Posts in "Virginia"
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Contract Defeats Virginia’s Defense of Sovereign Immunity
A recent decision from the Supreme Court of Virginia established an important precedent for contractors doing business with the Commonwealth. The doctrine of sovereign immunity generally prevents parties from being able to sue the government when it is acting within the scope of its governmental authority, unless the government consents to suit. However, in Montalla, LLC v. Commonwealth, 303 Va. 150, 900 S.E.2d 290 (2024), the Court ruled that the Commonwealth cannot invoke sovereign immunity as a defense when the government enters into a valid contract through an authorized agent. This ruling affirms that when the Commonwealth enters into a legally binding contract, it must uphold its contractual obligations and allow contractors to pursue legal remedies, even without the government’s consent.
The dispute arose after a government contractor named NXL sought reimbursement for overhead costs under its contract with the Virginia Department of Transportation (“VDOT”). VDOT denied payment based on its interpretation of certain Federal Acquisition Regulations (“FAR”) provisions. NXL ultimately entered into an unfavorable settlement with VDOT based, in part, on this interpretation of the FAR. However, during settlement negotiations, VDOT received guidance from the Federal Highway Administration (“FHWA”) on the correct interpretation of the relevant FAR provisions. The FHWA’s interpretation confirmed that NXL was entitled to reimbursement. VDOT intended to adopt FHWA’s interpretation but withheld this information from NXL during settlement negotiations.
Thereafter, Montalla, LLC acquired NXL’s contracts with VDOT. Montalla, LLC discovered that VDOT withheld this information and sued VDOT seeking equitable rescission of NXL’s settlement agreement and recovery of contract damages. The trial court and Court of Appeals dismissed the case based on VDOT’s asserted defense of sovereign immunity. The Supreme Court of Virginia reversed. Although the Supreme Court noted that the doctrine of sovereign immunity is “alive and well” in Virginia, it ultimately found that the defense does not extend to actions based on valid contracts entered into by authorized agents of the government.
This decision strengthens protections for contractors and confirms that the Commonwealth of Virginia must uphold its contractual obligations. Moving forward, contractors should be cognizant of their ability to enforce their contractual rights against the Commonwealth.
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Virginia Enacts New Law Prohibiting “Pay-if-Paid” Clauses
Beginning January 1, 2023, “Pay-if-Paid” clauses will no longer be enforceable in public and private construction contracts in Virginia. “Pay-if-paid” provisions in construction contracts have long been enforceable under Virginia law. These conditional payment provisions are intended to protect general contractors from the risk of nonpayment by the owner by making the duty to make payment to subcontractors or downstream parties expressly conditioned on receipt of payment from the owner. Enacted on April 27, 2022, Senate Bill 550 is a bill that prohibits contractors on both private and public construction projects in Virginia from including provision in subcontracts that condition payment on the receipt of funds from the owner or high-tier contractor. SB 550 does not, however, prohibit a general contractor from issuing a back charge to a subcontractor for noncompliance with the terms of the subcontract as long as it notifies the subcontractor in writing of the intent to withhold and the reason for withholding payment. This new law is scheduled to take effect January 1, 2023.
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Attention Contractors – New Defense to Joint Liability Available
By now, most contractors are cognizant of the impact of Virginia Code § 11-4.6. Enacted in 2020, this statute allows general contractors to be liable if their subcontractors fail to properly pay their employees. In 2021, the General Assembly modified this statute and general contractors need to be aware of this revision.
The modified statute provides that a general contractor may provide a “certification” as evidence that they did not know, and had no reason to know, that their subcontractors were not paying their employees properly. The general contractor must obtain this certification, in writing, from their subcontractor, and the certification must be signed by the subcontractor under oath. The certification must also state that the subcontractor and its sub-subs, paid all of their employees all wages due for the work performed on the project. Construction companies should review this newly modified statute and update their subcontracts and lien waivers accordingly.
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Moore & Lee Welcomes Allison Hemmer and Brandon Lee
Moore & Lee is pleased to announce that Allison Hemmer and Brandon Lee have joined the firm as Associates. Allison graduated from George Mason University School of Law in 2021. Brandon graduated from the UNLV William S. Boyd School of Law in 2021. Allison and Brandon worked as Summer Associates at Moore & Lee in 2020.
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Moore & Lee Welcomes Tara Hosseini and Zackary Rogers
Moore & Lee is pleased to announce that Tara Hosseini and Zackary Rogers have joined the firm as Associates. Tara graduated from The George Washington University School of Law in 2020. Zackary graduated from the George Mason University School of Law in 2020. Tara and Zack worked as Summer Associates at Moore & Lee in 2019.
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Moore & Lee Welcomes Rachel Bauer
Moore & Lee is pleased to announce that Rachel Bauer has joined the firm as a Law Clerk. Rachel graduated from the American University Washington College of Law in 2019. She worked as a Summer Associate at Moore & Lee in 2017.
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Moore & Lee Welcomes John Bertino and Danielle Lubin
Moore & Lee is pleased to announce that John Bertino and Danielle Lubin have joined the firm as Associates. John graduated from The George Washington University School of Law in 2018. He worked as a Summer Associate at Moore & Lee in 2017. Danielle graduated from Suffolk University Law School in 2018.