Justia Government Contracts Opinion Summaries

Like many Michigan municipalities, Pontiac has experienced significant economic difficulties, especially since 2008. Michigan’s Governor appointed Schimmel as Pontiac’s emergency manager. Acting under Michigan’s then-existing emergency manager law (Public Act 4), in 2011, Schimmel modified the collective bargaining agreements of Pontiac’s retired employees and modified severance benefits, including pension benefits, that Pontiac had given retirees not covered by collective bargaining agreements. The retired employees claim that Schimmel and Pontiac violated their rights under the Contracts Clause, the Due Process Clause, and the Bankruptcy Clause. The district court denied the retirees an injunction. The Sixth Circuit vacated and remanded for expedited consideration of state law issues. Michigan voters have since rejected Public Act 4 by referendum, which may have rendered Schimmel’s actions void.The court also questioned whether two-thirds of both houses of the Michigan Legislature voted to make Public Act 4 immediately effective. The court noted that similar issues face many Michigan municipalities. View "City of Pontiac Retired Emps. Ass'n v. Schimmel" on Justia Law

The Authority was formed under Ga. Code 46-4-82(a) to provide member municipalities with natural gas. It operates as a non-profit, distributing profits and losses to member municipalities: 64 in Georgia, two in Tennessee, 12 in other states. It pays its own operating expenses and judgments; it is exempt from state laws on financing and investment for state entities and has discretion over accumulation, investment, and management of its funds. It sets its governance rules; members elect leaders from among member municipalities. Smyrna, Tennessee has obtained gas from the Authority since 2000, using a pipeline that does not run through Georgia. The Authority entered a multi-year “hedge” contract for gas acquisition, setting price and volume through 2014, and passed the costs on. The market price of natural gas then fell due to increased hydraulic fracturing (fracking), but Smyrna was still paying the higher price. Smyrna sued for breach of contract, violations of the Tennessee Consumer Protection Act, breach of fiduciary duty, and unjust enrichment. The district court denied the Authority’s motion to dismiss based on sovereign immunity under Georgia law and the Eleventh Amendment. The Sixth Circuit affirmed, stating that the Authority’s claim that any entity referred to as a state “instrumentality” in a Georgia statute is entitled to state-law sovereign immunity “requires quite a stretch of the imagination.” View "Town of Smyrna, TN v. Mun. Gas Auth. of GA" on Justia Law

Triple A, a Michigan corporation, has offices in Dearborn, Michigan, the Congo (previously known as Zaire), and Sierra Leone. In 1993, Zaire ordered military equipment worth $14,070,000 from Triple A. A South Korean manufacturer shipped the equipment to Zaire at Triple A’s request. For 17 years, Triple A sought payment from Zaire and then the Congo without success. In 2010, Triple A sued the Congo for breach of contract. The district court dismissed the case, citing lack of jurisdiction under the Foreign Sovereign Immunities Act, 28 U.S.C. 1602. The Sixth Circuit affirmed, citing the language of the Act, under which federal courts have jurisdiction “in any case in which the action is based upon” the following: [1] a commercial activity carried on in the United States by the foreign state; or [2] upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or [3] upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States. View "Triple A Int'l, Inc. v. Democratic Republic of the Congo" on Justia Law

Janosek owns a business that makes welded ring products. The business uses water to cool hydraulics used in the process. In or before 1999 Janosek installed closed loop water chillers that he hoped would recapture the water and significantly decrease water consumption. Instead of seeing a decrease in his water bills, Janosek continued to pay in excess of $150,000 a year until 2002, when the bills dropped to between $10,000 and $25,000 a year. Janosek suspected that he had been over-charged based on the Cleveland Water Department practice of estimating water consumption. Cleveland’s Moral Claims Commission, established to consider monetary claims that Cleveland is not legally obligated to pay, held a hearing, without notifying Janosek, and denied the claim. The district court dismissed Janosek’s case, finding that claims of unjust enrichment, taking without just compensation, and negligence were barred by the statute of limitations, and that a due process claim concerning the lack of notice failed because Janosek had not identified a valid property interest. The Sixth Circuit affirmed. Any legitimate property interest that Janosek had in the overpayments lapsed with the running of the limitations period. View "Janosek v. City of Cleveland" on Justia Law

Hill, Director of Risk Management for Detroit Public Schools invited Washington to submit a proposal for a wellness program for DPS employees. Washington and others joined Associates for Learning (A4L) and submitted a proposal quoting $150,000 for a pilot study. Contrary to DPS policy, Hill did not open competitive bidding or execute a written contract, and made payments by wire transfer, rather than by check. Hill, who later left DPS testified that he met with Washington to discuss larger amounts. Washington paid Hill five percent of the invoice amount for assistance in getting the invoices paid. Invoices totaling more than a million dollars for “future work” were paid. The partners met in public places to distribute cash. Washington was convicted of conspiracy to commit program fraud, 18 U.S.C. 371 and 666, and conspiracy to commit money laundering, 18 U.S.C. 1956. The district court enhanced Washington’s base offense level by 22 levels, finding that Washington was an “organizer or leader” and that the amount of loss to DPS was more than $2.5 million, and sentenced her to 84 months. The Sixth Circuit affirmed, finding that Washington was not prejudiced by errors made by counsel and that the evidence was sufficient. View "United States v. Washington" on Justia Law

Kentucky provided medical care to its poorest citizens through Medicaid (42 U.S.C. 1396-1) using a traditional fee-for-service model until 2011, when it transitioned to a managed-care program and awarded Coventry a contract to administer Medicaid services in southeastern Kentucky. Coventry entered into a temporary agreement with Appalachian, the dominant hospital care provider in that area, to provide members in-network hospital care and other services. Coventry soon realized it was losing money, partly because its network included Appalachian, whose patients, on average, were sicker and more expensive to treat. Coventry learned that its competitors were not required to contract with Appalachian and unsuccessfully sought an increase in payment rates. Coventry then noticed termination of Appalachian’s contract, which would have made thousands of Medicaid recipients unable to access healthcare providers at Appalachian’s facilities without first paying fees. Appalachian sued Coventry and state defendants. The district court required Coventry to keep Appalachian in its network for four months longer than the contract specified (until November 1, 2012) and denied Coventry’s motion to require Appalachian to post a security bond. The Sixth Circuit affirmed with respect to the bond and otherwise dismissed an appeal as moot because no recognized exception permits review of an expired injunction. View "Appalachian Reg'l Healthcare, Inc. v. Coventry Health & Life Ins. Co." on Justia Law

Under the Medicaid program, the federal government offsets some state expenses for medical services to low-income persons; a state’s plan must cover medical assistance for specific populations, but a state may expand its Medicaid program by obtaining a waiver for an “experimental, pilot, or demonstration project.” In 1993, Tennessee obtained a waiver for TennCare, to cover uninsured and uninsurable individuals. Following approval, hospitals received reimbursement under the umbrella of TennCare. Because hospitals serving large numbers of low-income patients generally incur higher costs than Medicaid flat payment rates reflect, hospitals that treated a disproportionate share of low-income patients could apply for the “DSH” adjustment. A fiscal intermediary processed requests for reimbursement, including DSH adjustment payments. Due to discrepancies between the practices of fiscal intermediaries in different states, the Secretary issued a 2000 rule, providing that eligibility waiver patients were to be included as individuals “eligible for medical assistance” under Medicaid for purposes of DSH adjustment calculations. The 2005 Deficit Reduction Act ratified the rule. Adventist, a not-for-profit hospital network, provided more than 1,200 patient care days to TennCare expansion waiver patients 1995-2000. The fiscal intermediary did not include those days in calculating the adjustment. The Secretary’s Provider Reimbursement Review Board upheld the exclusion. The district court dismissed, concluding that section 1315 provided the Secretary discretion to exclude expansion waiver patient days from the DSH calculation. The Sixth Circuit affirmed. View "Adventist Health Sys./Sunbelt, Inc. v. Sebelius" on Justia Law

MedQuest is a diagnostic testing company that operates more than 90 testing facilities in 13 states. In 2006 a former MedQuest employee, brought a qui tam suit against MedQuest alleging violations of the False Claims Act. The United States intervened and obtained summary judgment ($11,110,662.71) that MedQuest used supervising physicians who had not been approved by the Medicare program and the local Medicare carrier to supervise the range of tests offered at the Nashville-area sites, and after acquiring one facility, MedQuest failed to properly re-register the facility to reflect the change in ownership and enroll the facility in the Medicare program, instead using the former owner’s payee ID number. The Sixth Circuit reversed, stating that the Medicare regulatory scheme (42 U.S.C. 1395x) does not support FCA liability for failure to comply with the supervising-physician regulations. MedQuest’s failure to satisfy enrollment regulations and its use of a billing number belonging to a physician’s practice it controlled do not trigger the hefty fines and penalties created by the FCA. View "United States v. MedQuest Assocs, Inc." on Justia Law

Berrien worked for a civilian contractor (TECOM) at a military base in Michigan. He was fatally injured by a gutter that fell from the liquor store on the base while he was working alone, behind the store. The district court awarded $1.18 million in damages for failure to warn, under the Federal Tort Claims Act, 28 U.S.C. 1346(b)(1). The Sixth Circuit reversed. Because the Act does not waive the immunity of the United States for acts of independent contractors, liability could only be based on the negligence of government employees. There was no evidence that government employees actually knew of the dangerous condition of the liquor store, so that, under applicable Michigan law, any liability for failure to warn an invitee of a dangerous condition would have to have been based on a negligent failure to discover the dangerous condition. Even though the United States retained the right to conduct spot checks under its contract with TECOM, this right does not subject it to FTCA liability. View "Berrien v. United States" on Justia Law

In 2004 the U.S. Department of Health and Human Services promulgated 42 C.F.R. § 412.106(b), concerning the amount that certain hospitals are entitled to receive as enhancements to their regular reimbursement payments from the Medicare program. In connection with the Medicare program, Congress created a statutory formula to identify hospitals that serve a disproportionate number of low-income patients and to calculate the increased payments due such hospitals. Metropolitan Hospital challenged the way that the Secretary of HHS interprets this statutory formula to exclude certain patients who are simultaneously eligible for benefits under both Medicare and Medicaid, claiming that exclusion of dual-eligible patients cost it more than $2.1 million in 2005. The district court ruled that the challenged HHS regulation was invalid as violating the statute that it purported to implement. The Sixth Circuit reversed, upholding HHS’s interpretation of 42 U.S.C. 1395. View "Metro. Hosp. v. U.S. Dept of Health & Human Servs." on Justia Law