Order
This court Adopts and Affirms Magistrate Judge Pallmeyer’s Report and Recommendation of October 26, 1994 and Denies Plaintiffs motion for a preliminary Injunction. This ease is hereby dismissed, all matters having been resolved. Dismissal is without prejudice to Plaintiff reinstating or refiling within 30 days to claim damages.
REPORT AND RECOMMENDATION
Plaintiff Advanced Seal Technology, Inc. (“AST”), a manufacturer based in Elgin, Illinois, alleges that the Defense Industrial Supply Center (“DISC”), under the control of Defendant Secretary of Defense William Perry, failed to follow proper procurement procedures in considering Plaintiffs bid on a contract to manufacture seal assemblies for the U.S. Navy. Plaintiff seeks a preliminary injunction to force Defendant to terminate its contract with the successful bidder and to resolicit bids or reconsider the previous bids in accordance with relevant regulations and procedures. Defendant opposes Plaintiffs motion, both on the merits and for lack of subject matter jurisdiction.
For the reasons set forth below, this court finds that it has jurisdiction over this matter but recommends that Plaintiffs motion be denied.
FACTUAL BACKGROUND
The following factual statement is based on the transcript of an evidentiary hearing held before Magistrate Judge Rebecca Pallmeyer on August 2-3, 1994, as well as Plaintiffs Amended Complaint for Preliminary Injunction (hereinafter “Amended Complaint”), Defendant’s Answer to Amended Complaint (“Defendant’s Answer”), and Defendant’s Response to Plaintiffs Motion for Preliminary Injunction (“Defendant’s Response”). 1
This case centers on a May 1993 solicitation by the Defense Industrial Supply Center to procure a specific type of spring-loaded mechanical seal assembly (the “seal”) for use in certain U.S. Navy water pumps. (Amended Complaint ¶ 4.) The seal is one of more than 900,000 types of military spare parts procured by DISC, an organization within the Department of Defense under the direction of Secretary William Perry. (Amended Complaint ¶¶3, 4; Defendant’s Response, at' 2.) The solicitation in question did not directly, describe the specifications for the seal; rather, it identified the seal by its National Supply Number (“NSN”) — NSN 5330-01-164-1113 (hereinafter abbreviated “NSN 1113”) — and by the corresponding part numbers from two known suppliers of the seal — Aqua-Chem, Inc. and John Crane, Inc. (Amended Complaint ¶ 4; Transcript, at 17, 20-21.) DISC modified the solicitation in June 1993 to identify a third supplier, Calnevar Seal, Inc., which DISC had approved as a source for the seal sometime in 1992. 2 (Amended Complaint ¶ 8; Transcript, at 24, 29.)
Any seal manufacturer may bid on a proposed contract, regardless of whether the manufacturer is identified in the solicitation as a source for the product. (Transcript, at
In response to the solicitation, Plaintiff offered to supply DISC with an alternate seal of its own manufacture, which Plaintiff claims it sold to DISC on two occasions in 1986 and 1990 to satisfy orders for seal assembly NSN 5330-01-161-2563 (hereinafter abbreviated “NSN 2563”). (Amended Complaint ¶¶ 9, 12.) The specifications for NSN 2563 are identical to those for NSN 1113; 5 consequently, Plaintiff claims that approval of AST’s seal as an alternate product for NSN 1113 should have Yequired nothing more than verification that AST had previously filled two orders for NSN 2563 and that NSN 2563 was identical to NSN 1113. (Id.) Plaintiff offered to supply DISC with the seal for a price of $250 per item if 70 seals were ordered, $210 per item if 190 were ordered, and $200 per item if 220 were ordered. (Id. ¶ 10.)
In a letter to Plaintiff in August 1993, DISC noted that Plaintiff’s two previous seal contracts had probably involved an earlier version of the seal design, which Plaintiff had revised in January 1992. (Amended Complaint ¶ 11; Letter from M.K. Lewis, Contract Specialist, DISC, to Thomas Doepker, President, AST, of August 5, 1993, Ex. 4 to Complaint.) DISC requested that Plaintiff submit test results for its revised seal; alternatively, DISC would submit Plaintiff’s technical package to its experts for qualification testing. (Amended Complaint ¶ 11.) Plaintiff responded that the seal designs were identical and provided DISC with technical data to support its proposal. (Id. ¶ 13; Transcript, at 25, 48.) DISC admits that it did not evaluate Plaintiff’s drawings and technical data prior to awarding the contract, although it should have done so. (Defendant’s Response, at 2-3, 10.)
On August 2-3, 1994, this court held an evidentiary hearing on Plaintiffs motion. Contrary to Plaintiffs contentions, government officials testified that prior award of a contract to a supplier does not necessarily guarantee that the supplier will be awarded a contract for the same item in the future. (Id. at 36, 60.) Instead, when a manufacturer claims to have previously supplied a product to DISC, DISC will look closely at what particular product has been supplied; whether it was properly evaluated and approved; what those evaluations and approvals stated; the subsequent quality deficiency history of the item; and whether the part supplied was in fact the part for which DISC had contracted. (Id. at 36, 60, 63-64, 164.) In short, DISC’S determination that an alternate product is acceptable is based on whether DISC has full confidence that the part will work, not necessarily on whether a particular supplier has provided that item in the past. (Id. at 63-64.)
In this case, the parties disagree whether DISC ever purchased or approved for purchase Plaintiffs seal to fill orders for NSN 2563. As stated above, Plaintiff claims that it was awarded two contracts in 1986 and 1990 to supply seals of the type NSN 2563, which is identical to NSN 1113. (Id. at 119.) Defendant, however, contends that in the ease of the 1990 procurement, DISC’S purchase order cited part numbers from Aqua-Chem and John Crane, not AST. (Id. at 68-69, 76, 179-181.) Defendant asserts that if Plaintiff sent its own part in response to this order, then Plaintiff improperly substituted its own part for the one that the government had actually ordered. (Id. at 76, 212-213.) Neither party provided any documentation regarding the 1986 procurement, nor does DISC have any record that AST ever supplied a seal of its own manufacture in the past. (Transcript, at 77.)
The government’s witnesses also explained that if DISC had procured Plaintiffs seal without having properly evaluated or approved it, then that procurement was made in error.
(Id.
at 36.) DISC has no record that it ever approved Plaintiffs seal as an alternate for either NSN 2563 or NSN 1113. (Transcript, at 117, 148; Memorandum from Commander, NAVSEA, to Commander, DISC of 07/27/94, Government Ex. 1.) In preparation for the evidentiary hearing, DISC did inspect Plaintiffs seal design by comparing the dimensions of Plaintiffs seal with the seal that had been produced by the original manufacturer, as well as with the pump into which the seal would be installed. (Transcript, at 88, 98-99.) Two defense witnesses — Ted Rrokus and Donald Haun, mechanical engineers with NAVSEA and Westinghouse Marine Technology Division, respectively — testified that they had evaluated Plaintiffs seal and concluded that it was too large to fit into the pump properly.
(Id.
at 90, 95, 112, 125-26, 129-30.) Mr. Haun ex
DISCUSSION
Plaintiff seeks to enjoin Defendant from executing its contract with Calnevar Seal and, if the goods are still needed, to order DISC either to resolicit the contract or to award the contract under the previous solicitation in accordance with relevant procurement law and methodology. (Amended Complaint, at 4.) Defendant opposes the motion on its merits and for lack of subject matter jurisdiction. The court finds that although jurisdiction is proper, Plaintiffs motion should be denied.
A. Jurisdiction
The first issue to be resolved is whether this court, as opposed to the Court of Federal Claims (also “Claims Court”) has subject matter jurisdiction over this case. As Defendant points out, the Court of Federal Claims has exclusive jurisdiction over cases in which a plaintiff is seeking monetary damages in excess of $10,000 from the federal government and such claim is derived from a federal statute, regulation, or contract.
Rose Acre Farms, Inc. v. Madigan,
Outside of these parameters, the jurisdiction of the Court of Federal Claims does not necessarily preclude action by a federal district court.
Western Securities Co. v. Derwinski,
In this light, it is clear that this court has subject matter jurisdiction over this action. Plaintiff suit is not a “veiled claim” for money damages, as Defendant urges (Defendant’s Response, at 7; Defendant’s Supplemental Response, at 1-2) because Plaintiff has not petitioned the court to order DISC to award the contract in its favor, or even to force DISC to award the contract at all. Thus, even if Plaintiffs motion were granted, Plaintiff would not necessarily receive any
Furthermore, Plaintiffs claim is clearly a post-award claim, not a pre-award claim: Plaintiff filed its initial complaint two months after DISC awarded the contract to Calnevar Seal. See Space Age Engineering, Inc. v. United States, 2 CLCt. 262, 263-64 (1983) (claim filed in November 1982 was clearly post-award when contract had been awarded in September 1982). This fact, together with the fact that Plaintiff is seeking purely equitable relief, means that the district court rather than the Court of Federal Claims has jurisdiction over this matter.
B. Preliminary Injunction
Although Plaintiff has brought its claim in the right court, Plaintiff has failed to persuade this court that its motion should be granted. A district court may issue a preliminary injunction only if the moving party can show: (1) that the case has some likelihood of success on its merits; (2) that the movant has no adequate remedy at law; and (3) that the movant would suffer irreparable harm if the injunction is not granted.
Storck USA L.P. v. Farley Candy Co.,
1. Irreparable harm
Plaintiff cites a number of cases that hold that improper denial of an opportunity to bid on a contract, with the resulting loss of business and profits, constitutes “irreparable harm” that may warrant injunctive relief.
Quality Transport Services, Inc. v. United States,
Plaintiff admits, however, that this rule “is by no means universal” among the circuits. (Plaintiffs Brief, at 13.) There are a large number of cases that have held that economic loss alone does not constitute irreparable hárm.
See, e.g., Sampson v. Murray,
2. Inadequate remedy at law
In some cases, a finding of irreparable harm is related to the absence of an adequate remedy at law.
See, e.g., Sampson,
This court is not convinced. In
Fairplain Development,
3. Likelihood of success
Even if this court were to adopt Plaintiffs suggestion that it has suffered irreparable harm that could not be remedied at law, Plaintiffs motion should be denied on other grounds. To challenge an agency’s decision to award a contract to a third party, the disappointed bidder must show either that the agency’s decision had “no rational basis” or that its procurement process involved a “clear and prejudicial violation” of applicable law.
Elcon Enters., Inc. v. Washington Metro. Area Transit Auth.,
Defendant admits that DISC violated its regulations by not evaluating Plaintiffs technical package before making the award. The evidence shows, however, that this violation did not prejudice Plaintiffs proposal for the simple reason that DISC would not have awarded Plaintiff even if it had examined the package. 10 Defendant has offered testimony from two technical experts that Plaintiffs seal is too large to fit into the pump without damaging or destroying the seal. Plaintiff, by contrast, has offered only the opinion of AST’s president, Thomas Doepker, that the seal would fit. Doepker provides no substantiation for his conclusion, nor has Plaintiff offered any other evidence to rebut Defendant’s testimony. This court is unwilling to accept Plaintiffs assertion that Doepker “is probably in the best position to recognize” that its seal would fit (Plaintiffs Reply Brief, at 7) absent compelling evidence to this effect.
Plaintiff apparently believes it can rest its case on its claim that because DISC allegedly procured AST’s seal on two previous occasions, DISC was wrong to deny its approval of the seal on this contract. There are two main flaws in Plaintiffs argument. First, Plaintiffs claim that it has twice filled orders for NSN 2563 (which is identical to the object of the solicitation in question) rests on weak and contradictory evidence. Plaintiff has not offered any evidence to substantiate its allegation that DISC purchased an AST seal in 1986. As for DISC’S procurement of an AST seal in 1990, the government’s purchase order shows that Plaintiff was to supply a. seal manufactured by Aqua-Chem or John Crane, not AST. If Plaintiff supplied an AST seal instead, then Plaintiff improperly substituted its own product for that which had been actually ordered by the government, so any “approval” is meaningless.
The second flaw is that Plaintiff has not provided any evidence showing that DISC ever actually approved AST’s seal as an alternate for either NSN 2563 or NSN 1113. As Defendant maintains, if DISC had procured AST’s seal in the past without approving it, then that procurement was in error. The court finds no reason to compound that error by forcing DISC to terminate a contract in order to reconsider purchasing a seal that it has shown will not work.
The remainder of Plaintiffs argument on this point is long on assertions but short on evidence. For example, Plaintiff claims it was improperly denied an opportunity to defend its proposal prior to award to the contract, in violation of procurement regulations. (Plaintiffs Brief, at 27-28.) Plaintiff then undermines its own argument by stating that “while the chance [of being awarded the contract] is admittedly speculative, it is not zero and may be significant.” (Plaintiffs Brief, at 28.) Speculation of any degree is inadequate to rebut Defendant’s more concrete evidence to the contrary,- and it fails to satisfy Plain
In sum, Defendant may have violated certain procurement regulations by not evaluating Plaintiffs technical package in a timely manner, but Plaintiff has not shown that this omission actually prejudiced consideration of its proposal. Plaintiff has failed to rebut Defendant’s evidence that Plaintiffs seal would not fit, nor has Plaintiff offered any other evidence to show that it would have had a substantial chance to be awarded the contract had its package been evaluated. Finally, Plaintiff has not shown that DISC ever approved or properly purchased AST’s seals to fill orders for NSN 2563 or NSN 1113. Consequently, there is little likelihood that Plaintiff would succeed on the merits of its claim.
4. Balancing the harm to the parties
In considering whether to grant a preliminary injunction, the court views the merits and harm to the parties as inversely related; in other words, the greater the movant’s chance of success on the merits, the less it must show that the balance of harm is in its favor.
Storck,
Here, there is little likelihood that Plaintiff will prevail on the merits of its claim, given that Plaintiff has failed to show that its seal would work properly. Consequently, Plaintiff must show that the harm it would suffer if the injunction were denied is far greater than the harm Defendant would suffer if the injunction were granted. Plaintiff asks this court to adopt the position “that an injunction is appropriate if the Plaintiff satisfies the court that it will likely prove that defendant committed material violations of federal procurement law.” (Plaintiffs Brief, at 15.) That the violations occurred is not the only issue, however. Plaintiff must show that it would suffer great harm if the injunction is denied, yet Plaintiff has failed to do so. Defendant, on the other hand, points out that it has none of the seals in question in its current inventory, and that it has had to order its contractor to cease production of the seals, causing both the contractor and the government to suffer considerable expense, delay, and other complications. It is clear, then, that any harm to Plaintiff caused by denying the injunction would not outweigh the harm to Defendant by granting it.
5. Weighing the public interest
In weighing the relative harms to the parties, the court is also directed to consider the interests of the public in granting or denying the injunction.
Storck,
CONCLUSION
The court finds that it has subject matter jurisdiction over this case because it is a post-award claim for purely equitable relief, as opposed to a pre-award claim qr a claim for money damages that should be brought before the Court of Federal Claims. Having established that jurisdiction is proper, however, Plaintiff fails to convince this court that injunctive relief is appropriate. Plaintiff has not shown that any loss of business or income it may suffer constitutes “irreparable harm,” or that such harm could not be remedied at least in part by a remedy at law. Furthermore, Plaintiff has little likelihood of success on the merits of its claim because it has failed to rebut Defendant’s evidence that AST’s seal simply will not fit properly. Finally, the court finds that the harm to Defendant and the public in granting this motion would be much greater than the harm to Plaintiff in denying it. Consequently, this court recommends that Plaintiffs’ motion for a preliminary injunction be denied.
Counsel have ten days from the date of service to file objections to this Report and Recommendation with the Honorable Paul E. Plunkett.
See
Fed.R.Civ.P. 72(b); 28 U.S.C. § 636(b)(1). Failure to object constitutes a waiver of the right to appeal.
Egert v. Connecticut General Life Ins. Co.,
Notes
. Although unverified pleadings are not normally considered part of the evidence, in this case the allegations contained therein are uncontested and help illuminate the facts of the case.
. The June 25 modification also extended the closing date for the solicitation from June 16 to July 19, 1993. Although DISC had rejected Plaintiff's original proposal because it was tardy, Plaintiff resubmitted its bid before the revised closing date. (Amended Complaint ¶¶ 5-8.) The timeliness of Plaintiff's submission is not an issue in this case.
. DISC actually relies on technical evaluations from the Naval Sea Systems Command ("NAVSEA”) and its contractor Westinghouse Marine Technology Division. DISC is only a purchasing agency; it does not have the authority to purchase an item that has not first been approved by NAVSEA. (Defendant’s Response to Plaintiff's Motion for Preliminary Injunction (hereinafter "Defendant’s Response”), at 3, n. 2.) The distinction between DISC and NAVSEA is not material to this case, however, so for ease of presentation this Report will refer only to DISC as the agency that approves and purchases the seals in question.
. Plaintiff, a manufacturer of mechanical pump seals, claims it has supplied the federal government with approximately 15,000-20,000 seals of some 25-30 different varieties since late 1985. (Amended Complaint ¶ 1; Transcript, at 202.) The key question whether it has filled or been approved to fill DISC'S orders for seals of the type NSN 1113 will be discussed later in this Report.
. The record shows that NSN 1113 and NSN 2563 differed only in the type of materials used in their construction. (Amended Complaint ¶ 9; Transcript, at 101.) At some unknown point in time, DISC determined that the materials used in NSN 2563 were unsuitable for continued successful operation; consequently, the government upgraded the materials used in a number of its seals, including NSN 2653. (Transcript, at 101-02.) This change made NSN 2563 identical to NSN 1113, so DISC eventually cancelled procurement number NSN 2563. (Id.)
. Defendant has not explained why it took 12 months from the time of. DISC’S first solicitation to award the contract. (Transcript, at 27-28.)
. Plaintiff further asserts that because AST is a small disadvantaged business and Calnevar Seal is not, Calnevar's bid should have been adjusted upward by 10%, to $264 per seal, for evaluation purposes. (Amended Complaint ¶ 16; Plaintiff’s Brief, at 29, n. 9, citing "Solicitation Clause M029(b)(l)” on page 21 of the May 1993 solicitation.)
. Disappointed bidder claims are relatively rare in the Seventh Circuit, so both parties cite cases from other circuits.
. The public interest element of this analysis will be considered later in this Report.
. This discussion, of course, proceeds from the "clear and prejudicial violation” prong of the test in Eicon and Stay, rather than the "no rational basis” prong. Plaintiff, which relies on the former standard, asserts that Defendant's arguments are unpersuasive because they are couched in terms of the "no rational basis” standard. (Plaintiff's Reply, at 3^1.) While Plaintiff is correct that these are two separate standards, Defendant's arguments are relevant not only to show that DISC did have a rational basis not to award the contract to AST but also to show that DISC's errors did not prejudice consideration of Plaintiff's proposal.