Construction Law Insights

Flour Fed. Sols., LLC v. Bae Sys. Ordinance Sys., 2020 U.S. Dist. LEXIS 106997, 2020 WL 3304196 (W.D. Va. June 18, 2020)

In 2011, the United States Army (“Army”) awarded BAE Systems Ordinance Systems, Inc. (“BAE”) a basic ordering agreement under which BAE was responsible for modernization projects at the Radford Army Ammunition Plan in Radford, Virginia (the “Plant”). BAE issued a request for proposal to Flour Federal Solutions, LLC (“Flour”) for the design, construction, and commission of a temporary facility on October 7, 2015. Later in October, the Army modified the contract, which changed the location of the facility. In December, the Army changed the project to a permanent facility instead of a temporary facility. On December 30, 2015, BAE and Flour executed a subcontract for Flour to design a temporary facility. Throughout 2016, BAE issued several modifications to Flour reflecting the modifications BAE received from the Army. In March 2016, BAE directed Flour to begin construction of a permanent facility. On September 1, 2016, BAE issued another

modification to Flour, authorizing payment for the design of a permanent facility. On November 29, 2016, BAE and Flour executed a fourth modification that eliminated the requirement that Flour construct a temporary facility and incorporated the requirement that Flour construct a permanent facility. The parties did not agree to a definite price, instead agreeing to negotiate and definitize the price by December 2016. With respect to Flour’s fraud claim, Flour alleged that BAE received several changes to its prime contract from the Army but did not pass those changes along to Flour until after BAE solicited a bid from Flour and entered into a contract with Flour to build a temporary facility. Flour alleged that the change in plans increased costs substantially, but BAE withheld information about those changes so it could solicit lower bids. Because BAE refused to provide a copy of its prime contract with the Army, Flour submitted a Freedom of Information Act request and received a copy of BAE’s prime contract on October 3, 2018. On October 17, 2019, Flour filed a complaint against BAE for breach of contract, quantum meruit, unjust enrichment, breach of duty of good faith and fair dealing, fraud in the inducement, and declaratory judgment. BAE moved to dismiss for failure to state a claim. The Court held a hearing and denied BAE’s motion except with respect to Flour’s fraud claim, which the court took under advisement and the parties submitted supplemental briefing.

The Court held that Flour’s fraud claim was barred by Virginia’s two-year statute of limitations. a cause of action for fraud accrues when a plaintiff discovers or by the exercise of due diligence reasonably should have discovered (1) that the defendant misrepresented a material fact and (2) the misrepresentation’s relation to the plaintiff’s injury. The Court found that Flour’s claim accrued at the latest on November 29, 2016 when Flour and BAE executed a modification to the subcontract that eliminated the requirement for Flour to build a temporary facility. At that time, Flour knew that BAE’s request for proposals related to a temporary facility was a misrepresentation and knew or had reason to discovery the injury that resulted therefrom. Because Flour did not file its complaint until October 17, 2019, its fraud claim was time-barred. The Court further found that Flour could not take advantage of Virginia’s equitable tolling statute. In Virginia, a statute of limitations is tolled until a person intentionally misled by a putative defendant could reasonably discover the wrongdoing and bring action to redress it. A defendant must intend to conceal the discovery of the cause of action by trick or artifice and must have thus actually concealed it form the plaintiff in order for the exception to apply. Because Flour had knowledge of the facts necessary for its cause of action in 2016, BAE’s alleged failure to disclose the terms of its prime contract did not prevent Flour from discovering its cause of action. Silence without more is insufficient to toll the statute of limitations.

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