Grant J. Book

An interesting development regarding the issues surrounding in-sourcing is unfolding at the Court of Federal Claims, courtesy of Elmendorf Support Services v. United States, No. 12-346C (Crt. Fed. Cl. Jun. 22, 2012). The plaintiff in this case had been providing services to the Air Force since October 1, 2005 with options under the contract through 2015. On February 2, 2011, the Air Force notified the plaintiff that it would not be exercising any further option year periods and would instead be in-sourcing the services provided under the contract. The last option year period executed by the parties ended on June 29, 2012.

Plaintiff filed a bid protest at the Court of Federal Claims on June 1, 2012. As is common with bid protests filed at the Court of Federal Claims, plaintiff also filed a motion for preliminary injunction seeking to enjoin the Air Force from in-sourcing the activities during the pendency of the litigation. Also as expected given recent history, the United States filed a motion to dismiss for lack of subject matter jurisdiction and lack of standing. 

On June 22, 2012, the Court of Federal Claims, Judge Bruggink, denied the government’s motion to dismiss. Judge Bruggink found that because the decision to in-source “necessarily included the process for ‘determining the need for . . . services’ that plaintiff currently provides, the in-sourcing decision-making process was ‘in connection with a procurement or proposed procurement’ within the rather generous definition adopted by the Federal Circuit” in Distributed Solutions, Inc. v. United States, 539 F.3d 1240 (Fed. Cir. 2008). Judge Bruggink also found that plaintiff’s case was not barred by prudential standing concerns and, in this regard, found instructive the Court’s holding in Santa Barbara Applied Research, Inc. v. United States, 98 Fed. Cl. 536 (2011). In a direct rebuke to Judge Allegra, Judge Bruggink also cited a recent Supreme Court decision to conclude that prudential standing was not meant to be especially demanding. See Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians v. Patchak, Nos. 11-246, 11-247, 2012 WL 2202936 (U.S. June 18, 2012).

With standing and jurisdiction established, Judge Bruggink turned his attention to Plaintiff’s motion for preliminary injunction. In determining whether a preliminary injunction is appropriate courts balance the hardships based on four factors: 1) whether the plaintiff will suffer irreparable injury; 2) the reasonable likelihood of success on the merits; 3) whether the harm suffered by the plaintiff is outweighed by that suffered by the government and third parties; and 4) whether injunctive relief serves the public interest. For the first factor, although the court acknowledged that plaintiff could suffer harm, the court noted that the injury is triggered by the government failing to exercise an option, something which was never required of it, and as well, in this case, plaintiff waited until the contract was nearly over to file its protest. Under the second factor, the court found that it was “not persuaded that plaintiff’s argument is a likely winner” and under the third factor, the court found significant harm to the government if an injunction were to issue. While the court found that the public interest is obviously served by the government following the law, here, on balance, the factors did not favor injunction. Accordingly, plaintiff’s motion for a preliminary injunction was denied.

Now, here is where things really get interesting. Readers may recall my posting discussing the case of Triad Logistics Servs. Corp. v. United States, No. 11-43 (Crt. Fed. Cl. Apr. 16, 2011), in which the Court found that the plaintiff was not an interested party because its contract had lapsed before the filing of the protest complaint. I noted that “[w]hile the Triad decision adds to the growing consensus that the Court of Federal Claims is the court with subject matter jurisdiction over in-sourcing claims, the decision ultimately leaves us with more questions than answers, such as what exactly is an interested party and what would happen if a contract ends by its own terms during the litigation.” In Elmendorf Support Services, with Judge Bruggink having denied the preliminary injunction, the plaintiff’s contract ended by its own terms on June 29, 2012. The Air Force has since in-sourced the services previously provided by the plaintiff, and on July 2, 2012, the United States filed a motion to dismiss the case as moot. The government argues that without a contract, plaintiff no longer has a legally cognizable interest in the outcome of the litigation, and, in accordance with Triad, requests the court to dismiss the case.

This could present a very interesting legal conundrum. In denying plaintiff’s motion for preliminary injunction could the court have also allowed to expire the very thing that gave it jurisdiction? Judge Bruggink will need to reconcile the Triad decision, which essentially held that without an active contract, a plaintiff lacks standing as an interested party. If Judge Bruggink follows Triad and dismisses the case, this would add new meaning to the term irreparable harm because the denial of the preliminary injunction would equate to a denial of plaintiff’s right to pursue its case altogether. Of course, Judge Bruggink could opt to distinguish or rebuke the Triad decision instead. We will be keeping a close eye on developments in this matter and keep you updated as they unfold.