LW Constr. of Charleston, LLC v. United States, No. 14-960C

CourtCourt of Federal Claims
Writing for the CourtHORN, J.
Docket NumberNo. 14-960C
Decision Date31 July 2018


No. 14-960C

United States Court of Federal Claims

July 31, 2018

Motion for Leave to Amend; Delay; False Claims Act; Common Law Fraud; Unjust Enrichment; Statute of Limitations; 28 U.S.C. § 2415; 28 U.S.C. § 2501; 31 U.S.C. § 3731; Service Disabled Veteran Owned Small Business.

William A. Scott, Pederson & Scott, P.C., Charleston, SC, for plaintiff. With him was James L. Werner, of counsel, Parker Poe Adams & Bernstein, LLP, Columbia, South Carolina.

Erin K. Murdock-Park, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for defendant.1 With her

Page 2

were Jeffrey Lowry, Trial Attorney, Commercial Litigation Branch, Civil Division, Martin F. Hockey, Jr., Deputy Director, Commercial Litigation Branch, Civil Division, Robert E. Kirschman, Jr., Director, Commercial Litigation Branch, Civil Division, and Chad A. Readler, Acting Assistant Attorney General, Civil Division.



Before the court is a motion by the defendant, the United States of America, "for leave of Court to amend its previously filed answer in order to assert a new affirmative defense of common law fraud, to assert fraud counterclaims pursuant to common law and to the False Claims Act, 31 U.S.C. §§ [sic] 3729," and to add a counterclaim for unjust enrichment. Previously, in its amended answer to plaintiff's amended complaint, filed on January 12, 2016, defendant had asserted a counterclaim for liquidated damages and for reprocurement costs in the amount of $1,703,353.22, stemming from the VA's reprocurement of a construction contract for the Fort Jackson National Cemetery (the Fort Jackson contract) after the VA terminated LW from performing on the Fort Jackson contract for default. Defendant now seeks to "bring counterclaims which allege that the plaintiff, LW Construction of Charleston, LLC (LW), misrepresented its status as a service-disabled veteran-owned small business (SDVOSB) in order to receive an award for the construction project at Fort Jackson National Cemetery, an award reserved for legitimate SDVOSBs." According to defendant's October 13, 2017 proposed amended answer, defendant seeks to assert four counterclaims and an affirmative defense of common law fraud. The first counterclaim, for common law fraud, seeks damages, to be determined at trial, that were caused by plaintiff's alleged, material misrepresentation of its SDVOSB status when it submitted its proposal for and was awarded the Department of Veterans Affairs' (VA) construction contract for the Fort Jackson National Cemetery, contract no. VA101CFM-C-0042, the underlying contract at issue in the above-captioned case. The second counterclaim seeks civil penalties under the False Claims Act (FCA), "31 U.S.C. § 3729(a)(1)(2006) and, as amended, 31 U.S.C. § 3729(a)(1)(A),"2 for each of the twenty-

Page 3

five allegedly false claims3 requesting payment submitted by plaintiff to the VA in connection with the Fort Jackson contract. The third counterclaim seeks civil penalties under a different provision of the FCA, "31 U.S.C. § 3729(a)(2)(2006) and, as amended, 31 U.S.C. § 3729(a)(1)(B)," for each of the twenty-five allegedly false claims submitted by plaintiff.4 The fourth counterclaim, for unjust enrichment, seeks return of all money paid by the VA to plaintiff derived from the allegedly fraudulently obtained Fort Jackson contract. Plaintiff opposes defendant's motion for leave to amend its answer with an affirmative defense and the new counterclaims because, according to plaintiff, the motion is "(i) untimely; (ii) filed solely to gain a negotiating advantage; (iii) prejudicial to LW; and (iv) futile."

Page 4


Statutory Background of the VA's SDVOSB Set-Aside Program.

Before addressing the defendant's pending motion for leave to amend, a review of the relevant statutory background regarding the VA's SDVOSB set-aside program, and a chronology regarding plaintiff's establishment in 2008 and history to the present, as well as the procedural history of the above-captioned case is helpful.

On December 26, 2006, Congress passed the Veterans Benefits, Healthcare, and Information Act of 2006, Pub. L. No. 109-461, 120 Stat. 3403 (2006), which created a new mandate for the VA to set-aside competitive procurements for SDVOSBs when two or more such businesses were likely to compete for a particular contract award. Under this Act, the VA was required to maintain a database of eligible SDVOSB entities, which was called VetBiz Vendor Information Pages (VIP), available at www.VetBiz.gov. In 2007, the VA issued guidance requiring contractors to register in the VIP database before contract award in order to be eligible for the award of a VA SDVOSB contract. At the time, the contractor, however, did not have to register in the VIP database before submitting an offer for a SDVOSB set-aside contract. According to a June 19, 2007 Department of Veterans Affairs memorandum regarding the "Veterans First Contracting Program," attached to defendant's reply in support of its motion for leave to amend, at the time, contracting officers only were required to "ensure businesses are registered in VetBiz.gov Vendor Information Pages (VIP) database and otherwise responsible prior to making award."

On May 19, 2008, however, the VA issued an interim rule requiring that contractors not only register in the VIP database, but also submit "information establishing that the business is owned and controlled by eligible parties." VA Veteran-Owned Small Business Verification Guidelines, 73 Fed. Reg. 29,024 (May 19, 2008). The interim rule also stated that the "Department of Veterans Affairs will examine the information provided by the owners and approve or disapprove applications for 'verified' status." Id. According to a Government Accountability Office Report (GAO Report) dated March 19, 2009, which defendant attached to its reply brief in support of its motion for leave to amend, despite the VA's 2008 interim rule, the VA only would begin requiring its contracting officers to award set-aside contracts to "verified" SDVOSBs by "May 2009 at the earliest," which was when the VA anticipated finalizing its rulemaking with regard to the SDVOSB set-aside program. Until at least May 2009, as stated in the GAO Report, contractors competing for SDVOSB set-aside contracts, according to VA policy at that time, "only have to be registered in VA's database to receive set-aside or sole-source awards." In fact, the VA did not publish its final rule until February 8, 2010. See VA Veteran-Owned Small Business Verification Guidelines, 75 Fed. Reg. 6098 (Feb. 8, 2010).

The verification process for the VA's SDVOSB set-aside program changed once again when Congress passed the Veterans Small Business Verification Act of 2010, Pub. L. No. 111-275, § 104, 124 Stat. 2864, 2867 (2010 Verification Act) on October 13, 2010, which occurred, according to the government, "[a]fter the GAO began reporting on abuse

Page 5

of the SDVOSB program, including from awarding contracts to large businesses that misrepresented their status at the expense of legitimate SDVOSBs." According to the 2010 Verification Act, a contractor had to submit documentation to the VA's Center for Veterans Enterprise (CVE) that demonstrated its eligibility for the SDVOSB program within 90 days of receiving notice, or else be removed from the VIP database. Once it received a "verified" status from the VA, the contractor then would be included in the government's database of eligible SDVOSB contractors.

September 11, 2008: LW is formed.

According to LW's operating agreement, attached as an exhibit to the government's proposed amended answer, Louis White, Sidney A. Brantley and Gary D. Brantley entered into a limited liability company agreement to form LW on September 11, 2008. Both parties state in their filings before the court that Mr. White is a "disabled veteran." According to LW's operating agreement, Louis White had a 51% company interest and had made a capital contribution of $510.00, Sidney Brantley had a 25% company interest and had made a capital contribution of $250.00, and Gary Brantley had a 24% company interest and had made a capital contribution of $240.00. Notably, the operating agreement states in the management section that "the Members shall have full, exclusive and complete discretion in the management and control of the Company and shall make all decisions affecting its business and affairs." The operating agreement further states that "all members must consent in writing in order that any of the powers set forth below may be exercised," and then details a laundry list of powers regarding management of the company, including but not limited to the power "[t]o execute all agreements and other documents necessary to implement the purposes of the Company, and to take such actions as may be necessary to consummate the transactions contemplated thereby," "[t]o invest funds of the Company," and "[t]o hire, supervise and terminate on behalf of the Company all independent contractors and employees . . . ." (emphasis in original).

2009: LW self-certifies as a SDVOSB and bids on the Fort Jackson contract.

On March 30, 2009, the VA issued solicitation number VA-101-09-RP-0100 for offers to perform the construction of Phase 1B of the Fort Jackson National Cemetery (the Fort Jackson solicitation). The solicitation stated that "[t]his procurement is a Service-Disable[d] Veteran-Owned Small Business (SDVOSB) set-aside," and that "[t]he SDVOSB must be registered in the Central Contractor Registration (CCR) database. . . prior to award and must also be registered as a SDVOSB firm at the VetBiz Vendor Information Pages [VIP]." According to the declaration of the VA contracting officer, Robert Capers, who was also the source selection authority for the award of the Fort Jackson contract, he "was required to determine...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT