J.K. Hill & Associates Inc. v. PKL Services Inc.

Filing 16

MEMORANDUM. Signed by Judge Sue L. Robinson on 2/5/2014. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

J.K. HILL & ASSOCIATES, INC.,

)
)

Plaintiff,

)
)

v.
PKL SERVICES, INC.,
Defendant.

) Civ. No. 14-16-SLR
)
)
)
)

MEMORANDUM
At Wilmington this 5th day of February, 2014, having reviewed the papers filed in
connection with plaintiff's motion for injunctive relief, and having heard oral argument on
the same; the court concludes that said motion (D.I. 1) should be granted, for the
reasons that follow:
1. Standard of review. "The decision to grant or deny ... injunctive relief is an
act of equitable discretion by the district court." eBay, Inc. v. MercExchange, L.L.C.,
547 U.S. 388, 391 (2006). The grant of a preliminary injunction is considered an
"extraordinary remedy" that should be granted only in "limited circumstances." See Kos
Pharm., Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir. 2004) (citation omitted). The
moving party for injunctive relief must establish: "(1) a likelihood of success on the
merits; (2) that it will suffer irreparable harm if the injunction is denied; (3) that granting
preliminary relief will not result in even greater harm to the nonmoving party; and (4)
that the public interest favors such relief." /d. (citation omitted). The burden lies with

the movant to establish every element in its favor or the grant of a preliminary injunction
is inappropriate. See P.C. Yonkers, Inc. v. Celebrations, the Party and Seasonal

Superstore, LLC, 428 F.3d 504, 508 (3d Cir. 2005). If either or both of the fundamental
requirements- likelihood of success on the merits and probability of irreparable harm if
relief is not granted- are absent, an injunction cannot issue. See McKeesport Hosp. v.

Accreditation Council for Graduate Med. Educ., 24 F.3d 519, 523 (3d Cir. 1994).
"Where a plaintiff seeks a mandatory preliminary injunction, rather than a
prohibitory preliminary injunction, the burden of showing an entitlement to relief is
greater." Hart lntercivic, Inc. v. Diebold, Inc., Civ. No. 09-678, 2009 WL 3245466, at *3
(D. Del. Sept. 30, 2009). "A party seeking a mandatory preliminary injunction that will
alter the status quo bears a particularly heavy burden in demonstrating its necessity."

Acierno v. New Castle County, 40 F.3d 645, 653 (3d Cir. 1994) (citing Punnett v. Carter,
621 F.2d 578, 582 (3d Cir. 1980)).
2. Background. Effective January 8, 2009, defendant PKL Services, Inc.
("PKL") entered into a contract with the United States 1 to perform selected maintenance
tasks on several helicopters ("the Prime Contract"). (D.I. 11, ex. A) To "aid in the
performance of the Prime Contract," PKL obtained the services of plaintiff J.K. Hill &
Associates, Inc. (JKH"), with the parties entering into a subcontract effective February
5, 2009 ("the Subcontract"). (D. I. 3, ex. A) Of relevance to the dispute at issue are the
following sections of the Subcontract:

2.

1

PERIOD OF PERFORMANCE

More specifically, Prime Contract #N00421-09-C-0023.
2

The services shall be performed during the period of performance of
the Prime Contract, including all Options and extensions thereto. Prime
Contractor shall, to the extent permitted by Federal law, extend this
Agreement with written notice within five (5) days of receiving written
notice of extension by the Customer to the Prime Contractor, exercising
each Option period with Subcontractor followed by a written modification
signed by both parties as indicated below:

Option
Base Period
Option Period One
,..,........-.-r,-~ ~

-v

•·•"<">-

-~.--

••·-••---·,-..

Option Period Two

Option Period Three
Option Period Four
Option Period Five
Option Period Six
Option Period Seven
Option Period Eight

Period of Performance

02/05/2009- 8/04!2009

"~

[

08/05/2010 - 02/04/2011
02/0 5/20 11 - 08/04/2011
08/05/2011 - 02/0412012
02/05/2012- 08/0412012
08/05/2012- 02/04/2013

!

--~~~~~~~--g~;g;ggll g ~

i

02/05/2013 - 08/04/2013

0E!~o!:~~E!9~~-~.!~~ ·~······· ".Q 8~Q.?I?..Q. !l.::.92(_Q,4/2 014
.
6.

STATEMENT OF WORK AND PERFORMANCE
*****

J.K. Hill Head Count for Lot 3 (AH-1W/UH-1 N/CH53D/E) & lot 4 (CH-46E)
as provided to PKL for RESET RFQ N00421-08-R-0073 and awarded under
N00421-09-C-0023. Per the Teaming Agreement, dated 7/07/08, J.K. Hill
will maintain 25% of the head count on Lot 3 and 37% of the headcount on
Lot 4.
*****

In the performance of these services the Subcontractor will provide the
necessary labor required to perform its work under this Agreement, unless
otherwise required by the Prime Contractor.
*****

3

8. CHANGES IN STATEMENT OF WORK
Changes in the Prime Contract SOW may be initiated by the Government
or the Prime Contractor. It is understood and agreed by both the Prime
Contractor and the Subcontractor that only changes to the Prime Contract
SOW, directed and/or approved in writing by the Government, may be
implemented under the Changes clause. The Subcontractor is specifically
prohibited from making any unilateral changes to the Prime Contract SOW.
(A) Changes Initiated by the Government. The Government may from
time to time direct changes to the Prime Contract SOW by issuing a written
request or statement to the Prime Contractor. The Government will not
issue or address any changes in the Prime Contract to the Subcontractor.
Upon receipt of a request from the Government, the Prime Contractor shall
promptly notify the Subcontractor of any impact on its area of subcontracted
work. The Subcontractor agrees, upon receipt of written direction from the
Prime Contractor, to immediately implement the specified modifications.
The Prime Contractor and the Subcontractor shall negotiate an equitable
adjustment to this Agreement to reflect such changes to the SOW.
10.

TERMINATION

Prime Contractor and Subcontractor represent that each party understands that the U.S. Government may terminate all or any portion of the
Prime Contract in accordance with the applicable Federal Acquisition
Regulation ("FAR") termination for convenience clause. If the Prime
Contract is terminated under such a FAR termination for convenience
clause, Prime Contractor may terminate the portion of the work to be
performed under this Agreement corresponding to the work terminated
by the Government. In the event of such termination, Subcontractor
shall take all action reasonably necessary to reduce the amount payable
from Prime Contractor for the terminated portion of the work including,
but not limited to, the immediate discontinuance of the terminated work
under this Agreement, and the placing of no further requirements for labor,
material, or services under the terminated portion. Subcontractor agrees
to take such action as may be reasonably necessary or as Prime Contractor
may direct to protect property in Subcontractor's possession in which Prime
Contractor may have an interest.
(0.1. 1, ex. A)
3. By letter dated November 18, 2013 (0.1. 11, ex. B), the Contracting Officer for
the Prime Contract notified PKL that the Government "intend[ed] to exercise [its] option

4

to extend services of CLINs 0517 and 0519," effective February 5, 2014 for six months
ending on August 4, 2014, pursuant to section 52.217-8 of the Prime Contract, which
section provides:
The Government may require continued performance of any services
within the limits and at the rates specified in the contract. These rates may
be adjusted only as a result of revisions to prevailing labor rates provided
by the Secretary of Labor. The option provision may be exercised more
than once, but the total extension of performance hereunder shall not
exceed 6 months. The Contracting Officer may exercise the option by
written notice to the Contractor within 30 days of the expiration of the option
period/contract.

(D.I. 11, ex. A at 194-95) Attached as exhibit A to PKL's answer is a copy of the Prime
Contract, as modified to reflect the extension, which "drastically" reduces the scope of
services required "to just the two CLINs 17 and 19 covering just the one helicopter (CH53 DIE)" from Lot 3. (D.I. 11 at 8) According to PKL, the reduced scope of services
would in turn reduce PKL's headcount required under the Prime Contract from 282
labor positions to only 86 labor positions for the six-month period. (D. I. 11 at 8) In like
manner, JKH argues that it will have to lay off employees and, further, will be
irreparably harmed by reason of its '"loss of control of reputation, loss of trade, and loss
of good will' through the loss of its sole, active CH-53 DIE maintenance contract." D.l.
14 at 10)2
4. Analysis. The court concludes, in the first instance, that the Prime Contract
has been extended for a period of six months. This conclusion is consistent with the

2

More specifically described as the loss of "its highly skilled employees and
accompanying past performance that is critical to maintaining business within the Navy
and Marine Corps, in particular, when the United States is faced with continued
adversity overseas." (D.I. 14 at 11)
5

plain language of section 52.217-8 and all of the documents of record pertaining to the
extension. Given the unambiguous language of section "2" of the Subcontract,3 the
PKL was obligated to extend the Subcontract accordingly. Based on this conclusion,
the question remains as to how the Subcontract addresses a reduction in the scope of
services required by the Government. 4 JKH identifies section "6" of the Subcontract as
the most pertinent to the issue, arguing that the headcount ratios described therein are
applicable. PKL identifies section "8," arguing that, when the Government directs
changes to the Prime Contract, PKL has the authority to change the scope of services
to be provided by JKH, including a cessation of services altogether. 5 The court finds
the provisions of section "1 0" instructive, although not literally applicable, to the
circumstances at bar. Under section "1 0," if the Prime Contract is terminated for the
convenience of the Government, PKL "may terminate the portion of the work to be
performed under this Agreement corresponding to the work terminated by the
Government. In the event of such termination, Subcontractor shall take all action
reasonably necessary to reduce the amount payable from Prime Contractor for the
terminated portion of the work under this Agreement. ... "
5. Likelihood of success on the merits. Having concluded that the Prime
Contract and, therefore, the Subcontract, has been extended, and having considered

3

To wit, the services of JKH "shall be performed during the period of
performance of the Prime Contract, including all Options and extensions thereto."
4

1n this regard, the court suspects that the instant dispute would not have arisen
had the scope of services remained the same for the duration of the extension.
5

Section "8" requires PKL to notify JKH "of any impact on its area of
subcontracted work."

6

the Subcontract together as a whole, which the court is required to do, 6 the court further
concludes that JKH has established a likelihood of success on the merits. More
particularly, section "6" of the Subcontract provides the means for determining the
scope of JKH's services, that is, 25% of the labor force. Under section "1 0," when the
Government "terminates" a portion of the Prime Contract, PKL appears to have no
more authority than to "terminate the portion of the work to be performed under this
Agreement corresponding to the work terminated by the Government." By essentially
terminating all of JKH's services, PKL has breached the Subcontract,?
6. Harm. Clearly, both of these parties want and need this work, and will suffer
economic injury as a result of losing all or part of it. However, the court finds credible
the further claims of JKH that, absent a role in the extended Prime Contract, its ability to
compete effectively in the future in the areas of expertise included within the scope of
the Prime Contract will be irreparably harmed. Moreover, although both parties are well
qualified to fulfill the work requirements of the Prime Contract, the public may in fact be
harmed if, by virtue of negating the ability of JKH to compete in the future, there are
fewer contractors available to satisfy the Government's maintenance needs.
7. Bond. Based on the arguments of counsel, the duration of the extension and
the value of the extended contract, the court will impose on JKH the burden of posting a

6

The Subcontract must be interpreted objectively according to its plain language,
giving effect to each term, and rendering no part of the contract nugatory. See, e.g.,
Estate of Osborn v. Kemp, 991 A.2d 1153 (Del. 201 0).
7

Although PKL argues that JKH is seeking a mandatory preliminary injunction,
the court concludes otherwise, as its injunction maintains the status quo by prohibiting
PKL from breaching the contract.

7

bond in the amount of $750,000.
8. Conclusion. For the reasons stated, the court grants JKH's motion for a
preliminary injunction. An order shall issue.

United States

8

rstnct Judge