Hard Cases

JOSEPH MARGULIES

Cornell law professor Joseph Margulies uses the killing of Rayshard Brooks in Atlanta by police to explain some lessons for reform we might learn. Margulies calls upon us to use this case to reexamine the circumstances that should result in a custodial arrest and to shrink the function of police so as to use them only in the very few situations that truly require them.

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First Mortgage Corp. v. United States

Court: US Court of Appeals for the Federal Circuit

Docket: 19-1798

Opinion Date: June 12, 2020

Judge: Wallach

Areas of Law: Banking, Civil Procedure, Government Contracts, Securities Law

Ginnie Mae (GM), established by 12 U.S.C. 1717(a)(2)(A) to provide stability in the secondary residential mortgage market and promote access to mortgage credit, guarantees mortgage-backed securities (MBS). FMC, a private corporation, was an originator and servicer of government-guaranteed home mortgages and an issuer of MBS in GM’s program. GM learned of FMC actions that constituted the immediate default of the Guaranty Agreements. FMC undertook an investigation and provided the results to GM, while also complying with SEC requests. GM later terminated FMC from its program. The SEC initiated a civil enforcement action, which terminated in a consent agreement, without FMC admitting or denying the allegations but paying disgorgement and penalties. The Consent Agreement provided that it did not affect FMC’s right to take positions in proceedings in which the SEC is not a party but FMC agreed to not take any action or permit any public statement denying any allegation in the SEC complaint FMC later sued, alleging that GM had breached Guaranty Agreements when it terminated FMC from its program and denied violating those Agreements. The Federal Circuit affirmed the Claims Court’s dismissal. FMC’s breach of contract claims are precluded under the doctrine of res judicata. FMC’s action is essentially a collateral attack on the judgment entered in the SEC action. The SEC and GM are in privity for the purposes of precluding FMC’s claims and “successful prosecution of the second action would nullify the initial judgment or would impair rights established in the initial action.”

Inserso Corp v. United States

Court: US Court of Appeals for the Federal Circuit

Docket: 19-1933

Opinion Date: June 15, 2020

Judge: Richard Gary Taranto

Areas of Law: Government Contracts

The U.S. Defense Information Systems Agency (DISA) awarded contracts for the opportunity to sell information technology services to various federal government agencies. Inserso did not receive an award; its total evaluated price was the 23rd lowest in a competition for 20 slots. DISA attached a debriefing document to its notice, including the total evaluated price for the awardees and some previously undisclosed information on how DISA evaluated the cost element of the proposals. Inserso sent follow-up communications, noting that several awardees in the small-business competition had also competed in the full-and-open competition as part of joint ventures or partnerships. Inserso asked whether those entities had received similarly detailed debriefings and expressed concern that, if so, the earlier debriefing would have provided unequal information giving a competitive advantage to some bidders. DISA stated that all unsuccessful bidders in both competitions were given similarly detailed information. The Federal Circuit ruled in favor of the government. Because Inserso did not object to the solicitation before the awards, when it was unreasonable to disregard the high likelihood of the disclosure at issue, Inserso forfeited its ability to challenge the solicitation. The court did not reach the issue of whether DISA’s disclosure prejudiced Inserso.

Oliva v. United States

Court: US Court of Appeals for the Federal Circuit

Docket: 19-2059

Opinion Date: June 15, 2020

Judge: Timothy B. Dyk

Areas of Law: Government Contracts, Labor & Employment Law

Oliva worked for the VA, 2000-2016. In 2015, Oliva challenged the VA’s issuance of a letter of reprimand for Oliva accusing a supervisor of improperly pre-selecting an applicant for a position; Oliva claimed that his email constituted protected whistleblowing. Under a Settlement Agreement, the VA agreed to provide a written reference and the assurance of a positive verbal reference, if requested; Oliva’s Waco supervisor would not mention the retracted reprimand. Oliva was terminated from his employment in April 2016, for performance reasons. Oliva claims that the VA twice breached the Settlement: in March 2015, when Oliva applied for a position in the VA’s El Paso medical center the reprimand letter was disclosed and in February 2016, when Oliva applied for a position in the VA’s Greenville healthcare center a Waco employee disclosed that Oliva was on a Temporary Duty Assignment. The Claims Court held that Oliva’s complaint plausibly alleged breaches of the Agreement that resulted in the loss of future employment opportunities. Oliva sought $289,564 in lost salary and lost relocation pay of either $86,304 or $87,312. The Claims Court then held that Oliva had not stated plausible claims to recover lost salary or relocation pay. The Federal Circuit reversed. Oliva plausibly claimed that the alleged breaches were the cause of his lost salary. Oliva’s termination from his Waco job does not undercut that plausibility.

City of Conroe, Texas v. San Jacinto River Authority

Court: Supreme Court of Texas

Docket: 18-0989

Opinion Date: June 12, 2020

Judge: Busby

Areas of Law: Contracts, Government Contracts

The Supreme Court held that the Expedited Declaratory Judgment Act (EDJA), Tex. Gov't Code ch. 1205, gave the trial court jurisdiction to declare whether contracts executed by the San Jacinto River Authority were legal and valid but not whether the Authority complied with the contracts in setting specific water rates. The Authority, which has contracts to sell water to cities and other customers and uses the revenue to pay off its bonds, filed suit seeking declarations under the EDJA regarding the contracts and the water rates set under those contracts. Several participants, including three cities (Cities) opted in as interested parties. The Cities filed pleas to the jurisdiction, arguing that the trial court lacked subject matter jurisdiction to adjudicate the Authority's claims. The trial court denied the pleas to the jurisdiction. The court of appeals held primarily for the Authority. The Supreme Court held (2) the EDJA permits the trial court to exercise jurisdiction over the Authority's claims as to the valid execution of the contracts, but it does not confer jurisdiction over whether the Authority complied with the contracts in setting specific water rates; and (2) the Cities' governmental immunity does not bar an EDJA claim, which is brought in rem to adjudicate interests in property.