Litigation

Claims for personal injuries that can be connected in some way to construction work often include allegations that the contractor was negligent. Even if the injured party sues only the property owner, the owner will often seek to pass this liability through to the contractor. In many states, such negligence claims are barred by the acceptance doctrine, which limits contractor liability to third parties for injuries that occur after the owner has accepted the work.

A recent decision by the Missouri Court of Appeals illustrates and applies this rule. In Wilson v Dura-Seal and Stripe, Inc., No. ED 104570 (Mo. Ct. App. Mar 21, 2017), the plaintiff alleged that she tripped in an area paved by Dura-Seal and Stripe, Inc. Dura-Seal paved a drive lane, but the paving did not extend all the way to the curb. The result was a gutter area and a resulting height differential. Ms. Wilson claimed she tripped on and because of the height differential.  Ms. Wilson sued the school district for which Dura-Seal did the work. The school district then sued Dura-Seal.

The trial court granted summary judgment for Dura-Seal because the work had been accepted. The court of appeals affirmed. Under Missouri law, a contractor is not liable for third party personal injuries after the owner accepts the work. The acceptance doctrine is founded on the assumption that the owner has made a reasonably careful inspection of the work of the contractor and the owner knows of the defects, if any. The owner then “accepts the defects and negligence that caused them as his own.”

Most court cases filed on the heels of a Department of Labor investigation focus on misconduct by a contractor. In that respect, the Fifth Circuit’s recent decision in Gate Guard Services, L.P. v. Perez, 792 F.3d 554 (5th Cir. 2015), is unusual. The case is the result of an action by a contractor challenging misconduct by the Department of Labor. According to the decision, DOL investigators and attorneys acted unethically, frivolously, and in bad faith. Ultimately, DOL was forced to close the investigation by making a $1.5 million payment to the contractor.

What happened? Gate Guard provides gate attendants at remote drilling sites for oilfield operators. The gate attendants remain at the drilling sites and record the license plates of vehicles entering and leaving the site. Because many locations are isolated, attendants often live on site and Gate Guard hires service technicians to deliver supplies to them. Gate Guard considers attendants to be independent contractors and pays them between $100 and $175 per day.

In July 2010, DOL investigator David Rapstine received a tip that Gate Guard had misclassified its gate attendants as independent contractors instead of employees. If that were true, Gate Guard would be violating the Fair Labor Standards Act by not paying overtime and by not keeping detailed time records. Rapstine had little training or experience in contractor misclassification cases, but he decided to open an investigation. 

The first Board of Contract Appeals to fully enter the digital age is the Postal Service Board of Contract Appeals, which recently issued new rules on electronic filing.  Although the PSBCA hears claims against the agency that provides U.S. Mail, that method of filing will no longer be allowed (absent permission). The Postal Service, however, is not a Luddite agency and has embraced modern technology in running its business.

Effective July 2, 2015, PSBCA filings must be made electronically unless permission to submit physical filings is requested and obtained. The website for electronic filing is https://uspsjoe.justware.com/JusticeWeb.  Online filers must use this exact web address. Omitting the initial “https://” – or the final “justiceweb” – results in an error message.  To assist users, the Board has created a PSBCA tutorial on electronic filing.

You read the agency’s solicitation and realize the specifications are written around a competitor’s product and your product does not qualify. You alert the government to the issue to no avail. Where do you turn?  This can be the ideal situation to lodge a pre-award protest of the specifications.

What is a pre-award protest?

A pre-award specification protest challenges the agency’s description of the requirements contained in a solicitation or the ground rules under which the agency intends to conduct the procurement. Under the Competition in Contracting Act, a contracting agency is generally required to specify its needs and solicit offers in a manner that will achieve full and open competition, so that all responsible sources are permitted to compete. An agency generally may include restrictive provisions or conditions in its solicitations only to the extent necessary to satisfy the agency’s needs. 10 U.S.C. § 2305(a)(1)(A); 41 U.S.C. § 3306(a)(2)(B). When an agency’s solicitation contains restrictions that prevent a potential bidder from competing, potential bidders can protest that the solicitation improperly restricts competition.

Prevailing on this type of protest can be difficult because it requires the protestor to demonstrate that an agency acted unreasonably in describing its requirements, which is an area over which agencies are granted broad discretion. But the equities of such a challenge can be in the favor of the protestor because the protest seeks to expand competition, which ultimately should benefit the agency. The GAO recently sustained a pre-award protest of a Department of Veterans Affairs procurement for sterile foam dressings because the agency was unable to provide a reasonable explanation for a restrictive absorbency specification in its solicitation.

If you are getting ready to submit a claim on a federal contract—especially one that challenges an assessment of liquidated damages—take note of the Federal Circuit’s decision in K-Con Building Systems, Inc. v. United States, No. 2014-5062 (Fed. Cir. Feb. 12, 2015) [pdf]. It has some specific instructions for the contents of your claim letter and demonstrates the harsh results that follow from a misstep in the disputes process.

K-Con held a Federal Supply Schedule contract for prefabricated structures. In 2004, it won a $582,000 Coast Guard task order for the design and construction of a Coast Guard cutter support building at Port Huron, Michigan.

K-Con’s July 2005 Claim

When K-Con was unable to complete the work by the deadline set forth in the task order, the Coast Guard assessed liquidated damages of $109,554—186 days at $589 per day. On July 28, 2005, K-Con submitted a one-page claim letter seeking remission of the liquidated damages.

Although it was brief, K-Con’s letter asserted three reasons why the liquidated damages assessment was improper:

  1. K-Con “was not the sole cause of any alleged delays” and any K-Con delays were “concurrent with delays caused by the government;”
  2. the government “failed to issue extension to the completion date as a result of changes to the contract by the government;” and
  3. the liquidated damages “are an impermissible penalty.”

K-Con’s letter requested a contracting officer’s final decision. Though it demanded relief of more than $100,000, K-Con’s letter asserted that a certification was not required “since the assessment of liquidated damages is a claim by the Government.”

Despite getting a rare Writ of Mandamus from the D.C. Circuit Court of Appeals establishing that its internal investigations were covered by the attorney-client privilege, Kellogg Brown & Root must still turn them over. As predicted in our earlier posts on Barko v. Halliburton, Judge James Gwin has ruled that KBR waived the attorney-client privilege that would otherwise have shielded KBR’s internal investigation documents from discovery. His rationale is reflected in three opinions published in November and December 2014.

In a June 2014 opinion, the D.C. Circuit held that KBR’s internal investigation documents would be privileged if obtaining or providing legal advice was “a primary purpose of the communication, meaning one of the significant purposes. . . .”

But the Court of Appeals also invited the District Court to consider additional arguments that might have been timely asserted as to “why these documents are not covered by either the attorney-client privilege or the work product doctrine.”

That is what Judge Gwin did. When the case returned to the District Court, Barko sought “interviews, reports, and documents that KBR prepared while investigating tips KBR had received that involved the same allegations found in Barko’s complaint.” Barko relied on four arguments to support his claim that KBR had waived any attorney-client privilege or work-product protection over the documents:

  1. KBR put the contents of the documents at issue in the litigation;
  2. KBR’s Rule 30(b)(6) witness reviewed the privileged documents prior to testifying at his deposition;
  3. The documents fell under the crime-fraud exception to the privilege; and
  4. KBR had failed to list these documents on a privilege log when responding to an earlier administrative subpoena from the Defense Criminal Investigative Service (“DCIS”).

In an opinion issued on November 20, 2014, Judge Gwin accepted the first two arguments.

Six years from accrual. Three years from discovery. And never longer than ten years.

Despite the statutory language imposing time limits on the government’s pursuit of False Claims Act violations, courts continue to bend over backwards to give the government more time to assert them. The decision in United States ex rel. Sansbury v. LB&B Associates, Inc., No. 07-251 (D.D.C. July 16, 2014) [pdf] allowed the government a total of 14 years from the date of the first alleged false claim.

We hope that the Supreme Court will restore some sanity to the enforcement of the FCA limitations period in its decision in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, No. 12-1497. We discuss the issues in that case in an earlier post. But we still have to wait a while for that. Argument in the Carter case is scheduled for January 13, 2015.

[UPDATE: On May 26, 2015, the Supreme Court reversed the Fourth Circuit’s decision in Carter and held that the Wartime Suspension of Limitations Act is limited to criminal offenses. Kellogg Brown & Root Services, Inc. v. Carter, No 12-1497 (U.S. May 26, 2015) [pdf]. Our discussion of the Carter decision is available here.]

The FCA limitations and tolling framework

Sansbury is an unusual case that is based on the intricacies of the FCA’s limitations and relation-back provisions. Before getting into the facts of the case and the holding, here’s a breakdown of those provisions.

According to the text of the False Claims Act (31 U.S.C. § 3731(b)), the limitations period applicable to civil FCA actions is the later of:  (1) 6 years after the date on which the violation is committed; or (2) 3 years after the date when the material facts giving rise to the cause of action are known or reasonably should have been known by the U.S. official responsible for acting on FCA violations (i.e. DOJ official), but in no event more than 10 years after the date on which the violation is committed.

But these may not be real deadlines. Even without the tolling that that may be available under the Wartime Suspension of Limitations Act, the government may get several additional years to make a decision on whether to intervene in a whistleblower’s qui tam suit. If the whistleblower’s original action is timely under § 3731(b), the government’s intervention complaint “relates back” to the date of the initial complaint. Even if the government takes three years to file its intervention complaint, it is deemed to have been filed on the date of the original suit. The relation back provision appears in 31 U.S.C. § 3731(c).

Cases at the Armed Services Board of Contract Appeals often require scientific or other technical evidence that is best explained by an expert witness. Though it conducts no jury trials and the rules do not expressly require it, the board generally considers itself the gatekeeper of junk scientific evidence. The board regularly considers motions challenging the admissibility of expert testimony. It also regularly grants them.

In the appropriate case, a pretrial motion to exclude an expert’s testimony can be an effective tool. Here we address the most common grounds for challenges to expert testimony at the ASBCA.

Expert testimony must be reliable.

The basic test for the admissibility of expert testimony in federal courts is set forth in Rule 702 of the Federal Rules of Evidence, which codifies the Supreme Court’s decisions in Daubert v. Merell Dow Pharmaceuticals, 509 U.S. 579 (1993), and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999). Under Rule 702, expert testimony must not only be helpful, it must be based on sufficient facts or data, and be the product of reliable principles and methods.

Parties in litigation at the ASBCA are not exempt from the reliability requirement. The board frequently refers to the standards set forth in Rule 702 as a prerequisite to the consideration of expert testimony. Even without a jury, the board will exclude expert testimony that the board finds unreliable. Board rules are generally more flexible than the federal rules when it comes to the admissibility of evidence, but an expert’s opinion must be sufficiently reliable for the board to consider it. Universal Yacht Services, Inc., ASBCA No. 53951, 04-2 BCA ¶ 32648 (May 24, 2004) [pdf].

Contractors know that discovery is the most time-consuming and expensive part of litigation. Until now, the Federal Rules of Civil Procedure have done little to address the problem. Parties that preserve too much data are burdened with the cost of collecting and reviewing it. Parties that preserve too little risk not having access to key evidence or being penalized for spoliation.

While we’re not sure the problem can be fixed with a few changes to the procedural rules, reducing discovery costs appears to be a key goal of the recently-proposed amendments to the Federal Rules of Civil Procedure [pdf]. The revised rules were passed by the Judicial Conference of the United States in September 2014 and are now awaiting approval by the Supreme Court. Assuming they are approved, the amendments will become effective on December 1, 2015.

The proposed amendments have three primary objectives: (1) improve early and active judicial case management; (2) enhance the importance of proportionality in the discovery process; and (3) encourage greater cooperation among litigants. The amendments would also resolve an apparent circuit split over when sanctions may be imposed for failing to preserve electronically stored information. The changes aimed at accomplishing these objectives appear in the proposed amendments to Rules 1, 4, 16, 26, and 37.