Month: October 2019

YOUR SWAM CERTIFICATION IS AT RISK

The Virginia Department of Small Business and Supplier Diversity (DSBSD) administers the small, women-owned and minority-owned (SWaM) business program. The DSBSD SWaM Certification Division reviews initial and recertification applications. DSBSD certification eligibility determinations are based on existing circumstances at the time of application. The criteria are in the Commonwealth of Virginia Administration Code regulations:

7VAC13-20-40. Eligible Small Business.
In general, a business may be certified as a small business if it meets the definition of small business provided in § 2.2-1604 of the Code of Virginia.

§ 2.2-1604. Definitions.
“Small business” means a business that is at least 51 percent independently owned and controlled by one or more individuals who are U.S. citizens or legal resident aliens and, together with affiliates, has 250 or fewer employees or average annual gross receipts of $10 million or less averaged over the previous three years. One or more of the individual owners shall control both the management and daily business operations of the small business.

7VAC13-20-110. Control
The applicant must show evidence that the women, minority, or individual owners have control of the business. The following factors will be examined in determining who controls an applicant’s business:

1. Governance.
a. The organizational and governing documents of an applicant (e.g., limited liability company operating agreements, partnership agreements, or articles of incorporation and bylaws) must not contain any provision that restricts the ability of the women, minority, or individual owners from exercising managerial control and operational authority of the business.

The DSBSD is scrutinizing company operating agreements, partnership agreements, articles of incorporation, and bylaws to assure that women and minority owners control the business. Even if a business was previously certified, the DSBSD might deny recertification based on its current more vigorous and technical review of the company documents that were previously approved. For example, provisions that require a non-woman or non-minority owner to be present for a quorum, or a supermajority vote might disqualify your company. Make sure to carefully review your documents before you apply.

A business whose application for certification has been denied may reapply for the same category of certification six months after the date on which the business receives the notice of denial. An applicant denied certification may apply for certification in any other category without delay if otherwise eligible. The applicant may request a waiver of the six-month reapplication period from the department director by submitting a written request for reconsideration and providing a reasonable basis for the waiver. However, these are rarely granted. For more information, please contact the authoring attorney.

Shopping Subcontractors After Using Bid That Resulted In Contract Award

Can contractors “shop” bids after obtaining and using them to obtain contract awards?  Generally speaking, the answer is yes under Virginia law.  However, the law varies in other jurisdictions.  While this may not seem necessarily fair, jurisdictional views vary. For example, Virginia holds that bids are a means by which the prospective subcontractor (SC) and prospective general contractor (GC) agree to potentially agree upon a subcontract award, if the Owner makes an award to the GC.  However, other jurisdictions see it differently and allow the GC to hold the SC to the bidding process.

This means that, for practical purposes, if Virginia law applies, the GC can shop bids after being awarded a contract and SCs can reject prospective subcontracts, even if the SC’s bid was used by the GC in submitting the GC’s bid or proposal to the Owner.  Various efforts have been made to avoid this result, both by GCs and SCs.  Additionally, there are practical concerns for both sides in that bid shopping is generally disfavored and viewed as a sharp business practice as is refusing to honor a submitted bid – both with potentially significant long-term business consequences, even if there are no legal consequences.

Construction contracts typically undergo a tiered bidding process.  First, the Owner requests bids from GCs for the scope of the overall project.  Before submitting bids, the GC then seeks its own bids from SCs for different tasks.  The GC then submits its bid to the Owner, relying upon quotes received from the SCs.  While the GC is typically bound to the bid it submits to the Owner, the GC is not bound to the SC bids used in its proposal.  Thus, absent valid contractual prohibitions, the GC may seek alternatives to the SCs used in its winning proposal.  However, depending on jurisdiction, a SC may be bound to its bid, for at least long enough to allow the GC to accept the SC’s offer.

In Virginia, a GC’s detrimental reliance on a SC’s bid does not bind the SC, so long as the SC revokes the offer before the GC accepts.  When a party detrimentally relies on another’s promise, even without a valid contract, courts in some jurisdictions may hold the other party to said promise under a theory of promissory estoppel.  However, Virginia does not recognize this theory of promissory estoppel and generally requires the formation of a valid contract.  This is consistent with Virginia’s position on teaming agreements, wherein parties agree to negotiate in good faith, which are also treated as mere “agreements to agree” and not as valid contracts.  In short, as previously stated, GCs in Virginia are generally free to bid shop after a contract award.

Most states other than Virginia follow the Drennan doctrine on promissory estoppel when dealing with GC-SC bidding.  Drennan v. Star Paving was a 1957 California Supreme Court case that involved a GC bidding on a school construction project and a SC that mistakenly underestimated its bid for paving services.  The SC revoked its offer after the GC received the award, but before the GC could accept the SC’s offer.  Nonetheless, the court held in favor of the GC, stating that “it is only fair that [the GC] should have at least an opportunity to accept [the SC]’s bid after the general contract has been awarded to [the GC]” in reliance on the SC’s bid, but noted that “a [GC] is not free to delay acceptance after [it] has been awarded the general contract in the hope of getting a better price.”  Thus, in Drennan jurisdictions, the SC is typically liable for performance, but may be relieved of such liability if the GC attempts to bid shop, renegotiate, or unduly delay acceptance.

Despite the general Virginia law, GCs in Virginia may be able to mitigate the risk of a SC dishonoring its bid by including language that specifically provides for an acceptance period in the event of award or entering into an actual subcontract with all aspects negotiated pending the award.  You should consult your attorney for advice on specific bids and contract needs if you wish to more formally structure such relationships.

Shopping Subcontractors After Using Bid That Resulted In Contract Award

Can contractors “shop” bids after obtaining and using them to obtain contract awards?  Generally speaking, the answer is yes under Virginia law.  However, the law varies in other jurisdictions.  While this may not seem necessarily fair, jurisdictional views vary. For example, Virginia holds that bids are a means by which the prospective subcontractor (SC) and prospective general contractor (GC) agree to potentially agree upon a subcontract award, if the Owner makes an award to the GC.  However, other jurisdictions see it differently and allow the GC to hold the SC to the bidding process.

This means that, for practical purposes, if Virginia law applies, the GC can shop bids after being awarded a contract and SCs can reject prospective subcontracts, even if the SC’s bid was used by the GC in submitting the GC’s bid or proposal to the Owner.  Various efforts have been made to avoid this result, both by GCs and SCs.  Additionally, there are practical concerns for both sides in that bid shopping is generally disfavored and viewed as a sharp business practice as is refusing to honor a submitted bid – both with potentially significant long-term business consequences, even if there are no legal consequences.

Construction contracts typically undergo a tiered bidding process.  First, the Owner requests bids from GCs for the scope of the overall project.  Before submitting bids, the GC then seeks its own bids from SCs for different tasks.  The GC then submits its bid to the Owner, relying upon quotes received from the SCs.  While the GC is typically bound to the bid it submits to the Owner, the GC is not bound to the SC bids used in its proposal.  Thus, absent valid contractual prohibitions, the GC may seek alternatives to the SCs used in its winning proposal.  However, depending on jurisdiction, a SC may be bound to its bid, for at least long enough to allow the GC to accept the SC’s offer.

In Virginia, a GC’s detrimental reliance on a SC’s bid does not bind the SC, so long as the SC revokes the offer before the GC accepts.  When a party detrimentally relies on another’s promise, even without a valid contract, courts in some jurisdictions may hold the other party to said promise under a theory of promissory estoppel.  However, Virginia does not recognize this theory of promissory estoppel and generally requires the formation of a valid contract.  This is consistent with Virginia’s position on teaming agreements, wherein parties agree to negotiate in good faith, which are also treated as mere “agreements to agree” and not as valid contracts.  In short, as previously stated, GCs in Virginia are generally free to bid shop after a contract award.

Most states other than Virginia follow the Drennan doctrine on promissory estoppel when dealing with GC-SC bidding.  Drennan v. Star Paving was a 1957 California Supreme Court case that involved a GC bidding on a school construction project and a SC that mistakenly underestimated its bid for paving services.  The SC revoked its offer after the GC received the award, but before the GC could accept the SC’s offer.  Nonetheless, the court held in favor of the GC, stating that “it is only fair that [the GC] should have at least an opportunity to accept [the SC]’s bid after the general contract has been awarded to [the GC]” in reliance on the SC’s bid, but noted that “a [GC] is not free to delay acceptance after [it] has been awarded the general contract in the hope of getting a better price.”  Thus, in Drennan jurisdictions, the SC is typically liable for performance, but may be relieved of such liability if the GC attempts to bid shop, renegotiate, or unduly delay acceptance.

Despite the general Virginia law, GCs in Virginia may be able to mitigate the risk of a SC dishonoring its bid by including language that specifically provides for an acceptance period in the event of award or entering into an actual subcontract with all aspects negotiated pending the award.  You should consult your attorney for advice on specific bids and contract needs if you wish to more formally structure such relationships.

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Is Denial of a Motion to File a Surreply Really a Denial if the Court Reads it Anyway?

Everyone likes to have the last word.  Indeed, often dubbed the “recency effect” there is scientific support that going last may increase persuasion.  But in ordinary motions practice in the EDVA, the movant both goes first and last.  Local Rule 7(f)(1) does allow the non-movant to request leave of court to file a surreply.

I often advise clients it is a request that should rarely be made before our judges.  And a recent order from Judge Miller reinforces that view as in Adams v. Applied Business Services, 2:18-cv-559 he denied the defendant’s request to file its surreply.

But, the opinion does reveal what I have often found confusing about the motion for leave process.  Judge Miller implicitly demonstrates that he has reviewed the proposed surreply—he both describes its contents and quotes from the surreply.  So although he denied the motion, he did read the brief.  On appeal of the underlying motion, perhaps, the contents of the surreply are not part of the record.  But if the Defendant’s goal was to focus the Court to a particular issue and reiterate its argument, the Defendant may have won the war even if it lost this particular battle.

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STATUTES, STATUES, AND MUNICIPAL CONSTITUTIONAL RIGHTS (Part 2)

We previously discussed the suit in the EDVA brought by the City of Norfolk against the Commonwealth of Virginia to try and remove the civil war monument in downtown Norfolk.  Service has been waived, and we can now expect responsive pleadings on October 22, 2019.  Then we will see whether the state challenges the right of a municipality to bring First and Fourteenth Amendment claims.

In the meantime, the City has amended the lawsuit and has a new theory based in the Virginia Constitution.  In a recently filed Amended Complaint, Count four now alleges that the Virginia Constitution prohibits any person from being granted any right in a public street longer than forty years.  The City contends that if the evidence shows the relevant monument is not owned by the city, that the perpetual right to keep the monument in the right of way would be unconstitutional.

It is unlikely that the Court would keep jurisdiction of this case to decide a purely state constitutional issue if the federal issues are dismissed.  So, it will be very interesting to see what responsive pleadings are filed by the Defendants.

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The Return of Corpus Linguistics

On a previous post on the blog, we discussed the increased judicial focus on “corpus linguistics,” the use of searchable databases to find specific examples of how a word is used at a given time.  The idea got additional appellate attention, again, at the instigation of Judge Thapar of the Sixth Circuit.

In Wright v. Spaulding, the Court considered a habeas petition and the right of prisoners to bring successive petitions.  But footnote 1 is what is of interest.  The Court’s opinion noted that the Court requested “the parties to file supplemental briefs on the original meaning of Article III’s case-or controversy requirement, specifically whether the corpus of Founding-era American English helped illuminate that meaning.”  Apparently, the additional briefing was not helpful: Judge Tharpar notes that after reviewing the supplemental briefing and two amicus briefs, “corpus linguistics turned out not to be the most helpful tool in the toolkit.

I predict we see a lot more reference to this interpretative technique.  Just in August and September, it has been referenced by the Supreme Court of Idaho (State v. Lantis, No. 46171, 2019 Ida. LEXIS 127, at *14 (Aug. 23, 2019)); the Supreme Court of Utah (Richards v. Cox, 2019 UT 57, ¶ 20 (Sup.Ct.)); and the Third Circuit (Caesars Entm’t Corp. v. Int’l Union of Operating Eng’rs Local 68 Pension Fund, 932 F.3d 91, 96 (3d Cir. 2019)).  Are you keeping up?

Thanks to Howard Bashman and his blog “How Appealing” for helping me keep up on these issues.

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Upcoming CLE—Be the Exception to the Rule: Beyond the Basics of Federal Court Practice

Please consider joining well-respected federal litigator Jim Theuer and (less well-respected) me as we present a 2-hour CLE on advanced issues in federal court practice.  The CLE is sponsored by the NPBA, and registration information is here.  We anticipate the first hour will be dedicated to how to get into and stay out of federal court, taught through a series of vignettes.  To whet your appetite, the first is below:

During a lazy Friday afternoon in the office you get a call from a long-time client.  The statute of limitations on a contract claim for COMPANY against SUPPLIER runs out on Monday.  The in-house counsel for COMPANY wants the suit filed in federal court, as she attended a recent CLE presentation sponsored by the NPBA and is now fascinated by federal procedure.

She tells you the claim is for $350,000.  COMPANY is incorporated in Virginia and conducts all of its business in Hampton Roads.  She tells you that SUPPLIER is a North Carolina LLC, and its headquarters is in Wilmington, NC, where it does the vast majority of its business.

You get off the phone with the client, ready to spend the rest of your weekend preparing the federal complaint to file in the EDVA on Monday.

You remember the rule from law school quite clearly, diversity exists when corporations are residents of different states and the amount in controversy is more than $75,000, exclusive of interest and costs.  You even google the relevant statute, 28 U.S. Code § 1332, and refresh yourself that “a corporation shall be deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business. . .”

Should you spend your weekend drafting a complaint to file in the EDVA on Monday?

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It’s Not Over ‘til it’s Over

A motion to enforce a settlement agreement in the EDVA is a good reminder that until all the paperwork is signed, and the money is in your client’s hand, cases are not necessarily over.  In Brunelle v. Norfolk Southern Railway Co., 2:18-cv-290, the Plaintiff requested the Court reopen the dismissed case and enforce the settlement agreement between the parties.

At issue, is the execution of the “standard” Norfolk Southern employee release.  The parties entered into a settlement of their pending case for a sum of $50,000.  The suit alleged discrimination under the Americans with Disabilities Act.  No one disagrees about the amount of the settlement.  The disagreement is about whether the Plaintiff was required to execute a settlement agreement before receiving the money.

Execution of a settlement agreement is fairly standard, so why is this a federal case?  Well, as alleged by the Plaintiff, between reaching an agreement to settle the case and execution of the settlement agreement, Norfolk Southern “removed Brunelle from service for a supposed rule violation, during which the involved manager referenced Brunelle’s settlement.”  And the settlement agreement released “any suits, actions, causes of actions . . . that Releasee could file but has not filed….”  Here, it appeared that by signing the proposed settlement agreement, Plaintiff would have to give up claims that arose after the settlement, but before execution of the settlement agreement.

Judge Krask is scheduled to hold a hearing on October 9, 2019, to decide whether and how to enforce the settlement agreement.

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“I Like Beer”: Non-EDVA Case of the Month

Beer was a more central topic of a recent Supreme Court nomination battle in the Senate than ever before.  One appellate step below the Supreme Court, it was also the central topic of a recent 7th Circuit oral argument and case.

Before the Court were questions concerning a preliminary injunction about Bud Light’s “Corn Syrup” advertising campaign that was featured during the 2019 Super Bowl.  The ad campaign emphasized that both Coors Light and Miller Light were brewed using corn syrup, a product with significant negative public attention.  Miller Brewing Company cried foul, claiming the ads unfairly and misleadingly led consumers to believe that corn syrup was added to their beer.  Instead, Miller explained, corn syrup was merely the grain added to the fermentation process to use as sugar for the yeast.

The three-judge panel, featuring the always-vocal Judge Easterbook and Judge Hamilton, was treated to an extensive discussion regarding the brewing process, beer ingredients, and the overall beer market.  Counsel specifically referenced beer brewed with cane sugar, which this blog’s author found quite intriguing until he discovered it was actually a sparkling cocktail.

In the end, however, the Court seemed far more interested in jurisdictional issues.  In particular, the Court was focused on whether the district judge’s initial order was sufficiently designated to be enforced as a preliminary injunction and what power the district court had to subsequently modify the injunction while the case was pending on appeal.  As a testament to the fact you can never quite predict where oral argument will go, neither of these issues had been briefed and both parties were ordered to submit supplemental briefing.

So, open a cold one—you choose if you want one brewed with rice, corn, or corn syrup—and wait to see whether we get another round of advertisements with the Bud Knight and his anti-corn syrup agenda.

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