Just when you thought you were out...They pull you back in.

Just when you thought you were in the clear and the U.S. Attorney was out of time to bring a false claims action against you, the Supreme Court of the United States may issue a decision that will keep you up at night.

On July 1, 2014, in Kellogg Brown & Root Services, Inc., et al. v. United States ex. rel. Carter, the Supreme Court decided that it will look at the applicability of the Wartime Suspension of Limitations Act (WSLA) to the statute of limitations applicable to False Claims Act (FCA) litigation.

By way of background, an action was brought against Kellogg Brown & Root Services, Inc., alleging that the company had fraudulently billed the United States for services provided to the U.S. military in Iraq in 2005. The court initially dismissed the complaint as being beyond the FCA’s statute of limitations. That decision was reversed on appeal. The Circuit Court found that the WSLA tolls the statute of limitations for “any offense” involving fraud against the federal government “[w]hen the United States is at war.” 18 U.S.C. § 3287. The court also held that the Act “does not require a formal declaration of war,” reasoning that such a requirement “would be an unduly formalistic approach that ignores the realities of today[.]” The United States had not formally declared war since World War II. Given the current military conflicts like Afghanistan and Iraq, as well as past military operations such as Operation Desert Shield in 1990 and Desert Storm in 1991, this decision effectively repeals the statute of limitations for civil fraud claims and authorizes an indefinite tolling of FCA claims pursuant to the WSLA. I wait with trepidation to see how the Supreme Court will handle this issue.

If you ever find yourself facing a false claim action or are unsure of your legal footing, feel free to contact Connell Foley’s New York Construction Law Group for guidance on this or any other construction-related issue.

It's Déjà Vu All Over Again – Joint Bidding is Back

On June 9 Assembly Speaker Sheldon Silver submitted a bill that would permit joint bidding for utility interference work. What does this mean for you – no more independent negotiations with the utility companies. The utility interference work will be included in your bid price and the project will be awarded to the lowest responsible bidder. Given that the type and extent of interferences that will be encountered is inexact and difficult to accurately estimate, it unclear to me how the City of New York intends to structure the bid documents. It would make sense to me for the bids to be based upon a multiplier of a unit price, but we shall see.

For those of you old enough to remember, in 1993 the City experimented with a joint bidding process. Back then, the City consulted with the relevant utility companies to identify the interferences and then incorporate those interferences into the project specifications of the contract. The bid documents solicited separate bids for the City work and the utility interference work, the “non-City” work. The contract was then awarded to the contractor who submitted the lowest aggregate bid. However, the Court of Appeals, the highest court in the State of New York, concluded that this bid structure violated the public bidding rules, as it was possible that the contractor with the lowest bid for the City work would not be awarded the project, if his bid for the non-City work was too high. It is also possible that a contractor with a higher bid for the City work to be awarded the contract, where its bid for the non-City work was lower, making its aggregate bid the lowest. Thus, “Section U” was born.  Section U eliminated aggregate bidding but required the contractor to perform the utility interference work.

Now, in the last days of this legislative session, Speaker Silver in response to the lobbying efforts of the utility companies, submitted this bill for a return to joint bidding. All indications are that this bill will pass. We will keep you posted on the passage of the bill and the structure of the bids to see if they conform to the public bidding rules. Only time will tell. I am sure this will be a hot topic in the coming months.

If you ever find yourself unsure of your legal footing feel free to contact Connell Foley’s New York Construction Law Group for guidance on this or any other construction related issue.

The New Normal: False Claims

We are all too familiar with the false claim actions that result in criminal and civil penalties and potential disbarment. In the last month alone, a Connecticut construction company paid a $2.4 Million dollar fine, a Chicago based company settled the claims against it for $12 Million, a New York based company forfeited $55 Million in a plea deal with the District Attorney’s Office and finally the US Attorney for the Southern District of New York commenced an action against another contractor for allegedly using a “pass through” to meet its DBE requirements on a contract.

The heightened scrutiny of our industry has raised some interesting questions when it comes to even mundane day to day practices. One that I want to touch upon today, is when there is “wiggle room” on your price for an additional work order to allow for negotiating movement. Can that situation result in a false claim? You know you are going to end up at the negotiation table to get “beat up” on your number for the work. Have you ever just given a quote and the owner accepted it? I don’t think so.

There are many variables in determining the price for a proposal. It is not an exact science. Delays, impacts, weather, labor efficiency, and material cost fluctuations all play a role.  Some helpful hints for staying out of trouble: (i) document everything (ii) have detailed backup as to how the price, overhead and profit was calculated including labor, material, insurance, difficulties expected to be encountered, overall impact costs to the project, etc.; (iii) document everything; (iv) maintain all correspondence; (v) document everything; (vi) be truthful, do not inflate the numbers; always (vii) document everything; and finally (vii) negotiate in good faith.  

If you ever find yourself facing a false claim or unsure of your legal footing, feel free to contact Connell Foley’s New York Construction Law Group for guidance on this or any other construction related issues.

Utility “interfering” with your street work?

We have all been there. The frustration and delays caused by a utility company refusing to let you relocate their interferences with your street work. There may be some hope.

Recently Brooklyn Union Gas (“BUG”) moved to dismiss a claim against by one of New York City’s prominent utility contractor for utility interference work. The utility contractor argued that it was entitled to compensation from BUG for the utility interference work it performed to completed its street repair project. BUG argued that it had no obligation to pay the contactor as there was no agreement between them to perform the work. The court found that BUG was obligated to pay all costs associated with protecting BUG’s facilities. The court further found that BUG assumed an obligation to pay the contractor when BUG failed to perform the work itself or arrange for it to be performed. This obligation is a condition of BUG being able to install or maintain utility equipment in the streets so BUG is on the hook for the cost of the relocation and protection work that was necessary to complete the project.

Please feel free to contact  Connell Foley’s New York Construction Law Group for guidance on this or any other construction related issue you may be facing.