Justia Government Contracts Opinion Summaries

Zafer, an Ankara, Turkey, contractor, and the Army Corps of Engineers (USACE) entered into a firm-fixed-price contract to construct the MILCON Support Facility at the Bagram Air Force Field in Afghanistan. Zafer was responsible for delivering materials to the site, and assumed the risk “for all costs and resulting loss or profit.” After issuing notice to proceed, USACE recognized that it could not make the project site available immediately and increased the contract price and set a new completion date. In November 2011, Pakistan closed its border from the seaport city of Karachi along the land routes into Afghanistan in response to a combat incident with the U.S. and NATO. The route remained closed for 219 days, Zafer notified USACE that the closure would greatly impact its delivery of materials and requested direction on how to proceed. USACE replied that the closure was “purely the act of Pakistan governmental authorities,” that the U.S. government was “not responsible” and denied further compensation. Zafer subsequently, repeatedly, asked for payment for additional costs. In 2013, Zafer submitted an unsuccessful request for an equitable adjustment. The contracting officer found no evidence supporting a constructive change claim. The Claims Court granted USACE summary judgment. The Federal Circuit affirmed. Zafer failed to designate specific facts to establish a constructive change claim based on either a constructive acceleration theory or on a government fault theory. View "Zafer Taahhut Insaat v. United States" on Justia Law

Former FBI agent Robert Lustyik wanted to help his friend and business partner, Michael Taylor, in return for payment. Taylor owned American International Security Corporation (AISC), a company that offered security and defense contracting services. The Department of Defense awarded AISC a contract in 2007 to provide training and related services to Afghan Special Forces. In mid-2010, the United States began investigating AISC regarding fraud and money laundering in connection with the 2007 contract. In September 2011, the United States filed a civil forfeiture action against assets owned by Taylor and AISC, which resulted in the seizure of more than $5 million dollars from AISC’s bank account. Lustyik used his status as an FBI agent to impair the government’s investigation of Taylor, including attempting to establish Taylor as a confidential source. Lustyik was indicted on charges related to the obstruction of justice. Prior to trial, Lustyik pleaded guilty to all charges in the indictment without a plea agreement. After his plea, his lead counsel withdrew and Lustyik obtained new counsel. On the eve of sentencing, counsel sought an order allowing him to obtain security clearance to review classified material he believed might be relevant for sentencing. The district court, having previously reviewed the documents, deemed them irrelevant to the sentencing issues, denied the motion, and subsequently sentenced Lustyik to 120 months’ imprisonment. Lustyik argued on appeal that the district court’s order denying his counsel access to the classified materials violated his Sixth Amendment rights at sentencing. Finding that the district court’s decision was not presumptively prejudicial to Lustyik’s advocacy at sentencing, nor did the district court abuse its discretion in concluding the documents were not relevant for sentencing, the Tenth Circuit affirmed. View "United States v. Lustyik" on Justia Law

Relator filed a qui tam action under the False Claims Act (FCA), 31 U.S.C. 3729-33, alleging that his former employer, AAKC, violated the FCA by submitting claims for Medicare reimbursement of anesthesia services at the “Medical Direction” rate. Relator alleged that, because AAKC anesthesiologists were not present in the operating room during patients’ “emergence” from anesthesia, and therefore AAKC did not comply with the Medicare conditions of payment for submitting such claims. The district court granted AAKC summary judgment. The court granted the United States leave to appear as amicus curiae supporting neither party. The court concluded that, because the agency had not clarified an obvious ambiguity in its Step Three regulation for decades, AAKC’s failure to obtain a legal opinion or prior CMS approval cannot support a finding of recklessness. The court also concluded that the district court did not abuse its discretion in refusing to consider a new theory first articulated in relator's summary judgment papers. Finally, the court rejected relator's claim that AAKC violated 42 C.F.R. 415.110(b). Accordingly, the court affirmed the judgment. View "Donegan v. Anesthesia Assoc." on Justia Law

Plaintiff filed a qui tam suit under the Minnesota False Claims Act (MFCA), Minnesota Statutes Annotated 15C.01 et seq., and the federal False Claims Acts (FCA), 31 U.S.C. 3729 et seq., against UMMC, alleging that UMMC fraudulently induced MDHS to overreimburse it for services provided to Medical Assistance (MA) patients. The district court granted UMMC's motion to dismiss and denied plaintiff's motion for leave to amend the complaint for a third time. Plaintiff alleges that UMMC's false or fraudulent claim is that it's children's unit was a "children's hospital." The court concluded that, in the absence of a statutory definition of "children's hospital," it was reasonable for UMMC to inquire about the proper classification of its children's unit. A reasonable interpretation of ambiguous statutory language does not give rise to a FCA claim. The court also concluded that the district court did not incorrectly hold plaintiff to Rule 9(b)'s heightened pleading standard; plaintiff's second amended complaint fails to demonstrate that UMMC violated section 3729(a)(1)(G); and the court found no violation of section 3729(a)(1)(C). Finally, the court concluded that plaintiff's proposed amendments would be futile. Accordingly, the court affirmed the judgment. View "Olson v. Fairview Health Serv." on Justia Law

Appellant City of Allentown (City) contracted with appellee A. Scott Enterprises, Inc. (ASE), to construct a new public road. After arsenic-contaminated soil was discovered at the worksite, the City suspended work on the project. Following testing, it was determined construction could resume if precautions were taken. Accordingly, the City instructed ASE to obtain revised permits and proceed with the project. However, the existing contract did not include terms regarding the potential for contaminated soil, despite the fact the City was aware there might be contamination prior to entering into the contract, and ASE declined to proceed, explaining it would incur substantial additional costs due to the contaminated soil. The parties made several attempts to reach an agreement in which ASE would continue the construction, but to no avail. Consequently, ASE sued the City to recover its losses on the project, alleged breach of contract, and sought compensation under theories of quantum meruit and unjust enrichment, as well as interest and a statutory penalty and fee award for violations of the prompt pay provisions of the Procurement Code. After a trial, a jury found the City breached its contract with ASE and also withheld payments in bad faith. In this discretionary appeal, the issue this case presented for the Supreme Court's review was whether an award of a statutory penalty and attorney fees under the prompt payment provisions of the Commonwealth’s Procurement Code was mandatory upon a finding of bad faith, irrespective of the statute’s permissive phrasing. The Court held such an award was not mandatory, and therefore reversed the order of the Commonwealth Court and remanded the case to the trial court for further proceedings. View "A. Scott Enterprises v. City of Allentown" on Justia Law

In 2003, the government awarded Laguna a contract for Worldwide Environmental Remediation and Construction (WERC). Under the contract, Laguna received 16 cost-reimbursable task orders to perform work in Iraq, and awarded subcontracts to several subcontractors. The physical work under the contract was completed by 2010. Laguna sought reimbursement of past costs, a portion of which the government refused to pay after an audit by the Defense Contract Audit Agency. Before the Armed Services Board of Contract Appeals, the government alleged that it was not liable because Laguna had committed a prior material breach by accepting subcontractor kickbacks (18 U.S.C. 371, 41 U.S.C. 53), excusing the government’s nonperformance. Three of Laguna’s officers were ultimately indicted for kickbacks. The Board granted the government summary judgment on that ground, The Federal Circuit affirmed. Laguna committed the first material breach by violating the contract’s Allowable Cost and Payment clause because its vouchers were improperly inflated to include the payment, Federal Acquisition Regulation 52.216-7. View "Laguna Constr. Co. v. Carter" on Justia Law

Relator filed a qui tam action alleging that Bi-State and Eager Road made false claims to receive federal public-transit funds through the Department of Transportation and the Federal Transit Administration. The district court denied Bi-State’s motion for summary judgment. The court dismissed the appeal for lack of jurisdiction. The court concluded that the issue of Bi-State's immunity is not properly before the court. At no point during the proceedings before the district court did Bi-State claim that it was entitled to sovereign immunity. Bi-State’s motion for summary judgment argued only that it is not a “person” under the False Claims Act (FCA), 31 U.S.C. 3729-3733, and the district court’s denial of summary judgement addressed only that question. View "United States ex rel Fields v. Bi-State Dev. Agency" on Justia Law

The Department of Education contracts with private collection agencies for services related to resolving defaulted student loans through the General Services Administration (GSA) Federal Supply Schedule (FSS), which provides federal agencies with a simplified process for obtaining supplies and services. FSS contractors are pre-approved. Orders placed against GSA Schedule contracts are “considered to be issued using full and open competition.” In 2008, Education issued a Request for Quotations for debt collection services, seeking to issue Task Orders under an existing GSA Schedule contract. Pioneer, Enterprise, and others were awarded identical Task Orders, containing a base term and an Option permitting the government to unilaterally extend the term up to 24 months; the contractor could earn extensions beyond the base period and options, based upon the quality of performance during evaluation periods. In 2014, Education began secretly auditing the contractors, counting violations of consumer protection laws. Based on their error rates, Education decided not to issue Pioneer or Enterprise award-term Task Orders, although they scored “excellent or better” under the contract-based evaluation system. The companies filed suit, challenging Education’s proposed issuance of extensions to their competitors. The Claims Court dismissed for lack of jurisdiction (Tucker Act, 28 U.S.C. 1491(b)(1)). The Federal Circuit vacated, holding that issuance of a new Task Order constituted the award of a contract, an action over which that court has jurisdiction. There is no exception for new Task Orders arising from an award-term extension. View "Coast Prof'l, Inc. v. United States" on Justia Law

In 2011, Horning won the subcontract for roofing work at the Dayton Veterans Affairs Medical Center. The Davis‐Bacon Act, 40 U.S.C. 3141–43, requires contractors who perform construction for the federal government to pay their workers the “prevailing wage.” Department of Labor regulations at that time set the base rate for a Dayton Sheet Metal Worker at $26.41 per hour; the fringe benefit rate was another $16.82 an hour. The workers were properly classified and received the appropriate base rate. All employees who work at Horning for more than 90 days are eligible for insurance; some receive vacation days. After a year, they become eligible for matching contributions to a 401(k) account. Accountants advised Horning about the amount to deposit into its benefits trust to comply with ERISA and Davis‐Bacon. Horning deducted a flat hourly fee from the paycheck of each Medical Center worker, regardless of whether the employee was eligible for any benefits. The amount did not correspond to the actual monetary value of the benefits each individual employee received. The Union filed a qui tam action under the False Claims Act, 31 U.S.C. 3729–3733, rather than filing under Davis-Bacon. The Seventh Circuit affirmed judgment in favor of Horning. Under the False Claims Act, the Union had to show that Horning knowingly made false statements (or misleading omissions) that were material to the government’s payment decision. The Union did not proffer enough evidence to permit a reasonable jury to conclude that Horning acted with such knowledge. View "Sheet Metal Workers Int'l Assoc. v. Horning Invs., LLC" on Justia Law

William Charles Construction (WCC) entered into a labor agreement with the Illinois Department of Transportation for the “Biggsville” construction project to expand a section of Rt. 34 to four lanes. A jurisdictional dispute between two unions, each claiming the right for their member drivers to operate large trucks involved in the excavation work, was resolved by an arbitrator. Later, a Joint Grievance Committee (JGC) determined, under a subordinated collective bargaining agreement, that WCC owed the Teamsters back pay and fringe benefit contributions ($1.4 million) for having assigned the operation of heavy trucks to the International Union of Operating Engineers rather than the Teamsters. A second JGC award determined that WCC was liable for two days’ back pay for having assigned work to two Teamsters in violation of other Teamsters’ seniority rights. WCC filed a declaratory action under the Labor-Management Relations Act, 29 U.S.C. 185. The court granted the Teamsters summary judgment, finding that WCC filed its complaint outside the statute of limitations. The Seventh Circuit reversed the grant of summary judgment to the Teamsters and dismissed the Teamsters’ counterclaim for enforcement of one of the JGC awards. WCC's challenge to the awards is not barred by the statute of limitations because WCC did not receive notice of their final entry. The greater of the two JGC awards is void because WCC did not agree to arbitration by the JGC. View "William Charles Constr. Co., LLC v. Teamsters Local Union 627" on Justia Law