Eagle vs KDH

8/3/2019 Eagle vs KDH

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6452334

IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

EAGLE INDUSTRIES UNLIMITED, INC., ))Plaintiff, )

)vs. ) Case No. __________________

)KDH DEFENSE SYSTEMS, INC., )

) JURY TRIAL REQUESTEDDefendant. )

)Registered Agent: )CT Corporation System )150 Fayetteville St., Box 1011 )Raleigh, NC 27601 )

COMPLAINT

Plaintiff Eagle Industries Unlimited, Inc. (Eagle) files the following complaint

against Defendant KDH Defense Systems, Inc. (KDH):

PARTIES

1. Plaintiff Eagle is a corporation organized and existing under the laws ofMissouri, with its principal place of business located at 1000 Biltmore Drive, Fenton,

Missouri.

2. Defendant KDH is a corporation organized and existing under the laws ofthe Commonwealth of Pennsylvania, with its principal place of business located at 401

Broad Street, Johnstone, Pennsylvania.


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JURISDICTION AND VENUE

3. This Court has jurisdiction over this action pursuant to 28 U.S.C. 1332.There is complete diversity of citizenship between the parties and the amount in

controversy exceeds seventy-five thousand dollars ($75,000), exclusive of interest and

costs. Venue is appropriate under 28 U.S.C. 1391(a).

FACTUAL BACKGROUND

A. The Marine Corps Request for Proposals and the Parties Teaming

Agreement

4.

Plaintiff Eagle is a world leader in the production of top-quality tactical,

individual equipment products for the military, homeland security, and law enforcement

agencies. Eagle designs and manufactures, among other things, vests to hold soft and

rigid ballistic-resistant materials (body armor). Eagle is headquartered in the St. Louis

area.

5. KDH is a company that is also involved in the manufacture of body armor.Upon information and belief, KDH specializes in the assembly of soft ballistic-resistant

materials.

6. In 2009, the United States Marine Corps (Marine Corps) issued a requestfor proposal M67854-09-R-3000 (the RFP) for the procurement of Plate Carriers

(PC) and Improved Modular Tactical Vests (IMTV). The RFP contemplated a five-

year, multiple award indefinite-delivery, indefinite-quantity (IDIQ) contract.


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7. IMTVs are wearable garments, made from various nylon materials, whichprovide a direct fire protection capability by holding ballistic-resistant materials and other

items in place across a Marines body. They are an upgrade to the currently deployed

Outer Tactical Vest (OTV)/Modular Tactical Vest (MTV).

8. Plate Carriers are also wearable garments, made from various nylonmaterials, that are an alternative to the OTV/MTV/IMTV that allows for greater mobility

with reduced thermal stress in high elevations, thick vegetation, and tropical

environments while maintaining an equal direct fire protection capability. The Plate

Carriers also hold ballistic-resistant materials and other items in place across a Marines

body.

9. In war zones, a combination of rigid and soft body armor protection is theprincipal personal defense system employed by United States Marines and other military

personnel.

10. In an effort to combine the strengths of both companies, Eagle and KDHentered into a teaming agreement (Teaming Agreement) on July 19, 2009 for the

preparation of a proposal in response to the RFP and for the performance of the RFP,

should an award to KDH have been made.

11. The Teaming Agreement, Clause 1.0, provides for an exclusive relationshipbetween KDH and Eagle for the sourcing of the parts to be provided by Eagle as part of

the Program, as defined in the Teaming Agreement.


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12. Clause 4.0 of the Teaming Agreement required KDH, in the event that itobtained award pursuant to the RFP, to award a subcontract to Eagle for the parties joint

effort to complete specified work under the RFP.

13. Clause 2.4 of the Teaming Agreement required the parties to mutuallyagree to negotiate in good faith to reach agreement on the price to be paid Eagle for the

items identified in Attachment A to the Teaming Agreement.

14. The term of the Teaming Agreement is five years, unless the agreement iseither extended by mutual agreement or is earlier terminated by certain specified events.

15. Clause 12 of the Teaming Agreement provides, inter alia: Pending finalresolution of any claim, controversy or dispute, the Parties will diligently proceed with

performance of this Agreement.

16. The parties executed an amendment to the Teaming Agreement inSeptember 2009 (Amendment 1) to confirm pricing and work split.

17. Pursuant to Amendment 1, KDH and Eagle agreed upon work split andpricing that shall be awarded to Eagle should KDH be awarded a prime contract.

18. The work split and pricing was set forth in an attachment to Amendment 1,and covered the 5-year period contemplated in Clause 6 of the Teaming Agreement.

19. KDH and Eagle jointly prepared a response to the RFP, and KDHsubmitted that proposal to the Marine Corps.


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B. Contract Award and the Marine Corps Revised Requirements

20. Pursuant to the RFP, the Marine Corps awarded indefinite-delivery,indefinite quantity contracts for Plate Carriers to three offerors, including KDH. The

Marine Corps also awarded contracts for IMTVs to two offerors, including KDH

(collectively, the two contracts awarded to KDH will be referred to as the Contract).

21. Pursuant to the Teaming Agreement, KDH awarded a letter subcontract toEagle for performance requirements of the Contract (the Subcontract).

22. The Subcontract incorporated the pricing enumerated in Amendment 1 tothe Teaming Agreement.

23. The Marine Corps subsequently issued Delivery Orders 1 and 2 to KDH foran initial buy of IMTVs.

24. After an award to KDH of initial requirements and delivery to the field fortesting, the Marine Corps required redesign of the IMTVs to be delivered under the KDH

contract.

25. In early 2011, KDH and Eagle engaged in negotiations over theadjustments to price necessitated by the Marine Corps request for redesign.

26. During the negotiations, KDH and Eagle agreed upon pricing for theMarine Corps redesign requirements.

27. On August 11, 2011, Eagle sent KDH a final schedule for delivery andprices on the redesigned IMTV requirements, which reflected the agreed-upon prices and

terms.


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28. Subsequently, KDH personnel affirmed KDHs agreement to prices setforth in the schedule transmitted by Eagle on August 11, 2011.

29. KDH has refused to sign an amendment to the Teaming Agreement,incorporating the agreed-upon changes to the pricing.

C. The Marine Corps Supplemental Requirements and the Parties Dispute

30. On or about August 24, 2011, Eagle received a notice that the MarineCorps had issued a Fair Opportunity Letter to KDH under the Contract for KDH to

submit a proposal to fill supplemental requirements for delivery of IMTVs

(Supplemental IMTV Requirements) under the RFP.

31. The Supplemental IMTV Requirements were to be ordered by the MarineCorps under the RFP.

32. The response date for the submission of bids to fill the Marine CorpsSupplemental IMTV Requirements was August 29, 2011.

33. On August 25, 2011, KDH and Eagle personnel participated in ateleconference that included a discussion regarding Eagles pricing for the Supplemental

IMTV Requirements.

34. In that teleconference, Eagle proposed to hold its prices at the prices it hadnegotiated and agreed to with KDH based on the Marine Corps revised requirements for

the IMTV.

35. In the teleconference, KDH claimed to have quotes from other vendors thatwere lower in price than the prices proposed by Eagle.


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36. KDH informed Eagle that Eagle would have to significantly reduce itsprices for the Supplemental IMTV Requirements. Eagle requested a pricing

recommendation from KDH.

37. KDH provided a pricing recommendation on August 26, 2011.38. The prices proposed by KDH were approximately 30 percent lower than the

prices which Eagle and KDH had previously agreed to for Eagles performance of the

Marine Corps redesigned requirements for the IMTV, which prices had been accepted

by the Marine Corps for Delivery Orders 1and 2.

39. In response to KDHs recommended pricing, Eagle informed KDH thatEagle would not be able to accept the prices because the proposed reduction in prices

would result in a substantial and adverse impact on Eagles profitability.

40. On August 29, 2011, KDH informed Eagle that KDH would use the pricingit had recommended to Eagle on August 26, 2011. As noted above, Eagle specifically

rejected that pricing.

41. Also on August 29, 2011, KDH informed Eagle that KDH had foundanother source from which to obtain its requirements.

42. By email dated August 29, 2011, KDH provided to Eagle what it referred toas Best and Final pricing, which increased the prices Eagle would be paid from the

prices KDH had issued to Eagle on August 26, 2011.

43. KDHs Best and Final prices were still substantially below the partiesagreed-upon pricing for the Marine Corps redesigned requirements for the IMTV.


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44. By an additional email on August 29, 2011, KDH informed Eagle that ithad submitted its Best and Final pricing for Eagle to the Marine Corps for the Marine

Corps Supplemental IMTV Requirements.

45. Eagle never agreed to the Best and Final pricing as proposed by KDH inits August 29, 2011 email.

46. By forwarding email and letter sent to KDH on September 1, 2011, Eagleprovided revised proposed prices for the Supplemental IMTV Requirements that reflected

substantial discounts to the previously agreed upon prices, but also reserving Eagles

rights to seek adjustment under the process set by the parties Disputes clause in Clause

12.0 of the Teaming Agreement.

47. Later on September 1, 2011, KDH again demanded that Eagle accept theBest and Final Pricing KDH submitted to the Marine Corps on August 29, 2011.

48. By forwarding email and letter on September 2, 2011, Eagle informedKDH of its willingness to perform the Supplemental IMTV Requirements at the Best and

Final prices demanded by KDH, subject to later appropriate adjustment under the

Disputes clause of the parties Teaming Agreement.

49. KDH has stated to Eagle that it would use entities other than Eagle if Eaglewill not agree to the Best and Final Pricing offered by KDH.

50. Upon information and belief, KDH has obtained quotes from twocompetitors of Eagle for performance of Eagles work for the Supplemental IMTV

Requirements.


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51. On August 25, 2011, KDH requested Eagle to provide KDH with Eaglesproprietary bill of materials for the manufacture of IMTVs. Upon information and belief,

KDH requested Eagles bill of materials in order to provide that information to Eagles

competitors so those competitors could submit price quotes for the Supplement IMTV

Requirements.

COUNT IDECLARATORY RELIEF

52. Eagle incorporates paragraphs 1 through 51 above by reference.53. Pursuant to 28 U.S.C. 2201 and Federal Rule of Civil Procedure 57, this

Court is vested with the power to determine questions regarding the construction and

interpretation of contracts, and is further vested with the power to declare the rights,

liabilities and obligations and other legal relations among parties to such contracts.

54. Eagle and KDH entered into the valid and enforceable Teaming Agreementdescribed above.

55. Eagle has a legally protectable interest under the Teaming Agreement.56. By reason of the above allegations set forth herein, a real, immediate, and

justiciable controversy exists between Eagle and KDH with respect to the parties rights

and obligations under the Teaming Agreement. A substantial controversy exists between

Eagle and KDH, which have genuinely adverse interests.

57. This controversy is ripe for judicial determination because KDH hasthreatened to, in the very near future, hire other subcontractors to perform work

encompassed by the Teaming Agreement, thereby violating its obligation to work

exclusively with Eagle as a part of the Program, violating its obligation to mutually


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agree to negotiate in good faith to reach agreement on the price to be paid Eagle for the

items identified in Attachment A to the Teaming Agreement, and violating the parties

previous, binding agreement to pricing.

COUNT IIBREACH OF CONTRACTSPECIFIC PERFORMANCE

58. Eagle incorporates paragraphs 1 through 57 above by reference.59. Eagle and KDH entered into the valid and enforceable Teaming Agreement

described above.

60. No adequate remedy for KDHs breaches exist due to the risk that Eaglesproprietary information would be shared with other potential subcontractors performing

work encompassed by the Teaming Agreement.

61. Moreover, Eagles damages are difficult to ascertain because the amount ofadditional services the Marine Corps will require pursuant to the IDIQ Contract is

unknown, but at contract award the maximum value was estimated at $380,260,385 for

both IMTVs and PCs.

62. Therefore, Eagle requests that this Court award Eagle the remedy ofdirecting KDHs specific performance of the parties exclusive Teaming Agreement,

specifically requiring that KDH honor its obligation to work exclusively with Eagle as a

part of the Program, to honor its obligation to mutually agree to negotiate in good faith

to reach agreement on the price to be paid Eagle for the items identified in Attachment

A to the Teaming Agreement, and to honor the parties previous, binding agreement to

pricing.


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63. In addition, Eagle requests that the Court award to Eagle all orders forrequirements under the Contract at the price mutually agreed to by the parties and not as

unilaterally determined by KDH, including the Supplemental IMTV Requirements.

COUNT IIIBREACH OF CONTRACT (CLAUSE 1.3)

64. Eagle incorporates paragraphs 1 through 63 above by reference.65. Eagle has, at all times, acted consistently with its obligations under the

Teaming Agreement.

66. Clause 1.3 of the Teaming Agreement provides: Each Party willparticipate exclusively with the other and will not participate in team efforts competitive

to the Teaming Agreement nor compete independently for the Program, but only for this

particular Program and only for the term of this Agreement.

67. KDH has materially breached Clause 1.3 of the Teaming Agreement by,upon information and belief, obtaining quotes from two of Eagles competitors and

working with those competitors to potentially replace Eagle as the subcontractor for the

Supplemental IMTV Requirements, as described above.

68. As a direct and proximate result of KDHs material breach of Clause 1.3 ofthe Teaming Agreement, Eagle has been damaged by KDHs breaches in excess of

$75,000.

69. Eagle requests a trial by jury for every issue so triable as of right.


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COUNT IVBREACH OF CONTRACT (CLAUSE 2.4)

70. Eagle incorporates paragraphs 1 through 69 above by reference.71. Clause 2.4 of the Teaming Agreement contains an explicit covenant of

good faith by requiring the parties to mutually agree to negotiate in good faith to reach

agreement on the price to be paid Eagle.

72. KDH has materially breached Clause 2.4 of the Teaming Agreement byrefusing to honor previously established prices and by submitting a bid to the Marine

Corps with pricing that was specifically rejected by Eagle.

73. As a direct and proximate result of KDHs material breach of Clause 2.4 ofthe Teaming Agreement, Eagle has been damaged by KDHs breaches in excess of

$75,000.

74. Eagle requests a trial by jury for every issue so triable as of right.COUNT VBREACH OF THE IMPLIED COVENANT OF GOOD FAITH

AND FAIR DEALING

75. Eagle incorporates paragraphs 1 through 74 above by reference.76. Eagle has fully performed its obligations under the Teaming Agreement

and has attempted, in good faith, to negotiate prices for the Supplemental RFP with

KDH.

77. In addition to Clause 2.4 of the Teaming Agreement, the TeamingAgreement also contains an implied covenant of good faith and fair dealing, as all

contracts do under Missouri law.


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78. KDH has breached the implied covenant of good faith and fair dealing byrefusing to honor previously established prices, by offering Eagle only take-it-or-leave-it

pricing, and by threatening to use entities other than Eagle to perform work encompassed

by the Teaming Agreement.

79. KDHs breaches have evaded the spirit of the exclusive TeamingAgreement so as to deny Eagle the expected benefit of the agreement.

80. Eagle has been damaged in an amount to be determined at trial.81. Eagle requests a trial by jury for every issue so triable as of right.

REQUEST FOR RELIEF

WHEREFORE, Plaintiff Eagle respectfully requests that the Court enter a

judgment against KDH and enter an order:

a. Issuing a declaratory judgment establishing the rights and obligations of the

parties under the exclusive Teaming Agreement namely, that KDH has an obligation to

work exclusively with Eagle as a part of the Program; to honor its obligation to mutually

agree to negotiate in good faith to reach agreement on the price to be paid Eagle for the

items identified in Attachment A to the Teaming Agreement; and to honor the parties

previous, binding agreement to pricing.

b. Awarding Eagle the remedy of specific performance specifically

requiring that KDH honor its obligation to work exclusively with Eagle as a part of the

Program, to honor its obligation to mutually agree to negotiate in good faith to reach

agreement on the price to be paid Eagle for the items identified in Attachment A to the

Teaming Agreement, and to honor the parties previous, binding agreement to pricing.


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c. Ordering KDH to pay Eagle actual damages, including consequential

damages, in excess of $75,000 and applicable interest arising from KDHs breach of

obligations under the Teaming Agreement;

d. Awarding the costs of suit, including reasonable attorneys fees; and

e. Award such other relief, both legal and equitable, as the Court may deem

just and proper.

Dated: September 15, 2011.

HUSCH BLACKWELL LLP

/s/ Greg G. Gutzler

Greg G. Gutzler, E.D.Mo. # [email protected] M. Berezney, E.D.Mo. # [email protected] Carondelet Plaza, Suite 600St. Louis, Missouri 63105

McKenna Long & Aldridge LLP

David R. [email protected] J. [email protected] Wewatta Street, Suite 700Denver, Colorado 80202

Attorneys for Plaintiff Eagle Industries

Unlimited, Inc.

Documents

Eagle vs KDH