IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION EAGLE INDUSTRIES UNLIMITED, INC.

, Plaintiff, vs. KDH DEFENSE SYSTEMS, INC., Defendant. Registered Agent: CT Corporation System 150 Fayetteville St., Box 1011 Raleigh, NC 27601 ) ) ) ) ) ) ) ) ) ) ) ) ) )

Case No. __________________

JURY TRIAL REQUESTED

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 of

Missouri, 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 of

the Commonwealth of Pennsylvania, with its principal place of business located at 401 Broad Street, Johnstone, Pennsylvania.

6452334

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 request

for proposal M67854-09-R-3000 (the “RFP”) for the procurement of Plate Carriers (“PC”) and Improved Modular Tactical Vests (“IMTV”). The RFP contemplated a fiveyear, multiple award indefinite-delivery, indefinite-quantity (“IDIQ”) contract.

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7.

IMTVs are wearable garments, made from various nylon materials, which

provide a direct fire protection capability by holding ballistic-resistant materials and other items in place across a Marine’s 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 nylon

materials, 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 Marine’s body. 9. In war zones, a combination of rigid and soft body armor protection is the

principal 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 KDH

entered 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 relationship

between 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 it

obtained 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 “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. 14. The term of the Teaming Agreement is five years, unless the agreement is

either extended by mutual agreement or is earlier terminated by certain specified events. 15. Clause 12 of the Teaming Agreement provides, inter alia: “Pending final

resolution 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 in

September 2009 (“Amendment 1”) to confirm pricing and work split. 17. Pursuant to Amendment 1, KDH and Eagle agreed upon “work split and

pricing 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 KDH

submitted 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 to

Eagle for performance requirements of the Contract (the “Subcontract”). 22. The Subcontract incorporated the pricing enumerated in Amendment 1 to

the Teaming Agreement. 23. The Marine Corps subsequently issued Delivery Orders 1 and 2 to KDH for

an initial buy of IMTVs. 24. After an award to KDH of initial requirements and delivery to the field for

testing, 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 the

adjustments to price necessitated by the Marine Corps request for redesign. 26. During the negotiations, KDH and Eagle agreed upon pricing for the

Marine Corps’ redesign requirements. 27. On August 11, 2011, Eagle sent KDH a final schedule for delivery and

prices on the redesigned IMTV requirements, which reflected the agreed-upon prices and terms.

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28.

Subsequently, KDH personnel affirmed KDH’s agreement to prices set

forth 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 Marine

Corps 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 Marine

Corps under the RFP. 32. The response date for the submission of bids to fill the Marine Corps

Supplemental IMTV Requirements was August 29, 2011. 33. On August 25, 2011, KDH and Eagle personnel participated in a

teleconference that included a discussion regarding Eagle’s pricing for the Supplemental IMTV Requirements. 34. In that teleconference, Eagle proposed to hold its prices at the prices it had

negotiated 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 that

were lower in price than the prices proposed by Eagle.

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36.

KDH informed Eagle that Eagle would have to significantly reduce its Eagle requested a pricing

prices for the Supplemental IMTV Requirements. recommendation from KDH. 37. 38.

KDH provided a pricing recommendation on August 26, 2011. The prices proposed by KDH were approximately 30 percent lower than the

prices which Eagle and KDH had previously agreed to for Eagle’s 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 KDH’s recommended pricing, Eagle informed KDH that

Eagle would not be able to accept the prices because the proposed reduction in prices would result in a substantial and adverse impact on Eagle’s profitability. 40. On August 29, 2011, KDH informed Eagle that KDH would use the pricing

it 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 found

another source from which to obtain its requirements. 42. By email dated August 29, 2011, KDH provided to Eagle what it referred to

as “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. KDH’s “Best and Final” prices were still substantially below the parties’

agreed-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 it

had 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 in

its August 29, 2011 email. 46. By forwarding email and letter sent to KDH on September 1, 2011, Eagle

provided revised proposed prices for the Supplemental IMTV Requirements that reflected substantial discounts to the previously agreed upon prices, but also reserving Eagle’s 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 the

“Best and Final Pricing” KDH submitted to the Marine Corps on August 29, 2011. 48. By forwarding email and letter on September 2, 2011, Eagle informed

KDH 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 Eagle

will not agree to the Best and Final Pricing offered by KDH. 50. Upon information and belief, KDH has obtained quotes from two

competitors of Eagle for performance of Eagle’s work for the Supplemental IMTV Requirements.

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51.

On August 25, 2011, KDH requested Eagle to provide KDH with Eagle’s

proprietary bill of materials for the manufacture of IMTVs. Upon information and belief, KDH requested Eagle’s bill of materials in order to provide that information to Eagle’s competitors so those competitors could submit price quotes for the Supplement IMTV Requirements. COUNT I—DECLARATORY RELIEF 52. 53. Eagle incorporates paragraphs 1 through 51 above by reference. 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 Agreement

described above. 55. 56. Eagle has a legally protectable interest under the Teaming Agreement. 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 has

threatened 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 II—BREACH OF CONTRACT—SPECIFIC PERFORMANCE 58. 59. Eagle incorporates paragraphs 1 through 57 above by reference. Eagle and KDH entered into the valid and enforceable Teaming Agreement

described above. 60. No adequate remedy for KDH’s breaches exist due to the risk that Eagle’s

proprietary information would be shared with other potential subcontractors performing work encompassed by the Teaming Agreement. 61. Moreover, Eagle’s damages are difficult to ascertain because the amount of

additional 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 of

directing KDH’s 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 for

requirements 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 III—BREACH OF CONTRACT (CLAUSE 1.3) 64. 65. Eagle incorporates paragraphs 1 through 63 above by reference. 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 will

participate 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 Eagle’s 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 KDH’s material breach of Clause 1.3 of

the Teaming Agreement, Eagle has been damaged by KDH’s 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 IV—BREACH OF CONTRACT (CLAUSE 2.4) 70. 71. Eagle incorporates paragraphs 1 through 69 above by reference. 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 by

refusing 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 KDH’s material breach of Clause 2.4 of

the Teaming Agreement, Eagle has been damaged by KDH’s breaches in excess of $75,000. 74. Eagle requests a trial by jury for every issue so triable as of right.

COUNT V—BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING 75. 76. Eagle incorporates paragraphs 1 through 74 above by reference. 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 Teaming

Agreement 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 by

refusing 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. KDH’s breaches have evaded the spirit of the exclusive Teaming

Agreement so as to deny Eagle the expected benefit of the agreement. 80. 81. Eagle has been damaged in an amount to be determined at trial. 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 KDH’s breach of obligations under the Teaming Agreement; d. e. Awarding the costs of suit, including reasonable attorneys’ fees; and 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. # 48893MO greg.gutzler@huschblackwell.com Steven M. Berezney, E.D.Mo. # 56091MO steve.berezney@huschblackwell.com 190 Carondelet Plaza, Suite 600 St. Louis, Missouri 63105 McKenna Long & Aldridge LLP David R. Fine dfine@mckennalong.com Mark J. Meagher mmeagher@mckennalong.com 1400 Wewatta Street, Suite 700 Denver, Colorado 80202 Attorneys for Plaintiff Eagle Industries Unlimited, Inc.

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