General Dynamics Corporation, v. United States

Oral argument transcript · No. 09-1298 · October Term 2010 · argued January 18, 2011 · the petitioner won

Decision: votes, opinion and citations · Official transcript (PDF) · Argument audio at the Supreme Court

Advocates

• Carter G. Phillips, Washington, D.C., for the petitioner
• Neal K. Katyal, Office of the Solicitor General, for the respondent

Transcript

From the Court's official transcript; speaker labels as in the transcript, with advocates' full names from its list of appearances.

Chief Justice Roberts: We'll hear argument first this morning in Case 09-1298, General Dynamics v. United States, and the consolidated case, 09-1302, the Boeing Company v. United States. Mr. Phillips. ORAL ARGUMENT OF CARTER G. PHILLIPS ON BEHALF OF THE PETITIONERS

Carter G. Phillips: Thank you, Mr. Chief Justice, and may it please the Court: The proposition that Petitioners are here challenging is the one adopted or embraced by the Federal Circuit that says that the United States Government can declare that certain of its government contracting partners have operated in default and, under those circumstances, can reach into the government contractor's pocket, withdraw at the time $1.35 billion of moneys that were spent by the United States, but for services that were rendered, without question, pursuant to the contract, pursuant to the instructions of the United States Government, and that when the contractor seeks to defend against the claim that it has engaged in some kind of default conduct, that the government can assert the state-secrets privilege and, in so doing, Alderson Reporting Company 1 deprive the contractor of the ability effectively to respond to the government's conclusion. Under those circumstances, it seems to me that the statement in this Court's decision in United States v. Reynolds, which is that the government is certainly free to assert the state-secrets privilege, but when it does so, it has to assume certain responsibilities that come from it, at least in the circumstances where the United States is the moving party.

Justice Ginsburg: Mr. Phillips, when the contractors -- when they failed to deliver the first aircraft at the time specified by the contract, their reason was that its costs would far outrun the contract price, and so it sought to reformulate the contract. At that time -- correct me if I'm wrong, but I think at that time the contractors said nothing at all about superior knowledge and the government's obligation to share information that it hadn't shared.

Carter G. Phillips: There was nothing specific with respect to that, Justice Ginsburg. The first time the contractors identified the superior knowledge problem arose, obviously, when the government took the extraordinary step of issuing a cure notice, because up until that point, obviously, the parties are attempting Alderson Reporting Company 1 to negotiate and work to a final resolution of this project, as you would hope any contracting entities would, to bring the contract to a happy resolution, so -­

Justice Ginsburg: But you would expect them to say, if they -- if that was the impediment to going forward on this contract, to at least mention it. And to -­

Carter G. Phillips: Well, yes, I think you have to put it in context, Justice Ginsburg, because during this period of time, obviously, there were consistent efforts and requests being made to get access to both the B-2 and the A-117 stealth technologies, and there were discussions that went back and forth, and the district court -- or the Court of Federal Claims specifically held -- eventually, the information was forthcoming, but it was, candidly, too little and too late in order to effectively allow the contract to proceed as -- as planned. So I think -- I mean, I agree, you know, in a perfect world, maybe you would have identified this. But in this situation, the parties are simply trying to come to some kind of a resolution that allows both sides to be satisfied by the final -­

Justice Sotomayor: Mr. Phillips -- Alderson Reporting Company

Carter G. Phillips: -- disposition.

Justice Sotomayor: -- why wasn't the need to share that technology a part of this contract or a condition to the contract? I've gone through the contract -- or, not all of it; enough of it. I haven't found anywhere in the contract that it requires the U.S. to share information with you. Does that have anything to do with what due process would require? Meaning -­

Carter G. Phillips: No, I think -- I think, Justice -­

Justice Sotomayor: I -­

Carter G. Phillips: I'm sorry.

Justice Sotomayor: I'm going to pose a hypothetical. Let's assume the contract required the sharing of state secrets, and the government then invokes its privilege. Is that a different case than this one in terms of due process? Wouldn't the -­ wouldn't the former situation, where it's been made a condition of the contract, require a different treatment than this situation where the government's just saying, if you want to raise a defense that's not part of the contract, then you do what every other litigant with a privilege does -- who a privilege has been invoked against; you proceed with whatever evidence you have.

Carter G. Phillips: Well, you have to -- Alderson Reporting Company

Justice Sotomayor: That's usually what happens with other privileges.

Carter G. Phillips: Right. And we would have been perfectly content to proceed with the evidence we had. But the ultimate decision by the Court of Federal Claims was that it was impossible to ultimately be in a position to resolve it. But I want to answer your more fundamental question, Your Honor, as to the -- you know, the basic point is, is that the background principle of law, the superior knowledge defense, is the understanding of the parties when they enter into an agreement. I mean, that would have been true just as much in the Helene Curtis case and the other cases where the Federal Circuit has acknowledged the superior knowledge defense. That's been around for a long time. It's a-- it's an understood basis on which the parties enter into an agreement. That's the first answer. The second answer is that you're asking us to put into a contract something about information that we don't know anything about. We -- I mean, we have some sense about the B-2 and the A-117, but we don't know anything about the other programs that are identified here.

Justice Sotomayor: Wait a minute. Where's Alderson Reporting Company 1 the obligation of the government to tell you build it this way using the technology we already have? I thought your claim was that you were promised this information, and you structured the contract based on that promise.

Carter G. Phillips: Well, our claim -- we have separate -- we have a series of distinct claims. Our first claim is that we never would have entered into the contract in the first place if the government had provided us with information based on its superior knowledge that the -- for instance, the weight specifics that we were being asked to provide or to supply were literally impossible to comply with based on what the government already knew. If we had been just told that much, just given a warning, we wouldn't be in the situation where we are here -­

Justice Sotomayor: There's a factual dispute about that. I think somewhere I read that there is a claim that they told you your weight estimates weren't right.

Carter G. Phillips: Well -- I mean, that may be a factual dispute, but I'd be -- and I'd be happy to litigate that issue if -- if we can get to that point where we're in fact allowed to litigate any aspects of our particular defense. But the bottom line here is -- Alderson Reporting Company 1 and again to state the proposition as starkly as it -­ as it is, because this is the way it comes to the Court from the Federal Circuit: They're saying that the government can assert a claim for $1.35 billion dollars against us and tell us that we cannot defend against that claim even though the reason why we were unable to comply with the contract is because of the fact that the government didn't provide us information either at the outset or as we went along.

Justice Breyer: The two questions I'd have is, first of all -- Justice Sotomayor, sorry; I did not -- I did have her question, because what that suggests is, in this case, it's not unfair to hold your client in this case. And you just read the two circuit court opinions here, and you think this is a defense coming out of long in the past that doesn't have much substance to it. That was her question, I think, as I understood it.

Carter G. Phillips: Can I answer -­

Justice Breyer: In other words, it's not unfair. But let me give you the other question because, sometime in your argument, I'd like you to get to that. And that is, if we accept as a principle of law what was said in Reynolds, a criminal case or whatever, and apply it to government contracting, where sophisticated Alderson Reporting Company 1 contractors are perfectly capable of negotiating their own contract, we are not just throwing a monkey wrench into the gears of government contracting; we're throwing the whole monkey. That's my second question.

Carter G. Phillips: Well, I don't -­

Justice Breyer: One, that this isn't a case that calls for it; and, two, the threat to government contracting by changing from Reynolds to here is overwhelming. Now, I'd like your views on both of those.

Carter G. Phillips: Right. Well, it seems to me clearly that this is the precise situation where Reynolds is saying if you cannot bring forward a legitimate defense -- I mean, part of the problem is we don't know precisely what information we didn't have and were never entitled to. So it's very difficult to say how strong is our defense under these circumstances. What we do know is that the Court of Federal Claims judge looked very carefully at this and said that we had made an impressive showing without regard to any of the confidential or privileged information of a prima facie defense in these circumstances. So our position is we had a very valid defense. This is not pretextual. We're not throwing this in simply as a mechanism to force the government to assert its state secrets. It's Alderson Reporting Company 1 a fairly contrived approach to litigation and, frankly, not something that I could imagine any circumstance in which we would do that. Two, I don't see how this throws a monkey wrench into this process whatsoever, much less throws out the monkey, because -- because the basic understanding here is that the government is not entitled to force its contractor down along this course. If the government has information available to it, then it has to make that information -- has to be forthcoming with the information with the contractor, either at the outset, which would have been the best of all circumstances here, or as matters go along.

Justice Alito: Well, the Petitioners as a formal matter were the moving party; isn't that right?

Carter G. Phillips: Well, not -- I mean, "moving party" I think is -- is not a self-defined concept, Justice Alito. The Petitioners are the plaintiffs.

Justice Alito: They were the plaintiffs. And the review scheme that you outlined was known to them beforehand. So why do we need to look beyond that?

Carter G. Phillips: Well, because the review scheme also says that the very -- in 1986, in the Assurance case, the Federal Circuit said -- which was before this contract was entered into, the Federal Alderson Reporting Company 1 Circuit said the filing -- the mere filing of a complaint immediately vacates the contracting officer's rule. So our understanding at the time we entered into this agreement is that if there were a problem with the way the contracting officer operated, we would be allowed to file a claim and immediately take the contracting officer's rule off the table. Under those circumstances, it seems to me all we're asking for is to go back to the status quo ante in that situation, which means there's no contracting officer decision, there's no basis on which the government can make a claim for 1.35 billion, now $3 billion.

Justice Ginsburg: Can you explain that -­ you've referred to it several times now. I thought that that was not a progress payment based on completed work. The government says that that money was advanced; you had not complied with what was necessary to comply with to get that 1.35 million. They distinguished the $1.35 million that you legitimately received as a progress payment, but this next, they say, you have not fulfilled what you needed to do to get that.

Carter G. Phillips: Well, what had not happened is that the final -- there had not been a final sign-off by the contracting officer approving it and thereby Alderson Reporting Company 1 reducing it to a liquidated claim. But that's a vastly different statement than to say -- and, indeed, we have an argument that, at least with respect to half of that, that it had already effectively been approved through a mechanism independent of the contracting officer. But the bottom line here is these were services rendered, actually rendered. This was not some kind of a prepayment for services to be rendered in the future. That's not the nature of this contract. These were -- this was for work we had done, for which we had submitted specific claims, and for which the contracting officer had pending before him at the time. And so, you know, what the government says is that -- is that it was a payment and they didn't ultimately get the airplanes that were the ultimate desire of the contract under these circumstances, and that's obviously true because they terminated the contract a year before the airplanes were due to be provided to them.

Justice Ginsburg: But you are here seeking to -- to emerge as a total winner, that is to get from this contract what you would have gotten if it had been successfully completed, including any profit -­

Carter G. Phillips: No. No, Justice Ginsburg, that's not true. All we are asking for is -- are the remedies that are fully available if you were to convert Alderson Reporting Company 1 this from a termination for default into a termination for convenience. And under those circumstances, what -­ you know, that -- the government has a wonderful mechanism there. It protects it against the kinds of lost profits damages that might otherwise be available in a situation where you have a more traditional breach of contract. So all we're -- all we're asking for is the actual amount of money that we expended, that the -­ frankly, the Court of Federal Claims explicitly found, and at this stage it's unchallenged, although presumably it might be litigable at some point, but that these were all reasonable, allowable, and fairly allocable costs to these -- to this particular contract.

Justice Alito: Well, why shouldn't we view this as if it were a dispute between two private contracting parties? And if we did that, perhaps one party would be the moving party with respect to some of the claims and the other party would be the moving party with respect to the remaining claims.

Carter G. Phillips: Justice Alito, I think that is precisely how you ought to look at it, and -- and we'd be very comfortable with that, because it's quite clear to me that, except in the hyper-technical way that -- that you articulate because of -- because of the Alderson Reporting Company 1 way the Contracts Disputes Act plays out, that the government is unquestionably the moving party, the party seeking affirmative relief to be able to take 1.35 billion -­

Justice Ginsburg: I would -- I think it's questionable, Mr. Phillips, for this reason: You say that it's an implied term of this contract that the government has a duty to share certain information, and you are seeking to enforce that implied term of the contract. So it seems to me, as to that alleged duty, you are the moving party. You're saying: Court, please enforce this implied term of the contract.

Carter G. Phillips: Well, not -- I mean, you could -- that's one way to articulate it. I think the other way to articulate it, which -- which is much more consistent with the reality of what's going on here, is that the government is making a claim for $1.35 billion for which -- on the basis that we did not act in a timely fashion. And that's the only basis that exists in this litigation anymore, is just the time of the actions that we took. And our answer to that claim is to say: No, we -- we are not at fault for the delays because you did not provide us the information or you did not spare us the burden of having to go down this path in the first Alderson Reporting Company 1 instance.

Justice Scalia: Yes, but then you go on to say: Moreover, give us -- give us the payment for the additional money beyond the 1.35 that you've already given us -­

Carter G. Phillips: But -­

Justice Scalia: -- plus this additional money that we've expended.

Carter G. Phillips: Right. But that just goes to Justice Alito's question about is there some way to evaluate those claims separately, and the answer is, yes, they should be evaluated separately. And -­

Justice Scalia: Well, why shouldn't we? I mean, it -- it seems to me if -- if, indeed, you say the government has come up with a defense that makes it impossible to decide who's in the right here -­

Carter G. Phillips: Right.

Justice Scalia: -- why don't we just -- you know, I think the usual course taken by courts would be to leave the parties where they are. The matter can't be litigated. That would mean you would keep your $1.35 billion, but you wouldn't be entitled to sue for the additional amount. If -- if you were that worried, you should have -- you -- you should have had more frequent progress payments or something. Alderson Reporting Company 1 Why don't we just leave you where you are, both you and the government, assuming we agree with you on all the rest?

Carter G. Phillips: Well, I mean, to be sure, we would be much more comfortable in the world you just articulated, Justice Scalia, than we are in the Federal Circuit.

Justice Scalia: Yes, you would be 1.35 billion -­ (Laughter.)

Carter G. Phillips: With interest. (Laughter.)

Justice Scalia: With interest. I forgot the interest.

Carter G. Phillips: That's starting to add up, Your Honor. (Laughter.)

Carter G. Phillips: But -- and -- certainly we think that's -- that is the minimum that we should be entitled to, and maybe to some extent you could say we're sort of being a little greedy. But the -- the reality is that the standard rule is that if you take a contract and you say you cannot make a determination that the contractor has been guilty of default, then that contract should be, in the -- kind of the basic Alderson Reporting Company 1 contract law and it's also in this -- in this agreement, that you -- you convert it to a termination for convenience. And then the question simply is, what rights flow from having declared this to be a termination for convenience?

Justice Ginsburg: You mentioned the 1.3 -­ that you get to keep the 1.35 million, but there was also another figure -- 1.2 million that you would get on top of that.

Carter G. Phillips: Right. And that -- that -­

Justice Ginsburg: So that certainly wouldn't be leaving you where you were.

Carter G. Phillips: Well, no. I mean, actually, what -- what the $1.2 billion was, was the additional amounts of money that were actually expended by the contractors that were reasonable, allocable, and allowable, by and according to the Court of Federal Claims, on this agreement. So, there -- and it would be the standard operating procedure. If you have a termination for convenience, where the government says, look, we've decided we just don't want to have this -­ these -- we don't want these airplanes anymore, so let's just call it off, which the government has the right to do, then the question is, what are the reasonable costs Alderson Reporting Company 1 that are, you know, sort of reallocated as a consequence of that? And the Court of Federal Claims -­

Justice Scalia: But the government didn't do that. I mean, you're making it up. The government didn't terminate for convenience. The government claimed you're in default. Why would -- why should we force that down the government's throat when we can no more say that the government's wrong than we can say that you're wrong?

Carter G. Phillips: Well, it seems to me the -- I mean, the question is was the default -­

Justice Scalia: It seems to me you call the game off.

Carter G. Phillips: Well, and the question is, if you call the game off, what -- what flows from that? And it seems to me that it -- you can say we'll let the government call it a default, I suppose, or you could just as easily say -- and obviously the position we would take is you say the government cannot call it a default because, in order to get some kind of a determination along those lines, somebody is going to have to make a judgment that's not an honest assessment of the -- of the -- of the facts of this case. And so, if you say it's not a default termination, then there's just a certain amount of -- Alderson Reporting Company 1 certain consequences that flow from converting it, and it automatically converts at that point to a termination for convenience. And in a termination for convenience situation, then you reallocate the costs in precisely the way that the Court of Federal Claims has done this at this point.

Justice Scalia: Yes, but -­

Justice Kagan: Mr. Phillips -­

Justice Scalia: -- the fallacy is we're not -- assuming we agree with you on the rest, we're not saying that it's not a default termination. We're saying we don't know.

Carter G. Phillips: Right. And the question is -­

Justice Scalia: We're saying we don't know. We don't know what the state-secrets thing is. The government is entitled to -- to make that determination, so we don't know who's in the right here.

Carter G. Phillips: Well, I -- I -- the problem -­

Justice Scalia: So why force the government to -- to go to a termination for convenience?

Carter G. Phillips: Right. Well, I would think that the -- that the more appropriate way to proceed under those circumstances, given that a default Alderson Reporting Company 1 termination carries with it a lot of collateral consequences, it exposes you to subsequent problems in the contracting context, it creates the possibility of debarment in -- in future proceedings, that rather than allow a finding that no one can comfortably conclude is the right finding to stay in place and have those collateral consequences flow from it, the more appropriate way to proceed would be to say: Look, I can't make a determination in this case that there should be a termination for default. And under those -- and so, therefore, the -­ the -- under the contract, under the government contracting principles generally, it automatically converts over to a termination for convenience. And once that happens, then you go down the road of -- of evaluating those costs. And, again, the government's got arguments about those costs, I'm sure, and we can -­ and we can debate those out, although, you know, I would commend the Court to the -­

Justice Sotomayor: Mr. Phillips, give us a way, a reasoned way, to reach the result Justice Scalia is suggesting, because you are being greedy. You admitted it. The termination -­

Carter G. Phillips: No, I -- I said -­

Justice Sotomayor: The termination for -- Alderson Reporting Company

Carter G. Phillips: -- I could be characterized that way.

Justice Sotomayor: A termination for convenience carries its own automatic consequences that appear unfair in light of the fact that the litigation of the default termination has been invoked because there is a risk to the United States. So, is there a reasoned way to do it -­

Carter G. Phillips: Now, are you -­

Justice Sotomayor: -- to not -- to not impose that unfairness on the government? And if there's not, then explain to me why it's unfair, given that you're two sophisticated contracting parties, to say you entered a contract knowing the government could invoke state secrets, it has, and so you bear the risk of that. I mean, you always knew the government could do this.

Carter G. Phillips: Right, but -- well, I don't know whether you want me to answer the second part first -­

Justice Sotomayor: It goes back to my original question, is -­

Carter G. Phillips: -- or go back to the original question.

Justice Sotomayor: -- you could have Alderson Reporting Company 1 contracted around it.

Carter G. Phillips: Sure, and so could the government. I mean, the reality is that the background principle here is United States v. Reynolds. And United States v. Reynolds says that if somebody is the moving party, that is the party seeking affirmative relief, that's the party who's going to bear the burden to -­

Justice Kagan: Mr. Phillips, could I ask you whether that principle makes any sense in this contracting situation, because both parties have argued it as though the question of who is the moving party is determinative of this case, but in a contract situation the question of who's the moving party is very often arbitrary or fortuitous. If you think about it in a private setting, you have one contract -- one contractor who fails to perform or -- or provides some deficient product, another who decides it's not going to pay, and the question of who the plaintiff is, is often just a matter of fortuity, who gets to the courthouse first -­

Carter G. Phillips: Right.

Justice Kagan: -- what the payment schedule has been like, so whether somebody is demanding their money back or simply refusing to pay it at all. So, why in this contract situation is the Alderson Reporting Company 1 question of who's the plaintiff or who's the moving party -- why does -- why does that make such a difference?

Carter G. Phillips: Well, I -- I think that actually the Court in Reynolds, to the extent it would have envisioned any of these circumstances decades ago, used the language "moving party" rather than "plaintiff" or "defendant" precisely for that reason, because I think what the Court had in mind is the party who was seeking affirmative relief. And -­

Justice Ginsburg: It was thinking of a tort. It wasn't thinking of -- Reynolds is a tort action.

Carter G. Phillips: Oh, no. To be sure, that -­ that's the specific context, although the Court's language is broader than that. It just didn't talk about itself as a defendant in a tort action.

Justice Kagan: But it can't possibly be the case that the question is what the payment schedule is. If I've paid you already and then I find your product deficient, then I'm going to go to court and demand my money back. If I find your product deficient before I pay you, then you're going to go to court and say you have to pay me. So why should that difference make a Alderson Reporting Company 1 difference with respect to the constitutional question before us?

Carter G. Phillips: Well, because in the one situation I have $1.35 billion in my pocket for services that were unquestionably rendered and which, in our judgment, you know, satisfied our portion of the obligation under this contract.

Justice Kagan: Both party has a claim here. One says you provided deficient performance; the other says you were obligated to pay me. The question of who has the claim and who has the affirmative defense -- it can be structured in either way.

Carter G. Phillips: I don't disagree with that, Justice Kagan. I think the bottom line, though, is, you know, what -- what -- what are -- what do principles of fundamental fairness tell you to do in this case?

Justice Breyer: That's exactly my problem, because when I looked at Reynolds, Reynolds doesn't hold anything in your favor. It holds the opposite way. It says to you -- in a criminal case, we said it was unconscionable for the government both to prosecute and not to -- not to tell them a secret, okay? And it says such a rationale has no application in a civil forum where the government is not the moving party. It doesn't say anything about where the government is the Alderson Reporting Company 1 moving party.

Carter G. Phillips: Right, but -­

Justice Breyer: And Exhibit A that it is not unconscionable here consists of the two opinions of the Federal Circuit. I mean -- now, what do you want me to read to get over that impression?

Carter G. Phillips: Well, I mean, the very fact that the court says and limits its ruling to where the government is not the moving party -- I mean, if the government really -- if the court -­

Justice Breyer: It didn't limit it. It said the rationale is unconscionable. Now, I don't even have to go that far. I can go to "fundamentally unfair." All I want to know is what should I read to get over my unfortunate impression, which I got out of the two opinions that I did read, that there was nothing unfair? Okay? What do you want me to read to get over that impression -­

Carter G. Phillips: Well -­

Justice Breyer: -- which I think you do want me to read something.

Carter G. Phillips: I think -- right. Well, no, you should clearly read the Court of Federal Claims opinion that gave rise to this in the first place, where Alderson Reporting Company 1 -- where the judge says we have made -­

Justice Breyer: Okay.

Carter G. Phillips: -- an impressive prima facie showing of a defense. And -- and the Federal Circuit's view is: We don't care; we're not going to let you go down that path, period. And all we're saying is that in that situation, where we've made that kind of showing, the default rule should be the government cannot reach into our pocket and -­

Justice Sotomayor: Just before we get there, that showing was based on the court's in camera review of quite a bit of already confidential information, correct?

Carter G. Phillips: And the non-privileged information that it had available to it.

Justice Sotomayor: And the non-privileged information. So it made this judgment on the basis of a great deal of information, and yet it couldn't conclude that you were right as a matter of law, correct?

Carter G. Phillips: Well, it recognized that it terminated the discovery early. And, actually, it did -- it terminated discovery very early, and -- and there are whole programs that we know nothing about. We know about the B-2 and the A-15. What we don't know are the Alderson Reporting Company 1 other programs, and there's nothing in this record on any of that, Your Honor.

Chief Justice Roberts: Thank you, Mr. Phillips. General. ORAL ARGUMENT OF GENERAL NEAL KUMAR KATYAL ON BEHALF OF THE RESPONDENT

Neal K. Katyal: Thank you, Mr. Chief Justice, and may it please the Court: Two basic things decide this case. First, the government is not affirmatively invoking the power of the Federal court; only the plaintiffs are. It was Mr. Phillips's clients who 20 years ago walked into the Federal court and asked that court to set aside the decision of the contracting officer and to award them over a billion dollars in damages. The government, by contrast, simply asked the court to dismiss the Federal lawsuit. And, second, Reynolds makes clear that the state-secrets privilege will be used to bar a claim at most only when the party that is relying on secret information is trying to use the Federal court to alter the legal status quo. And -­

Chief Justice Roberts: We have -- we've gotten to this point in the dispute because you say Alderson Reporting Company 1 they're at fault; they say you're at fault. Under the state-secrets doctrine, we can't resolve that question. Why don't we call the whole thing off? Nobody's at fault; that means it's terminated not for fault, but for convenience, and that's it.

Neal K. Katyal: Well, for several reasons. One is that is the affirmative use of the Federal courts to alter the legal status quo. I think the principle of Reynolds is that -­

Chief Justice Roberts: Well, only because you altered the legal status quo -- the legal status quo is they're going along with their contract, and you altered it by holding them in default.

Neal K. Katyal: I disagree, Mr. Chief Justice. I think that the contract itself specifies that the contracting officer will decide whether or not there's a default termination, and once there is that, they owe -- once the contracting officer so decides, then they owe the unliquidated payments that have -­

Chief Justice Roberts: Isn't that -- isn't that the affirmative step with the contracting officer saying there's a default?

Neal K. Katyal: Well, it's certainly an affirmative step under the terms of the contract, but it is not an affirmative step of the Federal court. Our Alderson Reporting Company 1 central proposition -­

Chief Justice Roberts: It's an affirmative step of the Federal Government. He works for you, and he's the one changing the status quo.

Neal K. Katyal: Undoubtedly the case, and those are the terms under the contract to which they agreed. Our central proposition is that in a world in which the Federal court doesn't know, as Justice Scalia said, who is right and who is wrong on a particular claim, it should stay its hand entirely and get out of the business altogether. It should follow the Hippocratic principle of doing no harm.

Justice Alito: Am I correct to interpret what you've just said to mean that you think this case should be decided under the basic principle of Reynolds, that the party that seeks the affirmative relief -­ seeks affirmative relief from the court is the -- is the party that bears the burden involving the invocation of the state-secrets privilege? You're not asking us to adopt a new test applicable in the contracts situation?

Neal K. Katyal: Absolutely. I don't think we need to go there. I do think that there are special arguments available in this case because it is a contract, as Justice Breyer said, with sophisticated parties who ex ante will decide who bears the burden of Alderson Reporting Company 1 coming into court and -- and so on. But here I think this is a simple principle that, in a world in which the court doesn't know who is right and wrong in the superior knowledge defense -- and that's the answer to the question that Justice Sotomayor asked to Mr. Phillips a moment ago about what did the Court of Federal Claims ultimately decide. They didn't decide there was a prima facie case. They said at page 245a of the 2001 opinion: We can't know one way or the other. And so -­

Justice Sotomayor: Could I -- could I -- I'm interrupting Justice Alito because you answered his question very quickly. It's your position that if we determine you're the moving party, you lose?

Neal K. Katyal: Oh, no. I think -­

Justice Sotomayor: Is that what your answer to him -­

Neal K. Katyal: No, we -­

Justice Sotomayor: -- which is that -- he asked you whether we apply Reynolds; you didn't say which part of Reynolds. Are you conceding that if we apply Reynolds and we find you're the moving party, you lose?

Neal K. Katyal: Oh, absolutely not, Justice Sotomayor. I don't think Reynolds says that if the Alderson Reporting Company 1 government is the moving party, it's an automatic loss. I think that's a back-up argument that we have advanced in our brief that I think there is no reason whatsoever for the Court to give its view -­

Justice Scalia: Let's talk about "moving party." I -- I don't -- I don't know that "moving party" means who comes into court first. I would -- I would -- in the -- in the context of a contract dispute, I would say the moving party is the party who is trying to use principles of law to change the contract, and that's the government here. The government -- the government is blowing the whistle; it is the government which is saying you are in default, and under the law, since you're in default, we can walk away, and indeed we can claim the money we've already paid you.

Neal K. Katyal: Justice -­

Justice Scalia: That seems to me the moving party in the -- in the context of a contract.

Neal K. Katyal: Justice Scalia, I think it's important to add to your definition "using legal principles in a Federal court," because that's I think what Reynolds is talking about. There's not some abstract moving -­

Justice Scalia: Reynolds was talking about that because that was the fact situation in Reynolds. Alderson Reporting Company 1 But I'm saying that the logic of the matter -- the logic of the matter when applied to a contract situation such as this ought to be the party who is blowing the whistle, who is trying to use the law, the one -- the one who is asserting that -- that the law requires this result. And then we say, well, we can't tell whether the law requires this result or not. That, it seems to me, ought to be the moment of truth.

Neal K. Katyal: I -- I don't think, Justice, that's what either Reynolds is getting at or what this Court's subsequent decisions about a state of uncertainty in the law and what the role of the Federal courts is getting at. I think, rather, what all of these decisions say together is if you don't know one way or another, you should return; you should wind the clock back to the status quo ante before the lawsuit was filed. And at that status quo ante, there was undoubted a right of the government to have $1.35 billion. Now, I understand some of you have suggested, well, maybe we should just cut it even and they get to keep the $1.35 billion and we get to keep -­ and we don't have to pay the $1.2 billion. I suggest there's no principled way to do that, which is what I think Mr. Phillips's answer -­

Justice Scalia: It wasn't the undoubted Alderson Reporting Company 1 right of the government before the lawsuit was filed. It was the undoubted right of the lawsuit only if the contracting officer was correct that there had been a default. If he was wrong about that, it was not the right of the government.

Neal K. Katyal: Justice Scalia, let me read to you the contract to which they agreed. It's at Joint Appendix, page 120 to '21: "If the contract is terminated under the default clause, the contractor shall, on demand, repay to the government the amount of unliquidated progress payments." And then, what happened, as a result of that demand letter that we sent right after the -- after the termination for default, was they came to us, hat in hand, and said: Please don't take this money from us right now, our banks are going to complain, and so on. And so we entered into a deferment agreement -­

Chief Justice Roberts: I thought -­

Neal K. Katyal: -- which is at page -­

Chief Justice Roberts: I'm sorry. Do you want to give the cite?

Neal K. Katyal: Joint Appendix page 342. And it seems to me a very odd notion of due process to say that somehow the fact that we agreed to their deferment creates some entitlement for them to Alderson Reporting Company 1 keep the $1.35 billion.

Justice Kennedy: I have this -- this question about due process: The components of the due process analysis, it seems to me, are what is reasonable, what's necessary in the case, what's unconscionable. That it seems to me is just an extrapolation of what Reynolds said, and I don't know why we don't have that just as a law of -- of -- the Federal common law of contracts. I don't know why we need to elevate this to a due process analysis.

Neal K. Katyal: I guess I would say two things. One is, if you look -­

Justice Kennedy: Assuming that we're -- we apply Reynolds, which -­

Neal K. Katyal: Right. And I think if you -- if you were to look to that background common law contract principle, you would look not just to Reynolds but to Tenet -- or excuse me, Totten, which I think makes clear that, at the time they signed their contract, they were on notice that highly classified information that is the subject of -- of litigation is something that generally can't be litigated in the Federal court. And then, if you wanted to think about due process and the overlay of unconscionability or whatever Alderson Reporting Company 1 with respect to Federal contracts, you would ordinarily assume that the contract itself from highly sophisticated parties would work that out ahead of time. And so if they were concerned about this situation unfolding, they could have written into the contract that they should get certain information and that if the government invoked the state-secrets privilege, it would automatically terminate the contract's default and convert a default termination into a termination for convenience.

Justice Kennedy: Well, that -­

Justice Ginsburg: So you're -­

Justice Kennedy: That just restates the question of what -- what do you do if you apply the Reynolds principle to this case, and they would say, well, you could have put it in your contract, too, and I think that's almost a wash.

Neal K. Katyal: Well, I don't think it comes out as a wash, Justice Kennedy, because I think the contract is undoubtedly clear that, in order to challenge the -- the decision of the contracting officer about a default termination, they have to come into Federal court and invoke affirmatively, seek affirmative judicial relief from the Federal court, to change the world. We don't have to do that. Alderson Reporting Company

Justice Ginsburg: Am I -- am I right that this contract did specify certain information that the government agreed to give the Petitioner?

Neal K. Katyal: That is correct. Some of that is at Joint Appendix 137 to 140.

Justice Ginsburg: Mr. Phillips said the reason they couldn't specify this information is they didn't know what it was.

Neal K. Katyal: Yes.

Justice Ginsburg: They -- they didn't know what -- it was secret information. They didn't know -­ wouldn't even know what to ask for.

Neal K. Katyal: I have to say, it is a very odd thing to bid on a highly -- a multi-billion-dollar contract on the assumption that they're going to get some technology that they haven't even specified. I mean, this -- we're bidding for their research and development. They brought in Lockheed, who -- which had built low-technology -- low-observability planes -­ precisely for the reason that they said they'd have the technology. At Joint Appendix page 1087, you see their bid, their offer, and I don't think anyone held a gun to their back to say: Enter into this.

Justice Scalia: No, but they -- they claim that you knew that it was impossible to do what they Alderson Reporting Company 1 contracted with you to do at the weight of plane which they promised to come across with. They say that you knew that because of -- of other contracts that you had had, and yet didn't -- didn't tell them about it.

Neal K. Katyal: Justice Scalia, let me say two things. First, the impossibility of -­

Justice Scalia: I don't know whether that's true or not, and we're never going to know it's true, because you came in and blew the whistle and said: State-secrets privilege.

Neal K. Katyal: Two things. One is that impossibility claim was separately litigated before the Court of Federal Claims, along with 18 other claims of theirs in defense to the 1.35 billion and this rest that we've been talking about. They've had massive opportunities to litigate almost all of their challenges, with the one exception being the superior knowledge aspect of this case, and much of that has taken place in a highly classified environment. The trial has taken place in -­

Justice Scalia: Are you saying it was not impossible to do it at that weight?

Neal K. Katyal: I'm saying -- well, at the initial weight, we thought it was impossible and warned them as such, and that's -- those are the citations in Alderson Reporting Company 1 the government's brief. But -- so -­

Justice Scalia: At the weight contracted for?

Neal K. Katyal: And then we -- at the weight contracted for, we had warned them that it wasn't, and then later we relaxed to that weight specification. So I'm not sure that is really present one way or the other. But our central submission to you, Justice Scalia, is: If you're not sure, as you were saying to me -- you don't know who is right and who is wrong -­ then the Federal court shouldn't be complicit in the process of siding and picking winners and losers in that circumstance -­

Chief Justice Roberts: Are you ever the -­

Justice Kagan: General, what would happen -­

Chief Justice Roberts: Are you ever the moving party in the Court of Claims?

Neal K. Katyal: Sure. I could imagine that we could be on a counterclaim, for example.

Chief Justice Roberts: Well, on a counterclaim, but that obviously means somebody else is the moving party. They've raised the claim.

Neal K. Katyal: That's correct. The -- the Alderson Reporting Company 1 jurisdiction of the CFC -­

Chief Justice Roberts: If somebody wants to get money -- if somebody wants to get money from the Federal Government, they have to go to the Court of Claims, right?

Neal K. Katyal: That's correct.

Justice Breyer: How do you -­

Chief Justice Roberts: So this is a pretty convenient rule for you, right? (Laughter.)

Neal K. Katyal: Well, it's a convenient rule, Mr. Chief Justice, that they agreed to when they signed the contract. The CDA was on the books. They knew the deal going in, which is if they wanted to challenge the decision of the contracting officer, they would have to come in. Now, you could have structured it very differently. You could have said we -- you know, that there would have to be -- that -- that if there were a termination for default, it would automatically change into a termination for convenience -­

Justice Alito: But you have the burden of -- you had the burden of proof on the issue of default. That was known, too, wasn't it?

Neal K. Katyal: We have the burden of proof Alderson Reporting Company 1 on default, but not on superior knowledge, the precise question here. In their rule, if you -- if you follow their rule, they're asking the court to proceed counterfactually and say that they are entitled to not just the 1.35, but the 1.2 billion on top of that, as if they had proved their superior knowledge claim. And -­

Justice Kagan: General, what would -­

Justice Ginsburg: Do you agree that -- do you agree that there is nothing between -- I think Justice Scalia was asking Mr. Phillips, why can't we just say let's -- all bets are off, everybody go home with what they have. But Mr. Phillips says there are only these two things; there's either default termination or termination for convenience, and nothing in between. Do you agree that that's the world that we're dealing with, those two choices and nothing else?

Neal K. Katyal: I do agree that that is -­ that's the way the contract is written. It distinguished between those two and distinguished between liquidated payments -- as to which the government has no right in the event of a default termination, and we're not seeking that -- and unliquidated payments, as to which the government has an absolute right at the moment the contracting officer Alderson Reporting Company 1 decides there has been a default termination.

Justice Scalia: I don't care how the contract's written. I mean, if we're going to -- if we're going to say that there's been a broken play, that we're not going to try to apply the contract because we can't tell who's in the right and who's in the wrong, it's totally irrelevant what the contract says. You just leave the parties where they are.

Neal K. Katyal: Justice Scalia, I am saying leave the parties where they are under the terms of the contract. And -­

Justice Scalia: You're -­

Neal K. Katyal: Well, that -- Justice Scalia, I don't think that the Federal court should be in the business of micromanaging under the Due Process Clause in a contractual situation with parties that can protect themselves ex ante very easily. I mean, they say -­

Justice Kennedy: We can -- we can do it as a member -- as a matter of the law of contracts. And when we look at the law of contracts in Reynolds, Reynolds talked about the moving party, and I'm not -- I'm not sure that that phrase either had or has really definable content in our law. It seems to me it's just a question of the burden of persuasion. Alderson Reporting Company 1 At one point, the contractor has to proceed. He makes -- it makes a certain showing, and the government has to go back and forth. And if at some point, the person with the burden of persuasion invokes the privilege, then we have to ask whether it's fundamentally fair as a matter of the Federal law of contracts.

Neal K. Katyal: So even if you followed that reasoning -- and I don't think you should, for a reason I'll explain in a moment -- but they would still lose, because they still bear the burden of proof and persuasion on superior knowledge, the -- the excuse that's at issue in this case. Now, I don't think that would be the rule, that that's an appropriate rule, Justice Kennedy, because I think underlying Reynolds is this central proposition that a court shouldn't be involved, shouldn't be picking winning -- winners and losers either way, when the state of knowledge is unknowable.

Justice Kagan: So just to make sure I understand your argument, suppose that state secrets had prevented you from being able to prove your default claim, that you were unable to make that showing because of state secrets. What would happen then?

Neal K. Katyal: Unable to make the showing Alderson Reporting Company 1 in -­

Justice Kagan: That the -- that the -­

Neal K. Katyal: -- in Federal court?

Justice Kagan: That's right, that the secrets that you were -- that you wanted to protect were actually the -- the key to your proving that there was a default.

Neal K. Katyal: Right. Well, in that circumstance, again, the -- I think the case would be dismissed, because they would be coming in and seeking affirmative judicial relief to void the contracting officer's decision and to get whatever damages they want and -­

Justice Kagan: Let me make sure I understand, because that really does sound like a tails you win, heads you win, whatever. (Laughter.)

Justice Kagan: You're saying that if the state secrets prevented you from making your affirmative case, you should win that one, too?

Neal K. Katyal: I think -- I think that that would be -- the general proposition is if the Federal court can't know one way or another who's right and who's wrong, it shouldn't grant affirmative relief to a party, and that's -- Alderson Reporting Company

Justice Scalia: To a moving party, and you are never the moving party. (Laughter.)

Neal K. Katyal: Well, again, Justice Scalia, that's the contract they've signed. They could have signed a different contract with different results. They say -­

Justice Sotomayor: Counsel, you seem -­

Neal K. Katyal: -- we didn't have the ability -­

Justice Kennedy: Did the contract -­

Justice Sotomayor: Counsel, you can't ever give -­

Chief Justice Roberts: Justice Kennedy -­

Justice Kennedy: Did the contract contain the term "moving party"?

Neal K. Katyal: The contract didn't say "moving party," but it did say who had to come into Federal court in order to challenge the decision of the contracting officer. And that is a -- that -- that -­ and it puts that burden on them.

Chief Justice Roberts: And now Justice Sotomayor.

Justice Sotomayor: That's what I don't understand. Yes, the default provision is decided by Alderson Reporting Company 1 the contracting officer, but by law you can't collect on that judgment once they file a complaint. So you can't do anything until you get the court to affirm your default. You are asking for a legal declaration of being right, that they defaulted. That's -- you're the one seeking -­

Neal K. Katyal: Justice Sotomayor, this is a very important question, and I think that that's the impression left by their briefs and it's wrong. So the filing of their claim -- their claim in the Court of Federal Claims they say vacated the contracting officer's decision. That's wrong under the statute; 605(b) in the -- in the Contracting Disputes Act says that a clause can be put into the contract to continue it in effect and require performance even if there's an appeal to the Court of Federal Claims, and that provision exists in this very contract. So -­

Justice Sotomayor: I'm sorry. You're going too fast for me, and I don't think I remember this in your reply brief.

Neal K. Katyal: Well, I think it is. It's in a footnote of our reply brief, and it cites to 605(b). And our claim is that -- that that provision requires -- right now we have an absolute entitlement to the $1.35 billion. That is what the contract says. Alderson Reporting Company 1 That is what even the deferment agreement says that we've entered into. So we're not asking, Justice Sotomayor, for any affirmative judicial relief at all. We don't need -- we want the Court, as it does in state-secret cases such as Tenet, to stay out entirely and say -- to deny an audience to this case on the merits. And if you do what Mr. Phillips says or if you do what Justice Scalia suggested, the kind of compromise option, that is affirmatively using the power of the Federal court, granting him relief on a claim that he has not proven, and that is something I see -- I see zero precedent for -­

Justice Scalia: It's granting nobody relief. We're leaving you where you are. "Get out of here," is what we're saying. (Laughter.)

Neal K. Katyal: Justice Scalia, we have no -­

Justice Scalia: We don't know what the answer is, so go away; we leave you where you are. (Laughter.)

Neal K. Katyal: Justice -- Justice Scalia, we have no problem with a go-away rule. And if you did that and you returned to the status quo ante, we would Alderson Reporting Company 1 have that $1.35 billion. That is what the contract says. That is what their own filing in September 16, 1991, said before the Court of Federal Claims, when they called that $1.35 billion, quote, "money presently due and owing."

Justice Scalia: That assumes that the contracting officer's termination for default was valid. And we don't know that it was valid, and we don't want to have to inquire whether it was valid. So to say "go away" means everybody keeps the money he has.

Neal K. Katyal: Justice Scalia, that seems to me -- that is affirmatively using the power of the Court to set aside the contracting officer's decision, which is what I think is forbidden by Reynolds. And it would be an odd rule, because it's basically a happenstance. If we had just simply insisted on our $1.35 billion at the moment that it was owed to us in February of 1991, we wouldn't even be having this conversation right now. The only reason we're having it is because we acceded to their own request to not take the $1.35 billion right away.

Chief Justice Roberts: How would you write -- you keep saying these are sophisticated parties. What would the contractual term look like that would avoid this problem? Alderson Reporting Company

Neal K. Katyal: Oh, I think it would be very simple. You could say: In the event the government invokes the state-secrets privilege, any termination for default automatically becomes a termination for convenience. That's one of many.

Chief Justice Roberts: Do you think your client would ever agree to something like that?

Neal K. Katyal: Do I think the government would?

Chief Justice Roberts: Yes.

Neal K. Katyal: Well, I think if they don't, Mr. Chief Justice, that underscores the problem with their argument, because they are saying: Read the contract precisely this way, to eliminate terminations for default and convert them all into terminations for convenience when the state-secrets privilege is being invoked. And I agree with you. I think that would be a very unusual contract for the government to get into. That is what they're demanding here, and that's strictly -­

Chief Justice Roberts: So how do they write the contract? If they -- your answer can't be the only way they can write it is a way that you'd never accept. So how -- how do you contract around this problem?

Neal K. Katyal: Well -- well, I think there Alderson Reporting Company 1 are other ways. There's the possibility that they may demand extra money in exchange for greater risk. There may be that there may be some alternative dispute resolution mechanisms available. I don't know, but I would -- I would -­

Chief Justice Roberts: This wouldn't be a problem in an alternative dispute resolution because that's not a court?

Neal K. Katyal: Well, it might depend on -­ you might have it within the military, you know, the equivalent of that -- in the Tenet v. Doe, you might have panels like the Helms panel. I'm not sure what the precise contractual arrangements would be. I do think that the need for this Court to be involved is a lot lower than, say, in the criminal context of Reynolds, because the government here is a repeat player with these contractors. They're not in the business, as our deferment agreement, I think, underscores of trying to willy-nilly advance the state-secrets privilege to undermine and take their money away. Indeed, I think since the 2003 Federal Circuit decision, there have only been a couple of instances, at most, in which -- that I'm aware of in which the government has invoked the state-secrets privilege in any sort of contracting action, and nothing Alderson Reporting Company 1 like this superior knowledge thing. And since 2009, the government, all together in civil court, has invoked the state-secrets privilege a whopping two times, to -- to my knowledge.

Justice Breyer: So it isn't -- it isn't a big practical problem. All right. Let me ask then, I was -- misimpression. Would you go back to Justice Kennedy's question for a minute? I'm -- I -- I don't quite see -- if you would discuss it a little bit -- how you do this as a matter of constitutional law, because the Due Process Clause is tied to fundamental unfairness, and I think the answer has to be in this kind of circumstance, secret block or not, it depends. It depends on many things. So, would you write this as a matter of constitutional law? Would it -- shouldn't it be written as a matter of Federal common law of contracts? Shouldn't it be written as an exposition of the superior knowledge doctrine, which seems totally open to it? And -- or shouldn't it be written as a matter of discovery law, which is what the district judge who ended up thinking -- the Court of Claims judge says, gee, I don't really know. I mean, that's how I read it. How would you -- would you speak about this for a minute? Alderson Reporting Company

Neal K. Katyal: Sure. Justice Breyer, I think that due process is an ill-fitting concept in this contractual dispute for a couple of reasons. Not just can the sophisticated parties agree ahead of time to other things, but also the whole notion of due process in contracts is odd, because the government has waived its sovereign immunity only since 1855. They don't have any freestanding right to come in ab initio and claim fundamental fairness on contracts. I think that is implicit in the Constitution itself, that they don't have that right. And so, the question becomes, is there some extra protection the courts should give here akin to the one in Reynolds about criminal defendants in the government using state-secrets information? And I think the answer to that is "no," because parties can work that out themselves ex ante. And so, my answer to you is -- I think it was option B -- to use the contract as the -- and contractual interpretation as the basic rule for a decision here. The contract itself specified -- and it was done under the shadow of Reynolds and under the shadow of -- of Totten that specified that they would have to be the moving party. They would have to come in and challenge the decision of the contracting officer -- Alderson Reporting Company

Justice Kennedy: Well, in a whole law of contracts, you could say, oh, the contracting parties could have put this down, anticipatory breach, we don't need to have rules on that, that the parties could have negotiated that. That's not the way the contract law works.

Neal K. Katyal: Well, I do think that with respect to this, in this -- you know, thousands-and-thousands-of-page contract, I think that this specific set of issues could have been worked out in advance and, I do think, was worked out in advance. They knew, going in, that they bore the burden of walking into court, paying their attorneys, and everything else, to challenge the decision of the contracting officer. And they also knew at that moment the government had an undoubted right to the unliquidated progress payments. The contract they signed distinguished between liquidated progress payments, as to which the government has no right, and unliquidated payments, as to which default termination automatically gave that to the government. And the argument they're advancing here is, well, let's collapse those two; let's keep the $1.35 billion, because the government hasn't given it to us yet. Alderson Reporting Company

Justice Scalia: Why is that unliquidated? I didn't get the distinction between -- why is the 1.35 unliquidated?

Neal K. Katyal: Because the contract specified two payment streams. One is the work that they had reviewed and understood and said -- the government had said this is good work, we're going to pay you for it; and other work which are claims that they have made but they haven't actually been approved by the government. And I think Mr. Phillips -- I don't think that there's any sort of evidence that -- or certainly nothing that the courts below found that says that the -- that they had a right to the unliquidated progress payments.

Justice Scalia: What's the other? What's the -- what's the other 1.25 billion -­

Neal K. Katyal: The 1.2 -­

Justice Scalia: -- that he's also asking for?

Neal K. Katyal: The 1.2 billion that he's seeking on top of -­

Justice Scalia: Right.

Neal K. Katyal: -- keeping 1.35 billion, as I understand it, is costs -- is extra costs incurred under the contract above and beyond the $4.8 billion Alderson Reporting Company 1 that was in the initial contract.

Justice Sotomayor: General, do you have the citation to that footnote you referred to in the -- the 605(b)? I can find it later, but -­

Neal K. Katyal: It's page 32, and I'd also refer the Court to the court of appeals appendix page 19567, which is the page of the contract itself that incorporates the provision. The provision is FAR 52.233-1(h), and it says that -- it mandates performance and compliance with the contract even when there -- in the contracting officer's decision, even when a decision is under appeal. So it is not the case whatsoever that their filing of this claim somehow vacated the contracting officer's decision. The only way that will happen is if this Federal Court reverses the Federal Circuit -­

Justice Sotomayor: So your view is that -­

Neal K. Katyal: -- and grants them affirmative -­

Justice Sotomayor: -- that the complaint did not stay their obligation to pay you; that provision required them to pay you -­

Neal K. Katyal: That's correct.

Justice Sotomayor: -- the -- the unliquidated sums? Alderson Reporting Company

Neal K. Katyal: That's right. At that moment they had to pay. They knew that, and they in fact sent a bank letter and so on -- this is Joint Appendix 329 -- saying please don't do that. And then we entered into a deferment agreement, but we have an absolute right to that money right now regardless of what -- we don't need an affirmative decision from this Court in order to get that money. We're asking the Court to simply stay its hand and follow the Hippocratic principle of doing no harm in a world in which the -­ the Court can't decide who's right and who's wrong.

Justice Ginsburg: If that -- if you're right about that, the government's absolute right, could you withhold it from other contracts of these contractors?

Neal K. Katyal: That's absolutely right. The -- the Federal rules and the Contract Disputes Act provide us an offset so that we could -- we don't have to actually seek the 1.35 billion from their coffers, as he colorfully called it, "reaching into"; we can just offset it against future contracts, and the Federal courts would be out of the business altogether about that 1.35 billion.

Chief Justice Roberts: So you get the extra money without having to go to court because then they'd Alderson Reporting Company 1 have to go to court and challenge your offset?

Neal K. Katyal: And, again, Mr. Chief Justice, that's the contract to which they signed. Thank you.

Chief Justice Roberts: Thank you, General. Mr. Phillips, you have 3 minutes remaining. REBUTTAL ARGUMENT OF CARTER G. PHILLIPS ON BEHALF OF THE PETITIONERS

Carter G. Phillips: Thank you, Mr. Chief Justice. Justice Kennedy, I think the answer to your question is that this case can properly be decided on Federal common law principles, and indeed I would ask the Court to apply those same -- those contract principles in this context to -- it's just on the Joint Appendix on page 209. General Katyal focuses on what happens when the contracting officer takes some action. What he leaves out is the following sentence: The contractor shall have the right of appeal under the disputes clause from any determination by the contracting officer. And while the General spends an awful lot of time talking about what do you do in the Article III context, the Contracting Disputes Act specifically allows to us go to a board of contract appeals, which is not an Article III institution. And I guarantee you Alderson Reporting Company 1 that the government would be making exactly the same argument if we had taken that particular route. It seems to me the case ought not to be decided on the basis of this kind of a technical assessment. The case ought to be decided on the basis of sort of where the rights are and what's the fundamental change and who's making the shift in one direction or the other. And if you do that -- and Justice Ginsburg, you specifically asked the question, am I asking for all or nothing? No. I think there's no question you can come up with a principled basis to adopt precisely the principle that Justice Scalia pointed out, which is to say we will stay our hand, we'll -- we will not uphold the -- the contracting officer's decision, and therefore we're not going to say there's a default -­

Justice Ginsburg: But you say -­

Carter G. Phillips: -- but we're not going to go the extra mile and say it's a termination for convenience. The Court can certainly do that.

Justice Ginsburg: So you are saying there is another way? There's a middle way?

Carter G. Phillips: There is a middle way. There's no question about it. All I was saying in response to Justice Scalia's question was, you know -- Alderson Reporting Company

Justice Sotomayor: On what principle of law?

Carter G. Phillips: On the principle of law that if you don't have a contract for default, then there's no basis for -- and we're not going to do any more than that; we can't decide who's right and who's wrong, and therefore we're not going to enforce the contracting officer's decision, or we're not going to do anything more than this. We're going to leave the status quo ante, which means before the contracting officer declared that there was a default under these circumstances.

Justice Scalia: It's the "go away" principle of our jurisprudence, right? (Laughter.)

Carter G. Phillips: I actually get that a lot, Justice Scalia.

Justice Kagan: Mr. Phillips, I understood your papers as making only a constitutional claim.

Carter G. Phillips: No. I don't read that, Justice Kagan. I mean, we -- we certainly have a due process argument in there, but embedded in there as well is -- are a number of references to Federal common law principles as a -- as a -- obviously nonconstitutional basis on which to rule in our favor. Alderson Reporting Company 1 And I -- I mean, I think the Court ought to be informed in -- in making its determination about how to interpret the contracting arrangement by the question of whether this is fundamentally unfair and unconscionable, obviously, but you would probably do that as a matter of Federal common law principles in trying to decide on the -- on contracting principles or not. At the end of the day, Your Honors, this has been fundamentally unfair, and we would ask for the Court to reverse.

Chief Justice Roberts: Thank you, Mr. Phillips, General. The case is submitted. (Whereupon, at 11:02 a.m., the case in the above-entitled matter was submitted.)