United States, ex rel. v Lockheed Martin Corp., et al.,

Filing 242

ORDER granting Lockheeds Motion for Leave to File Sur-Reply (doc. 233), the Sur-Reply is deemed to have been filed at docket number 233-1, and Relators Motion to Compel (doc. 209) is GRANTED IN PART AND DENIED IN PART. Signed by Chief Judge Susan J. Dlott. (wam1)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
United States of America ex rel. Donald
Howard, et al.,

Relators,
v.
Lockheed Martin Corporation, et al.,
Defendants.

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Case No. 1:99-CV-285

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Chief Judge Susan J. Dlott
ORDER GRANTING MOTION TO
FILE SUR-REPLY AND GRANTING
IN PART AND DENYING IN PART
MOTION TO COMPEL

This matter comes before the Court on (1) Relators’ Motion to Compel Complete and
Substantive Responses to Relator Don Howard’s Interrogatory Nos. 1, 14, 19, 22, 26, and 28 and
a Continuation of the 30(b)(6) deposition of Lockheed as to Paragraphs 2(D), 2(E), and 2(F) of
the Relators’ Original 30(b)(6) Notice (“Motion to Compel”) (doc. 209) and (2) Defendant
Lockheed Martin Corporation’s Motion for Leave to File a Brief Sur-Reply in Opposition to the
Motion to Compel (doc. 233). Relators seek in the underlying discovery requests, generally
stated, information and processes necessary to trace specific F-22 tooling costs to specific
vouchers submitted by Lockheed to the Government for payment. For the reasons that follow,
the Court will GRANT the Motion for Leave to File Sur-Reply and GRANT IN PART AND
DENY IN PART the Motion to Compel.
I.

PROCEDURAL POSTURE AND MOTION FOR LEAVE TO FILE SUR-REPLY
The parties have been disputing the tool-tracing method expounded by Lockheed in

response to Relators’ discovery requests for approximately four years. The parties and the Court
have expended significant time and effort to resolve the dispute, in an exchange of
correspondence between the parties, at out-of-court and in-court tool-tracing demonstrations, at
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status conferences conducted by the Court, and now in lengthy briefing. In fact, since the Court
held a tool-tracing demonstration hearing on January 28, 2011, Relators have filed four
substantive briefs (docs. 209, 223, 231, 236) and Lockheed has filed three substantive briefs
(docs. 226, 233, 237) on the pending Motion to Compel. The parties have supported their
arguments with hundreds of pages of exhibits, including expert reports, depositions, and court
hearing transcripts.
A.

Motion for Leave to File Sur-Reply
Discovery related to the tool-tracing dispute continued after the initial briefs on the

Motion to Compel were filed. Relators requested a new item of relief in their Reply brief based
on the on-going discovery. (Doc. 231 at 19.) Lockheed, thereafter, filed its Motion for Leave to
File Sur-Reply. Lockheed attached its proposed Sur-Reply to the Motion for Leave. (Doc. 2331.) Given the complexity of the issues presented and the new matters raised in the Relators’
Reply brief, the Court grants the Motion to File Sur-Reply.
Administratively, the Court deems to Sur-Reply to have been filed for purposes of
docketing.1
B.

Disputed Rule 30(b)(6) Deposition Topics
Relators served the Notice of Deposition of Lockheed Martin Corporation pursuant to

Rule 30(b)(6) (“Rule 30(b)(6) Notice”) on November 16, 2007. (Doc. 194-1.) The following

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In their Memorandum in Opposition to Lockheed’s Motion to File Sur-Reply, Relators
make substantive arguments that respond not only to the Motion to File a Sur-Reply, but to the
merits of the Sur-Reply itself. (Doc. 236.) Relators, nonetheless, intimate that they would seek
leave to file a second responsive brief to the proposed Sur-Reply if the Court gave Lockheed
leave to file it. (Id. at 5 n.1.) The Court finds that additional briefing will not further elucidate
this dispute. Leave for further briefing will not be granted.
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deposition topics are disputed:
2(d). The nature and operation of all billing systems, electronic or otherwise, by
which Lockheed charged the United States for any or all F-22 tools and/or
tooling-related charges.
2(e). The nature, status, and location of all physical or electronic documentation
which was, or which could have been, generated in connection with the operation
of any system within the purview of subsection d, including without limitation
records of items billed for; credits; deductions; refunds; and/or adjustments.
2(f). Any and all methodologies by which Lockheed is able to demonstrate
what amount was, or what amounts were, billed to the United States for items
within the scope of subsection d, including without limitation reference to
recapitulations; ledgers; backups; or other files.
(Id.)
Relators took the deposition of Richard “Rick” Elliott on February 5, 2008. (Doc. 2093.) Elliott, an accounting employee at Lockheed, was produced by Lockheed specifically to
respond to the disputed topics 2(d), 2(e), and 2(f) of the Rule 30(b)(6) Notice. (Id. at 3.)
Lockheed asserts that Relators also took a Rule 30(b)(6) deposition of Sheila Tapley on
November 6, 2008. (1/28/2011 Tr., Doc. 188 at 9.)
C.

The Disputed Interrogatories
Relators served the relevant Interrogatories on Lockheed on March 18, 2008. Lockheed

served its Supplemental [Verified] Responses to the Interrogatories on September 17, 2008.
(Doc. 209-4.) The relevant disputed Interrogatories are as follows:
1.
For every F-22 tool, identify the tool number, the corresponding
contract number, any corresponding voucher or other claim to the United
States government for payment and for each claim, identify the
corresponding billable cost number, the corresponding work order, the
corresponding TOS number or identification of the work authorizing
document, the corresponding purchase order(s) issued to one or more
subcontractors, the corresponding invoice, and the corresponding VIC
number in a manner that clearly ties all of the above information together
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and identify any corresponding documents (e.g., TOS, work order, PO,
invoice, etc.) by Bates number (or otherwise if not produced).
14.
Identify with specificity the “appropriate amount[s]” that You contend
(in Paragraph 306 of Your Answer) You billed the United States in connection
with the tools set forth in the chart in Paragraph 306 of the Complaint, and
describe in detail the calculation(s) You made to arrive at those alleged
“appropriate amount[s]”.
19.
In Paragraph 89 of your Answer you admitted “that on occasion
Lockheed Martin employees would perform work on tools originally built by
a tool vendor, that on occasion Lockheed Martin would send tools originally
built by one tool vendor to another tool vendor to do work on the tool, and
that on occasion Lockheed Martin returned tools to the tool vendor which
built the tool for work to be done on the tool.” For every such “occasion”
referenced in this admission, state all facts and identify all documents,
communications and persons with knowledge that in any way refer or relate to
any such “occasion” including, but not limited to, identifying the tool, whether it
was worked on by employees, another vendor, and/or sent back to the original
vendor, the work done, the claim made to the government for the work
(including the voucher, the date and the amount), any charge back to the
original vendor, the reason for the work, the portion of the contract and/or other
authorizing document that justified billing for the work and any documents by
Bates number (or otherwise if not produced) that pertain to each occasion.
22.
State all facts and identify all documents, communications and persons
with knowledge that in any way refer or relate to tools that were altered or reidentified including, but not limited to, the identity of the original tool, the
identity of any corresponding altered or reidentified tool, the reason for the alter
or re- identification, the identity of the claim to the government for the original
tool (including voucher number, amount billed, and date), the identity of the
claim to the government for the corresponding altered or re-identified tool
(including voucher number, amount billed, and date), the date and amount of
any credit to the government for that tool, and all related documents by Bates
number (or otherwise if not produced).
26.
State all facts and identify all documents, communications and person
with knowledge that in any way refer or relate to the closing of tool order serials
for accountability only as is referenced in Paragraphs 211-213 of the Complaint
and Paragraphs 211-213 of Your Answer, including, but not limited to, the
identity of each tool closed for accountability only, the reason the tool was closed
for accountability only, the identity of the manufacturer of the tool, the date of
manufacture of the tool, the date(s) and nature of disposition of the tool, the
identity of the claim to the government for the tool (including voucher number,
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amount billed, and date), the identity of any credit received for the tool, the date
and amount of any credit to the government for that tool, any subsequent
problems with the tool (or with parts related to the tool) and all related documents
by Bates number (or otherwise if not produced).
28.
Identify with specificity all costs associated with F-22 tools that You
paid to a tooling subcontractor or other third party or that You incurred inhouse but for which You did not submit claims to the United States.
(Id. at 4, 21, 27, 33, 40, 44 (emphasis added).) Lockheed responded to the Interrogatories with a
combination of narrative answers, the production of documents, and citations to the Elliott
deposition transcript.
D.

Remedies Sought By Relators if Motion to Compel is Granted
Relators request several alternative forms of relief if the Court grants the Motion to

Compel:
1. Order Lockheed to provide full and complete responses to the Interrogatories
and to continue the original Rule 30(b)(6) deposition as to topics 2(d), 2(e), and
2(f).
2. Allow Relators to use Lockheed’s “203” and “PARS-2” property control
computer systems to calculate damages, bar Lockheed from contesting the
accuracy of the costs data from the 203 and PARS-2 systems, and bar Lockheed
from asserting that the 203 and PAR-2 costs were not submitted to the
Government for payment or were not paid by the Government.
3. Find that Relators do not need to identify the specific public voucher on which
Lockheed submitted costs for payment to the United States to recover on their
claims and to trigger the per claim penalty set forth in 31 U.S.C. § 3729.
4. Find that Relators do not need to identify or segregate out specific tool rework
costs from other tool costs in order to recover on their claims because Lockheed
did not segregate such costs.
(Doc. 223 at 5–6; Doc. 231 at 19.)
II.

ANALYSIS OF MOTION TO COMPEL

A.

Relators Contend that Lockheed’s Production of Business Records Pursuant to Fed.
5

R. Civ. P. 33(d) Was Improper.
Relators assert that Lockheed inappropriately relied on a Federal Rule of Civil Procedure
Rule 33(d) document production in lieu providing complete narrative responses to the disputed
Interrogatories. The Court disagrees. Rule 33 provides in relevant part:
(d) Option to Produce Business Records. If the answer to an interrogatory may be
determined by examining, auditing, compiling, abstracting, or summarizing a
party’s business records (including electronically stored information), and if the
burden of deriving or ascertaining the answer will be substantially the same for
either party, the responding party may answer by:
(1) specifying the records that must be reviewed, in sufficient detail to enable the
interrogating party to locate and identify them as readily as the responding party
could; and
(2) giving the interrogating party a reasonable opportunity to examine and audit
the records and to make copies, compilations, abstracts, or summaries.
Fed. R. Civ. P. 33(d).
To begin, Relators’ attorney conceded at the tool-tracing hearing that use of the Rule
33(d) responses was appropriate so long as the tool-tracing process which accompanied the
documents worked to trace tooling costs to a claim for payment. (1/28/2011 Tr., Doc. 188 at
67.) Also, Lockheed did not provide Relators with a mere “document dump.” Lockheed
identified particular categories of documents sought by Relators by Bates-number ranges. (Doc.
209-4 at 4–8, 21–22, 27–30, 33–35, 40–42, 44–45.) It provided narrative responses explaining
how to conduct the tool-tracing process and cited the deposition of their Rule 30(b)(6) deponent,
Rick Elliott, for further explanation of the process of tracing tooling costs. (Id. at 5.) After
submitting the written responses, Lockheed demonstrated the tool-tracing process to Relators on
December 16, 2008, responded in writing to Relators’ follow-up inquiries, and demonstrated the
tool-tracing demonstration before the Court on January 28, 2011. (Doc. 234 at 2; Docs. 209-5,
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209-9, 209-11, 209-14, and 209-18.)
Importantly, Lockheed (through its attorneys) repeatedly represented to Relators and to
the Court that Lockheed has “has produced all relevant systems to Relators, and there is no
‘magic’ system that integrates all of the requested information together in one location.” (Doc.
226 at 3.) For example, Lockheed’s counsel stated at a December 9, 2010 court conference that
Lockheed did not have a system in place for “tracking an invoice from a vendor up through a
voucher.” (12/9/2010 Tr., Doc. 183 at 9.) Also, Lockheed’s counsel stated at beginning of the
tool-tracing hearing held by the Court as follows:
[W]e want to emphasize . . . that this brand of tool tracing that you’re going to see
requires an analysis of Lockheed Martin’s billing system . . . in a way that was
never contemplated by the government. The Defense Contract Audit Agency
[“DCAA”] did not require Lockheed to keep a system to track what we’re
showing to the Court today . . . DCA audited the systems at Lockheed Martin
and found that they’ve maintained an adequate billing system. So in terms of
whether or not Lockheed Martin was required to maintain a system that would
track literally the invoice all the way to the voucher on tooling, they did not, and
no such system ever existed.
(1/28/2011 Tr., Doc. 188 at 10–11.) Later at that same hearing, Lockheed’s counsel reiterated
that “there wasn’t a process in place that literally traced from invoice . . . all the way to a
voucher in a one – in a linear manner.” (Id., Doc. 188 at 57.)
After the tool-tracing hearing, Lockheed’s counsel stated in correspondence that the
“Elliott Method” for tracing tools “is a lawyer-created method of using existing systems to
obtain information that responds to the litigation-specific discovery requests” and that “we do
not have specific systems that provide the information [Relators] seek in the form that [Relators]
seek it because the Government did not require such systems.” (Doc. 209-18.) Lockheed’s
counsel clarified at a subsequent conference that the system arose from Elliott’s Rule 30(b)(6)

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deposition testimony and was created for the litigation. (8/8/2011 Tr., Doc. 225 at 127.)
Similarly, Lockheed’s counsel stated that “[w]hat [DCAA] required [Lockheed] to do was to
simply amass the cost and pass the costs along, not to be able to trace these things one to one.”
(Id., Doc. 225 at 121.) He affirmed that he was “not playing games with words” because he
knew “what the penalty would be” for misleading the Court. (Id., Doc. 225 at 125.) He
concluded as follows:
I’m telling you that there’s no system like they want. There are systems that
DCAA, the government, has approved, but they are not the systems that trace
what he wants to trace. And so in an attempt to help him do that, in response to
his 30(b)(6) notice, we gave them the various pieces of that so that he could do it.
We can’t do anything more than that. We have no separate system that is out
there that we can push this button . . . and turn up this information.
(Id.)
Relators have not rebutted these representations by Lockheed. On the basis of the
information now before the Court, the Court cannot conclude that Lockheed and its Rule
30(b)(6) deponents failed to disclose responsive documents, procedures, or systems. The Court
cannot grant the Motion to Compel in these circumstances on the grounds that Lockheed’s Rule
33(d) response was wholly inadequate.
However, Relators also assert that Lockheed failed to produce or identify certain discrete
responsive documents. For example, Relators assert that Lockheed has not identified the
location of Final Tool Price Approvals (“FTPAs”). (Doc. 231 at 8.) The Court grants the
Motion to Compel to the limited extent that Lockheed must identify and/or produce the relevant
FTPAs by Bates-number. Relators also state that Lockheed has not identified invoices related to
at least three purchase orders: RN65191, RL98197, and a purchase order which Relators
mistakenly identified as RN8020. (Id.; Doc. 209-10 at 3–4; Doc. 209-11 at 3.) After Relators
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provide Lockheed with the correct purchase order number, the Motion to Compel also is granted
to the limited extent that Lockheed must identify and/or produce by Bates-number the invoices
associated with the three purchase orders.
B.

Relators Contend that the Discovery Responses are Incomplete Because
Government Regulations Required Lockheed to Maintain More Specific Records
for Tracing Tooling Costs.
Relators also argue that Lockheed legally was required to maintain a system that would

trace costs from a voucher submitted to the Government for payment back to a work authorizing
document. (Doc. 223 at 2.) Relators rely on the report and rebuttal report of their purported
expert, Clarence Edward Brooks, Jr., a former DCAA auditor, and on Government regulations to
support their argument. Federal Acquisition Regulation (“FAR”) 31.201-2 required Lockheed to
maintain records “adequate to demonstrate that the costs claimed to have been incurred, are
allowable to the contract, and comply with applicable cost principles.” 48 C.F.R. § 31.201-2
(1996).2 FAR 52:215-2 required Lockheed to maintain books and records for review and audit
“sufficient to reflect properly all costs claimed to have been incurred or anticipated to be
incurred in performing” a contract. 48 C.F.R. § 52:215-2 (1989).3
Brooks stated in his Report that DCAA “audits require the auditor to trace selected costs
from the initiation of a transaction into the various accounting subsystems and from the
subsystems into the cost accounting system . . . [and then] into the billing system to support the
claim for payment.” (Brooks Report, Doc. 210-2 at 5.) He opined further that a contractor’s
accounting system should maintain audit trails during and after the processing of a transaction.

2

A copy of the regulation is found at Doc. 223-2.

3

A copy of the regulation is found at Doc. 231-5.
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(Id.) Brooks concluded that the Elliott Method failed to meet the regulatory requirements. He
stated as follows:
[T]he Elliott Method is not adequate to demonstrate conclusively that any labor or
vendor costs flowed into the billing system and were included in the claimed
contract costs. I encountered roadblocks at several of the steps outlined by Mr.
Elliott. Some of this inability to trace tooling costs from initiation of the
transaction through billing to the Government resulted from differences between
steps that could only be explained and reconciled using Lockheed’s institutional
knowledge. Further, the Elliott Method does not provide the information
necessary to comply with the regulatory, contract, and audit requirements of an
acceptable and adequate accounting and billing system.
(Id., Doc. 210-2 at 10.) Relators conclude that Lockheed’s discovery responses were incomplete
because the processes and data provided do not satisfy the regulations.
Lockheed responds that Relators’ arguments and the portions of Brooks’ report cited
above inappropriately conflate the Elliott Method with the requirements imposed by DCAA.
Relators requested Lockheed to identify and trace the costs of specific tools through to a public
voucher submitted the Government. Patrick McGeehin, Lockheed’s purported expert, opined
that Lockheed was not required by DCAA to identify tooling costs in the manner requested by
Relators when it accumulated costs for billing to the Government. (McGeehin Report, Doc. 2332 at 9.)4 Instead, McGeehin testified at his deposition that Lockheed had to be able to trace a
voucher backwards and “be able to show that the two or three systems that feed into that public
voucher have integrity and that they can find the basis and the backup to the main cost areas that
field [sic] into that.” (McGeehin Dep., Doc. 226-5 at 14.) At the tool tracing hearing, Lockheed

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Additionally, McGeehin opined at his deposition that Lockheed was “[n]ot necessarily”
required to “trace costs from a work authorizing document . . . into the claim for payment for
those costs.” (McGeehin Dep., Doc. 226-5 at 14.) McGeehin concluded, nonetheless, that such
a tracing could be done from a public voucher back to the work authorizing document. (Id.)
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presented an excerpt from a DCAA report dated April 9, 1997 in which the resident auditor
concluded that Lockheed “maintain[ed] an adequate billing system” and “submit[ted] its
proposals in accordance with FAR 52.216-7, Allowable Cost and Payment contract clause.”
(1/28/11 Tr., Doc. 188 at 11.)
Brooks, Relators’ purported expert, admitted that he had no knowledge of whether
“DCAA ever wanted Lockheed to trace the cost of a specific tool” and no knowledge of whether
DCAA disapproved or approved of the systems that Lockheed had in place. (Brooks Dep., Doc.
226-4 at 10.) Likewise, Brooks agreed during his deposition that the primary headings on a
public voucher traced by DCAA would be “items of cost, . . . materials and labor” and
“overhead, G&A, profit, [and] those kinds of things.” (Id.)
At best, the Court is left with competing expert opinions as to the level of specificity
required by Government regulations to support vouchers for payment. For purposes of this
discovery motion, the Court cannot conclude that Lockheed is withholding DCAA-required
documentation or systems for tracing tooling costs which would be responsive to the
Interrogatories and the Rule 30(b)(6) Notice. The Court will not grant the Motion to Compel or
impose discovery sanctions on the basis that the Government required Lockheed to maintain the
information sought by Relators.
C.

Relators Seek Discovery Sanctions Because Lockheed Admits Imperfections in the
Tool-Tracing Method.
Relators identify multiple imperfections or roadblocks in the Elliott Method and assert

that those imperfections, individually or collectively, justify granting the Motion to Compel. For
example, tool maintenance work record orders (“TMWRs”) were written by tool inspectors to
assign a maintenance task to tool mechanics or toolmakers and to track the labor time.
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(1/28/2011 Tr., Doc. 188 at 81.) Lockheed concedes that the tooling costs associated with a
TMWR cannot be traced one-to-one into the Attendance and Labor Recording (“A&LR”) system
data, despite the fact that the time charged on the TMWR was rolled into the A&LR data. (Id.,
Doc. 188 at 81–86.) However, TMWRs provided the name of the tooling inspector and the date
the maintenance work was checked. (Id.) Lockheed asserts that Relators could use the
employee names and the dates to gather more information about the tooling maintenance work
that was done. (Id.) Further, Lockheed emphasizes that “the work was done and it was charged
through the A&LR data and it was ultimately charged to the United States.” (Id., Doc. 188 at
87.)
Lockheed also concedes that there can be difficulties or inconsistencies in tracing costs
from the A&LR data to the Cost Accumulation for Multiple Purposes system (“CAMP”) system.
A&LR data is maintained on a weekly basis, but CAMP data is maintained on an annual basis.
(1/28/2011 Tr., Doc. 188 at 94.) Additionally, A&LR data contains labor hours expended by inhouse employees stated in hours, but CAMP reflects that labor cost in terms of dollars.
Lockheed’s expert testified that he could convert the A&LR hourly data into the CAMP
monetary data by applying the appropriate blended labor rate. (McGeehin Dep., Doc. 226-5 at
17–19.)5
At the tool-tracing hearing, Relators pointed out instances where the weekly data in the
A&LR system did not add up to match the annual data in the CAMP system such that more

5

Rick Elliott of Lockheed testified at his Rule 30(b)(6) deposition that the data
concerning the cost for specific tools lost its individual identity at the CAMP level and could not
be found in the Lockheed billing system because of the way in which the data was rolled up into
CAMP. (Elliott Dep., Doc. 209-3 at 63–65.)
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hours were reflected in CAMP than had been in A&LR. (1/28/2011 Tr., Doc. 188 at 94–96.)
Lockheed responded that any discrepancies could be explained by pool work order data which is
maintained in microfiche at Lockheed. (Id., Doc. 188 at 97–99.) The microfiche was made
available to Relators. (Id., Doc. 188 at 99, 101.)6 Lockheed’s counsel explained that although
reliance on the microfiche might be necessary “to reconcile every single number to the penny,”
Lockheed would not dispute that any time charged reflected in CAMP ultimately was charged to
the Government. (Id., Doc. 188 at 103–04.) Lockheed’s counsel summarized as follows:
CAMP ultimately represents what was billed to the government that refers to that
tool order. So if a part of the cost that’s relevant to whatever you’re trying to
prove includes pool work order numbers, then you should use CAMP. If it does
not include any allegations related to pool work orders, then I would suggest
using the A&LR.
(Id., Doc. 188 at 104.)7
Further, Lockheed agreed multiple times to enter into a stipulation that any costs
reflected in CAMP were billed to the Government. At the tool-tracing hearing, the parties
proposed the following stipulation:
If costs or hours are recorded in Lockheed’s A&LR, SHARP, or CAMP system
tied to a billable work order, then such costs or hours were submitted to the

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Relators complain that Lockheed did not explain at the tool-tracing hearing how to
utilize the pool work orders to achieve the reconciliation of A&LR data and CAMP data. (Doc.
231 at 4–5.) However, Relators acknowledged in correspondence prior to the tool-tracing
hearing that Lockheed previously had provided this pool work order explanation. (Doc. 209-6 at
2–3.) Relators did not put Lockheed on notice prior to the hearing that they had questions
regarding or objections to this explanation. (Id.)
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Relators identified other specific instances in which data in one database did not
completely match the data in the next-step database, but Lockheed provided a reconciliation
process which appeared to resolve the discrepancy. For example, Lockheed’s counsel identified
“pink data” which could be used to reconcile discrepancies between the SHARP and CAMP
systems. (1/28/2011 Tr., Doc. 188 at 53–56.)
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United States by Lockheed for payment and paid by the United States to
Lockheed. . . . Lockheed . . . will not assert that [R]elators must tie any such costs
or hours to specific claims for payment.
(Id., Doc. 188 at 121.) Lockheed’s counsel stated at that time that he needed to verify the
stipulation as to the A&LR and the Special Handling Accounting Receipts and Payment
(“SHARP”) systems. (Id., Doc. 188 at 122.) He affirmed, however, that “if [costs] are in the
CAMP system and they’re tied to a billable work order, they definitely were submitted to the
United States for payment” and that “Lockheed will not assert that [R]elators must tie any such
costs or hours to specific claims for payment.” (Id.)
After the hearing, Relators sought to expand the substantive scope of the stipulation
beyond the language set forth immediately above, but Lockheed refused to agree to the expanded
stipulation. (Doc. 209-8; Doc. 209-9.) On May 10, 2011, Lockheed’s counsel affirmed in
correspondence to Relators’ counsel that “Lockheed . . . will agree to the tool tracing stipulation
as originally communicated to the Court at the January 28, 2011 [tool-tracing hearing].” (Doc.
238-1 at 3.) Lockheed’s position that all tooling charges entered into the CAMP system were
presented to the Government for payment has not changed. (Doc. 226 at 6, 11; Doc. 233-1 at 7.)
In fact, Lockheed’s purported expert, Patrick McGeehin, testified in a deposition on September
22, 2011 that “Lockheed agreed to say any of these costs under the program that find its [sic]
way into CAMP . . . they were billed and they were paid.” (McGeehin Dep., Doc. 226-5 at 16.)8

8

Relators contend that they cannot determine from the Interrogatory responses, including
application of the Elliott Method, how to determine on which specific claims the costs reflected
in CAMP were charged. Rather, the Elliott Method requires making an educated guess based on
timing. (Elliott Dep., Doc. 209-3 at 103–05; McGeehin Dep., Doc. 226-5 at 16.) The fact that
Lockheed will not challenge that the costs reflected in the CAMP system ultimately were
charged to the Government obviates the concern raised by Relators’ objection.
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In another argument, Relators assert that Lockheed’s discovery responses were
inadequate because Lockheed did not explain how it segregated unallowable or unreasonable
tooling charges arising from rework necessitated by vendor error. Relators state that all rework
costs caused by vendor error were unreasonable. Therefore, Relators assert that rework costs
caused by vendor error should not have been billed to the Government. (Doc. 231 at 15–16.)
Lockheed concedes that it had an obligation not to bill the Government for unallowable
costs. (Doc. 233-1 at 2.) Lockheed also concedes that it did not have a system to track rework
costs caused by vendor error. (1/28/2011 Tr., Doc. 188 at 115.)9 Lockheed disputes, however,
that all rework costs were unreasonable and unallowable. Lockheed’s expert, McGeehin, opined
that no Federal Acquisition Regulation required Lockheed to segregate tooling rework costs and
that costs for rework were generally allowable. (McGeehin Rep., Doc. 233-2 at 15–16.)
Therefore, in this instance, there is apparent agreement that Lockheed did not have, and cannot
provide to Relators, a system to segregate rework costs caused by vendor error.
In sum, Relators contend that the Elliott Method is imperfect and cannot be used to trace
the specific tooling costs to a specific voucher, and therefore, Lockheed’s discovery requested
based on the Elliott Method were insufficient. The Court disagrees. The Elliott Method is a way
to analyze the data and processes contained within Lockheed’s accounting system to provide
traceability of tooling costs to the extent possible. The record indicates that the accounting
systems themselves (not simply the Elliott method for utilizing those systems) cannot provide
the one-to-one matching for tooling costs to a payment voucher in all circumstances. For

9

Lockheed made a finding in the 1998 internal audit that “[c]ontrols have not been
provided to ensure that the costs of rework are recorded so that, when appropriate, suppliers can
be billed for additional costs.” (Doc. 231-9 at 5.)
15

example, Lockheed concedes that the accounting systems do not provide the TMWR traceability
which Relators seek. Relators have provided no basis to challenge that representation.
However, a discovery response is not insufficient because it does not provide information which,
in fact, does not exist. Further, in the circumstances of this case, the concession that the
discovery responses are imperfect does not warrant the conclusion that the Motion to Compel
must be granted and sanctions imposed.
D.

The Court Will Not Impose Specific Sanctions Requested by Relators.
The Court will not impose the discovery sanctions which Relators request. Lockheed

will be prohibited from introducing evidence and arguments at summary judgment and/or at trial
which are inconsistent with the substantive representations it has made to the Court and Relators
regarding their billing systems and records for tracing costs. For example, pursuant to the
parties’ agreement, Relators will not be required to prove that costs in CAMP which can be tied
to a billable work order also must be tied to a specific claim for payment.
However, Relators will have the burden at summary judgment and at trial to otherwise
prove the merits of their claims and their entitlement to damages. The elements of Relators’
claims, the merits of those claims, and the calculation of damages, if any, are not pending before
the Court at this time. Nor have the parties adequately briefed these issues. The Court is
disinclined in adjudicating this discovery motion to make a final determination regarding the
elements of Relators’ False Claims Act claims and whether Relators can satisfy those elements.
For instance, Relators seek as a discovery sanction an order that “Relators do not need to
identify or segregate out specific tool rework costs from other tool order costs in order to recover
on their claims in this case because Lockheed did not segregate such costs (and Lockheed is

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barred from presenting evidence or argument that Relators must do so)[.]” (Doc. 231 at 19.)
Lockheed has conceded that it did not segregate costs for rework generated by vendor error.
Relators, presumably, will have the burden to prove in the first instance that vendor error related
to a specific tool generated rework costs. The Court is loathe at this juncture to otherwise define
or limit the elements of proof necessary to establish Relators’ claims.
For another example, Relators contend that they should be permitted to use the 203 and
PARS-2 property accounting systems to estimate damages because the Elliott Method is not
sufficient to allow Relators to trace particular tooling costs to a particular Government voucher.
Cf. Digital Filing Sys., L.L.C. v. Aditya Int’l, 323 F. App’x 407, 418–19 (6th Cir. 2009) (stating
that inferences can be taken against the defendant, and doubts resolved in favor of the plaintiff,
when damages cannot be calculated with precision based on the discovery produced by the
defendant). However, the parties have not at this time presented the Court with evidence and
arguments concerning Lockheed’s liability or Relators’ entitlement to damages. The Court will
not speculate at this juncture whether Relators will be able to establish damages with sufficient
particularity.
In sum, the Court denies the Motion to Compel insofar as Relators seek a remedy
compelling Lockheed to provide more complete responses to the Interrogatories and to continue
the Rule 30(b)(6) Notice deposition. The Court also denies the Motion to Compel to insofar as
Relators seek the Court to define or limit the elements needed to establish Lockheed’s liability or
the potential damages award. However, the Court grants the Motion to Compel to the extent that
Lockheed must produce or identify by Bates-number the FTPAs and the invoices associated with
the purchase orders specified above. Also, the Court will hold Lockheed to its agreement with

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the stipulation proposed at the tool-tracing hearing.
III.

CONCLUSION
For the reasons set forth above, Lockheed’s Motion for Leave to File Sur-Reply (doc.

233) is GRANTED, the Sur-Reply is deemed to have been filed at docket number 233-1, and
Relators’ Motion to Compel (doc. 209) is GRANTED IN PART AND DENIED IN PART as
set forth above.
IT IS SO ORDERED.

___s/Susan J. Dlott___________
Chief Judge Susan J. Dlott
United States District Court

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