July 2014

In an earlier post, I explained how a September 2011 decision in a matter U.S. v. Larson paved the way for the indictment of ten members of Ironworkers Local 401. That post explained that because of a controversial Supreme Court decision in U.S. v. Enmons unions enjoyed almost unfettered protection from RICO claims so long as they claimed their alleged actions were in furtherance of “legitimate union objectives.” However, the Larson Court rejected the preposterous argument that otherwise illegal activity was permitted if committed by a union and its members in furtherance of bargaining activity.  A recent decision in the Local 401 case has extended the holding of the Larson Court, which was limited to the Western District of New York, to the Eastern District of Pennsylvania.

On July 21, 2014, Judge Michael Baylson issued an opinion denying a motion to dismiss filed by five of the ten ironworkers indicted under criminal RICO laws. The motions sought to dismiss the indictment in part because of the Supreme Court’s decision in Enmons. Like in Larson, Judge Baylson rejected the contention that Enmons afforded unions broad protection from prosecution so long as some union objective was shown. Judge Baylson held there was nothing legitimate about the ironworkers’ use of violence and arson in attempting to obtain unwanted work stating:

“These allegations support a finding that Defendants used threats and violence to exact unwanted or fictitious work. This is not a valid union objective, and is not protected under Emmons (sic)”

Judge Baylson’s opinion coupled with the Larson Court’s earlier opinion is very important. These cases clearly indicate that federal court’s will not afford unions broad protection from prosecution under Enmons and that unions can no longer hide behind Enmons when engaging in otherwise unlawful activity.  Interestingly, the Philadelphia Business Journal featured a story earlier this week about how U.S. Attorney Zane Memeger has made cases like the ironworkers case a priority.  We will see if the recent decision in the ironworkers case emboldens him to bring more cases against unions for activity similar to the ironworkers.

In an earlier post, I talked about bid challenges and rejections being one of the “hidden dangers” of failing to understand and follow DBE regulations.  I explained how strict minority set asides or quotas are almost always unconstitutional.  In fact, the DOT DBE regulations explicitly state that the DBE goals are not quotas. Rather, they are goals that contractors must use “good-faith efforts” to achieve. A State Transportation agency cannot reject a bid because it fails to include a commitment to subcontract work that meets or exceeds the stated DBE goal. However, for its bid to be accepted, the contractor must be able to demonstrate “good faith efforts” in attempting to meet the stated DBE contracting goal.

A Maryland case shows how one contractors lack of understanding of DBE regulations likely resulted in it losing an airport contract.  (For a detailed explanation of the case visit livingstonprocurment.com)  In that case, the Maryland Aviation Administration issued an Invitation for Bids for fence installation and repair at two airports. The Invitation for Bids stated a DBE participation goal of 15%.

Fence Connection, Inc. was the apparent low-bidder and stated that 25% of its subcontracted work would be performed by a single DBE subcontractor.  However, the because the DBE was a supplier only 60% of the value of the work subcontracted to the DBE could be counted towards Fence Connection, Inc.’s DBE goal.  MAA rejected the bid believing that it was not possible for Fence Connection to meet the stated DBE goal using the fuel supplier because Fence Connection could not accurately state the amount of fuel it would purchase from the DBE supplier.

Fence Connection appealed to the Maryland Board of Contract Appeals.  The Board of Appeals affirmed the MAA’s rejection of the bid Fence Connection “could not accurate calculate how much fuel it was use on the contract.”

Unfortunately for Fence Connection, its apparent lack of understanding of DBE regulations caused it to lose the bid.  How could Fence Connection saved its bid?  First, even if it could not exactly calculate the amount of fuel it intended to purchased it could have come close based upon past fuel usage and perhaps expert testimony.

Second, outside of that calculation Fence Connection could still have come away with the contract if it demonstrated it used “good-faith efforts” to meet the stated DBE 15% goal and the DBE fuel supplier was all was the only reasonable candidate for subcontracting.  In order to do that, Fence Connection would need to have documented aggressive efforts to find DBE subcontractors to perform 15% of the work.  If it did so, Fence Connection should have been awarded the contract even if its DBE goal came in below 15%.  In other words, it could have argued that because it demonstrated good-faith efforts it is irrelevant if it met the 15% goal because under DBE regulations its bid cannot be rejected solely for failing to meet the goal.

Litigating a case against the government is an intimidating task.  The government has virtually unlimited resources at its disposal to wage its case.  Each side must bear it’s on costs of litigation, which means you must pay your attorney while the government attorneys are already paid by the taxpayers. However, in certain cases involving the government an award of attorneys is available to successful litigants, which can level the playing field.  Here is a look at five areas where successful parties in litigation involving the government can recover attorney’s fees from the government.

1.         Civil Rights Actions.

            When the local, state, or federal government violates an individual’s or corporate entity’s constitutional rights, they can sue the government for damages under 42 U.S.C. § 1983.  A claim under Section 1983 can arise when a party’s property is taken without due process of law, its free speech rights are infringed, or it is subject to a warrantless search and seizure.  If a party is successful in its litigation and the government is found liable for violating its constitutional rights, 42 U.S.C. § 1988 authorizes the court to award the party reasonable attorneys fees and costs.

2.         Equal Access to Justice Act.

            The Equal Access to Justice Act (EAJA) provides for an award of attorneys fees and costs to a party that prevails in litigation against the federal government or a federal government agency.  Unlike in attorney’s fees under 42 U.S.C. § 1983, under the EAJA, an award of attorneys fees and costs is mandatory.  However, the EAJA applies only to cases involving the federal government or a federal government agency.  Conversely, claims arising under 42 U.S.C. § 1983 can involve a local or state government.

            In order to receive an award of attorneys fees and costs, a party must meet four criteria:

            (1)        they must be a “prevailing party” in its suit against the government;

            (2)        the government’s position must not be “substantially justified;”

            (3)        there are no “special circumstances” that would make the award unjust;

            (4)        the application must be made within thirty (30) days of final judgment;

            Importantly, to be deemed a prevailing party entitled to attorneys fees, an applicant need not win on every claim it brings.  Rather, the Supreme Court has stated that a prevailing party is “one who has succeeded on any significant claim affording it some right to relief.”  The form of relief can be a judgment on the merits or a preliminary injunction.

            The government bears the burden of proof in demonstrating that its position was had substantial justification.  Substantial justification is “justification to a degree that could satisfy a reasonable person.”  The Supreme Court has “interpreted the term substantial justification as describing a position that has a reasonable basis both in law and fact.”

            Some examples of cases involving construction companies where the government failed to prove substantial justification for its position include:

  • Successful bid protests;
  • Successful payment claims;
  • Successful appeals of denial of SBA, DVOSB, and VOSB certification;
  • Successful defense of agency actions (OSHA, DOL, OFCCP)

            The downside to attorney’s fees claims under the EAJA is that, typically, the award of attorneys fees is capped at $125 per hour, unless the court decides otherwise.  Furthermore, individuals with a net worth of more than $2,000,000 or entities with a net worth of more than $7,000,000 and more than 500 employees are not eligible for an award of attorney’s fees under the EAJA.

3.         GAO Bid Protests.

Disappointed bidders on a contract being let by the federal government or government agency have the ability to challenge the contract award by filing a bid protest with the Government Accountability Office (“GAO”).  If GAO determines that a solicitation, proposed award, or award does not comply with statute or regulation, it may recommend that the agency pay the protester the costs of:

(1)   Filing and pursuing the protest, including attorneys’ fees and consultant and expert witness fees; and

(2) Bid and proposal preparation.

4.         Eminent Domain.

            Eminent domain is the process by which the government can acquire private property for public use.  If a private owner is successful in defending a claim by the federal government that a property should be acquired by eminent domain or if the federal government abandons its claim for the property then an award of the owner’s attorney’s fees is mandatory.  Local and State governments can also acquire property through eminent domain.  The rules vary from by State.  However, many States contain provisions in their eminent domain laws for compensating private owner’s attorney’s fees.

            Inverse condemnation is the legal term used to refer to when the government takes an action that impacts the economic value of a private property.  The action can be a physical one, such as where the access to private property is effected, or regulatory, such as where a government regulation impacts the ability for an owner to use his land.  The latter is sometimes referred to as a “regulatory taking.”  If the federal government has engaged in inverse condemnation and a private property owner sues the federal government and is successful, then under 42 U.S.C. § 4654(c), an award of attorney’s fees is mandatory.

 5.         Civil Asset Forfeiture.

            Under civil asset forfeiture laws, the federal government is empowered to seize property if it believes the property was obtained by or used to further committing a crime.  This is true even if the owner of the property is never charged with any wrongdoing.  As can be imagined, civil asset forfeiture laws are controversial.  However, private property owner’s challenging a civil forfeiture proceeding under federal law who are successful are entitled to a mandatory award of attorney’s fees.

For more information about recovering attorneys fees and costs from the government, visit our Economic and Individual Liberty Program at http://zimolonglaw.com/practice-areas-2/economic-and-individual-liberty.