Justia Government Contracts Opinion Summaries

The Tennessee Department of Transportation engaged Mountain States to build two bridges over the Cumberland River at its intersection with Highway 109 in Gallatin. On May 21, 2013, the boom cable of a Terex HC 165 crane snapped while the crane operator was excavating material from under water, causing the boom—the extendable overhead arm of the crane controlled by the load-bearing wire boom cable—to collapse onto the adjacent highway. As the cable broke under tension, it whipped back to shatter the windows of the crane operator’s cab and the boom hit a passing vehicle. Though no person was injured, the subsequent OSHA investigation determined that at least four people were exposed to risk as a result of the accident. An Administrative Law Judge determined that Mountain States had committed a willful violation of the wire rope inspection standard of the Occupational Safety and Health Administration Act because, before the accident, Mountain States had knowledge that the boom cable had “visible broken wires” within the meaning of the provision requiring repair or replacement before further use. The Sixth Circuit affirmed the citation and penalty, finding substantial evidence to support findings of constructive and actual knowledge. View "Mountain States Contractors, LLC v. Perez" on Justia Law

Garbe, an experienced pharmacist, began working at Kmart pharmacy in Ohio in 2007. When Garbe picked up a personal prescription at a competitor pharmacy, he discovered the competitor pharmacy had charged his Medicare Part D insurer far less than Kmart ordinarily charged it for the same prescription. He inspected Kmart’s pharmacy reimbursement claims and discovered that Kmart routinely charged customers with insurance—whether public or private—higher prices than customers who paid out of pocket, even ignoring “discount programs sales. Garbe shared his discovery with the government and filed a qui tam suit in 2008. The government has not intervened. Garbe asserts that Kmart’s “usual and customary” prices should be based on the prices Kmart charged the majority of its cash customers. The district court granted Garbe partial summary judgment. On interlocutory appeal, the Seventh Circuit, reversed in part, holding that Medicare Part D Pharmacy Benefit Managers and Plan Sponsors are not “officers or employees of the United States” for purposes of the False Claims Act, 31 U.S.C. 3729(a). The court agreed that Garbe has satisfied the materiality requirement under the Act for his Medicare Part D claims; and that Kmart’s “discount” prices were offered to the “general public.” View "Garbe v. Kmart Corp." on Justia Law

Plaintiff, a former employee of Power Solutions, filed suit under the False Claims Act (FCA), 31 U.S.C. 3729 et seq., alleging that Power Solutions and others made fraudulent representations to the United States in connection with certain equipment supplied to the government pursuant to a procurement contract. The court dismissed the Substitute Second Amended Complaint (SSAC) in part pursuant to Fed. R. Civ. P. 12(b)(1), ruling that plaintiff had released his claims against Power Solutions and its parent corporation and thus lacked standing to bring claims against them, and in part pursuant to Fed. R. Civ. P. 9(b) on the ground that the fraud claims were not pleaded with the requisite particularity. The court concluded that, although the right to bring a qui tam suit can be released when the government has knowledge of the relator's fraud allegations, the court did not endorse the district court's conclusion that the government had such knowledge in this case. The court affirmed the dismissal of the action against Power Solutions and Exelis for failure to allege fraud with the requisite particularity where the SSAC did not contain plausible allegations of fact that showed, as required for FCA purposes, that any claim for payment submitted by Power Solutions, ITT, or Exelis was false or that any of the devices delivered to the government failed to meet contract specifications. Finally, the district court did not abuse its discretion in denying leave to amend. View "United States ex rel. v. Exelis, Inc." on Justia Law

In 2001, Immigration and Customs Enforcement (ICE) awarded Northrop an order for network monitoring software produced by Oakley for one base year and three option years. A subsequent modification required ICE to use best efforts to secure funding for the option years. Without notifying ICE, Northrop entered into a private agreement with ESCgov, an IT services company, assigning all payments under the order to ESCgov. ESCgov paid more than $3,000,000. The agreement absolved Northrop from liability for failure of ICE to exercise a renewal option if Northrop “use[d] its best efforts to obtain the maximum recovery.” ESCgov assigned its rights to Citizens, a financial institution. None of the parties provided notice, as required by the Anti-Assignment Act, 31 U.S.C. 3727(a)(2). ICE paid Northrop $900,000 for the base year, which it delivered to ESCgov. ICE did not use the software in any investigations, and sent Northrop notification of its decision not to exercise the first option year. ICE did not exercise any option year. A contracting officer declined a claim that ICE breached the contract by failing to use its best efforts. The Claims Court dismissed a lawsuit on grounds that it lacked jurisdiction because Northrop failed to provide “adequate notice” of its claim by failing to disclose the assignments. The Federal Circuit affirmed a second dismissal, following remand, agreeing that Northrop “is unable to identify any way that it, as opposed to ESCgov or Citizens, was harmed.” View "Northrop Grumman Computing Sys., Inc. v. United States" on Justia Law

This case involved a written contract between a vendor and a state agency that contained form language stipulating that amendments had to be in writing and executed by the agency and the contractor. Appellant Georgia Department of Labor (DOL) entered into the contract in question with appellee RTT Associates, Inc. (RTT) to have some computer software developed for the agency. RTT asserted that the contract was extended by course of conduct as well as by certain internal writings created by the agency. By the terms of Georgia’s constitution, the state waived its sovereign immunity for breach of contract when it enters into a written contract. At issue was whether an agency’s waiver of immunity from a breach of contract claim as a result of entering into a written contract remained intact in the event the contract was extended without a written document signed by both parties expressly amending the contract, as required by its terms. The trial court concluded sovereign immunity was not waived beyond the required completion date of the contract, but the Court of Appeals reversed. The Supreme Court reversed the appellate court, finding RTT failed to complete its contractual obligations before the contract expired. "Even if the parties’ conduct after the expiration of the contract could be found to demonstrate an agreement between the parties to continue to perform under the original contract, as a matter of law neither that conduct nor the internal documents created by DOL after the contract expired establishes a written contract to do so. Without a written contract, the state’s sovereign immunity from a contract action is not waived." View "Georgia Dept. of Labor v. RTT Associates, Inc." on Justia Law

KBR, an Army contractor, subcontracted with KCPC/Morris to implement work release orders for construction of dining facilities and provision of food services in Iraq. KBR terminated the subcontract based on performance. KCPC/Morris disputed the termination and continued performance until transition to a new subcontractor in September 2003. In January 2005, the parties signed an agreement, converting the default termination into a termination for convenience. A $17,400,000 settlement was paid, but the parties disputed costs. In August 2006, KCPC/Morris submitted a certified claim, which KBR forwarded to the Army, stating that it would not certify validity and lacked supporting documentation. The Army responded in May 2007, that it was KBR’s responsibility to negotiate with its subcontractors, and refused to consider the submission. In October 2007, KBR “sponsored” the claim, followed by certification dated January 2008. In September 2010, KBR withdrew the claim. In August 2011, KCPC/Morris filed suit, which was withdrawn after the parties entered reached agreement dated February 2012. In May 2012, KBR filed a certified claim for the agreed amount. The contracting officer did not act, placing the claim in “deemed denied” status. The Board of Contract Appeals dismissed KBR’s appeal, holding that the limitations period had run before May 2012. The Federal Circuit reversed, holding that the KBR claim had not accrued, for limitation purposes, before May 2006. The Contract Disputes Act, 41 U.S.C. 7103(a)(4)(A), does not require the filing of protective claims related to subcontractors while those claims are being resolved between the prime and sub. View "Kellogg Brown & Root Servs., Inc. v. Murphy" on Justia Law

Lal was appointed as a distinguished consultant at the Centers for Disease Control, a component of the Department of Health and Human Services, in the excepted service under 42 U.S.C. 209(f), which provides that consultants “may be appointed without regard to the civil-service laws.” The agency understood this to mean that Lal was not subject to the statutory due process requirements of the civil-service laws under title 5 of the United States Code, and terminated her employment without providing notice of the termination or a right to respond, as would ordinarily be required by the civil-service laws. The Merit Systems Protection Board concluded that section 209(f) deprived it of jurisdiction. The Federal Circuit reversed. While section 209(f) placed Lal into the excepted service, it did not exempt her from the Civil Service Due Process Amendments of 1990, which provide appeal rights to certain excepted service employees, 5 U.S.C. 7511(a)(1)(C). View "Lal v. Merit Sys. Protection Bd." on Justia Law

Nguyen, a U.S. Patent and Trademark Office Supervisory Examiner, received a Notice of Proposed Reduction in Grade to Patent Examiner, alleging that she had violated rules prohibiting nepotism in attempting to prevent her son, a probationary examiner, from being fired. Nguyen received her yearly performance review, which reflected a reduced rating. Nguyen discussed with her supervisor, Banks, the possibility of resigning. Believing that Nguyen had resigned, Banks ordered that technicians collect Nguyen’s government-supplied laptop. Nguyen objected and sent an email to Banks, stating that she felt “forced . . . to resign.” Banks and another supervisor stopped by Nguyen’s office and assured her that “[a]s we stated multiple times today, the decision of whether to resign or stay is completely up to you.” Banks ordered that Nguyen’s access to computer supervisory functions be revoked, pending her grade reduction. Nguyen went to human resources to pick up retirement papers and sent Wallace emails offering to drop all appeal rights in exchange for a suspension instead of the grade reduction. Wallace was out of the office until the following Monday, one day after the reduction would be effective. Nguyen filed retirement papers that Friday, effective the next day, one day before her reduction would have gone into effect.. The Federal Circuit affirmed dismissal by the Merit Systems Protection Board. Nguyen failed to articulate a nonfrivolous argument that her retirement was involuntary. View "Nguyen v. Merit Sys. Protection Bd." on Justia Law

The Navy's Diego Garcia facility, a 10.5-square-acre Indian Ocean atoll, 1,800 miles east of Africa and 1,200 miles south of India, had no commercial or civilian infrastructure. In 2005, the Navy sought bids on a firm fixed-price contract for Diego Garcia support services, ranging from information technology to refuse collection. For contractor vehicles and equipment, “contractor-furnished fuel,” was to be provided by the Navy at the prevailing Department of Defense rate. DG21 submitted a bid and, for contractor-furnished fuel, arrived at “a significantly lower number of gallons than” reflected in the solicitation. DG21 indicated that if fuel rates varied from historical rates by 10% or more, it would request an equitable adjustment. The Navy clarified that the solicitation was fixed-price, “DG21 assumes the full risk of consumption and/or rate changes. Please price ... accordingly.” The Navy questioned the lack of an escalation clause. DG21 did not change its estimate or pricing, but removed the equitable adjustment reference. DG21’s $455,292,490 proposal was accepted. During the contract term, fuel prices rose dramatically, reaching a maximum of more than double the historical rate indicated in the solicitation. In 2011, DG21 requested an equitable adjustment, characterizing the fuel cost as a $1,171,475.90 contract “change” under FAR 52.243-4. The contracting officer and the Board of Contract Appeals rejected the request. The Federal Circuit affirmed. The cost increase was not a change to the contract triggering FAR 52.243-4; the contract allocated that risk to DG21. View "DG21, LLC v. Mabus" on Justia Law

Knight Systems, Inc., owned and operated by Buddy Knight, engaged primarily in the mortuary transport business until 2007. Knight Systems entered into an asset purchase agreement with Palmetto Mortuary Transport, Inc., a business owned by Donald and Ellen Lintal. Pursuant to the agreement, Knight Systems sold various tangible assets, goodwill, and customer accounts (including body removal service contracts with Richland County, Lexington County, and the University of South Carolina) to Palmetto in exchange for a purchase price of $590,000. The agreement also contained an exclusive sales provision that obligated Palmetto to purchase body bags at specified discounted prices from Knight Systems for ten years, and a non-compete clause. At issue in this case was a Richland County-issued request for proposal (RFP) seeking mortuary transport services from a provider for a period of five years. At that time, Palmetto still held the services contract with Richland County as a result of the Agreement. Palmetto timely submitted a response to the RFP. One day before responses to the RFP were due, Buddy accused Palmetto of breaching the agreement by buying infant body bags from other manufacturers in 2008. After this telephone conversation, Buddy consulted with his attorney and submitted a response to the RFP. After the RFP deadline passed, Buddy contacted an official at the Richland County Procurement Office, seeking a determination that Knight Systems be awarded the mortuary transport services contract because it was the only provider of odor-proof body bags required by the RFP. Although Palmetto asserted its response to the RFP contained the lowest price for services and had the highest total of points from the Richland County Procurement Office, Richland County awarded Knight Systems the mortuary transport services contract for a five-year term. Palmetto filed a complaint against Knight, asserting claims for breach of contract, breach of contract accompanied by a fraudulent act, and intentional interference with prospective contractual relations. A special referee ruled in favor of Palmetto, and Knight appealed. Knight argued the special referee erred in failing to find: (1) the geographic restriction in the parties' covenant not to compete was unreasonable and void; (2) the Covenant's territorial restriction was unsupported by independent and valuable consideration; (3) the Covenant was void as a matter of public policy; and (4) the Covenant became void after any breach by Palmetto. The Supreme Court found that the Covenant's 150-mile territorial restriction was unreasonable and unenforceable. Accordingly, the Court reversed and remanded for further proceedings. View "Palmetto Mortuary Transport v. Knight Systems, Inc." on Justia Law