February 2017

Last week, I posted about how whistleblowers continue to receive large settlements related to DBE fraud. A somewhat recent case from the federal court in Maryland shows how whistleblowers are ferreting out DBE fraud on construction projects receiving any form of federal funding.

The Case

The case involves a bridge painting project in Maryland that was let by the Maryland State Highway Administration. The contract required the prime contractor to meet a 15% DBE participation goal.  The prime contractor submitted a bid stating it would have 15.12% DBE participation.  After it was awarded the contract, the prime contractor – as is typical – submitted additional forms certifying to the MSHA that 15.12% of its contract price would be performed by a DBE firm.  The prime contractor indicated that one DBE subcontractor, Northeast Work and Safety Boats, LLC (“NWSB”), would perform the 15.12% of the work.

Continue Reading District Court Allows DBE False Claims Act Case to Proceed

It has been awhile since I last blogged about fraud involving the Department of Transportation’s disadvantaged business enterprise (DBE) program.  Trust me, the problem has not gone away. If anything, prosecutions and civil claims filed under the False Claims Act alleging DBE fraud have become so frequent, I could not write a blog post about each one.  The biggest winners in 2016 may have been the whistleblowers that brought the DBE fraud to the attention of the Department of Justice, who were awarded millions of dollars for doing their part to ferret out fraud.  Recent whistleblower settlements include:

Continue Reading Whistleblowers Continue to Receive Large Settlements in DBE Fraud Cases

In my last post I discussed suing a local government for a substantive due process violation. In this post, I discuss a the right to procedural due process.

The Fourteenth Amendment of the United States Constitution protects prohibits the government from depriving an individual or business of life (in the case of an individual), liberty, or property without due process of law.  Unlike the somewhat abstract and subjective concept of substantive due process, procedural due process is direct and objective. Generally, if an individual or business maintains a property or liberty interest, a local government must afford that individual or business notice that the government intends to deprive them of a liberty or property interest and a reasonable opportunity to be heard to contest the proposed deprivation.  Unless there is an emergency, the notice and opportunity to be heard must be given before the government deprives an individual or business of a liberty of property interest.  This is known as a pre-deprivation hearing.  Because of the clear contours of the right, procedural due process violations are typically easier to prove than substantive due process violations.

The first step in determining whether a procedural due process violation has occurred is to determine whether an individual or business has been deprived of a liberty or property interest.  Besides the obvious, what classifies as a liberty or property interest is a question of state law and, therefore, varies from state to state.  (An obvious property interest would be ownership in a building. In a case, that I brought against the City of Philadelphia for demolishing my client’s building without notice or an opportunity to contest the proposed demolition, the federal court easily found that a procedural due process violation occurred. Bullard v. City of Philadelphia (E.D. Pa., 2012))  Other not so obvious things that courts have concluded amount to a liberty or property interest include: zoning permits, building permits, business licenses, a contractor’s pre-qualification to bid on government contracts, and the general beneficial use of land.

The second step is determining whether a party have been given notice and an opportunity to be heard.  The notice the government provides must only be “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Actual notice is not required.  The opportunity to be heard requires the government to provide an party to present objection to the proposed deprivation before it occurs.

While this may seem obvious and well-settled, local government actors frequently revoke licenses or cancel permits without a pre-deprivation hearing.  It happens quite frequently in cities like Philadelphia, despite being chastised by both state and federal courts for doing it.

A revoked permit or suspended business license can significantly damage a business even if done for a short period of time.  If its done with first having a hearing, an affected business could recover damages for a constitutional violation.

Because of my personal political persuasions (pro-freedom) and success in litigating cases against the government and other media about those cases businesses frequently approach me about bringing claims against local governments and agencies for interfering with their Constitutional rights.  Actions by local government agencies that could give rise to a Constitutional violation include: treating a developer’s project differently than a similar project, revoking a previously issued zoning or building permit, disqualifying a contractor from bidding on a government contract, retaliating against a business owner for speaking out against the local agency or one of its members, or unnecessarily delaying the issuance of a permit. The Constitutional rights most typically implicated in these cases are those guaranteed by the 5th and 14th Amendments to the United States Constitution.  However, the 1st Amendment is also frequently implicated.

Suing a local government agency for violating your Constitutional rights is not easy.  However, the federal statute under which the cases are brought, 42 U.S.C. Section 1983, provides for the award of a successful plaintiff’s attorneys fees.  This is true even if the Judge or jury awards a mere $1 is damages.  Moreover, sometimes there can be a strategic value in the litigation.

This is the first in a series of blog posts exploring claims available to businesses harassed by local government agencies and officials and the challenges inherent in successfully bringing those claims.  We will start with a claim for a substantive due process violation.

Under the 5th Amendment, businesses and individuals cannot be subject to arbitrary and capricious application of the law.  In other words, there must be some objective standards for a laws application.  Before 2003, substantive due process claims in the land use context were fairly common. a party could bring a substantive due process claim whenever there was an “improper motive” by the local government authority. However, the Third Circuit changed that standard in United Artists v. Township of Warrington, 316 F.3d 392 (3rd Cir., 2003), where it held that in land use cases, only those actions by a local government agency that “shock the conscious” could act as a basis for a substantive due process claim.  The Third Circuit’s rationale is that it did not want to turn the federal courts into a super zoning board.

While determining what actions meet the “shock the conscious” standard is fact sensitive, Courts in the Third Circuit have set a high bar for plaintiffs bringing substantive due process claims.  Under existing precedent, Courts in the Third Circuit have said the following could be conscious shocking:

  • corruption and self dealing;
  • fraudulent conduct;
  • personal animus towards the property or business owner; and
  • conduct that violates some other constitutionally protected right

A substantive due process claim is usually brought together with other claims such as an equal protection or procedural due process claim.  So, even if the facts do not a support a claim for a violation of substantive due process rights, a person or business may still have a constitutional claim.

Because substantive due process claims are fact sensitive, a business that feels that its substantive due process rights are being violated should start to create a record and document those actions that it believes amount to a substantive due process violation.  This record can then be used to defeat a motion to dismiss which likely will be filed by the defendants.