U.S. v. United Technologies Corp.

• Decision Date: 06 March 2003
• Docket Number: No. C-3-99-093.,C-3-99-093.
• Citation: 255 F.Supp.2d 779
• Parties: UNITED STATES of America, Plaintiff, v. UNITED TECHNOLOGIES CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Ohio

255 F.Supp.2d 779

UNITED STATES of America, Plaintiff, v. UNITED TECHNOLOGIES CORPORATION, Defendant.

No. C-3-99-093.

United States District Court, S.D. Ohio, Western Division.

March 6, 2003.

COPYRIGHT MATERIAL OMITTED

Pamela M. Stanek, Dale Ann Goldberg, United States Attorney's Office—3, Dayton, OH, David Sadoff, U.S. Department of Justice, Michael F. Hertz, Stephen D. Altman, Department of Justice, Washington, DC, for USA, plaintiff.

James H. Greer, Bieser, Greer & Landis—3, David Carr Greer, Bieser, Greer & Landis—3, Dayton, OH, Peter B. Work, David Z. Bodenheimer, Brian C. Elmer, Richard L. Beizer, Crowell & Moring, Washington, DC, for United Technologies, defendant.

ENTRY AND ORDER DENYING DEFENDANT UNITED TECHNOLGIES CORPORATION'S MOTION FOR RECONSIDERATION OF ITS SUMMARY JUDGMENT MOTIONS. (DOC. 134).

ROSE, District Judge.

This matter is before the Court for decision on Defendant United Technologies Corporation's Motion for Reconsideration of its Summary Judgment Motions. (Doc. 134). As the instant case involves the Pratt & Whitney division of United Technologies, the Court will refer to the defendant as "United Technologies" and "Pratt" interchangeably. Defendant's motion requests the reconsideration of six motions, the first being one that claimed the logical impossibility of proving the falsity of United Technologies' allegedly fraudulent contract bid. See doc. 56. Another motion which United Technologies requests the Court to reconsider asserted that all of the Government claims are barred by statutes of limitations. See doc. 57. A third requested that the Court dismiss the Government's claims for equitable relief, as the Government has asserted an adequate remedy at law. See doc. 61. A fourth sought dismissal of the Government's claims on progress payments. See doc. 62. A fifth claimed that the Government's allegation that United Technologies' failure to provide true "best estimates" is amorphous, arbitrary, and, therefore, an unenforceable standard. See doc. 63. United Technologies' final motion for summary judgment that it requests this Court to reconsider sought to dismiss the Government's claims of Breach of Contract allegations as to the third count of the Complaint on the theory that there was no contract in existence at the time United Technologies understands the breach is alleged to have occurred. See doc. 64. These motions were earlier denied in an opinion that relied upon the arguments made by counsel at oral argument. Doc. 128.

I. Falsity (Doc. 56).

The Court will first consider United Technologies' request to reconsider whether the alleged falsity of the assertions in United Technologies' cost and pricing declarations and certification thereof can be resolved in favor of United Technologies on summary judgment. United Technologies asserts the Government is required to "negative any reasonable interpretation of [Complaint Exhibit 3] that would make it factually correct." Doc. 134 at 8 (quoting United States v. Gatewood, 173 F.3d 983, 988 (6th Cir.1999)). Complaint Exhibit 3 had asserted that Pratt had developed its ceiling price decrement factors for its best and final offer "based upon our review of the PCAG recommendations for each supplier and the cognizant buyer's past experience with the individual vendors involved."

In the case Defendants urge upon the Court, Gatewood, the defendant was accused of falsely certifying "that he had made payments to subcontractors and suppliers from previous payments received under a contract with the United States Navy[,] when in truth and in fact[,] as he then well knew[,] he had not made full payment to the subcontractors." Gatewood, 173 F.3d at 987. The Sixth Circuit reversed the defendant's conviction because the Government conceded that, in fact, Gatewood had made partial, though incomplete, payments to the subcontractors, a factual circumstance that rendered the certified statement true. Id. at 988.

Thus, the holding of Gatewood is narrower than the excerpt United Technologies quotes and the case is consistent with a case upon which the Government relies. While United Technologies asserts that its certified price estimates cannot be fraudulent because estimates are inherently subjective, "an opinion or estimate carries with it `an implied assertion, not only that the speaker knows no facts which would preclude such an opinion, but that he does know facts which would justify it.'" Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 792 (4th Cir.1999) (quoting W. Page Keeton, et al, Prosser & Keeton on the Law of Torts § 109, at 706 (5th ed.1984)).

In Gatewood the defendant knew, and the Government conceded that he knew, that some payments had been made. In the instant case, the Government has charged that United Technologies has certified that its estimates were based upon complete and current data and, moreover, were based upon past experience in achieving certain predictions. Unlike the defendant in Gatewood, United Technologies has not put forward facts that would support the veracity of its certification, but has simply asserted the metaphysical possibility that United Technologies, or some United Technologies' representative, had estimated the amounts certified. Not only does United Technologies not have the factual foundation underlying the decision in Gatewood, it ignores that it has certified a basis for its estimates, namely, its past experience-a basis that the Government asserts was not, in fact, utilized. Therefore, United Technologies' request that the Court reconsider its motion for summary judgment on the falsity allegations (Doc. 56) will be denied.

II. Best Estimates.

Defendant similarly asserts that it is impossible for the Government to prove that Pratt's certified "Best Estimates" were false, given the "vague" and "ambiguous" nature of the terms. This claim has already been considered and rejected by other courts. In Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 792 (4th Cir.1999), the Fourth Circuit held that "an opinion or estimate carries with it `an implied assertion, not only that the speaker knows no facts which would preclude such an opinion, but that he does know facts which justify it.'" Id. (quoting W. Page Keeton, et al, Prosser & Keeton on the Law of Torts § 109, at 706 (5th ed.1984)). The Government in this case asserts both that Pratt knew of no facts to substantiate its "best estimate" and that it actually knew of facts that would preclude such an opinion. Wherefore, United Technologies' request that the Court reconsider its motion for summary judgment on the Government's "best estimates" claims, doc. 63, will be denied.

III. Statute of Limitations

Pratt asserts that two statute of limitations provisions totally bar the Government's claims. A proper analysis of the appropriate statute of limitations period demands the development of facts different from those previously rendered.

A. Factual Background

United Technologies submitted its Best and Final Offer for the fighter engine contract on December 5, 1983. Part of this submission was United Technologies' Best and Final Offer Disclosure Item # 8, which listed "decrement factors" based upon Pratt's Procurement Contract Accounting Group ("PCAG") estimates. These decrement factors were reduced, however, to "reflect[ Pratt's] past experience in not being able to achieve PCAG recommendations at final settlement time."

Shortly after the February, 1984 initial award under the Alternate Fighter Engine Competition procurement, the General Accounting Office ("GAO") was requested to review the source selection procedure used. This GAO review concluded that the Air Force planned and executed the source selection in compliance with its established policies and procedures. Pl. ex. 9 at 00461.

The GAO review was followed by a series of audits carried out by the Department of Defense's Defense Contract Audit Agency in 1989. The Defense Contract Audit Agency uncovered a hand-written 1983 Pratt document that detailed Pratt's percentage of reduction resulting from negotiations of ceiling price purchase orders from its vendors during a 23-month period. Def. Ex. 33 at 2100975. The Defense Contract Audit Agency determined that the 23-month study was a better, and more favorable to the Government, reflection of Pratt's ability to meet Pratt's Procurement Contract Accounting Group-recommended decrements at final settlement time. However, on June 8, 1995, when this matter was reviewed by an Air Force review board, the Air Force decided that the 23-month study was an insufficiently narrow analytical base and therefore would not have affected negotiations of a contract that was to be carried out not over months, but a period of years. The Air Force closed its books on the issue at this point. While at this point the Government may have had reason to suspect the existence of records concerning Pratt's past experience in attaining PCAG-recommended decrements, Pratt allegedly stonewalled the Government's requests for documents to substantiate the claims made in Complaint Exhibit 3.

In 1997, a Department of Justice auditor, Dannie Zacheretti, began investigating the contract. Zacheretti requested and received documents to substantiate not the decrement rate that Pratt utilized in its best and final offer, but documents which would substantiate the PCAG-recommended decrement rates. Among the materials with which Zacheretti was provided was a print-out of computer-based data reflecting Pratt's past experience in achieving PCAG-recommended decrements. Def. ex. 2 at 230-40; Doc. 1, ex 8. Utilizing this data, Zacheretti determined that Pratt's Best and Final Offer was not based upon Pratt's past experience in achieving PCAG-recommended decrements.

On April 27, 1998, the Department of Justice and United Technologies agreed to toll the running of the statute of limitations periods relevant to the ceiling price decrement issue. Doc. 57, ex. 18. On ...