Northeastern University v. BAE Systems Information and Electronic Systems Integration Inc.
1:13-cv-12497
D. Mass.Nov 27, 2013Background
- Northeastern and BAE entered a cost-reimbursable sub-award in April 2011 to develop a 192-element acoustic receiver array for an NSF grant.
- The NSF-ONR Development Grant totaled $975,462 with a fixed fee; amendments later increased the project budget to about $1,077,000 and expanded the array to 192 elements.
- The SOW and amendments contemplated phased tasks under a cost-reimbursable framework, with risk allocation centered on inputs and budget rather than a fixed price.
- In 2013, BAE delivered a 64-element sub-array for sea-testing instead of the full 192-element Array, and Northeastern alleges the subarray failed to function properly.
- Budget exhaustion led BAE to suspend work in June 2013; after disputes over payments, Northeastern filed suit in October 2013 seeking, among other things, a fully functioning array and damages.
- The court granted in part BAE’s partial motion to dismiss and denied Northeastern’s motion for a preliminary injunction seeking delivery of a fully functioning array by January 15, 2014.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Contract interpretation: is the Agreement cost-reimbursable? | Northeastern contends the contract targets a fixed price for a fully functioning array. | BAE argues the contract is cost-reimbursable, focusing on inputs and budgeted costs rather than a fixed output. | The court finds the Agreement unambiguously cost-reimbursable. |
| Did BAE breach by failing to deliver a fully functioning 192-element Array within budget? | Northeastern asserts BAE must deliver a fully functioning 192-element Array for the agreed budget. | BAE maintains it is not obligated to deliver a fixed-output product beyond budget under a cost-reimbursable contract. | Count I is dismissed to the extent it seeks delivery of a fully functioning array within a fixed budget. |
| Whether best-efforts language is implied in a cost-reimbursable contract and governs performance. | Northeastern argues BAE failed to use best efforts to complete the project. | BAE contends best efforts are implicit in cost-reimbursable contracts and focus on input, not a fixed output. | The contract is consistent with cost-reimbursable form; no requirement to fix a price but best efforts may be present. |
| Northeastern’s motion for a preliminary injunction seeking a fully functioning array by a set date. | Northeastern seeks mandatory relief to compel delivery by January 15, 2014. | BAE argues against mandatory injunctive relief given the contract structure and likelihood of success. | Preliminary injunction denied. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pliability of pleading requires plausible claims, not mere possibility)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleadings must contain more than mere conclusory statements)
- Langadinos v. Am. Airlines, Inc., 199 F.3d 68 (1st Cir. 2000) (accepts allegations as true for motion-to-dismiss standard)
- Bank v. Int’l Bus. Mach. Corp., 145 F.3d 420 (1st Cir. 1998) (contract interpretation and ambiguity principles in First Circuit)
- Samia Cos. LLC v. MRI Software LLC, 898 F. Supp. 2d 326 (D. Mass. 2012) (extrinsic evidence allowed to resolve contract ambiguity)