Bae Sys. Tech. Solution & Servs., Inc. v. Republic of Korea's Def. Acquisition Program Admin., Case No.: PWG-14-3551

• Decision Date: 19 July 2016
• Docket Number: Case No.: PWG-14-3551
• Citation: 195 F.Supp.3d 776
• Parties: BAE SYSTEMS TECHNOLOGY SOLUTION & SERVICES, INC., Plaintiff, v. REPUBLIC OF KOREA'S DEFENSE ACQUISITION PROGRAM ADMINISTRATION, et al., Defendants.
• Court: U.S. District Court — District of Maryland

195 F.Supp.3d 776

BAE SYSTEMS TECHNOLOGY SOLUTION & SERVICES, INC., Plaintiff,

v.REPUBLIC OF KOREA'S DEFENSE ACQUISITION PROGRAM ADMINISTRATION, et al., Defendants.

Case No.: PWG-14-3551

United States District Court, D. Maryland, Southern Division.

Signed July 19, 2016

Ari Scott Meltzer, Gregory M. Williams, Richard W. Smith, Scott A. Felder, Wiley Rein LLP, Washington, DC, for Plaintiff.

Jason Drew Wallach, Richard James Conway, Blank Rome LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION

Paul W. Grimm, United States District Judge

Plaintiff BAE Systems Technology Solution & Services, Inc. ("BAE") and Defendant the Republic of Korea's Defense Acquisition Program Administration ("DAPA") entered into a Memorandum of Agreement ("MOA"), in conjunction with a Letter of Agreement between the United States and the Republic of Korea to upgrade the Republic of Korea's F-16 fighter fleet. When the contract between the nations terminated, DAPA felt that BAE had breached the MOA, while BAE felt that it had no ongoing obligation to DAPA. BAE filed suit here, seeking a declaration of the parties' rights under the MOA, and DAPA then filed suit for breach of contract in South Korea. BAE added the Republic of Korea as a defendant and filed a Motion for Preliminary Foreign Anti-Suit Injunction, ECF No. 73. The parties fully briefed the motion, ECF Nos. 73–1, 80, 83, and I held a hearing on July 18, 2016. I granted the motion, enjoining Defendants from taking any further action to prosecute the Korean suit, until I resolve threshold issues of subject matter and personal jurisdiction and the pending motion for summary judgment, or until the parties agree to stay the Korean lawsuit during the time that I take to resolve the jurisdictional issues and summary judgment motion, whichever occurs first. This Memorandum Opinion and Order memorializes that hearing.

Background

The United States Government hired BAE ... as the lead contractor for an agreement between the U.S. Government and ... DAPA[ ] "under the U.S. Foreign Military Sales (‘FMS') Program to upgrade South Korea's existing fleet of F-16 fighter aircraft for approximately $1.7 billion." Second Am. Compl. ¶ 1, ECF No. 22. Before the governments finalized their agreement, BAE entered into a Memorandum of Agreement ("MOA") with DAPA and "provided DAPA with a Letter of Guarantee for Payment of Bid Bond in the amount of $43,250,000" ("Guarantee"), under which BAE agreed "to pay the bond if it failed to take certain actions during the bid phase of the Upgrade Program." Id. ¶ 3. According to BAE, "DAPA continued to insist that BAE [ ] renew its Letter of Guarantee," even after the FMS contract was in effect, and BAE complied.^[1]Id. ¶ 23.

BAE "performed successfully the initial phases of work under the KF-16 Upgrade Program." Id. ¶ 1. But then, "the U.S. Government informed South Korea that the overall price of the Upgrade Program could increase by as much as $800 million," id. ¶ 2, and the U.S. Air Force "terminated for convenience" BAE's contract, at South Korea's direction to cancel BAE's "selection ... as the KF-16 system integrator for the KF-16 Upgrade Program," id. ¶ 4. DAPA now demands payment under the renewed Guarantee, and in BAE's view, "bases its claim for payment not on an alleged violation of the terms of the Guarantee, but on BAE [ ]'s inability to force the U.S. Government to withdraw its proposed price increases." Id. ¶ 5.

Mem. Op. 1–2, ECF No. 43.

BAE filed this declaratory judgment action against DAPA on November 12, 2014, seeking a declaration of rights under the MOA and Guarantees between it and DAPA. ECF No. 1; see Mem. Op. 2. "Primarily, BAE seeks a declaration that the Guarantee and its renewals are ‘incompatible with, and invalid under, the Foreign Military Sales Program ... and federal common law of the United States, and ... therefore unenforceable’; alternatively, it seeks a declaration that it ‘did not fail to perform any obligations required of it under such Letter(s) of Guarantee.’ " Mem. Op. 2. Plaintiff then amended to name the Republic of Korea as a second defendant. Am. Compl., ECF No. 12. I refer to Defendants together as "South Korea."

In July 2015, the Republic of Korea filed suit in Seoul Central District Court in South Korea, alleging breach of contract. Mem. Op. 2. South Korea then filed a motion to dismiss or, alternatively, to stay this case during the pendency of the Republic of Korea's suit against BAE in South Korea. ECF No. 26. I concluded that venue is proper in this Court, and I declined to exercise my discretion to dismiss this case under forum non conveniens , or to stay it. I reasoned, based on the evidence before me at that preliminary stage, that "the MOA's validity is entwined with the FMS Program, which is a matter of national security, such that venue certainly should be in this Court." Mem. Op. 3.

As of Defendants' May 19, 2016 status report, service had not been effected on BAE in the Korean suit, but Defendants had "what they believe to be a correct address for service of process and have been ordered by the Korean court to file information regarding the new address or face dismissal of their complaint." ECF No. 76. Defendants explained that "service of process in the Republic of Korea is handled by the courts." Id. As of the July 18, 2016 hearing on Plaintiff's motion for a preliminary injunction, Defendants had indeed provided the address to the Korean court but service still had not been effected.

Defendants stated in the status report that they "are willing to discuss a stay of the Korean action should the complaint be served prior to the Maryland court's determination of BAE TSS's preliminary injunction or summary judgment motions," but they "cannot agree to delay filing the information requested by the Korean court and risk dismissal of that action." Id. At the hearing, Defense counsel clarified that his clients are not willing to stay the Korean action until the final resolution of this case, but he agreed to consult with them to determine whether they are willing to stay it until this Court resolves the threshold jurisdictional and substantive issues that the parties have raised in the briefing on the preliminary injunction and summary judgment motions.

The parties agree that parallel suits in different countries " ‘should ordinarily be allowed to proceed simultaneously.’ " Defs.' Opp'n 12 (quoting Pl.'s Opp'n to Defs.' Mot. to Dismiss 34 n.54, ECF No. 27 (quoting China Trade & Devel. Corp. v. M.V. Choong Yong , 837 F.2d 33, 36 (2d Cir.1987) )). But, noting that " 'federal courts have the power to enjoin persons subject to their jurisdiction from prosecuting foreign suits," Plaintiff now "seeks a preliminary foreign antisuit injunction under Federal Rule of Civil Procedure 65." Pl.'s Mem. 8, 13. Specifically, BAE seeks an injunction of limited duration to allow this Court to resolve the issues raised in the pending summary judgment motion.

Preliminary Injunction

The purpose of a preliminary injunction is to "protect the status quo and to prevent irreparable harm during the pendency of a lawsuit, ultimately to preserve the court's ability to render a meaningful judgment on the merits." In re Microsoft Corp. Antitrust Litig. , 333 F.3d 517, 525 (4th Cir.2003). As a preliminary injunction is "an extraordinary remedy ... [it] may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter v. Natural Res. Def. Council, Inc. , 555 U.S. 7, 22, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008).

The standard for a traditional preliminary injunction is well-settled in the Fourth Circuit. To obtain a preliminary injunction, the plaintiff must "establish that [1] he is likely to succeed on the merits, [2] he is likely to suffer irreparable harm in the absence of preliminary relief, [3] the balance of equities tips in his favor, and [4] an injunction is in the public interest." Id. at 20, 129 S.Ct. 365 ; see Dewhurst v. Century Aluminum Co. , 649 F.3d 287, 290 (4th Cir.2011). Under Rule 65, "[a] preliminary injunction cannot be issued unless all four of these elements are met, and " ‘[p]laintiff bears the burden of establishing that each of these factors supports granting the injunction." ’ " Williams v. JP Morgan Chase Bank , No. RDB–16–00312, 2016 WL 509426, at *3 (D.Md. Feb. 4, 2016) (slip op.) (quoting Direx Israel, Ltd. v. Breakthrough Med. Corp. , 952 F.2d 802, 812 (4th Cir.1991) (citation omitted)). "[T]he burden placed upon Plaintiffs to state a claim for a preliminary injunction is high." EndoSurg Med., Inc. v. EndoMaster Med., Inc. , 71 F.Supp.3d 525, 538 (D.Md.2014) ; see Fowler v. Wells Fargo Home Mortgage, Inc. , No. GJH–15–1084, 2015 WL 2342377, at *2 (D.Md. May 13, 2015) (same).

Preliminary Foreign Anti-Suit Injunction

"The suitability of an anti-suit injunction involves different considerations from the suitability of other preliminary injunctions. An anti-suit injunction, by its nature, will involve detailed analysis of international comity. Often ... the injunction will be defensive in nature." E. & J. Gallo Winery v. Andina Licores S.A. , 446 F.3d 984, 990–91 (9th Cir.2006). And, as the parties observe, "[t]he Fourth Circuit has not addressed the precise legal standard to be employed in determining whether the issuance of an antisuit injunction is proper." Umbro Int'l, Inc. v. Japan Prof'l Football League , No. 97–2366–13, 1997 WL 33378853, at *2 (D.S.C. Oct. 2, 1997) ; see Pl.'s Mem. 13; Defs.' Opp'n 14. To date, the Fourth Circuit has addressed anti-suit injunctions only in the context of concurrent state (not foreign) and federal litigation and the Anti-Injunction Act. See Ackerman v. ExxonMobil Corp. , 734 F.3d 237, 252, 259 (4th Cir.2013) (Duncan, J., concurring) (noting that "the issuance of an anti-suit injunction is highly discretionary"; majority observed that "whether to enjoin state court proceedings is always discretionary"); Spencer v. Frontier Ins. Co., 290 Fed.Appx. 571, 573 (4th...