Earlier this month, the Federal Circuit provided new guidance on the high burden that the government must carry to terminate a contract for default. In Dep’t of Transp. v. Eagle Peak Rock & Paving, Inc., the Federal Circuit held that the validity of a termination decision does not depend exclusively on the contracting officer’s reasoning — rather, the government must produce evidence during litigation to prove the contractor’s default under a de novo standard of review. The Eagle Peak decision illustrates that, absent a threshold showing that the contracting officer’s decision was pretextual, contractors challenging a default decision should focus on developing the “clean slate” record needed to rebut the government’s allegations, rather than disputing the contracting officer’s rationale (or lack thereof) for termination.
Are Federal Contractors Immunized From Vaccination Litigation? Mitigating The Risk Of Civil Liabilities Arising Out Of The COVID-19 Vaccine Mandate
Federal government contractors face many uncertainties as they implement President Biden’s COVID-19 vaccine mandate. This includes the distinct possibility of civil lawsuits arising out of their implementation of the mandate, including potential allegations of invasion of privacy, wrongful termination, lost wages, discrimination, personal injury or other common law claims or statutory violations. At least one such lawsuit already has been filed. In that suit, dozens of aggrieved employees allege that the contractor’s vaccine mandate violates state law, and they seek an injunction and other relief. Other lawsuits are sure to follow.
But there is good news for contractors: Established legal doctrines should provide contractors some degree of protection—and perhaps complete immunity—against such lawsuits. In addition to the statutory protections afforded to contractors under the PREP Act, contractors may be protected from civil liability based on federal-law-based defenses that have been recognized and applied in analogous government contracting settings. In the coming weeks, as contractors navigate the many challenges associated with the vaccine mandate, they should carefully consider the risk of civil litigation, and, in order to minimize potential exposure in such lawsuits, proactively implement practices that maximize the likelihood that these doctrines and defenses will be applicable, as discussed below.
Fifth Circuit Reaffirms Breadth of Yearsley Immunity For Government Contractors
Government contractors should take note of the Fifth Circuit’s June 30, 2021 decision in Taylor Energy Co. v. Luttrell, which reaffirmed that contractors can enjoy a broad immunity from third-party liabilities—known as “derivative sovereign immunity,” or “Yearsley immunity.” Yearsley immunity emanates from Yearsley v. W.A. Ross Const. Co., an 80-year-old Supreme Court decision, which established that a contractor is immune when (i) it performed acts pursuant to a valid authorization of Congress and (ii) the contractor did not exceed the scope of that authority.
In Taylor Energy, the court dismissed claims arising out of an oil spill containment project in the Gulf of Mexico. The basic claim in the suit was that the contractor failed to effectively remediate and contain the oil. The Fifth Circuit found that the government: (i) provided direction to the contractor through the statement of work, in the form of “goals” and specific contract deliverables and deadlines; and (ii) periodically met with the contractor and reviewed and approved the work during performance. Based on these core facts, the court held the contractor was immune. The court held that it was irrelevant that the statement of work was “barebones,” and that the contractor—rather than the government—designed certain elements of the remediation effort. Following the Fourth Circuit’s 2018 decision in Cunningham v. GDIT, the Taylor Energy decision is another appellate court victory for contractors in the wake of the Supreme Court reaffirming Yearsley’s core principles in Campbell-Ewald Co. v. Gomez.
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Will an Unappealing Trend in Battlefield Contractor Suits Continue? Following A Pattern of Appellate Indecision—Fueled by the Government’s Equivocal Litigation Stances—the Fourth Circuit Mulls En Banc Review
It’s often said that hard cases make bad law. In the realm of contractor-on-the-battlefield lawsuits, hard cases seem to be making no law—at least at the appellate level.
As detailed in an amicus brief submitted by Covington on behalf of KBR last week in CACI Premier Technology Inc. v. Al Shimari, No. 19-1328 (4th Cir.), time and again in suits against battlefield contractors, appellate courts have refused to provide definitive rulings regarding threshold, immunity-based defenses. This chronic appellate-court indecision has caused unnecessarily-protracted litigation, which in turn has imposed enormous burdens on the U.S. military; permitted expansive discovery intruding upon sensitive military judgments; and rolled up litigation costs totaling tens of millions of dollars—costs that, in many instances, are reimbursed by the government and thus ultimately borne by taxpayers. In other words, lack of timely appellate review has resulted in the very harms that immunity and related defenses are designed to prevent. Ironically, a major reason why these suits have inflicted such harm on these important federal interests is the United States’ own equivocal and inconsistent litigation positions.
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Fourth Circuit Embraces Expansive View of Derivative Sovereign Immunity for Government Contractors
Last week, the Fourth Circuit Court of Appeals affirmed a lower court decision to dismiss a Telephone Consumer Protection Act (“TCPA”) lawsuit against General Dynamics Information Technology, Inc. (“GDIT”), on the basis that GDIT was immune from suit as a government contractor under what is known as the “Yearsley doctrine.” Craig Cunningham v. GDIT, No. 17-1592 (Apr. 24, 2018). The decision follows a long line of Fourth Circuit decisions in which contractors have been granted protection from liability when they perform work that supports important governmental functions.
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Construction Contractors: The Government Contractor Defense is Alive and Well in the Fifth Circuit
Construction contractors take note: the government contractor defense is alive and well in the Fifth Circuit. In Sewell v. Sewerage and Water Board of New Orleans, the Fifth Circuit recently confirmed that construction companies can successfully assert the government contractor defense in response to tort lawsuits that arise from their performance of federal public works and infrastructure projects. This is a welcomed decision in the Fifth Circuit, which had signaled in recent years that a higher level of proof may be required to establish the first element of the defense ─ i.e., that the government meaningfully reviewed and approved reasonably precise specifications for the allegedly defective construction feature.
The Sewell case illustrates that ─ with the right litigation strategy and a skillfully crafted evidentiary record ─ construction contractors may well prove the defense in cases involving even “rudimentary or general construction features.”
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The GAO Is Not Down With OFCCP: Report Criticizes Agency’s “Weak” Compliance Evaluations and May Trigger Increased Contractor Oversight
The Government Accountability Office (“GAO”) recently released a study of the Office of Federal Contract Compliance Program’s (“OFCCP” or the “Agency”) oversight functions for fiscal years 2010 to 2015. GAO’s report explains that “OFCCP has not found violations in the vast majority of its compliance evaluations,” noting that in the time period GAO studied, OFCCP found violations in 17% of evaluations. GAO pointed out that OFCCP resolved 99 percent of these violations through agreements between the agency and contractor that outlined remedial measures.
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GAO Rejects Timeliness Challenge Because “Essential Elements” of Protest Were Timely Filed
In REB ROWE Services, LLC; General Services Administration–Reconsideration, B-410001.6; B-410001.7 (Apr. 4, 2016), the Government Accountability Office (GAO) recently denied a request for reconsideration and clarified that protest grounds are interpreted broadly for timeliness purposes. This decision is a reminder for protestors and intervenors alike that seemingly untimely protest grounds may still be revived if they involve “the same essential elements” as timely filed protest allegations.
In the underlying procurement, the agency’s evaluation had determined the protestor’s price was unrealistic and assessed performance risk based upon the unrealistically low price. The initial protest was timely filed, and the protestor filed comments on the agency report 11 days after the agency report was filed. The protestor did not specifically invoke price realism until it filed its comments. GAO sustained the protest based on the agency’s unreasonable price realism analysis, holding that the agency failed to evaluate the protestor’s unique staffing approach during the price realism analysis; “instead [the agency] simply compared [the protestor’s] price to the government estimate and other offerors’ prices.”
OHA and COFC Agree: Mentor/Protégé JV Agreements Must Be Specific to Avoid Affiliation
Recent decisions by the Small Business Administration (“SBA”) Office of Hearings and Appeals (“OHA”) and the Court of Federal Claims offer important advice to anyone in the process of drafting and negotiating a mentor/protégé joint venture agreement: Be specific. Those agreements, in many cases, are the crown jewel of the mentor-protégé program enabling mentors and protégés to work together on set-aside opportunities that they would not otherwise have been eligible. And like anything of great value, it should not be taken for granted. Instead, as a matter of meeting both regulatory requirements and best practice, mentor/protégé joint venture agreements should specifically list all resources, equipment and facilities (and their estimated values) that each party will provide and detail how work will be shared between the joint venture members.
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