VB CGC Practice Group

VB CGC Practice Group
Vandeventer Black's Construction and Government Contracts Practice Group focuses on serving our business clients in the construction industry. We currently have offices in Norfolk and Richmond, VA, the OBX and Raleigh, NC, and Hamburg, Germany. For more information about Vandeventer Black, clink on the VB logo.

Tuesday, December 3, 2013

Potential Criminal Liability for Damage to Undergroud Utilities in Virginia

Vandeventer Black Partner John Lockard recently penned the following summary of potential criminal liability concerns associated with underground utility work in Virginia:


             Any contractor performing work that involves disturbing the ground faces the risk of damaging underground utilities.  Even with technological advancements, the marking of underground utilities can often seem more like an art than a science.  Contractors should be prepared to address the liabilities that can arise from the damage to an underground utility, including potential criminal charges.
             In addition to the liability for the costs to repair the utilities under the Virginia “Miss Utility” statute, some localities have been pursuing criminal charges against contractors for violation of the statewide fire prevention code.  Charges have been issued for the “unauthorized discharge, release, disposal, or spill of hazardous material” caused by damage to a utility line, especially in cases of damage to natural gas lines.  Localities may be more inclined to pursue criminal charges if the fire department or other emergency response units are called to the scene.  In addition to the criminal penalty, the statewide fire prevention code and the local statutes allow for the recovery of the locality’s response costs. 

             The criminal charges are often filed against the on-site supervisor or equipment operator.  A criminal charge against an employee may have serious consequences for both the employee and the contractor.  A violation of the statewide fire protection code is a Class 1 misdemeanor that can result in a fine of up to $2,500 and a sentence of up to a year in jail.  A guilty plea in the criminal action may also be admissible as part of a civil action to collect damages by the utility. 

             All contractors should take notice if any of their employees receive a summons relating to damage to an underground utility.  The summons may appear to be a simple violation of a local ordinance, but may actually involve criminal charges against the employee with possible civil consequences for the company.  Contractors should carefully evaluate the potential criminal and civil liability resulting from damage to an underground utility and consult with legal counsel experienced in these matters.

U.S. Supreme Court Strongly Upholds Contractual Forum Selection Clause

In a slip opinion decided December 3, 2013, the U.S. Supreme Court strongly upheld the enforceability of a contractual forum selection clause in its unanimous decision in Atlantic Marine Construction Co., Inc., No. 12-929. Our firm is particularly proud of the decision, having represented the winning petitioner, Atlantic Marine.

Atlantic Marine had subcontracted with J-Crew Management, Inc., a Texas corporation, for work performed in Texas. The subcontract contained a forum selection clause agreeing to the resolution of subcontract disputes in Virginia. Notwithstanding that clause, J-Crew filed suit in the Western District of Texas on a payment dispute. Atlantic Marine moved to dismiss that action for improper venue (28 U.S.C. Sec. 1406a), or to alternatively transfer under the forum non conveniens statute (28 U.S.C. Sec. 1404a). 

Both the District Court and Fifth Circuit Court of Appeals denied those motions, essentially holding that a forum selection clause was only one of many factors court may weigh when considering such forum motions.  The Supreme Court disagreed and reversed in a unanimous decision by Justice Alito, seemingly now making it all but impossible for a party to overcome a contractual forum selection clause. 

The Supreme Court held that while dismissal under Sec. 1406a is not appropriate if the suit is filed where statutorily appropriate (in that case the W.D. of Texas was statutorily appropriate), the lower courts both misapplied the deference required to be given to the parties' contractual venue agreement when considering transfer under Sec. 1404a.  The Court held that deference requires that "a forum-selection clause be given controlling weight in all but the most exceptional cases" and those extraordinary circumstances must relate to other than the convenience of the parties. 

In so holding, the Court altered previously used balancing tests in three significant way:

- First, the Court held that the "Plaintiff's choice of forum merits no weight" over what was previously contractually bargained.
- Second, the Court held that courts should not even consider arguments about "private interest" factors such as the forum court's jurisdiction over witnesses and inconvenience of travel; rather, courts may only consider "public-interest factors" that are rare in contract cases.

- Third, the Court held that transfer will not carry with it the original venue's choice-of-law rules (as well as forum-non-conveniens law).

Further, the Court held that the lower courts had improperly placed the burden of proof on Atlantic Marine to prove that transfer to the parties' contractually preselected forum was appropriate instead of requiring J-Crew, the party acting in violation of the forum selection clause, to show that public-interest factors overwhelming disfavored transfer, and also erred in giving weight to the parties' private interests outside those expressed in the forum selection clause.

The end result is a unanimously, strongly stated deference to parties' contractual forum selection clauses; making such clauses - and their particular wording - a critical aspect of any contract negotiation.  This is particular true given the increasingly national, and global, nature of businesses, including those in the construction industry.

A copy of the Court's decision is available at this link:

New DFAR Clause Added to Safeguard Unclassified Technical Information

My law partner Mike Sterling suggested a reminder about the new final Department of Defense (DoD) rule (DFARS Case 2011-D039, issued 11/18/2013) that amends the Defense Federal Acquisition Regulation Supplement to add a new subpart and contract clause adding requirements for the safeguarding of unclassified controlled technical information. 

As defined in the new rule, "controlled technical information" means technical information with military or space application that is subject to controls on access, use, reproduction, modification, performance, display, release, disclosure, or dissemination (see DFARS 204.7301). However, the definition excludes information that is lawfully publicly available without restrictions.

The newly added subpart is DFARS Subpart 204.73 and there is also a new associated contract clause at DFARS 252.204-7012. In short, these require DoD contractors and subcontractors to provide adequate security to safeguard unclassified controlled technical information on their unclassified information systems from unauthorized access and disclosure. At a minimum, this requires the implementation of an information systems security program that complies with National Institute of Standards and Technology Special Publication 800–53 security controls as identified in the table included in the clause.

The new rule also requires contractors to report to DoD cyber incidents affecting unclassified controlled technical information resident on or transiting contractor unclassified information systems. Detailed reporting criteria and requirements are set forth in the new DFARS 252.204-7012 clause. Of note, the clause does not limit the Government’s ability to conduct law enforcement or counterintelligence activities, or other lawful activities in the interest of Homeland Security and National Security.

Also note that the Government can use the results of the required activities to support an investigation and prosecution of any person or entity. Moreover, the new regulations do not abrogate any existing contractor physical, personnel, or general administrative security operations governing the protection of unclassified DoD information already in effect.

The effective date of the new rule is November 18, 2013. Below is a link to the final rule (last accessed 12/03/13):


Monday, December 2, 2013

Locker Room Environment - Lawsuit Waiting to Happen

There's a lot in the press lately about the "locker room" atmosphere of NFL teams; some content of which is more shocking than others. But the issues are not just sports related. Many of the players and ex-players have passed those issues to the side noting the "sanctity" of the football locker room, and other players and ex-players of other sports have talked about similar environments in their locker rooms.

Construction job sites share some similarities. They are largely male populated, and can be stereotypically a "boys will be boys" atmosphere, with lots of verbal jousting and counter-jousting; some in better taste than others. It's a rough and tumble environment with high testosterone personalities, many larger than life.  Field conduct can't really be legally actionable can it?

In a recent decision about that type of locker room banter between a male iron worker employee and another male iron worker supervisor, the U.S. Court of Appeals for the Fifth Circuit reaffirmed the answer as a strong yes.  The case is E.E.O.C. v. Boh Bros. Constr. Co., L.L.C. 2013 WL 5420320, 120 Fair Empl. Prac. Cas. (BNA) 15 (5th Cir. 2013), in which by a 10-6 whole court decision held that the construction company had illegally subjected its employee to severe or pervasive harassment based on gender stereotypes after the employee (a male) was the specific and frequent target of various "rough" and "mouthy" comments (by another male).

Some of those included that the employee was a "pus___y," a "princess," and a "fag__ot," and subjected to other comments and physical simulations about which the employee complained, but the company took no action to address the employee's concerns and actually later suspended the employee without pay. While the frequency and extent of the taunts to the employee clearly crossed the line, this case re-enforces that harassment should not be tolerated to any degree, and the time of chalking up bad behavior to a "boys will be boys" atmosphere - even male to male - is long gone.

One of the many lessons from this case is that all complaints of harassment, regardless of gender, must be taken seriously and fully investigated, with appropriate action taken, and all of it properly documented so that each step and decision can be later explained if questions are raised about them. Policies are important, but they can't just be on the shelf to say they exist; they must be enforced and followed. Even in the rough and tumble world of iron work!

Accelerated Payments to Small Business Subcontractors Rule Finalize

Following up on a prior blog about what was then a proposed rule, a final rule was issued on November 25th requiring accelerated payments to small business subcontractors. The rule mandates that if a contractor receives accelerated payments from the Government, the contractor shall make accelerated payments to its small business subcontractors. The new FAR clause incorporating this rule is Part 52.232-40, and goes into effect  December 26th.

This new clause requires:

In subparagraph (a):
(a) Upon receipt of accelerated payments from the Government, the Contractor shall make accelerated payments to its small business subcontractors under this contract, to the maximum extent practicable and prior to when such payment is otherwise required under the applicable contract or subcontract, after receipt of a proper invoice and all other required documentation from the small business contractor.

. . . and

In subparagraph (c):
(c) Include the substance of this clause, including this paragraph (c), in all subcontracts with small business concerns for the acquisition of commercial items.

This new clause specifically notes though:

In subparagraph (b):
(b) The acceleration of payments under this clause does not provide any new rights under the Prompt Payment Act.

So what does this new rule actually do?  This is unclear since, among other things, there is no definition of "accelerated payments" or of "maximum extent practical."  And, since it specifically states it is not intended to affect the Prompt Payment Act, the remedy, if there is a violation, is unclear. Under Virginia law it's likely a violation could be deemed a breach of contract, and thus the "first to breach" under appropriate circumstances if violation is not waived by the small business subcontractor. We'll all collectively have to wait and see though how this new rule gets applied; both by the Government and by the Courts.

Friday, November 22, 2013

ASBCA Holds That Lack of Contracting Officer’s Decision Does Not Preclude Appeal Challenging Performance Evaluation

In a recently released decision (11/18/13, Metag Insast Ticaret A.S., ASBCA No. 58616), the Armed Services Board of Contract Appeals reaffirmed its earlier holding that performance evaluation disputes may constitute Contract Disputes Act (CDA) claims, if the contractor has sought a final decision, as being an appealable request for interpretation of contract terms and relief therefore arising under the contract. In Metag, the Board further allowed the appeal to proceed even though the Contracting Officer (CO) had not issued a final decision.

The government had moved to discuss Metag’s appeal on that basis. But the Board held that Metag had provided the CO a reasonable amount of time to issue a decision before appealing, considering the size and complexity of the claim. This is despite the fact that only 51 days had elapsed between the final decision request and the appeal, but the Board concluded that 176 days had elapsed between Matag’s claim submission and the government’s motion to dismiss without a CO’s decision on the claim; and so the CO’s delay was unreasonable.

Performance evaluations are a continuing critical aspect of government contracts projects, and with best value and other more evaluative procurement processes are very important in both the administrative processes for the project for which they are issues and future prospects. It is therefore important for contractors to review and formally respond to any performance evaluations; but particularly those resulting in “marginal” or “unsatisfactory” ratings. Ideally, performance disagreements can be resolved as part of that review and response process; but if not the ability to request a CO’s final decision about performance ratings is another important tool in the contractor’s toolbox. The Metag decision reinforces that right, and the obligations of COs to reasonably and timely address contractor’s concerns respecting evaluation ratings.

Thursday, November 21, 2013

Vandeventer Black Partner Arlene Klinedinst to Speak About Fringe Benefit Compliance and Tracking

On Thursday, January 16, 2013, as part of AGC Virginia's Breakfast & Learn project, Vandeventer Black partner Arlene Klinedinst will speak with Lind Sawyer of Deltrack Fringe and Hunter Webb of Sullivan, Andrews & Taylor, CPA's about various fringe benefit compliance and tracking issues.  For more information about this program, please see the below brochure.  We look forward to seeing everyone there.

Saturday, November 2, 2013

Virginia Mechanic's lLien: Complexities Revisited

As Virginia construction attorneys know, the mechanic's lien laws and interpreted issues in Virginia are many and complex. A good reference for many of those is found in the following 2013 Virginia Supreme Court case from procedural to priority and almost every major issue in between:










Record No. 120287

Record No. 120288

Record No. 120289

Supreme Court of Appeals of Virginia

February 28, 2013

PRESENT: All the Justices


Mary Grace O'Brien, Judge

Virginia Administrative Appeals

Administrative appeals in Virginia have a high standard for reversal of an agency decision. An earlier blog talked about the potential impacts of recent statutory change but this 2012 case is a good overview source on the courts' review role:




Record No. 0285-12-3


NOVEMBER 20, 2012

Friday, October 11, 2013

Testimony Transcripts: Discoverable or Required to be Bought from the Court Report?

Sometimes facts in a case suggest the need to evaluate prior deposition or trial testimony. Does that make related transcripts subject to discovery production requests? Recently, Magistrate Judge Pamela Meade Sargent (Abingdon) said no, ruling instead that counsel needed to purchase a copy of the transcript from the court reporter who transcribed the testimony. This is certainly a win for court reporters who make part of their livings from transcript copies. It also relieves producing parties from the burden of copying and producing the transcripts. Whether other courts will follow Magistrate Judge Sargent remains to be seen.

Sunday, October 6, 2013

The Federal Goverment is Shut Down . . . Now What?

A seemingly simple proposition often misunderstood is that during a Government shutdown contracts remain in force; not all do. Therefore, the first and most important thing to do in determining shutdown implications is to review your contract. The second most important thing to do is to follow all applicable administrative requirements, including respecting required notices.  Communication, both internally and externally, is critical.
Some additional specific considerations for Government contractors as the current shutdown continues include the following:

Pre-FY 2013 Funded Contracts: These contracts should not be shut down; however, it would be good to confirm with the Contracting Officer that performance is to continue. Payments may be delayed, and this should result in interest payments under the Prompt Payment Act. You are generally obligated to perform work even if payment is delayed; however, if payment delay is excessive and you are unable to perform because of that you should consider making an administrative claim, providing notice to the Contracting Officer.  Please note that even with this, though, reducing or stopping work may not be contractually allowed. Keep a cash flow record to justify any reduction or stoppage.

FY 2013 Funded Contracts: For contracts where work has already been funded, or if revolving funds are available, work may continue. If the Contracting Officer provides a shutdown notice though, promptly stop work and track any cost impact. Continued work without approval will likely be considered volunteer work and not be paid for. As with other adverse administrative actions, notice and otherwise following adjustment and claim processes are required, including notices. Communication with the Contracting Officer is critical.  But communication with lower tiers is also critical, including notices to them to stop work or deliveries. Additionally, consider any security requirements that may apply / be affected.

Fixed Priced Contracts: These contracts are generally funded at the time of award, and can include fixed price task orders; however, beware of unfunded change orders and task orders. Performing them without approval / funding will also likely be considered volunteer work and not paid for.  As with the above, both external and internal communication is critical.

Cost Type Contracts: Typically these contracts are funded only in part as the work progresses, and are subject to limitation on funds clauses. Do not continue to work if it is not funded (see above), provide notice to the Contracting Officer (see above), and communicate both externally and internally (see above and below). Similar rules apply to Time and Material (T&M) contracts. 

Supply Contracts: Products may be subject to changed delivery and payment terms. Make sure to advise your vendors. Communication with them and the Government is critical.

Service Contracts: Make sure you know where your employees are located. They might find that they do not have access to Government facilities during the shutdown. Unless advised not to report to work, employers may be liable to pay the employee with no reimbursement from the Government. Also, if an employee is on official travel, employers may need to order them to return or stay in place for a short time until further information is available. Employees on leave, vacation or sick leave should probably stay on that status if they were assigned to a shutdown contract. However, if the employees are covered by a Collective Bargaining Agreement (CBA), the CBA might govern how employers must treat their employees.  Employers may be required to bargain or discuss shutdown changes with the union under federal labor law or the terms of the CBA.

Employees: Attempt to mitigate costs by work reassignments. Consider vacation or leave as that may not be classified as voluntary work, and may be compensable after the shutdown ends. Some workers may need to be on "stand by" to perform emergency services, such as maintenance of an IT system. If employers need to furlough employees they should first verify applicable laws and regulations of the jurisdiction in which the work is performed; especially California and New York.  Under the federal Fair Labor Standards Act (FLSA), if non-exempt employees perform any work during the shutdown (whether from their homes, cars, or any worksite) then employers are required to pay those non-exempt employees at their regular rates, for all time they actually work, even though the Government may never reimburse the company.  For salaried, exempt employees, if those employees work any part of any week (e.g. a few hours on the first day of the Government shutdown), then employers are required to pay them their entire, fixed salary for that entire week.  Depending on state or local law, the terms of any applicable CBA, and/or company policy or practice, employers may be able to require employees to use their available, paid vacation or other paid leave for full or partial days of the Government shutdown.

Federal Employees: Determine if you need a federal employee to approve the work, payment, accept deliveries, provide access, information, or other reasons. If the contract is not shut down try to plan around such problems and notify the Government of any impacts.

Government Agencies: Certain Government agencies with significant Government contract responsibility, such the Small Business Administration (SBA), may be completely shut down. This will delay approval of 8(a) applications, mentor-protégé applications, loans, size determinations, and other issues.

Shutdown issues are many, varied, and complex. Knowing your contract and then communicating both externally with the Government, lower tiers, etc. and also with your employees are critical first steps. 

Wednesday, September 25, 2013

New Affirmative Action and Nondiscrimination Obligations Set for March 2014

The U.S. Department of Labor published new final regulations on September 24, 2013 requiring Federal government contractors to begin complying with new affirmative action and nondiscrimination obligations towards veterans and individuals with disabilities by March 24, 2014.  The final regulations were published at 78 Fed. Reg. 58,614.  A link (last accessed 09/25/20013) follows:


Generally, the rule requires contractors to adopt quantifiable hiring benchmarks for veterans and utilization goals for people with disabilities.  The new rule also has a number of new employment data collection obligations, and requirements to invite job applicants to voluntarily self-identify themselves as protected veterans or individuals with disabilities both at the pre- and post-offer phases of the employment process.

There are some phase-in allowances.  As with any program of this type, its effectiveness in achieving its intended goal will remain to be seen, as will any future adjustments as the rules take affect.

Tuesday, September 3, 2013

Contractor's Misrepresentation Allows Government to Void Maintenance Contract

Multiple representations are required from prospective bidders as part of the bidding process. Some bidders push the line on those in order to put them in a better position for award. But what happens when a bidder crosses the line from augmenting qualifications to misrepresenting them? In the recent decision of Dongbuk R&U Engl'g Co., Ltd., ASBCA No. 58300, 8/13/13, decision released 8/26/13, the ASBCA concluded such misrepresentation allowed the Government to void the contact - in that case a maintenance services contract.  In its proposal, Dongbuk had represented that it had several technicians meeting required licensing requirements, but after award the Army found that none possessed the required certificate. 

The matter was referred to the local prosecutor's office and ultimately Dongbuk's CEO convicted of fraud and the company debarred.  In the interim, Dongbuk had been performing the contract and submitting invoices for its work that the Government did not pay.  Donguk's final decision request was denied, and it appealed for payment to the ASBCA. The ASBCA granted summary judgment to the Government on the grounds that Dongbuk's fraud voided the underlying contract, and that the fact that the Government may have received some benefit did not relieve Dongbuk from the consequences of its fraud.

This decision offers many lessons for prospective bidders / offerors; all learned the hard-way by Dongbuk.

Sunday, July 7, 2013

ASBCA Declines to Presume Knowledge by Government

In a recent decision involving differing site conditions in a ship repair contract, Appeal of Atlantic Drydock, ASBCA No. 54936 (20 June 2013), the Armed Services Board of Contract Appeals declined to presume that the Government had knowledge regarding the square footage requiring work.  The contract argued that since the Navy built and maintained the ships, it clearly knew the vessels non-vertical square footage, and thus was responsible for misleading the contractor by indicating in the contract documents what turned out to be less square footage than was required.  The contractor did not request or perform a ship check prior to bidding.  The Government claimed it did not have documents establishing a measurement, and its estimator testified he only did a rough estimate for the Government estimate.

The ASBCA declined to adopt the Contractor's position that the Board should presume that the square footage information existed somewhere in the Navy's data repositories.  In doing so, the ASBCA noted its rejection of the adoption of a "should have known" standard under those circumstances, holding that principle only applied to unilateral mistake / bid verification cases and unconscionability cases.  The ASBCA noted further that it was unaware of any case law supporting a finding of failure to disclose superior knowledge based on knowledge the Government should have known, and expressly declined to adopt such a premise for this case.

The case also has a good, detailed discussion of the admissibility of trade practice evidence, and when it is admissible.  In that case, the Board rejected the Contractor's trade practice evidence because it held it was not supported by substantial evidence, finding instead that the applicable decision by the Contractor was an exercise of business judgment only.

Wednesday, June 19, 2013

Got a spare $472 Million? Figher Engine Contractor Hit With Major Damages for Fraud

On June 17, the U.S. District Court for the Southern District of Ohio awarded the Government over $472 Million in damages for fraud by a fighter engine contractor, United Technologies Corp.  The case is U.S. v. United Technologies Corp., S.D. Ohio, No. 3:99-cv-093, Judge Thomas M. Rose.  The contractor's fraud was held to have directly resulted in the Government overpaying on the underlying contract, which had been issued to Pratt & Whitney, United's predecessor in interest, to provide F-15 and F-16 fighter jet engines.  The fraud was detected in a Justice Department audit in the form of false statements in Pratt's best and final offer.  This decision was the latest in a series of decisions and remands in the case.  The court declined to consider market value analysis for the engine charges because it held there was a limited market and so the "market prices" proposed were tainted by the fraud of Pratt's pricing and the market entry price of the only other source provider.  The court therefore accepted Government testimony that it should adjust what the Government eventually paid by subtracting the amounts the Government paid as the result of the fraud, offset by any underestimated costs United could prove.  United could not prove any underestimated costs, and the result was about $347 M in trebled False Claims Act damages found, plus more than $7 M in penalties and more that $108 M in common law damages and interest.  Yes, I would say this case is further evidence of the FCA's teeth, and warning for those thinking about pushing the procurement envelop with their proposals. 

Sunday, June 16, 2013

Teaming Agreements: Anything more than just an agreement to try and agree?

Teaming agreements are often used in the bidding or proposal process for construction or service contracts.  Two or more companies "team" together to try and take advantage of their individual strengths to better their chances at receiving an award.  They are particularly prevalent for Federal procurements.  Typically they include terms for how the team is going to bid or propose their offer, and contemplate a subsequent contract of some sort between them if the team receives the award; typically contemplating a subcontract agreement. Virginia attorneys have discussed for years whether these agreements are fully enforceable, and a recent April 2013 decision of the United States District Court for the Eastern District of Virginia, Alexandria Division (Cyberlock Consulting, Inc. v. Information Experts, Inc., Case No. 1:12cv396) calls teaming agreements even further into question.

The specific teaming agreement in question in Cyberlock designated solicitation obligations between the parties, and provided that if the team received the award they would enter into a subcontract with certain generalized terms regarding scope and percentages of work.  The teaming agreement did not include specified subcontract terms or attach the agreement into which the parties would enter; but rather left the specific subcontract for negotiation, and further included a provision that if the parties could not agree upon a subcontract, or the procuring client rejected the subcontract, the teaming agreement would terminate.  Considering these as a whole, the court held that the teaming agreement was nothing more than "an agreement to try and agree," and that the teaming agreement was therefore unenforceable.

So is this the end of teaming agreements in Virginia?  That is unlikely.  They are still a useful tool, and more typically they do not result in disputes.  But if they are going to be used, Cyblerlock is a necessary case for any teaming agreement drafter to consider.  As with many things in the law, enforceability will depend upon the specific terms of the agreement, and the more certain the terms the better.  Some considerations from Cyberlock though to try and hedge enforceability seem to include: a) including as part of the teaming agreement the subcontract into which the parties will agree; b) not making the inability to agree upon future terms a condition of termination; and c) possibly, and subject to multi-jurisdictional issues, using a choice of law provision to make the agreement subject to the laws of other than Virginia, using a jurisdiction that has considered and enforced teaming agreement terms more liberally.

As teaming agreements continue to be used and evolve, so too is the case law likely to evolve.  Where it ultimately goes in Virginia will have to be seen. - nsl

Tuesday, June 11, 2013

Carnell: VPPA Statutory Cap Sets Ceiling for Change Order Recovery

Carnell is a Western District of Virginia case that addressed the application of the Virginia Public Procurement's 25% cap for change orders.  Specifically, Virginia Code Sec. 2.2-4309(A) states that no fixed-price contract may be increased by more than 25% of the amount of the contract, or $50,000, whichever is greater, without the advance written approval of the Governor of his designee in the case of state agencies, or the governing body, in the case of political subdivisions.  Carnell performed change work, which exceeded the cap. 

The district court held that regardless of why the work was done, Carnell could not recover as a matter of law greater than the 25% cap because it had not received advance written approval (the 25% being based on the original contract price).  The court was unpersuaded by Carnell's argument that the cap did not apply to actions for breach of contract, holding that the cap applied to disputes as well as agreed contract action; holding that to rule otherwise "would result in the absurdity of allowing recovery on a public contract in excess of the amount that the legislature has specifically said that the contract may legally be increased."

Contractors should be very concerned about this application of the 25% cap.  It is not unusual for contractors to be forced by contract language to proceed with disputed work and negotiate adjustments later.  However, based on this ruling, if the contractor does so and the costs of doing so exceed the 25% cap then the contractor has volunteered that work and is without a remedy.  Carnell thus emphasizes the importance of estimating change impacts early and before proceeding with any work (which most contracts require anyway, but often is quite difficult to evaluate or calculate in practice), and if the cost impacts are expected to exceed the 25% cap then that issue needs to be addressed before proceeding, and certain prior to the costs reaching the cap.

Thursday, May 30, 2013

New Guidance Issued by Virginia Regarding Sales and Use Tax Refunds

Effective July 1, 2013, House Bill 2313 (Acts of Assembly 2013, Chapter 766) increases the rate of the statewide Retail Sales and Use Tax and imposes an additional state Retail Sales and Use Tax in the Northern Virginia and Hampton Roads Regions. Just recently the Virginia Department of Taxation issued its guidelines respecting associated refunds.  The guidance is available at the Tax Department's website at the following weblink (last accessed 5.30/2013):


My law partner Pat Genzler offers the following summary of and thoughts regarding the new guidelines:
  • The increase statewide is .3 % (from 4% to 4.3%), but in Northern Virginia and Hampton Roads is an additional .7 %.  Adding the new additional 1% local tax increase, the total tax for Northern Virginia and Hampton Roads will now be 6% (4.3% state, plus .7% regional, and plus 1% local).
  • Available refunds relate to "bona fide real estate construction contracts" entered into before April 3, 2013 that have: a) a specified completion date; and b) finished plans and specifications at award. 
  • If the project qualifies, a refund is available through the end of the contract.  Changes to either the completion date or adding new work are not available for the credit.
  • The finished plans and specifications at award likely excludes many design-build contracts since the plans and specifications for those projects are not typically "finished" at the time of award; but interpretation remains to be seen.
  • There is an unaddressed difference between the Guideline's language and that of the statute - specifically the statute only requires plans and specifications and does not use the word "finished" that is being applied as a qualifier by the Guidelines.  Whether this was intentional or not, such as being specifically intended to exclude design-build contracts, is unclear.

Tax issues are generally complicated at best, and these Guidelines, while intended as clarification, are seemingly wanting in terms of that intended goal.  Perhaps (hopefully) the Department of Taxation will choose to clarify further some of these issues.

Tuesday, May 7, 2013

Virginia FOIA: US Supreme Court Holds VA FOIA Can Limit Access to VA Residents

The U.S. Supreme Court ruled on April 29, 2013 in McBurney v. Young that Virginia's Freedom of Information Act can limit records access to residents of Virginia.  This was a unamimous opinion written by Justice Alito.  Among other things, the high court held that Virginia's FOIA law provides a service to local citizens that would not otherwise be available at all, and therefore does not consitutionally need to extend to non-residents. 

Administrative Decision Review Change About to Go Into Effect

Last session the Virginia General Assembly amended Virginia Code Sec. 2.2-4027 addressing judicial review of administrative decision.  Those changes go into effect on July 1, 2013.  The two key changes are: 1) removal of the prior "reasonable basis" standard, and changing it to determination whether there was substantial evidence in the agency record to support the agency's decision; and 2) adding de novo (fresh) review of issues of law.  Further, the amendment provides for a court to augment the agency record in whole or in part upon motion of any party.  Whether this will substantively affect judicial review is a matter of debate among practitioners.  However, it would seem, at the least, to provide greater opportunity for courts to challenge agency decisions and, if nothing else, not feel required to give as great deference to the findings of agencies.

The weblink to the Virginia Legislative website for the new law follows (last accessed 5/7/13):

Wednesday, April 3, 2013

No Private Cause of Action for Excessive Retainage Withholding, But Subcontractor Does Have Related Contract Claim

In South End Construction, Inc. v. Tom Brunton Masonry, Inc., No. 7:12cv390, Feb. 25, 2013, Judge Turk of the WDVA, Roanoke, held that a subcontractor could not assert a private cause of action for a prime contractor's violation of the Virginia Public Procurement Act's 5% retainage withholding limit.  There is no express private right of action, nor has a Virginia court implied one.  This is similar to the conclusions in other cases addressing the prompt payment aspects of the VPPA.  However, Judge Turk concluded the subcontractor was not without a remedy, and granted the subcontractor leave to amend to address the excessive withholding as a breach of contract claim; not an unexpected result.  The complaint was not available in ECF so why that was not claimed initially in the complaint is unclear.  One would presume the PPA also affords a right of interest on the excessively withheld retainage; particularly given the clearness of the limitation in the VPPA. - nsl

Wednesday, March 20, 2013

New Federal I-9 Form Required After May 7, 2013

The Department of Homeland Security published a new form for verifying employment eligability that is applicable to all U.S. business.  Vandeventer Black's Mara Mijal offers this summary of the change:
On March 8, 2013, U.S. Citizenship and Immigration Services (USCIS) published a revised Employment Eligibility Verification Form I-9 for use. All employers are required to complete a Form I-9 for each employee hired in the United States. Improvements to the new Form I-9 include new fields, reformatting to reduce errors, and clearer instructions to both employees and employers.
As of March 8, 2013, employers should begin using the newly revised Form I-9 for all new hires and reverifications.  Employers may continue to use previously accepted revisions until May 7, 2013; however, after May 7, 2013, employers must only use the new Form I-9.  Employers should not complete a new Form I-9 for current employees if a properly completed Form I-9 is already on file.

The revised Form I-9 is available online at www.uscis.gov.
For more information about this, here is Mara's contact information:

Mara S. Mijal
Immigration Law Group
Vandeventer Black LLP
101 West Main Street
500 World Trade Center
Norfolk, VA 23510
tel 757-446-8600
fax 757-446-8670
email: mmijal@vanblk.com

Thursday, March 14, 2013

Careful what you say: it may be actionable defamation

The Virginia Supreme Court recently held that a contractor could sue a competitor for defamation for asserting to the plaintiff contractor's client that the plaintiff contractor told the competitor he as going to "screw" the client. The lower court had dismissed the defamation claim, concluding that competitor's statements were opinion. The Virginia Supreme Court reversed, holding that under the specific facts the competitor's statement was one of fact, not mere opinion. The case is Tharpe v. J. Harman Saunders, No. 120985, Feb. 28, 2013. Bottom-line: be careful what you say about your competitors; it just might be actionable defamation.

County Claims: Don't Forget the Notice of Appeal and Bond

Claims against County's have their own statutory requirements in Virginia, including the requirement in Virginia Code Sec. 15.2-1246 that claimants both provide a written notice of appeal and a bond to be filed with the clerk respecting appeal of any money claims against the county. Recently, the Virginia Supreme Court reversed a judgment because the appellants filed a document with the county called "Appeal Bond", but nowhere in that document indicated it as notice of intent to appeal their claim. While the dissent argued this was form over substance, the majority of the court disagreed. That decision is County of Albermarle v. Camirand, No. 120711, decided Feb. 28, 2013.

What impact does that have on me you might ask? Well, if you do procurement work for a county you have the same statutory requirement. Even though your contract is under the Virginia Public Procurement Act, and even though that act has its own disputes resolution statute, and many contracts have their own disputes resolution statute as is allowed by the VPPA; you ignore Virginia Code Sec. 15.2-1246 at your peril. In its Jan. 16, 2009 decision in Viking Enterprise, Inc. v. County of Chesterfield, Record No. 080215, the Virginia Supreme Court noted that while the VPPA applies to how claims are initially presented to the public body, it is not inconsistent with Sec. 15.2-1246's requirements respecting how suits against counties are to be brought, and so both apply. Therefore, the failure to have complied with Sec. 15.2-1246, and to allege allege compliance in the complaint, are fatal jurisdictional defects.

Friday, February 1, 2013

EDVA Dismisses Quantum Meruit Claim as Irreconcilable With Breach of Contract Claim and Also Dismisses Claimed Private Right of Action to Enforce Alleged FAR Violation

Judge Turk, Senior District Judge for the United States District of Virginia, Roanoke Division, issued a recent opinion in Suleyman Civiv v. UXB International, Inc., Civil Action No. 7:12-cv-290 dismissing the plaintiff subcontractor's claim against the defendant prime contractor on a federal project that the prime contractor was liable under a quantum meruit (or implied contract) theory and the claim that the prime contractor was liable to the subcontractor for having violated the Federal Acquisition Regulations (FAR). 

Respecting the quantum meruit claim, the court noted that the subcontractor had pled a valid and binding express contract, and that the prime contractor had acknowledged that express contract as part of its motion.  Because the parties were in accord that they remained in a contractual relationship at all relevant times, the court held there was no basis for implying a contract, and so dismissed the quantum meruit claim.

Respecting the FAR violation claim, the court noted that the FAR does not provide for a private cause of action, and that it was therefore clear that a violation of the FAR, standing alone, could not give rise to a private cause of action.  Because of this the court also dismissed the FAR violation claim.  Of note, this same rationale would seem to apply to similar type claims, such as allegation of breach of the Federal Prompt Payment Act (a seemingly increasingly popular subcontractor assertion) - as the Magistrate Judge Prince ruled in an earlier EDVA action; it is will be interesting to see how Judge Turk's rationale is applied for future cases.

Thursday, January 3, 2013

Forum What Clause? And Why Should I Care?

In legal parlance, the “forum” is the location of a particular court. Generally speaking, there are statutory constricts on where cases are properly filed. If an improper forum is used, there are mechanisms to dismiss or transfer the case so the action gets resolved in the “correct” forum. Beyond those statutes, though, also generally speaking, the courts have increasingly allowed parties to choose legal forums as part of their negotiated contract terms.

Therefore, as part of your contract preparation, or review before signing someone else’s contract, it is important to determine if it contains what is called a “forum selection clause.” Those clauses specify where any dispute must be heard. Examples include limiting suits to a particular city, or even a particular court within that city – such as “all suits relating to this contract must be filed in the Circuit Court for the City of Norfolk, Virginia.”

Often those clauses limit the forum to the location of the contracting party with the greatest leverage; for example, the owner as regards its contract with the prime contractor or the prime contractor as regards its subcontracts with its subcontractors.  The common refrain of the courts is typified by that of the U. S. Supreme Court in the Burger King Corp. v. Rundzewicz case decided in 1985 (471 U.S. 462), holding “where forum selection provisions have been obtained through freely negotiated agreements and are not unreasonable and unjust, their enforcement does not offend due process.”

The Virginia Supreme Court has followed this approach.  But what does that really mean? What is free negotiation? What is unreasonable or unjust? As with many things associated with legal issues, the answer is not black or white, but rather is subject to interpretation. Again generally speaking, in Virginia the courts will not renegotiate contract terms, even if the court concludes those terms were harsh or one-sided.  The short position of the court is that the other side could have walked away from the deal, and that ruling otherwise would open the proverbial litigation flood-gates.

While a common-sense judicial approach, it ends up disregarding the realities of contract leverage, and can leave the side without leverage with no realistic financial choice but to accept the forum terms. The Virginia General Assembly has offered some relief to Virginia subcontractors by statutorily voiding subcontract forum selection clauses for Virginia construction projects if the forum is other than the project’s location. But otherwise, absent compelling facts inapplicable to most negotiated contracts, forum selection provisions are binding.

One way parties have sought to avoid forum selection clauses is to allege fraud in the inducement of the contract. If proven, fraud in the inducement can void a contract. But does it also void the forum selection clause? One would think that a void contract is a void contract, but in a recent opinion in Fill v. MidCoast Financial, Inc., Civil Action No. 1:12-cv-1054, USDC, EDVA, Alexandria Div. (filed 11/20/12), Judge O'Grady held that in order to void the forum selection clause the fraud must apply to the forum selection clause itself. Because under the facts of that case he held the forum selection clause was not agreed to because of the alleged fraud, the forum selection provision was enforced in that case.

No one likes to go into a contractual arrangement thinking it is going to result in a dispute, but the financial reality is that if there is a dispute a forum selection clause can significantly affect the cost of litigation, or even the base practicality of pursuing a claim at all. Because of this, the use of forum selection clauses, or minimally the negotiation of the forum, is an important component of all contract negotiations about which all contracting parties should be aware and should care about.