Skip to main content
News
April 11, 2024

A Presentment Problem or a Fishing Expedition? Court Explores the Contours of CDA Jurisdiction and Discovery in Latest Sikorsky Decision

Advisory

May the government use a broad discovery request to expand the scope of its claim? The Court of Federal Claims answered this question in the negative in its latest decision in Sikorsky Aircraft Corporation v. United States, No. 21-2327 — a longstanding dispute resulting from a December 29, 2020 contracting officer’s final decision (COFD), wherein the government determined that the allocation by Sikorsky Aircraft Corporation (Sikorsky) of independent research and development (IR&D) costs incurred from 2007 to 2017 did not comply with Cost Accounting Standards (CAS) 420. In its most recent decision, the court made clear that while it could not dismiss a government claim on the basis that the government sought discovery relating to IR&D projects outside the scope of the COFD, the court could issue a protective order limiting the scope of discovery to those projects covered by the COFD. In doing so, the court expounded upon when government discovery requests are relevant to claims properly pending before the court and elucidated several procedural pointers that contractors should bear in mind when responding to government assertions of CAS noncompliance and cost disputes more generally.

Case History and Current Dispute

We summarized an earlier decision in this legal saga in a prior Advisory. There, the court denied the government’s attempt to dismiss Sikorsky’s challenge to the CAS noncompliance determination and held that an “open … question” exists as to whether the government had waived its claim for contract adjustment when the government had unduly delayed evaluating the contractor’s disclosed practices and even entered into new contracts based on those disclosed practices in the interim. As our Advisory noted, a merits decision on this issue could have significant implications given the government’s audit backlog and tendency to assert CAS noncompliance years after the fact.

The court’s latest March 15, 2024 decision (reissued publicly March 22) explains that since denial of the government’s motion to dismiss in August 2022, the parties had engaged in a discovery process marred by disputes. One such dispute, the subject of this decision, involved a government request for production of documents related to 155 Sikorsky IR&D projects. Sikorsky objected, stating that this request went “beyond the operative facts of the 2020 COFD” and therefore, was “beyond the scope of the claim at issue in this action.” Sikorsky went on to file a motion, which it styled a motion to dismiss, alleging that the COFD only asserted a government claim with respect to one or at most two projects: the “S-92 Gearbox” project and the “H-60 Blackhawk” project.1 Therefore, according to Sikorsky, any potential government claims relating to other IR&D projects fall outside the court’s subject matter jurisdiction, as they have never been subject to a COFD. That is, Sikorsky moved to dismiss unasserted future government claims “anticipated and understood by reference to the government’s discovery request.”

Procedural Propriety of Motion To Dismiss

The court first addressed the procedural propriety of Sikorsky’s motion. After a robust overview of the court’s standards for a motion to dismiss under Rule 12, as well as discovery proceedings under Rule 26, the court held: “Put simply, Sikorsky’s motion to dismiss is the improper means by which to raise its objection to the government’s discovery requests.”

The court reasoned that Rule 12(b)(1), which addresses lack of jurisdiction, furnishes a “defense to a claim for relief,” whereas Sikorsky cited Rule 12(b)(1) to “raise a defense to a claim that does not currently exist.” While Sikorsky read the government’s discovery request to mean that “the government is asserting in this litigation an unspecified number of separate claims alleging that some, most, or all of [Sikorsky’s] IR&D project cost allocations were noncompliant with CAS 420,” the court agreed with the government that “the only claims before the [c]ourt in this case are Sikorsky’s.”2 As the government had not raised any additional and plausibly impermissible claims, there were no such claims for the court to dismiss.3

Protective Order To Limit Discovery

The court did not leave Sikorsky without relief though, finding that despite being styled as a motion to dismiss, “Sikorsky’s motion is better understood as a motion for a protective order” under Rule 26(b)(1). The court then considered whether the documents requested by the government fall outside the COFD’s scope. According to the court, “at issue is whether the government’s discovery requests are so expansive as to contravene Rule 26(b)(1)’s requirement that the discoverable information be ‘relevant to any party’s claim or defense.’” The court concluded that a protective order was appropriate.

Because the scope of discovery is limited to “relevant” materials, “[i]n an appeal of a COFD, the limits of the case are set by the claims addressed by the COFD.” The court read Sikorsky’s motion as asserting that the government’s requests sought irrelevant information because they concerned projects other than the S-92 Gearbox and H-60 Blackhawk projects. Specifically, the government sought discovery relating to all IR&D projects, which Sikorsky averred that the government “plans to use [] to conduct a fishing expedition to determine if it has a factual basis to assert a CAS 420 noncompliance arising from the allocation of the cost of any other IR&D project.” The government countered that “the scope of discovery extends to all the IR&D projects for which Sikorsky was required to allocate costs under CAS 420” and that courts generally construe the scope of relevant discovery broadly.

To resolve whether the government’s requested discovery fell within the scope of the pending action, the court applied the so-called “same-claim test,” which has three prongs: the claims are (1) based on the same underlying theory; (2) seek the same relief; and (3) arise from the same operative facts.

The court found that the government’s allegations regarding all 155 IR&D projects appear to be “based on the same underlying theory” as the S-92 Gearbox and H-60 Blackhawk projects — namely, that Sikorsky’s allocation of costs associated with those projects was noncompliant with CAS 420 — and thus satisfy the first prong. So too with the second prong, because the government “seek[s] the same relief” as to all Sikorsky IR&D projects. However, the court found that under the third prong, the 155 IR&D projects contemplated by the government’s request for production of documents did not “arise from the same operative facts.” Because “the projects other than the S-92 Gearbox and H-60 Blackhawk-related improvement projects specifically referenced in the COFD are distinct from what is at issue in this case,” the court held that “[d]iscovery spanning beyond the scope of” the two named projects “is unwarranted at this time.”

Before concluding the decision, the court appeared critical of the government’s theory that broad allegations of noncompliance in a COFD could incorporate all possible IR&D projects, without any mention of the specifics of those projects. The court noted its de novo review of a COFD and made clear that “conclusory assertions regarding general alleged non-compliance” preclude the court from “mak[ing] an independent assessment.” The court reasoned:

Concluding otherwise would risk allowing the government to make a “profound alteration” in the scope of its claims, spanning beyond the operative facts upon which the COFD was apparently based ... this court now prohibits the government from expanding the scope of claims at issue in the discovery context from a few projects to 155, based solely on vague and ambiguous references included in the COFD.

Far from “merely adding factual details or legal argumentation,” the court accordingly found that “allowing the scope of the claims at issue and the corresponding discovery to be expanded beyond the S-92 Gearbox and H-60 Blackhawk projects at this juncture” would instead “impermissibly deprive the contracting officer of the opportunity to make an initial independent assessment of compliance for each distinct project, as the statutory purpose of the CDA requires.”

Conclusion

While the court denied the motion to dismiss, Sikorsky ultimately received the remedy it desired — the court effectively limited the government’s assertion of a CAS 420 noncompliance to two out of 155 IR&D projects: “To the extent the government maintains that additional projects were non-compliant with CAS 420, the government may assert those claims of non-compliance separately for the consideration of the contracting officer in a new COFD, in accordance with 41 U.S.C. § 7103(a)(3).”

In so holding, this decision offers important takeaways for contractors confronting government allegations of CAS noncompliance and cost disputes more generally. For starters, this decision reinforces the importance of protective orders. Contractors should take advantage of this tool to manage the scope of discovery to the scope of the claims actually pending before the court.

Second, while government assertions of noncompliance may appear quite broad, the government may face criticism by an adjudicator for making blanket assertions in lieu of alleging facts specific to each project or cost allocation at issue. Contractors should remember to carefully analyze what contentions the government alleges with particularity.

Third, and relatedly, contractors should take care in how they describe the government’s claims, or the nature of related discovery requests, in correspondence with the government as well as in pleadings. In this latest decision, the court denied the government’s assertion that the lack of detail in its 2020 COFD regarding the other Sikorsky IR&D projects was attributed to Sikorsky’s own lack of detail regarding those projects in response to the government’s initial assertions of CAS noncompliance. The court thereby affirmed that the government was responsible for establishing the bounds of its claim, which then governs the scope of any appeal. Sikorsky thus benefitted from apparently strictly construing the government’s pre-claim information requests and not providing “extra” information regarding any unnamed projects. Yet, Sikorsky’s attempt to further limit the COFD to only the S-92 Gearbox project was thwarted by its references to the H-60 Blackhawk project in its discovery-related correspondence. While the court’s decision seems to look foremost to the language of the COFD to assess the scope of permissible discovery, the court raised and considered these exchanges in assessing the parties’ dispute, providing an important reminder to think strategically, even at the earliest stages of engagement with the government on cost accounting issues.

While the parties implement this latest decision in discovery, we are standing by for more from the court on the merits.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

  1. Interestingly, the court noted that Sikorsky’s pending motion argued that only the S-92 Gearbox project was encompassed by the COFD. However, given uncertainty in the pleadings on this issue, and Sikorsky’s own prior assertions (in discovery-related correspondence) that the COFD arguably encompassed the H-60 Blackhawk project as well, the court construed Sikorsky’s motion as seeking to limit the claims at issue to the S-92 Gearbox and H-60 Blackhawk projects.

  2. On this point, in footnote 7, the court recognized that the pending action resulted from a government CDA claim, but looked to Sikorsky’s amended complaint for the claims eligible for dismissal.

  3. Per footnote 8, Sikorsky’s allegations could not be construed as affirmative defenses for the same reason: Sikorsky could not affirmatively defend against a government claim not yet asserted by the contracting officer.