June 17, 2011
Job Opening: Associate Dean for Government Contracts at GW Law
The George Washington University Law School, in Washington, D.C. invites applications for an Associate Dean for Government Contracts Law.
JOB DESCRIPTION: Coordinates the GC LL.M. Program, ensuring that the efforts of the graduate admissions office, the communications office, the career development office, and the government contracts law faculty combine to create an academically strong, well-publicized program that meets students' and the bars' evolving needs. Assists in managing LL.M. degree design and student progress and completion of degrees. Assists in the management and supervision of student research and writing undertaken towards completion of LL.M. theses, relevant journal notes, and papers in related courses; works directly with students to facilitate publication. In conjunction with the government contracts library specialist, develops and administers special educational and research programs in the field of government contracts law. May be appointed to teach or co-teach one or more academic course(s) in government contracts law per year.
Works with the alumni office, the advancement office, and the GC faculty to coordinate GC alumni and advancement outreach, including organizing GC Advisory Board meetings and recruiting new GC Advisory Board members, and organizing alumni programs, lectures, and the annual luncheon (or similar events). Assists with the government contracts colloquia series. Attends bar, organizational, and public meetings to provide and receive feedback on issues that impact the government contracts law offerings of the Law School.
Publicizes the work of program faculty and students. In conjunction with the government contracts faculty and the legal research and writing faculty, assists in the management and supervision of the Public Contract Law Journal and the Federal Circuit Bar Journal. Creates and updates programmatic brochures, periodic newsletters, online information sharing (e.g., blogs) and provides appropriate input to annual law school publications (such as the Bulletin, Graduate admissions brochure, etc.). Engages in research and scholarship on relevant topics.
Works with the Student Bar Association, the Dean of Students Office, and the government contracts faculty to coordinate government contracts law student competitions and awards (including the internal Government Contracts Moot Court Competition and the major external annual writing competitions).
Serves as the principal contact for prospective students, visiting scholars, dignitaries, and other institutions concerning programs, conferences, cooperation agreements, and related activities involving government contract law. Investigates opportunities for international programs (e.g., exchange, summer abroad, fellowships, etc.). Participates in programs - domestically and abroad - that enhance the reputation of the Government Procurement Law Program and the George Washington University Law School.
APPLICATIONS/FURTHER INFORMATION: For applications and further information, please visit: https://www.gwu.jobs/postings/3820
May 25, 2011
Guest Post from Neil O'Donnell on General Dynamics
Given the oral argument, it was not a surprise that Justice Scalia wrote the opinion in General Dynamics v. United States. But who would have thought that this vigorous champion of applying what he dubbed the “go away principle of jurisprudence” to this nearly 20 year old case would be the author of a unanimous decision by the Court that created the distinct possibility that this litigation would go on for several more years.
For the most part the decision follows a path that could have been predicted by listening to the oral argument. Scalia for the Court agreed with the Court of Federal Claims that determining whether the Government had violated its obligation to disclose superior knowledge to the contractors and therefore invalidated its termination of the contractors for default, could not be ascertained without probing several layers of facts, all at great risk to national security. He posited, fairly enough, that each party to the litigation would have the incentive to go right up to the line of state secrets in trying to prove its case, and that, as a result, witnesses may inadvertently disclose secret information. And he strongly supported, as a policy matter, the conclusion that these risks made the contractor’s superior knowledge defense nonjusticiable.
Faced with this situation, Justice Scalia adopted the approach he had suggested at argument. First, he rejected the analysis on which the parties had devoted much of their energy in briefing and arguing the case. He was uninterested in trying to determine who was the “moving party” under the rubric of the Supreme Court’s first (and last) foray into the application of the state secrets privilege to civil litigation, United States v. Reynolds, 345 U.S. 1 (1953). Rather than prolonging this exercise akin to counting angels on the head of a pin, he sensibly observed that it was the “claims and the defenses together that establish the justification, or lack of justification, for judicial relief.” And from there he concluded that the invocation of the state secrets privilege in this case made it impossible to determine who was right, whichever party was regarded as making the affirmative claim or asserting the defense.
Justice Scalia then invoked courts’ “common law authority to fashion contractual remedies in Government contracts.” In so doing, he laid out the legal support for that proposition that neither side had been able to provide him at oral argument. He used that authority to leave the parties in the position that they were in at the time that the dispute began. That meant that the contractors did not have to pay back the $1.35 billion in progress payments that they had been paid but not yet earned. And it meant that the Government did not have to pay the contractors another $1.2 billion in costs of performance that they had incurred but for which they had not yet been reimbursed. Most outside observers would have agreed with the Court that it would have achieved what Scalia called “rough, very rough, equity” if this had been the final result of the case.
Unfortunately, it was not. Instead, astonishingly, Justice Scalia, seemingly the advocate of finally bringing this decades long dispute to an end, added a paragraph late in the opinion which has every prospect of keeping the litigation going for several years more. In remanding the case to the Federal Circuit, the Court specifically noted that no court had considered the Government’s claim that the well-established rule that the Government has an obligation to disclose superior knowledge to its contractors might not apply if the information was itself highly classified or if the contract had specified what information would be disclosed. In this high stakes litigation (with interest, the swing between victory and defeat could be as much as $5 billion) this invitation to the Government to keep the litigation going at the Federal Circuit seems sure to be accepted. So much for go away jurisprudence.
[Posted, on behalf of Neil O'Donnell, by JT]
May 23, 2011
Unanimous Decision in General Dynamics: Heads We Win; Tails You Lose!
Back in January, we hosted a roundtable discussion on the General Dynamics v. United States/Boeing v. United States case that was decided today by the U.S. Supreme Court. The last post from our roundtable, which includes links to all the previous posts can be found here.
Bobby Chesney provides an able synopsis of the case on the Lawfare blog here. He also ventures a paragraph about the limited scope of the opinion, which is also highly persuasive.
The issue in the case is what remedy is available to a government contractor when a court dismisses its prima facie valid affirmative defense on the ground that the issue cannot be litigated without posing a reasonable danger of the disclosure of national security secrets. During oral argument, Justice Kagan noted that the government's position seemed to be that, when it comes to the invocation of the state secrets privilege, it can't lose. It can rely on the state secrets privilege to withhold documents and thus prevent a party from making out a prima facie case or an affirmative defense, and it can also assert that the same privilege prevents it from asserting its own claims or affirmative defenses, all of which should result in the dismissal of the suit. At the time, Justice Kagan seemed to be expressing incredulity at the government's position, but that is the position that the court has adopted -- unanimously -- in an opinion written by Justice Scalia. Apparently, government contractors are like highwaymen. The courts leave the parties in the state that it found them. General Dynamics and Boeing are lucky they weren't hanged.
In upholding the lower courts' rulings on the application of the state secrets privilege, Justice Scalia invoked the Court's earlier rejection, in United States v. Reynolds of a proffered analogy to the criminal context in which the government must abandon any claims that it cannot make without recourse to secret evidence. In the civil context, "the Government is not the moving party, but is a defendant only on terms to which it has consented." And the government has not consented to civil trials that threaten the disclosure of national security secrets.
But then Scalia proceeds to point out that Reynolds is not relevant in this context. Reynolds simply involved an evidentiary ruling that allowed the government to refuse to produce certain documents. In fact, Scalia acknowledged, the language he relied on in the preceding paragraphs was dicta -- and dicta from a case that is not really on point.
The cases that are on point are the devastating one-two punch of Totten and Tenet v. Doe. This case, like those, is simply non-justiciable to the extent that the resolution of any issues necessarily threatens the disclosure of national security secrets. Justice Scalia acknowledges that this case is distinguishable from those others, which involved agreements that were secret by their very nature and ab initio, while secrecy only became an issue with respect to the set of agreements at issue in these cases when the government asserted the state secrets privilege. Six of one, half-a-dozen of the other, says Justice Scalia.
The Court of Federal Claims made a mess of things by allowing some claims to proceed while barring others. The cleanest solution, the Court unanimously held, "is to leave the parties where they stood when they knocked on the courthouse door." The petitioners take nothing on their claims and the government takes nothing on its claims. Justice Scalia pronounces this "rough, very rough, equity."
It's not really "heads I win; tails you lose" because the government's claims are also dismissed. And now that the rule is clear, Justice Scalia contends that contractors can better protect themselves by demanding progress payments. That may be true, and Justice Scalia and others may also be right that cases like this one are so unusual that the consequences of this decision may be limited to the parties to the case. Still, given that the government alone has the power to invoke the state secrets privilege and bring an end to litigation, there is every reason for concern that it will do so opportunistically.
Thus ends[?] about twenty years of litigation.
Lyle Denniston provides a very different take on the case over at the SCOTUSblog. He reads the opinion as leaving many questions undecided and remanding to the trial court to work out what parts of the case can proceed without involving state secrets.
He suggests the following unresolved issues remain:
For General Dynamics and Boeing, the likelihood is that they will get to keep $1.35 billion that they were paid along the way (payments that the Pentagon does not dispute), but they have at most a diminished chance of holding on to another $1.35 billion paid for work that was not completed as they struggled, ultimately without success, to develop the so-called “A-12 Avenger,” a carrier-based plane that would have many of the enemy-evading detection characteristics of land-based “stealth” fighters. Moreover, they may have next to no chance to collect another $1.2 billion they seek in damages for the Navy’s cutoff of the contract.
For the Pentagon, the decision gives it a new opportunity, in lower courts, to show that it never promised the contractors full access to highly classified data about “stealth” technology, so they cannot blame the Navy for the fact that they could not develop the know-how to complete the Avenger project on time. If the Pentagon succeeds on that point, it could open the contractors to a new finding that they defaulted, and that cannot be excused. Whether that would mean they must pay back the extra $1.35 billion is not clear at this point.
I read Scalia's "go away" message a bit more strongly and in any case hope that the parties are now so exhausted that they will walk away without throwing more good money after bad.
May 16, 2011
SCOTUS Decides Schindler v. U.S. ex rel. Kirk
We blogged about this case one year ago when the Second Circuit ruled in favor of Mr. Kirk. Here's how we described the case back then:
Daniel Kirk, a Vietnam War veteran, worked at Millar Elevator Industries beginning in the late 70s. In 2002, Millar's operations were integrated into those of the Schindler Elevator Company. In 2003, Millar was demoted and resigned. Eight months later, Kirk sued, alleging that he had been fired in violation of VEVRAA, the VIetnam Era Veterans Readjustment Assistance Act. That claim was dismissed and the dismissal was affirmed last year.
Meanwhile, Kirk brought suit under the False Claim Act in the name of the U.S. government. In 2007, the government elected not to intervene and Kirk pursued his claim as a relator. His suit alleged that Schindler had entered into hundreds of contracts subject to VEVRAA requirements but that Schindler had failed to comply with those requirements. Among other claims, Kirk alleged that Schindler failed to submit required VETS-100 reports in some years and had filed false VETS-100 forms in others. The district court dismissed the action finding, among other things, that the claim was bared under the FCA, 31 U.S.C. s. 3730(e)(4), which provides that information that has been publicly disclosed cannot be a basis for a FCA claim. The information at issue here related to the allegedly missing and/or falsified VETS-100 forms that Mr. Kirk had discovered through FOIA requests.
The relevant section of the FCA provides:
No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
The Second Circuit vacated and remanded. There was no question that Mr. Kirk was not the original source of the information, so the only question whether a FOIA request counts as "public disclosure" for the purposes of the statute. The Third Circuit answered that question in the affirmative. The Ninth Circuit concluded that only a FOIA request that results in the production of an "enumerated source;" that is, one of the types of sources expressly named in the statute, creates a jurisdictional bar to an FCA claim. The Second CIrcuit followed the Ninth. It was supported in its position by the U.S. government as amicus curiae.
At that time, we suggested that the rules regulating when the False Claim Act's jurisdictional bar precludes qui tam actions are complicated. Mr. Kirk, the relator in the case, commented that, in his view, they are not complicated at all and the Second Circuit was obviously correct in its finding that the jurisdictional bar did not preclude his claim.
The Supreme Court split along party lines 5-3 (Justice Kagan did not participate) and reversed, with Justice Thomas writing for the majority. The majority held that a government agency's response to a FOIA request constitutes a "report" and thus falls within the FCA's jurisdictional bar. Justice Ginsburg wrote a short dissent, basically endorsing the Second Circuit's approach. The opinion can be found here.
SCOTUSblog provides coverage here.
May 12, 2011
Guest Post by Steven Feldman on the Horn Case
Our recent post on Horn v. United States elicited even more comments than our posts usually do -- i.e., more than none. It has also generated this thoughtful response from friend of the blog and attorney for the U.S. Army Corps of Engineers, Steven Feldman (pictured), which we present below.
The Horn decision failed to mention that a conflict exists within the Federal Circuit's lower tribunals on whether Federal Acquisition Regulation (FAR) requirements contract clause 52.216-21 Alt I, analyzed in Horn, is valid. The Armed Services Board of Contract Appeals has explicitly rejected the Court of Federal Claims approach. Disagreeing with Ralph Construction, Inc. v. United States, 4 Cl. Ct. 717 (1984), heavily relied on in Horn, the board said the following about this clause in Dynamic Science, Inc., ASBCA 29510, 85-1 BCA 17,710, 1984 WL 13911,
In Maya Transit Co., ASBCA No. 20186, 75-2 BCA 11,552, the contract contained the same provision. We characterized the contract as a "limited form" requirements type. The limitation of the requirement to that portion that the Government did not choose to meet from its own capabilities did not render the promise illusory particularly because the Government was precluded from expanding its capabilities during contract performance at the expense of the contractor.
Later Board decisions also disapprove the Court of Federal Claims' reasoning. See Operational Service Corp., ASBCA 37059, 93-3 BCA 26,190, 1993 WL 243152. Because the Federal Circuit has not resolved the conflict, and because individual Court of Federal Claims judges are not bound by other decisions from the same court, it is puzzling why Judge Smith failed to consider contrary interpretations of FAR 52.216-21, Alt I.
I also would like to bring to your attention another case from the Court of Federal Claims, Howell v. United States, 51 Fed. Cl. 516 (2002) that uses a Cardozo-like approach from the Restatement (Second) of Contracts to imply a missing consideration term in an Indefinite Delivery, Indefinite Quantity (ID,IQ) contract. As noted in Horn, Judge Smith considered the alternative that the contract could have been an ID, IQ contract rather than a requirements contract. The court in Horn did not cite the Howell decision, which is at odds with the Horn analysis.
Here is what I have written about the Howell case (Tennessee Practice Services: Contract Law and Practice, Section 5:10):
In Howell v. U.S., 51 Fed. Cl. 516 (2002), the United States Court of Federal Claims analyzed a self-described IQ contract in a federal government contract that did not contain the requisite minimum quantity, although it did reflect the parties' established intent that there would be some minimum quantity. The court noted that the inclusion of standard government contract clauses from the Federal Acquisition Regulation required the agency to purchase some minimum quantity of supplies or services, although the clauses were not filled in with the specific amounts. The court further noted that the parties' conduct after contract execution reflected their mutual belief that a binding arrangement existed. Accordingly, the court relied on the Restatement (Second) of Contracts, § 204, which permits a court to supply a missing term in a reasonable way where the record otherwise establishes a sufficiently definite and binding arrangement. The Howell court employed this theory to incorporate a minimum quantity term, which was more than a nominal amount, so that there would be mutuality of obligation.
The Howell decision reflects the courts' general dissatisfaction with technical consideration objections where the circumstances show the parties' intent to be bound. It bears emphasis, however, that the Howell court found an enforceable contract only because the record showed that these particular parties clearly intended to limit the buyer's freedom of choice. If the facts were that the buyer did have total discretion on whether it could purchase from the seller, then the Court of Federal Claims undoubtedly would have deemed the promises illusory for lack of consideration.
As Judge Smith ruled in Horn, both parties entered the arrangement with the intent to form a contract. The applicable clauses in Horn did limit the buyer's freedom of choice because the government promised to use Ms. Horn for services the government could not fulfill in-house. As in Howell, the record in Horn reflected a basis for determining a fair minimum obligation. Because the contract in Horn did not reserve the agency's total discretion to purchase all its needs from any other dental hygienists, Judge Smith should not have found the promise illusory for lack of consideration.
Lastly, I disagree with your final thought that government lawyers either do not understand the FAR clauses or are willfully exploiting them "to take unfair advantage of their contracting partners." It was very unlikely that any government lawyers were involved in the award of this contract because the low dollar value ($49,920) is far below the legal review thresholds in most government agencies, which is typically $500,000. Further, I do not see any evidence of government overreaching in Horn and Judge Smith did not find any, either. As he commented, "[E]ven the government officials with whom she dealt did not seem to understand the document's lack of enforceability." Thus, I see some inadvertent oversights by both contracting parties that could have been resolved upfront with more attention to consideration issues.
[Posted, on behalf of Steven Feldman, by JT]
HuffPo on Schooner & Swan on Dead Contractors
Contracts Prof and friend of the blog, George Washington University Law School Professor Steven Schooner (pictured) has a new article up on SSRN that is making headlines in the nearly mainstream media. Over at the Huffington Post, David Isenberg reports on Professor Schooner's new scholarship, co-authored with GWU Law student Collin D. Swan, called "Dead Contractors: The Un-Examined Effect of Surrogates on the Public's Casualty Sensitivity." Here is the abstract from SSRN:
Once the nation commits to engage in heavy, sustained military action abroad, particularly including the deployment of ground forces, political support is scrupulously observed and dissected. One of the most graphic factors influencing that support is the number of military soldiers who have made the ultimate sacrifice on the nation’s behalf. In the modern era, most studies suggest that the public considers the potential and actual casualties in U.S. wars to be an important factor, and an inverse relationship exists between the number of military deaths and public support. Economists have dubbed this the "casualty sensitivity" effect.
This article asserts that this stark and monolithic metric requires re-examination in light of a little-known phenomenon: on the modern battlefield, contractor personnel are dying at rates similar to - and at times in excess of - soldiers. The increased risk to contractors’ health and well-being logically follows the expanded role of contractors in modern governance and defense. For the most part, this "substitution" has taken place outside of the cognizance of the public and, potentially, Congress. This article explains the phenomenon, identifies some of the challenges and complexities associated with quantifying and qualifying the real price of combat in a modern outsourced military, and encourages greater transparency so that the public can more meaningfully participate in "the great American experiment."
The article is forthcoming the Journal of National Security Law & Policy. As Isenberg notes, the article and its subject matter deserve our attention.
May 10, 2011
Court of Federal Claims Rules on Requirements Contract
In Horn v. United States, the plaintiff is a dental hygienist who claims that the U.S. Federal Bureau of Prisons (the BoP) breached a contract for the provision of dental hygiene services that it entered into in 2005 with her. According to the complaint, Horn was to perform such services at a federal prison in Marion, Illinois. Horn alleges that the BoP breached the contract by failing to utilize her in accordance with the contract's estimated quantity schedule and that it was negligent in estimating its needs when it issued the contract solicitation. She sued for lost wages. The government moved for summary judgment, arguing that it was not bound by its estimate of services needed, and on May 3, 2011, the Court of Federal Claims granted the government's motion to dismiss.
The contract provided that Horn would provide up to a maximum of 1,560 one-hour dental hygiene sessions over the term of the contract. Horn was thus entitled to a fixed price of $49.920. However, the contract was specifically designated a requirements contract and contained the following provision:
(a) This is a requirements contract for the supplies or services specified, and effective for the period stated, in the Schedule. The quantities of supplies or services specified in the Schedule are estimates only and are not purchased by this contract. Except as this contract may otherwise provide, if the Government’s requirements do not result in orders in the quantities described as “estimated” or “maximum” in the Schedule, that fact shall not constitute the basis for an equitable price adjustment.
The contract further specified that the purpose of the contract's schedule was simply to estimate the BoP's requirements in excess of the services it furnished itself with its own in-house hygienist.
One month after Horn was awarded the contract, the BoP informed her that it was hiring an in-house hygienist and would not longer need her services. She had provided only 130 sessions. While Horn regarded this as a breach of contract, the BoP believed otherwise since it was not bound by the estimates provided in the contract. Horn pointed to deposition testimony and argued that the BoP was in the process of hiring an in-house hygienist before it awarded the contract to her. She argued that the BoP had breached a duty of good faith in contracting by failing to provide a reasonable estimate of the services for which it was contracting.
The Court first determined that, despite the unambiguous boilerplate provision q uoted above, the contract in question was not a requirements contract because a requirements contract demands exclusivity and here the BoP committed itself only to use Horn for dental hygiene services beyond those that it could furnish itself. According to the Court, the parties intended to form a requirements contract but failed to do so.
The Court next considered whether the contract was enforceable as an indefinite quantities contract. However, because the contract failed to specify a minimum quantity of services to be provided, it could not qualify as an indefinite quantities contract. The Court thus concluded that the contract, being neither a requirements contract nor an indefinite quantities contract, was unenforceable for lack of mutuality and consideration. The good news? Horn gets to keep what she was paid for the 130 sessions she did perform.
The Court then proceeds to lament the governments practice of continuing to use a standard form that appears to innocent third parties to be a contract when it is not. According to the Court, the government has been on notice since 1929 that this kind of form contract is unenforceable.
Oh, come on!! Do justice, sir, do justice! Cardozo would have no difficulty implying any terms necessary to render the contract enforceable. It makes no sense to permit the government to use a form contract that will mislead people into thinking they are due a set wage -- the contract specified $49,920 -- and let it escape paying them that wage on the basis of legal doctrine so complex that the government's lawyers either cannot grasp it or are willfully exploiting it to take unfair advantage of their contracting partners.
April 18, 2011
Third-Party Beneficiary Issue in the Court of Federal Claims
So many cases that end up in litigation begin with parties trying to do their best to fulfill their contractual obligations. So it is with FloorPro, Inc. v. United States. Back in 2002, the Navy awarded a contract to GM&W Construction to install new floor coatings in some warehouse bays. GM&W sub-contracted with FloorPro and the latter was to be paid about ninety percent of the contract price -- $37,500 out of $42,000. FloorPro did the work but was not paid, apparently because GM&W was in financial difficulties. FloorPro wrote to the contracting officer to complain of the non-payment. The contracting officer felt guilty, because s/he had asked FloorPro to work with GM&W.
In order to facilitate payment, the Navy entered into a contract modification which provided for a joint check to be issued to both FloorPro and GM&W and also provided that the government was thereby released from any claim against it by the contractor. Unfortunately, the joint check was not issued. Instead, the government paid GM&W, and FloorPro never got paid. It sued the government on the theory that it was a third-party beneficiary to the contract modification.
The general rule is that subcontractors do not have standing to bring claims against the government for breach of contract when they are not in privity with the government. However, subcontractors will have standing if they can establish that they were intended third-party beneficiaries of a contract with the government. The court applied the following test to determine whether FloorPro had standing as a third-party beneficiary: (1) Did the contracting officer intend to benefit FloorPro through the modification? and (2) Did the modification result in a direct benefit to FloorPro?
The answer to the first question was obviously yes, since the purpose of the contract modification was to help get FloorPro paid. The court likewise had no difficulty in determining that the joint check conferred a benefit on FloorPro because such a check could not be deposited without FloorPro's endorsement.
The court rejected the government's argument that there be a third prong to the third-party beneficiary test, requiring that a contract modification intended to benefit a third party must be a “condition precedent” to further performance. Although there is some language to that effect in Flexfab, L.L.C. v. United States, 424 F.3d 1254, (Fed. Cir. 2005), no court in the Circuit had adopted that language as part of the test for third-party beneficiary standing.
The court accordingly denied the government's motion for summary judgment and granted summary judgment to FloorPro.
April 13, 2011
Effects of a Government Shutdown: Contractors Get Stiffed
Last week, as a shutdown of the federal government seemed imminent, the General Services Administration (GSA) issued this order clarifying the ramifications of such a shutdown for government contractors. In short, they get stiffed.
Under the Anti-Deficiency Act, which dates back to 1884, prohibits agency officials from incurring obligations in the absence of appropriations. As a result, a shutdown would have the following consequences:
- The 1500 federally-owned buildings and 8000 leased buildings which the GSA maintains will operate in "weekend mode," enabling tenant agencies to provide essential services;
- GSA will provide workspace, products and services ordered before the shutdown based on continuing need, but with certain exceptions, it will not process new orders;
- GSA will not make payments for products or services not funded before the funding lapse;
- GSA will not maintain or update websites, except on an emergency basis; and
- No animals will be harmed in the making of this political circus
April 12, 2011
Suit v. KBR Turns on Whether Wrongful Death Claim Relates to Contract with the Government
In January of 2008, Staff Sergeant Ryan Maseth died after being electrocuted in a shower at a U.S. military base in Iraq for which private defense contractor Kellogg, Brown and Root, Inc. (KBR) contracted to provide services. In 2009, according to CNN an investigator for the U.S. Army Criminal Investigations Division deemed Maseth’s death a “negligent homicide” that resulted from a failure to ensure that electrical and plumbing work was being performed adequately by qualified technicians and a failure to inspect the work performed.
We learn from the Appellate Law Blog that since 2008, KBR has used everything from the political question doctrine to the combatant activities exemption of the Federal Tort Claims Act to evade a wrongful death lawsuit filed by the Maseth's parents. The District Court didn't buy those arguments initially, but it denied KBR's motions to dismiss without prejudice. Unhappy with this result and unwilling to proceed with discovery, KBR attempted an interlocutory appeal. Last August, the Third Circuit ruled that it was not entitled to appeal, since the District Court's ruling was not conclusive. So far, Maseth’s parents have been successful in warding off KBR’s legal challenges, but now the future of the lawsuit may depend on an interpretation of KBR’s contract with the U.S. government.
As reported in the Philadelphia Inquirer, on April 5th, KBR’s attorneys contended in the Federal District Court of Western Pennsylvania that U.S. soldiers in Iraq have no expectation of protection under U.S. law. They argue that Iraq, as the location of the accident, has more of an interest in having its law applied than does the U.S. CNN speculates that KBR is pushing for the application of Iraqi law because under Iraqi law, punitive damages are not allowed in civil cases.
Maseth’s parents counter that KBR’s contract with the Defense Department states that U.S. law should apply for all claims arising from the contract. KBR’s attorneys claim that this clause only applies narrowly to contract disputes, rather than tort claims. However, the plaintiffs point to the provisions of the contract which refer to KBR’s duties in maintain the electrical system on base, which mentions US. safety regulations and electrical codes, not Iraqi regulations or codes.
So, while KBR's other affirmative defenses remain issues in the case, for now U.S. District Judge Nora Barry Fischer will have to determine whether a wrongful death lawsuit is a claim arising from KBR’s contract with the DOD.
[Jon Kohlscheen & JT]
April 05, 2011
EU and US Both Claim Victory in WTO Dispute
We have been providing on-going coverage, most recently here, of the epic battle between Boeing and Airbus over a long-term contract to provide the U.S. military with refueling tankers, shown at left. Our last post reported on Boeing's victory in the battle to win the government contract. Airbus decided not to fight that decision through domestic channels, but the battle continues in the World Trade Organization.
Last week, a WTO panel published its "final ruling" on Airbus's complaint alleging that the U.S. had provided subsidies to Boeing that are prohibited under international trade agreements. The European Union brought the case on Airbus's behalf, and the panel found that the U.S. had provided at least $5.3 billion in illegal subsidies to Boeing. As Agence France Presse reports, the WTO found that the EU had provided similar illegal subsidies in a decision handed down last June. Both sides are appealing that decision. While the EU characterizes the most recent decision in the case as a victory, AFP notes that it "launched" its appeal of the decision last Friday.
Although the U.S. was found to have engaged in some illegal practices, the result is still being described as a "victory," since U.S. violations were found to be less serious than those found against the EU, according to the Seattle Times. The appeals process will likely take several more years, and given the WTO's weak enforcement powers, the Seattle Times predicts a settlement in the future that will involve some tweaks to domestic laws that will still allow governments to provide their business partners with the sort of "launch loans" that are in dispute in this litigation.
March 30, 2011
D.D.C. Rejects Translator's Breach of Contract Claim
Back in 2003, a government contractor, L-3 Services offered Abdul Wahab Nattah, a dual U.S. and Libyan citizen, a position as a translator in Kuwait. Mr. Nattah alleges that he was assured certain work conditions that would keep him cozy, well-fed and away from combat. Despite these assurances, Mr. Nattah alleges that he spent a few unpleasant months in Kuwait before he L-3 transferred him to the custody of the U.S. Army, now in a condition he described as slavery. The U.S. Army took him to Kuwait, and he provided language services there that frequently brought him into harm's way. After a shell exploded near him, causing him hearing loss and other injuries, he was sent to Germany for treatment and then discharged, he alleges as a corporal in the U.S. Army. Despite this alleged status, Mr. Nattah claims that he has been denied veterans' benefits.
Mr. Nattah sued a number of government and private entities in 2006. The U.S. District Court for the District of Columbia dismissed all claims in 2008. In dismissing the claims against L-3, the court relied on a letter indicating that Mr. Nattah would be an at-will employee. In dismissing claims against the government entities, the court relied on soveign immunity.
The D.C. Circuit Court of Appeals reversed in part. Since sovereign immunity does not apply to claims for non-monetary relief, Mr. Nattah was allowed to amend his complaint to seek non-monetary relief against the Secretary of the Army. Second, the Court of Appeals found that the existence of the written offer letter did not negate the possibility of a binding oral agreement with the terms described in Nattah's complaint.
On remand, the District Court again dismissed all of Mr. Nattah's claims in a decision handed down on March 17. The Court conceded that sovereign immunity was generally waived on non-monetary claims. However, it noted an exception to the waiver for “acts of ‘military authority exercised in the field in time of war or in occupied territory.’” The District Court noted that the gravamen of Mr. Nattah's remaining claims against the Secretary of the Army was that "the Army bought plaintiff as a slave from L-3 Services, improperly detained him, and forced him to participate in the war in Iraq." Even though some of the conduct of which Mr. Nattah complained occurred before the actual war in Iraq began, the District Court still found that the military exception to the waiver of sovereign immunity applied and again dismissed Mr. Nattah's claims against the government.
In the alternative, the District Court noted that Mr. Nattah's claims under the Geneva Convention, the 13th Amendment, the constitutional right to travel and international law do not state claims that give rise to a private right of action. Moreover, even if they did, since Mr. Nattah no longer claims that he is enslaved, to the extent that he seeks non-monetary relief, his claims are moot.
As to Mr. Nattah's claims against L-3, the District Court first found that the were barred by the applicable three-year statute of limitations on contracts claims and that D.C. does not recognize the doctrine of equitable tolling. Mr. Nattah's allegation that his captivity and his injury from Iraq prevented him from filing a claim within the three-year period was thus unavailing.
While the District Court relied on D.C. law to establish the statute of limitations, it relied on Virginia law to determine that Mr. Nattah's contractual claims were also barred under the statute of frauds. The District Court reasoned that the alleged oral agreement created a potentially indefinite term for Mr. Nattah's service agreement with L-3, thus putting the alleged agreement in violation of the statute of frauds. The partial performance exception to the statute of frauds is an equitable doctrine and in Virginia is not applicable in cases such as Mr. Nattah's that seek money damages.
Court of Federal Claims Finds Illusory Promise Claim Illusory
Crewzers Fire Crew Transport, Inc. v. U.S. arose out of a solicitation issued by the U.S. Forest Service in connection with contemplated Blanket Purchase Agreements (BPAs) for the purchase of buses that would be used by the Service to transport crews in emergencies. The vendors would have to convert school buses to suit the Service's purposes. Once the BPAs were issued, the Service reserved the right to order buses based on "cascading set-aside procedure" that gave preference to certain categories of bidders. The Service wanted to make certain that it would be able to identify vendors who could provide the needed buses in a hurry, so it granted BPAs to multiple bidders. The Solicitation included he following provision:
Since the needs of the Government and availability of contractor’s resources during an emergency cannot be determined in advance, it is mutually agreed that, upon request of the Government, the contractor shall furnish the resources listed herein to the extent the contractor is willing and able at the time of the order. Due to the sporadic occurrence of Incident activity, the placement of any orders IS NOT GUARANTEED.
The Court of Federal Claims interpreted this and other language to mean that neither party was actually promising much. The Service made no promise to order buses to vendors awarded a BPA, and the the vendors only had a duty to maintain their readiness to provide such buses or to notify the Service of changes in their readiness to do so.
Crewzers was never a happy camper. It filed two pre-bid protests that the Government Accountability Office (GAO) rejected. At that point the contracting officer notified all potential bidders that, due to delays in the bidding process (caused at least in part by Crewzers), bidders could not change key terms of their bids. At that point, Crewzers challenged the solicitation as "illusory and unenforceable." Crewzers filed its amended complaint in December 2010. Briefing on cross-motions for judgment on the administrative record was completed in February and oral argument was held on March 11.
On March 18th -- how's that for efficiency?! -- the CoFC ruled for the Service. In so doing, the court noted that the a BPA is not a contract. Rather, "[i]t is instead a collection of provisions that may mature into a contract between the government and a supplier if and when a purchase order – in this case, a “resource order” -- is entered into by each." Crewzers' arguments focused on the tension in the language of the Solicitation quoted above. While contractors "shall furnish" resources; they only need do so if "willing and able." Crewzers characterized this tension as giving rise to an illusory promise. And so it would be, the CoFC acknowledged, if the BPAs were contracts, but they are not.
The CoFC then proceeded to reject Crewzers' alternative construction of the BPA as an option contract. Actually, it refused to consider the argument, because it was raised as a new argument in Crewzers' reply brief. However, the opinion then spends several pages carefully explaining why, even if the argument had been properly raised, it would have been rejected, which pretty much amounts to a rejection of the claim compounded by a criticism of Crewzers' litigation strategy.
The CoFC rejected Crewzers' attacks on the integrity of the contacting officer's determinations as "fly-specking the solicitation" and also rejected a statutory claim.
March 23, 2011
Contracts Clause Case in the Fourth Circuit
Note-writers take note! This is a fascinating case and involves a Circuit split!!!
In Crosby v. City of Gastonia, a Fourth Circuit panel that included retired Supreme Court Justice Sandra Day O'Connor affirmed the District Court's order, dismissing a Contracts Clause claim brought by retired members of the Gastonia police department. The case arose over a retirement Fund for police officers established by the North Carolina Assembly in 1955. In the early 1990s, the Fund began to experience financial difficulties. There were various attempts to supplement the Fund's resources, all of which were inadequate. In 2005, the Fund's assets were exhausted. Along the way, the North Carolina legislature allowed active officers to cease their contributions to the Fund and to recover their prior contributions in their entirety prior to retirement.
Plaintiffs brought suit alleging various state law claims but also claiming federal jurisdiction by making a § 1983 claim based on the City's alleged violation of the Contracts Clause. The District Court found no impairment of obligation within the meaning of the Contracts Clause but retained jurisdiction over the remaining claims and granted the defendant City summary judgment on all claims.
In affirming the District Court's judgment on the Contracts Clause issue, the Fourth Circuit discusses Carter v. Greenhow, an 1885 case in which a Richmond property owner engaged in a tax dispute tried to rely on the Contracts Clause to assert a civil rights violation -- i.e. a "deprivation of any rights, privileges or immunities secured by the Constitution" under color of law. In that case, the Supreme Court ruled that, while plaintiff had indeed identified a potential civil rights violation, the clause in question did not provide him with a cause of action. Rather, it seems, he could only rely on the Contracts Clause if the state had somehow impaired his ability to seek injunctive or declaratory relief in connection with his alleged deprivation of property.
In 1991, in Dennis v. Higgins, the Supreme Court seemed to favor a narrow reading of Carter, suggesting that plaintiff's claim was unsuccessful in that case because he chose to plead a contracts claim rather than a "right secured to him by" the Contracts Clause. The Ninth Circuit relied on this dictum in 2003 in ruling that § 1983 can give rise to claim sounding in the Contracts Clause. The Fourth Circuit found the Supreme Court's dictum in Dennis unpersuasive because the Clause at issue in Dennis was the Commerce Clause and not the Contracts Clause.
The Fourth Circuit acknowledges that Carter was decided largely on procedural grounds and did not "substantively explore the contours of a properly pleaded claim" and that Justice Matthews' opinion in Carter is thus "of limited utility in determining whether § 1983 might afford a remedy for infringement of federal rights not previously considered in that context." Nonetheless, it concludes that this case is in the same procedural posture as Carter and therefore that they cannot rely on § 1983 to pursue a Contracts Clause claim. That is, the plaintiffs cannot claim a violation of their civil rights because they do not allege that the City "impermissibly thwarted [them] in any prior attempt on their behalf to vindicate the application of the Contracts Clause to the parties' dispute by resort to the courts."
Frankly, the distinction is subtle, and neither the Fourth Circuit nor the Supreme Court have provided litigants with much guidance about what litigation strategy one ought to pursue in order to bring such an action.
Another interesting element of the opinion is that the Fourth Circuit's construction of plaintiffs' Contracts Clause claim is different from that of the District Court. The District Court treated the claim, somewhat creatively, as a direct Contracts Clause claim and ignored the link to § 1983. The District Court dismissed under Rule 12(b)(1) for lack of subject-matter jurisdiction. The Fourth Circuit found this improper. So why not just remand, especially since the Fourth Circuit notes that retention of jurisdiction over state law claims after dismissal on 12(b)(1) grounds is "problematic?"
March 21, 2011
Neither Snow nor Rain nor Heat nor Threat of Suit in Federal Court . . .
In Anselma Crossing v. United States Postal Service, the Third Circuit Court of Appeals affirmed the District Court's ruling that a federal court is not the proper venue for a breach of contract action against the United States Postal Service (USPS).
The dispute arose out of an alleged spring 2007 oral agreement according to which the USPS would lease from Anselma Crossing a new post office facility in Chester Springs, Pennsylvania. Anselma was to build and lease a building to the Post Office beginning in or around 2010. In reliance on this agreement Anselma asserted that it expended "substantial sums" on engineering and environmental services for the property. However, in 2008, the Post Office made the decision to rescind all new projects, which effectively cancelled the Anselma project along with about 400 others. Anselma sued USPS in District Court, alleging promissory estoppels and breach of contract, claiming it had incurred $150,000 in costs. The court first had to determine whether such a suit could commence a District Court.
Two conflicting Acts govern suits against the Post office. The first is the Postal Reorganization Act (PRA), which allows the USPS to “sue and be sued.” This act also gives District Courts original (but not exclusive) jurisdiction over all actions brought by or against the Postal Service. Easy enough for Anselma, right? The wrench in the works is the contradictory provision in the Contract Disputes Act of 1979, whichpushes any disputes by government contractors against the USPS- and other executive agencies into either the appropriate board of appeals- in this case the Postal Service Board of Contract Appeals, or the United States Court of Federal Claims. The Third Circuit determined that the provisions of the PRA were general, while the CDA is more “recent and precisely drawn.” Therefore the CDA’s specific provisions prevail over the RPA’s general ones. Anselma’s claims should have been brought to the Postal Service Board of Contract Appeals instead of the District Court.
[Katherine Freeman & JT]
March 16, 2011
New in Print
Samuel V. Jones, The Moral Plausibility of Contract: Using the Covenant of Good Faith to Prevent Resident Physician Fatigue-Related Medical Errors, 48 U. Louisville L. Rev. 265 (2009)
Alison Stanger, One Nation Under Contract: The Outsourcing of American Power and the Future of Foreign Policy (Yale U. Press 2009)
We mention Alison Stanger's book not because it is especially new but because she was just on The Daily Show talking contracts! [hat tip to Steven Schooner and the Government Contracts at GW Law Facebook Page].
|The Daily Show With Jon Stewart||Mon - Thurs 11p / 10c|
March 11, 2011
The New Hampshire Approach to Breach of Contract Suits by State Employees
All eyes have been on Wisconsin lately, as Republican Governor Scott Walker has succeeded in pushing through legislation that repeals collective bargaining rights for state employees and requires state workers to make financial contributions for their health care and retirement benefits. New York Times coverage of that saga is available here and here. Little noticed has been New Hampshire’s push for reforming state employee benefits, as reported by the Union Ledger. The proposed plan would raise the retirement age for police and firefighters, reduce the amount of each worker’s salary included in the formula for pensions, and require workers to contribute more of their salary toward their retirement benefits.
What makes New Hampshire’s plan interesting is an amendment that was added to the bill that would effectively penalize workers who sue the state for breach of contract in court and win. These workers would pay “an additional 3% of their salary in pension contributions starting 10 days after a court victory.” Practically speaking, this provision makes a breach of contract suit by the state workers a lose-lose proposition: either pay the increased contributions, or hire a lawyer, win your lawsuit, and pay increased contributions anyway. Diana Lacey, the president of the State Employees Association, argues that punishing workers who seek to protect their rights in court is a “chilling attack on democracy.” As reported in the Nashua Telegraph, supporters of the legislation argue that reforming state-employee retirement benefits is “essential to the long-term viability of the system.”
How likely is it that the bill will pass? Talking Points Memo points out that the New Hampshire GOP has veto-proof majorities in the State House and Senate. While it is possible that there may be some Republican defections, the State House just passed Right-to-Work legislation, which demonstrates GOP solidarity on labor issues. If Republicans don’t break ranks on the bill, Democratic Governor John Lynch will have little to no power to stop the bill’s passage.
One wonders, however if the penalty provision could survive court scrutiny. Is it an unconstitutional state impairment of the obligation of contracts? Is it a possible due process violation because it chills access to the courts as a remedy for contractual wrongs?
[Jon Kohlscheen & JT]
March 10, 2011
Self Promotion: Telman on the Totten Doctrine
I have floated my ideas about Totten on this blog before here and here. My students booed and hissed when I scolded Honest Abe for having breached his promise to pay William Lloyd for espionage services provided during the Civil War. "Too soon," they howled. Undeterred, I have developed my ideas about Totten in a new article, Intolerable Abuses: Rendition for Torture and the State Secrets Privilege, now available for dowload on SSRN. The discussion of the Totten doctrine takes up pages 15-45 of the draft.
That part explores the ambiguities of the case and decries its deployment in the state secrets privilege context in cases that do not involve contractual claims. The case is ambiguous because in the space of a two page opinion, the Supreme Court gives numerous reasons for refusing to enforce the government's alleged promise to Mr. Lloyd. Perhaps there was an implied promise of secrecy. Perhaps public policy forbids the disclosure and thus the enforcement of such a policy. Perhaps there is some sort of evidentiary privilege that prevents the claim from going forward, but if so, its operation is unlike that of any other evidentiary privilege. And then in the end, what is the Totten doctrine? Is it simply the application of one of the above-mentioned contracts or evidentiary doctrines or is it a principle of non-justiciability?
The discussion of Totten takes up about 1/3 of the piece. Here is the abstract for the whole thing:
In Mohamed v. Jeppesen Dataplan, Inc., the Ninth Circuit, sitting en banc, issued a 6–5 opinion dismissing a complaint brought by five men claiming to have been victims of the U.S. government’s extraordinary rendition program, alleged to involve international kidnapping and torture at foreign facilities. Procedurally required to accept plaintiffs’ allegations as true, the court nonetheless dismissed the complaint before discovery had begun based on the state secrets privilege and the Totten doctrine, finding that the very subject matter of plaintiffs’ complaint is a state secret and that the defendant corporation could not defend itself without evidence subject to the privilege. This Article contends that courts should almost never dismiss suits based on the state secrets privilege and should never do so in a case like Jeppesen Dataplan, in which plaintiffs did not need discovery to make out their prima facie case alleging torts by the government or its contractors.
While much has been written on the state secrets privilege since 9/11, this Article focuses on the role of the Totten doctrine in transforming the state secrets privilege into something like a government immunity doctrine. The Article first argues that Totten was wrongly decided because it is overprotective of state secrecy and requires dismissal with prejudice of suits that would more appropriately be dismissed without prejudice, subject to re-filing when the relevant secrets are declassified. The Article next contends that Totten is a very narrow doctrine that cannot and should not have any role in informing cases such as Jeppesen Dataplan in which plaintiffs did not contract with the government.
In addition, the Article argues that the state secrets privilege, as laid out in the 1953 Reynolds case and subsequently expanded by lower courts, permits pre-discovery dismissal of suits based on the state secrets privilege and thus exacerbates the pro government bias already present in Reynolds. The Article explores seven ways in which lower court decisions have all tended to make it easier for the government to assert the state secrets privilege, while the lack of penalties for overly aggressive assertion of the privilege results in intolerable abuses.
While the Article thus offers fundamental critiques of both the Totten doctrine and the state secrets privilege, it does not advocate disclosure of state secrets. Rather, in a concluding section, the Article draws on federal statutory schemes relating to the introduction of classified information in criminal trials and offers numerous alternatives to judgment in favor of the government and its contractors before discovery has begun in cases implicating state secrets. Congress has repeatedly empowered courts to make decisions that protect government secrecy while facilitating limited access to secret information when necessary in the interests of justice and open government. In some cases, the government’s inability to defend itself may necessitate the socialization of the costs associated with national security secrets, but that result is preferable to forcing plaintiffs to bear all the costs of government secrecy.
March 08, 2011
Breaking News from Lithuania
Friend of the blog, Tadas Klimas reports on his blog, Civitatus, that Lithuania has finally done away with the requirement that business entities use seals in connection with their government contracts. Professor Klimas links to a government press release which explains that the government is eliminating the seal requirement because seals have no utility. As the press release is in Lithuanian, we will have to take his word for it. In any case, Professor Klimas fully endorses this view, noting that no "normal" -- i.e. Western -- country uses seals.
So, Professor Klimas enthusiastically endorses the death of the seal, lamenting only that the change is long overdue. We offer a different perspective. Seals may be useless, but they are quaint, and imagine the poor Lithuanian artists who will be reduced to web design, now that life support has been removed from the seal industry. Now that seals have been sacrificed to the gods of utility, what's next? Coffee houses? Poetry? SpongeBob? Justin Bieber? Bricks and mortar law schools?!?
March 02, 2011
Boeing Wins [Final?!?] Round in 10-Year Battle over Air Force Contract
Stage 2: Get home
When the Muse sings into the ear of Boeing's Homer, he will record that as of 2011 Boeing's epic battle with EADS was finished. But already storm clouds are gathering as EADS murmurs darkly of legal challenges to come. And will the hero manage to complete the voyage and return home by issuing rich dividends to its shareholders?
After much controversy and two unsuccessful tries, The New York Times reports that Chicago-based company Boeing received a $35 Billion contract from the Air Force last week. Boeing beat out favored European Aeronautic Defense and Space Company (EADS) for the opportunity to build 179 aerial fueling tankers. The contract is for $35 billion, but it could eventually balloon to $100 billion. This award comes after years of trying to replace aging fueltankers, some of which have been around since the Eisenhower administration.
We've recounted the backstory before here and here. Long story short: U.S. awards $35 billion contract for about 180 aerial-refueling tanker aircraft to European company (EADS) working with U.S. corporation. Other U.S. corporation (Boeing) cries foul and challenges the bid process. U.S. calls for a do-over and this time Boeing wins.
Forbes's Loren Thompson explains how Boeing did so here. In sum, both bidders had established that they could get the job done, but Boeing offered a smaller plane at a lower price. Thompson is eating crow because he had predicted that EADS would win, but that was because he assumed that EADS would lower its prices with the help of government subsidies as it had done in the past. It didn't happen this time, and so it will be Freedom Fries on all U.S. refueling flights from here on in.
The Pentagon (pictured) determined that Boeing’s bid was more than 1% below EADS after weighing factors such as bid price, cost to operate the tankers over 40 years, and how each model met their wartime needs. EADS, who contends to have the bigger and better plane to Boeing’s “high-risk concept aircraft,” had 10 days from the award to appeal the decision with the Government Accountability Office. However, the Wall Street Journal reports that after meeting with the Pentagon on Monday to debrief, EADS is still “evaluating.” They better get a move on- they have until this Saturday
Whether or not EADS can challenge the award will turn on how successful the government was in creating a bulletproof bid process. Because this contract fight was so vexed and because the U.S. needs the new tankers so badly, it designed a rigorous bid process designed to remove any possible claim of bias. Bear in mind, resourceful Boeing and patient U.S. Air Force, Zeus does not bring all men's plans to fulfillment.
The contract is a victory for Kansas and Washington State, where Boeing manufactures and assembles its planes. However, states such as Alabama, where EADS was to build the tankers under its bid, feel cheated by the decision, with one Alabama lawmaker chalking it up to “Chicago politics.” This bid could also irritate European leaders, and derail any efforts to get European companies to bid on defense and other contracts.
Another loser in this deal could be the American people. While this is a victory for many Americans in terms of employment, is the Department of Defense really fueling planes with 50s era tankers? The bidding process for this has taken 10 years with three failed attempts only extending our use of these tankers. The Boeing contract will not provide all the 179 new tankers until 2017. In 2017 many of the existing fueling tankers will be approaching 70. Since the tankers are extremely important to U.S. Air Force operations, further delays in the contracting process could compromise U.S. national security.
[Katherine Freeman & JT]