Justia Government Contracts Opinion Summaries

Before Hurricane Katrina, State Farm issued federal government-backed flood insurance policies and its own homeowner policies. Relators, former claims adjusters for a State Farm contractor (Renfroe) filed a complaint under seal in April 2006, claiming that State Farm instructed adjusters to misclassify wind damage as flood damage to shift its insurance liability to the government. The district court extended the seal several times at the government’s request, lifting it in part in January 2007 for disclosure to another district court hearing a suit by Renfroe against the relators. In August, the court lifted the seal. The government declined to intervene. State Farm moved to dismiss on grounds that the relators’ attorney had disclosed the complaint’s existence to news outlets, which issued stories about the fraud allegations, but did not mention the False Claims Act (FCA, 31 U.S.C. 3729) complaint and the relators had met with a Congressman who later spoke against the purported fraud. Under the FCA: “The complaint shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders.” The court decided against dismissal, balancing actual harm to the government, severity of the violations, and evidence of bad faith. The Fifth Circuit and a unanimous Supreme Court affirmed. A seal violation does not mandate dismissal. The FCA has several provisions expressly requiring the dismissal, indicating that Congress did not intend to require dismissal for a violation of the seal requirement. This result is consistent with the purpose of section 3730(b)(2), which was enacted to “encourage more private enforcement suits,” and to protect the government’s interests when a relator filing a civil complaint could alert defendants to a pending federal criminal investigation. View "State Farm Fire & Casualty Co. v. United States ex rel. Rigsby" on Justia Law

Henderson, Nevada executed an agreement with Developer to construct sports venues on 480 acres of federally-owned public land. The city requested the Bureau of Land Management in the Department of Interior to convey the land to Developer. After completion of the project, Developer was to transfer ownership of the land and the sports complex to the city; the city would lease back the venues to Developer. The Bureau agreed to conduct a modified competitive sealed-bid auction, so that Developer had the right to match the highest bid. After the bidding, Developer paid the balance and requested the land patent for recording. Within hours after the funds transferred to the Bureau, Developer terminated its agreement with Henderson. Henderson requested the Bureau to cancel the sale and sued Developer. The parties settled. Developer agreed to give the city $4.25 million after it recorded the patent and not to pursue any development in Henderson. The city agreed to withdraw its objection. The Department determined that the Bureau should not release a patent for the land. Developer alleged violation of the Federal Land Policy and Management Act by canceling the sale more than 30 days after it paid for the land. The district court held that the Secretary had plenary power to terminate the sale because its consummation would have been contrary to law, given that the Bureau had authorized a modified land auction, only because of the anticipated public benefits. The D.C. Circuit affirmed, rejecting a claim that the Secretary’s action was arbitrary. The auction sale was rendered unlawful when Developer terminated the agreement; it did not suffer a due process violation because it never acquired a property interest in the land. View "Silver State Land, LLC v. Schneider" on Justia Law

Relator-appellee Jeffrey Simoneaux brought a qui tam action against his former employer, E.I. duPont de Nemours & Company ("duPont"), under the False Claims Act ("FCA"). He contended that duPont had violated the reverse-false-claims provision by concealing an obligation to pay the United States a penalty arising from alleged violations of the Toxic Sub-stances Control Act ("TSCA"). He also averred that duPont had retaliated against him in violation of the FCA. DuPont unsuccessfully moved for summary judgment on both claims, and the Fifth Circuit permitted an interlocutory appeal. Because duPont had no “obligation” to pay the United States, the Court reversed and remanded the denial of summary judgment on the reverse false claim. With respect to the retaliation claim, the Court dismissed the appeal for lack of jurisdiction. View "Simoneaux v. E. I. DuPont de Nemours & Co." on Justia Law

The City of Rochester’s Department of Public Works owned and operated the Rochester Water System, which provided water to residents of the City. The City operated three water storage tanks, one of which is the Rochester Hill Water Storage Tank (the Tank). Whitman & Howard n/k/a AECOM Technical Services, Inc. (AECOM) designed the Tank and oversaw its construction by Chicago Bridge & Iron n/k/a CB&I, Inc. (CB&I). CB&I completed the Tank in 1985, and it was placed into service that same year. In June 2009, the City contracted defendant Marcel A. Payeur, Inc. (Payeur) to service the Tank by recoating the Tank’s interior and exterior, installing a mixer, and modifying the Tank to accommodate the mixer. Defendant Wright-Pierce performed the engineering and design work for the modification project. Payeur substantially completed the modification, under Wright-Pierce’s supervision, in November 2009. In December 2011, the Tank developed a leak. The City had to evacuate nearby residents, drain the Tank, and remove it from service. The City inspected the Tank and discovered that Payeur had failed to properly construct the modifications in accordance with Wright-Pierce’s design. The City filed suit against Payeur in November 2012, alleging breach of contract, breach of warranty, negligence, and unjust enrichment. In April 2014, the City named CB&I, AECOM, and Wright-Pierce as additional defendants. The City’s amended complaint alleged that Wright-Pierce had failed to properly supervise Payeur’s 2009 modification work; it also alleged that, in 1985, CB&I had failed to properly construct the Tank in accordance with AECOM’s design, and AECOM had failed to adequately monitor CB&I. CB&I and AECOM moved to dismiss the City’s claims against them, arguing that the claims were time-barred. The superior court dismissed the City’s claims against CB&I and AECOM pursuant to a six year statute of limitations in effect when CB&I and AECOM substantially completed their contract with the City. The City appealed, arguing the superior court erred in refusing to apply the doctrine of “nullum tempus occurrit regi (“time does not run against the king”). Finding no reversible error, the New Hampshire Supreme Court affirmed. View "City of Rochester v. Marcel A. Payeur, Inc." on Justia Law

In 1973, two Kalamazoo, Michigan hospitals formed a consortium to manage their health education programs and to train interns and residents. In the 1980s, they joined Michigan State University to form the Michigan State University Kalamazoo Center for Medical Studies (KCMS). KCMS administered graduate medical programs for residency programs for the hospitals. The hospitals agreed to incur “joint and equal responsibility for providing [KCMS] with sufficient financing to carry out its programs as negotiated on a yearly basis.” KCMS also received patient-care revenue, support from Michigan State University, and funds from contracts and grants. The hospitals sought reimbursement on their Medicare cost reports (42 U.S.C. 1395ww(h)) during fiscal years 2000–2004 for costs incurred for residents’ training at KCMS’s nonhospital clinics. The Centers for Medicare and Medicaid Services found that the hospitals failed to show they incurred all or substantially all of the costs of their residency programs and that they failed to comply with a requirement of a written agreement detailing the financing of their offsite programs. The district court and D.C. Circuit affirmed the denials of reimbursement, rejecting an argument that the “written agreement” requirement was satisfied by a collection of documents executed over the years. None of the documents met the regulatory criteria. View "Borgess Medical Center v. Burwell" on Justia Law

The Department of Mental Health (DMH) submitted a proposal to the Auditor of the Commonwealth that would privatize certain of its state-run mental health services. The Auditor issued a written decision approving the proposed privatization contract, concluding that the privatization proposal met the requirements of the Pacheco Law. The Pacheco Law establishes procedures that agencies must follow when beginning the bidding process for an entering into a privatization contract. The Supreme Judicial Court affirmed the Auditor’s decision, holding that the Auditor did not abuse her discretion in determining that DMH’s privatization proposal met the requirements of the Pacheco Law. View "Service Employees International Union, Local 509 v. Auditor of the Commonwealth" on Justia Law

In September 2003, Bachner Company Inc. entered into a contract with the Alaska Department of Administration, to lease portions of the Denali Building in Fairbanks. After a ten-year lease term and a one-year renewal, Bachner alleged that the State was in default on its rent payments, and it filed suit in superior court to recover. The State moved to dismiss the complaint, arguing that the claim was governed by the Alaska State Procurement Code and that Bachner had failed to exhaust its remedies under the code before filing suit. The superior court agreed and granted the State’s motion to dismiss. Bachner appealed. After review, the Supreme Court concluded the procurement code covered a rent dispute over an ongoing lease, that the Bachner's claim fell under the procurement code, and Bachner had to exhaust its administrative remedies before filing suit in superior court. View "Bachner Company Incorporated v. State, Dept. of Administration" on Justia Law

In 2012, the FTC announced the “Robocall Challenge,” under 15 U.S.C. 3719(b). The public was invited to create “innovative solutions to block illegal robocalls.” for a $50,000 prize. Contestants granted the FTC non-exclusive, irrevocable, royalty free and worldwide license and agreed to release the FTC from all liability. The FTC received about 800 submissions. The judges, with little guidance from the contest rules, decided that the frontrunners would be those entries that proposed using filtering as a service (FaaS) to block robocalls. Frankel’s submission proposed a “traceback” solution rather than FaaS. When his submission was not chosen, Frankel sued under the bid protest provisions of 28 U.S.C. 1491(b) and alleging breach of contract. The Federal Circuit affirmed the Claims Court’s rejection of both theories. His contract with the FTC was not a procurement contract, so Frankel did not have standing to register an objection to the award under section 1491(b). Frankel is unable to show “fraud, irregularity, intentional misconduct, gross mistake, or lack of good faith.” Any other breach of contract claim based on the judging process is barred by the limitation of liability clause. View "Frankel v. United States" on Justia Law

Inclusion, Inc., Inclusion North, Inc., and Inclusion South, Inc., (collectively Inclusion) provided residential rehabilitation support services to Idahoans eligible for Medicaid. In September 2012, Inclusion filed a complaint against the Idaho Department of Health and Welfare (IDHW), alleging IDHW breached binding Medicaid Provider Agreements by failing to adequately reimburse Inclusion for its services. In June 2013, Inclusion amended its complaint with unjust enrichment and quasi-estoppel claims. The district court granted summary judgment for IDHW, concluding no triable issue of fact supported Inclusion’s claims. IDHW then moved for attorney fees under Idaho Code section 12-120(3) and requested $74,925.00 in fees. The district court found that IDHW’s requested award was based on a reasonable amount of hours and a reasonable hourly rate, as determined by the Boise market. As the district court acknowledged, “the hourly rate requested is reasonable and certainly well within the rate in the marketplace in the Fourth District in Ada County, in particular.” Even so, the district court took issue with how IDHW’s requested award was not based on the actual hourly rate billed during litigation. As the district court explained, “[e]xcept where the award of attorney fees is paid to the lawyer, fees awarded to a party should not exceed the amount the client actually paid for the lawyer.” To that end, the district court multiplied 599.4 hours of work by $54.00 per hour1 to award a total of $30,857.11. IDHW moved to reconsider, but the district court upheld the award for $30,857.11. IDHW timely appealed, arguing the district court abused its discretion by basing the award on the amount billed by the Attorney General. The Supreme Court agreed, vacated the judgment and granted IDHW its requested award. View "Inclusion, Inc v. Id. Dept. of Health & Welfare" on Justia Law

Kase was exposed to asbestos insulation used on nuclear submarines during the early 1970s. The trial court rejected claims against a broker that arranged for asbestos-containing insulation to be shipped to the Mare Island Naval Shipyard, where workers packed it around the submarine piping it protected. The court held, on summary judgment, that the Navy‘s procurement of asbestos insulation for its nuclear submarines implicated the government contractor defense set forth in the Supreme Court’s 1988 holding, Boyle v. United Technologies Corp. The broker procured the insulation pursuant to and in compliance with relatively detailed performance and testing specifications, although those specifications did not expressly call out for asbestos in the insulation. According to undisputed evidence, the specifications could only be met by asbestos-containing insulation, and the only product on the Navy‘s approved list of suitable products was the product at issue, Unibestos. The court of appeal affirmed, stating that the defense does not necessarily exclude the procurement of products also sold commercially. The Navy‘s procurement of the asbestos insulation at issue occurred after years of evaluating and weighing the utility of and the health hazards associated with asbestos products and pursuant to specifications that required an asbestos product. View "Kase v. Metalclad Insulation Corp." on Justia Law