Opinion
CA No. 99-364 (RWR/JMF).
June 8, 2000
MEMORANDUM
Lockheed Martin ("Lockheed") and Recon/Optical("Recon") are competitors in the highly restricted market of military reconnaissance equipment. Thanks to a successful bid protest by Recon, Lockheed Martin is the prime contractor and Recon one of its subcontractors on a contract to produce a "Theater Airborne Reconnaissance System" ("TARS") for the United States Air Force. Recon was to produce one sensor and Lockheed a second. The second is called a Medium Altitude Electro-Optical sensor; hence "MAEO." The other I will simply call "the Recon sensor." Each of these sensors occupies a different place in the TARS pod.
This lawsuit resulted from Lockheed's withholding payment for 7 of the 20 sensors Recon delivered because Lockheed claimed they were defective. Lockheed also claims that Recon's late delivery of defective products caused it damages. Defendant's Counterclaim ¶ 21. Recon claims ( inter alia) that any claim by Lockheed that Recon's delay in delivering Recon's sensors to Lockheed or of defects in the Recon sensors caused Lockheed damage would have to be excused under a principle of contract law known as "concurrent delay." Typically, the government asserts this defense of "concurrent delay" when a contractor accuses the government of delaying its performance and seeks to recover from the government damages or costs it suffered because of the government's delay. The government can defeat that claim if it can establish that there was some other cause for the delay for which it was not responsible thereby proving that the contractor could not have completed its performance even if the government had not caused any delay.
See William F. Klingensmith, Inc. v. United States, 731 F.2d 805, 809 (Fed. Cir. 1984); CJ Contractors, Inc. v. United States, 45 Fed Cl. 343, 372 (1999); Mega Construction Co., Inc v. United States, 29 Fed. Cl. 396, 423 (Fed.Cl. 1993); Avedon Corp. v. United States, 15 Cl Ct. 648, 652 (Ct.Cl. 1988). See also Youngdale Sons Construction Co., Inc. v. United States, 27 Fed. Cl. 516, 563-564 (Fed.Cl. 1993); Wilner v. United States, 23 Cl. Ct. 241, 257 (Cl.Ct. 1991). The principle does not work on an all or nothing at all basis. If possible, the courts will apportion damages for the delay between the parties in terms of terms of fault. William F. Klingensmith, Inc. v. United States, 731 F.2d at 809.
An example is helpful. The government contracts to have a runway built with work to commence on January 1, 2000 but the government, for its own convenience, then tells the contractor to postpone starting work until February 1, 2000. The contractor would get damages for the delay caused by the government unless the government could show that, for example, a blizzard made it impossible to start work on January 1, 2000 and that, given weather conditions, the contractor could not have started work until January 15, 2000. If the government proved that was true, the contractor would be limited to a recovery based on a 15 day delay. The delay between January 1 and January 15, 2000 would be "concurrent" and the contractor could not recover for it.
Recon apparently intends to defeat that claim by arguing that defects in Lockheed's MAEO delayed acceptance by the Air Force of the TARS and there was, therefore, "concurrent delay." Invoking this principle, Recon argues that Recon's late delivery of supposedly defective products caused Lockheed no harm since the supposed defects in the MAEO would have given the Air Force reason not to pay Lockheed independent of any defects in the Recon products or delay in their delivery.
The problem with Recon's theory is that it does not fit the facts as I know them. As I explained in my prior opinion, a specific amendment to the contract divorces the delivery of the Recon sensors from the delivery of the MAEO. The Recon sensors are an integral part of the Initial Configuration Capability phase of the TARS and the MAEO is not. Instead, the MAEO will be integrated into the TARS in a later separate effort, the Final Configuration Capability phase. Hence, "[i]nformation about the MAEO cannot be of any use to Recon in establishing its defense of concurrent delay." Memorandum, filed March 14, 2000, at 5. Recon now claims, however, that the deposition testimony of Captain Kurt Harendza, the Air Force program manager for TARS, compels a different conclusion.
To place Captain Harendza's testimony in context, one should begin with the testimony of Captain Harendza's predecessor as TARS program manager, Major Russell Prechtl.
Prechtl first explained that the "ICC" does not include a MAEO, it only includes a framing sensor." Deposition of Russell Prechtl at 498, Exhibit 1 to Defendant's Motion for Leave to File a Surreply to Plaintiff's Reply to Defendant's Opposition to Plaintiff's Second Motion to Compel Production of Documents.
"ICC" is the acronym for Initial Configuration Capability.
He then testified:
Question: Now it indicates in there that according to Mr., to Major Ingalls, that Mr. Coney indicated that or made it sound like "MAEO was what was causing the problems." Did you discuss that at all with Major Ingalls?
Answer: It says here is when I spoke to Mr. Coney, I never mentioned MAEO, because it really wasn't part of the, it wasn't being integrated yet, so it wasn't an issue on the program.
Question: So the MAEO couldn't be causing any of the problems with the TARS?
Answer: No, no.
Deposition at 567-568.
This testimony confirms the accuracy of my earlier determination that the MAEO will not be integrated into the Initial Configuration Capability phase. Instead, as a witness before me at the hearing held on February 2, 2000 testified, the Initial Configuration Capability phase TARS pods will be delivered and then will be retrofitted with the MAEO's once the MAEO's become available. Testimony of Michael Wallace at 101 at the hearing held on February 2, 2000.
The deposition of the TARS program manager, Captain Kurt Harendza, acknowledges this fundamental difference between Initial Configuration Capability and Final Configuration Capability. He explains, as did Wallace, that the MAEO will be retrofitted into the TARS pod and that his acceptance of the MAEO is unrelated to his acceptance of the Recon sensors. The acceptance of the latter is essential to the TARS pod achieving Initial Configuration Capability; acceptance of the MAEO, to be retrofitted into the TARS pod, once Initial Configuration Capability has already been achieved, is not.
There is, however, a complication. In the TARS pod there is an Environmental Control System which is supposed to prevent the temperature in the pod from rising to the point of threatening the operation of the optical equipment in it, including, of course, the Recon sensor and the MAEO. During flight tests there have been "false alarms", i.e., mechanical notifications to the pilot that the temperature in the pod has risen to a dangerous level when, in fact, it had not. Testimony of Kurt Harendza at 198. The false alarms that sounded during the flight tests left the Air Force with "a bad feeling that the ECS [Environmental Control System] was substandard based on the amount of failures. When, in fact, the failures were really false alarms." Id. The decision has now been made that acceptance of the Initial Configuration Capability of the TARS pod will be postponed until the MAEO is retrofitted into the TARS pod so that the Environmental Control System can be tested with all the heat generating components, including the MAEO, in it. Hence, the original plan of concluding Initial Configuration Capability testing without the MAEO in the pod and proceeding to the Final Configuration Capability phase once the MAEO was in the pod has been abandoned in favor of postponing Initial Configuration Capability approval until the pod is tested with the MAEO in it.
Captain Harendza's testimony, which I have quoted at length, is an Appendix to this Memorandum.
By postponing acceptance of Initial Configuration Capability until the TARS pod can be flown with the MAEO in it, the Air Force has joined the Initial Configuration Capability phase and the Final Configuration Capability phase for the limited purpose of testing the operational capability of the Environmental Control System. Delays in the delivery of the MAEO could in this limited sense have an impact on the flight testing schedule because the Air Force wants to test the TARS with the MAEO in it. It is still true, however, that as Captain Harendza testified, the acceptance of the Recon sensors is a part of the Initial Configuration Capability phase and the acceptance of the MAEO part of Final Configuration Capability phase. Thus, any delay in the production of the latter could have no effect on the acceptance of the former. If the original malfunctioning of those Recon sensors occasioned delay in any payment due Lockheed, thereby justifying an offset from what Lockheed owes Recon, any malfunctioning in the MAEO could not have had anything to do with whether or not Lockheed was ready to deliver the MAEO's to the Air Force since the Air Force had agreed to grant Initial Configuration Capability without delivery of the MAEO's.
Second, at no point in his testimony, did Captain Harendza say that defects in the MAEO were delaying the flight testing. He attributed that delay to the unavailability of aircraft to do the test flights. In any event, even if there were defects in the MAEO, the only reason given by Captain Harendza for delay in Initial Configuration Capability acceptance was the desire of the Air Force to test the Environmental Control System with the MAEO in the pod. To be realistically based on the facts of this case, the litigation on the concurrent delay issue will have to focus on the significance of the Air Force's determination to postpone Initial Configuration Capability approval until the Environmental Control System is tested. That is the only reason the Air Force has advanced to justify its refusal to grant Initial Configuration Capability approval. Thus, delays in payment due to the malfunctioning Environmental Control System may have something to do with Recon's claim that Lockheed should not be permitted to hold back any money because Lockheed had the responsibility to produce a Environmental Control System that operated correctly. The validity of that contention by Recon, however, has absolutely nothing to do with malfunctions in the MAEO because malfunctions in the MAEO are not the reason given by the Air Force for its refusal to grant Initial Configuration Capability approval until all the MAEO's are in the TARS pod. The documents concerning the supposed malfunctions in the MAEO therefore continue to be irrelevant to any issue in this case.
That, however, does not end the matter. Recon protests that Lockheed waived its right to claim the irrelevancy of documents dealing with delays in the delivery of the MAEO. According to Recon, while Lockheed made a general objection to the irrelevancy of the MAEO documents when it answered Recon's discovery, it produced certain reports by Michael Wallace without deleting from them material asserted to be irrelevant. Recon charges that Lockheed did not produce other Wallace's reports, from which Lockheed had redacted certain material, until Recon realized they were missing and demanded that Lockheed produce them. Lockheed does not say much about this except to explain in a footnote to its pleading that, if it initially produced documents which contained information it claims is irrelevant, it did so inadvertently. Defendant's Reply to Plaintiff's Reply to Defendant's Opposition to Plaintiff's Second Motion to Compel Production of Documents at 1 n. 1.
First, Lockheed's behavior in holding back the redacted Wallace reports cannot constitute a waiver since it is action consistent with the assertion of the objection, not with its waiver.
Second, this Circuit is the strictest in the country in determining the consequences of the inadvertent disclosure of documents protected by the attorney-client privilege. See In re Sealed Case, 877 F.2d 976 (D.C. Cir. 1989); In re Sealed Case, 676 F.2d 976, 981 (D.C. Cir. 1982). But, as Judge Hogan has pointed out, those decisions do not apply indiscriminately to the inadvertent disclosure of documents protected by any privilege or, analogously, to which there has been an objection. In re United Mine Workers of America Employee Benefit Plans Litigation, 159 F.R.D. 307 (D.D.C. 1994). Thus, while it is the law of this Circuit that the inadvertent disclosure of a document protected by the attorney-client privilege waives the privilege as to all communications relating to the same subject matter, that principle does not apply with equal force to documents protected by the attorney work-product privilege when there are competing considerations militating against its application in the context of the assertion of the latter privilege. Id. at 309-312. Therefore, it is certainly not the law of this Circuit that the inadvertent disclosure of any document in discovery waives any objection to the production of other documents that deal with the same subject matter. Instead, careful consideration must be given to the consequences that will follow if this strict rule is adopted in other circumstances. Id.
It nearly goes without saying that lawyers are cautious people. Confronted with a rule that the inadvertent disclosure of an irrelevant document will require the disclose of other documents dealing with the same subject matter, despite a legitimate claim of irrelevancy, lawyers will understandably resolve every questionable case in favor of asserting the irrelevancy of the document. This will increase the costs of document review to their clients and lead necessarily to more discovery battles over the relevancy of certain documents and the consequential expenditure of judicial resources resolving them.
On the other hand, this Circuit's strict rule on the inadvertent waiver of the attorney-client privilege is animated by the expressed desire to keep the attorney-client privilege, which obstructs the search for the truth, to its narrowest possible application:
To hold, as we do, that an inadvertent disclosure will waive the privilege imposes a self-governing restraint on the freedom with which organizations such as corporations, unions, and the like label documents related to communications with counsel as privileged. To readily do so creates a greater risk of "inadvertent" disclosure by someone and thereby the danger that the "waiver" will extend to all related matters, perhaps causing grave injury to the organization. But that is as it should be. Otherwise, there is a temptation to seek artificially to expand the content of privileged matter. In other words, if a client wishes to preserve the privilege, it must treat the confidentiality of attorney-client communications like jewels — if not crown jewels.In re Sealed Case, 877 F.2d at 980.
There is no similar interest in constricting claims of irrelevancy in discovery. No one would seriously suggest that there is a societal interest in the discovery of irrelevant material.
Because I see no value in doing otherwise, I will conclude that any inadvertent disclosure of material now claimed to be irrelevant waives the claim of irrelevancy only as to the documents already produced. There is therefore no impediment to Lockheed's protesting that the portions of the Wallace reports containing information as to the MAEO which it excised are irrelevant. Lockheed understandably concedes that it cannot claim an absolute right to expurgation free of judicial supervision and tenders for my in camera inspection the redacted and unredacted portions of the Wallace reports. I will take Lockheed up on its offer and order that the two sets of documents be delivered to my chambers within ten days of the date of this opinion.