Phillips v. Mabus , 894 F. Supp. 2d 71 ( 2012 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
SEBASTIAN PHILLIPS, et. al, )
)
Plaintiffs, )
) Civil Action No. 11-2021 (EGS)
v. )
)
RAYMOND E. MABUS, et. al, )
)
Defendants. )
)
MEMORANDUM OPINION
Plaintiffs, Sebastian Phillips and the company he owns,
Marine Design Dynamics, Inc. (hereinafter “MDD”), bring suit
against various officials in the United States Navy as well as
certain of MDD’s former employees. Plaintiffs allege they were
effectively debarred from government contracting with the Navy
without notice and a hearing, in violation of their Fifth
Amendment due process rights. Plaintiffs also allege a variety
of common law causes of action against MDD’s former employees as
well as two government employees. When this case was initially
filed plaintiffs moved for a temporary restraining order and
preliminary injunction against the federal defendants, seeking
to enjoin them from de facto debarring MDD from government
contracting. On December 7, 2011, following a hearing on
plaintiffs’ emergency motions, the plaintiffs and federal
defendants agreed and stipulated to a consent preliminary
injunction. Now pending before the Court are (1) the federal
defendants’ motion to dismiss, or in the alternative for summary
judgment, (2) plaintiffs’ motion to enforce the consent
preliminary injunction, and (3) motions to dismiss filed by
three of plaintiffs’ former employees. Upon consideration of
the motions, the responses, and the replies thereto, the
relevant caselaw and the record in this case as a whole, the
motions will be DENIED.
I. FACTUAL AND PRODCEDURAL BACKGROUND1
Plaintiff Marine Design Dynamics, Inc., a District of
Columbia-based government contractor, is a Naval Architecture
firm specializing in ship energy conservation for the Navy and
other government clients. In 2006, MDD began working as a
subcontractor to Computer Sciences Corporation (“CSC”),
performing work under CSC’s SeaPort e-prime contract with the
Naval Sea Systems Command of the Department of the Navy
(“NAVSEA”), contract number N001788-04-D-4030-EHO2. Under CSC’s
NAVSEA contract, MDD performed work for the Navy’s Operational
Logistics Integration Program (“OPLOG”) at its Carderock
1
For purposes of ruling on a motion to dismiss, the factual
allegations must be presumed true and liberally construed in
favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236
(1974); Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113
(D.C. Cir. 2000). Therefore, unless stated otherwise, the facts
set forth herein are taken from the Amended Complaint and its
accompanying exhibits.
2
facility. From 2006 through 2011, all the work MDD performed
for OPLOG was pursuant to this arrangement under the CSC
contract. This work comprised most of MDD’s government
contracting work, and plaintiffs derive all of their revenue and
income from government contracting.
In November 2009, MDD entered into a second contract, this
time as a prime contractor for the Navy, to provide engineering
and program management services to the energy conservation
program for the Combat Logistic Force ships of the Military
Sealift Command (“MSC”). That contract, number N00033-10-802,
specified a one year term, with an option for MSC to renew for
two additional years, until November 2012.
Between March and July of 2011, four key MDD employees who
had performed significant work on the OPLOG projects - Michael
Mazzocco, Volker Stammnitz, William Muras and Matthew Miller -
left MDD. Plaintiffs allege that before leaving MDD, each of
the key employees solicited OPLOG management and arranged to
take the work they were performing for MDD with them when they
left. At least two of the departing employees, Mazzocco and
Stammnitz, formed their own businesses to compete with MDD.
Plaintiffs allege that after leaving MDD, all four former
employees did, in fact, continue to perform the same work for
OPLOG as they had performed at MDD. In addition, Mazzocco
allegedly spread rumors that MDD was double or triple billing
3
the government for its work. Plaintiffs claim these rumors are
false, and that moreover, they have not been given formal notice
of the rumors or an opportunity to respond to them.
Nevertheless, as a result of the rumors, the government began to
deny plaintiffs work. First, on April 13, 2011, plaintiffs were
notified that OPLOG manager Charles Traugh was “pulling back”
$700,000 of OPLOG work previously budgeted for MDD, under the
CSC contract, in FY 2011. Plaintiffs allege that this $700,000
was reallocated to others, including Mazzocco, Stammnitz, Muras,
and Miller, who received the money after leaving MDD.
Shortly thereafter, on or about May 18, 2011, Mazzocco,
Stammnitz, and Muras met in Boston with NAVSEA and OPLOG
employees, including NAVSEA Chief Technology Officer Michael
Bosworth, OPLOG program manager Traugh, and assistant program
manager William Robinson. Plaintiffs allege that during that
meeting, Bosworth and Traugh, working with Mazzocco, Stammnitz
and Muras, decided to eliminate MDD entirely from the OPLOG
budget in Fiscal Year (“FY”) 2012, and redirect plaintiffs’ work
to the departing or already departed MDD employees. Plaintiffs
allege that OPLOG’s FY 2012 budget, developed by Traugh and
Robinson, had included a minimum of $2.7 million for MDD.
During a meeting to review the OPLOG program on July 13,
2011, Bosworth implemented the decisions reached at the May 2011
meeting in Boston. He instructed Traugh that OPLOG was to
4
immediately cease giving any OPLOG work to plaintiffs, and to
continue the moratorium through at least FY 2012. On July 28,
2011, Traugh met with plaintiff Phillips and informed him that
OPLOG would not be tasking work to MDD for FY 2012 under the CSC
prime contract or any existing prime contract. Plaintiffs
allege that they have been awarded no new work at OPLOG, through
the CSC contract or any other contract, since July 2011.
Without any work to perform at OPLOG, MDD attempted to get
additional work through other components of the Navy.
Specifically, plaintiffs attempted to obtain work as a
subcontractor to Gryphon Technologies, which has a prime
contract with NAVSEA. See Am. Compl. Exhibits O, P, Q; see also
Fed. Defs.’ Mot. to Dismiss or in the Alternative for Summ. J.,
Ex. C, Decl. of Kevin D. Baetsen (“Baetsen Decl.”), Exs. 1-3.
MDD’s ability to obtain this work, however, was subject to
NAVSEA appointing a government employee to serve as a Technical
Point of Contact (“TPOC”). Initially, Tom Martin, director of
the energy office at NAVSEA headquarters, agreed to serve as
TPOC, but later informed other Navy personnel that he could not
do so because he had been informed that there were problems
“tracking the money” MDD had charged the government for its
OPLOG work. Martin explained that he had been “directed by
[his] leadership not to be involved with any contract that
includes MDD,” regardless of whether the contract was to perform
5
OPLOG work or work for a different component of the Navy. Am.
Complaint ¶¶ 87, 89 (quoting Oct. 7, 2011 email from T. Martin).
Finally, MDD alleges that the defendants attempted to
interfere with its existing contract with MSC (contract number
N00033-10-802) before it was renewed for FY 2012 by, inter alia,
attempting to divert work under that contract to former MDD
employees. These alleged attempts were unsuccessful; in the
fall of 2011, MSC exercised its final one-year option on its
contract with MDD, which will expire in November 2012. Baetsen
Decl. ¶ 4.
On November 16, 2011, Plaintiffs initiated this suit
against several Navy officials as well as the four former MDD
employees discussed above. Plaintiffs moved for a temporary
restraining order and preliminary injunction against the federal
defendants only, alleging plaintiffs had been de facto debarred
from government contracting without notice and a hearing in
violation of their fifth amendment right to due process of law.
Pls.’ Mot. for Temp. Rest. Order at 4-5. Following briefing on
the motion, the Court held a hearing on December 7, 2011. At
the hearing’s conclusion, the parties agreed and stipulated to
the entry of a preliminary injunction. See Order Granting
Stipulated Prelim. Inj.; see also Minute Order of Dec. 7, 2012.
In relevant part, the Stipulated Preliminary Injunction (1)
enjoined the government from taking any additional action to
6
implement or spread the de facto debarment, (2) required the
Navy to allow MDD to compete for new work and to continue
performing contracts it was currently performing under the same
standards applicable to other contractors, and (3) required the
Navy to communicate the foregoing information to CSC and
Gryphon. See Id.Following the preliminary injunction proceedings,
Plaintiffs filed an Amended Complaint. Count I asserts that the
federal defendants violated plaintiffs’ constitutional right to
due process by blacklisting them for government contracting
without procedural safeguards, and seeks declaratory and
injunctive relief. Count II asserts the same claims against
Bosworth and Traugh in their individual capacities and seeks
damages of $2.5 million. Counts III – VIII assert breach of
fiduciary duty and civil conspiracy against Mazzocco, Stammnitz,
Muras, and Miller, and common law defamation against Mazzocco.
Finally, Count IX alleges common law interference with
contractual relations by Traugh and Robinson in their official
and individual capacities. The federal defendants, as well as
Mazzocco, Stammnitz, and Muras have moved to dismiss the Amended
Complaint; the federal defendants have also moved in the
alternative for summary judgment. Plaintiffs, for their part,
have filed a motion to enforce the preliminary injunction.
These motions are ripe for resolution by the Court.
7
II. STANDARD OF REVIEW2
On a motion to dismiss for lack of subject-matter
jurisdiction under Rule 12(b)(1), the plaintiff bears the burden
of establishing that the court has subject-matter jurisdiction.
Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). “The
court must address the issue of jurisdiction as a threshold
matter, because absent jurisdiction the court lacks the
authority to decide the case on any other grounds.” Am. Farm
Bureau v. EPA, 121 F. Supp. 2d 84, 91 (D.D.C. 2000). Moreover,
because subject-matter jurisdiction relates to the Court’s power
to hear the claim, the Court must give the plaintiff’s factual
allegations closer scrutiny when resolving a Rule 12(b)(1)
motion than would be required for a Rule 12(b)(6) motion.
Uberoi v. EEOC, 180 F. Supp. 2d 42, 44 (D.D.C 2001). In
resolving a motion to dismiss for lack of subject-matter
jurisdiction, the Court “may consider the complaint supplemented
by undisputed facts evidenced in the record, or the complaint
supplemented by undisputed facts plus the court’s resolution of
disputed facts.” Coal. For Underground Expansion v. Mineta, 333
F.3d 193, 198 (D.C. Cir. 2003) (internal citations and quotation
marks omitted).
2
This section addresses the standard of review for the motions
to dismiss, or in the alternative for summary judgment. The
standard of review for plaintiff’s motion for enforcement of the
stipulated preliminary injunction is addressed infra.
8
A motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) tests the legal sufficiency of a complaint. Browning v.
Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). A complaint must
contain “a short and plain statement of the claim showing that
the pleader is entitled to relief, in order to give the
defendant fair notice of what the ... claim is and the grounds
upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007) (internal quotation marks and citations omitted).
While detailed factual allegations are not necessary, plaintiff
must plead enough facts “to raise a right to relief above the
speculative level.” Id.When ruling on a Rule 12(b)(6) motion, the Court may
consider “the facts alleged in the complaint, documents attached
as exhibits or incorporated by reference in the complaint, and
matters about which the Court may take judicial notice.”
Gustave-Schmidt v. Chao, 226 F. Supp. 2d 191, 196 (D.D.C. 2002).
The Court must construe the complaint liberally in plaintiff’s
favor and grant plaintiff the benefit of all reasonable
inferences deriving from the complaint. Kowal v. MCI Commc’ns
Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). However, the Court
must not accept plaintiff’s inferences that are “unsupported by
the facts set out in the complaint.” Id. “[O]nly a complaint
that states a plausible claim for relief survives a motion to
dismiss.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
9
Summary judgment is appropriate “if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(a); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). Though the Court must draw all justifiable inferences
in favor of the non-moving party in deciding whether there is a
disputed issue of material fact, “[t]he mere existence of a
scintilla of evidence in support of the [non-movant]’s position
will be insufficient; there must be evidence on which the jury
could reasonably find for the [non-movant].” Anderson, 477 U.S.
at 252.
III. ANALYSIS
A. Federal Defendants’ Motion to Dismiss, or, in the
Alternative, for Summary Judgment
The federal defendants move to dismiss plaintiffs’ claims
against them in Counts I, II, and IX of the Amended Complaint
for lack of jurisdiction and failure to state a claim upon which
relief can be granted. In the alternative, the federal
defendants argue that summary judgment should be granted on
Counts I and II.
1. Sovereign Immunity
Federal defendants argue that sovereign immunity bars
plaintiff’s claims in Count I against the federal defendants in
their official capacities. Fed. Defs.’ Mot. to Dismiss or for
10
Summ. J. at 4-8 (hereinafter “Fed. Defs.’ Mem.”). The
plaintiffs contend that the government has waived sovereign
immunity for claims seeking non-monetary relief against the
United States, its agencies and federal officers acting in an
official capacity. Pls.’ Opp’n to Fed. Defs.’ Mot. to Dismiss
at 27-28. Plaintiffs are correct. See 5 U.S.C. § 702; see also
P&V Enters. v. United States Army Corps of Eng’rs, 466 F. Supp.
2d 134, 140-41 (D.D.C. 2006). In Count I of the Amended
Complaint, plaintiffs seek only declaratory and injunctive
relief, and their claims are against federal officers in their
official capacities.3 Accordingly, the waiver of sovereign
immunity found in Section 702 of the APA applies to plaintiffs’
claims against the federal defendants.
2. Sufficiency of Plaintiffs’ Claims that a De Facto
Debarment Occurred
Federal defendants also argue that plaintiffs cannot show
the government’s actions constituted de facto debarment in
violation of the due process clause of the Fifth Amendment.
Fed. Defs.’ Mem. at 27-31. Defendants principally argue that no
de facto debarment occurred for two reasons: (1) because MSC
exercised an option on its contract with MDD on October 30,
3
For the same reasons, federal defendants’ assertion that
plaintiffs may not allege Bivens claims against Mabus, Greenert,
McCoy and Kaskin for the actions of Bosworth and Traugh on a
theory of respondeat superior is irrelevant. Fed. Defs.’ Mem.
at 15-17. Plaintiffs do not bring Bivens claims against these
four federal defendants. See Pls.’ Opp’n at 30.
11
2011, which provided work for MDD until late 2012, plaintiffs
did not lose all of their government work and accordingly were
not debarred; and (2) in order to give rise to Fifth Amendment
protections, de facto debarment must be based on charges of a
lack of integrity, which, according to federal defendants,
plaintiffs do not allege.
De facto debarment occurs when a contractor has, for all
practical purposes, been suspended or blacklisted from working
with a government agency without due process, namely, adequate
notice and a meaningful hearing. Trifax Corp. v. Dist. of
Columbia, 314 F.3d 641, 643-44 (D.C. Cir. 2003); TLT Constr.
Corp. v. United States, 50 Fed. Cl. 212, 215 (2001). To
demonstrate de facto debarment, plaintiffs must show “a
systematic effort by the procuring agency to reject all of the
bidder’s contract bids. Two options exist to establish a de
facto debarment claim: 1) by an agency’s statement that it will
not award the contractor future contracts; or 2) by an agency’s
conduct demonstrating that it will not award the contractor
future contracts.” TLT Constr., 50 Fed. Cl. at 215-16 (internal
citations and quotations omitted).
Plaintiffs argue that they have adequately alleged both of
these options, although they need allege only one to survive a
motion to dismiss. Pls.’ Opp’n at 11. First, Plaintiffs
allege, and defendants do not dispute that two Navy officials,
12
Traugh and Bosworth, stated they would not permit plaintiffs to
work on any future contracts. Am. Compl. ¶¶ 79-84; see also
Fed. Defs.’ Mem. Ex. A, Traugh Decl. at ¶ 8 (“I decided, with
Mr. Bosworth’s concurrence, that OPLOG would no longer use MDD
as a subcontractor starting with work funded from FY 2012
appropriations.”); Ex. B., Bosworth Decl. at ¶ 7 (“I . . .
directed Charles Traugh . . . not to renew the association of
OPLOG with MDD starting in FY 2012.”) Plaintiffs allege that
these statements applied to their attempts to receive work at
OPLOG as well as other components of the Navy, as demonstrated
by NAVSEA employee Tom Martin’s statement that “I have been
directed by my leadership not to be involved with any contract
that includes MDD,” even if the contract had nothing to do with
OPLOG. Am. Compl. ¶ 89.
Plaintiffs also argue they have alleged a de facto
debarment by the agency’s conduct: namely, the Navy has taken
away MDD’s existing work and refused to permit MDD to obtain
additional work in several instances. First, in April 2011, the
Navy “pulled back” $700,000 that had been allocated to MDD for
subcontracting work with CSC during FY 2011. Am. Compl. ¶¶ 56-
57. Next, in July 2011 the Navy announced its intention not to
award MDD any more work under the CSC prime contract and to
prohibit MDD from receiving any more work from OPLOG under any
contract through FY 2012. Id. ¶¶ 73-74, 78-79. Plaintiffs
13
allege they have received no new work from OPLOG since summer
2011. Id. ¶ 83. Third, the Navy also indicated, via emails
dated September 15, 2011 and October 7, 2011, that MDD would not
get any funding on any future contract or subcontract, whether
through OPLOG or NAVSEA. Id. ¶¶ 87-92. The Navy also refused
to appoint a TPOC, which is a condition precedent to obtaining
this work. Id. Finally, Plaintiffs allege that federal
defendants attempted to stop – albeit unsuccessfully –
plaintiffs from performing the final year of work on plaintiffs’
single remaining contract to perform work for the Navy. Id. ¶
94. Plaintiffs allege that “all of their revenue and income
derive from Federal Government contracts, primarily OPLOG and
MSC contracts,” and that defendants’ actions threaten to put
plaintiffs out of business. Id. ¶ 95.
The Court agrees that plaintiffs have met their burden to
allege a de facto debarment sufficient to survive a motion to
dismiss. First, plaintiffs have alleged multiple Navy officials
stated that plaintiffs would not be awarded any future
contracts. As noted above, courts have found categorical
statements that contractors will not be awarded any future
contracts may amount to a de facto debarment. See TLT Constr.
Corp., 50 Fed. Cl. at 215; see also CRC Marine Servs. v. United
States, 41 Fed. Cl. 66, 84 (1988)(a contractor may allege de
facto debarment by evidence of statements, by agency officials
14
or employees, that he would not be awarded any contract at the
present or in the future); Related Indus., Inc. v. United
States, 2 Cl. Ct. 517, 525 (1983)(same).
Second, plaintiffs have alleged that the agency’s conduct
amounts to a systematic effort to preclude it from future
contracting. In Art-Metal USA, Incorporated v. Solomon, this
Court found that de facto debarment occurred when the government
terminated one of the movant’s contracts in its entirety and
held in abeyance the awards of four additional contracts for
which the contractor had submitted bids. The plaintiff did not
have to prove that it had lost 100% of its work to show de facto
debarment; it was sufficient to show that the government’s
actions were aimed at the overall status of the plaintiff as a
contractor, specifically at plaintiff receiving new contracts.
473 F. Supp. 1, 4, 5 n.7 (D.D.C. 1978). Similarly, in Leslie &
Elliott Company v. Garrett, this court found de facto debarment
when the Navy refused to award plaintiff two contracts for which
it had been the lowest bidder because the evidence showed the
Navy “had determined that it should no longer do business with”
the contractor at the submarine base. 732 F. Supp. 191, 196
(D.D.C. 1990). Likewise, this Circuit has found that de facto
debarment may lie where there has been exclusion from “virtually
all government work for a fixed period of time,” Reeve Aleutian
Airways, Incorporated v. United States, 982 F.2d 594, 598 (D.C.
15
Cir. 1993) (citations and quotations omitted); or where the
government’s conduct “has the broad effect of largely precluding
[plaintiffs] from pursuing” government work. Trifax Corp., 314
F.3d at 644 (citation omitted).
Defendants contend that plaintiffs cannot show a de facto
debarment as a matter of law because plaintiffs “were
subsequently awarded work by the alleged debarring agency;”
namely, on October 30, 2011, MSC exercised the final option of a
three-year contract with MDD. The MSC contract, which was
initially awarded in 2009, will expire in November 2012. Fed.
Defs.’ Mot. at 27-28, Baetsen Decl. ¶ 4.4
The present record is cloudy as to the extent of the Navy’s
disqualification of plaintiffs. The facts currently before the
court do not reveal whether MSC’s exercise of the final option
of its three year contract with MDD is tantamount to a new or
“future” contract awarded after the alleged debarment, or, in
the alternative, is effectively a continuation of a contract
awarded in 2009, well before the alleged debarment. Ultimately,
4
Defendants point out that, under the Federal Acquisition
Regulations, agencies may not exercise options on current
contracts with contractors that have been debarred absent
compelling circumstances. Fed. Defs.’ Reply at 9 (citing 48
C.F.R. § 9-405-1(b)(3)). This provision is not dispositive
here, as it only governs contractors who have been officially
debarred. Plaintiffs here have alleged de facto debarment,
which rests on the claim that defendants have ignored their own
regulations and are instead engaged in an unauthorized effort to
preclude them from receiving future work.
16
development of these facts may be dispositive as to the de facto
debarment claim. However, at the motion to dismiss stage, when
the Court must view all facts in the light most favorable to
plaintiffs, the statements and actions alleged in the Amended
Complaint make out a plausible claim to de facto debarment.
While plaintiffs have not lost 100% of their contracting work,
they have plausibly claimed that they have been barred from
performing work on several contracts and thus have been broadly
precluded from future work with the Navy. Courts have often
found that, while “[p]reclusion from a single contract is
insufficient to establish de facto debarment,” an allegedly
broad based preclusion across multiple contracts (or, in this
case, subcontracts) gives rise to a viable claim for de facto
debarment. Highview Eng’g, Inc. v. United States Army Corps. of
Eng’rs, Case 3:08-647, 2012 U.S. Dist. LEXIS 45249, *20 (W.D.
Ky. Mar. 30, 2012)(collecting cases); see also Leslie & Elliott
Co., 732 F. Supp. at 197; Art-Metal, 473 F. Supp. at 5.
Accordingly, the Court concludes that plaintiffs have stated a
claim of de facto debarment sufficient to survive a motion to
dismiss.
The Court likewise rejects the federal defendants’ claim
that plaintiffs have not asserted a de facto debarment claim
because they have not alleged they were barred from government
contracting due to charges of fraud, dishonesty, or lack of
17
integrity. As this Circuit has held, individuals and
corporations have a due process liberty interest in avoiding the
damage to their reputation and business caused by the stigma of
broad preclusion from government contracting. Reeve, 982 F.2d
at 598; see also Trifax, 314 F.3d at 643-44. Assuming arguendo
that the broad preclusion from contracting must be based on
charges of fraud, dishonesty, or lack of integrity in order to
give rise to a protected liberty interest, the Court finds
plaintiffs have alleged such charges in this case.
Specifically, plaintiffs have alleged Bosworth and Traugh
decided to bar them from Navy work because of rumors that
plaintiffs were submitting fraudulent bills to the government.
Am. Compl. ¶¶ 52, 87-93. Indeed, Bosworth and Traugh provided
declarations in support of the government’s motion to dismiss
stating that they decided to stop working with plaintiffs
because of their “lack of transparency.” Fed. Defs.’ Mem.,
Decl. of Charles Traugh at ¶ 8. Traugh and Bosworth assert that
MDD’s invoices did not contain sufficient information “to
evaluate whether the price [the Navy] paid for [MDD’s] work was
reasonable” and, despite repeated requests for more detail, MDD
refused to provide additional information. Id. at ¶¶ 6-7; see
also Fed. Defs.’ Mem., Decl. of Michael Bosworth at ¶¶ 4-5.
Defendants’ own statements confirm that concerns about
18
plaintiffs’ honesty and integrity animated the decision to stop
them from performing more government work.
3. Standing and Mootness
In their reply, defendants argue for the first time that
plaintiffs lack standing under Article III. Fed. Defs.’ Reply
at 2. To satisfy Article III's standing requirements, a
plaintiff must show that, at the time the suit is filed,
(1) [he] has suffered an "injury in fact" that is (a)
concrete and particularized and (b) actual or imminent, not
conjectural or hypothetical; (2) the injury is fairly
traceable to the challenged action of the defendant; and
(3) it is likely, as opposed to merely speculative, that
the injury will be redressed by a favorable decision.
Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528
U.S. 167, 180-81 (2000). While the proof required to establish
standing increases as the suit proceeds, at the motion to
dismiss stage “general factual allegations of injury resulting
from the defendant’s conduct may suffice.” Lujan v. Defenders
of Wildlife, 504 U.S. 555, 561 (1992) (internal citations and
quotation marks omitted).
Reprising their arguments that plaintiffs have not been de
facto debarred as a matter of law, the federal defendants claim
plaintiffs have suffered no “injury in fact because they were
not de facto debarred.” Fed. Defs.’ Reply at 2. For the
reasons explained above, plaintiffs have stated a claim for de
facto debarment. The Court also rejects federal defendants’
19
claim that plaintiffs cannot show injury in fact because they
have not presented evidence “that they attempted to get future
contracts” after the alleged debarment, but “were prevented from
doing so.” Id. at 5. A claim of de facto debarment may be
justiciable absent the formality of plaintiffs bidding on and
being denied future contracts after the alleged debarment. See
Dynamic Aviation v. Dep’t of Interior, 898 F. Supp. 11, 13
(D.D.C. 1995) (where possession of pilot and aviation
credentials was a condition precedent to performing government
work, and plaintiff’s credentials had been revoked, plaintiff
need not show he had bid on government work after the revocation
to present a justiciable controversy). In this case, Plaintiffs
allege that as a result of their de facto debarment, they lost
$700,000 of work they had already been allocated in FY 2011,
over $2.5 million of future work which had been set aside for
MDD in OPLOG’s FY 2012 budget, and an additional future
subcontract with Gryphon Technologies. These alleged losses
clearly constitute an injury in fact for the purposes of Article
III standing.
Defendants also argue that plaintiffs’ injuries are not
redressable because, even if they were de facto debarred, they
are not currently entitled to receive any contract work. Fed.
Defs.’ Reply at 7-9. As discussed supra, this argument is
premature; plaintiffs have alleged that they lost work to which
20
they were entitled, which is all that is required at the
pleading stage. Lujan, 504 U.S. at 561. Moreover, even
assuming arguendo defendants are correct, this does not
necessarily deprive plaintiffs of standing to seek prospective
injunctive or declaratory relief. Indeed, plaintiffs have
already received a preliminary injunction which, inter alia,
enjoins defendants from taking any further action to preclude
plaintiffs from contracting, and rescinds certain actions they
had taken to that effect. This injunction, however, only
remains in place pending a final determination of the merits of
the action. 13 James Wm. Moore, et. al, Moore’s Federal
Practice, § 65.20 (3d ed. 1997). Moreover, plaintiffs have
alleged a likelihood of future violations of their rights by the
defendants, and accordingly have standing to pursue a
declaratory judgment. Am. Compl. ¶¶ 83, 89, 95, 98; see also
Fair Employment Council of Greater Washington v. BMC Mktg.
Corp., 28 F.3d 1268, 1273 (D.C. Cir. 1994).
Finally, the complaint is not moot. Federal defendants’
mootness argument rests solely on the assertion that they have
taken action to change their conduct after the lawsuit was
filed, mainly, that they have complied with the consent
Stipulated Preliminary Injunction. Fed. Defs.’ Reply at 9-10.
Defendants cannot rely on their voluntary cessation of the
challenged conduct as a basis for mootness unless “subsequent
21
events made it absolutely clear that the allegedly wrongful
behavior could not reasonably be expected to recur.” Friends of
the Earth, 528 U.S. at 189 (citations omitted). Defendant has
provided no evidence on this point; indeed, notwithstanding the
preliminary injunction, the declarations of Charles Traugh and
Michael Bosworth do not indicate that OPLOG or NAVSEA will
consider plaintiffs for any future work. Accordingly,
defendants have not satisfied their “heavy burden of persuading”
the court that the challenged conduct cannot reasonably be
expected to recur. Id.
4. Federal Tort Claims Act
In Count IX of the Amended Complaint, plaintiffs allege
Traugh and Robinson tortiously interfered with their contractual
relations, their prospective contractual relations, and their
prospective advantageous relationships. Specifically, they
allege that Traugh and Robinson:
 Induced MDD’s key employees to breach their fiduciary
duties to MDD, by taking its work and its business
opportunities;
 Prevented MDD from performing task orders under the
CSC contract, and redirected funds allocated for MDD
under that contract;
 Interfered with other contracts of MDD’s, such as its
contract with the MSC;
 Published defamatory statements about MDD to injure
plaintiffs in their trade or business.
Am. Compl. ¶ 195. In response, the federal defendants filed a
certification pursuant to the Westfall Act, 29 U.S.C § 2679,
22
stating that Traugh and Robinson were acting within the scope of
their employment during the incidents alleged by plaintiffs, and
that the United States should therefore be substituted as sole
defendant in lieu of Traugh and Robinson. The federal
defendants then moved to dismiss Count IX, arguing that
plaintiffs’ claims against the United States are excluded from
the Federal Tort Claims Act’s (“FTCA”) waiver of sovereign
immunity and that plaintiffs failed to exhaust their
administrative remedies under the FTCA. In their opposition to
defendants’ motion, plaintiffs have requested discovery in order
to contest whether Traugh’s and Robinson’s actions were, in
fact, within the scope of their employment. For the following
reasons, the Court concludes that plaintiffs have met their
burden to obtain limited discovery on the scope of Robinson’s
and Traugh’s employment.
The Westfall Act provides that federal officials are immune
from state tort lawsuits for money damages if the employee was
“acting within the scope of employment during the alleged
incident.” Haddon v. United States, 68 F.3d 1420, 1422-23 (D.C.
Cir. 1995).
Upon certification by the Attorney General that the
defendant employee was acting within the scope of his
office or employment at the time of the incident out of
which the claim arose, any civil action or proceeding
commenced upon such a claim in a United States district
court shall be deemed an action against the United States .
23
. . . and the United States shall be substituted as the
party defendant.
28 U.S.C. § 2679(d)(1). The Attorney General’s certification
constitutes prima facie evidence that the employee was acting
within the scope of his employment, and once the certification
has been made, the plaintiff challenging the certification has
the burden of “alleging facts that, if true, would establish
that the defendants were acting outside the scope of their
employment.” Stokes v. Cross, 327 F.3d 1210, 1215 (D.C. Cir.
2003). As this Circuit has explained, “if a plaintiff meets
this pleading burden, he may, if necessary, attain limited
discovery to resolve any factual disputes over jurisdiction.”
Wuterich v. Murtha, 562 F.3d 375, 381 (D.C. Cir. 2009) (internal
citations omitted); see also Stokes, 327 F.3d 1210, 1213 (the
certification does not have “any particular evidentiary weight,”
therefore, if plaintiff alleges “a material dispute as to the
scope issue, the district court must resolve it[.]” (internal
citations omitted)).
In order to determine whether a federal employee was acting
within the scope of his employment, the Court must apply the law
in the state in which the alleged tort occurred. Id. at 1214.
District of Columbia law is drawn from the Restatement (Second)
of Agency. Id. The Restatement provides in pertinent part:
Conduct of a servant is within the scope of employment if,
but only if, (a) it is of the kind he is employed to
24
perform; (b) it occurs substantially within the authorized
time and space limits; (c) it is actuated, at least in
part, by a purpose to serve the master; and (d) if force is
intentionally used by the servant against another, the use
of force is not unexpected by the master.
Restatement (Second) of Agency § 228(1). The second, third and
fourth elements are irrelevant here because plaintiffs do not
contest that the alleged events occurred substantially within
authorized time and space limits or were actuated, in some part,
with the purpose to serve the master, nor do they allege the use
of force. The plaintiffs do, however, attempt to rebut the
United States’ scope-of-employment certification under the first
prong of the Restatement test, claiming “it is difficult to
understand that the [actions described in paragraph 195 of the
Amended Complaint] could be considered to be related to the work
Robinson and Traugh were employed to perform.” Pls.’ Opp’n at
33.
To qualify as conduct of the kind they were employed to
perform, Robinson’s and Traugh’s actions must have either been
“of the same general nature as that authorized” or “incidental
to the conduct authorized.” Restatement (Second) 229. The
current record sheds little light on the duties Traugh and
Robinson are authorized to perform. In the Amended Complaint,
plaintiffs assert that Traugh, in his capacity as OPLOG program
manager, and/or Robinson, in his capacity as OPLOG’s assistant
program manager, had the authority to, inter alia, (1) oversee
25
plaintiffs’ work, (2) review and approve their “deliverables”
and invoices, (3) develop OPLOG’s budget and allocate funds to
various contractors, and (4) block any contractor from
contracting to perform work on OPLOG projects. Am. Compl. ¶¶
29-31, 73, 82.
However, in their opposition to the federal defendants’
motion to dismiss, plaintiffs take a contrary position. They
assert that Traugh (and presumably his assistant Robinson), have
limited, if any authority to (a) oversee OPLOG funding to
government contractors and ensure it is well and prudently
spent; (b) request that prime contractors replace employees or
subcontractors, or assign follow-on tasks to current employees
or subcontractors; or (c) ensure that the work performed by
government contractors and subcontractors conforms to contract
requirements. See Pls.’ Opp’n to Fed. Defs.’ Mem., Ex. B.,
Decl. of Sebastian Phillips, ¶¶ 28-31, 39. Plaintiffs assert
that most or all of this authority is vested in either the prime
contractors for whom MDD works or in the Navy’s contracting
officers, not Traugh or Robinson.5 Id. Traugh maintains that he
5
It is worth noting that other documents provided by the Navy
seem to provide at least some support for these assertions.
Specifically, the memorandum issued by NAVSEA in response to the
Consent Preliminary Injunction provides, in relevant part, that
the Navy’s Seaport-e contracts, which include the contracts with
CSC and Gryphon at issue in this case, “do not permit Command
personnel to direct a prime contractor to select, or decline to
select, a given subcontractor for a given item of work. Other
26
is authorized to perform all of these duties, but, other than
his declaration, has provided no evidence to support his
assertions. See Fed. Defs.’ Mem., Ex. A., Traugh Decl.
The Court is troubled by plaintiffs’ contradictory
characterizations of the scope of Traugh’s and Robinson’s
employment. Nevertheless, plaintiffs have alleged facts in
their opposition to the Motion to Dismiss that, taken as true,
could rebut the Attorney General’s certification. Accordingly,
plaintiffs will be allowed to conduct limited discovery on the
scope-of-employment issue. The federal defendants’ motion to
dismiss Count XI on grounds of sovereign immunity and failure to
exhaust under the FTCA is therefore denied without prejudice to
refiling at the appropriate time.
5. Qualified Immunity
In Count II of the Amended Complaint, plaintiffs sue Traugh
and Bosworth in their individual capacity for the de facto
debarment. Qualified immunity is “a defense that shields
officials from suit if their conduct did not violate clearly
established statutory or constitutional rights of which a
reasonable person would have known.” Bame v. Dillard, 637 F.3d
380, 384 (D.C. Cir. 2011) (internal citations omitted). To
contractual direction may be issued only by cognizant
contracting officers.” See Pls.’ Mot. to Enforce Stip. Prelim.
Inj. at Ex. K, Mem. from NAVSEA Commander K.M. McCoy to NAVSEA
and Naval Service War Center, Dec. 20, 2011.
27
determine whether an official is entitled to qualified immunity,
the Court must consider whether the facts, viewed in the light
most favorable to plaintiffs, establish a violation of a
constitutional right, and if so, whether that right was clearly
established at the time of the alleged violation. Pearson v.
Callahan, 555 U.S. 223, 231-32 (2009). “An official enjoys
protection from a lawsuit where his conduct is objectively
reasonable in light of existing law. Conversely, an officer is
not shielded where he could be expected to know that certain
conduct would violate statutory or constitutional rights.”
Brown v. Fogle, 819 F. Supp. 2d 23, 28-29 (D.D.C. 2011)(quoting
Farmer v. Moritsugu, 163 F.3d 610, 613 (D.C. Cir. 1998)(internal
quotation marks omitted)).
As set forth above, de facto debarment of a government
contractor without due process and on grounds of dishonesty,
fraud or lack of integrity violates the Fifth Amendment. Traugh
and Bosworth contend, however, that (1) their job duties
permitted them to terminate all of MDD’s work with OPLOG, bar it
from obtaining new work with OPLOG, and refuse to appoint a TPOC
for MDD to obtain work via NAVSEA based on their concerns that
MDD was not charging a reasonable price or providing the best
value to the government, and (2) their actions did not bar
plaintiff from obtaining any and all additional work for the
Navy, and therefore did not constitute de facto debarment. Fed.
28
Defs.’ Mem. at 12-15.6 Federal Defendants’ framing of Traugh’s
and Bosworth’s actions highlights the factual disputes that
prevent dismissal of Count II on grounds of qualified immunity.
The resolution of these questions, specifically, defendants’
authority to bar MDD from performing future work at OPLOG, as
well as the breadth of MDD’s preclusion from government
contracting, depend on development of the facts, and the Court
must accept the truth of the plaintiffs’ factual allegations on
a motion to dismiss. Accordingly, the Court will deny
defendants’ Rule 12(b)(6) motion to dismiss on the ground of
qualified immunity.
6
Traugh and Bosworth also contend that plaintiffs’
constitutional rights are not clearly established. They claim
there is no authority specifically permitting subcontractors, as
opposed to prime government contractors, to allege de facto
debarment, or holding that a government official other than a
contracting officer or a “senior official” may effect a de facto
debarment. Fed. Defs.’ Mem. at 12. These claims are
unpersuasive. See, e.g., 48 C.F.R. § 9.405-2 (subcontractors
are impacted by debarments; once a contractor has been debarred,
it is effectively prohibited from serving as a subcontractor on
government contracts); see also Highview Eng’g v. Hawkins, Case
08-647, 2010 U.S. Dist. LEXIS 75102 (July 26, 2010)(finding
plaintiff stated a claim of de facto debarment by project
manager and attorney). Moreover, plaintiffs need not identify
factually indistinguishable precedent in order to defeat a claim
of qualified immunity. “The facts of such cases need not be
materially similar, but have only to show that the state of the
law [at the time of the incident] gave [the officer] fair
warning that [his alleged misconduct] ... was unconstitutional."
Bame, 637 F.3d at 384 (internal citations and quotations
omitted)(alterations in original).
29
6. Summary Judgment
Federal defendants have presented material outside the
pleadings, and the Court has considered those materials.
Accordingly, the Court will treat the motion as one for summary
judgment in the alternative. See Holy Land Found. for Relief &
Dev. v. Ashcroft, 333 F.3d 156, 165 (D.C. Cir. 2003). As a
general matter, summary judgment is premature unless all parties
“have had a full opportunity to conduct discovery.” Liberty
Lobby, 477 U.S. at 257. After reviewing the parties’ filings,
and for the reasons explained above, the court concludes that
the factual record is not sufficiently developed to allow a
determination as to whether genuine issues of material fact
exist. Accordingly, the defendants’ motion for summary judgment
is denied without prejudice to refiling at the appropriate time,
in order to permit plaintiffs the benefit of discovery.
7. Conclusion
For the foregoing reasons, the Court concludes plaintiffs
have stated a claim for de facto debarment in Count I. Further,
because of the factual allegations presented by plaintiffs at
this state of the litigation, the court cannot find, as a matter
of law, that the qualified immunity defense is properly asserted
as to Count II or that substitution of the United States and
dismissal under the FTCA is appropriate as to Count IX.
30
Accordingly, the Federal Defendants’ motion to dismiss or, in
the alternative, for summary judgment is DENIED.
B. Plaintiffs’ Motion to Enforce Stipulated Preliminary
Injunction
1. Factual Background and the Parties’ Positions
As discussed supra, on December 7, 2011, the parties agreed
and stipulated to a Consent Preliminary Injunction. Plaintiffs
argue that defendants have refused to comply with the terms of
the injunction. They seek to have this Court enforce its terms
and hold the federal defendants in contempt.
The terms of the Consent Preliminary Injunction enjoin the
Navy as follows.
(1) Federal defendants are enjoined from taking any action
to implement, enforce, or spread to any agency of the
federal government the de facto debarment of plaintiffs
from contracting.
(2) Federal defendants are required to allow Marine Design
Dynamics, Inc. (“MDD”) to compete for, and if awarded,
receive and perform contracts, subcontracts, task orders,
task instructions and orders under indefinite quantity
contracts, in the same manner and under the same standards
applicable to other contractors and subcontractors, unless
and until debarment or suspension proceedings are properly
initiated, or until further order of this Court, including
but not limited to the following:
(a) Plaintiffs’ subcontract under the Navy’s prime
contract with Computer Sciences Corporation
(“CSC”) pursuant to its SEAPORT-e contract,
N00178-04-D-4030-EH02. The government shall
appoint a Technical Point of Contact between
Operational Logistics Integration Program
(“OPLOG”) and CSC for this purpose.
(b) Successor contracts to MDD’s prime contract with
31
Military Sealift Command (“MSC”), N00033-10-C-
8002, which is expected to expire November 1,
2012.
(c) Federal Defendants shall communicate to CSC and
Gryphon Technologies, rescinding any guidance or
instruction that work was to be removed from or
not given to MDD, in effect restoring the status
quo ante.7 Federal Defendants shall appoint a
Technical Point of Contact between Naval Sea
Systems Command of the Department of the Navy
(“NAVSEA”), MSC and Gryphon Technologies for this
purpose.
(3) Federal defendants are required to allow MDD to
maintain and perform its existing contracts, subcontracts,
task orders, task instructions and orders under indefinite
quantity contracts, in the same manner and under the same
standards applicable to other contractors, unless and until
debarment or suspension proceedings are properly initiated,
or until further order of this Court, including but not
limited to the following:
(a) Plaintiffs’ existing prime contract with MSC,
N00033-10-C-8002.
(b) Plaintiffs’ existing subcontract under the Navy’s
prime contract with CSC pursuant to its SEAPORT-e
contract, N00178-04-D-4030-EH02.
In response to the Consent Preliminary Injunction, the Navy
took the following actions. First, on December 20, 2011,
defendant Vice Admiral McCoy, NAVSEA’s Commander, sent a
memorandum from NAVSEA’s counsel, Sophie Krasik, with the
Consent Preliminary Injunction attached, to NAVSEA’s Contracts
Directorate, NAVSEA’s Ship Engineering Directorate (where
7
This sentence was crafted by the parties in off the record
discussions and the parties inserted it into the Stipulated
Preliminary Injunction at the end of the hearing. Tr. of Oral
Argument at 70-71.
32
Bosworth is employed) and the Naval Surface Warfare Center
(under whose command OPLOG falls). Defs.’ Opp’n to Pls.’ Mot.
to Enforce at 4. The memorandum explains the Consent
Preliminary Injunction and directs Navy employees to “maintain a
position of strict neutrality toward MDD, neither encouraging
nor interfering with: (1) the efforts of MDD to obtain work from
prime contractors; or (2) prime contractors’ decision whether or
not to subcontract with MDD . . . The injunction is consistent
with the Navy’s SeaPort-e prime contracts, which do not permit
Command personnel to direct a prime contractor to select, or
decline to select, a given subcontractor for a given item of
work. Other contractual direction may be issued only by
cognizant contracting officers.” See Pls.’ Mot. to Enforce, Ex.
K.
Second, on December 16, 2011, Michael Kistler, the
Executive Director in the NAVSEA Engineering Directorate, issued
an email designating Chris Cable as TPOC for any MSC work
ordered through a Seaport-e prime contractor, including but not
limited to Gryphon Technologies, and Charles Traugh as TPOC for
any OPLOG work. Plaintiffs immediately objected to the choice
of Traugh, and in response the Navy replaced him with another
NAVSEA employee, Greg Doerrer. Pls.’ Mot. to Enforce at 6; Fed.
Defs.’ Opp’n at 14.
33
Third, on December 20, 2011, Lindsay Alexander, Contracting
Officer for CSC and Gryphon Technologies, the two SeaPort-e
prime contractors from whom MDD alleged it had been precluded
from receiving subcontracting work, sent CSC and Gryphon a
letter enclosing the Consent Preliminary Injunction and
explaining, inter alia, that MDD must have the same opportunity
to compete for and perform work as any other contractor. The
letter also states, in relevant part, “the terms of your prime
task order do not permit most Navy personnel to issue direction
to you to select, or decline to select, a given subcontractor
for a given item of work or to issue any other contractual
direction. Rather, only contracting officers may issue
contractual direction, and that direction cannot contradict the
terms of the court order.” Pls.’ Mot. to Enforce, Exs. M, N.8
Plaintiffs argue none of these actions comply with the
Consent Preliminary Injunction. According to Plaintiffs, the
Navy’s actions are deficient in three respects. First, they
claim the Navy’s communications with its own personnel as well
as CSC, Gryphon and Alion “distort” the terms of the preliminary
injunction and convey a negative impression of plaintiffs.
8
The Navy also sent this letter to one additional company, Alion
Science and Technology Corporation. In the letter to Alion,
Lindsay Alexander explained that the Consent Preliminary
Injunction only required communication to CSC and Gryphon, but
“because Alion holds a [prime contract] substantially identical
to those of CSC and Gryphon, we are informing you as well of
this aspect of the court order.” Id. Ex. L.
34
Pls.’ Mot. to Enforce at 8-14. Second, they claim the Navy did
not appoint a “suitable” TPOC for the OPLOG work, first, by
appointing defendant Traugh, and then, upon plaintiffs’
objection, replacing him with defendant Greg Doerrer, who has
not been accused of any wrongdoing but who “was present at the
[July 13, 2011] meeting at which” Bosworth instructed Traugh to
terminate MDD’s work for OPLOG in 2012. Id. at 6. Finally,
plaintiffs claim that the Navy has not restored “the status quo
ante” by awarding MDD subcontracting work with CSC, at OPLOG, or
with Gryphon, at NAVSEA/MSC. According to plaintiffs, MDD was
“scheduled to receive $2.7 in OPLOG work in FY 2012” and “was in
the final stages of being awarded a $5.529 M contract with the
MSC under a subcontract with Gryphon.” Id. at 5. Plaintiffs
request the Court fine the Navy, award attorneys’ fees, and
order the Navy to (1) prohibit the Navy from disseminating any
communications regarding this litigation without plaintiffs’
consent; (2) appoint a “suitable” TPOC, and (3) “restore the
status quo ante” with respect to OPLOG and MSC work. Pls.’
Proposed Order Granting Motion to Enforce.
The Navy responds that it has not violated the terms of the
injunction. The government notes that all of its communications
to Navy personnel and government contractors provided a copy of
the Stipulated Preliminary Injunction as an attachment, thereby
enabling every recipient to review the Order’s terms. Fed.
35
Defs.’ Opp’n at 16-19. It also asserts that the letters
explaining the Injunction accurately conveyed the Navy’s
responsibilities under the Order. Id. With respect to
appointment of a TPOC for OPLOG work, the Navy points out the
Injunction “only directed the Navy to appoint a TPIC for OPLOG
work; it did not . . . grant Plaintiffs any voice in the
appointment.” Id. at 14. Nevertheless, at plaintiffs’ request
it replaced Traugh with Doerrer “who is also an OPLOG employee
but is not in a subordinate or supervisory position to Mr.
Traugh.” Id.
Finally, the government points out that restoration of “the
status quo ante” does not require plaintiffs to be awarded
additional work with CSC or a new subcontract with Gryphon
Technologies. The government claims that “plaintiffs nowhere
assert, nor can they, that MDD had an actual contract terminated
or a pending award withheld because of the alleged debarment.”
Id. at 6. With respect to work to be performed for OPLOG under
a subcontracting agreement with CSC, the government points out
that “performance under the [CSC] contract does not commence
until the contractor receives a delivery order . . . plaintiff
MDD did not have a delivery order to perform Fiscal Year 2012
work under its . . . contract with CSC.” Id. at 6, n.4. “A
company’s placement in the budget” for FY 2012, which is all
that MDD alleged had occurred with respect to its award of OPLOG
36
work, “does not guarantee work for that company.” Id. at 7.
Likewise, the government asserts that MDD had not been awarded a
contract to perform MSC work under a subcontract with Gryphon;
indeed, federal defendants argue that the government had not
even agreed upon the scope of work to be done under any proposed
subcontract. Id. at 7-9. The Navy therefore argues that:
The status quo ante of each of the alleged debarments found
the parties far from ready to enter into any sort of
contractual arrangement. Rather, MDD was eligible for
prime contracts and subcontracts, a very different status .
. . . Restoring the status quo ante therefore meant
restoring MDD’s eligibility to compete, which is just what
the Navy did.
Id. at 11.
1. Discussion
An order granting injunctive relief is enforceable by the
district court’s power of contempt. See Gunn v. Univ. Comm. to
End War in Viet Nam, 399 U.S. 383, 389 (1970). A contempt
finding is proper where “the putative contemnor has violated an
order that is clear and unambiguous” and the violation of an
order is “proved by clear and convincing evidence.” Armstrong
v. Executive Office of the President, Office of Admin., 1 F.3d
1274, 1289 (D.C. Cir. 1993) (citation and internal quotation
marks omitted). “In the context of civil contempt, the clear
and convincing standard requires a quantum of proof adequate to
demonstrate a reasonable certainty that a violation occurred.”
37
Breen v. Tucker, 821 F. Supp. 2d 375, 383 (D.D.C. 2011)
(citations and internal quotation marks omitted).
In this case, neither party argues that the Stipulated
Consent Preliminary Injunction they reached is ambiguous; the
parties only dispute whether the Navy violated the Order.
Armstrong, 1 F.3d at 1289. The Court concludes the government
has not. The stipulated injunction requires the government
allow MDD to compete for, and if awarded, perform work for the
Navy. Stip. Prelim. Inj. ¶ 2. It also requires the government
to allow MDD to maintain and perform its existing work in the
same manner and under the same circumstances applicable to other
contractors. Id. ¶ 3. The Stipulated Injunction does not
purport to define the work MDD has been or would be awarded,
except to identify one contract on which the parties agreed MDD
had been awarded work in FY 2011 (the CSC contract) and one in
which it had been awarded work continuing in FY 2012 (MDD’s
prime contract with MSC).
It may be that the plaintiffs will be able to establish
that they had been awarded, or all-but-awarded, additional work
for OPLOG or MSC, and that they would have received such work
but-for the de facto debarment. However, no requirement that
the Navy or the contractors give plaintiffs this work is plain
on the face of the Stipulated Preliminary Injunction. See,
e.g., United States v. Armour & Co., 402 U.S. 673, 681-2 (1971)
38
(“the [stipulated injunction] must be construed as it is
written, and not as it might have been written had the plaintiff
established his factual claims and legal theories in
litigation.”)9
Plaintiffs’ arguments that the government violated the
Consent Preliminary Injunction by its allegedly misleading
communications with Navy personnel and government contractors,
and by failing to appoint a “suitable” TPOC likewise fail.
While plaintiffs may wish the government’s communications had
been worded differently, they describe the substance of the
Stipulated Injunction and, indeed, plaintiff does not dispute
that a true and correct copy of the Injunction was provided as
an attachment. Likewise, while the Court agrees that the
government’s initial appointment of Traugh as TPOC was at best,
imprudent, the government has since replaced him with Greg
9
Plaintiffs rely on a phrase the parties added to the
Injunction during off the record discussions -- “in effect
restoring the status quo ante,” –- to justify their position
that the Navy is required to award MDD additional OPLOG and MSC
work. Plaintiffs’ argument is meritless. The sentence in which
the phrase appears reads as follows: “Federal Defendants shall
communicate to CSC and Gryphon Technologies, rescinding any
guidance or instruction that work was to be removed from or not
given to MDD, in effect restoring the status quo ante.” Stip.
Prelim. Inj. ¶ 2(c). Read in context, this requires the Navy to
tell CSC and Gryphon that the Navy had withdrawn any objection
to MDD, a requirement the Navy has fulfilled. It does not state
that CSC or Gryphon had contracted, or would have contracted,
with MDD for present or future work but for the Navy’s
instructions not to use MDD.
39
Doerrer, an OPLOG employee who has not been charged by
plaintiffs with any wrongdoing.
Based on the foregoing, the Court concludes that plaintiffs
have not met their burden to show, by clear and convincing
evidence, that the Navy violated the Stipulated Preliminary
Injunction. Accordingly, the Motion to Enforce is DENIED.
C. MDD’s Former Employees’ Motions to Dismiss
Three of MDD’s four former employees named in this action
have filed motions to dismiss. See Motions to Dismiss by
Michael Mazzocco, Volker Stammnitz, and William Muras. The
Amended Complaint alleges breach of fiduciary duty and civil
conspiracy as to each of them. Am. Compl. Counts III, IV, V,
and VIII. Additionally, the Amended Complaint asserts a common
law defamation claim against Mazzocco. Id. Count VII. The
Court will address each cause of action in turn.
1. Breach of Fiduciary Duty
Employees, particularly managers and officers, “owe an
undivided and unselfish loyalty to the corporation” during the
term of their employment, “such that there shall be no conflict
between duty and self-interest.” Mercer Management Consulting
v. Wilde, 920 F. Supp. 219, 233 (D.D.C. 1996) (internal
citations and quotation marks omitted); see also Gov’t Relations
v. Howe, Case No. 05-1081, 2007 U.S. Dist. LEXIS 4952, *33
(D.D.C. Jan. 24, 2007); PM Servs. Co. v. Odoi Assoc., Inc., Case
40
No. 03-1810, 2006 U.S. Dist. LEXIS 655, *84 (D.D.C. Jan. 4,
2006). Although an agent may “make arrangements or plans to go
into competition with his principal before terminating his
agency,” he may only do so “provided no unfair acts are
committed or injury done [to] his principal.” Mercer, 920 F.
Supp. at 233 (citation omitted). Specifically, in preparing to
compete, an employee may not engage in “misuse of confidential
information, solicitation of the firm’s customers, or
solicitation leading to a mass resignation of the firm’s
employees.” Furash & Co. v. McClave, 130 F. Supp. 2d 48, 54
(D.D.C. 2001) (citing Mercer, 920 F. Supp. at 233). “The
ultimate determination of whether an employee has breached his
fiduciary duties to his employer by preparing to engage in a
competing enterprise must be grounded upon a thoroughgoing
examination of the facts of the particular case.” Id. (internal
citations omitted).
As a general rule, an employee’s fiduciary duty ends upon
termination of the employment relationship. Draim v. Virtual
Geosatellite Holdings, Inc., 631 F. Supp. 2d 32, 40 (D.D.C.
2009). “An agent after termination of his employment, in the
absence of an agreement to the contrary, may compete with his
former principal.” United States Travel Agency, Inc. v. World-
Wide Travel Service Corp., 235 A.2d 788, 789 (D.C. 1967).
41
Plaintiffs allege that Mazzocco, Stammnitz, and Muras
breached their fiduciary duty of loyalty to MDD both during and
for a year after their employment, during which they were
allegedly subject to a non-compete agreement. Am. Compl. ¶¶ 34-
36 and Exs. A-C, MDD Employee Handbook and Code of Business
Conduct. All three employees were senior officers and key
employees at MDD. Am. Compl. ¶¶ 33, 128-29, 146-47, 159-60.
All three employees resigned from MDD in the spring of 2011;
Mazzocco and Stammnitz formed independent companies to compete
with plaintiffs either during or immediately following their
employment with MDD. Am. Compl. ¶¶ 47-51, 62-65. Plaintiffs
principally allege that Mazzocco violated his fiduciary duties
as follows:
 “Confirmed” with Robinson, before leaving MDD in March
2011, that he would be able to continue performing the
same work for OPLOG, and in the same position, after
leaving MDD, thus soliciting MDD’s customers and
business opportunities. Am. Compl. ¶¶ 44-45, 139.
 Signed an agreement in February 2011 on behalf of his
new company, Alytic, Inc., with a competitor of MDD to
exchange proprietary information, thus competing with
MDD while still employed there and misusing its
confidential and proprietary information. Am. Compl.
¶¶ 49, 140.
 Solicited other employees to resign their positions
with MDD and join him at OPLOG, thus leading to a
“mass resignation” of plaintiffs’ employees. Am.
Compl. ¶ 139.
 Attended a meeting with Muras, Stammnitz, and Navy
officials in Boston in May 2011, at which he worked to
have plaintiffs removed from OPLOG’s 2011 and 2012
42
budget in order to obtain plaintiffs’ work for
himself, thus soliciting MDD’s customers and business
opportunities during the term of his alleged non-
compete agreement. Am. Compl. ¶¶ 68-88, 138-39.
Plaintiffs’ allegations regarding Stammnitz and Muras are
very similar. Plaintiffs primarily allege that both solicited
MDD’s customers and business opportunities at OPLOG while they
were employed with MDD, as well as during the term of their non-
compete agreements, by (1) arranging to continue performing the
same work for OPLOG after leaving MDD, while still employed with
MDD; and (2) attending the Boston meeting, at which they worked
to exclude MDD from OPLOG’s 2011 and 2012 budgets in order to
obtain plaintiffs’ work for themselves, also while still
employed with MDD. Am. Compl. ¶¶ 59-64, 66, 68-77, 152-55, 164-
67.
The defendants argue that these allegations are
insufficient. They claim they had no binding non-compete
contract with MDD, therefore plaintiffs cannot state a claim for
any of their actions after they resigned from MDD. See Muras
Mot. to Dismiss at 9, Stammnitz Mot. to Dismiss at 7-9, Mazzocco
Mot. to Dismiss at 6-8. They also claim plaintiffs cannot show
proximate cause between the alleged breach and plaintiffs’
injuries, because the Navy, not MDD’s former employees, made the
decisions to remove work from plaintiffs. Muras Mot. to Dismiss
43
at 6-7, Stammnitz Mot. to Dismiss at 11-12, Mazzocco Mot. to
Dismiss at 8-9.10
10
Stammnitz additionally argues that the claim against him
should be dismissed on abstention grounds because plaintiffs
filed a substantially identical counterclaim in Stammnitz’
pending Superior Court lawsuit against the MDD and Sebastian
Phillips. The Court will not dismiss on this basis. Federal
district courts have a “virtually unflagging obligation... to
exercise the jurisdiction given them.” Colorado River Water
Conservation Dist. v. United States, 424 U.S. 800, 817 (1976).
In determining whether a case is appropriate for Colorado River
abstention, the Court's task “is to ascertain whether there
exist ‘exceptional’ circumstances, the ‘clearest of
justifications,’ that can suffice... to justify the surrender of
that jurisdiction,” Moses H. Cone Mem'l Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 25-26 (1983) (citations omitted); see also
Handy v. Shaw, Bransford, Veilleux & Roth, 325 F.3d 346, 348
(D.C. Cir. 2003) (“A district court's authority to dismiss a
case within its jurisdiction in favor of parallel local court
proceedings is limited.”). The Supreme Court has articulated
six factors that a district court must consider in deciding
whether the circumstances of a particular case are exceptional:
(1) whether one court has first assumed jurisdiction over
property; (2) the inconvenience of the federal forum; (3) the
desirability of avoiding piecemeal litigation; (4) the order in
which jurisdiction was obtained by the concurrent forums, (5)
the source of the law that will provide the rules of the
decision; and (6) the adequacy of the state court proceeding to
protect the rights of the parties, see Moses H. Cone, 460 U.S.
at 24-26. A district court’s analysis of the above factors
should not be mechanical, but rather the district court should
carefully balance the factors that apply to the given case,
“with the balance heavily weighted in favor of the exercise of
jurisdiction.” Id. at 16. The Court finds that none of the
factors weighs strongly in favor of abstention. Because this
case does not involve jurisdiction over property, and because
both the federal and state forums are located in the District of
Columbia and are thus equally convenient, the first and second
factors are neutral. The third factor is the avoidance of
piecemeal litigation. In analyzing the problem of piecemeal
litigation, courts must “look beyond the routine inefficiency
that is the inevitable result of parallel proceedings to
determine whether there is some exceptional basis for requiring
the case to proceed entirely in state court,” such as severe
44
Plaintiffs have clearly stated a claim for breach of
fiduciary duty. Even assuming arguendo that plaintiffs had no
enforceable non-compete agreement with the employees after the
termination of employment, the Amended Complaint contains
factual allegations that Mazzocco, Stammnitz, and Muras all
solicited MDD’s customers and business opportunities while they
were still employed by MDD. Plaintiffs have also alleged that
they suffered damages – namely, loss of OPLOG work in 2011 and
2012 – as a proximate cause of their former employees’ actions.
To establish proximate cause, the plaintiffs must allege that
prejudice to one of the parties. Johns v. Rozet, 770 F. Supp.
11, 15 (D.D.C. 1991) (citations omitted). The Court is not
persuaded that parallel litigation would severely prejudice
defendant in this case, particularly because the plaintiffs have
indicated a willingness to dismiss their counterclaims in the
Superior Court case and where the Superior Court Judge has
demonstrated sensitivity to the burdens of duplicative
discovery. See Pls.’ Opp’n to Stammnitz Mot. at 14-16;
Stammnitz’ Suppl. Reply, Ex. B, Order of Superior Court Judge
Craig Iscoe. The fourth factor, the order in which the courts
obtained jurisdiction, is neutral because neither case has
progressed beyond the early stages. The fifth factor, the source
of law, does not weigh in favor of abstention because state law
issues do not govern all claims in this lawsuit, and the state
law claims alleged do not appear to involve novel or complex
legal issues. See Rozet, 770 F. Supp. at 16. Finally, the sixth
factor, the adequacy of the Superior Court to protect the rights
of the parties, does not weigh in favor of abstention. Although
the issues between plaintiffs and Stammnitz turn on local law,
this action is the only one where all of MDD’s former employees
have been joined, and accordingly this Court is in a better
position to comprehensively protect plaintiffs’ interests, and
no worse a position to protect Stammnitz’s interests. Having
balanced the relevant factors, with the balance heavily weighted
in favor of the exercise of jurisdiction, the Court has
determined that this case does not present "exceptional
circumstances" that would justify abstention.
45
“there was a direct and substantial causal relationship between
the defendant’s breach of the standard of care and the
plaintiff’s injuries and that the injuries were foreseeable.”
Convit v. Wilson, 980 A.2d 1104, 1125 (D.C. 2009). Here,
plaintiffs contend that Mazzocco, Stammnitz, and Muras deprived
plaintiff MDD of work by (1) soliciting OPLOG to take work away
from MDD and take it for themselves after leaving MDD, and (2)
working with OPLOG officials to change existing budgets, in
order for Mazzocco, Stammnitz, and Muras to take the work that
had previously been allotted to plaintiffs. As a direct result,
plaintiffs allege, they lost over $2.5 million in Fiscal Year
2012. At this preliminary stage, plaintiffs have clearly met
their burden to plead proximate cause. Accordingly, the Motions
to Dismiss Counts III, IV and V will be DENIED.
2. Civil Conspiracy
Civil conspiracy is not an underlying tort, but only a
means for establishing vicarious liability for an underlying
tort. Paul v. Howard Univ., 754 A.2d 297, 310 n.27 (D.C. 2000).
Plaintiffs allege that Mazzocco, Stammnitz, Muras and Miller
conspired to breach their fiduciary duties to MDD “by the
elimination of Plaintiff MDD from the OPLOG FY 2012 budget, and
the solicitation of MDD’s . . . client, OPLOG[.]” Am. Compl. ¶
188. Mazzocco, Stammnitz, and Muras argue that plaintiffs have
46
failed to plead the existence of a civil conspiracy with
particularity.11 The Court disagrees.
To establish a prima facie case of civil conspiracy,
plaintiffs must show (1) an agreement between two or more
persons (2) to participate in an unlawful act, and (3) an injury
caused by an unlawful overt act performed by one of the parties
to the agreement in furtherance of the common scheme. Paul, 754
A.2d at 310 (citation omitted). Plaintiffs must plead the
elements of conspiracy with particularity; “bald speculation or
a conclusory statement that individuals are co-conspirators is
insufficient to establish” a claim for conspiracy. 3M Co. v.
Boulter, 842 F. Supp. 2d 85, 112 (D.D.C. 2012) (internal
citations omitted).
Plaintiffs have met their burden to plead a conspiracy
between their former employees. Plaintiffs allege the following
11
Additionally, Mazzocco and Stammnitz claim immunity under the
“intracorporate immunity” doctrine, in which an entity, its
officers and agents are presumed to act as a single enterprise
and may not be found to have conspired with one another. Wesley
v. Howard Univ., 3 F. Supp. 2d 1, 3 (D.D.C. 1998). Assuming the
doctrine applies here, where the employees were allegedly
conspiring against the corporation, intracorporate immunity may
be overcome when the employees act outside the scope of their
employment. Weaver v. Gross, 605 F. Supp. 210, 214-15 (D.D.C.
1985). Plaintiffs have alleged facts in their Amended Complaint
suggesting that Mazzocco, Stammnitz and Muras were acting
outside the scope of their employment and pursuing their
personal interests by conspiring to take clients and business
opportunities for themselves and away from MDD. Accordingly,
defendants’ motion to dismiss on the basis of intracorporate
immunity is denied.
47
facts in support of their claim that the employees agreed to
leave MDD and to take MDD’s business for themselves in their new
ventures. First, when plaintiff Phillips asked Mazzocco, the
first employee to leave MDD, whether he was taking other
employees with him, he responded “not initially.” Am. Compl. ¶
45. Second, in the following months, three additional employees
left MDD to “join” Mazzocco. Id. ¶ 55. Third, the departing
employees needed funding for their new ventures, so they
obtained “help” from Defendants Robinson and Traugh to obtain
the $700,000 “pull-back” from MDD’s FY 2011 budget and all of
the money from MDD’s FY 2012 budget, with money from both fiscal
years to be reallocated to MDD’s former employees. Id. ¶ 56-58;
68-77. Fourth, the departing employees all met in Boston where
they agreed, with Bosworth, Traugh, and Robinson, to eliminate
MDD’s funding for FY 2012 and prepare a new budget in which the
former employees would receive the work instead. Id. ¶ 68-77.
Taking these allegations and all reasonable inferences therefrom
as true, plaintiffs have stated a plausible claim of civil
conspiracy.
3. Defamation
Finally, Mazzocco moves to dismiss Count VII, in which
plaintiffs seek damages for defamation. Plaintiffs allege that
Mazzocco spread rumors to OPLOG and MSC that plaintiffs had
double and triple billed OPLOG for services rendered to OPLOG,
48
that these statements were false, and that the statements
injured plaintiffs in their profession. Am. Compl. ¶¶ 179-186.
In order to state a claim for defamation, a plaintiff must
allege “(1) that the defendant made a false and defamatory
statement concerning the plaintiff; (2) that the defendant
published the statement concerning the plaintiff; (3) that the
defendant’s fault in publishing the statement amounted to at
least negligence; and (4) either that the statement was
actionable as a matter of law irrespective of special harm or
that its publication caused the plaintiff special harm.”
Jankovic v. Int’l Crisis Group, 494 F.3d 1080, 1088 (D.C. Cir.
2007). Mazzocco argues, unsuccessfully, that the defamation
claim should be dismissed.
Mazzocco first claims plaintiffs did not plead sufficient
factual allegations to support a defamation claim. Mazzocco
Mot. to Dismiss at 10-11. Not so. The Amended Complaint
alleges that Mazzocco spread false rumors “amongst the OPLOG
community, including OPLOG’s management and Plaintiff MDD’s
customers on its prime contract with the Military Sealift
Command, that Plaintiff MDD was double billing, and even triple
billing, the government on OPLOG projects.” Am. Compl. ¶¶ 52-
53. The Amended Complaint further alleges that these false
statements caused plaintiffs to lose their government
contracting work. The plaintiffs clearly allege defamatory
49
statements. See Jankovic, 494 F.2d at 1091 (“a statement is
defamatory if it tends to injure the plaintiff in his trade,
profession or community standing.”) (citation omitted).
Second, Mazzocco claims that even if he made these
statements, they are covered by the “common interest privilege.”
Mazzocco Mot. to Dismiss at 11-12. The common interest
privilege protects otherwise defamatory statements made “(1) in
good faith, (2) on a subject in which the party communicating
has an interest, or . . . honestly believes he has a duty to a
person having a corresponding interest or duty, (3) to a person
who has such a corresponding interest.” Mastro v. Potomac Elec.
Power Co., 447 F.3d 843, 858 (D.C. Cir. 2006). However, the
privilege does not exist unless “the publisher believes, with
reasonable grounds, that his statement is true.” Altimont, Inc.
v. Chatelain, Samperton & Nolan, 374 A.2d 284, 290 (D.C. 1977)
(citation omitted). In this case, plaintiffs have alleged that
Mazzocco did not believe these statements were true because he
“knew from his previous employment” with MDD that the statements
were “false,” but made them “for the purpose of damaging his
prior employer’[s] reputation as an honest Government contractor
for reasons of personal malice and unlawful competitive
advantage.” Am. Compl. ¶ 54. Accordingly, Mazzocco’s assertion
of the common interest privilege fails at the motion to dismiss
stage. For the same reasons, the Court rejects Mazzocco’s
50
claims that the statements were true and therefore not
defamatory, and/or that he was not “at least negligent” in
publishing the statements. Mazzocco Mot. to Dismiss at 12-14.
Accordingly, the Court will DENY Mazzocco’s motion to
dismiss Count VII of the Amended Complaint.
IV. CONCLUSION
For the foregoing reasons, the Court will deny the Federal
Defendants’ Motion to Dismiss or in the Alternative for Summary
Judgment, the Plaintiffs’ Motion to Enforce the Stipulated
Preliminary Injunction, Michael Mazzocco’s Motion to Dismiss,
Volker Stammnitz’s Motion to Dismiss, and William Muras’s Motion
to Dismiss. An appropriate Order will accompany this Memorandum
Opinion.
Signed: Emmet G. Sullivan
United States District Judge
September 30, 2012
51