Phillips v. Mabus ( 2022 )


Menu:
  •                       UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF COLUMBIA
    SEBASTIAN PHILLIPS, et al.,
    Plaintiffs,
    v.
    No. 11-cv-2021 (EGS)
    CARLOS DEL TORO, 1
    Secretary of the Navy, et al.,
    Defendants.
    MEMORANDUM OPINION
    I.     Introduction
    Plaintiff Sebastian Phillips (“Mr. Phillips”), a Naval
    Architect, and his architecture and engineering firm, Plaintiff
    Marine Design Dynamics, Inc. (“MDD”), allege that they have been
    effectively debarred from future government contracts with the
    United States Department of the Navy since 2011. Plaintiffs sued
    eleven individuals on various federal constitutional and state
    common-law claims.
    Plaintiffs brought federal constitutional claims against
    the Secretary of the Navy, the Chief and Deputy Chief of Naval
    Operations, and four officials of the Naval Sea Systems Command
    (“NAVSEA”) and Operational Logistics Integration Program
    1 Pursuant to Rule 25(d) of the Federal Rules of Civil Procedure,
    Carlos Del Toro has been automatically substituted as the lead
    defendant in this case. See Fed. R. Civ. P. 25(d).
    1
    (“OPLOG”) (collectively, the “Federal Defendants”). In a
    Memorandum Opinion issued on July 15, 2019, the Court dismissed
    all of these claims. No federal claims remain before the Court.
    Plaintiffs also sued four private individuals, who are
    former employees of MDD: Michael J. Mazzocco (“Mr. Mazzocco”),
    William J. Muras (“Mr. Muras”), Volker Stammnitz (“Mr.
    Stammnitz”), and Matthew K. Miller (“Mr. Miller”). Plaintiffs
    contend that these defendants are liable for breach of fiduciary
    duty, defamation, and civil conspiracy. The Court dismissed all
    claims against Mr. Miller in its July 15, 2019, Memorandum
    Opinion.
    Pending before the Court is a Motion to Dismiss filed by
    Mr. Mazzocco, Mr. Muras, and Mr. Stammnitz (collectively, the
    “Individual Defendants”). The Individual Defendants move to
    dismiss the remaining breach of fiduciary duty, defamation, and
    civil conspiracy claims against them. Upon careful consideration
    of the Parties’ submissions, the applicable law, and the entire
    record, the Court will retain supplemental jurisdiction over the
    remaining claims in the case. Accordingly, the Court DENIES the
    Individual Defendants’ Motion to Dismiss.
    2
    II.   Background
    A. Factual
    The Court assumes the Parties’ familiarity with the factual
    background and the long history of this litigation, which are
    set forth in the Court’s three prior opinions. See Phillips v.
    Mabus (“Phillips I”), 
    894 F. Supp. 2d 71
     (D.D.C. 2012); Phillips
    v. Mabus (“Phillips II”), 
    319 F.R.D. 36
     (D.D.C. 2016); Phillips v.
    Spencer (“Phillips III”), 
    390 F. Supp. 3d 136
     (D.D.C. 2019).
    Accordingly, the Court provides only a brief summary of those facts
    that are relevant to resolving the instant motion to dismiss.
    In 2005, Mr. Phillips, a Naval Architect, formed MDD, a
    District of Columbia-based Naval Architecture firm specializing
    in ship energy conservation for the Department of the Navy and
    other government clients. See Am. Compl., ECF No. 42 at 4 ¶¶ 6-
    7. 2 Between 2006 and 2011, MDD was one of the subcontractors for
    Computer Sciences Corporation (“CSC”), 
    id.
     at 6 ¶ 23; which
    served as one of the contractors supporting the Navy's
    Operational Logistics Integration Program (“OPLOG”), 
    id.
     at 7-8
    ¶¶ 25-30.
    Between March 2011 and July 2011, four MDD employees who
    had performed significant work on the OPLOG projects left MDD:
    2When citing electronic filings throughout this opinion, the Court
    cites to the ECF header page number, not the original page number
    of the filed document.
    3
    Mr. Mazzocco, Mr. Stammnitz, Mr. Muras, and Mr. Miller. 
    Id.
     at
    14-21 ¶¶ 45-67. In their Amended Complaint, Plaintiffs allege
    that all four former employees either started or joined business
    entities that competed with MDD to perform the same work for
    OPLOG. See 
    id.
     Plaintiffs also allege that Mr. Mazzocco spread
    false rumors that MDD was double- or triple-billing the
    government for its work. 
    Id.
     at 16 ¶¶ 52-54.
    Shortly thereafter, on or about May 18, 2011, Mr. Mazzocco,
    Mr. Stammnitz, and Mr. Muras met in Boston with Naval Sea
    Systems Command (“NAVSEA”) and OPLOG employees. 
    Id.
     at 21-23 ¶¶
    68-77. Plaintiffs allege that during that meeting, two federal
    Navy officials, working with the Individual Defendants, decided
    to eliminate MDD entirely from the OPLOG budget for the
    following year and redirect Plaintiffs' work to the departing or
    already-departed MDD employees. 
    Id.
     Plaintiffs further allege
    that they have been awarded no new work for OPLOG, through the
    CSC contract or any other contract, since July 2011. 
    Id.
     at 25 ¶
    83.
    4
    B. Procedural
    On January 3, 2012, Plaintiffs filed the Amended Complaint.
    See generally 
    id.
     Counts I and II assert federal-question claims
    against the Federal Defendants, 
    id.
     at 29-35 ¶¶ 99-126; and
    Count IX asserts common-law claims against two of the Federal
    Defendants, 
    id.
     at 47-49 ¶¶ 193-200. Counts III, IV, V, and VI
    assert a breach of fiduciary duty claim against Mr. Mazzocco,
    Mr. Stammnitz, Mr. Muras, and Mr. Miller, respectively. 
    Id.
     at
    35-44 ¶¶ 127-78. Count VII asserts a defamation claim against
    Mr. Mazzocco. 
    Id.
     at 44-45 ¶¶ 179-86. Count VIII asserts a civil
    conspiracy claim against all four individual defendants. 
    Id.
     at
    46 ¶¶ 187-92.
    On September 30, 2012, the Court denied the following
    motions: (1) the Federal Defendants’ Motion to Dismiss, or in
    the alternative, Motion for Summary Judgment, (2) Plaintiffs’
    Motion to Enforce the Stipulated Preliminary Injunction, and (3)
    the Motions to Dismiss filed by Mr. Mazzocco, Mr. Stammnitz, and
    Mr. Muras. Phillips I, 894 F. Supp. 2d at 76. The Parties
    engaged in limited discovery and settlement discussions as to
    the Federal Defendants only but never reached a resolution.
    Phillips II, 319 F.R.D. at 37.
    On July 15, 2019, after full rounds of briefing, the Court
    granted the Federal Defendants’ Renewed Motion to Dismiss, or in
    5
    the alternative, for Summary Judgment as to Counts I, II, and
    IX. Phillips III, 390 F. Supp. 3d at 183. The Court also granted
    Mr. Miller’s Motion for Summary Judgment as to Counts VI and
    VIII. Id.
    Thereafter, the Individual Defendants filed the instant
    Motion to Dismiss the remaining claims for breach of fiduciary
    duty, defamation, and civil conspiracy. See Defs.’ Mot. Dismiss,
    ECF No. 140; Defs.’ Br. Supp. Mot. Dismiss (“Defs.’ Mot.”), ECF
    No. 140-1. Plaintiffs filed a brief in opposition, see Pls.’
    Opp’n Defs.’ Mot. Dismiss (“Pls.’ Opp’n), ECF No. 141, and
    Defendants filed a reply in support of their motion, see Defs.’
    Reply Supp. Mot. Dismiss (“Defs.’ Reply”), ECF No. 142. This
    motion is ripe and ready for the Court's adjudication.
    III. Standard of Review
    Federal Rule of Civil Procedure 12(b)(1) provides for
    dismissal of an action for “lack of subject matter
    jurisdiction.” Fed. R. Civ. P. 12(b)(1). On a Rule 12(b)(1)
    motion to dismiss, the party asserting jurisdiction has the
    burden of establishing that the Court has subject matter
    jurisdiction over the case. See Logan v. Dep't of Veterans
    Affs., 
    357 F. Supp. 2d 149
    , 153 (D.D.C. 2004) (citing McNutt v.
    Gen. Motors Acceptance Corp. of Ind., 
    298 U.S. 178
    , 182–83,
    (1936)). “Because Rule 12(b)(1) concerns a court's ability to
    6
    hear a particular claim, the court must scrutinize the [party]’s
    allegations more closely when considering a motion to dismiss
    pursuant to Rule 12(b)(1) than it would under a motion to
    dismiss pursuant to Rule 12(b)(6).” Schmidt v. U.S. Capitol
    Police Bd., 
    826 F. Supp. 2d 59
    , 65 (D.D.C. 2011) (citations
    omitted).
    To assess whether a complaint sufficiently alleges subject
    matter jurisdiction, the Court accepts as true the allegations
    of the complaint, see Ashcroft v. Iqbal, 
    556 U.S. 662
    , 678
    (2009); and liberally construes the pleadings in the plaintiff’s
    favor, see Barr v. Clinton, 
    370 F.3d 1196
    , 1199 (D.C. Cir.
    2004). The Court may also consider “undisputed facts evidenced
    in the record” as well as its own “resolution of disputed
    facts.” Herbert v. Nat'l Acad. of Scis., 
    974 F.2d 192
    , 197 (D.C.
    Cir. 1992).
    IV.   Analysis
    “Federal courts are courts of limited jurisdiction.”
    Kokkonen v. Guardian Life Ins. Co. of Am., 
    511 U.S. 375
    , 377
    (1994). They “possess only the power authorized by the
    Constitution and by statute.” Jarkesy v. S.E.C., 
    803 F.3d 9
    , 15
    (D.C. Cir. 2015). “When a federal court has an independent basis
    for exercising federal jurisdiction, it may, in certain
    circumstances, also exercise pendent, or supplemental
    jurisdiction over related claims under state law.” Women
    7
    Prisoners of D.C. Dep’t of Corr. v. Dist. of Columbia, 
    93 F.3d 910
    , 920 (D.C. Cir. 1996).
    In United Mine Workers of America v. Gibbs,
    
    383 U.S. 715
    , 
    86 S. Ct. 1130
    , 
    16 L. Ed. 2d 218
    (1966), the Supreme Court crafted a two-part
    test to determine when the assertion of
    jurisdiction over a state law claim is
    appropriate. First, the district court must
    determine whether the state and the federal
    claims “derive from a common nucleus of
    operative fact”; if they do, the court has the
    power, under Article III of the Constitution,
    to hear the state claim. 
    Id. at 725
    , 
    86 S. Ct. at 1138
    . Second, even if it concludes that it
    has that power, the district court must then
    decide whether to exercise its discretion to
    assert jurisdiction over the state issue. 
    Id. at 726
    , 
    86 S. Ct. at 1139
    . The Supreme Court
    cautioned that
    pendent jurisdiction is a doctrine
    of discretion, not of plaintiff's
    right. Its justification lies in
    considerations of judicial economy,
    convenience    and    fairness    to
    litigants; if these are not present
    a federal court should hesitate to
    exercise jurisdiction over state
    claims . . . . Needless decisions of
    state law should be avoided both as
    a matter of comity and to promote
    justice between the parties, by
    procuring for them a surer-footed
    reading of applicable law.
    
    Id.
     (quoting United Mine Workers of Am. v. Gibbs, 
    383 U.S. 715
    ,
    725-26 (1966)). “A district court's decision to resolve state law
    claims is    reviewed   for   an   abuse   of   discretion.”   
    Id.
       (citing
    Edmondson & Gallagher v. Alban Towers Tenants Ass'n, 
    48 F.3d 1260
    ,
    1265–66 (D.C. Cir. 1995)).
    8
    In 1990, Congress enacted the supplemental
    jurisdiction   statute, which provides  in
    relevant part:
    (a)    Except    as    provided    in
    subsections (b) and (c) . . . , in
    any civil action of which the
    district    courts   have    original
    jurisdiction, the district courts
    shall        have        supplemental
    jurisdiction over all other claims
    that are so related to claims in the
    action    within    such     original
    jurisdiction that they form part of
    the same case or controversy under
    Article III of the United States
    Constitution . . . .
    * * * * * *
    (c) The district courts may decline
    to       exercise      supplemental
    jurisdiction over a claim under
    subsection (a) if—
    (1) the claim raises a
    novel or complex issue of
    State law,
    (2)        the       claim
    substantially
    predominates    over   the
    claim   or   claims   over
    which the district court
    has               original
    jurisdiction,
    (3) the district court has
    dismissed all claims over
    which   it   has  original
    jurisdiction, or
    (4)     in     exceptional
    circumstances, there are
    other compelling reasons
    9
    for              declining
    jurisdiction.
    Id. at 920-21. Each Section 1367(c) basis provides an
    independent reason for a court to decline supplemental
    jurisdiction. Edmondson & Gallagher, 
    48 F.3d at 1266
    .
    A. The Common-Law Claims Form Part of the Same Case or
    Controversy
    The Amended Complaint invoked the Court’s supplemental
    jurisdiction over the state-law claims on the grounds that those
    claims were “so related to claims in the action within such
    original jurisdiction that they form part of the same case or
    controversy.” 
    28 U.S.C. § 1367
    (a); compare Am. Compl., ECF No.
    42 at 29-35 ¶¶ 99-126, with 
    id.
     at 35-48 ¶¶ 127-199. The Court
    concludes that the remaining common-law claims form part of the
    same case or controversy. Defendants do not suggest otherwise.
    See generally Defs.’ Mot., ECF No. 140-1.
    B. The Court Will Exercise Supplemental Jurisdiction Over the
    Remaining Claims
    In light of the dismissal of the federal constitutional
    claims, Phillips III, 390 F. Supp. 3d at 183; the Amended
    Complaint contains no further federal causes of action over
    which the Court has original subject matter jurisdiction. The
    Court therefore must consider whether it “may decline to
    exercise supplemental jurisdiction” over the remaining claims.
    10
    
    28 U.S.C. § 1367
    (c). Defendants invoke two of the Section
    1367(c) bases, arguing that the Court should decline to exercise
    supplemental jurisdiction over the remaining claims because: (1)
    they raise novel issues of state law; and (2) the Court has
    dismissed all of the federal claims. Defs.’ Mot., ECF No. 140-1
    at 2, 6. For the reasons that follow, the Court concludes in its
    discretion that it will exercise supplemental jurisdiction over
    the remaining state-law claims.
    1. The Remaining Claims Do Not Raise Novel or Complex Issues
    of State Law
    The supplemental-jurisdiction statute permits federal
    courts to decline to exercise jurisdiction over novel and
    complex issues of state law, 
    28 U.S.C. § 1367
    (c)(1); because
    “[n]eedless decisions of state law should be avoided both as a
    matter of comity and to promote justice between the parties,”
    Gibbs, 
    383 U.S. at 726
    .
    Defendants assert that the common-law claims raise
    “unresolved issues of District of Columbia law” because with
    regard to the breach of fiduciary duty claim, “[t]here does not
    appear to be much, if any, law in the District of Columbia
    clearly telling” the Individual Defendants what their duty was.
    Defs.’ Mot., ECF No. 140-1 at 6. Defendants provide no caselaw
    to support their assertion. See generally 
    id.
     In their Reply
    brief, they acknowledge that while breach of fiduciary duty is
    11
    not a novel issue on its own, “the peculiar factual
    circumstances” here make it so. Defs.’ Reply, ECF No. 142 at 1-
    2. Plaintiffs respond that “there are no uncertain questions of
    District of Columbia law with respect to the [remaining] breach
    of fiduciary duty, defamation, and civil conspiracy claims.”
    Pls.’ Opp’n, ECF No. 141 at 5; and point out that the Court has
    already ruled on the breach of fiduciary duty and civil
    conspiracy claims with regard to Mr. Miller, 
    id.
    Defendants have failed to identify any novel or complex
    issues of state law regarding the remaining claims of breach of
    fiduciary duty, defamation, and civil conspiracy. As an initial
    matter, they asserted only that the breach of fiduciary duty
    claim raised an unsettled issue of District of Columbia law,
    raising no issue with respect to the defamation and civil
    conspiracy claims. See Defs.’ Mot., ECF No. 140-1 at 6-7.
    Defendants then acknowledged that the factual scenario in this
    case, not the applicable law, is unusual. Defs.’ Reply, ECF No.
    142 at 1-2. However, while “the facts underlying the [state-law]
    claim[s] may be novel, [here] the question presented” is not.
    Powers v. United States, 
    783 F.3d 570
    , 577 (5th Cir. 2015).
    That the state law claims do not raise novel issues of
    District of Columbia law is demonstrated in the Court’s 2019
    Memorandum Opinion. In that Opinion, the Court ruled on cross-
    12
    motions for summary judgment with respect to the breach of
    fiduciary duty and civil conspiracy claims against Mr. Miller.
    Phillips III, 390 F. Supp. 3d at 167-82. On the breach of
    fiduciary duty claim, the Court concluded that that Plaintiffs
    proved Mr. Miller’s duty of loyalty but not breach of that duty
    or proximate cause. See id. at 170-81. On the civil conspiracy
    claim, the Court concluded that Plaintiffs did not establish
    that there was an agreement between two or more persons. See id.
    at 181-82.
    For these reasons, the Court need not decline to exercise
    supplemental jurisdiction on this basis.
    2. The Court Can Exercise Supplemental Jurisdiction Even
    Though It Dismissed the Federal Claims
    Section 1367(c)(3) permits district courts to decline to
    exercise supplemental jurisdiction when they have already
    dismissed the claims that supported original jurisdiction. 
    28 U.S.C. § 1367
    (c)(3); see also Karim-Panahi v. 4000 Mass.
    Apartments, No. 18-7054, 
    2018 WL 6167393
    , at *1 (D.C. Cir. Nov.
    1, 2018) (per curiam) (affirming dismissal on this ground
    alone). Defendants argue that when a district court has
    dismissed all the claims over which it had original
    jurisdiction, “the law makes clear that the greatly favored
    course is to dismiss the supplemental claims without prejudice.
    There is nothing about this case that makes it an exception to
    13
    that rule.” Defs.’ Reply, ECF No. 142 at 2. At the same time,
    however, they acknowledge, as they must, that “[w]hether to
    retain jurisdiction over pendent state and common law claims
    after the dismissal of the federal claims is ‘a matter left to
    the sound discretion of the district court.’” Defs.’ Mot., ECF
    No. 140-1 at 2 (quoting Edmondson & Gallagher, 
    48 F.3d at
    1265-
    66).
    “[I]n the usual case in which all federal-law claims are
    dismissed before trial, the balance of factors to be considered
    under the pendent jurisdiction doctrine—judicial economy,
    convenience, fairness, and comity—will point toward declining to
    exercise jurisdiction over the remaining state-law claims.”
    Shekoyan v. Sibley Int'l, 
    409 F.3d 414
    , 424 (D.C. Cir. 2005)
    (quoting Carnegie–Mellon Univ. v. Cohill, 
    484 U.S. 343
    , 350 n.7
    (1988)). The Court finds, however, that this litigation does not
    present “the usual case” and that the balance weighs in favor of
    exercising supplemental jurisdiction.
    Both judicial economy and convenience weigh strongly in
    favor of the Court retaining jurisdiction over the remaining
    claims. This case has been before the Court for over ten years.
    See generally Docket for Civil Action No. 11-2021; cf. White V.
    Bank of Am., N.A., 
    200 F. Supp. 3d 237
    , 247 (D.D.C. 2016)
    (determining that the Court would exercise supplemental
    jurisdiction over the remaining state-law claim where the case
    14
    had been pending in federal court for almost four years).
    Although the Parties have not conducted discovery on the
    remaining claims, see Defs.’ Mot., ECF No. 140-1 at 3; the Court
    has issued three Memorandum Opinions, thereby becoming familiar
    with the facts, see Phillips III, 390 F. Supp. 3d at 145-151;
    Phillips II, 319 F.R.D. at 37; Phillips I, 894 F. Supp. 2d at
    77-79. Furthermore, the Court has already considered the breach
    of fiduciary duty and civil conspiracy claims in light of these
    facts, albeit with respect to a different Defendant in the case.
    See Phillips III, 390 F. Supp. 3d at 167-82 (considering claims
    against Mr. Miller). Furthermore, and as explained supra,
    because the state-law issues are neither novel nor complex,
    comity does not demand dismissal.
    For these reasons, the Court will exercise supplemental
    jurisdiction over the remaining state-law claims in this case. 3
    3 Since the Court will exercise supplemental jurisdiction over
    the state-law claims, the Court need not reach Plaintiffs’
    argument that diversity jurisdiction now exists.
    15
    V.      Conclusion
    For the reasons set forth above, the Court DENIES the
    remaining Individual Defendants’ Motion to Dismiss, ECF No. 140.
    A separate Order accompanies this Memorandum Opinion.
    SO ORDERED.
    Signed:     Emmet G. Sullivan
    United States District Judge
    May 19, 2022
    16