LAX ELECTRONICS, INC. v. USA

Filing 15

UNREPORTED OPINION.granting in part and denying in part 10 Motion to Dismiss - Rule 12(b)(1); TRANSFERING COUNT 1 to the Eastern District of New York; Dismissing Count II for failure to state a claim, and finding as moot 2 Motion for Permanent Injunction; finding as moot 2 Motion for Preliminary Injunction; finding as moot 2 Motion for TRO The Clerk is directed to enter judgment. Signed by Senior Judge Eric G. Bruggink. (jpk1) Service on parties made.

In the United States Court of Federal Claims
No. 19-1668C
(Filed: December 17, 2019)
NOT FOR PUBLICATION

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LAX ELECTRONICS, INC.
d/b/a AUTOMATIC CONNECTOR,
Plaintiff,
v.
THE UNITED STATES,

Pre-award bid protest; Motion
to
dismiss;
Jurisdiction;
Standing; Failure to state a
claim; Qualified parts list;
FAR § 9.205; Transfer of
complaint.

Defendant.
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OPINION
This is a challenge to the Defense Logistics Agency’s (“DLA”)
decision to remove plaintiff from its Qualified Parts List (“QPL”) for certain
electronic connectors that plaintiff manufactures. Not being on the list,
plaintiff may not respond to solicitations from DOD entities for these parts
nor may other contractors offer to the government plaintiff’s parts.
Defendant has moved to dismiss for lack of jurisdiction on the basis that the
DLA’s removal of plaintiff from the QPL is not an action taken in connection
with a procurement or proposed procurement, and thus there is no bid protest
jurisdiction under 28 U.S.C. § 1491(b) (2012) over this claim. We agree in
part and transfer Count I and dismiss Count II.
BACKGROUND
Plaintiff, LAX Electronics, Inc., doing business as Automatic
Connector, supplies electronic connectors to contractors and directly to the
government. For over 50 years, plaintiff has had parts listed on DLA’s QPL.
In June 2019, a DLA Auditor, Sonya Taylor, performed an audit of plaintiff’s
facility. The resulting audit report identified several deficiencies relating
primarily to a recently-issued DLA standard for electric and fiber optic parts
(MIL-STD-790). Ms. Taylor’s report further states that corrective action for

the identified problems was required within 30 days and that the corrections
had to then be accepted by DLA. DLA then sent a letter, dated July 2, 2019,
which ordered plaintiff to stop shipment and production of the connectors
due to the deficiencies noted in the audit report. Plaintiff responded to DLA
with its Corrective Action Reports for the noted deficiencies on August 6,
2019.
Since August, plaintiff alleges that it has further attempted to discuss
the matter with DLA on numerous occasions, but DLA has not responded.
Instead, on August 13, 2019, DLA sent a notice to plaintiff that LAX may be
required to issue a notice to the Government-Industry Data Exchange
Program (“GIDEP”) for the accused parts. Plaintiff notes that the letter does
not mention LAX’s CARs nor its attempts to contact DLA regarding the
audit report.
Automatic responded two days later by letter, asserting that no GIDEP
notice was necessary nor was any required by regulation and that there are in
fact no problems with plaintiff’s parts. On September 12, 2019, DLA
removed plaintiff from the QPL due to repeated program violations and
plaintiff’s refusal to issue a GIDEP notice. The practical import of which,
according to plaintiff, is that it will now be forced to requalify all of its parts
at significant and prohibitive cost to it.
On October 9, 2019, DLA sent a letter to LAX, notifying plaintiff of
the government’s intent to issue a GIDEP alert by the end of the month to
alert government and industry members of plaintiff’s nonconformance to
military specifications. Plaintiff’s counsel contacted counsel for DLA and
requested that no GIDEP action be taken pending a protest brought by
plaintiff. That request was rebuffed.
On October 28, 2019, plaintiff filed suit here. Along with its
complaint, it filed a motion for a temporary restraining order and preliminary
injunction. We held a status conference on November 1, 2019, at which the
issue of jurisdiction was raised by defendant. We thus set a schedule for
briefing on a motion to dismiss prior to further action on the merits and
plaintiff’s request for preliminary relief.
As part of that schedule, we afforded plaintiff an opportunity to
supplement its motion for preliminary relief in order to identify a
procurement or procurements that the protested action is in connection with,
as required by the statute. See 28 U.S.C. § 1491(b) (granting jurisdiction
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over challenges to illegal agency action “in connection with a procurement
or a proposed procurement”) It did so primarily in the form of an affidavit
from its President, Pierre Lax, which identified two outstanding solicitations
for parts that plaintiff offers but can no longer sell to the government after
being removed from the QPL, one closing on November 12, 2019 and the
other on November 15, 2019. Copies of those solicitations were attached to
the affidavit. Mr. Lax additionally names three similar solicitations that
closed after the filing of the protest and before the date of the affidavit
(November 6, 2019).
Defendant filed its motion to dismiss on November 12, 2019. On
November 21, 2019, plaintiff filed both a response to the motion and an
amended complaint. Because an amended complaint would normally moot
a pending motion to dismiss, we held a status conference on November 25,
2019, at which the parties agreed that defendant’s motion was not moot and
to keep the briefing schedule as previously set. The motion is now fully
briefed, and oral argument was held on December 12, 2019.
DISCUSSION
This court has “jurisdiction to render judgment on an action by an
interested party objecting to a solicitation by a Federal agency for bids or
proposals for a proposed contract . . . or any alleged violation of statute or
regulation in connection with a procurement or a proposed procurement.” 28
U.S.C. § 1491(b)(1). The issue is whether the alleged agency action is
properly considered “in connection with a procurement or a proposed
procurement.” Jurisdiction hangs in the balance.
The complaint, as amended, identifies five DLA solicitations “that
were open as of October 28, 2019.” Am. Compl. ¶ 25. The closing dates
range from October 28, 2019 to November 14, 2019. Id. The amended
complaint further alleges that plaintiff would have been a bidder for these
solicitations had it not been for DLA’s improper removal of LAX from the
QPL. Plaintiff goes on to allege that DLA failed to follow its own
procedures, Department of Defense Manual (“DoDM”) 4120.24, Enclosure
14, Sections 11-12 in issuing the stop shipment order, removing plaintiff
from the QPL, and threatening to issue a GIDEP alert. The amended
complaint adds the allegation that DLA violated Federal Acquisition
Regulation (“FAR”) § 9.205(a) by failing to give DLA sufficient time to
qualify its products prior to award and failed to give proper notice of its intent
to establish a qualification requirement as required by the regulation.
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Plaintiff seeks an injunction to prevent DLA from issuing a GIDEP alert and
to prevent DLA from issuing any more contracts for parts that plaintiff had
listed on the QPL, and it seeks a declaration that DLA cannot legally establish
a qualification requirement and exclude plaintiff from the QPL without
providing a response to LAX’s CARs.
Defendant argues that these allegations are insufficient to establish
jurisdiction in this court because plaintiff’s removal from the QPL was not
taken “in connection with a procurement” and because plaintiff lacks
standing to challenge any current and future solicitations due to it being
unqualified to bid on them. Factually, defendant identifies a DLA audit,
unconnected to a specific procurement or planned procurement, as the
precipitating event to plaintiff’s removal from the list. Plaintiff does not
dispute the point.
Defendant relies on this court’s and the Federal Circuit’s decisions in
Geiler/Schrudde & Zimmerman v. United States. In Geiler, the protestor
challenged the award of a contract to upgrade the chiller at a Veterans
Administration (“VA”) hospital in Kentucky. The solicitation was set aside
for service-disabled veteran owned small businesses (“SDVOSBs”). 133
Fed. Cl. 578, 582 (2017). The government moved to dismiss on the basis
that the plaintiff had lost its SDVOSB status during the pendency of the
protest due to the death of its principle, Mr. Geiler, meaning that the company
no longer had standing to bring suit because it could not otherwise be
awarded the contract. Id. This argument triggered the plaintiff to file a
supplemental complaint in which it alleged that revocation of its SDVOSB
status was irrational and illegal (lack of due process). Id. at 583.
Judge Smith denied the motion as to the original grounds of the protest
because standing is determined at the time of filing of suit, but he dismissed
plaintiff’s supplemental complaint, holding that the decision to revoke the
plaintiff’s status was not taken in connection with the subject procurement,
or any other, and was thus outside of the court’s purview under § 1491(b)(1).
Id. at 584. Plaintiff appealed that dismissal. The Federal Circuit affirmed,
finding that the revocation of SDVOSB status was not an action taken in
connection with a procurement or proposed procurement. 743 Fed. App’x
974, 976-77 (Fed. Cir. 2018). The circuit court first noted that the loss of
status did not affect VA’s decision to whom it would award the contract. Id.
at 977. Plaintiff argued, however, that all future procurements were at issue
because, lacking status, it could no longer bid on any work set aside for
SDVOSB contractors. The court found that link too tenuous. Although
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recognizing the broad scope of bid protest jurisdiction under § 1491(b)(1),
the Federal Circuit found that the possibility that an agency action would
affect future procurements did not “establish that the violation ‘clearly
affected’ a contract’s award or performance.” Id. (quoting Ramcor Servs.
Group, Inc. v. United States, 185 F.3d 1286, 1289 (Fed. Cir. 1999)).
The court also found support in the statute’s requirement that a protest
be brought by an “interested party.” Id. at 977-78. The requirement that an
interested party have a direct economic interest in the outcome of a particular
procurement suggests that bid protest jurisdiction does not cover allegations
concerning “unidentified pending and future procurements.” Id. at 978
(citing Myers Investigative & Sec. Servs., Inc. v. United States, 275 F.3d
1366, 1370 (Fed. Cir. 2002)).
Although plaintiff here has identified specific solicitations that it has
been prevented from bidding on after its removal from the QPL, we agree
with defendant that the removal from the list was not an action taken in
connection with a procurement or a proposed procurement. The removal
came about after an audit that revealed a paperwork problem with the
sourcing of LAX’s parts. The audit was not performed in connection with
any of the listed procurements from the amended complaint nor any others;
according to plaintiff, in fact, it was the result of a several year dispute with
DLA’s auditor, Ms. Taylor. 1 See Am. Compl. ¶¶ 8, 10.
The present case is unlike that relied on by plaintiff in its opposition,
SAI Industries Corp. v. United States, in which the court exercised
jurisdiction over a challenge to the disqualification of the protestor from
receiving a contract to produce aircraft tailpipes because it was not a
prequalified source. 60 Fed. Cl. 731, 733 (2004). As a preliminary matter,
as defendant points out, the issue of jurisdiction was not raised nor treated by
the court. More importantly, the case dealt with the pre-approval process for
a specific solicitation not a standing QPL. The facts at issue revolved around
a solicitation, unlike here. We find missing in the present case the necessary
factual connection between the alleged impropriety and a procurement or
proposed procurement. Count I then must be dismissed for lack of
jurisdiction.
Further, as provided by plaintiff, several of the solicitations since LAX’s
disqualification have asked for plaintiff’s parts by name. This suggests that
the procuring activity at DLA certainly was not in cahoots with Ms. Taylor
to deprive LAX of a chance to bid on a specific procurement.

1

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Plaintiff, however, points out that its amended complaint, in Count II,
also alleges a regulatory violation in connection with the five solicitations
that it has identified. Plaintiff cites to FAR § 9.205, which states that an
agency must, “when possible, give sufficient time to arrange for qualification
before award” if and when “an agency determines that a qualification
requirement is necessary.” 48 C.F.R. § 9.205(a) (2019). Reading the
complaint generously, we construe the argument to be that, by not responding
to plaintiffs CARs and booting it from the QPL, the agency has failed to give
LAX “sufficient time to arrange for qualification before award” as to the five
identified solicitations. Although there is no merit to the claim, we have
jurisdiction over it.
Count II of the amended complaint puts at issue a regulatory provision
that plainly applies to public procurements, and plaintiff has identified five
solicitations, and now presumably five awards, that it argues were issued
without affording plaintiff “sufficient time to arrange for qualification.” Id.
The allegation draws a sufficient nexus between an asserted violation of a
procurement regulation and five specific procurements. 2 Thus, Count II is
within the court’s bid protest jurisdiction, but that is as far as it goes.
Although within the court’s broad protest jurisdiction, the allegation
is not otherwise well-founded. Plaintiff argues that the agency violated FAR
§ 9.205 by issuing the solicitations without first having given plaintiff
sufficient notice and more of an opportunity to correct the problems listed in
the audit report.
We begin with the obvious. Plaintiff was, until it was removed from
the QPL, qualified to sell those parts to the government. It is thus the removal
of plaintiff’s parts from the qualified list—the bona fides of which are not
properly before us—that, according to plaintiff, triggered an obligation to
apply FAR § 9.205 and to halt purchasing pending a new notice that a
It is no answer, as defendant posits, that plaintiff lacks standing due to it
having been bounced from the qualified list. Count II alleges that plaintiff
was owed an opportunity to requalify before award of the five procurements
identified in the complaint. Standing is determined at the time of the
complaint, when these procurements were still not completed. It has thus
alleged a non-trivial competitive injury in a pre-award context, but for which
plaintiff would have competed for the award. In these circumstances, that is
enough to establish standing.
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qualification to bid would be applied and to afford time for the ousted offeror
to requalify. This reading would flip the purpose of these provisions on its
head. The obligations on agencies are triggered by the imposition of a new
qualification. That is not what happened here. Rather, an experienced and
previously qualified bidder was, independent of any solicitation or new need
of the agency, removed from the QPL. DLA’s need for qualified parts was
unchanged and nothing new imposed. Plaintiff’s reading would place an
untenable burden on agencies; one that the FAR specifically disclaims.
Subpart 9.202 lays out what an agency must do when it wants to
impose a qualification on bidders. Although the agency must issue a
justification and afford fair opportunity for bidders to become qualified,
9.202(e) states that “a contracting officer need not delay a proposed award in
order to provide a potential offeror with an opportunity to demonstrate its
ability to meet the standards specified for qualification.” 48 C.F.R. §
9.202(e). Plaintiff’s argument is thus a nonstarter and need not delay the
entry of judgment. 3 We thus find it appropriate to dismiss Count II for failure
to state a claim. See Constant v. United States, 929 F.2d 654, 657 (Fed. Cir.
1991) (holding that a sua sponte dismissal for failure to state a claim was not
a denial of due process because the claim was “untenable as a matter of law”
and thus “no additional proceedings could have enable [plaintiff] to prove
any set of facts entitling him to relief”).
Although Count II fails to state a claim for which this court can afford
relief and Count I is miscast as a bid protest, the challenge to plaintiff’s
removal from the QPL by DLA appears, on its face, to be subject to review
as final agency action under the Administrative Procedures Act, jurisdiction
over which belongs to the district courts. Defendant’s motion posits the
same. At the conclusion of oral argument, plaintiff made an alternative
request that the court transfer its complaint to the Eastern District of New
York should we find jurisdiction in this court wanting. 28 U.S.C. § 1631
gives authority to federal courts to transfer actions in order to cure a want of
jurisdiction if the transferring court finds it “to be in the interest of justice.”
We find a transfer appropriate here.
The argument that DLA owed plaintiff, and presumably others, a notice of
the imposition of a qualification is likewise unavailing. Plaintiff has been on
the QPL for 50 years. Nothing new was imposed on offerors when LAX was
removed from the list nor has plaintiff pled any independent prejudice to it
from the alleged lack of notice.
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CONCLUSION
Because jurisdiction over Count I is appropriate only in district court
and because Count II fails to state a claim, the Clerk of Court is ordered to
do the following:
1. transfer Count I to the United States District Court for the Eastern
District of New York;
2. dismiss Count II for failure to state a claim;
3. enter judgment accordingly. 4
No costs.
s/Eric G. Bruggink
ERIC G. BRUGGINK
Senior Judge

4

Plaintiff’s motion for preliminary relief (ECF No. 2) is denied as moot.
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