Northrop Grumman Information Technology, Inc. v. United States

535 F.3d 1339, 83 Fed. Cl. 1339, 2008 U.S. App. LEXIS 16493, 2008 WL 2967098
CourtCourt of Appeals for the Federal Circuit
DecidedAugust 5, 2008
Docket2008-5003
StatusPublished
Cited by65 cases

This text of 535 F.3d 1339 (Northrop Grumman Information Technology, Inc. v. United States) is published on Counsel Stack Legal Research, covering Court of Appeals for the Federal Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Northrop Grumman Information Technology, Inc. v. United States, 535 F.3d 1339, 83 Fed. Cl. 1339, 2008 U.S. App. LEXIS 16493, 2008 WL 2967098 (Fed. Cir. 2008).

Opinion

Opinion for the court filed by Chief Judge MICHEL. Circuit Judge NEWMAN concurs in the result.

MICHEL, Chief Judge.

This is a government contract case. It arises because Logicon, Inc., now known as Northrop Grumman Information Technology, Inc. (“Northrop”), acted as a middleman between a software developer and the United States Army. Logicon purchased certain software from the developer and then leased it to the military, effecting the lease by way of a delivery order under a pre-existing contract between Logicon and the United States Air Force.

*1341 But before the Air Force issued the delivery order, and apparently before the Army had even received or tested the software, Logicon asked the Army to sign a “Letter of Essential Need,” which Logicon drafted, reciting that the software was “essential to the operation of,” and “integral to,” certain Army computer systems. Apparently based only on a sales presentation, an Army employee signed the letter, and the Air Force issued the delivery order. The Army later determined that the software did not function as expected and was not compatible with its systems and needs, so the Army declined to renew the lease after the first renewal term.

Logicon, by then known as Northrop, filed suit against the United States in the United States Court of Federal Claims, claiming that the United States breached a warranty—allegedly contained in the Letter of Essential Need and incorporated by reference into the contract between the parties—that the software was essential to the Army’s computer systems and, according to Logicon’s understanding, was not acquired merely on a test or research and development basis. The Court of Federal Claims granted summary judgment to the United States, holding that there could be no breach of warranty because the Letter of Essential Need (1) did not form part of the contract, and, in any event (2) did not warrant what Northrop contends it warranted. Northrop appealed, and we heard oral argument on June 6, 2008. Because the Court of Federal Claims correctly determined that the alleged warranty was not incorporated by reference into the parties’ contract, we affirm.

BACKGROUND

A. Omnicast Software, the Letter of Essential Need, and the Software Lease

Starburst Software (“Starburst”) created Omnicast, a software program designed to minimize the bandwidth required to send data over a network to multiple recipients. In 1999, a Starburst salesman made a marketing call to Joseph Johnson, an employee in the Army’s Communication-Electronics Command (“CECOM”), offering to license the Omnicast software to the Army. Johnson thought that Omnicast had the potential to increase efficiency in communications between different CECOM computer systems, and agreed to license the software. Johnson, however, was not a contracting officer authorized to bind the government, and no contract document was signed by him. Starburst, moreover, did not have an existing contract with the Army, so the parties planned to use a preexisting contract between the Air Force and Logicon to effect the lease as follows: Starburst would sell the software to Logicon; Logicon would lease the software to the Air Force; CECOM would receive the software; and CECOM would transfer money to the Air Force to support Air Force lease payments to Logicon.

Before consummating this transaction, and allegedly to satisfy Logicon that the transaction would be worthwhile, a Logicon representative drafted a “Letter of Essential Need” to be signed by CECOM. The letter read in relevant part (emphasis added):

This letter is intended to clarify the essential need of the Program Executive Office, Command, Control and Communications (PEO C3S) for the “Starburst Software License Lease Agreement” currently being prepared for implementation. ... PEO C3S has decided to enter into a lease agreement for the Star-burst database products to support [Army Battle Command System] 6.0 and beyond. These products are essential to the operation of ABCS 6.0 as they are integral to the system. After considering the alternatives, it was determined that a lease was the most cost-effective means of providing long-term, Program- *1342 wide access to the Starburst products ....

Johnson signed the Letter of Essential Need on behalf of CECOM on or about September 22, 1999. On October 20, 1999, the Air Force issued a delivery order to Logicon, under their pre-existing contract, for the Omnieast software. The delivery order provided for a base period of approximately one month for $100,000, two successive one-year renewal terms for $285,000 each, and a final purchase option for an additional $285,000. The delivery order also recited that “[t]he ‘LEASING TERMS AND CONDITIONS’ to Special Offer # 330 Revision 03 ... were incorporated ... in order to facilitate this [Delivery Order].” Those LEASING TERMS AND CONDITIONS (“Terms and Conditions”), in turn, contained the following opening paragraph (emphasis added).

These lease terms and conditions are hereby incorporated by reference in their entirety within the [Air ForceLogicon contract]. The [] applicable Delivery Order and these lease terms and conditions constitute the entire agreement between Logicon, Inc. (“Contractor”) and the U.S. Government (“Government”) relative to the CECOM Starburst lease transaction under the aforementioned contract. It is hereby mutually understood and agreed that as inducement for Contractor entering into this Agreement, the Government has provided required information relative to the essential use of the software Asset which includes, but is not limited to, a description of the currently identified applications to be supported and planned life-cycle operations for the leased software.

The Terms and Conditions also contained the following clause—in the words of the Court of Federal Claims, the “Escape Clause”—under the heading “Lease.”

[T]he government shall be relieved from all obligations under the lease, if the Bona Fide Needs of the Government for the Asset cease to exist and such need is not fulfilled within the succeeding twelve (12) months from the date of non-renewal/termination, with an asset performing similar functions which the leased Asset was intended to perform.

CECOM accepted delivery of the Omnicast software in November of 1999, and the Army (through the Air Force) paid for the base period and the first one-year renewal term. Upon testing the software at Fort Hood in Texas, however, the Army discovered that Omnicast did not work effectively with CECOM’s ABCS computer systems in a tactical environment. In March of 2000, Starburst announced that it was being acquired by another software company and that there would be no more updates to the Omnicast software. After discussions with Logicon, CECOM stopped using Omnicast and decided it would not renew the software lease after the first one-year renewal term. The Army uninstalled Omnicast, offered to return it to Logicon, and did not renew the software lease when the first one-year renewal term expired in November of 2001.

B. Procedural History

In October of 2001, Logicon changed its name to Northrop Grumman Information Technology, Inc.

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535 F.3d 1339, 83 Fed. Cl. 1339, 2008 U.S. App. LEXIS 16493, 2008 WL 2967098, Counsel Stack Legal Research, https://law.counselstack.com/opinion/northrop-grumman-information-technology-inc-v-united-states-cafc-2008.