MEMORANDUM OPINION
ROYCE
C. LAMBERTH, UNITED STATES DISTRICT JUDGE
I.
Legal Standard
.............................................................................................................................
2
II.
Factual Background
....................................................................................................................
3
A. The
Initial Effort to Rebuild Iraqi Armed Forces Following the
U.S.-led Invasion in 20033
B. Iraq
Contemplates Stopping Some Scrap Exports
...............................................................
6
C. Wye
Oak and MoD Execute the BSA
..................................................................................
7
D. Wye
Oak Begins Performance
...........................................................................................
11
E. Wye
Oak and Zayna Sign a Limited Power of Attorney
................................................... 13
F. Wye
Oak Presents Three Invoices to MoD
........................................................................
15
G.
October 19, 2004 Meeting
.................................................................................................
16
1.
MoD Approved Wye Oak's Three Invoices
.......................................................................
16
2.
Wye Oak and MoD Effectuated the First Amendment to the
BSA ..................................... 17
H. MoD
and GIG Sign the Contract of Financial Agreement
................................................ 21
I. MoD
Paid Zayna Instead of Wye Oak
...............................................................................
24
J. Wye
Oak Continued to Perform until Nonpayment Became a Serious
Impediment ............ 25
1.
Wye Oak Performed Work in Iraq
.....................................................................................
25
2.
Wye Oak Performed Work in the United States
................................................................
27
3.
Nonpayment Eventually Became a Significant Impediment to
Wye Oak's Work .............. 28
K.
December 5, 2004 Meeting
................................................................................................
29
L. Wye
Oak Goes Back to Work, But Dale Stoffel is Murdered
........................................... 31
M. Wye
Oak Produced Armored Vehicles in Time for the January 2005
Elections, But Eventually Ceased to Perform Work in Iraq
Because It was Never Paid .................................
33
N. Iraq
Prohibits Scrap Sales
..................................................................................................
35
III.
Legal Discussion
.....................................................................................................................
35
A. MoD
is Not Separate from the Republic of Iraq
................................................................
35
B. The
Court has Subject Matter Jurisdiction and Personal
Jurisdiction Over Defendants ... 39
1.
The BSA was a “Commercial Activity” Under the
FSIA ..................................................
40
2.
This Action is Based Upon an Act Performed in the U.S. in
Connection with a Commercial Activity of Iraq Elsewhere
....................... 41
3.
The Court has Personal Jurisdiction over Iraq and
MoD ................................................. 44
C.
Defendants Breached the BSA
...........................................................................................
45
1.
Wye Oak's Three Invoices Were Submitted Under the
BSA .............................................. 45
2.
Wye Oak was never paid for its three invoices
..................................................................
50
3.
Wye Oak Performed Under the BSA
..................................................................................
51
4.
MoD Materially Breached the Contract with Wye Oak
.................................................... 52
D. The
Court Rejects Defendants' Affirmative Defenses
......................................................... 52
1.
The Court Rejects the Defense Wye Oak was Not Properly
Licensed ............................... 53
2.
The Court Rejects the Defense Wye Oak was Not Owed Any
Compensation Under the BSA Because Wye Oak Did Not Conclude
Any Sales Contracts
........................................... 55
3.
The Court Rejects the Defense Wye Oak Waived any
Breach ........................................... 55
IV.
Damages
.................................................................................................................................
56
A. Dr.
Gale's Expert Damages Report
......................................................................................
59
1.
The Court Finds Defendants Breached the BSA on October
28, 2004 ............................. 60
2.
Gale Did Not Err in Not Taking Into Account Subsequent
Events .................................... 61
a. Dale
Stoffel's Murder
....................................................................................................
62
b. Wye
Oak's Withdrawal of American Personnel
............................................................
63
c. The
Scrap Ban
................................................................................................................
63
B.
Damages for the Three Invoices
...........................................................................................
67
C. Lost
Profits
...........................................................................................................................
70
1.
Defendants' Overall Objections to Plaintiffs'
Lost Profits Calculations .......................... 70
2.
Lost Profits from Construction
..........................................................................................
75
3.
Lost Profits from Refurbishing Military Equipment
.......................................................... 78
4.
Lost Profits from Scrap Sales
............................................................................................
88
5.
Lost Profits From the Sale of Surplus Military
Equipment
............................................... 93
D.
Terminal Value
.....................................................................................................................
94
E.
Discounted Future Income
....................................................................................................
95
1.
Risk-Free Rate
...................................................................................................................
97
2.
Equity Risk Premium
.........................................................................................................
97
3.
Firm Size Premium
............................................................................................................
98
4.
Industry Risk Premium
......................................................................................................
99
5.
Defendants' Objections that Gale Did Not Include a
Company-Specific Risk Premium and Did Not Apply a Higher
Discount Rate to Damages in Option Years
................................ 100
6.
Discount rate
...................................................................................................................
100
F.
Prejudgment Interest
...........................................................................................................
101
G.
Enhanced Damages
............................................................................................................
102
H.
Costs, Including Reasonable Attorney's Fees and Expenses
............................................. 104
V.
Conclusion
.............................................................................................................................
105
Fifteen
years ago, Wye Oak Technology, an American company, entered
into the Broker Services Agreement (BSA) with the Iraqi
Ministry of Defense (MoD) to play a key role in re-equipping
the Iraqi military. Iraq urgently needed to rebuild its armed
forces as the Coalition Provisional Authority (CPA)
transferred sovereignty back to the Iraqi people and the
interim Iraqi government prepared to hold its first
parliamentary elections since the fall of Saddam Hussein. The
BSA was set to be the central component of the Iraqi Military
Equipment Recovery Project (IMERP).
Under
the BSA, Wye Oak was responsible for developing an inventory
and assessing what military equipment was salvageable and
what was scrap, providing military refurbishment services,
arranging for scrap sales, and arranging for the sale of
military equipment. Wye Oak began performing as soon as the
BSA was effectuated. By October 2004, Wye Oak submitted three
pro forma invoices to MoD for work in relation to the IMERP.
But MoD
never paid these invoices to Wye Oak. Instead, MoD paid a
third-party, Raymond Zayna, the money owed to Wye Oak under
the BSA. Nonetheless, Wye Oak continued to perform under the
contract while desperately trying to extract the funds it was
owed. And briefly, Wye Oak thought it succeeded. After months
of performing vital activities as part of the IMERP despite
not being paid, all issues seemed to be solved after a
December 5, 2004 meeting. However, this was not the case.
A few
days later, Wye Oak's president Dale Stoffel and his
colleague Joe Wemple were brutally murdered on their way to
arrange for funding to finally be released. Nonetheless, Wye
Oak still did not immediately abandon the IMERP even after
Dale Stoffel's tragic death. Instead, Wye Oak exceeded
the goal of producing a mechanized brigade of operational
armored vehicles for Iraq's January 2005 parliamentary
election. Yet Wye Oak was never paid for the vital work it
performed under the BSA.
Now,
more than fifteen years after Wye Oak entered into the BSA,
and more than a decade after Wye Oak first filed suit, the
Court finds MoD breached the BSA. And because MoD is an
integral component of the national government itself, the
Republic of Iraq is also liable for the breach.
Ultimately,
the Court will award Wye Oak damages for its three invoices,
lost profits from construction, lost profits from
refurbishing military equipment, and lost profits from scrap
sales. Also, the Court will award Wye Oak prejudgment
interest and costs, including reasonable attorney's fees
and expenses.
I.
Legal Standard
Wye Oak
bears the burden of proving its breach of contract claim by a
preponderance of the evidence. The preponderance of the
evidence standard “simply requires the trier of fact to
believe that the existence of a fact is more probable than
its nonexistence before [he] may find in favor of the party
who has the burden to persuade the [judge] of the fact's
existence.” Concrete Pipe & Prods., Inc. v.
Constr. Laborers Pension Tr., 508 U.S. 602, 622 (1993)
(internal quotation marks omitted). In a bench trial, the
Court is the trier of fact and rules on the law. Wye Oak will
only succeed in its suit if it demonstrates it is more likely
than not that the MoD materially breached the BSA.
The BSA
provides it “shall be exclusively construed and
interpreted pursuant to the laws of the Republic of
Iraq.” Pl.'s Ex. 5 ¶ 21. Thus, under this
choice-of-law clause, Iraqi law controls for the purposes of
interpreting the contract.
Under
Iraqi law, the rules of evidence and procedure of the venue
where the dispute is pending control. Mallat Dep. 2/14/19,
33:17-34:4. Thus, the Federal Rules of Evidence apply to any
evidentiary issues in this matter.
Finally,
under the Federal Rules of Evidence, “[i]n determining
foreign law, the court may consider any relevant material or
source, including testimony, whether or not submitted by a
party or admissible under the Federal Rules of Evidence. The
court's determination must be treated as a ruling on a
question of law.” Fed.R.Evid. 44.1.
II.
Factual Background
A.
The Initial Effort to Rebuild Iraqi Armed Forces
Following the U.S.-led Invasion in 2003
In
March 2003, U.S. forces invaded Iraq and swiftly toppled
Saddam Hussein's dictatorial regime. The U.S.-led
Coalition forces set up the CPA to govern Iraq as a
transitional government. On June 28, 2004, the CPA
transferred sovereignty to the Iraqi people and an interim
Iraqi government. This interim government held office until
parliamentary elections occurred in January 2005.
As part
of Iraq's rebuilding efforts, Iraq needed to rebuild its
own armed forces. This was especially vital as a growing
insurgency began to take hold following the U.S.-led invasion
and occupation.
Secretary
of Defense Donald Rumsfeld requested that then-Lieutenant
General David Petraeus lead the Multi-National Security
Transition Command-Iraq (MNSTC-I) to help rebuild the Iraqi
armed forces and police. MNSTC-I's mission was to oversee
and support the reconstruction of Iraq's Ministry of
Defense and Ministry of Interior. MNSTC-I developed the IMERP
to re-equip the Iraqi military. The IMERP's goal was to
salvage the military equipment that could be refurbished and
the scrap military equipment that was scattered across Iraq
after the fall of Saddam Hussein's regime.
Under
Saddam Hussein, Iraq had an extremely large military with
extensive stocks of military equipment. Expert Report of John
M. Gale app. C, 11, 43-47, Pl.'s Ex. 101. A significant
amount of this equipment consisted of Soviet weaponry. Tr.
12/18/18 PM 65:7-9; Tr. 12/19/18 PM 85:8-13. Destroyed and
abandoned equipment littered the country following the
U.S.-led invasion. See Tr. 12/17/18 PM 28:25-29:25;
Tr. 12/19/18 AM 13:7-14, 33:6-34:2; Tr. 12/20/18 PM 37:8-19;
Petraeus Dep. 14:18-15:20; Pl.'s Ex. 63. The IMERP
intended to determine what equipment was recoverable and what
could be scrapped, hoping to immediately repair salvageable
equipment so that a portion of the Iraqi armed forces could
be rebuilt as quickly as possible. IMERP's immediate
focus was to prepare at least one armored mechanized brigade
to be on the streets in time for the new Iraqi
government's parliamentary election in January 2005.
See Tr. 12/17/18 PM 35:21-37:5; Tr. 12/19/18 AM
25:9-26:14; Joe Kane, Iraqi Mech Brigade Moves Toward
Initial Ops, The Advisor, Oct. 9, 2004, Pl.'s Ex.
16, at 1, 8. This was a critical component of the Coalition
and Iraq's goal to withdraw American troops and have
Iraqi security forces take on greater responsibility.
Petraeus Dep. 20:19-21:2, 28:19-30:3.
The
Coalition and MNSTC-I leaders viewed Wye Oak and its
president, Dale Stoffel, as capable of executing the IMPERP
effort. Wye Oak, and Dale Stoffel in particular, had
extensive familiarity with Soviet military equipment and had
government contacts throughout the world. See Tr.
12/18/18 PM 65:7-9; Pl.'s Ex. 1; Pl.'s Ex 5 ¶ 2.
Further, Wye Oak possessed the necessary arms and weapons
licenses to perform the planned work. Pl.'s Ex. 1;
Pl.'s Ex. 51. And Wye Oak had a strong relationship with
CLI Corporation, an American based construction firm that had
experience working in Iraq, as Dale Stoffel was a part owner
of CLI. Pl.'s Ex. 51.
On June
25, 2004, Wye Oak officially presented MoD its proposal to
carry out the IMERP. Pl.'s Ex. 1. Wye Oak offered its
services to “assess [MoD's] discarded and/or
damaged military equipment to identify military salvageable
equipment and scrap, account and inventory, value and
identify purchasers for such military equipment and scrap, to
maximize and to assist you in carrying out the Iraqi Military
Equipment Recovery Project. In such role, Wye Oak would act
as the exclusive broker for such transactions for the [sic]
Iraq's Ministry of Defense for a minimum of ten percent
commission on each such transaction.” Id.
Following this letter, on July 4, 2004, Iraq's Minister
of Defense, Hazim al-Shalan, requested access to the military
equipment depositories at the Taji military base so MoD
personnel and Dale Stoffel could inspect and assess the
equipment as part of the beginning phase of the IMERP.
Pl.'s Ex. 2. Petraeus responded on July 20, 2004 with his
full support for the MoD's expeditious initiation of the
IMERP, and granted al-Shalan's request. Pl.'s Ex. 3.
Wye Oak
and MoD began drafting the BSA. Nicholas Beadle, a United
Kingdom government official and senior Coalition advisor to
the Iraqi MoD, Iraqi Minister of Defense Hazim al-Shalan, and
Iraqi MoD Secretary General Bruska Shaways, recalled his
conversations with Shaways in July 2004 regarding the draft
contract. Beadle made sure Shaways understood the MoD was
agreeing to pay Wye Oak up front based on pro forma
invoices-besides commissions-without having seen the
completed work and would only have an opportunity to
reconcile the payments at a later time. Tr. 12/20/18 PM
37:20-38:16, 53:11-54:3; Tr. 12/21/18 AM 36:16-38:20. On
August 16, 2004, the MoD and Wye Oak officially entered into
a contract, the BSA, to carry out the IMERP.
B.
Iraq Contemplates Stopping Some Scrap Exports
While
Wye Oak and MoD were negotiating the BSA, Iraq was also in
the process of cracking down on scrap smuggling. On June 19,
the General Secretary of Iraq's Council of Ministers
informed the Ministries of Industry, Trade, and Finance that
the Prime Minister directed the formation of a committee of
representatives from these ministries to study scrap exports
and provide a recommendation on the topic. Defs.' Ex. 56.
Following
this directive, the Ministry of Trade wrote the Council of
Ministers to inform the Council of its views on exporting
scrap. Defs.' Ex. 55. The Ministry of Trade stated the
decision to export scrap was implemented in accordance with
CPA Order 54 on the Trade Liberalization Policy of 2004
issued on February 26, 2004. Id. According to the
Ministry of Trade, CPA Order 54 in part sought to stop scrap
smuggling and institute a legal regime to govern scrap
exports. Id. CPA Order 54 prohibited the export of
“metals of all kinds, including scrap, ” in
quantities in excess of personal use without a license from
the Ministry of Trade. Defs.' Ex. 54. However, the Basra
Governate apparently interfered with authorized scrap
exports. Id. This led the Ministry of Trade to
request the Basra Governate be directed not to interfere with
the export of scrap done in accordance with previously
granted licenses. Id.
The
committee formed pursuant to the Prime Minister's
direction ultimately recommended stopping scrap exports but
allowing those who already had export licenses to continue
their export efforts because those licensees only accounted
for a small portion of existing scrap. Defs.' Ex. 57. But
the committee also urged the Ministry of Interior and General
Commission of Customs to institute strict procedures to
prevent scrap smuggling. Id.
On July
17, 2004, the General Secretary of the Cabinet issued a
letter to the Ministry of Interior regarding the prohibition
of exporting scrap with copies to the Office of the Prime
Minister, Ministry of Industry and Minerals, Ministry of
Trade, and National Intelligence Service. Defs.' Ex. 53.
Specifically, the letter stated the Prime Minister agreed to
the Ministry of Industry and Minerals' proposal to stop
exporting scrap, with the exception that some materials of a
military nature could still be exported upon the Prime
Minister and his economic committee's approval.
Id. Unfortunately, this Court was never provided
with the Ministry of Industry and Minerals' proposal
referenced in this letter, which makes it impossible to fully
comprehend the exact terms of the prohibition on exporting
scrap the Prime Minister approved.
This
deliberation on scrap exports and decision by the Prime
Minister was never communicated to Wye Oak at any time during
the BSA negotiations or after Wye Oak and the MoD signed the
BSA. And Beadle testified he understood all orders
prohibiting scrap sales to only apply to private sales, not
the MoD. Tr. 12/21/18 AM 7:25-8:10. Further, Neal testified
General Bashar, an MoD official working on the effort to
recover vehicles, informed him the scrap ban was intended to
stop individuals from illegally taking scrap and did not
affect Wye Oak. Tr. 12/19/18 AM at 29:22-31:16; Tr. 12/19/18
PM 4:9-18.[1]
C.
Wye Oak and MoD Execute the BSA
Wye Oak
and MoD entered into the BSA to carry out the IMERP on August
16, 2004. The BSA was signed by Dale Stoffel on behalf of Wye
Oak and countersigned by Iraqi MoD Secretary General Bruska
Shaways. Pl.'s Ex. 5. Secretary General Shaways had the
“full signatory authority” of MoD regarding all
matters related to Wye Oak's work recovering and selling
scrap military equipment. Pl.'s Ex. 6. Under the BSA, MoD
was required to “work exclusively with [Wye Oak]
regarding furnishing of Military Refurbishment Services,
Scrap Sales and the sale of Refurbished Military Equipment
with respect to all Military Equipment.” Pl.'s Ex.
5. The BSA appointed Wye Oak as the sole and exclusive broker
for:
(i) the accounting, inventory, and assessment of discarded
and/or damaged Military Equipment in connection with the
Iraqi Military Equipment Recovery Project to identify which
Military Equipment is salvageable and suitable for Military
Refurbishment Services and which Military Equipment is scrap;
(ii) the arranging of any Scrap Sales of any Military
Equipment that is not suitable for Military Refurbishment
Services;
(iii) the provision of Military Refurbishment Services with
respect to all of the various military bases, offices and
properties owned by, or under the control of, the Ministry
and/or the Republic of Iraq, wherever such bases, offices and
property maybe [sic] located and all the related military
equipment located thereon or otherwise owned by the Ministry
and/or the Republic of Iraq; and
(iv) the arranging for the sale of Military Equipment and/or
Refurbished Military Equipment to Customers during the term
of this Agreement or for Scrap Sales of any such Military
Equipment that is not suitable for Military Refurbishment
Services, which arranging shall include the valuation of any
such Military Equipment, whether original, refurbished or
scrap, and the identification of prospective Customers for
such sales.
Pl.'s Ex. 5 ¶ 2. MoD agreed “not to conduct
any Military Refurbishment Services or arrange for the use,
sale or lease of any Refurbished Military Equipment provided
for under [the BSA] nor engage in any scrap sales, except
pursuant to an engagement with [Wye Oak] under [the
BSA].” Id. The BSA stated Wye Oak would begin
performing services at five military facilities: “Taji
Military Base/Camp Cooke, Camp Normandy, Camp Ashraft, Camp
Anaconda, and the Coalition facilities at the Hilla Military
Facility.” Id.
The BSA
provided specific definitions for the terms military
equipment, military refurbishment services, refurbished
military equipment, customers, and scrap sales. Military
equipment was defined as “any equipment that is used by
or in the provision of military [sic], including, without
limitation, any and all vehicles, aircrafts, guns, missiles,
armored personnel carriers, heavy armor/tanks, military radar
equipment, ballistic missiles, rocket launchers, artillery,
artillery scrap, small arms, small arms scrap or any parts or
components thereof.” Id. ¶ 1. The
contract defined military refurbishment services as
“any services sold, performed for, or provided with
respect to any Refurbished Military Equipment that is either
retained by the Ministry or sold or otherwise provided to
Customers by the Ministry, including, but not limited to, the
inspection of the Military Equipment prior to performing any
Military Refurbishment Services to make a value assessment
and a refurbishing assessment for such Military
Equipment.” Id. The BSA provided that
“Refurbished Military Equipment shall mean any Military
Equipment that has been refurbished by, or under the
direction of, the Broker pursuant to this Agreement, and sold
or provided to customers by the Ministry.” Id.
Customers were defined as “purchasers of the
‘Military Refurbishment Services' and/or
‘Refurbished Military Equipment' and ‘or
Scrap sales' including, but not limited to, Iraqi
Ministry of Defense, commercial establishments and
governmental and semi-governmental entities in the military
sector.” Id. And scrap sales were defined as
“sales to any third party of any Military Equipment or
other items which may not be defined as scrap but
contemplated by the nature of this Agreement (e.g., brass,
gun barrels, etc.) that the Broker or Iraqi Ministry of
Defense determines is not suitable for Military Refurbishment
Services in accordance with the terms of this
Agreement.” Id.
Further,
Wye Oak was required to use “all reasonable commercial
efforts to perform the Military Refurbishment Services and in
the development of markets and sales prospects for Military
Equipment, including Refurbished Military Equipment and Scrap
Sales.” Id. ¶ 3. Wye Oak was not under
any obligation to expend any money in performing these
services or activities, except money that was advanced by the
MoD to cover “certain expenses associated with the
performance of the Military Refurbishment Services, the sales
of any Military Equipment, Refurbished Military Equipment or
any Scrap Sales.” Id. ¶ 3. In addition,
MoD was required to “fully inform [Wye Oak] at all
times of all matters reasonably required to enable [Wye Oak]
to carry-out its duties as set forth [in the BSA].”
Id. ¶ 4.
As
compensation, MoD was required to pay Wye Oak “a
commission of [a] minimum of ten percent (10%) based on the
Contract Value set out in each Sales Contract entered into by
the Ministry, pursuant to this Agreement.” Id.
¶ 5. With respect to Refurbished Military Equipment, the
MoD was required to pay Wye Oak 10% of such equipment's
refurbishment cost. Id. The commissions were to be
paid “pursuant to proforma invoices submitted by [Wye
Oak] and then reconciled by final invoice. Upon providing
such proforma invoice, Ministry will make full payment on
such invoice immediately upon presentation. All payments to
be made to [Wye Oak] under this Agreement shall be made in
United States Dollars in the form and manner as directed by
[Wye Oak].” Id. Also, the BSA provided
significant protections for Wye Oak. Wye Oak was entitled to
receive and retain all commissions for sales contracts for
military refurbishment services, refurbished military
equipment, or scrap MoD cancelled or terminated, regardless
of the cause. Id.
The BSA
was set to last for one year. This one-year term was to renew
automatically for two subsequent, consecutive one-year
periods unless either Wye Oak or the MoD gave the other party
written notice it would not renew at least sixty days prior
to the end of any term. If termination notice was provided,
the BSA was set to terminate at the end of the then-current
term. Id. ¶ 6.
This
Agreement was not assignable by either party. Id.
¶ 8. Any purported assignment of the BSA without written
consent from both parties was void and without effect.
Id. A failure by one of the parties to assert any
right in the BSA or upon a breach of the BSA would not
constitute a waiver of such rights. Id. ¶ 12.
And a written waiver of any right was not deemed to extend to
any subsequent breach. Id. The BSA was not to be
amended or supplemented except in writing, signed by both
parties. Id. ¶ 13. The BSA constituted the
entire agreement between Wye Oak and the MoD. Id.
¶ 14.
In
addition, the BSA contained an indemnification clause. Each
party was to “indemnify, defend and hold harmless the
other party from and against any and all liabilities,
demands, claims, lawsuits, damages, judgments, costs
(including reasonable attorney's fees and expenses)
including but not limited to injury to persons (including
death), loss or damage to, or destruction of property arising
out of that party's breach of this Agreement or that
party's negligent or willful actions while performing
hereunder.” Id. ¶ 15.
Finally,
the English version of the Agreement governed and the BSA was
required to be construed and interpreted pursuant to Iraqi
law. Id. ¶¶ 18, 21.
D.
Wye Oak Begins Performance
Wye Oak
more likely than not began performing activities related to
the BSA around the same time as the contract was signed. In
the days preceding the BSA, Wye Oak identified 70, 000 tons
of brass artillery casings it believed could be sold as
scrap. Wye Oak began trying to broker a sale of these scrap
brass shell casings and had some communications with at least
one potential customer after the BSA was signed. See
Defs.' Ex. 91 (email from Coskun Akdeniz to Dale Stoffel
on August 18, 2004, regarding a potential customer for the
scrap brass casings).[2] Unfortunately, these shell casings were
stolen from the Iraqi military base where they were stored
before Wye Oak could broker any sales contract. See
Pl.'s Ex. 24 (email from Dale Stoffel to Nick Beadle,
William Felix, and Colonel David Styles with the subject line
“missing brass” and attached pictures of the
brass); Pl.'s Ex. 26 (email from Colonel David Styles to
Dale Stoffel, Nick Beadle, and William Felix regarding the
stolen brass); Tr. 12/18/18 AM 81:16-84:21 (David Stoffel
testifying the potential sale of the 70, 000 tons of brass
shell casings was never completed). While Wye Oak claims MoD
and Iraq were at fault for this theft, the evidence presented
to the Court is insufficient to establish this point.
Nonetheless,
Wye Oak continued to move ahead. Wye Oak worked with its
sister company CLI, and Wye Oak and CLI hired Iraqi laborers.
Tr. 12/18/18 PM 64:17-64:19; Felix Dep. 20:15- 23:1,
80:22-81:3. On September 6, 2004, Secretary General Shaways
wrote to Multi-National Forces-Iraq Commanding General George
Casey to inform him that “Wye Oak has begun the initial
assessment of equipment and is preparing to assemble the
necessary personnel to inventory, assess and remove Iraqi
military equipment or scrap for sale or use by the Iraqi
Ministry of Defense.” Pl.'s Ex. 10. Shaways then
requested access to Iraqi military bases under the U.S.
military and Coalition forces' control because military
equipment and scrap were located on those bases. Id.
On
September 17, Dale Stoffel reached out to a Ukrainian company
to invite specific employees and affiliates to Iraq to assist
Wye Oak in assessing, recovering, and refurbishing military
equipment for the IMERP. Pl.'s Ex. 11. Wye Oak offered to
provide transportation from Ukraine to Iraq and to arrange
visas for these individuals. Id. Several witnesses
testified Dale Stoffel brought in a team from Ukraine to
assist with the work. See, e.g., Tr. 12/19/18 AM
42:1- 9; Felix Dep. 102:24-104:06. While Dale Stoffel and
individuals from CLI, Iraqi laborers, and workers from
Ukraine got started on identifying, assessing, and
refurbishing military equipment in Iraq, David Stoffel worked
on the IMERP from the United States. David Stoffel oversaw
all information technology services for Wye Oak. Tr. 12/18/18
AM 31:7-32:1, 43:22-25, 44:11-20, 48:25-49:5.
By
September 29, 2004, Wye Oak provided MNSTC-I project officer
Colonel David Styles an initial survey of equipment that had
been reviewed thus far at Camp Normandy. Pl.'s Ex. 14.
This survey consisted of 745 units of military equipment,
including various tanks, armored personnel carriers,
artillery, rocket launchers, anti-aircraft guns, and
vehicles. Id. Even the equipment marked
“operational” still likely required at least some
maintenance before it could be put back into operation. Tr.
12/19/18 AM 12:14-20.
The
Iraqi government announced in October 2004 it would be
standing up a mechanized brigade of about 3, 000 soldiers by
early 2005. Pl.'s Ex. 16 at1. Iraqi Brigadier General
Mahmoud Bashar, the official selected to lead the new
brigade, proudly proclaimed most of the tanks and personnel
carriers would come from Iraq. Id. These statements
were reported in The Advisor, an authorized
publication of MNSTC-I. This publication was authenticated as
a self-authenticating official publication and newspaper
under Federal Rules of Evidence 902(5) and 902(6). The Iraqi
government and General Bashar's declarations were
admitted into evidence as admissions by a party-opponent-and
therefore non-hearsay-under Federal Rule of Evidence
801(d)(2). Nicholas Beadle testified Wye Oak was the one
performing the work to refurbish the vehicles discussed in
The Advisor's October 2004 issue that the Iraqi
government and General Bashar boasted about. Tr. 12/20/18 PM
57:5-21. Beadle declared, “Wye Oak were the only show
in town. They were the only ones who were performing
refurbishment work of this sort.” Tr. 12/20/18 PM
57:5-21.
E.
Wye Oak and Zayna Sign a Limited Power of Attorney
On
September 28, 2004, Wye Oak granted Raymond Zayna, a Lebanese
businessman in charge of the General Investment Group, s.a.l.
(GIG), a limited power of attorney to arrange financing and
bank guarantees on behalf of Wye Oak for its contract with
MoD. Pl.'s Ex. 13. Wye Oak made clear Zayna's
authority under this agreement was circumscribed. Wye Oak
specified “GIG will provide financial services with
respect to the IMERP Contract when and as requested by
Wye Oak.” Id. (emphasis added). The
parties drastically differ on how Raymond Zayna came to be
involved with Wye Oak and MoD.
Wye Oak
insists Zayna was inserted by MoD, while defendants claim Wye
Oak and Zayna had a business relationship dating back to
summer 2004. Neither side offers definitive evidence on this
point. Wye Oak bases its contention on several witnesses'
personal observation giving the impression that Dale Stoffel
and Raymond Zayna did not have any form of relationship.
See, e.g., Tr. 12/17/18 PM 24:6-21 (Clements stated
he did not believe any relationship existed between Stoffel
and Zayna based on his observations of their interactions
during meetings); Tr. 12/17/18 PM 25:21-26:7 (Clements
recalled a December 5, 20004 meeting in which discussions
focused on the fact Zayna was holding funds on behalf of MoD
and needed MoD's authorization to release those funds to
Wye Oak); Tr. 12/20/18 76:24-77:24 (Beadle saw Zayna in the
MoD without Stoffel or anyone from Wye Oak on occasions). On
the other hand, defendants point to an email from Dale
Stoffel in November 2004 indicating GIG paid for Ukrainian
expert's travel to Iraq to help assess and repair
military equipment (likely as a result of Dale Stoffel's
September 17, 2004 invitation) to indicate Dale and Zayna had
a preexisting relationship. Pl.'s Ex. 31, 2 (“$112,
150.00 from Invoice #MUQ002 due to GIG for completed work for
the transportation of Ukrainian Experts to assess the
repair/overhaul work.”). But David Stoffel did not
recall ever hearing about Zayna until September or October
2004. Tr. 12/18/18 AM 57:13-18. And William Felix repeatedly
stated he associated Zayna with MoD. Felix Dep. 141:7-16. It
is unlikely David Stoffel and William Felix, two important
players among a small group of people that made up Wye Oak
and CLI, would either not have heard of Zayna or viewed him
as an interloper to Wye Oak's arrangement with MoD if Wye
Oak was indeed the party who inserted Zayna into this deal in
the first place. This leads the Court to believe it is more
likely than not that Zayna was inserted at the behest of the
MoD.
This
conclusion is even more likely given that Ziad Cattan, the
Deputy Secretary General of the MoD, was convicted for his
role, along with Bruska Shaways and Sawsan Jasim, in
concluding a financial agreement with GIG, Zayna's
company, that violated Iraqi law and intentionally caused
harm. See 34/CR3/2011, ECF No. 430; 34/CR3/2011, ECF
No. 438-1. This conviction indicates these MoD officials
conspired with Zayna to steal millions of dollars. The Court
is left with the distinct inference from this Iraqi Integrity
Commission case that Zayna had a relationship with these MoD
officials and was more likely than not inserted by these
officials into the arrangement between Wye Oak and MoD.
F.
Wye Oak Presents Three Invoices to MoD
In
October 2004, Wye Oak submitted three pro forma invoices to
MoD for work in relation to the IMERP. On October 11, 2004,
Wye Oak submitted two pro forma invoices for construction at
the Muqdadiya Armored Depot (Invoice #MUQ001) and Taji
Facility (Invoice #TAJI001). Pl.'s Ex. 18. These invoices
covered the initial construction costs for armored vehicle
repair facilities, costs of purchasing tools and moving spare
parts, the initial hiring and training of workers, and a 10%
mobilization fee for construction efforts at Taji.
Id. Further, these invoices included a 15% overhead
cost and 10% profit. Id. Invoice #MUQ001 was for $2,
302, 300 and Invoice #TAJI001 was for $5, 945, 500.
Id. On October 18, 2004, Wye Oak submitted a third
invoice, Invoice #MUQ002, for vehicle recovery efforts at
Muqdadiya. Id. at 3. This invoice covered travel,
lodging, and food for technical experts, materials to wash
and paint vehicles, costs for skilled and unskilled labor,
and costs for the initial repair of 246 armored vehicles at
both Muqdadiya and Taji. Id. This invoice also
included a 15% overhead cost and 10% profit. Id. It
was for $16, 466, 897.15. Id. In sum, these three
invoices totaled $24, 714, 697.15.
G.
October 19, 2004 Meeting
On
October 19, 2004, a meeting was convened at MoD headquarters
to ensure the IMERP was progressing. The meeting consisted of
Shaways, Beadle, Marr, Dale Stoffel, Zayna, Styles, Ziad
al-Cattan, and Jasim. Tr. 12/20/18 AM 13:21-14:19; Pl.'s
Ex. 20, 6.
Marr
arrived at the MoD at about the same time as Dale Stoffel,
and they waited together for about an hour while Zayna met
with the senior MoD officials in Shaways office. Tr. 12/20/18
AM 13:21-14:19. Beadle arrived shortly before Marr, Stoffel,
and him entered Shaways office. Id. And they were
later joined by Colonel Styles. Id.
1.
MoD Approved Wye Oak's Three Invoices
During
the meeting, the parties discussed Wye Oak's three
invoices and how they would be financed. Tr. 12/20/18 PM
64:3-16. Ultimately, Marr testified that Shaways declared MoD
accepted the invoices. Tr. 12/20/18 AM 16:13-20. And Beadle
further testified Shaways agreed to pay the invoices to Dale
Stoffel. Tr. 12/20/18 PM 65:23-66:4. This testimony regarding
Shaways' ratification of the invoices and agreement to
pay Dale Stoffel was admissible as non-hearsay admissions by
a party-opponent. Shaways was authorized to make such
decisions for MoD regarding all matters related to Wye
Oak's work under the BSA. See Pl.'s Ex. 6
(letter from Shaways asserting he had full signatory
authority on all matters with respect to the BSA, as
designated by the Iraqi Minister of Defense); Fed.R.Evid.
801(d)(2)(C). Further, Shaways was an MoD employee speaking
on a matter-work related to the IMERP-within the scope of his
relationship with MoD while he was employed by MoD.
Fed.R.Evid. 801(d)(2)(D). The Court therefore concludes it is
more likely than not MoD approved Wye Oak's three
invoices and agreed to pay this money to Wye Oak's
president, Dale Stoffel.
2.
Wye Oak and MoD Effectuated the First Amendment to the
BSA
In
addition to discussing and approving the three Wye Oak
invoices, the parties at the October 19 meeting took up an
amendment to the BSA. Tr. 12/20/18 AM 18:5-18:20; Tr.
12/20/18 PM 63:7-17. The amendment, termed the “First
Amendment, ” was presented to the Court as Wye
Oak's business record, but lacked any signature from
either Shaways or Dale Stoffel. Tr. 12/18/18 AM 26:4-35:25;
Pl.'s Ex. 19; Pl.'s Ex. 19.1.
Defendants
took issue with the unsigned amendment as initially presented
to the Court because defendants wanted to also admit the
document's metadata in addition to the document itself.
Tr. 12/18/18 PM 3:5-4:12. Wye Oak had no objection to the
admission of the document's metadata. Tr. 12/18/18 PM
3:21-4:6. Metadata is data that describes and gives
information about other data. Here, the file's metadata
describes the file's creation date, time saved, and who
created, edited, and saved the file. Pl.'s Ex. 19.1. The
metadata showed William Felix last saved the Microsoft Word
document. Id. Indeed, David Stoffel testified this
document was found on the computer he had purchased for
Felix. Tr. 12/18/18 PM 93:6-7. Further, the metadata showed
the document was created on October 25, 2004 at 3:26 a.m. and
also last saved on October 25, 2004 at 3:26 a.m., with a
total editing time of 6 minutes. Pl.'s Ex. 19.1. However,
Marr and Beadle both testified the First Amendment was
brought up, and signed, during the October 19, 2004 meeting.
This raises a question as to whether the document presented
to the Court was indeed the pertinent document discussed at
the October 19 meeting or whether it was created in the first
instance on October 25, after the meeting.
Metadata
can be misleading. For example, “if a Microsoft Word
document is created on one machine, and transferred to and
saved to a second machine without being altered, the copy on
the second machine (erroneously) will show the date the
document was saved to the second machine as the date
created.” The Sedona Principles, Third Edition:
Best Practices, Recommendations & Principles for
Addressing Electronic Document Production, 19 Sedona
Conf. J. 1, 171 (2018). “There is . . . the real danger
that information recorded by the computer as application
metadata may be inaccurate.” Id. at 211. This
is a significant note of caution regarding the utility of
metadata in determining a document's true creation date.
Ultimately,
the Court finds it is more likely than not that the First
Amendment presented to the Court during trial, Pl.'s Ex.
19, was a copy of the document discussed during the October
19 meeting. Marr and Beadle both testified during the trial
this amendment was discussed by the parties at the meeting.
Tr. 12/20/18 AM 18:5-6 (“I saw a document, the document
looked like [Pl.'s Ex. 19].”); Tr. 12/20/18 PM 63:7
(“Well, they discussed this amendment, first of
all.”). The Court found Marr and Beadle to both be
extremely credible witnesses, who participated in the October
19 meeting. Their testimony, which corroborates one another,
when weighed against the inherent potential misimpressions
metadata can produce, leads the Court to conclude the
preponderance of the evidence establishes this document was
the same document the parties dealt with at the October 19,
2004 meeting.
The
Court must next decide whether this First Amendment was
actually signed by Shaways and Dale Stoffel. Both Marr and
Beadle testified they personally saw Shaways and Dale Stoffel
sign the document. Referring to the First Amendment, Marr
asserted “I saw Bruska Shaways sign it and Dale Stoffel
sign it.” Tr. 12/20/18 AM 18:9-10. Beadle also
responded in the affirmative when he was specifically asked
by Wye Oak's counsel whether he saw Bruska Shaways sign
the First Amendment and whether he saw Dale Stoffel sign the
First Amendment. Tr. 12/20/18 PM 63:12-17. While defendants
contend these statements are hearsay that cannot be admitted
to establish the First Amendment was signed and effectuated
as a valid amendment to the BSA, the testimony about Shaways
and Stoffel's signatures is admissible.
First,
signatures are written assertions and nonverbal conduct
intended as assertions, which makes them statements under
Federal Rule of Evidence 801(a). Shaways signature is
certainly not hearsay, as it constitutes an admission by a
party-opponent under Rule 801(d)(2). Shaways was authorized
to make decisions for the MoD regarding all matters related
to Wye Oak's work under the BSA. See Pl.'s
Ex. 6 (letter from Shaways asserting he had full signatory
authority on all matters with respect to the BSA, as
designated by the Iraqi Minister of Defense). So Shaways was
authorized to amend the BSA. Accordingly, his signature was a
statement made by an individual authorized to make a
statement on the subject that is now being offered against
the defendants. See Fed. R. Evid. 801(d)(2)(C).
Shaways was also an MoD employee making a statement on a
matter- the BSA-within the scope of his relationship with MoD
while that relationship existed. See Fed. R. Evid.
801(d)(2)(C).
Further,
Shaways and Stoffel's signatures constitute verbal acts
where the legal effects of the statements flow just by virtue
of the fact they were made. In other words, the significance
of these signatures lies solely in the fact they were made.
Testimony about the fact the signatures occurred was not
offered to prove the truth of anything asserted. Accordingly,
these signatures are not hearsay. See Fed. R. Evid.
801(c) adv. comm. note (“If the significance of an
offered statement lies solely in the fact that it was made,
no issue is raised as to the truth of anything asserted, and
the statement is not hearsay.”); Mueller v.
Abdnor, 972 F.2d 931, 937 (8th Cir. 1992) (finding
communications relevant to making a contract, such as
conversations and letters, are not hearsay because such
“verbal acts” are not assertions and are not
offered to prove the truth of the matter); 2 McCormick on
Evidence § 249 (7th ed. 2016) (“[P]roof of oral
utterances by the parties in a contract suit constituting the
offer and acceptance which brought the contract into being
are not evidence of assertions offered testimonially but
rather verbal conduct to which the law attaches duties and
liabilities.”); see also Preferred Properties, Inc.
v. Indian River Estates, Inc., 276 F.3d 790, 799 n.5
(6th Cir. 2002); Stuart v. UNUM Life Ins. Co. of
Am., 217 F.3d 1145, 1154 (9th Cir. 2000). The credible
testimony from Marr and Beadle regarding Shaways and Stoffel
signing the First Amendment sufficiently demonstrates it is
more likely than not both parties signed the First Amendment
and therefore validly amended the BSA.[3]
This
amendment attempted to clarify the BSA. The First Amendment
altered the definition of “military refurbishment
services” to read:
any services sold, performed for, or provided with respect to
any Refurbished Military Equipment that is either retained by
the Ministry or sold or otherwise provided to Customers by
the Ministry, including, but not limited to, the inspection
of the Military Equipment prior to performing any Military
Refurbishment Services to make a value assessment and a
refurbishing assessment for such Military Equipment,
including but not limited to, construction of facilities,
bases, billeting, service/repair depots, repair
factories/facilities.
Pl.'s Ex. 19; Pl.'s Ex. 19.1. Wye Oak's role as
the sole and exclusive broker for providing military
refurbishment services was altered such that Wye Oak was now
appointed for:
the provision of Military Refurbishment Services with respect
to all of the various military bases, offices and properties
owned by, or under the control of, the Ministry and/or the
Republic of Iraq, wherever such bases, offices and property
maybe [sic] located and all the related military equipment
located thereon or otherwise owned by the Ministry and/or the
Republic of Iraq, including but not limited to, construction
of facilities, bases, billeting, service/repair depots,
repair factories/facilities.
Pl.'s Ex. 19; Pl.'s Ex. 19.1. And one of the
compensation terms in the BSA was altered such that:
The Ministry shall pay [Wye Oak] a commission of minimum of
ten percent (10%) based on the Contract Value set out in each
Sales Contract entered into by the Ministry, pursuant to this
Agreement. With respect to Refurbished Military Equipment and
Military Refurbishment Services, the Ministry will pay [Wye
Oak] ten percent ...