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Bechtel National, Inc. v. United States

United States Court of Appeals, Federal Circuit

July 16, 2019

BECHTEL NATIONAL, INC., Plaintiff-Appellant
v.
UNITED STATES, Defendant-Appellee

          Appeal from the United States Court of Federal Claims in No. 1:17-cv-00657-EDK, Judge Elaine Kaplan.

          Stephen Knight, Smith, Pachter, McWhorter, PLC, Tysons Corner, VA, argued for plaintiff-appellant. Also represented by Edmund Michael Amorosi.

          Geoffrey Martin Long, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Joseph H. Hunt, Robert Edward Kirschman, Jr., Patricia M. McCarthy.

          Before Newman, Schall, and Dyk, Circuit Judges.

          Dyk, Circuit Judge.

         Bechtel National, Inc. ("Bechtel") appeals from a decision of the United States Court of Federal Claims ("Claims Court") granting summary judgment in favor of the government. The Claims Court held that our decision in Geren v. Tecom, Inc., 566 F.3d 1037 (Fed. Cir. 2009), precluded reimbursement of costs that Bechtel incurred in defending two sexual and racial discrimination and retaliation suits brought by former employees.

         We hold that Tecom governs the allowability of Bechtel's defense costs and affirm the Claims Court's decision.

         Background

         Between 1943 and 1990, the government produced plutonium for nuclear weapons at the Hanford Site in the state of Washington, leaving behind "approximately 56 million gallons of nuclear waste" stored in underground tanks. Bechtel Nat'l, Inc. v. United States, 137 Fed.Cl. 423, 425 (2018). On December 11, 2000, Bechtel was awarded a cost-plus-incentive fee contract by the Department of Energy ("DOE") "for the design, construction, and operation" of a nuclear waste treatment plant at the Hanford Site in Washington. Id. The contract incorporated by reference provisions of the Federal Acquisition Regulation ("FAR") and the Department of Energy Acquisition Regulation ("DEAR").

         During performance of the contract, two former Bechtel employees at the Hanford Site separately sued Bechtel under 42 U.S.C. § 1981 and state law, alleging sexual and racial discrimination and subsequent retaliation for raising their complaints. Bechtel settled these lawsuits and then sought $500, 000 in reimbursement from the DOE for the costs it incurred in defending the two suits. Bechtel did not seek reimbursement for the settlement payments related to the litigation, likely because the settlement amounts were covered by insurance. The DOE provisionally approved Bechtel's request and reimbursed Bechtel for the full amount requested.

         On May 11, 2016, the contracting officer issued a notice of intent to disallow the costs. The contracting officer informed Bechtel that "[he had] determined that the costs incurred by [Bechtel] in defending these matters [were] unallowable under the standards set forth in Tecom." Bechtel, 137 Fed.Cl. at 427 (alterations in original).

         Bechtel responded on July 13, 2016, arguing that Tecom did not govern the allowability of the costs. Rather, it contended that a provision of the contract, DEAR 970.5204-31 (1997), "alone dictates the treatment and re-imbursability of legal costs." J.A. 691. The DEAR provision, entitled "Insurance-litigation and claims," provides:

(e) Except as provided in subparagraphs (g) and (h) of this clause, or specifically disallowed elsewhere in this contract, the contractor shall be reimbursed . . .
(2) For liabilities (and reasonable expenses incidental to such liabilities, including litigation costs) to third persons not compensated by insurance or otherwise . . . .
(g) Notwithstanding any other provision of this contract, the contractor shall not be reimbursed for liabilities (and expenses incidental to such liabilities, including litigation ...

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