Alabama Aircraft Industries Inc et al v. Boeing Company, The et al

Filing 445

MEMORANDUM OPINION. Signed by Judge R David Proctor on 8/15/2018. (KAM)

FILED
2018 Aug-15 PM 03:32
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION

)
ALABAMA AIRCRAFT INDUSTRIES,
)
INC., ALABAMA AIRCRAFT
INDUSTRIES, INC. – BIRMINGHAM, AND )
)
PEMCO AIRCRAFT ENGINEERING
)
SERVICES, INC.,
)
)
Plaintiffs,
)
)
)
v.
)
)
THE BOEING COMPANY,
)
BOEING AEROSPACE OPERATIONS,
)
INC. AND BOEING AEROSPACE
)
SUPPORT CENTER,
)
)
Defendants.
)

Case No. 2:11-cv-03577-RDP

MEMORANDUM OPINION
This case relates to an award of Programmed Depot Maintenance (“PDM”) work for the
United States Air Force’s KC-135 Stratotanker fleet. (Doc. # 97 at & 8). Since approximately
1969, Alabama Aircraft, Inc. (“AAI” or “Pemco”)1 had performed some of this work in Jefferson
County, Alabama. In February or March 2004, Boeing2 and AAI began conversations about
teaming together to bid jointly on future KC-135 PDM work. (Doc. # 97 at && 8, 29). After a
long and circuitous series of events, the work was awarded to Boeing. (Doc. # 97). This case
relates to the events surrounding that award.
1

The claims of the named Plaintiffs in this action, Alabama Aircraft Industries, Inc., Alabama Aircraft
Industries, Inc. – Birmingham, and Pemco Aircraft Engineering Services, Inc., are being prosecuted by and through
Joseph Ryan as the trustee of the Litigation Trust established in relation to the Chapter 11 Bankruptcy case of the
named Plaintiffs. The term “Plaintiff” or “AAI” will be used in the singular herein to refer to these entities.
2

Defendants in this case are The Boeing Company, Inc., Boeing Aerospace Operations, Inc., and Boeing
Aerospace Support Center. For ease or reference, they will be referred to in the singular as “Boeing.”

After a number of pleadings and motions, AAI filed its Third Amended Complaint. The
claims presently before the court are as follows:
1.
Count One is a Breach of Contract claim alleging that Boeing improperly
terminated the Memorandum of Agreement executed on September 6, 2005
(“MOA”) and failed to award it 50% of the planes under the 2005 Work Share
Agreement (“WSA”);
2.
Count Two is a Declaratory Judgment claim regarding the application of
the Limitation of Liability clause in the MOA to Count One;
3.
Count Three is a Breach of Contract claim alleging that Boeing breached
the Non-Disclosure Agreement executed on June 3, 2005 (“NDA”);
4.
Count Four is a Declaratory Judgment claim regarding the application of
the Limitation of Liability clause in the MOA to Count Three; and
5.
Count Seven is a Suppression of Fact claim regarding Boeing’s Bridge
Contract for KC-135 PDM work.
(Doc. # 97).
This case is currently before the court on the parties’ respective motions for summary
judgment. (Docs. # 340, 343). The Motions have been fully briefed. (Docs. # 341, 342, 344-347,
392-396, 405-409).3 For the reasons discussed below, both Motions are due to be granted in part
and denied in part.

3

Appendix II to the court’s Initial Order, “Summary Judgment Requirements” states that “Counsel must
state facts in clear, unambiguous, simple, declarative sentences.” (Doc. # 3 at 15). AAI appears to have had trouble
drafting its statement of facts in compliance with this requirement, causing Boeing to respond to many of its facts
with “disputed as stated” and “Boeing disputes any implication … .” (See, e.g. Doc. # 341 at 44, & 152). Plaintiff’s
proposed undisputed fact 152 clearly contains attorney argument. (“Such undisputed facts demonstrate Boeing’s
Truman Project rewriting work occurred by early May 2006 … .”), & 163 (“Discovery in this case does not contain
any, and Boeing will be unable in its opposition to adduce any, communication from Boeing to Pemco (or vice
versa) prior to signing the MOAs, or indeed up through June 6, 2006 or after, which discloses or discusses any
ground for termination of the MOA as being founded upon anticipated impacts on Boeing's KC-10, C-130 AMP, C17, or KC-135 GATM programs (i.e., four other programs in which Pemco did not participate) at San Antonio.”).
This has made the court’s task in sifting through the parties’ submissions to determine whether there are undisputed
facts much more time consuming and tedious than it should have been. Moreover, in their argument sections, in
providing record citations to “evidence” supporting a statement, both parties frequently cited back to their purported
statements of undisputed facts, rather than directly to the record evidence on the court docket. This, too, made the
court’s examination of the facts of the case doubly time-consuming inasmuch as the court was then required to

2

I.

Facts
The facts set out in this opinion are gleaned from the parties’ respective statements of

undisputed facts, their responses thereto, and the court’s own examination of the evidentiary
record. All reasonable doubts about the facts have been resolved in favor of the non-moving
party. See Info Sys. & Networks Corp. v. City of Atlanta, 281 F.3d 1220, 1224 (11th Cir. 2002).
These are the “facts” for summary judgment purposes only. They may not be the actual facts that
could be established through live testimony at trial. See Cox v. Adm’r U.S. Steel & Carnegie
Pension Fund, 17 F.3d 1386, 1400 (11th Cir. 1994).
Boeing is an aerospace and defense company with locations across the country. (Doc. #
97 ¶ 2). AAI provided aircraft maintenance, repair, and modification services for government
and military customers. (Doc. # 97 ¶ 1).4 Because this case involves department of defense
contracting, the parties’ briefing and this court’s opinion are replete with abbreviations and
acronyms. The court apologizes in advance.
A.

Background

AAI has a long history of involvement with refurbishing work on KC-135s. AAI and its
predecessors began performing PDM services on KC-135 aircraft in 1968. (Doc. # 349-1). AAI
was a prime contractor under a contract with the United States Air Force (“USAF”) for KC-135
PDM services from 1994 through 2001. Alabama Aircraft Indus. Inc. – Birmingham v. United
States, 83 Fed. Cl. 666, 670 n.6 (Ct. Cl. 2008). In 1998, the USAF awarded Boeing a prime

reference the asserted fact to find the record cite to then evaluate the record evidence. See, e.g., Docs. 342 at 22, 396
at 57). The court instructs the parties as follows: in the future don’t do that!
4

Michael Tennenbaum, co-founder and former Senior Managing Partner of Tennenbaum Capital Partners,
LLC, was AAI chairman of the board from 1999 through 2009. (Doc. # 364-2).

3

contract to perform PDM services on KC-135 aerial refueling aircraft. (Doc. # 364-5 at 2).
Although AAI had performed and was performing KC-135 PDM work, it did not perform other
services that the USAF bundled into the 1998 RFP. (Doc. # 349-1).
Historically, Boeing has “experienced performance difficulties associated with the speed
and the quality of its work” on the KC-135 aircraft. (Doc. # 349-3 at 12). In 2000, “the USAF
‘encouraged’ Boeing to take on [AAI] as a major supplier at the end of FY2001.” (Doc. # 364-6
at 4). On October 27, 2000, Boeing and AAI entered into a Memorandum of Agreement
(“MOA”) pursuant to which AAI was made a subcontractor to Boeing for the 1998 KC-135
PDM contract for Fiscal Years (“FY”) 2002 through 2007. (Docs. # 364-7, 349-6).5 The 2000
MOA included various grounds for termination, including “[f]ailure of the Customer to award an
FY02 KC-135 PDM contract to [Boeing] at the quantity anticipated in Attachment A.” (Doc. #
349-6).
Boeing and AAI entered into a formal Long Term Requirements Contract (“LTRC”),
titled “Repair Agreement 01-003,” with Boeing designated a prime contractor and AAI a
subcontractor in relation to PDM work. (Doc. # 349-10). Boeing and AAI amended the terms of
the LTRC numerous times. (Docs. # 349-10, 349-11, 349-12).
In 2004, the USAF elected not to exercise the final option years of the 1998 KC- 135
PDM contract (Doc. # 364-8), and decided to “recompete” the KC-135 PDM contract (the
“Recompete Contract”) and open bidding on the new contract to all bidders. (Doc. # 365-1).

5

The 2000 MOA had a “Limited Obligation” provision at Section 11.0 which provided, in relevant part,
that “[n]either Party will be liable to the other for costs expenses risks liabilities or special indirect or consequential
damages arising out of this MOA.” (Doc. # 364-7 at 6).

4

On April 1, 2005, Boeing and AAI entered into a Memorandum of Agreement (the
“Bridge MOA”) for KC-135 PDM work for the Bridge Contract for FY06 and FY07. (Doc. #
365-9). On October 1, 2005, the USAF awarded Boeing the Bridge Contract to perform KC-135
PDM work for FY2006 and FY2007, pending the award of the Recompete Contract. (Docs. #
365-10, 365-11, 349-23).
On October 17, 2005, Boeing and AAI entered into a Long Term Requirements Contract
(the “LTRC”) whereby AAI would be a subcontractor to Boeing for the Bridge Contract, sharing
the aircraft “on a fifty-fifty split.” (Doc. # 365-12). The LTRC provided for a “basic period
effective 1 Oct 05 through 30 Sep 07 [FY06-07] and two six-month option periods effective
October 1, 2007 through September 30, 2008 [FY08].” (Docs. # 365-12, 365-10 at 9-19). For
each year of the Bridge Contract, the parties negotiated the prices Boeing would pay AAI. (Docs.
# 365-13 through 365-17).
B.

Competition for the KC-135 Recompete Contract

After the USAF decided to recompete the KC-135 PDM, Boeing and AAI each expected
a Request for Proposal (“Recompete RFP”) for the Recompete Contract to be issued. (Docs. #
365-19 at 6, 365-20 at 4). In January 2005, Boeing and AAI separately evaluated various
options to compete for the KC-135 Recompete Contract, including whether to bid independently,
team with each other, or team with other companies. (Docs. # 365-19, 365-20, 365-22 at 23, 34920).
In a January 18, 2005 e-mail among Boeing employees, an “exit strategy with [AAI]”
was mentioned. (Doc. # 350-2 at 2). In a January 21, 2005 KC-135 PDM Re-compete
“Campaign Review” presentation, Boeing’s “Proposed Win Strategy” included “[b]ecom[ing]

5

single source of repair/overhaul on KC-135 for recompete,” but its evaluation of AAI recognized
that AAI “[c]ould provide a benefit to any competitor that competes against Boeing.” (Doc. #
350-3 at 9, 12).
1.

The MOA Negotiations

In April and May 2005, AAI and Boeing were negotiating language for a new MOA,
Work Share Agreement (“WSA”), and Non-Disclosure Agreement (“NDA”), where it was
contemplated that Boeing would act as the prime contractor, and AAI as a subcontractor. (Docs.
# 365-23, 395 at 11, 296-19, 350-12). A separate Proprietary Information Agreement was AAI’s
idea. (Doc. # 350-12 at 2).
On April 28, 2005, Boeing internally circulated a first draft of the Recompete MOA
which included a limitation of liability clause at Section 11.0. (Doc. # 367-4). On May 3, 2005,
AAI sent its first draft of the Recompete MOA to Boeing, which contained the following
provision: “IN NO EVENT SHALL ANY PARTY HERETO BE LIABLE FOR ANY LOST
PROFITS, LOST SAVINGS, CONSEQUENTIAL, INCIDENTAL, OR SPECIAL DAMAGES,
EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.” (Docs. # 367-5 at 10; 377-17 at 5). On May 6, 2005, Boeing sent AAI a revised
draft Recompete MOA, which included a different limitation of liability clause at Section 11.0.
(Doc. # 367-6 at 2, 11). On May 11, 2005, AAI sent Boeing a revised draft of the Recompete
MOA that accepted Boeing’s May 6 the limitation of liability language. (Doc. # 367-7 at 2, 11).
The clause provided that the parties disclaimed any incidental damages, punitive and exemplary
damages and any consequential damages, including but not limited to any profits that the

6

Non-breaching Parties expected to earn. (Doc. # 367-7 at 11). After May 11, 2005, no further
changes were made to the limitation of liability clause. (Docs. # 367-7 at 11, 367-8 at 9-10).
AAI and Boeing both had some concern about the number of aircraft (Best Estimated
Quantity or “BEQ”) which would be subject to the Recompete MOA, and whether two sources
of repair would be feasible. (Docs. # 341 at 16, 349-5 at 34-35, 350-9, 350-10). In May 2005,
the parties exchanged various drafts of the Recompete MOA. (Docs. # 367-9, 367-10, 367-11).
Early drafts of MOA § 5.0(c) allowed for termination by either party if the USAF failed to award
a KC-135 PDM contract to Boeing at a quantity that would support two contractor sources of
repair, but in the final MOA language Boeing accepted AAI’s proposed revision to § 5.0(c)
which allowed either party to terminate the MOA at the time of “any RFP or amendments
thereto” rather than at the time of “award.” (Docs. # 341 at 15, 395 at 13). AAI wanted “to make
sure that if the quantities dropped below a level that they could support work for both of us, that
[the planes] would come to [AAI].” (Doc. # 349-5 at 35).
After several months of negotiations, and after multiple drafts of the MOA had been
exchanged, Boeing sent AAI “Boeing’s final offer for the Re-compete MOA for KC-135 PDM.”
(Doc. # 350-28). The final MOA was signed on June 3, 2005. (Doc. # 365-18). Exhibit A to the
MOA was the WSA, and Exhibit B was the NDA. (Docs. # 341 at 18, 395 at 15, 365-18).
2.

Boeing and AAI Begin Work Together

In June 2005, the Recompete MOA was signed and Boeing and AAI began working on
their October 2005 joint proposal. (Doc. # 367-18). On July 20, 2005, Boeing and AAI
executives held a joint executive review during which they discussed the strategy for the October
2005 bid submission. (Doc. # 367-18).
7

Boeing regularly employs a Blue Team Process in which people who are not members of
the bid proposal team analyze publicly-available information about a competitor to simulate the
role of a competitor and develop a bid as that competitor. (Doc. # 367-20). The purpose is to
“assess[] the competitive environment; determin[e a] competitor’s likely proposal strategies; and
communicate mock competitors’ strategies to Boeing Capture Team leaders responsible for
generating Boeing’s proposal for specific competitive procurements.” (Doc. # 362-22). The
Process manual provides that “[a]ll Blue Teams will be performed in compliance with Boeing
ethical standards” and be derived from an “analysis of publicly available information.” (Doc. #
362-22 at 2, 5). Although it considers this analysis proprietary, Boeing shared its Blue Team’s
Recompete analysis with AAI during the July 20, 2005 joint executive review. (Doc. # 367-18 at
15-19).
The USAF issued the Recompete RFP on August 19, 2005. (Doc. # 367-16). The
Recompete was for five base years plus five option years. There was a proposed BEQ of 28
aircraft for base year three and a BEQ of 44 aircraft per year for base years four and five, and for
all five option years. (Doc. # 351-13).
Although AAI developed its own pricing for the joint Recompete bid, Boeing provided
AAI with certain price targets to meet. (Docs. # 368-5, 368-11).
Joint bid work included estimating the intermittent tasks (“ITs”) for the Recompete
proposal. (Docs. # 368-8 at 50, 381 at 10, 393 at 6). ITs “are a list of PDM tasks that don’t
appear on … every PDM. And the government wanted us to price all those tasks, should they
occur … .” (Doc. # 368-6 at 50). AAI developed its IT hours estimates and provided them to
Boeing in October 2005. (Docs. # 368-10, 381 at 10, 393 at 6). AAI completed a pricing
8

template and provided it to Boeing. (Doc. # 368-5). AAI did not provide Boeing access to
substantiation of its costs. (Docs. # 368-13 at 42, 368-18 at 2). Rather, the price substantiation
was given to Boeing in a sealed envelope to provide to the USAF. (Doc. # 368-23, 368-24 at 2,
381 at 11, 393 at 8).
3.

The Amendments to the Recompete MOA

On September 6, 2005, the Recompete MOA was amended to add L-3 Communications
Integrated Systems L.P., another subcontractor, and to list AAI as “Principal Subcontractor.”
(Doc. # 367-8). The September 6, 2005 Recompete MOA included four attachments: Exhibit A
was a WSA between AI and Boeing; Exhibit B was the “L3 Work Share Agreement”; Exhibit C
was the June 2005 NDA executed by Boeing and AAI; and Exhibit D was a “Proprietary
Information Agreement,” executed by Boeing and L3. (Doc. # 376-8).
The September 2005 Recompete MOA contains the following relevant clauses:
WHEREAS, the United States Government (“Government” or “Customer”), or
its designated agencies, anticipates issuing a Solicitation(s)/Request(s) for the
Proposal (“RFP”) in the near future for the Program Depot Maintenance for the
KC-135 Aircraft (the “Program”), currently referred to as the FY08 Recompete;
and
....
1.0
RELATIONSHIP OF THE PARTIES
1.1
The relationship established by this document shall be exclusive for each
party with the others and the Parties agree that they will not enter into any
teaming agreement with any other offeror under or for the Program
defined herein. Should any party violate the terms of this paragraph, this
Agreement shall terminate immediately and the injured party shall have
recourse to all available remedies, at law or in equity, to compensate for
any direct damages suffered as a result of breach of this paragraph.
....
1.4
Each party shall act as an independent contractor and not as agent for,
partner of, or joint venturer with the other party unless such agency,
partnership or joint venture is established and agreed to, under separate
document, between the parties. ... No other relationship outside of that
contemplated by the terms of this Agreement shall be created hereby. . . .
9

....
3.0
....
3.5

....
4.0
4.1

....
5.0

....
c.

....
f.
....
7.0

....
11.0
11.1

PROPOSAL ACTIVITY
The Parties recognize that changes in the proposed Statement of Work and
Work Share may be necessary to respond to changes requested by the
Customer to the RFP or to enhance the likelihood of prime contract award.
Under such circumstances, and at BASC’s request, [AAI] will negotiate in
good faith to revise the proposed Subcontract Work consistent with terms
of this Agreement. Under no conditions shall the Prime Contractor
unilaterally change the Subcontract Statement of Work or workshare.

SUBCONTRACT AWARD
Subject to the conditions in this MOA, if BASC is awarded a contract in
connection with the Program, BASC will award subcontracts to [AAI] and
L3/IS for the stated work shares to the extent that the government awards
PDMs.
TERM AND EFFECTIVITY
This MOA … shall terminate upon the first occurrence of any of the
following”
After the release of any RFP or amendments thereto, if the contents
thereof are so unfavorable to the Prime or a Principal Subcontractor that
participation in the Program is no longer practical or financially viable; in
such case, the party seeking termination for this reason will provide
written notice to the other party within 15 days of the receipt of the RFP
(or amendment) giving notice of such.
The execution of a contract between the Parties which incorporates key
provisions of this MOA.
INTELLECTUAL PROPERTY
Proprietary Information will be treated according to the Non-Disclosure
Agreement executed separately by the Parties, incorporated by reference
as Exhibit “C” and “D”.
LIMITED OBLIGATION
The Parties recognize that one Party ... may fail to perform its obligations
under this Agreement ... and thereby cause damage to the other Parties ... .
The Parties, having full consideration to the nature of this transaction,
agree that the following categories of damages are disclaimed by each
Party, and the Non-breaching Parties neither expect[], nor will seek, to
10

recover from the Breaching Party any incidental damages, punitive and
exemplary damages and any consequential damages, including but not
limited to the following: (a) any profits that the Non-breaching Parties
expected to earn on the Prime Contract or any other contract related to the
Program; ...
....
11.2

....
15.0

....
17.0

. . . Nothing in this MOA shall constitute, create, give effect to or imply a
joint venture, partnership, or formal business organization. Each Party is
an independent contractor and not an agent for the other Party. ... No such
relationship is intended by any reference herein to a “team” or “team
members.”
APPLICABLE LAW
This MOA shall be governed by the laws of the state of Missouri, without
resort to conflict of laws provisions.
ENTIRE AGREEMENT
This MOA together with its Exhibits and Attachments contains the entire
agreement between the Parties concerning the subject matter thereof and
supersedes any previous understanding, commitments or agreements, oral
or written.

....
(Doc. # 40-6 at 4, 6, 8-9, 10).
Exhibit A to the September 2005 MOA, the WSA, contains the following relevant
language: “Upon successful award of a contract for the Program, it is agreed that [AAI] will
receive 50% of all KC-135 PDM inductions awarded on said contract.” (Doc. # 367-8 at 13).
Exhibit C to the September 2005 MOA, the NDA executed on June 3, 2005, recites its
Purpose as follows:
The Purpose of this Agreement is to set forth the rights and obligations of the
parties with respect to the use, handling, protection, and safeguarding of
Proprietary Information which is disclosed by and between the parties hereto
relating to the KC-135 Program Depot Maintenance (PDM) for the purpose of
negotiating a Memorandum of Agreement leading to a long-term subcontracting
relationship relating to the aforementioned program.
(Doc. # 367-8 at 17). The NDA contains the following additional provisions:
4(e). This Agreement shall not restrict disclosure or use or use of Proprietary
Information that:
....
11

(3) becomes known to the receiving party from a source other than the
disclosing party without breach of this agreement by the recipient.
....
12. In the event the contractual relationship between the parties (for the KC-135
PDM program that is embodied in the associated Memorandum of Agreement or
in a subsequent long-term subcontracting relationship) terminates pursuant to the
terms of such MOA or subcontract, either party may pursue an independent
contract to perform work for the United States Government on the PDM program,
either alone or in conjunction with other parties. Nonetheless, in compliance with
this Agreement, each party shall safeguard the Proprietary Information exchanged
up to the date the relationship ends, and ensure that such data is not used against
the disclosing party’s interests. This restriction will not preclude a party’s
employees who have had access to the other party’s Proprietary Information from
participating in the subsequent independent contract, so long as appropriate
safeguards are in place to prevent inappropriate use of the other party’s
Proprietary Information.
13. Entire Understanding. This Agreement contains the entire understanding
between the parties concerning the subject matter hereof, superseding all prior or
contemporaneous communications, agreements, and understandings between the
parties with respect to the disclosure and protection of Proprietary Information
relating to the purpose of this Agreement. The rights and obligations of the parties
shall be limited to those expressly set forth herein.
(Doc. # 367-8 at 18-20).
4.

Behind the Scenes at Boeing

Boeing was aware that AAI’s KC-135 PDM subcontract work with Boeing represented
the vast majority of AAI’s business, and essentially all of its reported profits for the relevant time
period. (Doc. # 264-14 at 10; Doc. # 264-15 at 12). Boeing was also aware that the loss of KC135 PDM work would force AAI out of business. (Doc. # 228-40 at 6; Doc. # 228-42 at 2, 6). In
making the Recompete bid, AAI essentially “bet the farm” because “eighty percent of [its]
business in Birmingham was [derived from] KC-135 PDM.” (Doc. # 263-2 at 328:16-23).
5.

Submission of the Bid and Boeing Looks at Contingency Plans

Despite this knowledge of the ramifications for AAI of losing the KC-135 PDM work,
during the period of time when AAI and Boeing were preparing the joint Recompete bid, Boeing
was also exploring contingency “off ramps” with AAI (i.e., ways to opt out of the teaming
12

arrangement with AAI). (Docs. # 352-27, 368-1 at 90-92, 352-27). Boeing’s Patrick Finneran
testified that contingency planning was standard practice due to perceived issues with AAI at that
time. (Doc. # 368 at 90). However, he further testified that “the issues were resolved to my
satisfaction because we continued on.” (Doc. # 368 at 91). Boeing’s candid assessment at that
time was that, if it opted out of either the MOA or a separate bridge contract, “we can expect an
ugly, lengthy legal battle.” (Doc. # 263-31).
On October 24, 2005, Boeing submitted AAI’s price substantiation to the USAF
in a sealed envelope. (Docs. 368-23, 368-24, 351-21). On October 31, 2005, Boeing submitted
its joint bid to the USAF with AAI and L-3 as subcontractors. (Docs. # 368-20, 368-21, 368-22).
On November 15, 2005, AAI announced a third quarter net loss of $3.75 million and a
43.5% decline in revenue. (Doc. # 290-26).
In February 2006, the USAF conducted a meeting with Boeing and AAI regarding its
Joint Bid Evaluation. (Docs. # 370-3 at 45, 370-1, 349-19 at 138-139). The Joint Bid Evaluation
is the government’s debrief of the proposal. (Doc. # 349-19 at 138-139). Although it was
“appropriate for [AAI personnel] to be there for the technical debrief,” it was not typical for AAI
personnel to attend the cost/price debrief. (Doc. # 349-19 at 138-139). One of the documents
used at the USAF’s cost/price debrief was a chart that included Boeing’s actual “Cost/Price” that
Boeing submitted to the USAF. (Doc. # 370-1 at 76-80).
On March 27, 2006, AAI announced a net loss of $5.8 million for 2005, as well as a
38.5% decline in revenue. (Doc. # 290-27 at 2).
In March and early April 2006, Boeing was evaluating “contingency plans” in case the
USAF reduced the BEQ to an extent that only one repair site was feasible. (Docs. # 352-32, 35233). In a March 29, 2006 e-mail titled “[AAI] Contingency Plan,” Boeing also considered the

13

possibility of AAI filing for bankruptcy protection. (Doc. # 296-5). In a different March 29, 2005
e-mail, Boeing’s Michael Wright stated that certain events might:
force Boeing to move all of the workload to one site. Our MOA with [AAI] is
clear who that would be, but the financial risk of [AAI] coupled with the risk to
San Antonio and future competitions like the KC-10 would indicate that
following the MOA might not be wise.
(Doc. # 352-32). An April 4, 2006 Boeing internal memorandum regarding a potential BEQ
reduction stated:
The intent of this white paper is to summarize my conversation with the PCO and
highlight the fact that the Government already has mechanics in place to execute
any change in quantity that may occur. In addition, information was also provided
concerning the MOA and the exit criteria available to both Boeing and [AAI].
This information is preliminary. A decision has not been made and no direction
has been given to the Source Selection team to modify the RFP at this time. Upon
receipt of formal direction from the Government, we must be prepared to address
[our] relationship with [AAI] in a timely manner.
(Doc. # 352-33). Boeing anticipated that, “[c]onsidering their current financial position, [AAI]
will make a case that all the aircraft should go to [AAI], should this become a reality.” (Doc. #
352-33 at 3-4).
6.

The Air Force Changes the BEQ

On April 18, 2006, the USAF released a Letter of Intent (“LOI”) regarding a potential
BEQ change from 44 aircraft per year to 24 aircraft per year. (Docs. # 369-3, 352-35). The LOI
sought input and information regarding how the proposed BEQ changes might affect the parties’
Recompete bids. (Doc. # 369-3).
Boeing then began comparing different pricing scenarios for a joint bid with the reduced
BEQ, including comparing both Boeing and AAI as the single repair site. (Docs. # 352-36, 35237, 369-14 at 38-39). Boeing executives evaluated the financial impact on Boeing and its San
Antonio site of a potential BEQ reduction. (Docs. # 369-13, 369-14 at 38-39). Boeing estimated
that losing the PDM program to an AAI single site would result in losses of over $12 million.
14

(Doc. # 369-13). Boeing considered three options: (1) splitting the aircraft 50/50, (2) splitting the
FY06 aircraft and then moving all FY07 aircraft to San Antonio, and (3) moving all aircraft to
San Antonio after June 2006. (Docs. # 369-15, 369-14 at 47-48).
In an April 22, 2006 e-mail, although Boeing’s Vietor noted that “[c]urrently we have
Boeing as the single source for quantities below 26,” he requested “one more” comparison and
stated that “the next step would be to calculate the true Boeing Management Cost Burden.” (Doc.
# 352-36). During this time, Boeing continued to engage in various pricing comparisons. (Docs.
# 352-37. 352-39, 352-40, 352-41). In an April 27, 2006 version of the comparisons, the AAI
versus Boeing price comparison slides are re-captioned “Apples to Apples Comparison Single
Site w/o Mgmt. Burden” and “[AAI] vs. Boeing Single Site Comparison w/Mgmt Burden.”
(Doc. # 352-41 at 16-17).
On May 1, 2006, Boeing sent the USAF a letter in response to the LOI in which it
expressed “several concerns regarding this LOI,” asked the USAF to “continue the source
selection based on the requirements set forth in the current RFP,” and stated that “[t]he
Boeing/[AAI] team’s commitment to the ongoing success of the KC-135 PDM program has
never been stronger.” (Doc. 369-6).
In April and May 2006, Boeing also formed the “Truman Project” to evaluate and
compare options for terminating the MOA. (Doc. # 263-38; Doc. # 264-5). Boeing again
estimated that a “Single Site [AAI]” scenario would cause losses at Boeing. (Doc. # 352-47).
On May 3, 2006, Boeing asked AAI to provide its best pricing for a joint bid on the
reduced BEQ. (Docs. # 369-10 at 5, 369-20). Boeing noted that “[AAI] should provide an
updated pricing matrix that reflects single site scenario.” (Doc. # 369-10 at 5). In response, AAI
“developed ‘best shot’ pricing,” but did not submit it to Boeing. (Doc. # 369-12).

15

In May 2006, AAI understood that Boeing was considering its options in light of the
reduced BEQ, including “going [it] alone.” (Doc. # 369-18). In a May 10, 2006 AAI board
meeting presentation, AAI acknowledged that it had a “decision to make relative to teaming”—
including “stay[ing] the course with Boeing,” “proposing as prime,” or finding “another teaming
arrangement.” (Doc. # 369-21 at 1, 38).
On May 16, 2006, Boeing was advised that an RFP amendment incorporating the LOI
should be expected on May 31, 2006, with a June 30 proposal deadline and a contract award in
August or September. (Doc. # 353-10). On May 25, 2006, Michael Tennenbaum, the chairman of
AAI’s Board of Directors, sent an email to the AAI Board stating that “[Boeing] is considering
worst case scenarios which include giving all planes to [AAI] and giving no planes to [AAI].
They do not think two sites can be competitive with the present quantity.” (Doc. # 369-19).
On May 31, 2006, the USAF formally issued an amendment to the RFP that lowered the
BEQ to 24 aircraft per year. (Doc. # 369-22).
On June 1, 2006, Boeing again asked for AAI’s pricing. (Doc. # 370-4 at 2-3). AAI
completed the pricing package on Saturday, June 3, 2006, and was prepared to give it to Boeing
on the morning of June 5, 2006. (Doc. # 398-1). However, AAI never submitted its “best shot”
pricing to Boeing. (Doc. # 369-12).
In early June 2006, after the BEQ change, AAI tried to see if it could estimate Boeing’s
pricing. (Docs. # 365-21 at 64, 370-4). Boeing had never provided AAI with information about
the Joint Bid pricing. (Doc. # 365-21 at 63-64). From information received at the USAF’s Joint
Bid Evaluation meeting and some other data, AAI tried to estimate Boeing’s bid price. (Docs. #
365-21 at 63-64, 370-3 at 42-43). Specifically, AAI “looked to see if [it] could make some kind
of an estimate of what Boeing was charging the government.” (Doc. # 365-21 at 63-64). AAI

16

wanted to “find out[] what our competition would be if they cut us loose.” (Doc. # 365-21 at 64).
Ultimately, AAI was not able to do so. (Docs. # 365-21 at 63-64, 370-3 at 42-43). Nonetheless,
AAI used the government’s analysis of the Joint Bid in analyzing Boeing’s pricing and coming
up with its own strategy for the KC-1 35 FY08 Re-Compete Program. (See, e.g., Docs. # 370-6,
370-8, 370-12, 370-13, 370-15, 370-16, 372-8). AAI was not aware at the time that the numbers
from the USAF presentation were Boeing’s actual bid price numbers. (Doc. # 365-21 at 64).
Boeing again engaged its “Blue Team Process.” Boeing performed a Blue Team analysis
of L-3 Integrated Systems and Lockheed and thereafter decided to team with L-3. (Docs. # 36223, 362-24). No Blue Team analysis was performed of AAI. (Doc. # 349-4 at 38).
7.

Boeing Terminates the MOA

On June 6, 2006, Boeing faxed a letter to AAI titled “Notice of Termination of
September 6, 2005 Memorandum of Agreement Between Boeing … [AAI] and L3IS Integrated
Systems re: KC-135 PDM Competition.” (Doc. # 369-24). The letter explained that “[t]he
reduction in requested quantities is so unfavorable to Boeing that further participation in the
Program pursuant to the MOA is no longer practical or financially viable.” (Doc. # 244-2). The
letter further cited Section 5.0(c) of the MOA and the basis for the termination. (Doc. # 369-24).
The letter then quotes Section 5.0(c):
After the release of any RFP or amendments thereto, if the contents thereof are so
unfavorable to the Prime or a Principal Subcontractor that participation in the
Program is no longer practical or financially viable; in such case, the party
seeking termination for this reason will provide written notice to the other party
within 15 days of the receipt of the RFP (or amendment) giving notice of such.
(Docs. # 369-24, 367-8 at 7). Boeing’s termination of the Recompete MOA did not affect the
parties’ Bridge MOA, and Boeing and AAI continued to work together on the Bridge for four
more years. (Doc. # 310 at 7).

17

Also on June 6, 2006, Boeing sent a separate and different MOA termination letter to L3. (Doc. # 354-18). In the letter to L-3, Boeing stated that it “would like to continue efforts
directly with L-3 one-on-one to maintain the same type working relationship as the MOA dated 6
September 2005 identified. Should L-3 be receptive to a continued relationship with Boeing,
please advise the undersigned at your earliest convenience so that we may establish a new MOA
between Boeing and L-3 only.” (Doc. # 354-18). On June 13, 2006, Boeing and L-3 executed an
MOA to submit a joint bid for the Recompete. (Doc. # 354-20).
AAI takes the position that, in the event a party terminated the MOA under section 5(c),
that section “would then prevent the party who terminated pursuant to it from pursuing the recompete independently.” (Doc. # 365-22 at 35-36). AAI specifically negotiated the language of
section 5(c) with that goal in mind. (Doc. # 365-22 at 35-36). AAI did not want to agree to any
provision where Boeing could get out of the MOA if the BEQ was reduced. (Doc. # 365-22 at
35-36). That is, AAI believed it had “taken out the language that would allow [Boeing] to go [it]
on their own.” (Doc. # 365-22 at 35-36). AAI’s in-house counsel, Doris Sewell, explained that
AAI’s position was that “[w]hen they invoke 5(c), they’re saying that pursuing the program is no
longer practical or financially viable to them, period. So if they invoke it and then decide to go
after it, that’s fraud.” (Doc. # 365-22 at 36). AAI did not express this position to Boeing at the
time the MOA was adopted, but after the termination, AAI informed Boeing that AAI considered
Boeing to have violated the agreement and that AAI was likely to do something about the
breach. (Doc. # 370-3 at 13).
During a telephone call on June 12, 2006, AAI notified the USAF that it intended to
submit a protest letter regarding the change from a 44 BEQ to 24. (Doc. # 370-24). AAI also
asked the USAF if it would be allowed to submit an independent bid on the KC-135 Re-compete

18

Program. (Doc. # 370-24). The USAF responded that AAI would not be allowed to submit a bid
because it was a subcontractor on the joint bid with Boeing. (Doc. # 370-24). The USAF
indicated it saw no need to allow more participants because it did not consider the BEQ changes
to be significant. (Doc. # 370-24). AAI explained to the USAF that Boeing had terminated the
MOA with AAI as a result of the change in BEQ. (Doc. # 370-24).
On June 13, 2006, AAI filed a protest with the USAF requesting that the competition be
reopened so that it could submit its own proposal. (Doc. # 349-25 at 50).
In a June 19, 2006 presentation regarding the anticipated bid without AAI, Boeing noted
that “Mike Wright, Don Vietor, Kyle Smith, Pat Holden, and Roger Witte have handled [AAI’s]
prices.” (Doc. # 354-21 at 8). Despite this acknowledgement, Vietor and Smith continued to
work on Boeing’s bid with L-3 and the revisions to it. (Docs. # 273-5, 352-48 at 102, 351-19 at
67, 357-10, 357-11).
On June 27, 2006, contrary to its initial pronouncement, the USAF issued another
amendment to the Recompete RFP that re-opened the Recompete Contract competition and
allowed AAI to submit an independent bid by September 11, 2006. (Doc. # 370-25 at 6).
C.

Segregation of Proprietary Information

At the end of June 2006, Boeing attorney, Mark Rabe, and AAI General Counsel, Doris
Sewell, discussed the handling of each party’s proprietary data, and Boeing promised “to retrieve
all [AAI]-originated proposal-related information, for return to” Sewell, and to “establish
firewalls to screen BRIDGE administration from influencing our proposal.” (Doc. # 263-28).
Rabe noted, however, that Sewell informed him that AAI did not have enough employees to
“screen anybody from working on [AAI’s] independent proposal.” (Doc. # 263-28).

19

On June 28, 2006, Boeing sent an e-mail to various employees involved in the Joint Bid
on the KC-135 Re-compete Program titled “Protection of [AAI] Data.” (Doc. # 371-2). The email instructed recipients to “immediately … identify and locate all data they have received that
relates to [AAI] for the KC-135 Recompete Program,” including “Cost, Technical, Or Other
data; whether on [his/her] hard-drive, CD ROMS, paper copies, etc.” and that all such
information “need[ed] to be identified, segregated, and protected … to insure Boeing honor[ed]
the signed Proprietary Information Agreement.” (Doc. # 371-2). On June 30, 2006, Boeing
circulated the June 28, 2006 “Protection of [AAI] Data” e-mail to additional personnel. (Doc. #
371-4). On July 3, 2006, Boeing circulated an e-mail titled “KC-135 Firewall,” which contained
additional information related to the “Protection of Proprietary Data” including an attachment
that “describe[d] the firewall procedures in place at Boeing to protect [AAI’s] cost, technical,
and/or performance data to prevent any unauthorized disclosure.” (Doc. # 371-5).
On June 30, 2006, AAI circulated an e-mail titled “Proposal Firewall” discussing what
AAI employees were to do with “Boeing proprietary information.” (Doc. # 371-3). AAI’s
“Proposal Firewall” e-mail states: “Upon receipt of your information we will log it and have you
sign a certification that you have turned over any and all information to which you held
custody.” (Doc. # 371-3). The e-mail noted that the firewall does not apply to “working
documents required to do business on a daily basis” under the ongoing Bridge Contract. (Doc. #
371-3).
On July 10, 2006, Sewell sent another “Firewall” e-mail stating “Recently I sent you a
note that asked that all Boeing proprietary materials you may have with regard to [your work
with Boeing on] the original RFP for the FY08 KC-135 Re-Compete effort be sent to me in

20

compliance with the firewall being developed for purposes of our new bid. It is imperative that
those materials…be sent immediately.” (Doc. # 372-3).
On August 4, 2006, Boeing issued its “KC-135 PDM Recompete Program FIREWALL
PLAN.” (Docs. # 228-39, 263-89, 371-6). Section 6.4(3) of Boeing's Firewall Plan required that
AAI ESI be copied to a disk and delivered to the Boeing Law Department for preservation
purposes. (Docs. # 263-36 at 4, 371-6). Boeing’s Firewall Plan included an acknowledgement
form stating that the signatory “read and underst[oo]d the KC-135 PDM Program Firewall Plan”
and that he/she “confirm[ed] [his/her] commitment to comply with the requirements of that
plan.” (Docs. # 370-10, 371-7, 371-8, 371-9). Boeing’s Firewall Plan was the ‘rough[]
equivalent’ of a litigation hold. (Docs. # 263-12 at 278:4-16, 263-13 at 10:22-11:10).
Steve Blake, the Chief Financial Officer of Boeing’s Support Systems Division, was the
second-highest ranking Boeing employee on both the Recompete WSSC and the Truman Project,
and Blake had to approve the pricing on the Recompete. (Doc. # 276 at 56:18-56:25; Doc. # 26314 at 105:12-106:23). Blake maintained AAI-related ESI in his e-mail files. These were e-mails
that he personally segregated into an AAI-specific folder on his computer. (Doc. # 263-21 at
14:1-16:7). Blake was aware of the August 4, 2006 directive to preserve and deliver AAI-related
materials to the legal department. (Doc. # 228-12 at 440:19-441:1).
Smith and Holden (Boeing’s Firewall roster administrator), both of whom had handled
AAI’s pricing data, assisted Blake in an effort to comply with the firewall. (Docs. # 310 at 11,
354-21 at 8). Before working on Blake’s AAI-related ESI, Holden and Smith fully complied with
Boeing's Firewall Plan with respect to AAI information which resided on their own computers.
They did so by copying AAI ESI found on their computers to a disk, and turning that disk over to
the Boeing legal department for preservation. (Doc. # 276 at 27:25-28:4; Doc. # 281-4 at 10:16-

21

11:16, 19:19-20:11, 34:9-22; Docs. # 228-4, 228-7, 228-10, 228-14 at 282:1-285:15). But, rather
than handling Blake’s AAI’s ESI as they did their own (and in compliance with the Firewall
Plan), Smith and Holden accessed Blake’s company computer and, in two methodical stages,
permanently deleted Blake’s AAI-related ESI. First, they moved his AAI ESI to the Recycle Bin,
and then they “emptied” the Recycle Bin (that is, they deleted the ESI rather than copying it to a
disk to deliver to the legal department before deleting it, as required). (Doc. # 276 at 17:16-19:9;
Docs. 228-12 at 441:7-446:8, 263-21 at 14:1-20:11; Doc. # 281-5 at 276:13-288:2; Doc. 276 at
20:5-29:23).
On August 22, 2006, Sewell sent a letter to Boeing’s Rabe enclosing AAI’s log of
documents it had sequestered from AAI personnel. (Doc. # 290-17). AAI confirmed that the
documents collected were secured. (Doc. # 290-17).
On August 29, 2007, AAI had its outside counsel, Latham and Watkins, write to Boeing
requesting written confirmation regarding Boeing’s firewall obligations. (Doc. # 263-37 at 2-3).
In an August 31, 2007 letter (which was revised on September 4, 2007), Rabe provided AAI with
a copy of Boeing’s firewall plan and log of sequestered documents. (Doc. # 263-37 at 5-6).
Relevant to Rabe’s own compliance with the Firewall Plan, Doug Lundy was a Boeing
analyst providing assistance in writing AAI out of the joint bid volumes in order to convert them
into Boeing solo bid documents. Lundy complied with the Firewall Plan and forwarded all AAIrelated information he had to Boeing’s legal department. In May 2007, Rabe, an in-house Boeing
attorney who worked on setting up the Firewall Plan, and who was the designated recipient and
custodian of AAI-related information to be sequestered under that Plan, retrieved two CDs of
AAI-related ESI which had been collected from Lundy. Rabe does not recall why he removed

22

the CDs, but acknowledges they were subsequently misplaced and not returned. (Doc. # 310 at
13).
D.

The Parties Submit Independent Bids

In September 2006, AAI and Boeing submitted their independent KC-135 PDM bids.
(Docs. # 377-1, 387-2). AAI and Boeing both had employees who worked on the October 2005
Recompete joint bid also work on their respective independent Recompete bids. (Docs. # 372-1
at 29, 368-8 at 14-15).
Thereafter, the USAF issued amendments 9 and 10 to the Recompete RFP. (Docs. # 37410, 374-13). On February 23, 2007, AAI and Boeing submitted their First Final Proposal
Revisions (“FPR1”). (Doc. # 387-70). The USAF then issued Amendment 11 to the Recompete
RFP, which further reduced aircraft quantities. (Docs. # 381 at 29, 393 at 34). On June 18, 2007,
AAI and Boeing submitted their Second Final Proposal Revisions (“FPR2”). (Docs. # 387-81,
378-191). Both AAI’s and Boeing’s FPR2 submissions were lower in price than the FPR1
submissions due to the reduced aircraft quantities in Amendment 11. (Docs. # 381 at 29, 393 at
34). No major changes were made from AAI’s and Boeing’s FPR1 submissions to their FPR2
submissions, beyond the adjustment for Amendment 11. (Docs. # 381 at 29, 393 at 34).
On September 7, 2007, the USAF awarded the Recompete Contract to Boeing. (Doc. #
387-270). The USAF determined that Boeing’s proposal “provide[ed] the best overall value to
meet the United States Air Force’s stated requirements.” (Doc. # 384-2 at 2).
On September 19, 2007, AAI submitted a bid protest to the United States Government
Accountability Office (“GAO”) protesting the award of the Recompete Contract to Boeing.
(Doc. # 387-272). On October 19, 2007, in connection with the GAO protest, the USAF
Contracting Officer, Jim Stephens, issued a Statement of Facts regarding the decision to award

23

the Recompete Contract to Boeing. (Docs. # 381 at 31, 393 at 34). The Contracting Officer’s
Statement of Facts stated: “Ultimately, there was nothing in either Boeing’s or [AAI’s] proposals
to indicate any Procurement Integrity Act violations in their relationship.” (Docs. # 381 at 31,
393 at 34).
On December 27, 2007, the GAO sustained AAI’s protest “with regard to the agency’s
evaluation of cost/price” but “den[ied] all of [AAI’s] other protest grounds, including those
concerning the agency’s evaluation of past performance and mission capability, alleged OCIs,
and the alleged procurement integrity violation.” (Doc. # 387-277 at 23). The GAO further
stated: “Our review of the record does not support [AAI’s] assertion regarding ‘the remarkable
similarity’ of the two proposals. Indeed, other than the total prices proposed, the two proposals
differ markedly.” (Doc. # 387-277 at 22).
On March 3, 2008, the USAF again awarded the contract to Boeing. (Doc. # 378-278).
On March 11, 2008, AAI again submitted a bid protest to the GAO protesting the award
of the Recompete Contract to Boeing. (Doc. # 387-275). On June 13, 2008, the GAO denied
AAI’s bid protest in full. (Doc. # 378-280). On June 27, 2008, AAI filed a bid protest in the
Court of Federal Claims. Alabama Aircraft Indus., Inc.-Birmingham v. United States, 83 Fed. Cl.
666, 679 (Fed. Cl. 2008). On September 30, 2008, the Court of Federal Claims issued an opinion
denying all of AAI’s claims except for AAI’s claim that the USAF did not properly consider the
pricing of the proposals. Id. at 666. In February 2009, Boeing, the USAF, and AAI crossappealed to the Federal Circuit. (Alabama Aircraft Indus., Inc.-Birmingham v. United States, 586
F.3d 1372, 1374 (Fed. Cir. 2009). On November 17, 2009, the Federal Circuit reversed the
judgment of the Court of Claims and vacated the “injunction against proceeding with the contract
award to Boeing.” AAI, 586 F.3d at 1376.

24

On March 31, 2010, the USAF reinitiated the Recompete Contract with Boeing. (Doc. #
377-19).
E.

Ongoing Joint Work Under the Bridge Contract

During the time the KC-135 PDM Recompete issues were playing out, AAI and Boeing
continued to work together on the Bridge Contract because the USAF exercised its option to
extend the contract during the period 2007 through 2009. (Docs. # 375-13, 375-14, 375-15, 37516). Each time the USAF extended the Bridge Contract with Boeing, Boeing extended its LTRC
with AAI and the parties continued to split the Bridge aircraft. (Docs. # 365-12, 365-15, 375-17).
In early 2008, the USAF planned to reduce the number of aircraft to be serviced under
the Bridge Contract and there was some concern at AAI that the USAF might seek to renegotiate prices under the Bridge Contract. (Docs. # 375-19, 375-20). On February 19, 2008, the
USAF sent a letter to Boeing requesting a reduction in Boeing’s FY08 Bridge pricing. (Doc. #
375-21).
On March 17, 2008, the parties held a telephone conference to discuss the pricing cut
under the Bridge Contract. (Docs. # # 375-18, 375-22). Boeing told AAI that, although it had
received two jets for $12 million so far, the next six jets would be priced at $14 million, which
constituted a sum total of $26 million for the eight jets (or $3.25 million per jet). (Docs. # 375-18
at 30-32, 375-22). Boeing presented this as a “take it or leave it” proposal. (Doc. # 375-18 at 3032). AAI asked “repeatedly (3-4 times)” to know the prime contract numbers, but Boeing
“refused to share” them. (Doc. # 375-22). AAI did not know the prime contract number when it
entered into the LTRC for 2006, 2007, or 2008. (Doc. # 375-18 at 22).
On March 18, 2008, AAI accepted a reduced FY08 Bridge price of $3.25 million per
aircraft, stating: “We accept the revised pricing, as it has been represented to us that it is being

25

requested by the customer to provide for flexibility in moving forward with the contract within
government funding/budgetary constraints.” (Docs. # 375-18 at 31-32, 365-16).
On March 19, 2008, Boeing agreed with the USAF to reduced FY08 Bridge pricing at the
prime level. (Doc. # 375-24). Under the revised Bridge pricing for FY08, Boeing would receive
$3.935 million per aircraft. (Doc. # 375-24).6
II.

Standard of Review
Under Federal Rule of Civil Procedure 56(c), summary judgment is proper “if the

pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986). The party asking for summary judgment always bears the initial responsibility of
informing the court of the basis for its motion and identifying those portions of the pleadings or
filings which it believes demonstrate the absence of a genuine issue of material fact. Id. at 323.
Once the moving party has met its burden, Rule 56(c) requires the non-moving party to go
beyond the pleadings and -- by pointing to affidavits, depositions, answers to interrogatories,
and/or admissions on file -- designate specific facts showing that there is a genuine issue for trial.
Id. at 324.
When faced with a “properly supported motion for summary judgment, [the non-moving
party] must come forward with specific factual evidence, presenting more than mere
allegations.” Gargiulo v. G.M. Sales, Inc., 131 F.3d 995, 999 (11th Cir. 1997). The substantive

6

AAI’s 30(b)(6) corporate representative testified as follows: “Q. [W]hat facts did Boeing suppress that
[AAI] would have liked to have known in connection with this FY2008 pricing negotiations? A. I don’t know that
we -- that we were -- that we asked them or they suppressed facts.” (Doc. # 375-28 at 23-24). Also, when asked if
AAI had asked Boeing what prime contractor price it was getting from the USAF, AAI’s representative testified
“not to my knowledge. It was something that I personally would not have asked for.” (Doc. # 375-18 at 22).

26

law will identify which facts are material and which are irrelevant. See Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). All reasonable doubts about the facts and all justifiable
inferences are resolved in favor of the non-movant. See Allen v. Bd. of Pub. Educ. For Bibb
Cty., 495 F.3d 1306, 1314 (11th Cir. 2007); Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115
(11th Cir. 1993). A dispute is genuine “if the evidence is such that a reasonable jury could return
a verdict for the nonmoving party.” Anderson, 477 U.S. at 248. If the evidence is merely
colorable, or is not significantly probative, summary judgment may be granted. See id. at 249.
III.

Analysis
AAI argues that it is entitled to a partial summary judgment on counts One through Four.

It asserts that (a) Boeing is liable under Count One alleging breach of the MOA; (b) Boeing is
liable under Count Three alleging breach of the NDA; and (c) it is entitled to a declaration that
the limitation of liability provision in Section 11.1 of the MOA does not limit the damages that
AAI can seek under Counts Two and Four for breach of the MOA or the NDA. (Doc. # 340).
Boeing opposes AAI’s motion and further contends that it is entitled to summary
judgment in this case. It claims that (a) under Counts Two and Four, the limitation of liability
clause in the MOA is enforceable and applies to AAI’s contract claims; (b) under Counts One
and Three, AAI failed to perform under the MOA, Boeing did not breach the MOA, and, in any
event, AAI cannot show a causal link between any alleged breach and the damages it claims; and
(c) as to Count VII, regarding the Bridge Contract, Boeing did not fraudulently suppress any
material information that it was under a duty to provide to AAI. (Doc. # 343).
The parties agree that Missouri law governs the contract claims in counts One through
Four because the MOA contains a Missouri choice of law provision. (Docs. # 263-27 at 10, § 15;
342 at 8 n.1; 345 at 5). Alabama law governs the fraud claim in Count Seven.

27

The court addresses the parties’ respective motions by analyzing their arguments related
to each count of the operative Complaint, but in a slightly different order.
A.

Count I - Breach of Contract

In Count I, AAI asserts that Boeing’s June 2006 termination of the MOA based on the
Amendment to the RFP that reduced the BEQ was a breach of the MOA and the associated
WSA. (Doc. # 97).
1.

Breach of the MOA

In its letter terminating the MOA, Boeing explained that “[t]he reduction in requested
quantities is so unfavorable to Boeing that further participation in the Program pursuant to the
MOA is no longer practical or financially viable.” (Doc. # 244-2) (emphasis added). Boeing
cited Section 5.0(c) of the MOA as the basis for the termination. That section provides:
After the release of any RFP or amendments thereto, if the contents thereof are so
unfavorable to the Prime or a Principal Subcontractor that participation in the
Program is no longer practical or financially viable; in such case, the party
seeking termination for this reason will provide written notice to the other party
within 15 days of the receipt of the RFP (or amendment) giving notice of such.
(Docs. # 369-24, 367-8 at 7).
AAI argues that the MOA “did not allow Boeing to terminate the MOA for a reduction in
the BEQ.” (Doc. # 342 at 9). In support of its argument, AAI recounts the negotiations regarding
section 5.0(c) leading up to the final version and its repeated insistence that any language which
would have allowed for termination upon a reduction of the BEQ be removed. (Id.). It further
notes that Boeing altered the language of section 5.0(c) in the termination letter to imply that the
termination was in compliance with that section. (Doc. # 342 at 14).
In its response, and in its own Motion for Summary Judgment, Boeing focuses its Count I
arguments primarily on the alleged breach of the WSA, rather than of the MOA itself. (Docs. #
346, 396). Boeing argues that the MOA unambiguously allowed for termination following an
28

amendment to the RFP. (Doc. # 396 at 37). In support of this argument, Boeing asserts that the
WSA and the NDA are not separate agreements, but rather are all part of the MOA. (Docs. # 346
at 10-11, 396 at 25). If one reads the MOA, the WSA, and the NDA together, Boeing contends,
that removes any ambiguity regarding Boeing’s ability to terminate the MOA and continue to bid
on the Recompete. Specifically, it points out, Paragraph 12 of the NDA provides that, if the
relationship between the parties is terminated “pursuant to the terms of such MOA or
subcontract, either party may pursue an independent contract either alone or in conjunction with
other parties … .” (Doc. # 367-8 at 20).
Under Missouri law, “[a] breach of contract action includes the following essential
elements: (1) the existence and terms of a contract; (2) that plaintiff performed or tendered
performance pursuant to the contract; (3) breach of the contract by the defendant; and (4)
damages suffered by the plaintiff.” Keveney v. Missouri Military Acad., 304 S.W.3d 98, 104
(Mo. 2010) (citing Howe v. ALD Servs., Inc., 941 S.W.2d 645, 650 (Mo. Ct. App. 1997)).
It is undisputed that the MOA constituted a contract between the parties. The writing
contains the terms agreed to by the parties. As to the MOA, Boeing does not argue that AAI
failed to perform. The pertinent question with regard to whether Boeing breached the MOA
involves the meaning of language “participation in the Program” used in the section 5.0(c) of the
MOA.
“Ambiguities in written instruments may be of two kinds: (1) patent, arising upon the
face of the documents, and (2) latent.” Royal Banks, 819 S.W.2d at 362 (citing Busch & Latta
Painting Corp. v. State Highway Comm’n, 597 S.W.2d 189, 197 (Mo. Ct. App. 1980)). “A
‘latent ambiguity’ arises where a writing on its face appears clear and unambiguous, but some
collateral matter makes the meaning uncertain.” Id. (citing Boswell v. Steel Haulers, Inc., 670

29

S.W.2d 906, 912 (Mo. Ct. App. 1984)). “Where a contract is ambiguous, recourse must be had to
evidence of external matters, bearing in mind the cardinal principle that the object is to determine
the true intent of the parties.” Boswell, 670 S.W.2d at 913. “Appropriate for consideration are the
relationship of the parties, the circumstances surrounding execution of the contracts, the subject
matter of the contracts, the acts of the parties in relation to the contract and any other external
circumstances which would cast light on the intent of the parties.” Id. (citing N.B. Harty Gen.
Contractors, Inc. v. W. Plains Bridge and Grading Co., Inc., 598 S.W.2d 194, 197 (Mo. Ct. App.
1980)).
Although this language may appear straightforward, after careful review the court
concludes that, in context, the language is latently ambiguous. “‘An ambiguity exists when there
is more than one reasonable interpretation which can be gleaned from the contract language.’”
City of St. Joseph v. Lake Contrary Sewer Dist., 251 S.W.3d 362, 367 (Mo. Ct. App. 2008)
(quoting Harris v. Union Elec. Co., 622 S.W.2d 239, 247 (Mo. Ct. App. 1981)). “Whether an
ambiguity exists depends on the context of the agreement.” Sherman v. Deihl, 193 S.W.3d 863,
866 (Mo. Ct. App. 2006 (citing Yerington v. La–Z–Boy, Inc., 124 S.W.3d 517, 520 (Mo. Ct. App.
2004)). “A determination as to whether a [contract] is ambiguous is a question of law to be
decided by the court.” Alack v. Vic Tanny Int'l. of Mo., Inc., 923 S.W.2d 330, 337 (Mo. 1996)
(citing Royal Banks of Mo. v. Fridkin, 819 S.W.2d 359, 361 (Mo. 1991)).
Section 5.0(c) of the MOA clearly allows for termination upon the issuance of an
amended RFP under certain circumstances. (Doc. # 367-8 at 7). One of those defined
circumstances was “[a]fter the release of any RFP or amendments thereto, if the contents thereof
are so unfavorable to the Prime or a Principal Subcontractor that participation in the Program is
no longer practical or financially viable … .” (Doc. # 367-8 at 7). The “Program” is defined as

30

“the Program Depot Maintenance for the KC-135 Aircraft.” (Id.). Therefore, Boeing had a right
to terminate the MOA pursuant to its terms if the BEQ amendment made participation in the KC135 PDM “Program” no longer practical or financially viable. Pursuant to section 12 of the
NDA, if the MOA terminated pursuant to its terms, either party was free to pursue an
independent contract to perform the KC-135 PDM work. (Doc. # 367-8 at 20).
During the negotiation of the MOA, AAI and Boeing both had concerns about the
eventual BEQ and whether two sources of repair would end up being feasible. (Docs. # 341 at
16, 349-5 at 34-35, 350-9, 350-10). Early drafts of MOA § 5.0(c) allowed for termination by
either party if the BEQ would not support two sources of repair. Boeing’s early draft of MOA §
4.1 did not require Boeing to subcontract with AAI at an award of the Recompete contract if the
number of aircraft fell below “the anticipated quantity.” (Docs. # 341 at 15, 395 at 12, 350-26).
AAI on the other hand wanted “to make sure that if the quantities dropped below a level that they
could support work for both of us, that [the planes] would come to [AAI].” (Doc. # 349-5 at 35).
Those negotiations resulted in MOA terms that are open to more than one reasonable
interpretation. Could Boeing terminate the MOA under § 5.0(c) because the Amendment to the
RFP made participation in the KC-135 PDM Program no longer practical or financially viable
for it to proceed with AAI as a principle subcontractor? Or, alternatively, could Boeing only
terminate the MOA under § 5.0(c) if the Amendment to the RFP made participation in the KC135 PDM Program no longer practical or financially viable under any circumstances?
Because the contact is ambiguous, the object of the court’s current inquiry is to determine
the “true intent of the parties.” Boswell, 670 S.W.2d at 913. The record evidence shows that the
parties had competing interests and competing intents. Thus, a question of fact is raised as to
whether there was actually a meeting of the minds on the termination issue. Therefore, the court

31

finds that genuine issues of material fact remain to be resolved by a jury on the claim that
Boeing’s termination of the MOA pursuant to § 5.0(c) was in breach of the MOA.
2.

Breach of the WSA and Section 1.1 of the MOA

Also under Count I, AAI argues that, in addition to breaching the MOA, Boeing also
breached the WSA and the exclusive teaming arrangement found in ' 1.1 of the MOA. The
relevant clause of the WSA provides that, “[u]pon successful award of a contract for the
program, it is agreed that [AAI] will receive 50% of all KC-135 PDM inductions.” (Doc. # 367-8
at 13). Section 1.1 provides that “[t]he relationship established by this document shall be
exclusive for each party with the others and the Parties agree that they will not enter into any
teaming agreement with any other offeror under or for the Program defined herein.” (Doc. # 3678 at 4). Boeing argues that, under Missouri law, the WSA was an unenforceable “agreement to
agree,” and that the MOA terminated before the WSA was triggered. (Doc. # 346 at 37-39). It
also complains that the claim regarding ' 1.1 was raised for the first time at summary judgment.
(Doc. # 396 at 48). Boeing also asserts that AAI has failed to present substantial evidence in
support of the essential causation element of its breach of contract claim, i.e., that its breach
caused AAI’s damages. (Doc. # 356 at 41).
As to ' 1.1, Boeing did not enter into any teaming agreement with any other offeror. It
continued to work with L-3, which was a party to the MOA - no one else. Moreover, the court is
not persuaded that the parties’ obligations under the WSA and ' 1.1 survived the termination of
the MOA. See Katz v. Anheuser-Busch, Inc., 347 S.W.3d 533, 541 (Mo. Ct. App. 2011) (“even
though an arbitration provision in a contract may be presumed to survive the agreement's
expiration, this presumption is overcome when, as here, the parties specifically expressed an
intent to negate that presumption.”); see also Regions Bank v. Chattanooga-Hamilton Cty. Hosp.

32

Auth., 2014 WL 12621478, at *17 (N.D. Ga. 2014) (“In evaluating what clauses of a contract
survive its termination, courts first look at enumerated items identified as intended to survive in
the termination clause.” (citing Jackson Nat'l Life Ins. Co. v. Workman Secs. Corp., 803 F. Supp.
2d 1006, 1015 (D. Minn. Mar. 17, 2011)).7
In the MOA, the parties expressly agreed that “[t]ermination of the MOA shall not
abrogate any Party’s obligations regarding Proprietary Information disclosed prior to the
effective date of termination.” (Doc. # 367-8 at 8). That is, both sides expressly agreed that the
obligations under the NDA would survive termination of the MOA. Thus, it is clear that the
parties knew how to contractually provide for certain obligations to survive termination of the
agreement. They did not include similar language in connection with the WSA. Nor did they do
so for the exclusive teaming arrangement in ' 1.1 of the MOA. Therefore, the court concludes
that those obligations did not survive the termination of the MOA. Boeing is entitled to summary
judgment AAI’s claim that it breached the WSA and/or the exclusive teaming arrangement in '
1.1 of the MOA.
3.

Damages

Boeing further argues that is it entitled to summary judgment on AAI’s breach of contract
claims because AAI cannot establish that Boeing’s alleged breach caused its alleged harm. (Doc.
# 346 at 41). It argues that, “to prevail on Count I, AAI must establish that Boeing’s termination
of the MOA is what caused the Air Force not to award the Boeing/AAI team the Recompete
Contract.” (Doc. # 346 at 41-42). Boeing asserts that “[t]here is no evidence that the joint bid

7

While contractual obligations may expire upon the termination of a contract, provisions that are structural
(e.g., relating to remedies and the resolution of disputes) may survive that termination. Goshawk Dedicated v.
Portsmouth Settlement Co., 466 F.Supp.2d 1293, 1300 (N.D. Ga. 2006).

33

would have won the Recompete Contract even if the MOA had remained intact.” (Doc. # 346 at
42).
AAI responds that it “does not have to prove that the Boeing/[AAI] Joint Bid would have
won the Recompete because it is indisputable that Boeing’s breach of the MOA prevented any
possibility of a successful Joint Bid.” (Doc. # 392 at 31). It further argues that Boeing should not
be able to profit from its breach of the MOA by now claiming that AAI cannot prove causation
because of Boeing’s unilateral actions. (Doc. # 392 at 34).
According to the Missouri Supreme Court,
The general rule as to the recovery of anticipated profits of a commercial business
is that they are too remote, speculative, and too dependent upon changing
circumstances to warrant a judgment for their recovery. They may be recovered
only when they are made reasonably certain by proof of actual facts, with present
data for a rational estimate of their amount; and, when this is made to appear, they
may be recoverable.
Coonis v. Rogers, 429 S.W.2d 709, 714 (Mo. 1968). However, where one party hinders
performance by the other party, the hindering party may not avail itself of the nonperformance
which it induced or occasioned. In re President Casinos, Inc., 419 B.R. 381, 389 (E.D. Mo.
2009) (citing 17A C.J.S. Contracts s 468, p. 645). That is, “where the breach alleged consists of
prevention of performance, the party not in default may generally recover the profits which
would have resulted to him from performance.” Harvey, 37 S.W.3d at 819 (emphasis added).
Thus, when a plaintiff sues for damages arising directly out of a breach of contract, he or she
need not prove past profits or expenses. BMK Corp. v. Clayton Corp., 226 S.W.3d 179, 195 (Mo.
Ct. App. 2007); Harvey v. Timber Resources, Inc., 37 S.W.3d 814, 818 (Mo. Ct. App. 2001).
After careful review, under the circumstances of this case, and for the reasons stated
above, Boeing’s argument that is it entitled to summary judgment due to AAI’s failure to prove
damages caused by its breach is without merit.
34

B.

Count III – Breach of the NDA

Count Three of the Third Amended Complaint alleges that Boeing breached the NonDisclosure Agreement, executed on June 3, 2005, by using AAI”s proprietary information in
preparing its own successful bid for the KC-135 PDM recompete after terminating the MOA
with AAI. (Doc. # 97).
1.

Boeing’s Motion and the Spoliation Issue

With regard to evidence related to AAI’s claim that Boeing breached the NDA, the court
has already found there is evidence that Boeing employees intentionally destroyed potentially
relevant Electronically Stored Information (“ESI”) which it was under an obligation to preserve not only under the NDA, but also under Federal Rule of Civil Procedure 37(e). (Doc. # 310)
(“[T]here [] is sufficient circumstantial evidence for the court to conclude that Boeing’s agents
acted with an intent to delete (or destroy) ESI on Blake’s computer in order to hide from [AAI]
what Blake possessed at a time when Boeing should have anticipated litigation related to the
terminated MOA and/or for a jury to infer that Boeing wished to conceal what information was
on Blake’s computer.”). Accordingly, the jury must separately decide whether Boeing engaged
in spoliation of relevant evidence.
The spoliation doctrine permits a trier of fact to draw an inference that, if evidence was
destroyed in bad faith, the evidence would have been unfavorable to the party responsible for its
destruction. See Aramburu v. Boeing Co., 112 F.3d 1398, 1407 (10th Cir.1997); Brewer v.
Quaker State Oil Refining Corp., 72 F.3d 326, 334 (3d Cir.1995); Coates v. Johnson & Johnson,
756 F.2d 524, 551 (7th Cir.1985). The court has already held that Boeing’s “unexplained,
blatantly irresponsible” destruction of Blake’s ESI was done “with the intent to deprive AAI of
the use of this information in connection with its claims against Boeing.” (Doc. # 310 at 30).

35

Based on the court’s spoliation finding, the court must assume that the deleted ESI was adverse
to Boeing.
“At the summary judgment stage, the spoliation doctrine provides a basis for denying a
motion for summary judgment where there is sufficient probative evidence for a jury to find an
act of spoliation and to draw the inference derived from such an act.” Watson v. Edelen, 76 F.
Supp. 3d 1332, 1343 (N.D. Fla. 2015); see also Stanton v. Nat'l R.R. Passenger Corp., 849 F.
Supp. 1524, 1528 (M.D. Ala. Apr. 19, 1994) (giving prejudiced party adverse inference on
summary judgment upon determining a question of fact existed as to whether opposing party
committed sanctionable spoliation). Therefore, the court’s prior ruling on the spoliation issue is a
sufficient basis to deny Boeing’s Motion for Summary Judgment on the breach of the NDA. To
be clear, however, the court held only that, at trial, it would give the jury a permissive, rather
than mandatory, adverse inference jury instruction. (Doc. # 310 at 30). Thus, AAI is not entitled to
summary judgment on this basis.

2.

AAI’s Motion for Summary Judgment on Count III

AAI argues that it has established as a matter of law that Boeing breached the NDA by
using its proprietary pricing information to conduct an “apples to apples” comparison of AAI as
a prime contractor and allowing personnel with knowledge of AAI’s pricing to work on Boeing’s
solo bid. (Doc. # 342 at 19).
In response, Boeing argues that AAI’s own failure to perform under the NDA renders it
unable to recover on its breach of contract claim, and that the information it possessed regarding
AAI’s pricing as a subcontractor, rather than a prime, was irrelevant. (Doc. # 396 at 51, 56).
Boeing asserts that there is evidence in the record that even AAI concluded that the information
it provided to Boeing was “useless even to AAI.” (Doc. # 396 at 57).

36

The court concludes that while AAI has presented evidence that Boeing breached the
NDA, there is also evidence submitted by Boeing which creates a genuine issue of material fact
as to whether Boeing used AAI’s proprietary information in violation of the NDA. At a
minimum, the following substantial evidence creates such a material issue of fact. First, record
evidence shows that Boeing received AAI’s price substantiation in a sealed envelope which was
then provided to the USAF in the unopened, sealed envelope. (Doc. # 368-23, 368-24 at 2, 381 at
11, 393 at 8). Second, after the amendment to the RFP lowering the BEQ, Boeing asked for
AAI’s “best shot” pricing, but AAI never submitted it to Boeing. (Docs. # 369-12, 370-4 at 2-3).
Third, Jeff Smith, AAI’s then-VP of Finance and a developer of AAI’s independent bid pricing
model, testified that he did not “review any of [AAI’s] information that [AAI] had prepared in
connection with the joint bid” during the course of his work on the independent bid. (Doc. # 37315 at 37-38, 49). Finally, there is Rule 56 evidence that even AAI did not find its alleged
proprietary pricing information relevant to preparing its independent bid. (Docs. # 372-1 at 6,
367-24 at 66). Indeed, Smith confirmed that none “of the [AAI] pricing information that [AAI]
prepared and submitted to the government in connection with the joint bid phase ha[d] any
impact on [his] development of the independent bid cost model for [AAI].” (Doc. # 373-15 at 3738, 49). This record evidence is sufficient to create a genuine issue of fact as to whether Boeing
used AAI’s proprietary information in violation of the NDA.
C.

Counts II and IV - The Effect of the Limitation on Liability Clause

Counts II and IV of AAI’s Third Amended Complaint seek a declaratory judgment that a
separate clause of the MOA dealing with the Limitation of Liability, ' 11.1, does not apply to
either Count One, alleging a breach of the MOA, or Count Three, alleging a reach of the NDA.

37

The Limitation of Liability clause purports to bar recovery of consequential damages based on
claims for breach of contract. Specifically, ' 11.1 provides as follows:
the following categories of damages are disclaimed by each Party, and the Nonbreaching Parties neither expect[], nor will seek, to recover from the Breaching
Party any incidental damages, punitive and exemplary damages and any
consequential damages, including but not limited to the following: (a) any profits
that the Non-breaching Parties expected to earn on the Prime Contract or any
other contract related to the Program; ... .
(Doc. # 367-8 at 9).
The Missouri Court of Appeals has defined consequential damages as “those damages
naturally and proximately caused by the commission of the breach and those damages that
reasonably could have been contemplated by the defendant at the time of the parties’
agreement.” Ullrich v. CADCO, Inc., 244 S.W.3d 772, 779 (Mo. Ct. App. 2008) (citation
omitted). Black’s Law Dictionary defines consequential damages as “[l]osses that do not flow
directly and immediately from an injurious act but that result indirectly from the act.” Damages,
Black's Law Dictionary 17c (10th ed. 2014).
Boeing argues that it is entitled to summary judgment on these claims because the clause
is enforceable under Missouri law and it expressly applies to Plaintiff’s contract claims. (Doc. #
345). Boeing further argues that AAI’s first draft of the MOA, sent to Boeing on May 3, 2005,
included a similar limitation of liability provision. (Doc. # 345 at 16). In fact, AAI’s first draft of
the Recompete MOA contained the following provision (and the provision is in all caps): “IN
NO EVENT SHALL ANY PARTY HERETO BE LIABLE FOR ANY LOST PROFITS, LOST
SAVINGS, CONSEQUENTIAL, INCIDENTAL, OR SPECIAL DAMAGES, EVEN IF SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.” (Docs. #
367-5 at 10; 377-17 at 5).

38

AAI argues that the clause does not apply to its claim that Boeing breached ' 1.1 of the
MOA or its claim that Boeing breached the NDA. (Doc. # 342). Specifically, AAI argues that '
1.1 of the MOA has its own damages provision which applies to breaches of that section. (Doc. #
342 at 26). It further argues that the Limitation of Liability clause does not apply to the NDA
because it is a stand-alone contract. (Doc. # 342 at 29). Finally, AAI argues that the Limitation
of Liability clause is not enforceable because Boeing acted intentionally in breaching the MOA
and the NDA. (Doc. # 342 at 34).
“Sophisticated parties have freedom of contract—even to make a bad bargain, or to
relinquish fundamental rights.” Purcell Tire & Rubber Co. v. Exec. Beechcraft, Inc., 59 S.W.3d
505, 508 (Mo. 2001). “This freedom includes the right to contractually limit future remedies for
consequential damages.” Union Elec. Co. v. Chicago Bridge & Iron Co., 2015 WL 1262941, at
*3 (E.D. Mo. Mar. 19, 2015), order clarified, 2015 WL 2193809 (E.D. Mo. May 11, 2015).
Here, the parties agreed to limit damages recoverable for a breach of contract. Boeing argues the
limitation is enforceable as “[c]lear, unambiguous, unmistakable, and conspicuous limitations of
negligence liability do not violate public policy.” Purcell Tire, 59 S.W.3d at 508.
“Where both parties are sophisticated businesses and damages are economic, courts
rarely find that liability limitations are unconscionable.” Purcell Tire, 59 S.W.3d at 510 (citing
Roy A. Elam Masonry, Inc. v. Fru–Con Constr. Corp., 922 S.W.2d 783, 790 (Mo.App.1996)
790; Liberty Fin. Mgmt. Corp. v. Beneficial Data Processing Corp., 670 S.W.2d 40, 49-50
(Mo.App.1984)). “Missouri courts ‘have afforded little sympathy to a party who did not
understand the consequences of an act.’” Silgan Containers Corp. v. Sheet Metal Workers Int'l
Ass’n, Local Union No. 2, 820 F.3d 366, 370 (8th Cir. 2016) (quoting Parks v. MBNA Am. Bank,
204 S.W.3d 305, 314 (Mo. Ct. App. 2006) (internal quotations omitted)).

39

First, whether the Limitation of Liability clause applies to a breach of ' 1.1 of the MOA
is of no concern. The court has already held that Boeing is entitled to summary judgment on any
claim that it breached ' 1.1 because the terms of that provision did not survive the termination
on the MOA. But even if this issue remained a concern, ' 1.1 by its terms applies to direct
damages. (Doc. # 367-8 at 4). Section 11.1 applies to “any incidental damages, punitive and
exemplary damages and any consequential damages … .” (Doc. # 367-8 at 4). Therefore, the
clauses are not necessarily in conflict.
As to whether the Limitation of Liability is enforceable with regard to intentional
breaches, the Supreme Court of Missouri has “held limitations or shifts of liability in contracts
are enforceable if the exculpatory or indemnity clause contains clear, unambiguous,
unmistakable, and conspicuous language.” State ex rel. Pinkerton v. Fahnestock, 531 S.W.3d 36,
47 (Mo. 2017) (citing Alack v. Vic Tanny Intern. of Mo., Inc., 923 S.W.3d 330, 337-38 (Mo. banc
1996)). Here, without question, the clause was clear and unambiguous. Moreover, a similar
clause was actually proposed by AAI in its initial MOA draft proposal. AAI’s “argument that the
clause does not apply because the breach was in bad faith asks this Court to adopt a reading []
that has never been adopted in … Missouri.” Foam Supplies, Inc. v. Dow Chem. Co., 2008 WL
3159598, at *4 (E.D. Mo. Aug. 4, 2008). Indeed, “[t]his argument, if accepted, would render
almost all limitations clauses invalid, as most contract breaches are intentional.” Foam Supplies,
2008 WL 3159598 at *4. A party’s “subjective intent when it breached the contract has no
bearing on whether the limitation on liability clause is valid.” (Id.) (emphasis added).
AAI also contends that the clause is unenforceable because Boeing entered into the MOA
in bad faith. However, the fact remains that AAI and Boeing were both sophisticated businesses
and the Limitation of Liability clause was clear and unambiguous. Furthermore, AAI’s draft of

40

the MOA contained a similar clause, as did an MOA between the parties from 2000. (Doc. #
364-7 at 6). And, this argument ignores the undisputed fact that AAI also proposed a similar
limitation on liability. Many breaches of contract are intentional in nature. Under these
circumstances, where the liability limitation applies only to contract claims, and not tort claims,
it is not unconscionable. See Sports Capital Holdings (St. Louis), LLC v. Schindler Elevator
Corp. & Kone, 2014 WL 1400159, at *4 (E.D. Mo. Apr. 10, 2014). Therefore, AAI’s argument
that the clause does not apply to an intentional or bad faith breach of the MOA is without merit.
Boeing’s Motion seeking a declaration that the clause is applicable to the breach of the MOA is
due to be granted.
Finally, as to whether the Limitation of Liability clause applies to a breach of the NDA,
AAI argues that it does not because the NDA is a separate, stand-alone contract. (Doc. # 342 at
29). Boeing counters by saying that the plain language of both the MOA and the NDA makes
clear that they are one contract. (Doc. # 396 at 26). Boeing also notes that AAI’s current
argument conflicts with AAI’s previous positions in this litigation. (Id.).
Paragraph 6.0 of the MOA expressly incorporates the NDA into the MOA:
“PROPRIETARY INFORMATION … Proprietary Information will be treated according to the
Non-Disclosure Agreement executed separately by the Parties, incorporated herein by reference
as Exhibits ‘C’ and ‘D’.” (Doc. # 367-8 at 8). Paragraph 17 of the MOA is a merger clause titled
“ENTIRE AGREEMENT” that states “[t]his MOA together with its Exhibits and Attachments
contains the entire agreement between the Parties concerning the subject matter hereof[.]” (Doc.
# 367-8 at 11). The NDA contains its own merger clause titled “Entire Agreement” which
provides “This Agreement contains the entire understanding between the parties concerning the
subject matter hereof, superseding all prior or contemporaneous communication, agreements,

41

and understandings between the parties with respect to the disclosure and protection of
Proprietary Information relating to the purpose of this Agreement. The rights and obligations of
the parties shall be limited to those expressly set forth herein.” (Doc. # 367-8 at 20). The NDA
was executed on June 3, 2005. The MOA was executed at the end of August and the beginning
of September 2005. Thus, the parties deliberately incorporated the pre-existing NDA into the
revised MOA, which contains the Limitation of Liability clause.
“Matters incorporated into contract by reference are as much a part of the contract as if
they had been set out in the contract in haec verba.” Intertel, Inc. v. Sedgwick Claims Mgmt.
Servs., Inc., 204 S.W.3d 183, 196 (Mo. Ct. App. 2006) (citing Lacey v. State Bd. of Registration
for the Healing Arts, 131 S.W.3d 831, 839 (Mo. Ct. App. 2004), as modified (Apr. 27, 2004)).
“So long as the contract makes clear reference to the document and describes it in such terms
that its identity may be ascertained beyond doubt, the parties to a contract may incorporate
contractual terms by reference to a separate, noncontemporaneous document, including a
separate agreement … .” Intertel, 204 S.W.3d at 196. “Where a writing refers to another
document, that other document, or the portion to which reference is made, becomes
constructively a part of the writing, and in that respect the two form a single instrument.”
Intertel, 204 S.W.3d at 196 (citing Richard A. Lord, Williston on Contracts Section 30.25 at
234–35 (4th ed.1990).
“Contract interpretation is a question of law.” Lacey, 131 S.W.3d at 838. Here, two
sophisticated businesses agreed to incorporate a preexisting agreement (the NDA) into a new one
(the MOA). The MOA had a clear, conspicuous Limitation of Liability clause. Under these
circumstances, the court concludes, as a matter of law, that the MOA’s Limitation of Liability

42

clause applies not only to a breach of the MOA, but also it applies to a to a breach of the
incorporated NDA.
C.

Fraudulent Suppression

In Count Seven of its Third Amended Complaint, AAI alleges that Boeing suppressed
certain material facts in connection with the Bridge Contract. (Doc. # 97). In response to
Boeing’s Motion on this claim, AAI has conceded its fraudulent suppression claims based on
pricing of the FY2009 and FY2010 planes. (Doc. # 392 at 53, n.47). AAI’s remaining fraudulent
suppression claim is based on Boeing’s refusal to disclose its 2008 prime pricing for KC-135
PDM work. (Doc. # 97). In light of AAI’s concession, the court addresses that claim, and only
that claim.
AAI specifically requested Boeing’s 2008 prime pricing. But Boeing argues that it is

entitled to summary judgment because it truthfully and unambiguously told AAI that it would
not make that disclosure. Boeing contends that, under Alabama law (which applies to this claim
only), such a straightforward refusal to disclose the requested information is not fraudulent
suppression. (Doc. # 347 at 5).
AAI asserts that there is a question of material fact as to whether Boeing fraudulently
suppressed (1) information indicative of the amount of USAF funding available for the 2008
planes and (2) Boeing’s prime pricing for those planes. (Doc. # 392 at 53). To be clear, Count
Seven advances only a suppression claim, not a misrepresentation claim. AAI had previously
asserted a misrepresentation claim in Count Six of its Second Amended Complaint. (Doc. # 34 ¶
245 (“That the USAF only had $26 million of funding available to pay for PDM work on 8
aircraft (i.e., $3.25 million per aircraft), and a correspondingly low $3.25 million for each
additional aircraft that could be sent to Plaintiff, i.e., that the only way the work could be

43

obtained was by Plaintiff agreeing to do the PDM work for $3.25 million per aircraft.”).
However, the court dismissed Count Six because:
The Second Amended Complaint does not allege that the [] false representation
concerned a material existing fact. Rather, it assumes based on hindsight that the
representations must have been false when made. Plaintiff’s failure to allege that
the statements were false when made negates Plaintiff’s misrepresentation claim,
particularly on a third attempt at drafting the claim. Allen v. Baker, 99 So.3d 324,
331 (Ala.Civ.App. 2012) (where the alleged misrepresentation is a truthful
statement, an essential element of a misrepresentation claim is negated); see GE
Capital Aviation Services, Inc. v. Pemco World Air Services, Inc., 92 So.3d 749
(Ala. 2012) (where there is no evidence8 that the representation at issue was false,
a fraud claim fails as a matter of law).
(Doc. # 55 at 17). AAI’s argument regarding the amount of USAF funding available for the 2008
planes, made in response to Boeing’s Motion regarding Count Seven, seeks to revive a
misrepresentation claim which the court previously dismissed. It is not entitled to do so.
The remaining suppression claim under Count Seven relates only to AAI’s direct inquiry
to Boeing for its prime pricing. (Doc. # 55 at 19-20). “The elements of a cause of action for
fraudulent suppression are: (1) a duty on the part of the defendant to disclose facts; (2)
concealment or nondisclosure of material facts by the defendant; (3) inducement of the plaintiff
to act; (4) action by the plaintiff to his or her injury.” Lambert v. Mail Handlers Benefit Plan,
682 So.2d 61, 63 (Ala.1996) “A duty to communicate can arise from a confidential relationship
between the plaintiff and the defendant, from the particular circumstances of the case, or from a
request for information, but mere silence in the absence of a duty to disclose is not fraudulent.”
Lawson v. Harris Culinary Enterprises, LLC, 83 So.3d 483, 492 (Ala. 2011). The court evaluates
this remaining claim below.
A.

Boeing Undertook No Duty to Speak

As the court has already concluded, the parties did not have a confidential relationship
which would give rise to a duty to speak. (Doc. # 55 at 19-20). The September 2005 MOA
44

defined the parties’ relationship as follows: “Nothing in this MOA shall constitute, create, give
effect to or imply a joint venture, partnership, or formal business organization. Each Party is an
independent contractor and not an agent for the other Party. ... No such relationship is intended
by any reference herein to a ‘team’ or ‘team members.’” (Doc. # 40-6). Although AAI and
Boeing agreed to attempt to work together for their mutual benefit, they were both sophisticated
businesses, experienced in their work, and generally operated as competitors. (Doc. # 55 at 1920).
Despite the ruling on the parties’ relationship, the court allowed discovery to proceed on
this claim to determine whether there was evidence that AAI posed direct inquiries to Boeing
which may have given rise to a duty to speak. “[I]n a commercial transaction involving arm’s
length negotiations, the parties have no general obligation to disclose any specific information to
the other, but each has an affirmative duty to respond truthfully and accurately to direct questions
from the other.” CNH Am., LLC v. Ligon Capital, LLC, 160 So. 3d 1195, 1201 (Ala. 2013)
(citing Freightliner, L.L.C. v. Whatley Contract Carriers, L.L.C., 932 So.2d 883, 892 (Ala.
2005)). “‘A disclosing party cannot be punished for fraudulent suppression unless the
questioning party articulates with reasonable clarity the particular information it desires.’”
Freightliner, 932 So.2d at 893 (quoting Shutter Shop, Inc. v. Amersham Corp., 114 F.Supp.2d
1218, 1226 (M.D. Ala. 2000)).
Boeing is entitled to summary judgment on this claim unless AAI can present evidence
that it made a direct inquiry on the subject to Boeing, and that Boeing voluntarily undertook to
speak in a way that required full disclosure. See Spearman v. Wyndham Vacation Resorts, Inc.,
69 F. Supp. 3d 1273, 1286 (N.D. Ala. 2014). The evidence shows that, during a March 17, 2008
telephone call, AAI directly asked Boeing what its prime contract pricing to the USAF was for

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the FY08 planes. But Boeing explicitly refused to answer. (Doc. # 375-22 at 2). Fully aware that
it did not have the information it requested, AAI accepted the revised pricing under the Bridge
Contract. (Doc. # 365-16).
AAI argues that because it asked, Boeing had a duty to answer. (Doc. # 392 at 53).
Boeing argues that AAI’s suppression claim fails because it explicitly refused to answer. (Doc. #
408 at 46-47).
“Silence is not actionable fraud absent a confidential relationship or some special
circumstances imposing a duty to disclose.” Cato v. Lowder Realty Co., 630 So. 2d 378, 383
(Ala. 1993) (citing Wilson v. Brown, 496 So.2d 756, 759 (Ala. 1986); Cooper & Co. v. Bryant,
440 So.2d 1016 (Ala. 1983)). In Alabama, “even though one is under no obligation to speak as to
a matter, if he undertakes to do so, either voluntarily or in response to inquiry, he is bound not
only to state the truth but also not to suppress or conceal any facts within his knowledge which
will materially qualify those stated; if he speaks at all, he must make a full and fair disclosure.”
Freightliner, L.L.C. v. Whatley Contract Carriers, L.L.C., 932 So. 2d 883, 895 (Ala. 2005)
(citing Ellis v. Zuck, 409 F.Supp. 1158 (N.D. Ala. 1976) (in turn citing Jackson Co. v. Faulkner,
55 Ala.App. 354, 315 So.2d 591 (1975))). “‘[W]here one responds to an inquiry, it is his duty to
impart correct information, and he is guilty of fraud if he denies all knowledge of a fact which he
knows to exist, or if he gives equivocal, evasive, or misleading answers calculated to convey a
false impression, even though literally true as far as they go, or if he fails to disclose the whole
truth.’” Cato, 630 So. 2d at 383 (quoting Boswell v. Coker, 519 So.2d 493 (Ala. 1987)).
Here, the undisputed Rule 56 evidence makes clear that Boeing explicitly refused to
provide the requested information. In light of such a candid and clear refusal to disclose, Boeing
clearly did not voluntarily undertake to speak in a way that required full disclosure. To the

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contrary, Boeing plainly made it clear that it chose not to speak on the subject. The theory behind
a suppression claim like this one is that one believes it has been provided all relevant information
when in fact it has not. Here, Boeing explicitly refused to respond to the inquiry. Therefore, AAI
could not have been under the impression it had all relevant information or that Boeing was
“suppressing” any such information. AAI knew that rather than suppressing the relevant
information, Boeing flatly refused to provide the information requested. And, when AAI decided
to act, it knew fully that it did not have the information it requested. On these facts, AAI has not
presented evidence sufficient to create a genuine issue of material fact as to its suppression
claim.
IV.

CONCLUSION
For all of the foregoing reasons, AAI’s and Boeing’s Motions for Summary Judgment are

due to be granted in part and denied in part. A separate order will be entered.
DONE and ORDERED this August 15, 2018.

_________________________________
R. DAVID PROCTOR
UNITED STATES DISTRICT JUDGE

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