Lite Machs. Corp. v. United States, 18-1411C

• Decision Date: 21 May 2019
• Docket Number: No. 18-1411C,18-1411C
• Parties: LITE MACHINES CORPORATION, Plaintiff, v. UNITED STATES, Defendant.
• Court: Court of Federal Claims

LITE MACHINES CORPORATION, Plaintiff, v. UNITED STATES, Defendant.

No. 18-1411C

United States Court of Federal Claims

May 21, 2019

Motion to Dismiss; Contract Disputes Act; Breach of Contract; Small Business Innovation Research Program; Christian Doctrine; Lost Profits; Implied-in-Fact Contract.

Ronald J. Waicukauski, Price Waicukauski Joven & Catlin, LLC, Indianapolis, IN, for plaintiff. Of counsel were Brad A. Catlin, Price Waicukauski Joven & Catlin, LLC, Indianapolis, IN, and Jonathan Cain, FisherBroyles, LLP, Washington, D.C.

James W. Poirier, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for defendant. With him were Franklin E. White, Jr., Assistant Director, Commercial Litigation Branch, Robert E. Kirschman, Jr., Director, Commercial Litigation Branch, and Joseph H. Hunt, Assistant Attorney General, Civil Division, Department of Justice.

OPINION

HORN, J.

In the above-captioned case, plaintiff Lite Machines Corporation (Lite Machines) alleges that the United States, acting through the United States Air Force (Air Force), breached a contract it entered into with Lite Machines in 2013.

FINDINGS OF FACT

According to plaintiff's amended complaint, Lite Machines is a privately-held small business headquartered in West Lafayette, Indiana. Plaintiff states that the United States Department of Defense previously has awarded Lite Machines over $30,000,000.00 in Small Business Innovation Research (SBIR) contracts and Small Business Technology Transfer (STTR) contracts[¹] under which Lite Machines "develop[ed] technologies related to unmanned aerial vehicles."

The Small Business Administration describes the SBIR program as a "highly competitive program that encourages domestic small businesses to engage in Federal Research/Research and Development (R/R&D) that has the potential for commercialization. Through a competitive awards-based program, SBIR enables small businesses to explore their technological potential and provides the incentive to profit from its commercialization." See About SBIR, SMALL BUS. ADMIN., https://www.sbir.gov/about/about-sbir (last visited May 21, 2019). The statute at 15 U.S.C. § 638 (2012)² defines the SBIR program as "a program under which a portion of a Federal agency's research or research and development effort is reserved for award to small business concerns through a uniform process having" three phases. 15 U.S.C. § 638(e)(4). The first phase of the SBIR program, referred to as Phase I, is defined in the statute as being used "for determining, insofar as possible, the scientific and technical merit and feasibility of ideas that appear to have commercial potential," which are submitted in response to "SBIR program solicitations." 15 U.S.C. § 638(e)(4)(A).

The second phase of the SBIR program, referred to as Phase II, is defined in the statute as being used to "further develop proposals which meet particular program needs, in which awards shall be made based on the scientific and technical merit and feasibility of the proposals, as evidenced by the first phase, considering, among other things, the proposal's commercial potential." 15 U.S.C. § 638(e)(4)(B). A proposal's commercial potential is to be determined in reference to the "small business concern's record of successfully commercializing SBIR or other research," "the existence of second phase funding commitments from private sector or non-SBIR funding sources," the existence of Phase III "follow-on commitments" related to the "subject of the research," and "the presence of other indicators of the commercial potential of the idea." See id. The statute at 15 U.S.C. § 638 defines the third phase of the SBIR program, referred to as Phase III, as follows:

[W]here appropriate, a third phase for work that derives from, extends, or completes efforts made under prior funding agreements under the SBIR program--

(i) in which commercial applications of SBIR-funded research or research and development are funded by non-Federal sources of capital or, for products or services intended for use by the Federal Government, by follow-on non-SBIR Federal funding awards; or (ii) for which awards from non-SBIR Federal funding sources are used for the continuation of research or research and development that has been competitively selected using peer review or merit-based selection procedures.

15 U.S.C. § 638(e)(4)(c).

The Small Business Administration describes the STTR program as "another program that expands funding opportunities in the federal innovation research and development (R&D) arena," and states that the "unique feature of the STTR program is the requirement for the small business to formally collaborate with a research institution in Phase I and Phase II." See About STTR, SMALL BUS. ADMIN., https://www.sbir.gov/about/about-sttr (last visited May 21, 2019). The statute at 15 U.S.C. § 638 defines the STTR program as a program "under which a portion of a Federal agency's extramural research or research and development effort is reserved for award to small business concerns for cooperative research and development through a uniform process having" three phases.³ 15 U.S.C. § 638(e)(6). Phase I of the STTR program is defined in the statute as being used to determine the "scientific, technical, and commercial merit and feasibility of ideas submitted pursuant to STTR program solicitations." 15 U.S.C. § 638(e)(6)(A). Phase II of the STTR program is defined as being used to "further develop proposals that meet particular program needs." 15 U.S.C. § 638(e)(6)(B). The statute at 15 U.S.C. § 638(e)(6)(C) defines Phase III of the STTR program as being used, "where appropriate," for "work that derives from, extends, or completes efforts made under prior funding agreements under the STTR program," which is funded "by non-Federal sources of capital," "follow-on non-STTR Federal funding awards," or "awards from non-STTR Federal funding sources." 15 U.S.C. § 638(e)(6)(C). The statute at 15 U.S.C. § 638(r)(4) states that, "[t]o the greatest extent practicable, Federal agencies and Federal prime contractors shall issue Phase III awards relating to technology, including sole source awards, to the SBIR and STTR award recipients that developed the technology." 15 U.S.C. § 638(r)(4).

In the above-captioned case, plaintiff alleges that the Air Force awarded Lite Machines a "$1.6 million SBIR Phase II prime contract for development of the Tiger Moth Small Unmanned Aerial System ('SUAS')" in 2008. According to plaintiff's amended complaint, the Air Force provided Lite Machines with "an additional $1.3 million from the Air Force in SBIR Phase III funding to further develop and demonstrate the Tiger Moth SUAS" in 2010. According plaintiff:

In early 2013, representatives of the Vice Chairman of the Joint Chiefs of Staff, Adm. [Admiral] James Winnefeld, contacted LMC [Lite Machines Corporation] for technical specifications for the Tiger Moth SUAS. On information and belief, in May 2013, the Vice Chairman of the Joint Chiefs issued a letter of needs defining a DoD [Department of Defense] requirement for the Tiger Moth SUAS ("T1 Requirements"). The T1 Requirements were designed to specify the Tiger Moth SUAS. On information and belief, the Air Force presented the T1 Requirements to Congress as a basis for obtaining funding to complete development of, commercialize and acquire a derivative of the Tiger Moth SUAS for the Department of Defense. On information and belief, Congress appropriated more than $100 million in funding to the Air Force based upon the T1 Requirements request.

On October 9, 2013, the Air Force awarded Contract No. xxx-14-D-0111 (the 2013 Contract) to Lite Machines.⁴ Plaintiff asserts that the 2013 Contract was a "cost-reimbursement plus fixed-fee, incentive fee, indefinite delivery indefinite quantity, sole-source, SBIR Phase III prime contract (the 'Contract') for development and demonstration of the Tiger Moth SUAS." The 2013 Contract, as issued, stated that the maximum dollar amount the government could order under the 2013 Contract was $21,000,000.00, and the minimum dollar amount the government was obligated to order was $3,000.00. The period of performance of the 2013 Contract was up to seventy-two months after award of the 2013 Contract. The period of performance of task orders issued under the 2013 Contract was to be defined at the task order level.

That same day, on October 9, 2013, the Air Force issued Task Order 1 to Lite Machines under the 2013 Contract.⁵ Task Order 1 had a period of performance of one year from the date of award, and the estimated total value of Task Order 1 was $9,668,228.00. Plaintiff indicates that the initial statement of work issued by the Air Force in Task Order 1, which plaintiff refers to as "SOW-1," related to the development of Lite Machines' Tiger Moth SUAS in accordance with the Air Force's T1 Requirements. According to plaintiff's amended complaint, the "Air Force's initial statement of work ('SOW-1') under TO-1 [Task Order 1] included two phases: Phase 1 involved rapidly demonstrating the Tiger Moth SUAS using commercially available parts, and Phase 2 called for demonstrating the system using line-of-sight radio communications." Plaintiff alleges, in its amended complaint, that SOW-1 in Task Order 1 was "defective" because "the Tiger Moth demonstration system specified by the Air Force in SOW-1 required use of components that did not meet the DoD's stated military requirements."

In plaintiff's amended complaint, plaintiff contends that Major Nate Klatt, who plaintiff identifies as the program manager of the Air Force's T1 Requirements, left his position with the federal government to pursue employment with Osterhout Design Group in 2014. Plaintiff's amended complaint indicates that Osterhout Design Group was Lite Machines' "primary subcontractor" for work related to the T1 Requirements. According to plaintiff, "while still employed by the...