Phillips v. Mabus

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).
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(“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.
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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.
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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.
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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
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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
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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
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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)).
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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
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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.
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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
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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-
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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
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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
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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.
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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
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