Latest 2 Cases This Week: United States v. Kozerski (6th Cir.), FastShip, LLC v. United States (Fed. Cir.)

Economic Theory Shows that People Will Make Choices that Worsen the Pandemic

NEIL H. BUCHANAN

UF Levin College of Law professor and economist Neil H. Buchanan points out some of the ways in which congressional Republicans misunderstand economics to justify withholding unemployment payments from Americans during the COVID-19 pandemic. Buchanan argues that economic theory soundly demonstrates that given the opportunity, people will make choices that worsen the toll of the pandemic.

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United States v. Kozerski

Court: US Court of Appeals for the Sixth Circuit

Docket: 19-3949

Opinion Date: August 6, 2020

Judge: Jeffrey S. Sutton

Areas of Law: Criminal Law, Government Contracts, White Collar Crime

Kozerski owned two construction companies in Detroit. He formed the second one, CA, to bid on Veterans Administration contracts set aside for small businesses owned by service-disabled veterans. Kozerski does not have a service-related disability. He convinced J.R., a service-disabled veteran, to pretend to be the company’s owner. CA handled six contracts. Kozerski forged J.R.’s signature and sent the government emails supposedly from J.R.. For five contracts, Kozerski did not pay J.R. anything, lying to him that CA did not receive any contracts after the first one. The government eventually discovered the scheme and charged Kozerski with wire fraud, 18 U.S.C. 1343. Kozerski pleaded guilty. The PSR recommended a loss amount of $9.5 million to $25 million, calculated by adding the amounts the government paid CA on all six contracts without crediting the value of the work performed on the contracts: $11,891,243.45, resulting in a Guidelines range of 37-46 months. Kozerski argued the loss should be the amount of profit a qualifying veteran-owned business would receive from the contract, yielding a guidelines range of eight-14 months. The district court adopted Kozerski’s formula and sentenced him to a year and a day. The Sixth Circuit affirmed, upholding the district court’s calculation of the loss as the aggregate difference between Kozerski’s bids and the next-lowest bids, about $250,000.

FastShip, LLC v. United States

Court: US Court of Appeals for the Federal Circuit

Docket: 19-2360

Opinion Date: August 3, 2020

Judge: Timothy B. Dyk

Areas of Law: Aerospace/Defense, Government & Administrative Law, Government Contracts, Intellectual Property, Legal Ethics, Military Law, Patents

The Navy began a program to design and build littoral combat ships (LCS) and issued a request for proposals. During the initial phase of the LCS procurement, FastShip met with and discussed a potential hull design with government contractors subject to non-disclosure and confidentiality agreements. FastShip was not awarded a contract. FastShip filed an unsuccessful administrative claim, alleging patent infringement. The Claims Court found that the FastShip patents were valid and directly infringed by the government. The Federal Circuit affirmed. The Claims Court awarded FastShip attorney’s fees and expenses ($6,178,288.29); 28 U.S.C. 1498(a), which provides for a fee award to smaller entities that have prevailed on infringement claims, unless the government can show that its position was “substantially justified.” The court concluded that the government’s pre-litigation conduct and litigation positions were not “as a whole” substantially justified. It unreasonable for a government contractor to gather information from FastShip but not to include it as part of the team that was awarded the contract and the Navy took an exceedingly long time to act on FastShip’s administrative claim and did not provide sufficient analysis in denying the claim. The court found the government’s litigation positions unreasonable, including its arguments with respect to one document and its reliance on the testimony of its expert to prove obviousness despite his “extraordinary skill.” The Federal Circuit vacated. Reliance on this pre-litigation conduct in the fee analysis was an error.