[00:00:00] Speaker 01:
So we have four arguments today.

[00:00:02] Speaker 01:
Judge Hughes will be participating in the decision.

[00:00:07] Speaker 01:
He's not available to be here today.

[00:00:09] Speaker 01:
He will listen to the recordings after the arguments.

[00:00:14] Speaker 01:
Our first case today is number 22-1719, Anchorage against the United States.

[00:00:22] Speaker 01:
Mr. Whisser.

[00:00:25] Speaker 03:
Good morning, Your Honors.

[00:00:27] Speaker 03:
May it please the Court.

[00:00:28] Speaker 03:
The trial court aired in its plain text interpretation of the party's 2003 memorandum of understanding.

[00:00:34] Speaker 03:
This court, Pondanova Review, should hold that the agreement's text did not require the United States contractually to deliver a defect report structure to Anchorage, nor would we expect it to.

[00:00:46] Speaker 03:
This is a federal project authorized by Congress, executed by a federal procurement contract.

[00:00:52] Speaker 00:
In your opinion, what duties did Morad have under the 2003 MOU?

[00:00:56] Speaker 03:
So as far as we're concerned, your honor, Marad didn't really have any duties under the MOU.

[00:01:00] Speaker 03:
The MOU is what it says on its face.

[00:01:02] Speaker 03:
It's a government to government agreement whereby it sets out the party's mostly preexisting responsibilities in writing to make it clear who's doing what.

[00:01:10] Speaker 03:
The main things that it's doing, which is confirmed in

[00:01:14] Speaker 03:
Anchorage's own presentation to its municipal assembly in the ratification process was it was providing a mechanism to transfer the local matching funds to the federal government.

[00:01:22] Speaker 01:
I keep getting stuck on, you say you don't think it had any duties?

[00:01:28] Speaker 01:
I mean, it's an agreement between two parties?

[00:01:30] Speaker 01:
Unless you use the word agreement like, I agree that the Steelers are the best team at football.

[00:01:38] Speaker 01:
I mean, agreements have duties.

[00:01:40] Speaker 03:
They do have duties, Your Honor.

[00:01:41] Speaker 03:
And the point though is that they're not substantive project execution duties.

[00:01:44] Speaker 03:
They're procedural in nature.

[00:01:46] Speaker 01:
Okay.

[00:01:46] Speaker 01:
Well, that's kind of important.

[00:01:47] Speaker 01:
I mean, I was sort of startled.

[00:01:49] Speaker 01:
I think maybe it was the other side's brief that said you argued there were no duties.

[00:01:53] Speaker 01:
I thought you can't possibly be saying that.

[00:01:55] Speaker 03:
No, Your Honor.

[00:01:57] Speaker 03:
I should have clarified.

[00:01:57] Speaker 03:
What I meant was there were no substantive project execution duties.

[00:02:00] Speaker 03:
They're duties relating to the procedures and how each government is going to respond to

[00:02:05] Speaker 03:
the movement of funds, who's going to do what in that process.

[00:02:08] Speaker 03:
There are provisions in there which provide Anchorage some authorities that they otherwise would have lacked.

[00:02:13] Speaker 03:
So the government is committing to let Anchorage authorize all expenditures on the project before they're obligated on the contract.

[00:02:20] Speaker 03:
Merit is committing itself to give Anchorage the right to inspect and accept the work through Addendum 2, which otherwise they would not have under a FAR procurement contract.

[00:02:29] Speaker 01:
Is there a name

[00:02:30] Speaker 01:
for this role in the world of construction.

[00:02:34] Speaker 01:
It's not the project owner.

[00:02:38] Speaker 01:
You say you're not really the builder.

[00:02:42] Speaker 01:
You're sort of a financier.

[00:02:45] Speaker 01:
Is there a name for this role?

[00:02:49] Speaker 03:
Your Honor, I think it's a difficult way to frame the federal government's role here, right?

[00:02:54] Speaker 03:
Because the federal agency is the agency Congress has tasked with executing the projects.

[00:02:59] Speaker 03:
And that's a typical role that the government plays in thousands of projects nationwide every year.

[00:03:04] Speaker 03:
And the government, pursuant to its congressional authority, went out, hired a procurement contractor.

[00:03:08] Speaker 01:
And entered into a contract with Anchorage in which he had some duties.

[00:03:12] Speaker 03:
And then we entered into a government-to-government MOU, which again is very common in these projects.

[00:03:18] Speaker 03:
Almost every single one that's going out into the states is going to have a local government partner that's facilitating the project in some way, oftentimes with matching funds as Anchorage did here.

[00:03:27] Speaker 03:
And I think that speaks to sort of the broad reach and the risk of the way that the trial court interpreted the MOU.

[00:03:34] Speaker 03:
which is that these kinds of arrangements happen all the time, but if we're going to imply into every government-to-government MOU an implicit promise by the United States to guarantee the success of the project, that could apply to thousands of projects, and the government simply doesn't take on that role.

[00:03:51] Speaker 03:
If the government is going to commit to build something contractually to a third party, it has to say so expressly in the text, and it didn't do so here.

[00:04:01] Speaker 01:
So the language of, what is it?

[00:04:06] Speaker 01:
This is the 2003 MOU, section five, number seven, maybe.

[00:04:13] Speaker 01:
Disperse funding for construction.

[00:04:17] Speaker 01:
Now, you all entered into an agreement with what became ICRC.

[00:04:25] Speaker 01:
That's correct, Your Honor.

[00:04:28] Speaker 01:
which has been described as the prime contractor.

[00:04:30] Speaker 01:
Is that a label that you dispute or do you use that label too?

[00:04:35] Speaker 03:
No, that's a reasonable description.

[00:04:37] Speaker 01:
And was it ICRC that then entered into contracts with the firms that

[00:04:43] Speaker 01:
Did the pile driving, the actual constructors?

[00:04:46] Speaker 03:
Yes, Your Honor.

[00:04:47] Speaker 03:
So ICRC was a federal procurement contractor, had an IDIQ task order-based contract, and the government would issue task orders to ICRC, again, concurrent with Anchorage's responsibility to authorize funding for those tasks.

[00:05:01] Speaker 03:
And then ICRC, if they could do the work in-house, they would do it.

[00:05:04] Speaker 03:
If they needed a subcontractor, they would identify a subcontractor and go forth that way.

[00:05:09] Speaker 01:
So why doesn't that put you in the position of essentially the builder that is supposed to deliver the product through ICRC?

[00:05:21] Speaker 03:
Well, again, your honor, if that was a role the government was volunteering to take on on behalf of a local government, it has to say so in the text, which it doesn't do.

[00:05:29] Speaker 01:
So assume with me that there is a word or two that is not clear on its face as to its scope.

[00:05:39] Speaker 01:
Perhaps the words that I pointed to, five, seven.

[00:05:43] Speaker 01:
Yes, Your Honor.

[00:05:44] Speaker 01:
Why would the ICRC MARAD contract described as you just did, and I think the contract itself has a section on construction services with the curing thing.

[00:06:01] Speaker 01:
It does, Your Honor.

[00:06:02] Speaker 01:
Why would that not be

[00:06:06] Speaker 01:
relevant to, or maybe even significant to deciding on the scope of this 5-7 language.

[00:06:12] Speaker 03:
So if there is an ambiguity the court finds and perceives that the scope of the ICRC contract itself is relevant to determining the party's responsibilities under the MOU, there are a couple of points there that I think undercut Anchorage's theory also.

[00:06:25] Speaker 03:
The first, Anchorage was a named third party beneficiary under the ICRC contract.

[00:06:30] Speaker 03:
And so they were entitled to, and in fact did,

[00:06:33] Speaker 03:
seek their own contract claim for breach directly against ICRC and district court in Alaska.

[00:06:38] Speaker 03:
So again, this is not a situation where there was perhaps one line of privity of contracts and Anchorage was sitting on the outside.

[00:06:44] Speaker 03:
Anchorage was a direct third-party beneficiary.

[00:06:46] Speaker 03:
So again, if the court is reading all of these agreements together to resolve some ambiguity, that is persuasive evidence that this was not intended to be sort of a linear flow of contracts.

[00:06:56] Speaker 03:
Anchorage had its own right to sue ICRC for breach, and they did so.

[00:06:59] Speaker 03:
They got $19.35 million in a settlement before trial.

[00:07:02] Speaker 03:
The other piece in there is there's all sorts of language.

[00:07:04] Speaker 01:
Explain to me why Anchorage and I'm not quite getting why.

[00:07:09] Speaker 01:
The fact that Anchorage was a third-party beneficiary to the MARAD ICRC contract tends to undermine, I think you're suggesting, the inference that it also, under its closely related 2003 agreement with MARAD, was purchasing a defect-free dock.

[00:07:33] Speaker 03:
Right.

[00:07:34] Speaker 03:
Because, Your Honor, I think the situation would be different if

[00:07:38] Speaker 03:
Anchorage did not have that ability, then I think there might be more force to their argument that they were sort of on the outside of this chain of contracts looking in.

[00:07:47] Speaker 03:
And so they were looking to MARAD to be the entity that was essentially vindicating any rights that the government might have had for breach of contract.

[00:07:55] Speaker 03:
But the fact that MARAD made Anchorage a third-party beneficiary shows that this was less of a straight line and more of a mutual relationship with the project contractor.

[00:08:06] Speaker 03:
So it's not the situation where merit is simply going out and procuring services on Anchorage's behalf.

[00:08:11] Speaker 03:
Anchorage is deeply involved in those services themselves.

[00:08:14] Speaker 03:
The other thing I would note, and this relates to Addendum 2 of the MOU, which is another part of the MOU that the trial court relied on.

[00:08:21] Speaker 03:
In Addendum 2, there's language in there about the process for inspecting and accepting the work.

[00:08:26] Speaker 03:
And what we find in the contract, the FAR contract with ICRC,

[00:08:30] Speaker 03:
is that MARAD modified the typical FAR clause for inspection and acceptance.

[00:08:35] Speaker 03:
And instead of the typical clause, which says the government has the right to inspect and accept all work, they inserted language that mirrors Addendum 2, which says that it's Anchorage that has the right before a certificate of completion is provided to MARAD to inspect and accept the work.

[00:08:49] Speaker 00:
So you anticipate that I want to talk about Addendum 2.

[00:08:52] Speaker 00:
Can you just kind of walk me through that?

[00:08:54] Speaker 00:
And in particular, I want to understand

[00:08:57] Speaker 00:
was there some work that was accepted, certified, and tendered through the process?

[00:09:02] Speaker 03:
There was, Your Honor.

[00:09:03] Speaker 03:
And so this goes to one of our arguments later on on the reliance damages analysis.

[00:09:08] Speaker 03:
But yes, there was $117 million worth of work that was in fact

[00:09:12] Speaker 03:
completed, inspected, accepted, and title transferred to Anchorage through this process.

[00:09:17] Speaker 03:
And that the scope of work that was accepted was stipulated by the party's pretrial.

[00:09:20] Speaker 03:
There's no dispute about that.

[00:09:21] Speaker 01:
And that work is... And that's usable.

[00:09:24] Speaker 03:
It's in use.

[00:09:24] Speaker 01:
It's being used by the port.

[00:09:25] Speaker 01:
Yes.

[00:09:25] Speaker 03:
That's not the defective... There are other dock structures.

[00:09:28] Speaker 03:
There's backlands areas of the port.

[00:09:29] Speaker 03:
There's a road and rail spur.

[00:09:31] Speaker 03:
There are other elements of the overall property that was also built under the auspices of this larger project and agreement.

[00:09:37] Speaker 03:
And that was all accepted and is being used by Anchorage today.

[00:09:40] Speaker 03:
But what this addendum is providing, as I said, Your Honor, is it's essentially adding anchorage into the process of inspecting work where otherwise, under the typical FAR clause, they would not have any rights.

[00:09:53] Speaker 03:
Again, the typical FAR clause says it's the government's responsibility to inspect and accept work provided by a contractor.

[00:10:00] Speaker 03:
What this does, and we can read it right here,

[00:10:02] Speaker 03:
The certificate of completion is executed by Marin's Prime Contractor, testing to the inspection of the work.

[00:10:07] Speaker 00:
What page are you on?

[00:10:07] Speaker 00:
You're reading from something.

[00:10:08] Speaker 00:
Can you tell me the page?

[00:10:08] Speaker 03:
Oh, I'm sorry, Your Honor.

[00:10:10] Speaker 03:
Appendix 21681.

[00:10:11] Speaker 03:
And this is the very last page of the 2003 MOU.

[00:10:23] Speaker 00:
You can keep reading.

[00:10:24] Speaker 00:
I just want to make sure I could follow along.

[00:10:26] Speaker 03:
Certainly, Your Honor.

[00:10:28] Speaker 03:
And I'm looking at the second full paragraph there.

[00:10:31] Speaker 03:
And it says, the certificate of completion is a document executed by Merritt's prime contractor, attesting to the prime contractor's inspection of the work, certifying the work was completed according to specifications.

[00:10:40] Speaker 03:
And then if we read the next sentence, prior to submission to the Merritt contracting officer technical representative, the certificate of completion shall also be signed by an authorized representative of the municipality of Anchorage.

[00:10:51] Speaker 03:
Such signature indicates acceptance by municipality of Anchorage of the work provided by Merritt's prime contractor, as specifically described in each certificate of completion.

[00:11:00] Speaker 03:
So again, this is adding Anchorage.

[00:11:02] Speaker 01:
So your time is running low and there are at least two topics that I at least want to get to.

[00:11:09] Speaker 01:
One of them is in the scheme of things, small, merely $11 million.

[00:11:16] Speaker 01:
So why isn't, I'm not entirely sure I understand your various arguments against that.

[00:11:26] Speaker 01:
Tell me what's wrong with the following.

[00:11:28] Speaker 01:
The way in which the expectancy damages was calculated, and you don't challenge that calculation here, the 356, is to take certain payments that were made to ICRC and others as an estimate of what the value would have been of a successful

[00:11:52] Speaker 03:
That's correct, Your Honor.

[00:11:53] Speaker 03:
And that's because that's the traditional practice.

[00:11:55] Speaker 01:
So why isn't the $11.3 million that was paid to ICRC not...

[00:12:04] Speaker 01:
not without dispute, but as a settlement, not a form of that.

[00:12:09] Speaker 03:
Your Honor, our position is it has nothing to do with the work received.

[00:12:12] Speaker 03:
I want to make sure we're clear in where this lies in the sequence of arguments.

[00:12:17] Speaker 03:
The court would only reach this point if it affirms the trial court's interpretation of the MOU as to Marat's breach of both the obligation to deliver a defect report and the obligation to provide cooperation with Anchorage in the settlement process.

[00:12:31] Speaker 03:
If the court reaches both of those,

[00:12:33] Speaker 03:
Our argument is that the way that the trial court described the settlement damages, it described it as essentially a reliance damage, which is Anchorage provided funds to the United States in reliance on the fact that the United States would comply with what the court believed to be its obligations under the MOU.

[00:12:51] Speaker 03:
Merritt failed to do so, and so the proper remedy is to essentially put the parties back where they were status quo, refund that money to Anchorage.

[00:12:58] Speaker 03:
And our argument, your honor, is that that is incompatible with the expectation award.

[00:13:02] Speaker 01:
And so the second item that I was flagging, um, suppose for purposes of this question, that we agree with you that there was no duty under the contract to deliver a defect free port.

[00:13:17] Speaker 01:
Um, nevertheless, there are, I think you now agree a bunch of duties in the memorandum of understanding.

[00:13:24] Speaker 01:
Why shouldn't we remand for those to be considered?

[00:13:30] Speaker 01:
Was it a preservation question?

[00:13:32] Speaker 01:
That is, were they independently not argued?

[00:13:38] Speaker 01:
Were there findings about those?

[00:13:39] Speaker 01:
And if there are such duties, what kinds of damages would flow?

[00:13:44] Speaker 01:
The second part may be more for the other side.

[00:13:46] Speaker 03:
And I think the simplest response from our view, Your Honor, there, the straightest line path, is there was no evidence of damages presented at the trial court that could sustain an award under any other breach theory.

[00:13:59] Speaker 03:
We described in our brief how the trial court's damages opinion

[00:14:04] Speaker 03:
recited the full scope of damages evidence which was exclusively focused from an expectation standpoint.

[00:14:10] Speaker 01:
Was this all tried in one trial?

[00:14:12] Speaker 01:
It was, Your Honor.

[00:14:13] Speaker 01:
There wasn't a damages trial against your liabilities?

[00:14:15] Speaker 03:
No, Your Honor.

[00:14:15] Speaker 03:
It was all in one trial, Your Honor.

[00:14:17] Speaker 03:
The opinions were split, but it was one trial.

[00:14:20] Speaker 03:
And so the only evidence presented was on the value of the port structure.

[00:14:24] Speaker 03:
There's other evidence that would have needed to be presented if there were more discrete expectation awards based upon a failure to manage.

[00:14:31] Speaker 03:
You would still need to do proximate cause and foreseeability analyses.

[00:14:34] Speaker 03:
We noted that in the trial court's opinion itself, it made findings about how Anchorage was involved in a lot of these decisions, which would be relevant to that analysis.

[00:14:43] Speaker 03:
But Anchorage didn't present any evidence on that.

[00:14:45] Speaker 03:
They focused exclusively on the value of the court.

[00:14:47] Speaker 03:
And so our argument, based on this court's precedence,

[00:14:50] Speaker 03:
is that they don't get a redo to present new evidence on a remand.

[00:14:53] Speaker 03:
It has to be a citation to evidence on the record.

[00:14:55] Speaker 00:
I have a follow-up on the judge's good question there.

[00:14:59] Speaker 00:
What about if we agree with you that there was no breach under what I'm going to call a 2003 MOU, which I think is what you call it.

[00:15:05] Speaker 00:
Yes, Your Honor.

[00:15:06] Speaker 00:
What about the 2011 MOA?

[00:15:08] Speaker 03:
Yes, Your Honor.

[00:15:09] Speaker 00:
would there potentially be something where we need to remand to go back and see if there would be?

[00:15:14] Speaker 03:
No, Your Honor.

[00:15:14] Speaker 03:
The parties all agreed that the relevant actions that occurred that might have constituted a breach with respect to the construction and design work itself were all under the 2003 MOU.

[00:15:22] Speaker 03:
The 2011 MOU was only in effect for six months at the very tail end of this, from November 2011 until May 2012, and there was no

[00:15:30] Speaker 03:
substantive activity going on that time.

[00:15:32] Speaker 03:
It was mostly inspecting, trying to figure out what went wrong in the project.

[00:15:36] Speaker 01:
I'm a little confused.

[00:15:37] Speaker 01:
It's the 2011 MOA that has this duty to cooperate.

[00:15:42] Speaker 01:
It does, Your Honor.

[00:15:43] Speaker 01:
Why is that not a freestanding breach of a

[00:15:46] Speaker 03:
It is.

[00:15:48] Speaker 03:
I want to be clear.

[00:15:48] Speaker 03:
The duties related to the construction and design work, any breach thereof, are exclusively under 03 MOU.

[00:15:55] Speaker 03:
The duty with respect to the settlement and the duty to coordinate and cooperate in claims, that's under the 2011 MOU.

[00:16:01] Speaker 03:
And so two agreements, two relevant duties, two potential breaches that the court could find, but they're separate in that respect.

[00:16:10] Speaker 01:
So assuming that we're just talking about a breach of the 2011,

[00:16:16] Speaker 01:
agreement of the duty to cooperate clause.

[00:16:22] Speaker 01:
What's wrong with the $11 million damages award for that?

[00:16:27] Speaker 03:
So our argument there is that the trial court simply misinterpreted the plain language of that clause, which says... Assume I disagree with you.

[00:16:35] Speaker 03:
If you disagree with that, then we have no other argument about the breach on that point, other than potentially the argument that the breach occurred several months after the MOA expired.

[00:16:46] Speaker 03:
Now, the trial court said it was a continuing duty.

[00:16:48] Speaker 03:
We disagree with that.

[00:16:49] Speaker 03:
That may be a separate ground.

[00:16:50] Speaker 03:
But we don't make any other arguments beyond the interpretation of the scope of the duty.

[00:16:56] Speaker 03:
So I see my time as more than expired here.

[00:16:58] Speaker 01:
We'll restore your rebuttal time.

[00:17:00] Speaker 01:
Thank you.

[00:17:00] Speaker 01:
Thank you.

[00:17:02] Speaker 01:
Mr. Smith.

[00:17:03] Speaker 02:
Good morning, Your Honors.

[00:17:06] Speaker 02:
If I may, I'd like to start with answering a question that Judge Toronto posed to the government's counsel.

[00:17:11] Speaker 02:
And that is, is there any kind of

[00:17:13] Speaker 02:
similar structure that the maritime administration would be in the construction industry?

[00:17:19] Speaker 02:
And the answer to that is yes.

[00:17:22] Speaker 02:
And as Judge Sheffield told the assembly as the part of Governor Sheffield, thank you, Governor Sheffield pointed out to the assembly during the process of the assembly's approval of the 2003 MOU,

[00:17:36] Speaker 02:
The parties likened Marad's role to a project management consultant.

[00:17:39] Speaker 02:
That's similar to a design-build contract or a construction manager at risk.

[00:17:44] Speaker 02:
And if you look at Appendix 169.59, where Governor Sheffield is describing what the Maritime Administration is going to do vis-a-vis this project.

[00:17:53] Speaker 01:
It's when he's lobbying the assembly for ratification.

[00:17:56] Speaker 02:
Right.

[00:17:56] Speaker 02:
What he says is Marad is going to serve in the role of PMC.

[00:18:00] Speaker 02:
In other words, they're going to provide their expertise

[00:18:03] Speaker 02:
And they're going to go out and they're going to hire the designers on behalf of the municipality.

[00:18:08] Speaker 02:
They're going to hire the contractors and they're going to deliver to us support expansion project.

[00:18:13] Speaker 01:
So in that role, the project management consultant, does that is that actor.

[00:18:22] Speaker 01:
disperse funds?

[00:18:23] Speaker 02:
Yes.

[00:18:24] Speaker 01:
Does it become a contract party with the actual worker bees?

[00:18:29] Speaker 02:
Yes.

[00:18:29] Speaker 02:
Well, not necessarily.

[00:18:31] Speaker 01:
Not the individuals, but the constructing companies.

[00:18:34] Speaker 02:
It's no different, Your Honor, than if you look at the organizational chart of the maritime.

[00:18:39] Speaker 01:
I'm sorry, the answer is yes.

[00:18:40] Speaker 01:
The answer is yes.

[00:18:41] Speaker 01:
That's a role.

[00:18:42] Speaker 02:
That is a role in the construction.

[00:18:44] Speaker 01:
That actor would do something that included that kind of

[00:18:49] Speaker 01:
contract with a prime contractor who then in turn has the contracts with the actual builders.

[00:18:57] Speaker 02:
That's correct, Your Honor.

[00:18:59] Speaker 02:
And it's depicted graphically in our brief.

[00:19:02] Speaker 02:
I believe it's at page 33.

[00:19:04] Speaker 02:
We reproduced for this court the organizational chart that the Maritime Administration actually put out in the public to show how it saw this project and the management of this project.

[00:19:16] Speaker 02:
And if you look at that, it shows the municipality of Anchorage, the port of Anchorage, off to the side as the, quote, project sponsor, and Marad in charge of the entire project and holding all of the design and construction contracts.

[00:19:29] Speaker 02:
And that's, in fact, what happened.

[00:19:31] Speaker 02:
The parties executed.

[00:19:32] Speaker 01:
So if that's an apt label for the role, does

[00:19:45] Speaker 01:
Does it follow that actor in normal parlance, normal practice does in fact promise to deliver the end product?

[00:19:57] Speaker 01:
Even though it's just a consultant?

[00:19:58] Speaker 02:
Yes.

[00:20:00] Speaker 02:
If that contractor holds the design and construction contracts, that contractor is responsible for the actions of those contractors.

[00:20:10] Speaker 02:
That's the TECON case.

[00:20:12] Speaker 02:
The TECON case from this court,

[00:20:14] Speaker 02:
says that a contractor is responsible for the non-performance of its subcontractors.

[00:20:20] Speaker 02:
And that is exactly what we have here.

[00:20:21] Speaker 00:
So just to kind of also have us doing like a talking to each other, I want to point to, or have you point to actually, what you are thinking is most relevant to your side of the case in terms of the 2003 email year.

[00:20:35] Speaker 02:
I would be happy to, Your Honor.

[00:20:36] Speaker 02:
If you start at section three,

[00:20:39] Speaker 02:
of the 2003 MOU, the very last sentence in that section says- What page are you on?

[00:20:44] Speaker 02:
I'm sorry, I'm at appendix 21676, which is page one of the 2003 MOU.

[00:20:50] Speaker 02:
This is the objectives section.

[00:20:53] Speaker 02:
It's the objectives, it's section three, correct.

[00:20:56] Speaker 02:
And if, I'll give your honor a second to get there.

[00:21:00] Speaker 02:
Okay, go for it.

[00:21:01] Speaker 02:
If you look at the last sentence, it says, MOA Port of Anchorage and MARAD anticipates substantial completion of port expansion

[00:21:09] Speaker 02:
will occur during calendar year 2008.

[00:21:11] Speaker 02:
And then the duties and obligations of the parties go on.

[00:21:16] Speaker 02:
And if we look at the responsibilities that the Maritime Administration undertook, and now I'm at Appendix 21677, Section 5 of the 2003 MOU, we have several operative provisions that establish duties on the part of the Maritime Administration.

[00:21:33] Speaker 02:
Number one, the Maritime Administration was going to provide specialized technical expertise

[00:21:39] Speaker 02:
and input as necessary to port expansion, and in exchange was going to receive 3% of contract funds, and we know that they did.

[00:21:48] Speaker 02:
In addition, they received a number of military benefits.

[00:21:50] Speaker 02:
Your Honor asked about the $117 million in booked assets.

[00:21:54] Speaker 02:
Part of that included military benefits.

[00:21:56] Speaker 02:
Those road and rails and some of the Tidewater Road, those are to establish links between Joint Base Elmendorf-Richardson, which sits right above the port.

[00:22:05] Speaker 02:
The port was designated a strategic port, and the striker brigade needed an access point to get to the port so it could deploy out into the world.

[00:22:13] Speaker 02:
Then we go down, section three, designate primary MARAD points of contact for day-to-day management of port expansion activities.

[00:22:21] Speaker 02:
And we know MARAD did that.

[00:22:23] Speaker 02:
Judge Damage listened to 24 witnesses and looked at a huge volume of evidence.

[00:22:29] Speaker 02:
And the testimony before Judge Damage from the contracting officer, from the contracting representative, was all the same.

[00:22:35] Speaker 02:
Marriott understood that it had an obligation to provide design, construction, and quality assurance, and it attempted to go out and do that.

[00:22:44] Speaker 02:
Wayne Leong, who was the contracting officer for the duration of the project, testified that they were responsible.

[00:22:49] Speaker 02:
Marriott was responsible for quality assurance of this project.

[00:22:52] Speaker 02:
And he testified that they hired civil engineers to be physically on site to supervise the work at a time after they learned of defects.

[00:23:01] Speaker 02:
And when asked if that should have been done earlier, he said, absolutely, we should have done that earlier.

[00:23:06] Speaker 02:
Because it was our responsibility to oversee and manage this project.

[00:23:11] Speaker 02:
As Judge Damage pointed out in his opinion,

[00:23:14] Speaker 02:
There is not one single witness of the 24 who testified over the course of this trial who disagreed that Merritt had an obligation to design and deliver a report to the municipality of Anchorage.

[00:23:27] Speaker 02:
Those are the witnesses offered by the municipality and those are the witnesses that were offered by the government.

[00:23:31] Speaker 02:
They all said the exact same thing.

[00:23:33] Speaker 00:
How do you believe Addendum 2 fits into all of this?

[00:23:37] Speaker 02:
Addendum two, so let's be clear.

[00:23:39] Speaker 02:
So addendum two, which is a contract document, was executed in 2006.

[00:23:43] Speaker 02:
And the contemporaneous stage of the project is important at that point, because at the time the 2003 MOU was executed, a design had not been selected for this project.

[00:23:57] Speaker 02:
By 2006, the Maritime Administration had selected the preferred design for the project, the open-cell sheet pile technology.

[00:24:04] Speaker 02:
And at that point had gone through the environmental assessment process and was ready to start design and construction work.

[00:24:11] Speaker 02:
And so in 2006, the parties established this process by which title for completed work will transfer from the maritime administration to the municipality of Anchorage.

[00:24:21] Speaker 02:
Now, if the municipality was responsible for this project, there'd be no need to transfer title.

[00:24:26] Speaker 02:
And again, the Governance Council made reference to modifications to the ICRC contract to make it consistent with Addendum 2.

[00:24:34] Speaker 02:
Well, as Judge Damage found, we were not a party to that federal procurement contract.

[00:24:40] Speaker 02:
That was a contract that was held by the Maritime Administration.

[00:24:44] Speaker 02:
But the language is clear.

[00:24:46] Speaker 02:
in addendum two.

[00:24:47] Speaker 02:
And if we look at the first paragraph, the government focuses on the second, but if we look at the first paragraph, it says that Marad's contracting officer's technical representative will look at the work, that the work's being performed by Marad's contractor.

[00:25:03] Speaker 02:
and that upon acceptance, all right, title, and interests, including all warranties for the work shall pass to the municipality of Anchorage.

[00:25:10] Speaker 02:
And work is defined as materials, workmanship, warranties, guarantees, and manufacture and fabrication of components.

[00:25:17] Speaker 02:
And the clear import of this provision was that that work that was being procured by the Maritime Administration had to be free of material defect and conformed an applicable industry standard at the time it was transferred to the municipality of Anchorage.

[00:25:29] Speaker 02:
And that simply didn't happen.

[00:25:31] Speaker 01:
Why do you think that the sentence in addendum two about, upon acceptance by merit of work tendered, all right title and interest to such work shall be conveyed to Anchorage indicates that there was a government promise to deliver the port, as opposed to deliver title to

[00:26:00] Speaker 01:
pieces of work that are acceptable and then, we haven't talked about this yet because I'm not quite sure why, but 90 days later, Merritt can walk away from this.

[00:26:13] Speaker 02:
Yeah, and I'm happy to address that too.

[00:26:15] Speaker 02:
Let me take those two points separately.

[00:26:17] Speaker 02:
Number one, the right title and interest is in Merritt's possession because Merritt holds all of the design and construction contracts and the work is being procured under that federal procurement contract.

[00:26:28] Speaker 02:
as, as the government council admitted during the mantra.

[00:26:31] Speaker 01:
So it's right.

[00:26:32] Speaker 01:
So Merritt would have titled to it and then has to pass it.

[00:26:35] Speaker 01:
Why does that tend to imply that it took on the task, the obligation to finish the product, um, you know, successfully?

[00:26:46] Speaker 02:
Well, the object of this contract, as the parties understood, was to complete port expansion.

[00:26:53] Speaker 02:
And you have that in the 2003 MOU and your honors asked the government about the 2011 MOU, the Memorandum of Agreement.

[00:27:00] Speaker 01:
Is there something about this agreement that wouldn't make sense if basically one read it to say, Marid's on board now, but three months from now at night, it might not be.

[00:27:10] Speaker 02:
No, I don't agree with that.

[00:27:13] Speaker 02:
First of all, termination clauses are not unusual in the construction industry, and they're certainly not unusual in the government contracts field.

[00:27:21] Speaker 02:
But nothing about the termination provision suggests that it alleviated Marriott for the breach of the other duties it assumed under this contract.

[00:27:33] Speaker 02:
And we have to deal with the reality of the situation that we're operating in.

[00:27:37] Speaker 02:
The reality of that situation is,

[00:27:39] Speaker 02:
Even though there's a termination clause, the Maritime Administration went out and executed $300 million in designing construction contracts.

[00:27:48] Speaker 02:
And so they can't just walk away from this project.

[00:27:51] Speaker 02:
But more importantly, this whole notion about the termination clause, essentially rendering this contract meaningless, that wasn't properly raised in front of the court.

[00:28:01] Speaker 02:
If you look at Judge Damage's well-reasoned decision on liability, he struck that argument.

[00:28:06] Speaker 02:
because it had never been raised at any point during the seven years of litigation.

[00:28:10] Speaker 02:
And the government didn't appeal Judge Damage's decision to strike that.

[00:28:13] Speaker 02:
And so it's not properly before this court.

[00:28:16] Speaker 01:
So can I ask them, I guess, a new question that was asked of the other side a little bit?

[00:28:21] Speaker 01:
But let us suppose for a minute that we thought that there was not a promise to deliver a defect-free court.

[00:28:31] Speaker 01:
There are nevertheless a bunch of promises that the government makes in the 2003

[00:28:36] Speaker 01:
MOU.

[00:28:39] Speaker 01:
Where does that leave us?

[00:28:43] Speaker 01:
We don't, for some, I write in understanding that the damages case you put on was entirely about the expectancy of a fully delivered port.

[00:28:56] Speaker 02:
No, we offered alternate theories in our briefing.

[00:28:59] Speaker 02:
Judge Damage and his damages decision decided that because he had found the breach of the duty to deliver,

[00:29:06] Speaker 02:
There was no reason to consider our other alternative theories.

[00:29:09] Speaker 01:
But where does he say that, do you remember?

[00:29:13] Speaker 01:
Is this in the breach opinion?

[00:29:14] Speaker 02:
It's in the breach opinion, Your Honor.

[00:29:15] Speaker 02:
I believe it's footnote number one.

[00:29:19] Speaker 02:
And I can provide that to you.

[00:29:21] Speaker 01:
I'm looking at it.

[00:29:32] Speaker 02:
Footnote number one of the breach.

[00:29:33] Speaker 02:
I'm sorry, it's footnote seven, Your Honor.

[00:29:39] Speaker 02:
I was so close.

[00:29:43] Speaker 00:
What appendix page?

[00:29:46] Speaker 01:
39?

[00:29:47] Speaker 01:
Appendix 71.

[00:29:47] Speaker 01:
Oh, 71?

[00:29:49] Speaker 02:
Appendix 71, footnote 7.

[00:29:51] Speaker 01:
OK, so it's the damages opinion, not the breach opinion.

[00:29:58] Speaker 02:
And I can read it for the court.

[00:29:59] Speaker 02:
It says, the court need not address Anchorage's alternative theory reliance damages in light of this opinion.

[00:30:06] Speaker 02:
and then goes on to say, reliance damages allow a party to recover all damages caused by the breach, regardless whether the damages occurred before the breach.

[00:30:14] Speaker 02:
And I'm running short on time.

[00:30:16] Speaker 02:
I want to make sure I address your question on duties.

[00:30:20] Speaker 02:
Let us be clear.

[00:30:21] Speaker 02:
There were multiple duties assumed by the Maritime Administration.

[00:30:24] Speaker 02:
We advanced multiple theories of breach in the case below, including

[00:30:30] Speaker 02:
the breach of the only duty that the government admits it had an obligation to perform, and that is the duty to administer these contracts.

[00:30:38] Speaker 02:
Administer has to be understood in the context of federal procurement law.

[00:30:43] Speaker 02:
And under federal procurement law, when a government agency goes out and procures and administers contracts, it does so with the requirement that it gets value for the services that it is procuring.

[00:30:57] Speaker 02:
And our position is, and always has been, that MARAD was given $306 million to build this port.

[00:31:07] Speaker 02:
But even if you assume the only obligation is the obligation the government admits that it had, it had an obligation to administer those funds appropriately.

[00:31:20] Speaker 01:
I'm certainly remembering this, but tell me if I'm remembering that it has something to do with this reliance damages.

[00:31:26] Speaker 01:
I thought the government has a presentation in which it says you all received more money from the combination of the merit plus the state of Alaska contributing like $91 million or something to you.

[00:31:45] Speaker 01:
So you just

[00:31:46] Speaker 01:
don't have any positive reliance damages to complain about.

[00:31:50] Speaker 02:
Yeah.

[00:31:51] Speaker 02:
Let me address it because that can be easily addressed and the judge below, judge damage quickly addresses.

[00:31:56] Speaker 02:
There are two buckets of damages here.

[00:31:58] Speaker 02:
Bucket number one is $180 million.

[00:32:01] Speaker 02:
That is money that was provided to the maritime administration for design and construction work, for which we got defective work that has no value.

[00:32:08] Speaker 01:
That was provided by Anchorage.

[00:32:10] Speaker 02:
That was, well, the source of funds under the WestFed case is irrelevant, your honor.

[00:32:14] Speaker 02:
It's money that we procured either from ourselves, our own Anchorage sources or other sources to provide to the maritime administration.

[00:32:22] Speaker 02:
to build a port expansion.

[00:32:24] Speaker 02:
That money was for the benefit of the US government.

[00:32:26] Speaker 01:
Would that include congressionally appropriated?

[00:32:28] Speaker 02:
Yes, absolutely.

[00:32:30] Speaker 02:
Under the WestFed case, it would a hundred percent.

[00:32:33] Speaker 02:
In addition, we have a second bucket of damages, $186 million.

[00:32:37] Speaker 02:
Now there is no dispute.

[00:32:39] Speaker 02:
The government's own consultant found that what was built out there is a hazard to public safety.

[00:32:45] Speaker 02:
A sinkhole could open at any point in time and kill somebody.

[00:32:48] Speaker 02:
It has to be removed.

[00:32:50] Speaker 02:
creates navigational hazards and all kinds of other issues.

[00:32:53] Speaker 02:
The $186 million is the cost it will take to remove that structure and stabilize the site to make it safe.

[00:33:01] Speaker 01:
If I remember right, the government about that says you haven't incurred that yet, so it's not reliance damages, I don't know, American capital or something.

[00:33:10] Speaker 02:
They cited one of the Winstar cases, right?

[00:33:12] Speaker 02:
But the Winstar cases aren't applicable here.

[00:33:15] Speaker 02:
If you look at Indiana Power, this is obviously a total breach case.

[00:33:18] Speaker 02:
In a total breach case, we can recover all of the damages.

[00:33:22] Speaker 02:
that are reasonably certain and that were foreseeable at the time.

[00:33:28] Speaker 02:
But a couple of things on the damages.

[00:33:30] Speaker 02:
I just want to remind the court, there was no testimony from the government below.

[00:33:35] Speaker 02:
We provided expert testimony on the calculation of damages, including the impairment calculation of the $180 million that was defectively performed.

[00:33:44] Speaker 02:
There was no expert, no witness that contested that calculation.

[00:33:49] Speaker 02:
Same thing with the 186, the government gets up here and says it's speculative.

[00:33:53] Speaker 02:
It's not been actually encouraged, so you can't award it.

[00:33:55] Speaker 00:
Can you specifically address the 11 million?

[00:33:57] Speaker 00:
I feel like that was where a lot of their argument was lying on the damage.

[00:34:00] Speaker 02:
Yeah, let me talk about the 11.3.

[00:34:02] Speaker 02:
So the 11.3 is included in bucket one, the impairment calculation.

[00:34:05] Speaker 02:
Now, in 2010, the parties started negotiating the 2011 memorandum of agreement.

[00:34:11] Speaker 02:
At that time, Marad's contractor had already asserted claims.

[00:34:16] Speaker 02:
The parties knew there were claims.

[00:34:18] Speaker 02:
And so part of the reason for entering into the 2011 MOA was to establish that the maritime administration would defend and pursue claims on behalf of the municipality of Anchorage.

[00:34:28] Speaker 02:
There was testimony on that at trial from Colonel Vicalis.

[00:34:33] Speaker 02:
That money was then subsequently paid to the contractor.

[00:34:38] Speaker 02:
That claim was for work that was performed pursuant to the procurement contract, the 2003 and 2008 ICRC contracts.

[00:34:47] Speaker 02:
It was a award fee dollars that the government originally said, we're not paying you because you've defectively performed your work.

[00:34:53] Speaker 02:
You're not entitled to these dollars.

[00:34:55] Speaker 02:
And instead it took the money that was transferred to it by the municipality and use that to settle the claim, paying a contractor for defective work.

[00:35:02] Speaker 02:
It's all part and parcel of the same bucket of damages.

[00:35:06] Speaker 02:
It is money that was earmarked for the purpose of constructing a port that was used to pay for defective work.

[00:35:12] Speaker 02:
And we're entitled to recover it under an expectancy theory.

[00:35:16] Speaker 01:
Even if- For breach of which of the two agreements?

[00:35:19] Speaker 02:
For breach of the 2011 MOA.

[00:35:22] Speaker 01:
But even if- I think I understood, maybe I misunderstood, government counsel to say that if we conclude that there was indeed a breach of the 2011, that

[00:35:37] Speaker 01:
They have no further objection to the $11.3 million damage.

[00:35:41] Speaker 02:
And I'll rest my case on that because there's clearly a breach here.

[00:35:44] Speaker 02:
The judge, in its well-reasoned opinion, found that there was a clear breach of the 2011 MOA because there was a duty on the part of the maritime administration to assert and defend claims on behalf of the municipality.

[00:35:59] Speaker 02:
The party sent entered into a joint defense agreement.

[00:36:01] Speaker 02:
The parties understood that was a requirement under the contract, and the mayor had breached that obligation.

[00:36:06] Speaker 02:
Can I be on?

[00:36:07] Speaker 02:
Over my time, I apologize.

[00:36:09] Speaker 01:
Thank you.

[00:36:09] Speaker 01:
Thank you.

[00:36:15] Speaker 01:
Mr. Whistler.

[00:36:16] Speaker 03:
Thank you, Your Honors.

[00:36:17] Speaker 03:
I just want to cover two points on our model.

[00:36:19] Speaker 03:
One, I want to make sure our position is as clear as it can be on the various damages theories, because I think that is particularly relevant to whether a remand is ultimately necessary if the court reverses the trial court's plain language interpretation.

[00:36:31] Speaker 03:
Expectation damages were focused on the value of the port structure.

[00:36:35] Speaker 03:
And footnote seven that was pointed to in the last argument doesn't say anything otherwise.

[00:36:40] Speaker 03:
It says the alternative theory was the reliance theory.

[00:36:43] Speaker 03:
So expectation was just about the value of the port structure.

[00:36:46] Speaker 03:
There was no expectation damages presentation about any other breach.

[00:36:51] Speaker 03:
There was no proximate cause analysis, no nexus connection between

[00:36:54] Speaker 03:
perhaps management decisions and particular actions and damages that flowed from there.

[00:36:59] Speaker 03:
So expectations is just about the value of the court structure.

[00:37:02] Speaker 03:
And so if the court reverses that interpretation of the MOU, then there is no expectations, damages theory that is left.

[00:37:10] Speaker 01:
There might be a reliance.

[00:37:11] Speaker 03:
There might be a reliance.

[00:37:12] Speaker 03:
And as Your Honor suggested, we presented our argument in our briefing about why there is no reliance damages that could be awardable here under the undisputed facts.

[00:37:22] Speaker 03:
And that is the fact that Anchorage contributed $163 million to the project.

[00:37:26] Speaker 03:
That was their initial contribution.

[00:37:29] Speaker 03:
As a consequence of that contribution, they received $117 million in assets, $19.35 million through the settlement with ICRC, and $91 million in reimbursement from the state.

[00:37:39] Speaker 03:
That exceeds their contribution.

[00:37:40] Speaker 03:
That's the end of the reliance analysis.

[00:37:43] Speaker 03:
And I'll just note that Judge Damage in the opinion on damages when he was discussing Indiana, Michigan and total breach,

[00:37:51] Speaker 03:
That's an expectation damages case, spent nuclear fuel damages or expectation damages.

[00:37:56] Speaker 03:
The rule is different in reliance damages, as Westfed expressly said, which is in a reliance damages case, you can't recover future damages not incurred like you can in an expectations case.

[00:38:07] Speaker 03:
And in Westfed, those were binding financial obligations that simply hadn't been liquidated yet.

[00:38:12] Speaker 03:
And even still.

[00:38:13] Speaker 03:
The court said it's not actually spent, it's not included in reliance.

[00:38:16] Speaker 01:
It gave out some new stock when they couldn't pay the interest on the old stuff.

[00:38:19] Speaker 03:
That's right, Your Honor.

[00:38:20] Speaker 03:
And so even binding financial commitments that come due after a period of time are not actually incurred and can't be included in reliance damages.

[00:38:29] Speaker 03:
The only other point I wanted to make, Your Honors, is I want to resist the framing that I think infects a lot of Anchorage's theory overall, which is the MOU is not a procurement

[00:38:41] Speaker 03:
Anchorage was not procuring services from the government.

[00:38:45] Speaker 03:
Congress instructed MARAD to execute this project.

[00:38:49] Speaker 03:
MARAD as a government agency executed a procurement contract with a contractor.

[00:38:53] Speaker 03:
Ordinary agency activity.

[00:38:56] Speaker 01:
Anchorage- That's with ICRC?

[00:38:58] Speaker 03:
With ICRC.

[00:38:59] Speaker 03:
Anchorage as a local government had a role, as many local governments do.

[00:39:04] Speaker 03:
And if the court is going to imply into this MOU,

[00:39:09] Speaker 03:
It promised by the government to the local government that the project will be successfully completed.

[00:39:13] Speaker 03:
That would have substantial impacts in all of the work the government does on a day-to-day basis.

[00:39:18] Speaker 01:
Thank you, Your Honor.

[00:39:19] Speaker 01:
Thank you.

[00:39:19] Speaker 01:
Thanks to all council cases submitted.