Part 2 of 2
C. INSLAW ATTEMPTS TO DEMONSTRATE ENHANCEMENT OWNERSHIPINSLAW and the Department ostensibly resolved their dispute by "good-faith" action on a contract modification (Mod. 12) dated April 11, 1983. As a result, DOJ agreed to continue to provide advance payments to INSLAW. [56] According to Judge Bryant, under this agreement:
The parties reaffirmed their understanding that their initial contract governs the rights to the disputed software.
By letters dated April 5, and April 12, 1983, INSLAW attempted to demonstrate that its enhancements were privately funded, but the Department did little to assist INSLAW in determining what documentation would be acceptable. [57] By letter dated April 21, 1983, Mr. Videnieks reiterated that the contract entitled the Government to a version of PROMIS with no restrictions, and demanded that INSLAW:
. . . . provide all information necessary to demonstrate that the change was developed both at private expense and outside the scope of INSLAW's performance of any Government contract.
INSLAW sent another proposed methodology to demonstrate private funding by letter dated May 4, 1983. [58] Mr. Videnieks responded that INSLAW's methodology was unacceptable because it did not identify enhancements developed without Federal funds. [59] Mr. Videnieks never provided INSLAW with a methodology on standards by which INSLAW could demonstrate his evidence requirements.Mr. Jack Rugh, the Department's Acting Assistant Director for Office of Management Information Systems Support (OMISS), analyzed the INSLAW submissions supporting its contentions that Enhanced PROMIS had been privately funded. Mr. Rugh stated under oath during the Bankruptcy Court hearing that it was his opinion that the methodology used by INSLAW to support its assertion was flawed and that the companys presentation "probably" (emphasis added) lacked accounting records to support its claims. Mr. Rugh further stated that he could not recall if he had informed INSLAW of his concerns regarding their lack of accounting records to substantiate their claims. Mr. Rugh said that although he could see no reason why he would withhold this information from INSLAW, he could see no reason for including it. [60] Mr. Rugh stated, however, that INSLAW had an excellent method of documenting the changed (enhanced) source code, so that those changes could be considered proprietary if they were attributed to a particular private source. [61] This admission caused the bankruptcy judge to conclude:
This process of comparing the enhancements proofs with the previously-provided PROMIS software could have been performed easily by INSLAW with DOJs assistance in the summer of 1983, when INSLAW attempted to negotiate this issue with DOJ and submitted to DOJ its memoranda proving specific enhancements. All of the documents used by INSLAW in this proceeding to identify the funding of its enhancements existed at the time the negotiations should have occurred. As Mr. Rugh conceded at trial, the proofs offered by INSLAW would have satisfied him that the enhancements were indeed privately funded. (Rugh, T. 1517-1520). DOJ was required to negotiate then, in 1983, as Videnieks specifically had proposed under Modification 12, (see PPFF 228-236) but instead it wrongfully and cynically failed either to negotiate in good faith or even to reveal to INSLAW any purported concerns of Messrs. Rugh and Videnieks at that time with INSLAW's proposed method of proof (see PPFF 246-250). [62]
Mr. Videnieks never accepted any INSLAW attempts at defining proprietary enhancements, and Department officials concluded that the Department had the same unlimited rights to Enhanced PROMIS as it had with public domain PROMIS. This posture was made clear from a variety of sources, including Messrs. Brewer and Videnieks. In a sworn statement before this committee, Mr. Brewer responded to the following questions:
Question: At this April 19th meeting, do you recall making the statement that the Department had unlimited rights to the software?
Mr. Brewer: That was our position throughout this whole thing, yes.
Question: What is your view today on that?
Mr. Brewer: I maintain that we negotiated for and received unlimited rights and data.
Mr. Videnieks also believed that the Department had title to Enhanced PROMIS, which he characterized while discussing his position regarding Modification 12 in a sworn deposition before this committee:
Initially, I'm the one who wanted no modification. I wanted only a letter saying, "Give us the data," because if we we dont need any signatures, if we can get the goods. My words. The goods were ours under the contract. All we would have to pay for to effect delivery of those goods were reproduction costs.
Brewer, I believe, wanted a supplemental agreement but not a modification. I didnt want any of them. But the legal advice was that Bill Snider (the Department's legal counsel) felt strongly that there should be a Modification 12, but my opinion was supported by Patricia Rudd, who was the Chief Procurement Officer at that time.
So we in Procurement, the hands-on people, thought that the contract as it stands had the mechanism in there for satisfying the Program Officers needs. But the lawyers on all sides felt that we needed to write escrow agreements and make the thing look pretty, I guess. [63]
Mr. Videnieks, by letter dated July 21, 1983, told INSLAW that:
We agree with you that Modification No. P0012 to the Contract continues to limit dissemination of that version of the PROMIS computer software specified in the modification. Modification No. P0012 will continue to apply in the event that the Government invokes the provisions of Clause 22, "Disputes," in that the Government will limit dissemination pending a Contracting Officers Final Decision in the matter. [64]
On December 29, 1983, in spite of a report that there was progress with INSLAW counsel on resolution of the contract problems, Judge Jensen and other members of the PROMIS Oversight Committee approved the termination of the word processing portion of the contract for default based on their view that INSLAW had failed to perform this portion of the contract. [65] However, in February 1984, Department procurement counsel William Snider issued a written legal opinion showing that the Department lacked sufficient legal justification for a default termination. Instead, the PROMIS Oversight Committee approved the termination of the word processing portion of the contract for convenience. Shortly thereafter, Mr. Brewer notified Mr. Hamilton by telephone that Judge Jensen had decided to only terminate the word processing portion of the INSLAW contract at the 74 smaller U.S. attorneys offices for convenience of the Government. [66]
D. THE DEPARTMENT MISAPPROPRIATED INSLAW'S SOFTWAREThe Department's position that it owned Enhanced PROMIS was founded on amendments to the RFP [67] that (1) made available to all offerors copies of the pilot project software and (2) stated that the RFP does not anticipate redevelopment of the public domain PROMIS software used in the pilot offices. The RFP also stated that:
All systems enhancements . . . performed pursuant to this contract shall be incorporated within the systems which have already been installed in the U.S. attorneys offices, including systems installed pursuant to other contracts. . . .
According to Department officials, this language was included to ensure that offices already using PROMIS would benefit from the enhancements and modifications to the Government-furnished software during performance of the new contract. Unfortunately, this language may also have blinded Department management to the idea that INSLAW had made privately funded enhancements that were its property, notwithstanding the Department's claims to the contrary.
INSLAW attempted to convince Department officials that it held proprietary rights to Enhanced PROMIS over a period of several years, but to no avail. The Department steadfastly ignored INSLAW's requests, and even fought two judgments that it believed were in error based on technical, legal issues rather than on the merits of the case. Department officials have continued to maintain that they enjoy total control of Enhanced PROMIS since they obtained it from INSLAW in 1983.
After Modification 12 was signed and the Department obtained Enhanced PROMIS and terminated the installation of PROMIS at the 74 smaller U.S. attorneys offices, INSLAW again attempted to define its enhancements to the Department while the Department continued to use INSLAW's software and services. Each attempt was rebuffed by Mr. Videnieks. He issued a series of determinations in response to INSLAW's claims between November 1984 and September 1986. Finally, almost 3 years after signing Modification 12, Mr. Videnieks declared, on February 21, 1986, that INSLAW had no enhancements that were proprietary to it, and denied INSLAW's claim of $2.9 million for licensing fees.
The Bankruptcy Court took the position that the Department obtained INSLAW's Enhanced PROMIS through "fraud, trickery, and deceit." As stated by Judge Bason:
Under Modification 12, it is undisputed that INSLAW delivered Enhanced PROMIS to DOJ on the basis of an explicit commitment by DOJ which had three components: first, to bargain in good faith to identify the proprietary enhancements; second, to decide within a reasonable time which enhancements it wanted to use; and third, to bargain in good faith with INSLAW as to the price to be paid for such enhancements. On the basis of the foregoing and all of the evidence taken as a whole, this court finds and concludes that the Department never intended to meet its commitment and that once the Department had received Enhanced PROMIS pursuant to Modification 12, the Department thereafter refused to bargain in good faith with INSLAW and instead engaged in an outrageous, deceitful, fraudulent game of "cat and mouse," demonstrating contempt for both the law and any principle of fair dealing. [68]
The Department's unilateral claim of ownership rights to Enhanced PROMIS, coupled with Mr. Videnieks denial of INSLAW's claims to proprietary enhancements, demonstrates at the very least, a mechanistic approach to procurement policy that always favors the Department, which just happens to be in a most favored negotiating position at every turn. At worst, it reflects a biased view that denied due process and full and fair consideration, for whatever reason. Most disturbing, Mr. Brewer and Mr. Videnieks, the persons in charge of the PROMIS project, refused to consider the software ownership concepts involved in INSLAW's assertions. The judge, in the Bankruptcy Courts findings of fact and conclusions of law, stated:
Brewer was not given and had not considered INSLAW's January 13, 1982 letter, or any of the pre-contract correspondence between INSLAW and Videnieks; therefore, Brewers subsequent positions regarding INSLAW's proprietary rights were taken without consideration of this letter. [69]
This position which seemed to be predicated more in the fear of giving up an advantageous position, than reaching a determination on the merits, is corroborated in an August 15, 1984, memorandum, in which Mr. Brewer stated that:
. . . the proposal would substantially alter our rights in data (e.g., we would become a licensee and thus give up the unlimited rights we currently enjoy). (Emphasis added.) [70]
This belief, was shared by other officials at the Department. In its analysis of an INSLAW proposal, dated April 30, 1985, an EOUSA analysis stated:
. . . it appears (to the Department) that there are no proprietary enhancements.
All . . . proposals received from INSLAW. . . . attempt to force the Department into acknowledging INSLAW's proprietary interest in the U.S. attorneys version of PROMIS by offering a license agreement for software maintenance. To accept INSLAW's proposal would, in effect, ratify INSLAW's claim that the software is proprietary; not only the micro-computer version which INSLAW proposes to develop, but also the Prime mini-computer version currently operational in 20 districts. [71]
Also, in a November 15, 1985, counter proposal to an INSLAW settlement offer, Justice Management Divisions General Counsel hewed to the inflexible position that:
1. The United States will not pay INSLAW any additional money for software obtained pursuant to this contract.
2. INSLAW will recognize that the United States has the right to unrestricted use of the software obtained or delivered under this contract for any Federal project, including projects that may be financed or conducted by instrumentalities or agents of the Federal Government such as its independent contractors.
3. The Department of Justice will agree not to make or permit any disclosure or distribution of the software other than as described above (in 2. above) or as required by Federal law. [72]
Between August 29, 1983, and February 18, 1985, INSLAW implemented Enhanced PROMIS in 20 U.S. attorneys offices.
Yet, even as negotiations were underway, the Department, between June 24, 1985, and September 2, 1987, installed Enhanced PROMIS software at 25 additional sites. [73] According to INSLAW's counsel, Elliot Richardson, Enhanced PROMIS was illegally copied to support an additional two sites and subsequently 31 additional sites were brought "on line" via telecommunications. This action was considered an explicit breach of the bankruptcy rules governing the respective actions of creditors and debtors in a reorganization situation. As stated in the findings of facts, the automatic stay provisions of the Bankruptcy Code prohibit "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." [74] The Department violated the provisions of the stay by installing Enhanced PROMIS at the additional sites, and also accomplished this deed over the known protests of INSLAW. On September 9, 1985, Mr. Hamilton told the Department that:
I am extremely disturbed and disappointed to learn that the Executive Office for U.S. Attorneys has begun to manufacture copies of the PROMIS software for customization and installation in additional U.S. attorneys offices, specifically those in St. Louis, Missouri, and Sacramento, California. This action occurs at the very time that the Department of Justice and INSLAW are attempting to resolve, by negotiation, INSLAW's claim that the U.S. attorneys version of PROMIS contains millions of dollars of privately-financed enhancements that are proprietary products of INSLAW and for which INSLAW has, to date, received no compensation. [75]
Not only did the Department proceed with the national installation of Enhanced PROMIS, but it also may have used its "unlimited rights" posture as a pretextual basis for its national and international distribution of Enhanced PROMIS outside of the Department. Details of this distribution are discussed in section IV of this report.
According to Judge Bryant:
Although INSLAW and the Justice Department negotiated over the enhancements that INSLAW indicated that it had included in the proprietary version of PROMIS, the parties could not agree that the enhancements had been paid for with non-government funds. While INSLAW made several efforts to demonstrate the private financing of the enhancements, the Government did not accept its methodology for allocating funding. When asked to provide an alternative methodology that would be acceptable, the Government declined. [76]
The Department proceeded in its unilateral actions despite internal advice that INSLAW's claims were not frivolous and in fact, likely to be sustained in a court challenge. Pursuant to a letter dated July 9, 1986, from Senator Mathias, Mr. Arnold Burns, the Deputy Attorney General, conducted an inquiry into the status of the INSLAW litigation and was told that INSLAW wanted the Department to pay royalties. As a result of this briefing, Mr. Burns suggested that the issue should be turned around and that a claim against INSLAW should be made for INSLAW to pay royalties to the Government since he believed that PROMIS was the Department's property. Department research provided a shocking result to Mr. Burns:
. . . the answer that I got, which I wasnt terribly happy with but which I accepted, was that there had been a series of old correspondence and back and forthing (sic) and stuff, that in all of that, our lawyers were satisfied that INSLAW could sustain the claim in court, that we had waived those rights, not that I was wrong that we didnt have them but that somebody in the Department of Justice, in a letter or letters, as I say in this back and forthing (sic), had, in effect, waived those rights. [77] (Emphasis added.)
Considering that the Deputy Attorney General was aware of INSLAW's proprietary rights, the Department's pursuit of litigation can only be understood as a war of attrition between the Department's massive, tax-supported resources and INSLAW's desperate financial condition, with shrinking (courtesy of the Department) income. In light of Mr. Burns revelation, it is important to note that committee investigators found no surviving documentation (from that time frame) which reveal the Department's awareness of the relative legal positions of the Department and INSLAW, on INSLAW's claims to proprietary enhancements referred to by Mr. Burns.
E. INSLAW DECLARES BANKRUPTCY AND PURSUES LITIGATIONBy February 1985, at least $1.6 million in contract payments had been withheld by the Department and INSLAW was forced to file for chapter 11 reorganization in the Bankruptcy Court for the District of Columbia. [78] On June 9, 1986, INSLAW filed a Complaint for Declaratory Judgment, and for an order Enforcing Automatic Stay [79] and Damages for Willful Violation of Automatic Stay in the Bankruptcy Court. [80] In its pleadings, INSLAW asserted that Mr. C. Madison Brewer, who was responsible for implementing PROMIS throughout the Department, was instrumental in propelling INSLAW into bankruptcy, and that he thereafter hindered INSLAW in its development of a reorganization plan. [81] INSLAW also alleged that the Department had improperly converted and exercised control over INSLAW's proprietary Enhanced PROMIS and that its concerns were made known to the highest levels of Department management, without any departmental response. [82]
On July 20, 1987, the court began a trial that lasted 2 1/2 weeks and involved sworn statements from over 40 witnesses and thousands of pages of documentary evidence. [83] On September 28, 1987, Bankruptcy Court Judge Bason issued an oral ruling on liability, concluding that a key Department official was biased against INSLAW and that the Department "took, converted, and stole" INSLAW's Enhanced PROMIS by "trickery, fraud, and deceit." [84] On January 25, 1988, the bankruptcy judge issued his written order on liability, which documented his September 1987 oral ruling. On February 2, 1988, the court issued an order awarding INSLAW $6.8 million in damages and $1.2 million in attorneys fees.Department violated the Bankruptcy Court's automatic stay: During INSLAW's period of chapter 11 bankruptcy, the Department proceeded to copy and use INSLAW's Enhanced PROMIS, and even spread its use in violation of the automatic stay. By letter dated March 14, 1986, shortly after INSLAW declared bankruptcy, INSLAW's counsel notified the Department's contracting officer that:
. . . any continued use by the Department of the (Enhanced) PROMIS software without the consent of INSLAW and the use of the software without any agreement as to the payment of license fees contravene INSLAW's property rights, its rights as a debtor in possession under the Bankruptcy Code and is a wrongful exercise of control over property of the debtors estate in violation of the automatic stay now in effect. Furthermore, the Department's disclosure and dissemination of the PROMIS software to third parties will substantially dissipate, if not completely waste, the commercial value of this major INSLAW asset. We will hold the Department of Justice liable for any such loss of the value of INSLAW's property rights and if necessary will take such actions as are required to prevent such a loss. . . . If the Department of Justice causes a loss in the commercial value of INSLAW's principal asset, PROMIS, it may be responsible for destroying the company. [85]
The Bankruptcy Court found that the Department had violated the automatic stay by not negotiating a license fee for Enhanced PROMIS after INSLAW declared bankruptcy:
. . . INSLAW is entitled to automatic stay protection for its enhancements under the bankruptcy laws, and appropriate relief for violations of the automatic stay by DOJ.
* * * * * * *
Under 11 U.S.C. 362(h), (a)n individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys fees and, in appropriate circumstances, may recover punitive damages.
* * * * * * *
A "willful" violation does not require a specific intent to violate the automatic stay. Rather, the statute provides for damages upon a finding that the defendant knew of the automatic stay and that the defendants actions which violated the stay were intentional. Whether the party believes in good faith that it had a right to the property is not relevant to whether the act was "willful" or whether compensation must be awarded.
* * * * * * *
The judge concluded that the Department was liable for actual damages, including costs and attorneys fees, and that INSLAW could recover punitive damages.
F. DISTRICT COURT JUDGE WILLIAM BRYANT'S DECISION ON APPEAL OF THE BANKRUPTCY COURT'S RULINGThe Department appealed the Bankruptcy Court rulings in the U.S. District Court for the District of Columbia. On November 22, 1989, the District Court upheld the Bankruptcy Courts orders regarding liability and damages against the Department. District Court Judge William Bryant in his ruling stated:
The government accuses the bankruptcy court of looking beyond the bankruptcy proceedings to find culpability by the government. What is strikingly apparent from the testimony and depositions of key witnesses and many documents is that INSLAW performed its contract in a hostile environment that extended from the higher echelons of the Justice Department to the officials who had the day-to-day responsibility for supervising its work. [86]
In its decision upholding the ruling of the Bankruptcy Court, the District Court:
Emphasized that the Department knew Enhanced PROMIS represented INSLAW's central asset and that ownership of the software was critical to the companys reorganization.
Held that the Department's unilateral claim of ownership and its installation of Enhanced PROMIS in offices around the United States violated the automatic stay.
Concurred with the bankruptcy courts conclusion that the Department never had any rights to Enhanced PROMIS.
The District Court also agreed with Bankruptcy Judge Bason's finding that:
. . . the government acted willfully and fraudulently to obtain property that it was not entitled to under the contract. . . .
and found
. . . convincing, perhaps compelling support for the findings set forth by the bankruptcy court. . . . . The cold record supports his (Bason's) findings under any standard of review. [87]
The District Court also found that the Department unlawfully violated the automatic stay provision of the Bankruptcy Code and agreed that the Department attempted to convert INSLAW's bankruptcy standing from a chapter 11 reorganization to a chapter 7 liquidation. The court also upheld the Bankruptcy Courts order regarding assessed damages as a result of the Department's unlawfully exercising control over and proliferating INSLAW's Enhanced PROMIS and upheld the award of attorneys fees, but reduced compensatory damages by $655,200. [88]
DEPARTMENT'S POSITION AGAINST JUDGE'S DECISION IS REBUTTED ON APPEAL
The Department's legal defense was found to be deficient on appeal by District Court Judge Bryant. [89] The Department contended that the Bankruptcy Court lacked jurisdiction over INSLAW's claim because the Department had not waived its immunity from monetary judgments against the United States. Judge Bryant ruled against the Department's position stating that the Department's actions throughout the litigation suggested a calculated decision to assert a claim against INSLAW until it appeared that the Department had more to lose than gain.
The Department also argued that the Bankruptcy Court should have referred the case to the Department of Transportation Board of Contract Appeals (DOTBCA) for judgment because INSLAW's claims were based on contract law. However, Judge Bryant found that the INSLAW case did not involve a contract claim but was grounded in bankruptcy law, whereby INSLAW sought relief for violations of the automatic stay provisions of bankruptcy laws. Judge Bryant also found that Bankruptcy Judge Bason used his discretion to decide the legal ownership of Enhanced PROMIS that was necessary for determining whether there had been a violation of the automatic stay.The Department also argued that INSLAW did not prove that the automatic stay had been violated. However, Judge Bryant concluded that the facts established in the Bankruptcy Court support the multiple violations of the automatic stay that the Bankruptcy Court found. Judge Bryant stated that the Department knew that PROMIS represented INSLAW's principal asset and that, without ownership of the software, the companys economic viability was threatened. Judge Bryant found that the Department acted willfully and fraudulently to obtain property that it was not entitled to under the contract and that, once the software was in the possession of the Department, there was no evidence that it ever negotiated in good faith over the proprietary enhancements claimed by INSLAW. Judge Bryant noted that, instead of following the procedure established by the Bankruptcy Code for resolving the ownership dispute and seeking relief from the automatic stay,
the Department had pursued a course of self-help by claiming Enhanced PROMIS to be its property and installing it throughout the United States.The Department also charged that Judge Bason exhibited the appearance of bias and should have recused himself, and requested a new trial based on this assertion. The Department also accused Judge Bason of using the bankruptcy proceeding to find culpability by the Government. Judge Bryant responded that the Department had previously been denied its reversal request by the District Court and, considering the earlier denial, no new trial would be granted. J
udge Bryant further stated that, while the bankruptcy review must focus on Department actions taken after INSLAW filed for bankruptcy, the Department's actions cannot be understood without understanding the events leading up to the bankruptcy. He added that what was strikingly apparent from the evidence was that INSLAW performed its contract in a hostile environment from the higher echelons of the Justice Department to the officials who had responsibility for supervising its work. Judge Bryant also noted that Judge Bason's attention to detail, in both his oral and written rulings, demonstrated a mastery of the evidence and provided compelling support for his findings. Judge Bryant concluded that the record adequately supported the bankruptcy judges findings under any standard of review.The Department also stated that the award of damages by the Bankruptcy Court exceeded its authority and urged that no attorney fees be awarded. However, Judge Bryant determined that the Bankruptcy Court discharged its responsibility to assess damages based on the evidence provided at trial, and its decision was supportable.
G. APPEALS COURT REVERSES INSLAW'S VICTORY ON PRIMARILY JURISDICTIONAL GROUNDSOn October 12, 1990, the Department appealed the District Court decision to the U.S. Court of Appeals for the District of Columbia. The Department raised some of the same issues previously raised in its appeal to the District Court and requested a reversal on the basis of the facts found in the Bankruptcy Court. In its brief for the appellants, the Department stated that:
In the district court, the Government set out the clear errors underlying these findings of facts at great length and with great specificity. The district courts decision is deficient in not discussing any of these specific contentions. Of necessity, our factual contentions on appeal are more limited. [90]
The following issues were raised by the Department on appeal to the Court of Appeals: (1) that the Department's use of computer software in its possession did not violate the automatic stay and was more properly the subject of a contract dispute under the Contract Disputes Act, which should be heard in DOTBCA; (2) that since there was no motion to convert INSLAW from a chapter 11 to a chapter 7, there was no violation of the automatic stay; (3) that the Department did not file a claim and therefore, did not waive its sovereign immunity; and (4) that damage awards for violation of the automatic stay can only be paid to individuals not corporations. [91]
On May 7, 1991, a panel of the U.S. Court of Appeals for the District of Columbia reversed both the Bankruptcy Courts and District Courts judgments on primarily jurisdictional grounds the Circuit Court found that the Bankruptcy Court was an inappropriate forum to litigate the issues it decided and furthermore that the Department had not violated the automatic stay and dismissed INSLAW's complaint against the Department. The Court of Appeals noted that both courts found that the Department had "fraudulently obtained and then converted Enhanced PROMIS to its own use." The court further noted that: "Such conduct, if it occurred, is inexcusable." [92]On October 9, 1991, INSLAW filed an appeal for a writ of certiorari to the Supreme Court of the United States. On January 13, 1992, the Supreme Court denied the writ.
H. DEPARTMENT ASSERTS ERRONEOUS POSITION BEFORE DOTBCAIn addition to initiating proceedings in the Bankruptcy Court, INSLAW pursued remedies under the Contract Disputes Act. INSLAW filed notices of appeals with the Department of Transportation Board of Contract Appeals (DOTBCA) in February 1985, and in May and November 1986. On June 23, 1986, the first complaint was filed before DOTBCA. Additional claims were filed on September 19, 1986, and August 24, 1987.
INSLAW's claims before DOTBCA fell into six categories: (1) computer time-sharing charges associated with the computer center operated by INSLAW and used by several U.S. attorneys offices; (2) contract target fees and voucher payments withheld by the Department and additional fees due INSLAW as a consequence of changes in the scope of work ordered by the Department; (3) indirect costs, including overhead; (4) direct costs; (5) costs, including legal fees, allegedly incurred by INSLAW because of the termination for convenience by the Department of the word processing portion of the contract; and (6) costs incurred because the Department withheld payments.
These claims were held in abeyance pending the outcome in the bankruptcy adversary proceeding. INSLAW's claims against the Department totaled $1,589,562 and the Department's claims against INSLAW totaled $1,216,752. On November 13, 1991, DOTBCA established October 13, 1992, as the trial date to hear INSLAW's case. [93]
Unfortunately, the Department took the spurious position that it has successfully defended itself against assertions of illegality, as defined in two courts and based on some of its own internal analysis, by having convinced the Appeals Court to vacate the earlier courts decisions based on jurisdictional grounds a ruling that had absolutely no bearing on the truth of the matter adjudicated on the basis of the substantial evidence presented. The Department is operating under the belief that it has been exonerated of any misconduct. In a November 13, 1991, hearing before DOTBCA, Department counsel stated that:
I think those trials speak for themselves, and every order has been vacated. . . . [94]
However, the DOTBCA judge responded:
There is one problem. The fact that a judge or a court doesnt have jurisdiction doesnt mean that the court is completely ignorant. True, Mr. Bason (the bankruptcy court judge) and Mr. Bryant (the judge that heard the initial appeal) did not have jurisdiction, but they did make some very serious findings on the basis of sworn testimony.
They had been truly vacated, and it may be that all the statutes to run have run and they cant go anywhere. Those cases may be dead forever. But it has left a cloud over the respondent (the Department). (Emphasis added.) [95]
Thus, still another adjudicating judge found that the rulings of the two courts that reviewed the INSLAW litigation ran counter to the Department's intransigent approach to recognizing formerly what its own internal analysis had suggested in confidence. When asked for his reaction to the finding of the District Court, Attorney General Meese responded that the ruling:
. . . seems totally at odds with everything I have learned and been told while I was in the Department of Justice . . . that there was any wrongdoing on the part of Justice people. [96]
Department counsel at the DOTBCA hearings responded to the judge by stating that:
Your Honor, with all due respect, those orders were vacated. And the effect of the vacating is to make them void. They have no force in effect whatsoever. They are as if they never happened. They it would be improper for a court or a board or any other judicial tribunal to rely, in any way, shape or form, on those decisions. (Emphasis added.) [97]
Certainly, the Department may be correct in asserting that there is presently no legal force to the courts rulings on terms of enforceability. But that result is because of the jurisdictional defects, and not the merits of the case, which had been adjudicated in two separate forums. However, it is not correct for the Department to conclude that the INSLAW matter has been resolved or that it should be considered as if it "never happened." The Department has not yet compensated INSLAW for its illegal and improper use of software that was found to be proprietary to INSLAW by two courts. Furthermore, Justice officials cannot escape accountability merely because the Appeals Court has reversed the lower courts rulings based on a procedural ruling.
As the DOTBCA judge concluded, there definitely remains a cloud over the Department's handling of INSLAW's proprietary software. Department officials should not be allowed to avoid accountability through a technicality or a jurisdiction ruling by the Appeals Court and INSLAW deserves to receive equitable consideration of its claims.An impartial inquiry needs to be undertaken to assess the facts and potential culpability of the actions involved. Strategic gamesmanship has no place when the full weight and resources of the enforcement arm of the Government is pitted against a private interest, whose financial ability to litigate may have been compromised by the very departmental actions in dispute.
In addition, should the Department not resolve this matter fairly and expeditiously, the dispute should be referred through a bill to the Chief Judge of the Claims Court whereby the statute of limitations can be suspended. To recover in such a case a claimant must show that (1) the Government committed a negligent or wrongful act, and (2) this act caused damage to the claimant. [98]
The litigation of a congressional reference case is fully adversarial once the pleading is complete. It proceeds like any other court case through discovery, pretrial, trial, the submission of requested findings and briefs, and decision. After the case is heard, a hearing officers report is submitted to the Congress, together with the findings of facts. The hearing officer must provide sufficient conclusions to inform Congress:. . . whether the demand is a legal or equitable claim or a gratuity, and the amount, if any, legally or equitable due from the United States to the claimant. [99]
There is a distinct possibility that the extent of damages to INSLAW (particularly the Department's distribution of INSLAW's proprietary PROMIS) will never be fully known. Department documents provide evidence of distribution of PROMIS to at least one foreign government. There are also numerous allegations of widespread distribution to other foreign governments.
I. DEPARTMENT ENCOURAGES CONTRACT MEDIATION WHILE IT HINDERS SETTLEMENTIt is important to document that another equivocal effort to mediate the INSLAW dispute was initiated on June 28, 1990, when the Department requested the Appellate Court to consider INSLAW for the Appellate Mediation Program. [100] This action on the Department's part appeared significant because it was its first mediation request out of the 13 appeals submitted since January 1989. However, the success of this program requires that confidentiality be ensured throughout the mediation process. Information concerning cases screened by the Chief Staff Counsels Office is not to be shared with judges or with anyone outside the court. The judges do not know which cases are selected for mediation. [101]
However, for some unexplained reason, the Department failed to comply with this most basic requirement. On October 3, 1990, Ms. Linda Finklestein, Circuit Executive of the District of Columbia Circuit Court, contacted INSLAW's counsel and referred to an October 1, 1990, Washington Post article, which revealed that mediation had been requested by one of the parties. The article, cited to a departmental spokesman stated:
that the department has requested that the matter (INSLAW) be considered for mediation by the appeals court, in an attempt to settle the long-running dispute. [102]
This disclosure was completely contrary to the standards of the Appellate Program pursuant to the order of the court. The effect was to force INSLAW to withdraw from the program after only 3 months. It is difficult to understand the Department's strategy by this action. It may be that the Department wanted to maintain the facade of working diligently to settle a sticky contract dispute while working behind the scenes to sabotage it and keep pressure on INSLAW by forcing it to expend additional resources on legal support during the mediation process. If this is the case, the Department was successful. But the Department also succeeded in maintaining a near-flawless record of seeking delay over resolution and raising the level of suspicion about its motives to a point where the public trust in the untarnished pursuit of justice is subject to grave doubts.