What and How Obamacare Is Doing at the Court of Federal Claims

Millions of Americans who were able to obtain health insurance as a result of the Patient Protection and Affordable Care Act (“ACA” or “Obamacare”) are waiting to learn the extent to which Congress and the new administration will repeal, replace, or do something else with the ACA. At the same time, Government contracts lawyers are watching a group of ACA-related lawsuits being litigated at the Court of Federal Claims and the Federal Circuit. The cases involve “risk corridors,” which the ACA implemented to entice insurers to enter healthcare exchanges by reducing downside risk if, among other possibilities, enrollment did not meet projections. After the ACA was implemented (and control of the Legislative branch had shifted), Congress effectively defunded the ACA’s risk corridors (i.e., reduced necessary appropriations), leaving the Department of Health and Human Services (“HHS”) without sufficient funds to pay participating insurers. So far, approximately 20 of those companies have sued and are pursuing damages claims based on the Government’s failure to make promised payments.

Last November, the Court of Federal Claims issued its first merits ruling in one of the ACA risk corridor cases, Land of Lincoln Mutual Health Insurance v. U.S. Judge Lettow’s opinion in that case rejected the plaintiff’s claims based on “statutory entitlement,” breach of contract, and Fifth Amendment taking theories. A decision in a second case, Moda Health Plan v. U.S., was issued late last week by Judge Wheeler—who ruled in that plaintiff’s favor. In Moda Health, the court held that the relevant ACA provision “requires full annual payments to insurers” and, alternatively, that the Government’s non-payment constituted a breach of the implied-in-fact contract with the insurer.

How the current administration and Congress will change ACA—and the American healthcare system—is anybody’s guess. The ACA-related cases before the Court of Federal Claims are not getting the same amount of press as potential changes to the healthcare reform law, but they address important legal and financial consequences of the long-running policy dispute over the ACA. The cases raise complex legal issues that should be of substantial interest to Government contracts lawyers and practitioners before the Court of Federal Claims and the Federal Circuit.
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DoD Effectively Recognizes That Issues With Its New IR&D “Technical Interchange” Rule Are More Significant Than Previously Acknowledged

In a January 4, 2017 Memorandum, the Under Secretary of Defense for Acquisition, Technology and Logistics (“Under Secretary”), discussed implementation of a problematic DFARS rule issued on November 4, 2016, requiring “major contractors” to engage in a “technical interchange” with a DoD employee before IR&D costs are generated as a prerequisite for the allowability of such costs (“IR&D Rule”). The Memorandum effectively recognizes that issues with the IR&D Rule are more significant than DoD previously acknowledged. However, although the Memorandum addresses certain issues arising out of the IR&D Rule, it remains to be seen whether contractors will encounter different types of problems as the Rule is implemented.
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Supreme Court Refuses To Require Sanctions for Breach of the Seal Requirement of the False Claims Act

On December 6, 2016, the Supreme Court ruled that the False Claims Act (“FCA”) does not require the dismissal of lawsuits brought by relators who violate the requirement that information regarding the FCA complaint (and alleged fraud) not be disclosed to anyone (other than the district court and Department of Justice) and remain “under seal.” In State Farm Fire & Casualty Co. v. United States ex rel. Rigsby , the Court held that district courts retain discretion to fashion an appropriate remedy based on the facts of the case. Continue Reading

Federal Court Repudiates the Most Significant Provisions of the New DOL Rules

On October 24, 2016, a federal district court in Texas issued a preliminary injunction in a case called Associated Builders & Contractors, et al. v. Rung, in which it halted implementation of the most controversial aspects of the newly-minted “Fair Pay and Safe Workplaces” FAR rule and the corresponding Department of Labor guidance, including the disclosure provision and the restriction on arbitration agreements. This post discusses the district court decision, which represents a sweeping repudiation of the most significant provisions of the controversial Fair Pay and Safe Workplaces rule and guidance. Mayer Brown previously published a Legal Update explaining the new rule and the Department of Labor guidance in far greater detail. Continue Reading

Cybersecurity Services on the Multiple Award Schedule: Change is Afoot

Cybersecurity services soon will be available under new common provisions of the Multiple Award Schedule (MAS) Program administered by the General Services Administration (GSA). The MAS Program is the primary means to sell commercial products and services to federal agencies.

GSA announced the new provisions this week. In mid-August 2016, GSA issued a draft solicitation and engaged in industry outreach to explain the changes to the current ordering system, in which companies sell such services under a variety of provisions. GSA is now rolling out the new process, which will be available for use in October 2016. These changes will facilitate agency ordering of critical cybersecurity services. Continue Reading

Substantial New Rules Implementing “Fair Pay and Safe Workplaces” Executive Order Create Risks for Contractors and Subcontractors

On August 25, 2016, DoD, GSA, and NASA issued a final rule amending the FAR to implement President Obama’s Executive Order on “Fair Pay and Safe Workplaces” (“E.O.”) The Department of Labor (“DOL”) also issued final guidance to assist in the implementation of the E.O. The new FAR rule follows a proposed FAR rule that generated substantial comments. The final rule and guidance represent significant new obligations and risks for contractors and subcontractors, who should start preparing now to address them. This post focuses on the final FAR rule because it imposes specific requirements on contractors and subcontractors. Notably, this post provides only a high-level summary because the new rule, related commentary published in the Federal Register, and DOL’s guidance are lengthy and sometimes complex documents. Mayer Brown also published a Legal Update that discusses these developments in greater detail. Continue Reading

Federal Circuit Finds ASBCA had Jurisdiction over a Government Affirmative Defense of Fraud—Which the Court Also Characterized as a Defense of Prior Material Breach—and Affirmed the Board’s Grant of Summary Judgment to the Government Based on that Defense

The Federal Circuit recently affirmed the ASBCA’s grant of summary judgment to the Government based on the Government’s affirmative defense that the court described both as a defense of fraud and a defense of prior material breach. In a case called Laguna Constr. Co. v. Carter, the court initially determined that the ASBCA had jurisdiction over the Government’s affirmative defense. It then affirmed the ASBCA’s grant of summary judgment to the Government because the contractor committed the first material breach. Along the way, the court rejected several arguments advanced by the contractor. Continue Reading

Federal Circuit Emphasizes the Need to File a Pre-Award Protest When Faced with Patently Defective Solicitation Language

The Federal Circuit recently issued a decision in Copenhagen Arctic A/S v. United States that underscores the importance of promptly pursuing bid protests regarding patent defects in a solicitation’s language—including questions and answers incorporated into the solicitation. Continue Reading

Supreme Court Rejects the Government’s Expansive Interpretation of “Official Act” for Honest Services Fraud and Bribery Allegations

On June 27, 2016, in McDonnell v. United States, the Supreme Court resolved a case of substantial interest to businesses that interact regularly with government officials with respect to grants, contracts, regulations and numerous other matters. The Court vacated the conviction of the former governor of Virginia, Bob McDonnell, because it was based on an improperly expansive interpretation of “official act” as used in the federal bribery statute. The Court’s opinion rejects the Department of Justice’s expansive interpretation of the relevant statutes and holds that a government official’s “setting up a meeting, calling another public official, or hosting an event does not, standing alone, qualify as an ‘official act’”—and, thus, is not sufficient to support a conviction. Instead, an honest services fraud allegation must involve:

  • Ÿ “a decision or action on a ‘question, matter, cause, suit, proceeding or controversy’”
  • Ÿ “a formal exercise of governmental power that is similar in nature to a lawsuit before a court, a determination before an agency, or a hearing before a committee”
  • Ÿ “something specific and focused that is ‘pending’ or ‘may by law be brought’ before a public official”
  • Ÿ a “public official [who] make[s] a decision or take[s] an action on that ‘question, matter, cause, suit, proceeding or controversy,’  or agree[s] to do so.”

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DoD Advisory Committee Seeks Comments on Broad Range of Issues Concerning Rights in Technical Data

On June 21, 2016, DoD published a notice in the Federal Register indicating that an advisory committee is seeking information to facilitate its review of 10 U.S.C. §§ 2320 and 2321 regarding rights in technical data and the validation of proprietary data restrictions. This is an excellent opportunity for contractors, Government contracts counsel, and others to provide input into rules that play an important role in DoD procurements involving rights in technical data. The notice requires submission of written comments in the very near future—on or before July 21, 2016. The Panel must submit its final report and recommendations to the Secretary of Defense no later than September 30, 2016. Continue Reading

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