A federal appeals court ruled this week Bechtel National is not due reimbursement from the U.S. government for $500,000 in legal fees the company incurred prior to settling discrimination litigation brought by two former employees at the Energy Department’s Hanford Site in Washington state.
In an opinion issued Tuesday, a three-judge panel for the U.S. Court of Appeals for the Federal Circuit agreed with a lower court that Bechtel must show the discrimination lawsuits had “very little likelihood of success” had the cases gone to trial.
Bechtel is building the Waste Treatment Plant, which will convert radioactive waste held in underground tanks at Hanford into a more stable glass-like substance for disposal. Two former employees on the project sued the company in 2010 and 2012 for sexual and racial discrimination, as well as alleged harassment after they filed their complaints.
Bechtel in 2012 reached out-of-court settlements in the two lawsuits, brought by Linda Mims-Johnson for racial discrimination and sexual harassment and by Willie Lockhart for racial and disability discrimination. The settlement amounts were not made public.
The company subsequently sought $500,000 in Energy Department reimbursement for defending itself against the claims. It did not seek to recoup the actual payouts, “likely because the settlement amounts were covered by insurance,” the appeals court said.
The Energy Department provisionally found the reimbursement acceptable, but after further consideration a DOE contracting officer in May 2016 issued a notice of intent to disallow the costs apparently because the discrimination cases had a chance of success. In its response two months later, Bechtel argued the case cited by the agency actually would allow reimbursement of legal expenses. But the contracting officer’s final decision in September 2016 affirmed the earlier ruling.
Because the government had already reimbursed Bechtel, it would subtract the amount from future payments under the $14.7 billion Waste Treatment Plant contract that runs through 2022.
Bechtel challenged the Energy Department decision in May 2017 with the U.S. Court of Federal Claims, where 11 months later Judge Elaine Kaplan issued a summary judgment in favor of the government. The contractor then took its case to the Federal Circuit.
Bechtel would not be able to collect defense fees via Federal Acquisition Regulation had it lost a discrimination case in court. But standards for reimbursement of such legal fees are more complex when there is an settlement without a court ruling, the Federal Circuit decision noted.
Recovering legal costs is not allowed unless the vendor can show the plaintiff had “very little likelihood of success on the merits,” the appeals court said. But here Bechtel failed to establish the employee cases were a long shot.
The lower court’s decision noted the Energy Department wants to stand behind its contractors on matters of radioactive cleanup, but not support discrimination or other improper management practices.
Before the contracting officer, Bechtel argued that the former employees’ claims had little chance success on the merits, but abandoned that argument when it took its case to federal court, according to the Tuesday decision.
The court was unswayed by Bechtel’s arguments that the Energy Department has reimbursed such costs in the past, or that contractors might decline the “extreme risk” of cleaning up nuclear sites if they cannot recover legal costs.
Bechtel is reviewing the court’s opinion, which involves a longstanding question of contractual interpretation, said company spokeswoman Staci West in a Wednesday email.
