U.S. ex rel. Campbell v. Lockheed Martin Corp.

• Citation: 282 F.Supp.2d 1324
• Decision Date: 05 August 2003
• Docket Number: No. 6:95CV549-ORL-28DAB.,6:95CV549-ORL-28DAB.
• Parties: UNITED STATES of America, ex rel. Albert D. CAMPBELL, Plaintiffs, v. LOCKHEED MARTIN CORPORATION, Martin Marietta Corporation, Defendants.
• Court: U.S. District Court — Middle District of Florida

282 F.Supp.2d 1324

UNITED STATES of America, ex rel. Albert D. CAMPBELL, Plaintiffs, v. LOCKHEED MARTIN CORPORATION, Martin Marietta Corporation, Defendants.

No. 6:95CV549-ORL-28DAB.

United States District Court, M.D. Florida, Orlando Division.

August 5, 2003.

COPYRIGHT MATERIAL OMITTED

Joseph P. Covington, Jodie L. Kelley, Jenner & Block, Washington, DC, for Edward C. Fitzgerald, Martin H. Harris, John P. Loughe.

Ralph E. Hopkins, Karen L. Gable, U.S. Attorney's Office, Orlando, FL, Carolyn G. Mark, U.S. Dept. of Justice, Civil Division, Washington, DC, Andrew Grosso, Law Office of Andrew Grosso, Washington, DC, Michael F. Hertz, Alan E. Kleinburd, Patricia R. Davis, Dodge Wells, Jeffrey M. Cohen, Louis J. Virelli, III, U.S. Dept. of Justice, Washington, DC, for U.S.

Tobe M. Lev, Egan, Lev & Siwica, P.A., Orlando, FL, Andrew Grosso, Law Office of Andrew Grosso, Washington, DC, Pamela B. Stuart, Law Office of Pamela B. Stuart, Washington, DC, for Albert D. Campbell.

Allen J. McKenna, Ford & Harrison LLP, Orlando, FL, James A. Bensfield, Mary Lou Soller, Peter B. Hutt, II, Adam P. Feinberg, Brian A. Hill, Miller & Chevalier, Chartered, Washington, DC, Scott W. McKay, Assistant General Counsel, Litigation and Compliance, Bethesda, MD, for Lockheed Martin Corp., Martin Marietta Corp.

Bradford M. Berry, Miller, Cassidy, Larroca & Lewin, Washington, DC, Jay L. Alexander, Baker Botts, LLP, Washington, DC, for Harold Cates.

Mark D. Maneche, Michael Schatzow, Venable, Baetjer & Howard, LLP, Baltimore, MD, for Greg Snyder.

ORDER

ANTOON, District Judge.

In this action the United States ("the United States" or "the Government") and its relator, Albert Campbell, seek to recover damages from Defendant Lockheed Martin under the False Claims Act ("the FCA") (31 U.S.C. § 3729) and the Truth in Negotiations Act ("TINA") (10 U.S.C. § 2306a). Plaintiffs contend that Lockheed Martin withheld "cost or pricing data" from the United States Air Force in connection with contracts for the manufacture by Lockheed of LANTIRN pods, despite being obligated to disclose such data under TINA. Additionally, Plaintiffs assert that Lockheed Martin double-billed the Government and submitted false invoices to the Government in connection with several LANTIRN contracts.

This cause is currently before the Court on several motions for summary judgment submitted by the parties: the United States' Motion for Partial Summary Judgment (Doc. 369) ("Motion I"); Defendants' Motion for Summary Judgment on Counts II-VII of the Government's Complaint (Doc. 374) ("Motion II"); and Defendants' Motion for Summary Judgment on FMS Issues (Doc. 376) ("Motion III").¹ The Court heard oral argument on these motions on July 1, 2003 (see Doc. 470) and now issues the following rulings thereon.

I. Background

A. Factual Background²

Defendant Lockheed Martin ("Lockheed") was formed in 1994 via a merger of Martin Marietta Corporation and Lockheed Corporation.³ Lockheed is the only manufacturer of LANTIRN ("Low Altitude Navigation and Targeting Infrared for Night") pods, which are targeting and navigation pods used on military aircraft, including F-15s and F-16s. Relator Albert Campbell was formerly employed by Lockheed as Cost Control Chief of the LANTIRN program.

Since the 1980s, the United States Government has entered into several contracts with Lockheed for the production of LANTIRN pods. The LANTIRN pods are manufactured at Lockheed facilities in Orlando, Florida, and Ocala, Florida. In late 1993, the final assembly and test subtasks of the manufacturing process were moved from Orlando to Ocala; this move caused an interruption in production and a "learning loss" that are important to some of the issues in this case.

The first production contract for the LANTIRN system, known as the "USAF contract," was entered into in 1984. Another LANTIRN contract entered into by the Government and Lockheed involved the ultimate sale of LANTIRN pods to Saudi Arabia, Greece, and Bahrain and is referred to by the parties and herein as the "SGB contract." The SGB contract is a sole-source, negotiated contract⁴ that was entered into in 1993-1994.

The SGB contract and other contracts that involve the resale of LANTIRN pods (or other defense material) to foreign governments are referred to as "FMS contracts" because they involve "Foreign Military Sales" under the Arms Export Control Act ("AECA"), 22 U.S.C. § 2751 et seq. Under that statute, the President and, by designation, the Department of Defense, may sell arms to friendly foreign governments either from stocks of arms or through procurement from American contractors. In procured Foreign Military Sales, the United States Government contracts with a foreign government, and then the United States Government contracts separately with the contractor. The contractor sells the items to the United States Government, which then resells to the foreign government.

In negotiating the SGB contract, the Government and Lockheed first entered into a letter contract on July 12, 1993; this contract was modified on September 13, 1993. The modification authorized Lockheed to spend no more than $272 million to perform the contract and also authorized Lockheed to begin performance even before agreement was reached on a final price. On November 12, 1993, Lockheed submitted a proposal to "definitize" the SGB contract. The parties conducted factfinding in November and December 1993, and after this factfinding Lockheed submitted an updated proposal on February 21, 1994.

Because of cash-flow problems with one of the purchasing foreign countries, Lockheed was asked to restructure its SGB contract proposal, and in compliance with that request Lockheed submitted a restructured proposal on June 16, 1994. A final update to the proposal followed on August 3, 1994. The parties engaged in further face-to-face negotiations at Wright Patterson Air Force in Ohio in late August 1994 and agreed to a contract price of $450,748,730 for 67 target pods and 72 navigation pods.

The parties established a certification date of September 22, 1994, and Lockheed certified that as of that date all "cost or pricing data" submitted in support of Lockheed's proposal was "current, accurate, and complete." The date of final contract "definitization" was October 25, 1994.

Normally, Lockheed estimated future performance of its production line, or "touch labor," based on actual historical performance of such workers. Lockheed kept data on how long it took workers to perform tasks, and typically that data would show an increase in efficiency over time. However, as noted earlier, during the time that the SGB contract was being negotiated, Lockheed was planning to move, and ultimately did move, the location of some of its LANTIRN manufacturing tasks from Orlando to Ocala. Because of this expected location shift, Lockheed informed the Air Force that in preparing its proposal Lockheed could not use its normal labor cost-estimate method based on performance history but instead would use a theoretical construct known as "the Anderlohr method" to estimate its labor costs for the SGB contract.

"The Anderlohr method" is a way of estimating the "lost learning" that occurs when there is a line break or other disruption in manufacturing such as the move of some tasks from Orlando to Ocala. Under this method, although more than 600 LANTIRN pods had been produced (on prior contracts from late 1989 until late 1993) at the time of the SGB negotiations, Lockheed's estimate was that final assembly tasks would be performed with the efficiency of the 85th pod rather than the 600th pod; Lockheed thus "proposed to start the learning curve for SGB at that point and assume" that efficiency on the SGB contract "would come down the learning curve at the same rate which had been experienced in the past." (Doc. 370 ¶ 15). Although Lockheed's normal estimation procedures—based on performance history —were used for other portions of LANTIRN production, for the "old Ocala scope" work for which there was likely to be a loss-of-learning effect from the line break, the Anderlohr method was used. The Air Force propounded questions to Lockheed about the Anderlohr estimation method, and David Karr, an industrial engineer for the Air Force, prepared a technical evaluation of Lockheed's SGB proposal.

While the SGB contract negotiations were ongoing, Lockheed was producing LANTIRN pods in Ocala on two other Air Force contracts—Peace Nightlight II ("Peace Nightlight") and Peace Marble 3 Buy 2 ("Peace Marble"). After the final assembly tasks were moved to Ocala, the Peace Nightlight pods were at the final assembly stage; the Peace Marble pods were at all stages of production; and Lockheed had started work on some of the SGB pods. By August 1994, 27 target pods had completed final assembly and testing, as had 17 navigation pods.

During the SGB contract negotiations, Mr. Karr asked Lockheed for the most current performance data. In January 1994, Lockheed Martin provided Mr. Karr with data on 2½ units that had been completed in Ocala, but upon review Mr. Karr concluded that "too few units had been employed for [him] to draw any conclusions about the rate of learning after the move." (Aff. of David Karr, Ex. 11 to Doc. 370, at ¶ 12). Mr. Karr asked for more "touch labor" data for final assembly in April 1994 and Lockheed complied, but Mr. Karr again concluded that there were not enough completed units for him to draw any conclusions. (Karr Aff. at ¶ 14).

In June 1994, Mr. Karr was replaced in the negotiation process by Kurt Bledsoe. Mr. Bledsoe reviewed those parts of Lockheed's June proposal that differed from its February proposal, but he did not ask for information related to the Orlando-to-Ocala move. Moreover, in its June 1994 updated proposal, Lockheed did not include actual performance data for the three LANTIRN contracts (Peace Nightlight, Peace Marble, and SGB) that were underway, nor did Lockheed...