In December 2014, the Court of Appeals for the Federal Circuit issued an important decision that impacts how the 6 year statute of limitations (SOL) is applied under the Contract Disputes Act (CDA).  In Sikorsky Aircraft Corporation v. United States, the Court of Appeals determined that the CDA’s 6 year SOL for filing a claim is not jurisdictional, contrary to  number of lower court opinions.  This ruling has a number of important consequences that Federal Government contractors should understand.

claims handwritten with chalk on a blackboard

The CDA states that, “each claim by a contractor against the Federal Government…and each claim by the Federal Government against a contractor…shall be submitted within 6 years after the accrual of the claim.”  Prior to Sikorsky, this requirement was considered by most to be jurisdictional.  This meant that the 6 year time limit was absolute and, even in extenuating circumstances, could not be missed.  Therefore, any claim brought beyond 6 years simply could not be considered by the court.  The court would not have the jurisdiction.

While the decision in Sikorsky did not eliminate the CDA’s 6 year SOL, it does open the door to “equitable tolling” an important exception in applying a limitations period.  Equitable tolling is a legal concept that, in certain circumstances, allows contractors to bring claims after the time allowed by an applicable SOL.  Specifically related to the 6 year SOL under the CDA, a claim can be equitably tolled if a claimant diligently pursues its rights to bring that claim but extraordinary circumstances stood in its way.  For example, in Sikorsky the activities that brought about that claim began in 1999 but did not become material until 2003.  The claim was eventually brought in 2008 and a dispute ensued regarding whether the claim was timely filed.  The claimant, in this case the Government, argued that because the claim was not material until 2003 the SOL did not start to run until then and, therefore, when the claim was filed with the court in 2008, it was brought within the 6 year SOL.  Sikorsky, on the other hand, argued that the claim accrued in 1999 and was, therefore, barred by the 6 year SOL because it was not brought until 2008.  Ultimately, the court did not decide whether the claim was timely filed because it found that the appellant failed to meet its burden in proving the merits of the claim.  In the process of discussing that issue, however, the court made the important determination that the 6 year SOL was not jurisdictional.

In addition to opening the door for equitable tolling, Sikorsky will also change how SOL issues are litigated under the CDA.  Prior to this decision, because the CDA’s 6 year SOL was largely considered jurisdictional, any challenge to the Court’s jurisdiction had to be decided if and when it was raised.  The issue could not be waived and could come up at any time.  After review, if it was found that the court did not have jurisdiction, the matter would be dismissed because jurisdiction is a prerequisite for the court to decide a matter on the merits.  Based upon Sikorsky, things have changed.  First, a defendant must now raise SOL as an affirmative defense.  An affirmative defense must typically be plead at the first opportunity possible (usually in the Answer to a Complaint) or it is waived.  Second, a non-jurisdictional challenge to the SOL is normally decided when a court renders a decision on the merits.  For contractors doing business with the Federal Government this has an important practical effect.  If a contractor brings a claim against the Federal Government and also argues that equitable tolling should apply, post-Sikorsky a judge or jury will likely decide whether equitable tolling has taken place after all of the evidence on the facts have been heard.  This means that a claimant may have to litigate its entire claim before the court will even determine if the claim was raised within the 6 year SOL.

As a practical matter, if you have a claim, or a potential claim, do not sit on your rights.  While Sikorsky is helpful and important in terms of how the SOL is considered under the CDA, do not take any chances.  6 years represents a very generous limitations period.  Seek professional assistance as early as possible and get the claim submitted.  If you have any questions, please let us know.

Edward T. DeLisle is Co-Chair of the Federal Contracting Practice Group. Ed frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues and dispute resolution.

Amy M. Kirby is an Associate in the firm’s Federal Contracting Practice Group and focuses her practice on government construction litigation. Amy’s practice includes a wide variety of federal construction matters.

On January 8, 2015 the U.S. Court of Appeals for the Fourth Circuit issued a decision in United States v. Triple Canopy, which broadened the reach of the False Claims Act (FCA) by embracing the theory of implied certification. While it is too early to speculate about the impact of the decision, it certainly could result in a rise in whistle blower and government initiated actions under the FCA.

Money Exchange

The case stems from a security services contract at Al Asad Airbase in Iraq, which was awarded to Triple Canopy in 2009. As a part of the contract, Triple Canopy was required to provide security personnel who possessed specific firearms training and who were able to pass a U.S. Army qualifications course with a minimum score. Scorecards indicating that personnel passed the qualifications course were to be maintained in each employee’s personnel file.

Triple Canopy hired 332 Ugandan guards to work at the Airbase. The guards’ personnel files indicated that they met the training requirements; however, once they arrived on site and were retested, it was discovered that they were unable to properly perform. To overcome this, Triple Canopy falsified scorecard sheets indicating that its personnel were, in fact, qualified.

For the 12 month contract period Triple Canopy presented monthly invoices to the government and received payments totaling over 4 million dollars. Sometime later, a former employee filed a qui tam action in the Eastern District of Virginia alleging that the FCA had been violated. The government intervened alleging that Triple Canopy knowingly presented false claims to the government. Specifically, the government alleged “that Triple Canopy knew the guards did not satisfy [the contract’s] marksmanship requirement but nonetheless billed the government the full price for each and every one of its unqualified guards and falsified documents in its files to show that the unqualified guards each qualified as a Marksman on the U.S. Army Qualification course.”

Triple Canopy filed a motion to dismiss. The basis for this motion was the government’s failure to sufficiently plead that Triple Canopy submitted a demand for payment that contained a false statement. The motion went on to state that the government failed to prove that a false record was created by Triple Canopy, which the government relied upon in paying Triple Canopy. The Court agreed. In its opinion, the Court asserted that the government did not plead “that Triple Canopy submitted a demand for payment that contained an objectively false statement.” In other words, because the actual claim for payment did not contain a false statement, there was no violation of the FCA. Further, the Court held that the “Government … failed to allege that the [Contracting Officer’s Representative] ever reviewed the scorecards,” demonstrating that the government did not rely upon a false record because it did not examine the scorecards before it made payment. The United States (along with the former employee) appealed to the Fourth Circuit.

On appeal the Fourth Circuit reversed the District Court’s ruling. The Court held that the “Government pleads a false statement when it alleges that the contractor, with the requisite scienter, made a request for payment under a contract and withheld information about its noncompliance with material contractual requirements. The pertinent inquiry is whether, through the act of submitting a claim, a payee knowingly and falsely implied that it was entitled to payment.” The Fourth Circuit further found that, although Triple Canopy had not submitted certifications that were false on their face, the government plead sufficient evidence to sustain a FCA claim under a theory of implied certification.

In making this finding, the Court acknowledged the broad purpose of the FCA by stating that “claims can be false when a party impliedly certifies compliance with a material contractual condition [which] gives effect to Congress’ expressly stated purpose that the FCA should reach all fraudulent attempts to cause the Government to pay out sums of money or to deliver property or service.” Here, the material contractual condition was the guards’ qualifications, which Triple Canopy falsified. As the Court explained “common sense strongly suggests that the government’s decision to pay a contractor for providing base security in an active combat zone would be influenced by knowledge that the guards could not, for lack of a better term, shoot straight….[and further] if Triple Canopy believed that the marksmanship requirement was immaterial to the government’s decision to pay, it was unlikely to orchestrate a scheme to falsify records on multiple occasions.” Essentially, the Fourth Circuit found that the claim itself did not have to be false as long as the underlying information that formed the basis of the claim was material and false.

Prior to this ruling, it was difficult to bring a claim under the FCA under circumstances such as these because it was generally only permissible where there was fraud found in an actual certification for payment. Based upon this decision, a FCA claim can be sustained as long as the material upon which payment is based is false. This is yet another example of the expansive nature of the FCA. If you are a government contractor beware of its implications and if you have any questions, call a legal professional.

Edward T. DeLisle is Co-Chair of the Federal Contracting Practice Group. Ed frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues and dispute resolution.

Amy M. Kirby is an Associate in the firm’s Federal Contracting Practice Group and focuses her practice on government construction litigation. Amy’s practice includes a wide variety of federal construction matters.

Several months ago, we told you about Ambuild Company v. LLC v. U.S., a very important case pending before the Court of Federal Claims (“COFC”).  The AmBuild case was of particular interest to our firm because it concerned the interpretation of a Department of Veterans’ Affairs (“VA”) regulation, which the VA revised following an adverse ruling in our case, Miles Construction, LLC v. United States.  AmBuild was of particular interest to SDVOSBs because of its potential impact on their due process rights in the context of status protests. Gavel and book

Well, the COFC issued its opinion.  The decision is a major victory for veteran-owned businesses, wherein the Court rejects the VA’s attempt to circumvent the ruling in Miles, and reaffirms that the VA cannot cancel a concern’s SDVOSB status without first allowing it an opportunity to respond to potential eligibility issues.

As those of you that follow this blog know, Miles involved the cancellation of our client’s SDVOSB status.  The cancellation stemmed from a protest lodged by a competitor.  However, the VA’s basis for cancellation was something that was never raised in that competitor’s protest.   Rather, the cancellation was based upon a new issue that the VA brought up on its own when deciding the protest, which Miles knew nothing about prior to cancellation.  When Miles protested the cancelation of its status, the COFC found that the VA had violated Miles’ due process rights.  The Court reasoned that an agency performing an investigatory function must provide the investigated party with notice, and afford that party an opportunity to meaningfully participate in the investigation.  The Court said: “an interpretation of 48 C.F.R. § 819.307(c) [the regulation pertaining to SDVOSB/VOSB eligibility protests] that does not allow this basic procedural due process is plainly erroneous and cannot be upheld.”

Following the Miles decision, the VA revised its regulations.  The amended version of 48 C.F.R. § 819.307 (which went into effect on September 30, 2013) added language that gave the VA the ability to determine the status of a protested concern based upon “a totality of the circumstances.”  (48 C.F.R. 819.307(e)).  In AmBuild, the VA relied on this language, arguing that it allowed the VA to consider facts or issues not specifically raised by the protesting party when reviewing a concern’s SDVOSB status.  In effect, the VA argued that “totality of the circumstances” meant that it could review any potential issue affecting a concern’s eligibility under the SDVOSB Program, whether or not it was raised as part of a protest.

In the AmBuild decision, the COFC squarely rejected the VA’s argument.  The Court again emphasized the importance of a protested party’s due process rights, and the necessity of giving a protested party a chance to respond to any allegations affecting its status.  It stated that: “The requirements of due process rest at the core of our nation’s Constitution and governmental institutions and are ingrained in our national traditions. . .”  As a result, “[b]efore adverse action is to be taken by an agency, the individual immediately concerned should be apprised not only of the contemplated action with sufficient precision to permit his preparation to resist, but, before final action, he should be apprised of the evidence and contentions brought forward against him so that he may meet them.”  Accordingly, the Court reasoned that the VA’s “strained construction” of 48 C.F.R. § 819.307 “would convert [the VA’s] scope of review into a general license to act on a protest without giving notice of issues not raised by the protesting party or contracting officer but rather generated sua sponte by [the VA]. The requirements of procedural due process cannot be so easily cast aside.”  The Court concluded that the 2013 amendment to 48 C.F.R. § 819.307 may be interpreted to establish a scope of review only – not to abrogate the requirements of procedural due process.  Thus, going forward, the “totality of the circumstances” language in 48  C.F.R. § 819.307(e) must be read to include only those issues to which the protested party was afforded an opportunity to respond.   That is, the VA may consider the totality of the information available relating to a protested concern’s eligibility for the SDVOSB Program, but only within the context of the issues raised in the protest itself.  The Court ruled that AmBuild was entitled to reinstatement to the VetBiz database, that it must be considered for the award of the contract at issue in the protest, and that AmBuild was entitled to its costs of suit.

This is a major victory for VOSB/SDVOSBs.  AmBuild reaffirms that the VA cannot cancel a concern’s VOSB/SDVOSB status without explicitly notifying that concern of any and all potential issues concerning its eligibility status, giving that concern an opportunity to provide a meaningful response, and allowing that concern to participate in the investigatory process.  It will be interesting to see if the VA attempts to amend its regulations again to circumvent the ramifications of this decision.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group. Ed frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues and dispute resolution.

Maria L. Panichelli is an Associate in the firm’s Federal Contracting Practice Group.