

A.

"Delay and excessive expense now characterize a large percentage of all civil litigation. The problems arise in significant part, as every judge and litigator knows, from abuse of the discovery procedures available under the [Federal] Rules." 446 U.S. 995, 999 (1980) (Powell, J., dissenting from adoption of amendments to the Federal Rules of Civil Procedure). To combat abuse of the discovery system, RUSCC 37, which parallels Fed.R.Civ.P. 37, provides the Claims Court with an arsenal of discovery sanctions designed to discourage dilatory practices and encourage full disclosure of relevant information prior to trial. RUSCC 37 in pertinent part provides:

(2) Sanctions against a party. If a party ... fails to obey an order to provide or permit discovery ... the court may make such orders in regard to the failure as are just and among others the following:

(A) An order that the matters regarding which the order was made or any other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order;

(B) An order refusing to allow the disobedient party to support or oppose designated claims or defenses, or prohibiting him from introducing designated matters in evidence;

(C) An order striking out pleadings or parts thereof, or staying further proceedings unless the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party;

....

In lieu of any of the foregoing orders or in addition thereto, the court shall require the party failing to obey the order or the attorney advising him or both to pay the reasonable expenses, including attorneys' fees, caused by the failure, unless the court finds that the failure was substantially justified or that other circumstances make an award of expenses unjust.

The decision whether to impose discovery sanctions rests within the sound discretion of the trial court. Adkins v. United States, 816 F.2d 1580, 1581 (Fed.Cir.1987); see Heat & Control, Inc. v. Hester Indus., Inc., 785 F.2d 1017, 1022 (Fed.Cir.1986). Accordingly, when reviewing a decision ordering sanctions the question is not whether we "would as an original matter" have imposed the sanction but "whether the [Trial] Court abused its discretion in so doing." National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 642, 96 S.Ct. 2778, 2780, 49 L.Ed.2d 747 (1976); Minnesota...