DC Metropolitan Business Law Alert - Updates on Important Legal Developments that Impact the Business Community in DC, Md and Va.

The Department of Veterans Affairs (the “VA”) issued a Notice of Proposed Rulemaking last week seeking input on ways to clarify and simplify the “veteran-owned small business” (“VOSB”) verification program. The VA has been criticized in recent months for its inefficient verification process, which – in attempting to cull out fraudulent companies from those legitimately owned and controlled by veterans – has resulted in a rejection rate of over 60% of new service-disabled veteran-owned small business (“SDVOSB”) applicants. At the same time, the VA has come under fire from the Government Accountability Office and the VA's Office of Inspector General for the persistence of fraud in the program.

In its Notice of Proposed Rulemaking, the VA states that it wants to “encourage more VOSBs to apply for verification,” while at the same time discouraging fraudulent applicants. To that end, the VA is seeking comments from any interested party regarding amendments to the VOSB regulations. Although any comments related to the improvement of the VOSB regulations and program are invited, the VA specifically seeks comments on the following eight questions:

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'That was the clear message from the U.S. Court of Appeals for the District of Columbia Circuit’s in Zuckerman Spaeder, LLP v. James A. Aufenberg, Jr., No. 10-7041, July 29, 2011 (slip op.) when it “alert[ed] the bar in this Circuit that failure to invoke arbitration at the first available opportunity will presumptively extinguish a client’s ability later to opt for arbitration.” Typically the time to seek arbitration after being sued is in an answer to a complaint or in a motion to dismiss. However, if a defendant fails to assert his right to arbitration then but only later seeks a stay of the litigation in favor of arbitration, the D.C. Circuit explained that the presumption of forfeiture can be rebutted only if requester’s delay in seeking the stay has not prejudiced the plaintiff.

In the case at hand, the Court found that by failing to seek an early stay and allowing the case to move forward, the defendant had “imposed substantial costs upon [the plaintiff] and the district court.” Specifically, in the several months before the defendant sought a stay, the defendant had already engaged in discovery, filed several amended counterclaims, and participated in a court-ordered mediation. Accordingly, the Court held that plaintiff had been prejudiced and that the defendant had indeed forfeited any right to arbitration.

The lesson to be learned? If you are sued and your agreement contains an arbitration clause, seek an early stay of the litigation. If you don’t timely use your right to arbitrate, you’ll likely lose it.