[00:00:00] Speaker 03:
Next argued case is number 20, 1389, McLeod Group, LLC, against the United States.

[00:00:08] Speaker 03:
Mr. Rector.

[00:00:11] Speaker 02:
Thank you, Your Honors.

[00:00:12] Speaker 02:
And good morning.

[00:00:13] Speaker 02:
May it please the Court?

[00:00:15] Speaker 02:
The heart of this appeal is the important distinction between jurisdiction and failure to state a claim.

[00:00:22] Speaker 02:
As this Court knows, jurisdiction refers to the power of the Court to hear and decide a case.

[00:00:28] Speaker 02:
while stating a claim refers to whether the allegation of the complainer's suspicion is proven to entail a party to the leak.

[00:00:38] Speaker 02:
In this case, the court below failed to observe that distinction, and as a result, erred.

[00:00:45] Speaker 02:
Critically, the only issue raised by the government through a 12-B1 motion, the only issue before this court today, is jurisdiction.

[00:00:56] Speaker 02:
And that means the analysis

[00:00:58] Speaker 04:
that the BPA is not a contract?

[00:01:14] Speaker 02:
That's what it says.

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could, by its terms, in fact be a contract.

[00:01:32] Speaker 02:
And that's our argument here with regard to McCloud's BPA.

[00:01:36] Speaker 02:
There are terms in McCloud's BPA that create mutual obligations for both parties that are not present in the cases that the government relies upon and that the lower court relied upon.

[00:01:54] Speaker 04:
Well, the government is not obligated for any funds.

[00:02:00] Speaker 04:
And McLeod was only obligated to show up for a meeting.

[00:02:05] Speaker 02:
That's not quite right, Your Honor.

[00:02:08] Speaker 02:
It's true that the contract says, it's true, I'll call it the agreement.

[00:02:14] Speaker 02:
It's true that the agreement says this is not a contract.

[00:02:17] Speaker 02:
We don't dispute that.

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However, as this court has held on multiple occasions,

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the label that is applied to an agreement is not net control.

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Rather, you have to look at the terms of the agreement and determine what, in fact, that agreement is.

[00:02:35] Speaker 02:
Is it a contract?

[00:02:36] Speaker 02:
Is it a BPA?

[00:02:38] Speaker 02:
Is it some other type of agreement?

[00:02:42] Speaker 02:
As to the funding, Your Honor, it's true that the contract says there is no funding assigned to the agreement when issued.

[00:02:54] Speaker 02:
However, we're not relying on funding as the basis for arguing that there was in fact consideration provided to McLeod.

[00:03:04] Speaker 04:
But that's what you want out of the contract, money, which requires funding.

[00:03:12] Speaker 02:
It does, Your Honor, but the fact that there is no funding when the BPA is issued

[00:03:23] Speaker 02:
It doesn't mean that there's not an agreement between the parties, a contract between the parties.

[00:03:31] Speaker 02:
The agreement said, very importantly for McLeod, that whenever the government had a solicitation or whenever they had a requirement for work that was within the scope of this particular statement of work, McLeod would be given an opportunity to bid on that.

[00:03:53] Speaker 02:
It was not given that opportunity.

[00:03:55] Speaker 02:
In fact, that's the basis for the underlying claim.

[00:03:59] Speaker 01:
But that's... Could you point us to... No, I'm sorry.

[00:04:03] Speaker 01:
This is Judge Chen.

[00:04:04] Speaker 01:
Could you point us to where in the blanket purchasing agreement it obligates the government, DHS here, to notify

[00:04:23] Speaker 01:
McCloud of a particular service that it needs that then obligates the government to hear any request or any bid by McCloud.

[00:04:38] Speaker 01:
My understanding of the BPA by term says any task orders that the government seeks will be done in accordance to certain procedures.

[00:04:53] Speaker 01:
in section 2.17.

[00:04:55] Speaker 01:
And then 2.17 says whenever the government contemplates a task order for McLeod to serve service, then the government will ask for a quote request from McLeod.

[00:05:20] Speaker 01:
And so in that sense,

[00:05:22] Speaker 01:
The obligations from the government in this agreement rest on the government first deciding for itself that it wants to use McLeod for a given service and then follow the procedures for issuing a task order.

[00:05:45] Speaker 01:
I don't see, I guess another way of saying it, sorry if I'm sounding convoluted, is I don't see anything in the BPA here

[00:05:53] Speaker 01:
that requires and obligates the government to use McCloud any time the government decides that it wants the particular service that's contemplated in this agreement.

[00:06:08] Speaker 01:
I don't see anything in there that constrains the government to basically eliminate competition when it wants the given service.

[00:06:23] Speaker 02:
The obligation appears at page appendix 89 in paragraph 2.17.2.

[00:06:33] Speaker 02:
Right.

[00:06:35] Speaker 01:
And this is under the heading of 2.17 ordering procedures, right?

[00:06:40] Speaker 02:
That is correct, Ron.

[00:06:42] Speaker 02:
And the sentence says, the terms of this BPA require that whenever an order is contemplated,

[00:06:51] Speaker 02:
the BPA holder shall receive a request for quotation.

[00:06:57] Speaker 02:
And you're exactly right that it does not say whenever the terms require or the government needs a certain thing, it will be ordered under the BPA.

[00:07:13] Speaker 02:
That would be a requirement contract.

[00:07:15] Speaker 02:
And we're not arguing that this is a requirements contract, but the fact

[00:07:21] Speaker 02:
The BPA commits the government to provide McLeod with a request for quotation whenever an order is contemplated.

[00:07:34] Speaker 02:
It is nonetheless meaningful.

[00:07:36] Speaker 02:
And it comes close to a requirement type contract.

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It means the government has to give McLeod the opportunity to bid on the work.

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And that's a meaningful opportunity.

[00:07:51] Speaker 02:
it was not provided under the terms of this contract because of the retaliation that we've alleged in the complaint.

[00:08:01] Speaker 02:
So it's true that there is nothing in the contract that guarantees that McLeod will receive an order for particular work.

[00:08:11] Speaker 02:
But the contract does commit to providing McLeod an opportunity to bid for that work.

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And they were selected.

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under a competitive acquisition as the only holder of the BPA.

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So there's a built-in opportunity for the cloud to be able to win the work in response to any request for quotation.

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And what happened is, as a result of the retaliation at the last new complaint,

[00:08:48] Speaker 02:
That work was diverted to a different contractor and the cloud did not receive a quota, a request for quotation whenever the agency had a need for work that was within the scope of the BPA.

[00:09:03] Speaker 01:
So that, you and I might have a different reading of the meaning of 2.17.2, but at a minimum, would you agree that there's nothing in this BPA

[00:09:17] Speaker 01:
that obligates the government to narrow the competition pool for contracting for a given service?

[00:09:27] Speaker 02:
The ordering procedures refer to the FAR, FAR 8.405S3B2.

[00:09:38] Speaker 02:
And in that section of the FAR, Your Honor, it requires the government to get at least three

[00:09:46] Speaker 02:
proposals in response to a particular need.

[00:09:50] Speaker 02:
So the cloud is in a preferred position because it's always going to be one of those three that the government goes to whenever it has a need for these services.

[00:10:02] Speaker 02:
And it has previously won this DPA against its competitors for these exact services.

[00:10:09] Speaker 02:
So it's a position of preference, I would say.

[00:10:13] Speaker 01:
Well, let me be clear.

[00:10:14] Speaker 01:
There's nothing, there's no

[00:10:17] Speaker 01:
promised by the government to confine the number of possible competitors like there was in Ace Federal.

[00:10:27] Speaker 01:
Is that fair to say?

[00:10:31] Speaker 02:
The regulations said there's nothing that requires them to confine the number, that's correct.

[00:10:38] Speaker 02:
The regulations said a minimum of three.

[00:10:46] Speaker 03:
Another question.

[00:10:49] Speaker 03:
What is the status of the other two counts of the complaint that were not dismissed?

[00:10:56] Speaker 03:
Is litigation proceeding?

[00:10:58] Speaker 02:
It is, Your Honor.

[00:11:00] Speaker 02:
And we are proceeding on those counts.

[00:11:04] Speaker 02:
However, those counts will not provide the full relief that was thought of in the original complaint.

[00:11:13] Speaker 02:
By dismissing the three counts that it did,

[00:11:16] Speaker 02:
The court eliminated the basis for roughly 80% of the damages that were originally claimed.

[00:11:29] Speaker 03:
OK.

[00:11:32] Speaker 03:
Anything else that you need to tell us?

[00:11:35] Speaker 03:
Should we save you rebuttal time?

[00:11:37] Speaker 02:
I'd like to save my rebuttal time, Your Honor.

[00:11:40] Speaker 03:
OK.

[00:11:40] Speaker 03:
Thank you.

[00:11:42] Speaker 03:
We'll hear from the government.

[00:11:44] Speaker 03:
Ms.

[00:11:44] Speaker 03:
Murphy?

[00:11:45] Speaker 00:
May it please the court.

[00:11:46] Speaker 00:
Your Honor, this appeal is focused mainly on one issue, and that is whether McLeod's blanket purchase agreement with the Department of Homeland Security is a contract for purposes of invoking trial court subject matter jurisdiction.

[00:11:59] Speaker 03:
Well, isn't it more complicated in terms of the issues of retaliation and improper purchase?

[00:12:08] Speaker 00:
Well, the issues of retaliation, Your Honor, and further to the question you just asked

[00:12:13] Speaker 00:
The issue of retaliation is still present in the task order claims that survive the dismissal of the claims that related solely to the BPA because under this court's binding precedent, a BPA like McLeod, which indicates that it's not a contract and which doesn't obligate the parties in any way, is not a contract and can't be used to invoke the court's subject matter jurisdiction.

[00:12:39] Speaker 03:
Okay.

[00:12:40] Speaker 00:
Thank you.

[00:12:41] Speaker 00:
McLeod argues that if BPA may be a contract and then asks the court to remand its claims to the trial court to allow them an opportunity to prove as much, but their request flies in the face of both the plain language of the BPA itself, which says it's not a contract, and the binding precedent of this court, which indicates that BPAs like the one at issue here are frameworks for future contracts and cannot be used to invoke the trial court subject matter jurisdiction.

[00:13:07] Speaker 04:
What's the binding precedent?

[00:13:08] Speaker 04:
Is it cruiser?

[00:13:10] Speaker 00:
It is, Your Honor, cruiser.

[00:13:13] Speaker 04:
Of course, that relates to the particular aspects of that BPA.

[00:13:18] Speaker 04:
Isn't that right?

[00:13:19] Speaker 00:
Well, our position in that case was not limited to the BPA in that case.

[00:13:24] Speaker 00:
The court's holding was broader than that.

[00:13:26] Speaker 00:
The court looked at the BPAs there, of course, but the question presented was whether

[00:13:31] Speaker 00:
The BPA, whether presented a well-fitted allegation, the contractor presented a well-fitted allegation that the BPAs between the contractor and the United States constitute a binding contract sufficient to establish Tucker Act jurisdiction.

[00:13:45] Speaker 00:
And in that case, looked at the BPAs, which are quite similar to the BPA that you see here, and said, no, they're frameworks for future contracts.

[00:13:52] Speaker 00:
The parties are not obligated.

[00:13:54] Speaker 00:
And there was no language there that limited the holding and cruises to that case.

[00:13:58] Speaker 00:
McClatchy points to a sentence where the court inserted the contractor's name, Cruiser, but that in no way, and the court in no way said, our holding here is not applicable in any cases going forward.

[00:14:11] Speaker 01:
Can you hold on a second?

[00:14:13] Speaker 01:
Are you suggesting, is it your position, that any time an agreement is labeled blanket purchasing agreement, then our opinion in Cruiser holds that

[00:14:28] Speaker 01:
Such an agreement with that label is not a contract?

[00:14:34] Speaker 00:
No, Your Honor.

[00:14:34] Speaker 00:
That's not the government's position at all.

[00:14:36] Speaker 01:
Right.

[00:14:37] Speaker 01:
Okay.

[00:14:37] Speaker 01:
Then that's, I think, what Judge Laurie was getting at, which is our understanding of the cruiser's opinion is that you have to explore the content of a specific BPA and figure out to what extent there is some kind of mutuality of consideration and obligations of the parties.

[00:14:56] Speaker 00:
Correct.

[00:14:57] Speaker 00:
And the government's point here is that the BPA, here McCloud's BPA, is not materially distinguishable from the BPA's and cruiser's.

[00:15:06] Speaker 00:
Because again, the BPA's and cruiser's did not obligate the government.

[00:15:11] Speaker 00:
And here the BPA, McCloud's BPA, specifically says it does not obligate any funds, it is not a contract, and that obligations will begin at the task order level.

[00:15:23] Speaker 01:
And so the... Well, can you... Can you... My understanding is your opposing counsel, it zeroed in on a couple of provisions in 2.17 of the BPA here.

[00:15:34] Speaker 01:
Can you comment on those?

[00:15:37] Speaker 00:
Yes, Your Honor.

[00:15:38] Speaker 00:
The language that you discussed at 2.17, too, absolutely is here.

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And the government's view is that that language is consistent with the fact that the task order level is where obligations kick in.

[00:15:50] Speaker 00:
Specifically, as Judge Ken, I believe, mentioned, there's no obligation here on behalf of the government to use McLeod.

[00:15:56] Speaker 00:
And indeed, it says there will be no payment even for the quotation that is called for by Section 2.17.2.

[00:16:04] Speaker 00:
And so the government does not view this provision as providing consideration such that the DPA would be transformed to a contract.

[00:16:13] Speaker 00:
Specifically, when it says it's not a contract, and it was clear to the parties, the intent of the parties, that that was not a contract.

[00:16:20] Speaker 00:
And so that the obligations were kicked in at the task order level.

[00:16:24] Speaker 03:
And so what remedy is available, except for the purpose of my inquiry, that there was indeed retaliation, improper retaliation?

[00:16:36] Speaker 00:
There are claims that remain, Your Honor.

[00:16:39] Speaker 00:
Three claims remain, and those claims do include the allegations of retaliation.

[00:16:44] Speaker 00:
And the government has not disputed that the trial court has jurisdiction over those claims.

[00:16:49] Speaker 00:
But McLeod's claims, which relate specifically to the BPA, just do not allege a non-frivolous... There is no non-frivolous allegation of a contract here because the BPA specifically says it is not a contract and that it doesn't obligate any funds for the task order level.

[00:17:13] Speaker 03:
Okay, anything else you need to tell us?

[00:17:16] Speaker 00:
Yeah, just, Your Honor, with respect to McLeod's argument that the trial court should have handled this as a failure to state a claim as opposed to a jurisdictional basis, I would just again point the court towards Cusers and remind the court that Cusers was actually decided after engaged learning, which was referenced by Mr. Rector.

[00:17:35] Speaker 00:
And so the court was well aware of the engaged learning decision and still made the determination that when you have a BPA that does not obligate the party

[00:17:43] Speaker 00:
This can be decided that it is not a contract, and that dismissal can happen on a jurisdictional basis, just as it is in Cruiser.

[00:17:52] Speaker 03:
Isn't that a decision on the merits rather than jurisdiction?

[00:17:56] Speaker 00:
In Cruiser there was absolutely a jurisdictional decision, Your Honor.

[00:18:00] Speaker 03:
And in the cases that are cited... But there was a contract in Cruiser.

[00:18:07] Speaker 00:
No, in Cruiser there were two blanket purchase agreements, like the blanket purchase agreement here.

[00:18:12] Speaker 00:
And the court decided on a jurisdictional basis that the claims should be dismissed.

[00:18:18] Speaker 00:
They did not reach the merits.

[00:18:21] Speaker 00:
Inclusive, again, was decided in 2014, well after engaged learning, and was binding precedent on the trial court.

[00:18:33] Speaker 03:
OK.

[00:18:35] Speaker 03:
Any more questions for Ms.

[00:18:37] Speaker 03:
Murphy?

[00:18:38] Speaker 04:
No.

[00:18:39] Speaker 03:
No.

[00:18:40] Speaker 03:
Okay, Mr. Rector, you have your rebuttal time.

[00:18:44] Speaker 02:
Thank you, Your Honor.

[00:18:46] Speaker 02:
Engaged learning was effectively not addressed by the lower court.

[00:18:52] Speaker 02:
What the court did in a footnote, in footnote five of the court's decision, it acknowledges the standard in engaged learning, but it rejects its applicability.

[00:19:02] Speaker 02:
It says, but the Federal Circuit has also specifically held in cruisers that a BPA is not a contract.

[00:19:10] Speaker 02:
for purposes of establishing jurisdiction.

[00:19:14] Speaker 02:
That's not, Your Honors, a fair reading of cruisers.

[00:19:19] Speaker 02:
The holding in cruisers says, we hold that cruisers has failed to present a non-frivolous allegation that the BPA at issue here are binding contracts.

[00:19:31] Speaker 02:
So the holding is clearly limited to the fact of the agreement in front of it.

[00:19:38] Speaker 02:
In reconciling that with engaged learning, what other courts have found and what this court should find is that the court needs to accept jurisdiction of the case and then decide the merits-based issue of whether a contract exists.

[00:20:02] Speaker 02:
And that's the station between jurisdiction

[00:20:05] Speaker 02:
And the merits-based 12b6 motion is critical, Your Honor.

[00:20:09] Speaker 02:
The government didn't move or dismissal on a 12b6.

[00:20:13] Speaker 02:
It didn't say there is no contract, and therefore the complication be dismissed.

[00:20:20] Speaker 02:
Instead, there is no jurisdiction.

[00:20:22] Speaker 02:
And the cases that we cited, engaged learning in particular, are very clear that the court need only find a non-frivolous allegation

[00:20:34] Speaker 02:
of a contract with the government.

[00:20:36] Speaker 02:
We've identified, well, with regard to the law, there is no holding.

[00:20:43] Speaker 02:
It says every BPA cannot be a contract.

[00:20:49] Speaker 02:
We've established that.

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And so there's no provision of law that forecloses the possibility of a BPA being a contract.

[00:20:59] Speaker 02:
With regard to the facts of this particular BPA,

[00:21:03] Speaker 02:
When the court went and decided the case based on those facts and what that contract says, what that agreement says, it reached across and Sue Espante issued a decision on the merits of the case by reaching the issue of whether there is a contract or not.

[00:21:25] Speaker 02:
It went too far.

[00:21:27] Speaker 02:
And it did that very clearly by applying the wrong standards.

[00:21:33] Speaker 02:
The court said that to establish jurisdiction under the CBA, a plaintiff must establish the existence of an express or implied contract.

[00:21:45] Speaker 02:
That's simply not the law.

[00:21:47] Speaker 02:
That is not the law under engaged learning.

[00:21:51] Speaker 02:
And so the court recited and applied the wrong legal standard.

[00:21:57] Speaker 02:
And there's a little bit of a chicken and an egg question here that's tough.

[00:22:01] Speaker 02:
to think through, and it is confusing sometimes, even to the courts.

[00:22:06] Speaker 02:
But it's very important to be clear that the first inquiry is, does the court have jurisdiction?

[00:22:14] Speaker 02:
And then if it does, is there a contract in place that goes to the merits of the case and should only be raised in the context of a 12b6?

[00:22:27] Speaker 02:
And Your Honor, we tried to address this

[00:22:32] Speaker 02:
with the court in our briefs.

[00:22:34] Speaker 02:
We said we offered to brief the matter as a 12b6 if the government moved on that basis or if the court requested it.

[00:22:44] Speaker 02:
And the court didn't request it, and the government never moved.

[00:22:49] Speaker 02:
So we were left with a choice of making an arc or responding to an argument that no one had made and that was not before the court or addressing the narrow jurisdictional issue

[00:23:01] Speaker 02:
that had been raised.

[00:23:03] Speaker 02:
And so to allow this decision to address the merits of whether there is a contract or not, which we've never had an opportunity to brief, is not appropriate.

[00:23:18] Speaker 01:
I'm sorry.

[00:23:19] Speaker 01:
You haven't had an opportunity to brief whether this is a contract?

[00:23:23] Speaker 02:
We haven't focused on that specific issue, Your Honor.

[00:23:28] Speaker 01:
I thought the whole argument that we've been looking at in your briefs and your briefs below was whether or not there was mutuality of obligation, consideration, et cetera.

[00:23:39] Speaker 02:
That's the government's argument.

[00:23:42] Speaker 02:
We think that that argument is out of step with what they moved on a jurisdictional basis.

[00:23:54] Speaker 02:
And considering the merits of that issue, we believe,

[00:23:59] Speaker 02:
It goes too far and isn't appropriate.

[00:24:06] Speaker 03:
Okay.

[00:24:07] Speaker 03:
Any more questions for Mr. Rector?

[00:24:09] Speaker 04:
No.

[00:24:10] Speaker 03:
No.

[00:24:12] Speaker 03:
Okay.

[00:24:13] Speaker 03:
All right.

[00:24:13] Speaker 03:
Well, thanks to both counsels.

[00:24:15] Speaker 03:
This case is taken under submission.

[00:24:18] Speaker 03:
And that concludes this panel's argued cases for this morning.

[00:24:25] Speaker 01:
The Honorable Court is adjourned until tomorrow morning at 10 a.m.