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.

U.S. Coast Guard photo by Petty Officer 1st Class Bethannie Kittrell.  August 26, 2013.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.”

Continue Reading Claims for remission of liquidated damages after the Federal Circuit’s decision in K-Con Building Systems

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.A trash-burning incinerator is installed at Forward Operating Base Warhorse, Iraq, through a LOGCAP contract.

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.


Continue Reading Barko v. Halliburton: The next (and final?) chapter

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).


Continue Reading How a 14-year-old case escaped the False Claims Act’s 6-year statute of limitations

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].


Continue Reading Daubert motions at the ASBCA

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.


Continue Reading Amendments to the Federal Rules make discovery better, faster, cheaper

Controlling legal spend is a frequent and important topic of discussion, especially among in-house counsel and their litigation teams. Much of the discussion focuses on the problem of soaring discovery costs driven by the proliferation of electronic data. As an eDiscovery attorney, I employ early case assessment strategies and tools, technology-assisted review, and even low-cost outside staff attorneys to try and curtail the cost of discovery. In the end, the effectiveness of these cost-reduction alternatives hinges on whether clients have done their part to reduce the volume of data upstream.

Beyond implementing a formal records retention plan, there are a number of fairly simple steps that companies can take to help reduce litigation costs. Items 1-5 help reduce the volume of data that needs to be collected and reviewed. Items 6-8 will help ensure that your litigation budget is not exhausted on spoliation or sanctions motions.

1.   When implementing an email archive, be mindful of how it will impact litigation costs.

An email archive is not a cure to your litigation woes. Storing every company email that was sent or received in an email archive may make preservation easy, but it may also be contributing to your soaring discovery costs. Despite claims to the contrary, most archives have poor search and export features. It is also very difficult to pull out only responsive email from an archive.  Instead, you end up overspending on attorney review of irrelevant data or producing mounds of irrelevant data.

One way to control this issue is to tailor the archive for your own business and legal needs from the beginning. Do you really need every employee’s email messages for the last 10 years? Very few industries have regulatory requirements that require such broad retention. Even those that do usually only apply to a small subset of employees. Confirm any applicable regulatory requirements and consider your own business and legal needs. Consider creating email groups with different retention cycles.


Continue Reading Eight ways to cut the cost of ediscovery

The attorney-client privilege applies with equal force to internal investigations today as it did 30 years ago thanks to the D.C. Circuit’s recent decision in In re: Kellogg Brown & Root, Inc., No. 14-5055 (D.C. Cir. June 27, 2014). The appeals court decision vacates the March 6, 2014 district court decision in the same case. At the district court, Judge James Gwin ruled that the attorney-client privilege did not protect documents developed during KBR’s internal investigations of potential fraud relating to its LOGCAP III contract. According to Judge Gwin, KBR’s investigations were not privileged because they were conducted “pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice.”

The D.C. Circuit’s decision reverses Judge Gwin’s ruling. The decision recognizes the “uncertainty generated by the novelty and breadth of the District Court’s reasoning” and echoes the Supreme Court’s concern that an “uncertain privilege, or one which purports to be certain but results in widely varying applications by the courts, is little better than no privilege at all.” If the district court’s decision were to stand, “businesses would be less likely to disclose facts to their attorneys and to seek legal advice.” The behavior created by this uncertainty in the attorney-client privilege would undercut the very compliance and disclosure regulations central to Judge Gwin’s analysis.


Continue Reading Barko v. Halliburton—How the D.C. Circuit’s decision reaffirms the attorney-client privilege in internal investigations

[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.]

Whether the Wartime Suspension of Limitations Act tolls the six-year statute of limitations for civil claims under the False Claims Act will soon be addressed by the Supreme Court. In Kellogg Brown & Root Services, Inc. v. United States ex rel Benjamin Carter, No. 12-1497 (July 1, 2014), the Court will have the opportunity to address several important questions about the application of the WSLA. Should it apply to civil claims or be limited to criminal actions? Does the tolling specified in the WSLA require a formal declaration of war? And does the WSLA apply to a qui tam claim in which the United States declines to intervene?

[Note:  The case also asks the Court to address whether the FCA’s “first-to-file” bar applies to cases filed after the first case is dismissed.  We’ll look at that question in another post.]

The case comes to the Supreme Court following the Fourth Circuit’s decision in U.S. ex rel Carter v. Halliburton Co., 710 F.3d 171 (4th Cir. 2013). In that case, the Fourth Circuit held that the WSLA tolled all civil actions—including civil FCA claims brought by qui tam relators—until the President or Congress declared a “termination of hostilities.” The Supreme Court accepted Halliburton’s petition for certiorari and will hear the case in 2015.

We believe the Fourth Circuit’s opinion represents a significant expansion of the WSLA. As Judge Agee points out in his dissenting opinion, a particularly troublesome aspect of the Fourth Circuit’s decision is its application of the WSLA to civil qui tam actions in which the United States has not intervened. The underlying purpose of the WSLA is to allow the law enforcement arm of the United States government to focus on its “duties, including the enforcement of the espionage, sabotage, and other laws’” in times of war. Id. (citing Bridges v. United States, 346 U.S. 209, 219 n. 18 (1953)). In a qui tam action initiated by a private citizen, the rationale for tolling the limitations period is diminished.

Continue Reading Will the Supreme Court uphold tolling of the six-year limitations period for civil False Claims Act cases during times of war?

The Severin doctrine restricts the ability of prime contractors to hold the government responsible for costs incurred by subcontractors. It is often of limited practical effect because it can usually be avoided by contract. Liquidation agreements, sponsorship agreements, pass-through agreements, and other similar agreements often include a conditional release that limits the subcontractor’s recovery to the amount that the prime contractor recovers from the government. With this protection, prime contractors are often willing to pursue subcontractor claims on a pass-through basis.

As we discussed in part one of this post, the Severin doctrine is nevertheless a recurring issue in federal contracts. Here we address two recent cases that explore the application of the Severin doctrine when the rights of the prime contractor and subcontractor are not expressed in a written agreement.

No subcontract at all

The decision in Parsons-UXB Joint Venture, ASBCA No. 56481, 13-1 BCA ¶ 35,378 (Aug. 1, 2013) [pdf] addresses the application of the Severin doctrine when there is no written subcontract. Parsons and UXB formed a joint venture to complete a Navy project to restore the Hawaiian island of Kaho’olawe, which had been used as a weapons range. The JV was “unpopulated,” meaning that employees of Parsons and UXB did all the work even though the JV formally held the contract. There were no subcontracts in place between the JV and either Parsons or UXB. When a dispute developed over costs incurred on the project and the JV brought the case to the Armed Services Board, the Navy cited the Severin doctrine. Without a subcontract, the Navy asserted that the JV could not be liable for costs incurred by Parsons or UXB and therefore could not pursue claims on their behalf.


Continue Reading Pass-through claims without a contract—Severin doctrine part two