670 F.3d 1370
Fed. Cir.2012Background
- DIRECTV sold two segments and transferred pension assets and liabilities, creating segment closing adjustments under CAS 413.50(c)(12).
- First closing (Raytheon, 1997) transferred assets and liabilities with a net surplus of approximately $2.465 billion; second closing (Boeing, 2000) transferred a net surplus of about $806.587 million.
- GOVERNMENT notified DIRECTV of noncompliance with CAS 413.50(c)(12) after each transfer and sought payment of specific segment closing amounts.
- District court granted summary judgment for DIRECTV, applying the pre-1995 CAS rule basing the adjustment on the entire segment's assets and liabilities; court allowed cost reductions from successor contracts as payment.
- Government appealed; Court of Federal Claims decision analyzed under GE II and related CAS/FAR framework; standard of review is de novo.
- Panel majority affirmatively held that segment closing adjustments are based on the entire segment and may be recouped via cost reductions arising from successor contracts, not solely from DIRECTV.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper base for segment closing adjustments | DIRECTV argues complete segment assets/liabilities govern the adjustment. | Government contends only retained assets/liabilities or other restricted bases should apply. | The panel majority held the entire segment base applies. |
| Permissible payment method for closing adjustments | DIRECTV may satisfy its obligation via cost reductions from successor contracts. | Government argues payments must be direct refunds or cost reductions from the contractor, not third parties. | The majority allowed payment via cost reductions arising from successor contracts; no double recovery. |
Key Cases Cited
- Gates v. Raytheon Co., 584 F.3d 1062 (Fed. Cir. 2009) (defined-benefit pension accounting and CAS considerations)
- Allegheny Teledyne, Inc. v. United States, 316 F.3d 1366 (Fed. Cir. 2003) (segment closing and amortization under CAS)
- General Electric Co. v. United States, 84 Fed.Cl. 129 (2008) (GE II; CAS interpretation of segment closing)
- Int'l Data Prods. Corp. v. United States, 492 F.3d 1317 (Fed. Cir. 2007) (statutory and regulatory interpretation in CAS/FAR context)
- Boeing Co. v. Roche, 298 F.3d 1274 (Fed. Cir. 2002) (allocability and cost accounting standards context)
- Rumsfeld v. United Techs. Corp., 315 F.3d 1361 (Fed. Cir. 2003) (legal standard for agency/statutory interpretations)