Now There’s Something You Don’t See Every Day: A Subcontractor Intervening in a Bid Protest

Patrick R. Quigley and Aron C. Beezley | Buildsmart

Fans of the classic 1960s cartoon series Rocky and Bullwinkle may recall two minor characters, Chauncey and Edgar, who commented on the action by saying something like this: “Now there’s something you don’t see every day, Edgar.” “What’s that, Chauncey?” And then Chauncey would tell the joke, such as it was. (It usually wasn’t much.)

The U.S. Court of Federal Claims (COFC), however, has just given us, in all seriousness, one of those something-you-don’t-see-every-day moments by letting a subcontractor intervene in a bid protest in Mitchco International, Inc. v. United States. Although the decision probably will apply narrowly because of its unique facts involving the Randolph-Sheppard Act, its rarity merits a closer look, and the reasoning might offer opportunities for resourceful counsel in the future.

Randolph-Sheppard Act Overview

The Randolph-Sheppard Act (RSA), which governs the Mitchco procurement, “establishes a priority for blind persons represented by state licensing agencies (SLA)” for “the award of contracts for . . . the operation of cafeterias in federal buildings” (Ga. Bus. Enter. Program-Vocational Rehab. Agency). When a federal agency uses the RSA to procure cafeteria operations services from blind vendors, the agency invites the SLA to respond to the solicitation (34 C.F.R. § 395.33). If the SLA submits a competitive offer, the procuring agency will contract with the SLA after negotiations, and the SLA will “identify and assign qualified blind vendors to operate the facilities” (Colo. Dep’t of Human Servs., Div. of Vocational Rehab. v. United States).

Background of the Mitchco International Case

Mitchco, the incumbent contractor, recently filed a bid protest at COFC, challenging the award of an Army contract under the RSA to the Kentucky Office of Vocational Rehabilitation (KOVR), a Kentucky state agency, and its teaming partner, Southern Foodservice Management, Inc. The contract is for food services at the Fort Knox dining facilities. The Government Accountability Office already dismissed a protest by Mitchco of that award (Mitchco Int’l, Inc. ). Among other counts, Mitchco alleges possible violations of the Procurement Integrity Act by KOVR and Southern. In an unusual move, Southern moved to intervene in Mitchco’s COFC case.

How Does a Party Normally Intervene at the COFC?

The Rules of the Court of Federal Claims (RCFC) allow for “Intervention of Right” and “Permissive Intervention” (RCFC 24). Intervention of Right applies when the prospective intervenor has an unconditional right under the law or claims an interest in the matter that requires its participation to protect (RCFC 24(a)). Permissive Intervention, on the other hand, applies to parties having only a “conditional right” to intervene under the law or that have “a claim or defense that shares with the main action a common question of law or fact” (RCFC 24(b)). Southern sought to intervene under the second option, Permissive Intervention.

COFC’s Order on Southern’s Motion to Intervene

Normally in a bid protest, the intervener is the awardee of the contract being challenged. The gist of Southern’s argument, however, was that although the contract awardee was KOVR (the SLA), KOVR had proposed Southern to perform the work with KOVR’s blind vendor, meaning that Southern was not a typical subcontractor. In addition, Southern argued that the complaint in a separate state-level lawsuit was “brimming with allegations directed at Southern,” including that KOVR and Southern had “colluded to misappropriate Mitchco’s proprietary and trade secret information about cafeteria services at Fort Knox.” Thus, Southern argued, the COFC complaint was just a repackaged version of the state-level allegations. According to Southern, it was impossible for COFC to resolve the bid protest without addressing “at least some of Mitcho’s allegations against Southern – which overlap Mitchco’s state court allegations substantially.”

The COFC granted Southern’s motion, stating, in part:

If plaintiff is correct, Southern violated procurement law and committed fraud, in collusion with KOVR, when KOVR was tentatively awarded the contract. Who better and with more at stake to deal with these accusations than Southern?

*     *     *

Our review is thus limited to the propriety of the federal government’s actions or inactions in awarding this contract, but Southern may be able to shed light on the question by explaining its own conduct in response to the allegations brought by plaintiff. In that sense, Southern has a defense that shares a common question of law and fact with the government’s and KOVR’s defense of the Army’s decision to award to KOVR (and to Southern as the subcontractor).

The COFC was also persuaded by the fact that the contract was awarded under the RSA because, in that case, KOVR was only a nominal awardee as SLA. The real party that stands to win or lose economically is Southern. Thus, Southern has an interest “beyond that of a normal subcontractor.” Lastly, the COFC found that no other party could adequately represent Southern’s interests.

Takeaways

In any future protests at the COFC where a subcontractor tries to intervene, the opposing parties will probably try to rely on the unique facts of the Mitchco case to oppose the attempt. Nevertheless, it is likely that practitioners who represent subcontractors that want to participate in bid protests will focus on the language in the order, which is already on Westlaw, regarding a subcontractor’s ability to protect its interests when it is being accused of wrong-doing in a bid protest. Thus, we can expect to see more of these arguments, perhaps making them something not that unusual at all.

Virtual Claims Handling Quickly Delivers Accurate Results

Susan Egeland and Sara Inman | Faegre Drinker biddle & Reath

Property and casualty insurers are integrating drones and other means of virtual claims handling as part of their routine property inspections. But, in litigation, virtual claims handling is unfairly getting a bad rap from plaintiffs’ attorneys who try to pass it off as solely a cost-cutting measure by insurers.

In actuality, virtual claims handling works to the benefit of both insureds and insurers because it allows an insurer to handle a claim sooner without compromising accuracy. The current COVID-19 pandemic is proving the value of virtual claim handling capabilities. Major metropolitan areas have “shelter-at-home” policies in place to minimize in-person contact. Even where such policies are not in place, cities across the country are practicing social distancing. Under such circumstances, an insured may not want an adjuster to come to their property to handle a claim. But, an insurer that utilizes virtual claims handling can send a drone to a property, control it remotely and capture images of damages for an adjuster to review without any in-person contact.

Some plaintiffs’ attorneys may argue drone images are not fully capable of capturing damages present on a property. However, the accuracy of such images has already been established. A virtual imagery system known as Eagleview has long been the industry standard for measuring properties by both contractors and insurers. Eagleview takes aerial, high-resolution images of properties that are so comprehensive they can be used to measure the pitch of a roof and determine the exact number of squares on a roof.

Similarly, aerial images taken by Google are detailed enough to reflect the history of repairs to a property and the general condition of a property. Through such images, one can determine whether a roof has been replaced in subsequent years, the number of metal appurtenances on the roof, whether any appurtenances have been changed and whether any new construction has been completed at the property.

Now consider that, in virtual claims handling, the images are taken in much closer proximity than aerial images. The details of any existing damages are easy to see. The skepticism regarding virtual property inspections is simply unwarranted. Virtual claims handling is the claims handling of the future, and insureds are fortunate if their insurer is one of the carriers leading the transition. This has become even more apparent under recent circumstances such as the COVID-19 pandemic.

Remote Trials Can Control Prejudgment Risk

Robert G. Devine, Victor J. Zarrilli and Kimberly M. Collins | White and Williams

While courts across the country are largely unavailable to litigants demanding a jury trial, pre-judgment interest rules present an increasing penalty risk to a defendant wanting its day in court and may not always make a plaintiff whole. The COVID-19 pandemic has altered the manner in which people and industries operate across the board. In light of the need to maintain social distancing whenever possible, the use of technology to replace in-person appearances is becoming more commonplace. As more attorneys become comfortable with the remote platform, the willingness to consider a remote trial grows.

With in-person jury trials suspended until further notice, it is important for attorneys and parties to consider the attendant consequences of the indefinite delay in waiting for a traditional jury trial. Aside from general inconvenience, continued delays may have a substantial financial impact, particularly with regard to the accumulation of pre-judgment interest.

Prejudgment interest is essentially additional money the court can award to the prevailing party based on the interest that the judgment would have earned over the course of the litigation. A number of factors influence the amount a court may award in prejudgment interest, including what the interest rate is, when interest begins to accrue, and the type of dispute. Moreover when the prejudgment interest attaches varies and may not always compensate for having had access to the funds during the litigation. A sampling of how prejudgment interest is treated in different contexts illustrates the impact these factors have on the ultimate judgment.

In Pennsylvania, for instance, a plaintiff in a tort action may seek delay damages calculated at “the prime rate” as listed by The Wall Street Journal, for each year the damages are sought, plus 1%. Pa..R.Civ..P. 238(a)(3). In other actions, unless otherwise specified, the legal rate of interest is calculated at 6% annually. 41 P.S. § 202. For New Jersey tort actions, judgments not exceeding the monetary limit of Special Civil Part at the time of entry will earn annual interest at “the average rate of return,” and for those cases exceeding the monetary limit, an additional 2% annually. N.J. Court Rules, R. 4:42-11. The amount awarded in contract matters in New Jersey remains in the court’s discretion.

The fluctuations in prejudgment interest rates are important to consider when assessing the resolution of a case under any circumstance. The backlog of trial-ready cases, however, is increasing as the pandemic continues, prompting the need to reevaluate the best outcome for clients. This is particularly true in jurisdictions that impose a particularly high rate of interest. In New York, for example, prejudgment interest is set at 9% in certain circumstances unless otherwise provided by statute. N.Y. C.P.L.R. § 5004. As an example, in a New York wrongful death action, the application of this rate resulted in an additional $1,190,747 awarded to the plaintiff. See Toledo v. Iglesia Ni Christo, 18 N.Y.3d 363 (2012). Moreover, a number of jurisdictions impose interest rates of up to 12% in certain actions. Our chart outlines the different rules on prejudgment interest among the states. Given the likelihood of increased costs as well as delay in ultimate resolution if parties opt to await a time when in-person jury trials resume, parties would do well to consider alternatives not otherwise requiring consideration. Although previously not the norm, summary trials, shorter trials with relaxed rules of evidence, may become more prevalent. Another option may be to forgo a jury trial in favor of a bench trial. Summary trials, where rules of evidence may be relaxed to permit the expert’s opinion to be introduced through a report reconfigured as a PowerPoint presentation, as well as bench trials, where additional flexibility is typical in regard to presentation of proof, can be conducted remotely. An overview of these options and others were recently explored in our articles “Evaluating Alternative Avenues to Verdict in the COVID-19 Legal Atmosphere” and “Virtual Jury Trials: The Next Wave of Remote Legal Practice.” Considering formats available in the more immediate future compared to awaiting a traditional trial can promote earlier resolution and control the pre-judgment interest risk.

Is There a Downside to Virtual Trials?

Alaina Lancaster | Law.com

What’s Wrong With Virtual Jury Trials?

Jurors in some of the country’s first online trials faced tech issues and waning attention spans. But Cooley’s Litigation Chair Michael Attanasio says there are more problems with a virtual jury trial to be skeptical about.

Attanasio said one of the constitutional issues that remote jury trials could raise is that defendants didn’t get a jury of their peers, because every person must have a steady WiFi connection.

“You’re creating a class of jurors who happen to have secure internet connections and nice computers,” Cooley said. “I don’t think that’s very workable either. That’s a real issue. It’s not unlike the debate about how schools are being managed and conducted right now with these challenges and the difference between socioeconomic groups when it comes to remote learning. You would have the same thing with remote court, and that’s not how juries are supposed to be constructed.”

The San Diego partner said the trials could raise challenges based on the U.S. Supreme Court’s Batson decision, which spoke to the principal that jury service is a right as a citizen.

“So you are taking the right to be a juror and you are excluding the class of people who don’t have computers and internet connections that would allow them to be in court on a screen for five or six hours a day,” he said. “That raises some real interesting issues.”

Keep an eye on your Legal Speak podcast feeds for the full interview with Attanasio to find out the Cooley litigation team’s quarantine ritual for staying sharp amid trial backlogs. Warning: You might not be able to “handle the truth.”