International Engineering Company v. Richardson, Civ. A. No. 927-73.

• Citation: 361 F. Supp. 818
• Decision Date: 10 July 1973
• Docket Number: Civ. A. No. 927-73.
• Parties: INTERNATIONAL ENGINEERING COMPANY, Plaintiff, v. Elliot L. RICHARDSON et al., Defendants.
• Court: U.S. District Court — District of Columbia

361 F. Supp. 818

INTERNATIONAL ENGINEERING COMPANY, Plaintiff, v. Elliot L. RICHARDSON et al., Defendants.

Civ. A. No. 927-73.

United States District Court, District of Columbia.

July 10, 1973.

Robert H. Turtle, James M. McHale, Washington, D. C., for plaintiff.

Harold H. Titus, Jr., U. S. Atty., Leonard W. Belter, Asst. U. S. Atty., for defendants.

MEMORANDUM OPINION

CHARLES R. RICHEY, District Judge.

INTRODUCTION

This action arose out of a Complaint for a Declaratory Judgment and Injunctive Relief under the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202 and 28 U.S.C. § 1331 and the Administrative Procedure Act (5 U.S.C. § 702) by Plaintiff, International Engineering Company (hereinafter IEC or Plaintiff) against Defendants, Elliot Richardson, Secretary of Defense and Robert Seamans, Jr., Secretary of the Air Force (hereinafter Government or Defendants). Plaintiff seeks equitable relief to restrain Defendants from releasing to the Defense Documentation Center three Final Technical Reports delivered by Plaintiff to the Air Force in connection with Government Contract F33657-69-C-1290 (hereinafter referred to as Contract). Plaintiff delivered the Reports with Restrictive Legends affixed that purported to limit the Government's use of the research data contained therein to circulation among Government Agencies only. Plaintiff alleges that it has a "proprietary" interest in portions of the Reports and that the Contracting Officer's decision to the contrary reflected an unconstitutional application of the Armed Services Procurement Regulations by depriving IEC of the due process to which it was entitled. Alternatively, Plaintiff argues that if the Armed Services Procurement Regulations permit the Contracting Officer to remove IEC's "proprietary" legend without requiring a hearing, such regulations violate the due process clause of the Fifth Amendment. The Air Force contends that Plaintiff was afforded adequate due process consistent with Armed Forces Regulation (ASPR) § 7-104.9(a), Rights in Technical Data, incorporated by reference into the Contract. Defendant urges that the technical data in issue is part of the very material for which the Government contracted and paid, and that the Government has every right to distribute it to other Defense Department contractors.

Plaintiff seeks a Preliminary Injunction and Defendants seek to have the Court dismiss the suit, or enter Summary Judgment in their favor. Plaintiff additionally wants to depose two Air Force officials but agrees to delay the depositions pending resolution of Defendant's Motion to Dismiss.

Before turning to the questions presented, several facts should be mentioned. On February 8, 1968, IEC submitted a technical proposal to the Air Force reflecting IEC's development to date of a process for guiding bombs or missiles with a Loran C/D system (hereinafter LOMISS). As a result of the proposal, the Air Force entered into a contract with IEC effective May 29, 1969 to provide final and interim reports of a flight test evaluation of the LOMISS system. From a data certificate executed by the parties March 3, 1969 and not included in the express terms of the Contract, it appears that IEC agreed to furnish with unlimited rights to the Government the information required to comply with the initial data requirements of the Contract. The Contract included at Part V a clause entitled "Data Provisions" which purported to delineate the rights of the parties in data under the Contract to the exclusion of any documents not expressly provided for in the Contract. The most important Contract provision relating to the respective rights in data was ASPR § 7-104.9(d), incorporated by reference into the Contract, with the pertinent provisions set forth as follows:

"(d) Unmarked or Improperly Marked Technical Data

(1) Technical data received without a restrictive legend shall be deemed to have been furnished with unlimited rights. However, the contracting officer may permit the contractor to place a restrictive legend on such data within six months of its delivery if the contractor demonstrates that the omission of the legend was inadvertent and the use of the legend is authorized.

(2) Technical data received with a restrictive legend not permitted by the terms of the contract shall be used with limited rights pending inquiry to the contractor whose name appears on the data as the originator. If no response to a properly directed inquiry has been received within 60 days, or if the response fails to show that the restriction was authorized, the cognizant Government personnel shall obliterate such legend, notify the contractor accordingly, and thereafter may use such data as if it were acquired with unlimited rights."

The above Rights in Technical Data clause also provides that IEC would have a property interest in and that Air Force would have only limited rights to the following:

". . . technical data pertaining to items, components, or processes developed at private expense." ASPR 7-104.9(a).

Under the "Limited Rights" provision, the Government is entitled to circulate technical data generated at IEC's expense among Government personnel but not among Government contractors in competition with IEC.

This Contract was modified twice in 1970 and 1971 to involve testing of more recently developed IEC processes and components. At the time the Final Report under the first contract modification was to be filed, the Air Force Project Engineer requested IEC to provide information on processes and components to facilitate the Air Force's evaluation of the results of the simulation test program. IEC responded by providing such information in the Final Report but affixed to it a "Proprietary Notice" indicating IEC developed this data at private expense. On two other occasions IEC submitted Final Reports containing what IEC considered extra-contractual information on processes and components. Accordingly, restrictive legends indicating a proprietary interest were marked on the material. After submission of the first report and, again, after the later reports were given to the Government, the Contracting Officer notified IEC by letter that the Air Force had "unlimited rights" to the Final Reports necessitating the removal of the restrictive legends unless IEC furnished substantiation of its "proprietary notice." On June 26, 1972 the Contracting Officer met with IEC repsentatives to provide them with the opportunity to substantiate the "limited rights" legends contained in the three Final Reports. At the conclusion of the meeting, the Contracting Officer stated that IEC still had failed to substantiate its claim and that further material should be submitted. IEC failed to submit more information by July 17, 1972, as promised. On October 2, 1972, the Contracting Officer informed IEC that the Government would treat the data with "unlimited rights." By agreement, the Government will treat the data in question with "limited rights" pending a decision by the Court on Plaintiff's Motion for a Preliminary Injunction.

QUESTIONS PRESENTED

1. Whether the Court lacks jurisdiction over the subject matter of this suit?, and

2. Whether the Contracting Officer's failure to state reasons for his decision to eradicate IEC's restrictive legends frustrates effective judicial review?

CONCLUSIONS

1. The Applicability of the Administrative Procedure Act Serves as a Waiver of Sovereign Immunity.

As a threshold matter in this case, the Court is confronted with questions of sovereign immunity and preclusion of judicial review in relation to the actions of a Contracting Officer under a Government Contract. Plaintiff seeks review of the Contracting Officer's determination of Plaintiff's rights in technical data pursuant to ASPR 7-104.9(a), under section 10 of the Administrative Procedure Act, 5 U.S.C. § 702 (Supp. IV 1965-68), which provides:

"A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof."

Plaintiff asserts that the action of the Contracting Officer in deciding to strike IEC's restrictive legends from the Final Reports prepared by IEC under the Contract and disclose those reports to the public through the Defense Documentation Center was arbitrary and capricious, without authority and without due process of law insofar as Plaintiff was not given adequate notice or proper hearing before its property was appropriate.¹ Plaintiff additionally pleads that the Contracting Officer acted without due process of law in issuing his decision without indication as to what factors he considered relevant, what weight be attached to those factors, or how he arrived at his conclusion.

In support of jurisdiction under the APA, Plaintiff has shown that it is "aggrieved" by the Contracting Officer's acts within the meaning of a relevant statute, the Armed Services Procurement Act, 10 U.S.C. chapter 137, and the Armed Services Procurement Regulations (ASPR) promulgated thereunder, specifically ASPR 9-203(a)-(d) which has the force of law in this Contract.² Therefore it is the Court's conclusion that the provisions of section 10 are applicable. In such a situation section 10 of the APA serves as a waiver of sovereign immunity. Scanwell Laboratories v. Shaffer, 137 U.S.App.D. C. 371, 424 F.2d 859 (1970); Estrada v. Ahrens, 296 F.2d 690 (5th Cir. 1961).

The Government urges that Scanwell is inapposite to the case at bar since Plaintiffs in Scanwell were contractors who lost contract awards because of alleged arbitrary Government conduct under regulations designed to control the contract letting process. However, the Court discerns nothing in Defendants' argument to support the proposition that a Government official's conduct under federal regulations incorporated by reference into a Government Contract is not reviewable under the APA. Nothing in the APA or cases...