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.