SERCO, INC v. USA
Filing
46
REDACTED REISSUED OPINION, PUBLISHED--Filed this date. Signed by Judge Lawrence J. Block. (smm)
United States Court of Federal Claims
No. 11-735 C
(Filed Under Seal: November 8, 2011)
(Reissued: November 17, 2011)
(Reissued Redacted: November 18, 2011) *
_______________________________________
SERCO, INC.,
Plaintiff,
v.
THE UNITED STATES OF AMERICA,
Defendant,
Post-Award Bid Protest;
Temporary Restraining Order;
Preliminary Injunction;
RCFC 65.
and
CAPSTONE CORP.,
Intervenor-Defendant.
_______________________________________
Cameron S. Hamrick, Mayer Brown, LLP, Washington, DC, for plaintiff.
Armando A. Rodriguez-Feo, United States Department of Justice, Civil Division,
Commercial Litigation Branch, Washington, DC, for defendant.
Ronald S. Perlman, Holland & Knight, LLP, Washington, DC, for intervenor-defendant.
OPINION and ORDER
Block, Judge.
Before the court in this post-award bid protest is plaintiff’s motion for reconsideration of
this court’s denial of a temporary restraining order (“TRO”). Plaintiff’s initial application for a
TRO was filed on November 3, 2011, along with its bid protest complaint, motion for a
*
This opinion originally was issued under seal on November 8, 2011. The court afforded the
parties an opportunity to propose redactions in the opinion prior to its publication. The opinion
was reissued on November 17, 2011, and is herewith reissued with redactions and other minor
changes.
preliminary injunctive relief, and a memorandum of law supporting its legal and factual
allegations. The court held a status conference the next day during which it (1) established a
rigorous scheduling order to expedite this litigation, (2) denied plaintiff’s application for a TRO,
(3) granted plaintiff’s motions for a protective order, and leave to file the complaint and other
pleadings under seal, and (4) granted Capstone Corporation’s (Capstone) motion to intervene as
a third-party. The court explicitly refused to rule on plaintiff’s pending motion for interim
injunctive relief before the upcoming hearing could be held on cross-motions for judgment on
the administrative record and for a preliminary or final injunction. See Rule 65(a)(2), Rules of
the Court of Federal Claims (“RCFC”). The court hoped that the parties would resolve this
matter given that it was in the mutual interest of the parties to agree. Unfortunately, that has not
happened, and this court must now decide the motion based on limited materials before the full
administrative record is filed. In light of the balance of the hardships favoring interim injunctive
relief, and the need to preserve the status quo ante, plaintiff’s application for a TRO is
GRANTED. 1 As explained below, to protect the intervenor and the government in the event
that the bid protest is denied, plaintiff is DIRECTED to post a bond in the amount of
$300,000.00.
I. BACKGROUND
Plaintiff, Serco, Inc., (“Serco”) is the incumbent provider of personal effects (“PE”)
services at the Human Resource Command of the Army’s Joint Personal Effects Depot
(“JPED”). Compl. at 2. PE services include the receiving, safeguarding, inventorying, storing,
processing, and final disposition of fallen soldier’s personal effects. Id. Serco has been
providing the Army with PE services since 2004. Id. at 3. The Army issued a request for
proposal (“RFP”) for PE processing services at JPED on March 1, 2011 because Serco’s contract
was set to expire on July 31, 2011. Id. at 4. Capstone, a competitor of Serco’s, was awarded the
new contract for PE processing. This bid-protest ensued.
On October 12, 2011, the General Accountability Office (“GAO”) denied plaintiff’s
protest. Appx. Tab B. Thereafter, on November 3, 2011, plaintiff filed its complaint,
applications for a TRO and preliminary injunction, and a memorandum in support thereof with
the court. In addition, plaintiff submitted an appendix containing various documents relating to
1
During the status conference, the court denied plaintiff’s application for a TRO as “moot,”
given that defendant and intervenor had made an appearance. Plaintiff on November 7 filed a
“Supplemental Memorandum” providing authority showing that a TRO could in fact be granted
after the adverse parties had made an appearance. The court construes this filing as a motion for
reconsideration under RCFC 59(a). See RCFC 1 (“The RCFC should be construed and
administered to secure the just, speedy, and inexpensive determination of every action and
proceeding.”); see generally Young v. United States, 60 Fed. Cl. 418, 425–26 (2004) (treating a
second complaint as an amendment to the first to advance the filing’s “substance and not the
labels mistakenly placed on them”). The authority plaintiff cites is compelling, and the court
will reconsider its denial of the TRO.
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the bid process, including, inter alia, excerpts from the Source Selection Plan (“SSP”), Appx.
Tab 20; the RFP, Appx. Tab 4; plaintiff’s proposal, Appx. Tab 7; Capstone’s proposal, Appx.
Tab 6; and documents reflecting discussions between the Army and other bidders, the Army’s
evaluation of the proposals, and the decision to award the contract to Capstone, Appx. Tab 8, 10,
13, 14, 17, 23, 24, and 26. The materials also include a letter from the contracting officer (“CO”)
explaining the final cost estimate, Appx. Tab A. (Aug. 30, 2011); as well as two “Statements of
Fact” by the CO purporting to describe the Army’s conduct during the procurement process,
Appx. Tab 1 (Aug. 4, 2011), Tab 6 (Aug. 24, 2011).
Finally, the appendix contains the Declaration of Steven Sultan, Serco’s Vice President
for Defense Personnel Services, dated November 1, 2007. Appx. Tab C. The Declaration states
that Serco will lose [amount redacted] per month in revenue, of which [amount redacted]
represents profits, if the court denies injunctive relief. Appx. Tab C at 2. It also states that
Serco will have to terminate its employment of 134 individuals in the absence of injunctive
relief. Appx. Tab C at 2. Mr. Sultan in his Declaration alleges that it would be “very difficult”
for Serco to rehire these employees and that terminating them would increase Serco’s business
and employment costs. Appx. Tab C at 2-5.
II. DISCUSSION
RCFC 65 authorizes this court to issue provisional injunctive relief, whether a TRO or a
preliminary injunction. The court may grant such relief if plaintiff establishes (1) the likelihood
of success on the merits, (2) the prospect of irreparable harm to plaintiff in the absence of
injunctive relief, (3) the balance of hardships, and (4) the public interest. FMC Corp. v. United
States, 3 F.3d 424, 427 (Fed. Cir. 1993) (permanent injunction); CC Distribs., Inc. v. United
States, 65 Fed. Cl. 813, 815 (2005) (TRO) (citing PGBA, LLC v. United States, 389 F.3d 1219,
1228–29 (Fed. Cir. 2004)); see also Yakus v. United States, 321 U.S. 414, 440 (1941) (“[W]here
an injunction is asked which will adversely affect a public interest for whose impairment, even
temporarily, an injunction bond cannot compensate, the court may in the public interest withhold
relief until a final determination of the rights of the parties, though the postponement may be
burdensome to the plaintiff.”). Furthermore, in the context of bid protests, the Tucker Act also
this court, in conducting its balancing, to “give due regard to the interests of national defense and
national security and the need for expeditious resolution of the action.” 28 U.S.C. § 1491(b)(3);
see also ViroMed Labs., Inc. v. United States, 87 Fed. Cl. 493, 504 (2009).
This Federal Circuit balancing approach has a provenance rooted in “equity practice with
a background of several hundred years of history.” Hecht Co. v. Bowles, 321 U.S. 321, 329
(1944). Flexibility rather than rigidity has distinguished injunctive relief making it the
“instrument for nice adjustment and reconciliation between the public interest and private
needs.” Id. To be sure, it is inherent in the court’s balancing of competing public interests to
weigh each harm or benefit based upon both its magnitude and likelihood of occurrence. Such
an approach has a long lineage in the law dating back at least to Judge Learned Hand’s famous
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“sliding scale” formula for determining liability in negligence suits. See United States v. Carroll
Towing Co., 159 F.2d 169, 173 (2d Cir. 1947); see also Linc Gov’t Servs., LLC v. United States,
96 Fed. Cl. 672, 701 (2010). Accordingly, when balancing the factors under the “sliding scale”
or balancing approach, a weak showing of likelihood of success on the merits could be cured by
a strong showing that the balance of the equities favors plaintiff, or vice versa. Standard
Havens Prods., Inc. v. Gencor Indus., 897 F.2d 511, 513 (Fed. Cir. 1990) (“[I]f the other
elements are present (i.e., the balance of the hardships tips decidedly toward plaintiff), it will
ordinarily be enough that the plaintiff has raised questions going to the merits so serious,
substantial, difficult and doubtful, as to make them a fair ground for litigation.” (quoting
Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2d Cir. 1953))).
Plaintiff contends that the hardships it would suffer justify this court issuing a TRO. It
argues that “[a]ny short-term harm to Capstone from not immediately starting contract
performance is outweighed by the harm to plaintiff, its employees, and the Army if the status quo
is disrupted by a change in contractors.” Pl.’s Mem. at 37. It contends that if no injunctive relief
is granted it “will be forced to release the employees working on the [former] contract, many of
whom have developed specialized expertise over years of service at the JPED facility.” Id. at
37–38. It also argues that “the Army will be adversely affected by a change in contractors if
Capstone commences performance and then is required to stand down in the event Serco prevails
in its bid protest.” Id. at 38.
On the other side of the coin, defendant has an interest in not continuing to pay for
plaintiff’s services. Indeed, defendant’s counsel estimated during the status conference that the
cost of continuing to pay plaintiff until November 22 would be approximately $300,000. 2
Moreover, Capstone is expecting to assume all contract functions on November 9, and the court
fully expects that any delay would impose some costs on Capstone, including (as their counsel
argued) possible loss of new employees tasked with administering the contract.
Nevertheless, the balance of hardships favors granting a TRO. Come November 9,
Capstone’s contract will take effect, ousting plaintiff from the JPED facility and bringing about
all the costs necessarily associated with such a turnover. If the court was to deny the TRO and
plaintiff subsequently prevailed in this bid protest, plaintiff would then oust Capstone, creating a
second turnover with additional costs. Conversely, should the court grant a TRO and Capstone
then prevailed in the bid protest, there would be only one turnover when Capstone replaces
plaintiff. The latter scenario is obviously preferable to the former. Although the court
recognizes that defendant and Capstone stand to incur costs as a result of a TRO, the balance of
hardships favor plaintiff.
For the same reason, it is common sense that the public interest would be served by
granting a TRO. See Yakus, 321 U.S. at 440. Although JPED may not serve an urgent need of
2
November 22, 2011 was the date set by the court for oral argument and also the date the TRO,
if granted, would expire.
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national security, the public and the service-members’ families, have an obvious interest (quite
apart from the government’s own interest) in seeing the prompt return of Nation’s killed and
wounded service-members’ personal effects. That interest is best served by preserving the status
quo ante, thus preventing possibly unnecessary turnovers in who runs the JPED facility. The
only way to do that is to grant a TRO.
Although plaintiff’s success on the merits is by no means certain, the court concludes that
it is sufficient in light of the strong showing that the balance of hardships favors plaintiff. The
plaintiff has pointed to some materials, in particular the CO’s August 4 statement, the SSP, and
the emails attached to the August 30 letter, that (at least arguably) call into question the validity
of the Army’s explanation of its award to Capstone. The court concludes that these materials
raise “questions going to the merits so serious, substantial, difficult and doubtful, as to make
them a fair ground for litigation.” Standard Havens Prods., 897 F.2d at 513. The court therefore
concludes that a TRO is appropriate.
Finally, RCFC 65(c) provides that “[t]he court may issue a preliminary injunction or a
temporary restraining order only if the movant gives security in an amount that the court
considers proper to pay the costs and damages sustained by any party found to have been
wrongfully enjoined or restrained. The United States, its officers, and its agencies are not
required to give security.” “The amount of a bond is a determination that rests within the sound
discretion of a trial court.” Sanofi-Synthelabo v. Apotex, Inc., 470 F.3d 1368, 1385 (Fed. Cir.
2006) (citing Doctor’s Assocs., Inc. v. Distajo, 107 F.3d 126, 136 (2d Cir. 1997)); see also EOD
Tech., Inc. v. United States, 82 Fed. Cl. 12, 23 (2008) (citing to Doctor’s Associates with
approval). In the past, the court has relied on the government’s estimates of the costs associated
with issuing a TRO. See, e.g., Bona Fide Conglomerate, Inc. v. United States, 96 Fed. Cl. 233,
243 (2010) (relying on defendant’s reasonable estimate of $50,000).
Here, defendant’s counsel mentioned during the November 4, 2011 status conference that
the government would, if enjoined, have to transfer $300,000 from other mission critical
programs to cover two weeks of contract performance. Counsel based his estimate on Serco’s
bill from October, which was “something like $680,000.” This estimate corresponds to the
duration of the TRO, which will be in effect for 14 days. See RCFC 65. Although speculative,
counsel’s statement is reasonable because he has considered only the costs that might be incurred
by defendant’s compliance with a TRO. In sum, RCFC 65(c) requires a bond, and that bond is
set at $300,000.
III. CONCLUSION
Plaintiff’s application for a temporary restraining order is hereby GRANTED.
In accordance with Rule 65 of the Rules of the United States Court of Federal Claims, the
United States of America and Capstone Corporation, their officers, agents, servants, employees,
representatives, and all persons acting in concert and participating with them respecting the
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subject procurement are hereby TEMPORARILY RESTRAINED AND ENJOINED from
permitting performance of or performing the contract awarded to Capstone Corporation on or
about June 24, 2011 under RFP No. W0124D-11-R-0009, for personal effects (PE) processing
services for the Army Human Resource Command. Defendant may secure PE services from the
incumbent, Serco, Inc., or any other legal source during this timeframe.
Plaintiff shall post a bond in the amount of $300,000.00 in accordance with RCFC 65(c).
If plaintiff has any questions about the proper procedure for securing a bond, it may contact the
Clerk’s Office at (202) 357-6400.
s
/Lawrence J. Block
Lawrence J. Block
Judge
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