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Lockheed Martin Corporation v. United States of America

May 13, 2013

LOCKHEED MARTIN CORPORATION, PLAINTIFF,
v.
UNITED STATES OF AMERICA, DEFENDANT.



The opinion of the court was delivered by: Alan Kay United States Magistrate Judge

MEMORANDUM OPINION

Pending before the Court is Plaintiff Lockheed Martin Corporation's Motion to Compel Production of Rule 30(b) (6) Witnesses for Examination ("Motion") [77]; the United States' Memorandum in Opposition to Motion ("Opposition") [79]; and Lockheed Martin Corporation's Reply Memorandum in support of Motion ("Reply") [81].*fn1 Plaintiff Lockheed Martin Corporation ("LMC" or "Plaintiff") moves to compel Defendant United States (the "Government" or "Defendant") "to designate and produce for examination one or more corporate representatives on six of the Topics noted in Lockheed Martin's Notice of Rule 30(b)(6) Deposition." (Motion at 1.)

I. Background

The underlying litigation involves a claim by LMC for recovery of response costs under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). See Complaint [1]. These costs were incurred by LMC when it was ordered to implement a remedial action plan to respond to chemical contamination in soil and groundwater at three Southern California facilities (collectively, "the Site") where rocket systems were developed and manufactured by Lockheed Propulsion Company.*fn2 See Memorandum Order [38] ruling on Defendant's motion for summary judgment at 1. Plaintiff seeks recovery of costs on grounds that the Government effectively owned and operated the Site and arranged for the disposal of chemical contaminants thereon. (Memorandum Order [38] at 1.) See also 42 U.S.C. §9607.

On August 21, 2012, Plaintiff served Defendant with a Notice of Rule 30(b) (6) Deposition in this case. See Notice of Rule 30(b) (6) Deposition ('Notice") attached as Exhibit 2 to the Declaration of Michael K. Murphy.*fn3 On September 19, 2012, the Government responded and objected to the Notice. See September 19, 2012 Letter from J. Sullivan to M. Murphy attached as Exhibit 2 to the Murphy Declaration. More specifically, the Government objected and refused to designate a witness on the following six topics at issue in this Motion:

Topic 1- The Department of Defense's standard policies, procedures and practices, and any changes in those policies, practices, and/or procedures since 1986, with respect to the allowability of environmental costs.

Topic 3- The Department of Defense's application of the Credit Cost Principle with regard to monetary recoveries under CERCLA by its contractors.

Topic 4- The Unites States' position in litigation involving its contractors and their insurers with regard to recovery of environmental remediation costs and the application of the Credit Cost Principle.

Topic 6 -- The Burbank Consent Decree, including, but not limited to, negotiation of its terms, operation of the decree, interpretation of its terms, and communications between the signatory parties.

Topic 7 -- The United States' policies, opinions, procedures and practices, and any changes in those policies, procedures, and/or practices since 1986, with regard to whether the Department of Defense-appropriated funds may be used to satisfy the Government's liability as a potentially responsible party under CERCLA.

Topic 29- The United States' knowledge and understanding regarding vapor degreasers and solvent-water separators as a source of contamination at other United States military, civilian, or contractor facilities, including but not limited to, TCE contamination. (Motion at 2.)

Plaintiff notes that the first five contested topics relate to the United States' claim that "it is inequitable for Lockheed Martin to recover its response costs under CERCLA because it has recovered a portion of those costs already as payments to perform its government contracts." (Motion at 5.)*fn4 The sixth contested topic relates to the dispute between the parties as to the source of trichloroethylene ("TCE") groundwater and soil contamination at the Redlands Site. Plaintiff filed the instant Motion after the parties "reached an impasse as to these six topics in the Notice." (Motion at 3.)

By way of background, the Government moved for summary judgment on its "double recovery defense," which was described by the Honorable James Robertson [the initial trial court]*fn5 as a two-step argument:

(1) that collateral estoppel requires the Court, and Lockheed, to accept the determination in Procter v. Lockheed Corp., Case No. 731752 (Cal. Super. Ct. Oct. 22, 2003), that the government is in fact reimbursing Lockheed for the response costs it incurs at the Site through various government contracts; and (2) that, because Lockheed is already being reimbursed by the government, it cannot recover response costs again under CERCLA.

(Memorandum Order [38] at 2.)*fn6 Judge Robertson rejected the Government's collateral estoppel argument, finding that "[t]he issue decided in Procter concerned the meaning of the language of insurance policies [and] did not define the term 'actual reimbursement' for all time or in all contexts, but only established its meaning within the context of a number of insurance contracts." (Id. at 9.)

The trial court next considered the Government's claim [incorporated in their second and sixteenth affirmative defenses] that "Lockheed cannot recover costs under CERCLA that it has billed to the government as indirect costs." (Id.) The trial court determined that "[t]he contract payment framework and the requirements of the Billing Settlement ensure that Lockheed will not realize a double recovery" because "any CERCLA recovery from the government would lead to a commensurate reduction in the Settled Discontinued Operations Costs pool that Lockheed could charge as indirect costs on its government contracts." (Memorandum Order [38] at 12.) The trial court further distinguished between "[t]he 'government-as-PRP' [potentially responsible party], which would be responsible for paying for Lockheed's CERCLA recovery [and] . . . the 'government-as-client,' which would get that money back from Lockheed." (Memorandum Order [38] at 13.) Because any award Lockheed would receive would be paid out of the Judgment Fund, "[t]he practical effect . . . would be to reduce the indirect costs Lockheed could pass on to its government clients . . . , effectuating Congress' desire to have CERCLA liability come from the Judgment ...


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