Justia Government Contracts Opinion Summaries

Articles Posted in Government Contracts
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Construction firm Brasfield & Gorrie, LLC, received the prime contract to expand the University of Mississippi Medical Center Children’s Hospital in 2017. Electrical contractor McInnis Electric Company secured the winning bid to install the electrical and low voltage systems package for the project and subsequently signed a subcontract with Brasfield & Gorrie. Terms of the subcontract incorporated the prime contract, which were related to the same project by reference. The contract provided that work was set to begin on the project on February 15, 2018. However, McInnis, was directed not to report on site until June 4, 2018, and, due to delays, was unable to begin until July 23, 2018. As work progressed, the schedule allegedly became delayed as a result of Brasfield & Gorrie’s failure to coordinate the work of the various subcontractors. McInnis averred that Brasfield & Gorrie’s failure to coordinate and facilitate the work of the various subcontractors worsened as the project progressed, and Brasfield & Gorrie experienced turnover in management. This failure allegedly delayed McInnis’s work, which was not on the path toward completion, supposedly through no fault of its own. Construction issues were amplified when on March 11, 2020, Mississippi experienced its first reported case of COVID-19. On April 1, 2020, the Mississippi Governor instituted a shelter in place order in response to the ongoing pandemic, requiring certain nonessential businesses to close and recommending social distancing to reduce the spread of the coronavirus in Mississippi. The children’s hospital was not classified as an existing infrastructure as it was a nonoperational work in progress and thus was not subject to the executive order’s exception to the governmental shutdowns. By May 8, 2020, McInnis had suffered an approximately 40 percent loss in its workforce due to employees testing positive for COVID-19. Despite the decrease in the available workforce, Brasfield & Gorrie demanded McInnis perform under its contractual obligation. McInnis took measures to continue the work. Brasfield & Gorrie further declined requests for accommodation and instead terminated McInnis on May 13, 2020. The case before the Mississippi Supreme Court here stemmed from disagreements and a broken contract between the parties, contesting whether arbitration was appropriate to settle their disputes. The trial court compelled arbitration, and the Supreme Court affirmed. View "McInnis Electric Company v. Brasfield & Gorrie, LLC et al." on Justia Law

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In 2018, Kousisis and Alpha Painting were convicted of conspiracy to commit wire fraud, 18 U.S.C. 1349, and three counts of wire fraud, 18 U.S.C. 1343. The charges arose from false documents filed concerning “disadvantaged business enterprise” status in transportation construction projects for which the U.S. Department of Transportation provided funds through the Federal Highway Administration to the Pennsylvania Department of Transportation. The district court imposed a 20-point sentencing enhancement under U.S.S.G. 2B1.1(b)(1), which corresponds to a loss of $9.50 million-$25 million, noting that the actual loss to the government was not measurable at the time of sentencing and concluding that Alpha’s “ill-gotten profits” represented an appropriate measure of loss.The Third Circuit affirmed the convictions. The defendants secured PennDOT’s money using false pretenses and the value PennDOT received from the partial performance of those painting and repair services is no defense to criminal prosecution for fraud. The court vacated the calculation of the amount of loss for sentencing purposes, noting the extreme complexity of the case. The victim’s loss must have been an objective of the fraudulent scheme; it is insufficient if that loss is merely an incidental byproduct of the scheme. The court separately vacated a forfeiture order of the entire profit amount on the contracts. View "United States v. Alpha Painting & Construction Co., Inc." on Justia Law

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Westlands Water District (Westlands) appeals from a judgment of dismissal entered in a validation action filed pursuant to, inter alia, Code of Civil Procedure section 860 et seq. The subject matter was an anticipated contract between Westlands and the United States concerning the ongoing delivery of federal reclamation project water and repayment of certain financial obligations. The superior court declined to grant relief and ultimately dismissed Westlands’ validation action for multiple reasons. Most pertinently, the draft was found to be materially deficient in its failure to specify Westlands’ financial obligations under the anticipated contract.   The Fifth Appellate District affirmed the judgment. The court explained that the “Repayment Obligation” cannot be determined without knowing the “Existing Capital Obligation” and/or the contents of exhibit D. The “Existing Capital Obligation” cannot be determined without knowing the contents of exhibit D. In the absence of exhibit D, both terms are useless for purposes of determining Westlands’ financial obligations, i.e., “the scope of the duty and the limits of performance.” Moreover, as Westlands admitted during the motion proceedings, exhibit D was not merely omitted from the draft attached to the complaint. Despite being expressly incorporated into the contract by reference, exhibit D did not exist when the complaint and the December 2019 motion were filed. Even when the motion was heard, there was only meager parol evidence of estimates ranging from $200 million to $362 million. Given the circumstances, the court agreed the contract presented for validation was missing an essential term and, therefore uncertain, i.e., not sufficiently definite to be binding and enforceable. View "Westlands Water Dist. v. All Persons Interested" on Justia Law

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The City and County of San Francisco (the City) owns and operates San Francisco International Airport (SFO or the Airport). Airlines for America (A4A) represents airlines that contract with the City to use SFO. In 2020, in response to the COVID-19 pandemic, the City enacted the Healthy Airport Ordinance (HAO), requiring the airlines that use SFO to provide employees with certain health insurance benefits. A4A filed this action in the Northern District of California, alleging that the City, in enacting the HAO, acted as a government regulator and not a market participant, and therefore the HAO is preempted by multiple federal statutes. The district court agreed to the parties’ suggestion to bifurcate the case to first address the City’s market participation defense. The district court held that the City was a market participant and granted its motion for summary judgment. A4A appealed.   The Ninth Circuit reversed the district court’s grant of summary judgment. The court concluded that two civil penalty provisions of the HAO carry the force of law and thus render the City a regulator rather than a market participant. The court wrote that because these civil penalty provisions result in the City acting as a regulator, it need not determine whether the City otherwise would be a regulator under the Cardinal Towing two-part test set forth in LAX, 873 F.3d at 1080 View "AIRLINES FOR AMERICA V. CITY AND COUNTY OF SAN FRANCISCO" on Justia Law

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Ascendium Education Solutions (“Ascendium”) is a Program guarantor that previously charged debt-collection costs to defaulting Program borrowers who entered loan rehabilitation agreements. Ascendium challenged the Department of Education’s Rule, 34 C.F.R. Section 682.410(b)(2)(i), under the Administrative Procedure Act (“APA”), arguing that the Department of Education and its Secretary (collectively, the “Department”) did not have statutory authority to promulgate the Rule because the Rule conflicts with the Act. The district court ruled that Ascendium lacked standing to challenge the Rule as it applies to borrowers who enter repayment agreements. But the district court held that the Rule exceeded the Department’s authority under the Act with respect to borrowers who enter rehabilitation agreements. Both Ascendium and the Department appealed.   The DC Circuit reversed in part and affirmed in part. The court concluded that Ascendium has standing to challenge the entirety of the Rule, that the Rule is consistent with the Act and therefore is lawful, and that the Rule is not arbitrary or capricious. The court explained that the Rule prohibits a guarantor from charging collection costs to a borrower who enters a repayment plan or a rehabilitation agreement during the initial default period: It implicitly deems such costs “unreasonable” under the circumstances. The court concluded that the Rule is consistent with the Act’s requirement that “reasonable” collection costs must be passed on to borrowers. Further, the court explained that the Department’s response to Ascendium’s comment adequately refuted Ascendium’s assumption that the purpose of the Rule should be to incentivize guarantors to enter rehabilitation agreements by allowing them to charge collection costs. View "Ascendium Education Solutions, Inc. v. Miguel Cardona" on Justia Law

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Former employees of Alternatives, a for-profit hospice provider, sued under the False Claims Act, 31 U.S.C. 3729, alleging that Alternatives submitted claims for Medicare reimbursement despite inadequate documentation in the patients’ medical records supporting hospice eligibility, under 42 C.F.R. 418.22(b)(2). For a patient to be eligible for Medicare hospice benefits, and for a hospice provider to be entitled to reimbursement, a patient must be certified as “terminally ill.” The district court granted Alternatives summary judgment based on lack of materiality, finding “no evidence” that Alternatives’ insufficiently documented certifications "were material to the Government’s decision to pay.” The court reasoned that “[t]he Government could see what was or was not submitted” yet never refused any of Alternatives’ claims, despite the inadequacy or missing supporting documentation or where compliance was otherwise lacking.The Third Circuit vacated. When a government contractor submits a claim for payment but fails to disclose a statutory, regulatory, or contractual violation, that claim does not automatically trigger liability. The Act requires that the alleged violation be “material” to the government’s decision to pay. The Supreme Court has identified factors to assist courts in evaluating materiality. In this case, the court based its decision principally on the government’s continued payments after being made aware of its deficient documentation, overlooking factors that could have weighed in favor of materiality— and despite an open dispute over the government’s “actual knowledge.” View "Druding v. Care Alternatives" on Justia Law

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In 2010, the Army Corps of Engineers awarded ECCI a contract to design and build a military compound in Afghanistan. In 2014, ECCI sought compensation for construction delays allegedly attributable to the government. After six years of unsuccessful settlement discussions, followed by a nine-day hearing before the Armed Services Board of Contract Appeals, the government—three months after the hearing—successfully moved to dismiss ECCI’s claim for lack of subject-matter jurisdiction for failure to state a “sum certain.”The Federal Circuit reversed. The requirement, established by the Federal Acquisition Regulation, that claims submitted under the Contract Disputes Act (CDA), 41 U.S.C. 7101–7109, state a “sum certain”—i.e., specify the precise dollar amount sought as relief—is not jurisdictional and is subject to forfeiture. The court noted the Supreme Court’s direction to “police this jurisdictional line.” Congress did not clearly state that a claim submitted under the CDA must include a sum certain: the sum-certain requirement is not even in the CDA itself. A claim that does not state a sum certain has not sufficiently pleaded the elements of a claim under the CDA and may be denied by the contracting officer and dismissed on appeal for failure to state a claim. If a party challenges a deficient sum certain after litigation has far progressed, however, that defense may be deemed forfeited. View "ECC International Constructors, LLC v. Secretary of the Army" on Justia Law

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The Supreme Judicial Court affirmed the judgment of the superior court judge granting summary judgment in favor of BSC Companies, Inc., BSC Group, Inc., and the companies' president (collectively, BSC) in this action brought by BSC's former employees alleging claims under the Prevailing Wage Act, Mass. Gen. Laws ch. 149, 26-27H, holding that the contracts at issue were not governed by the Act, and BSC was not required to pay its employees a prevailing wage pursuant to the contracts.At issue were two professional engineering services contracts awarded by the Department of Transportation (MassDOT) to BSC. The contracts were not competitively bid and were not awarded to the lowest bidder, unlike contracts for public works construction projects governed by the Act. Further, the contracts did not specify that BSC's employees would be paid at least a prevailing wage determined by the Department of Labor Standards. The superior court judge granted summary judgment to BSC. The Supreme Court affirmed, holding that Plaintiffs were not entitled to a prevailing wage for their work under the professional services contracts. View "Metcalf v. BSC Group, Inc." on Justia Law

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Johnson was the councilman in Cleveland’s Buckeye-Shaker neighborhood for 41 years. Jamison was his executive assistant. For years, Johnson used his position to fraudulently claim federal reimbursements for payments he never made. He also secured employment for his children in federally funded programs, although they were not legally eligible to work in such positions. Johnson deposited their earnings into his own account. In addition, Johnson fraudulently claimed a series of tax deductions. He encouraged and assisted his son Elijah in submitting falsified records for Elijah’s grand-jury testimony. Jamison assisted Johnson in these crimes. Johnson and Jamison were convicted on 15 charges, including federal program theft under 18 U.S.C. 371, 666(a)(1)(A) and (2); tax fraud, 26 U.S.C. 7206(2); and obstruction of justice, 18 U.S.C. 1512(b) and 1519. Johnson was sentenced to 72 months in prison. Jamison was sentenced to 60 months.The Sixth Circuit affirmed, rejecting challenges to the district court’s loss calculations and to sentencing enhancements for being an organizer or leader of a criminal activity involving five or more participants, for using a minor, and for obstructing justice. The district court properly admitted “other acts” evidence of prior misuse of campaign funds. Any other errors in evidentiary rulings were harmless. View "United States v. Jamison" on Justia Law

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If a borrower defaults on a loan guaranteed by the Small Business Administration (SBA), the lender asks the SBA to purchase the outstanding balance of the defaulted loan. The SBA then decides whether to honor the guarantee after reviewing the paperwork to ensure that the loan complied with SBA requirements. A lender can retain a lending service provider (LSP) to package, originate, disburse, service, or liquidate SBA-guaranteed loans on the lender’s behalf. The five defendants worked at, or with, an LSP, and engaged in a scheme to obtain SBA guarantees for loans that did not meet the SBA’s guidelines and requirements. They made false statements on loan-guarantee applications and purchase requests sent to the SBA about matters such as borrowers’ eligibility to receive a loan and how loan proceeds would be disbursed.The Seventh Circuit affirmed the defendants’ convictions for conspiracy to commit wire fraud affecting a financial institution, 18 U.S.C. 1349, and wire fraud affecting a financial institution, section 1343) and their sentences. The court rejected arguments concerning a constructive amendment to the indictment, that the government did not prove that the wire fraud scheme deprived the SBA of a protectable money or property interest, jury instructions, the sufficiency of the evidence, and loss calculation. View "United States v. Griffin" on Justia Law