Rq Squared, LLC v. United States

In the United States Court of Federal Claims
No. 12-527 C
(Filed January 14, 2015)
* * * * * * * * * * * * * *
RQ SQUARED, LLC, *
* Implied-in-Fact Contract Claim; RCFC
Plaintiff, * 12(c); RCFC 56(d).
*
v. *
*
THE UNITED STATES, *
*
Defendant. *
* * * * * * * * * * * * * *
Paul W. Verner, New York, NY, for plaintiff.
Joshua E. Kurland, with whom were Joyce R. Branda, Acting Assistant
Attorney General, Robert E. Kirschman, Jr., Director, Steven J. Gillingham,
Assistant Director, United States Department of Justice, Washington, D.C., for
defendant.
___________________
OPINION
___________________
BUSH, Senior Judge.
The court has before it defendant’s motion for judgment on the pleadings,
relying on Rule 12(c) of the Rules of the United States Court of Federal Claims
(RCFC), as well as, in the alternative, defendant’s motion for summary judgment,
relying on RCFC 56. These motions have been fully briefed. Oral argument was
neither requested by the parties nor deemed necessary by the court. For the
reasons described below, defendant’s RCFC 12(c) motion is granted in part and
denied in part, and defendant’s RCFC 56 motion is deferred pending limited,
targeted discovery.
BACKGROUND1
I. Introduction
This a straightforward dispute. RQ Squared, LLC (RQ2), a technology
company, asserts that the United States Postal Service (USPS) entered into
negotiations with RQ2 regarding a potential business relationship between the two
entities. According to the complaint, the negotiations faltered and some time later
proprietary information belonging to RQ2 – information that had been revealed to
USPS – was improperly used by USPS and disclosed to other businesses. The
government contends, on the other hand, that no proprietary RQ2 information was
used or disclosed by USPS. The basic dispute has proceeded, in various forms, in
a suit brought in the United States District Court for the Western District of
Missouri, and in two suits before this court.
II. History of RQ2’s “Dual Label System”
RQ2 is based in St. Joseph, Missouri. Compl. ¶ 1. The founder and
“Member Manager” of RQ2 is Christopher Grubb, who worked as a Senior
Account Executive with Nextel Communications, Inc. for about a year before
leaving to start RQ2 in 1998. Grubb Decl. ¶¶ 14, 17-18. Initially, RQ2 purchased
and sold new and used cell phones. Id. ¶ 18. “In or around 2001, RQ2 developed
a proprietary web-based program and software to enable customers of RQ2’s
clients to print Federal Express (“FedEx”) labels in order to return used, damaged,
or defective products [to the seller].” Compl. ¶ 10. At the time, RQ2’s product
return service, as it was originally developed, depended only on the FedEx
shipping infrastructure. Id. ¶¶ 10-12; Grubb Decl. ¶¶ 23, 33, 35.
RQ2’s primary client for this service appears to have been Nextel at that
1
/ The facts recounted here are taken from the complaint and other filings submitted by
the parties, and appear to be undisputed for the purpose of resolving this court’s jurisdiction over
plaintiff’s claims. The court makes no findings of fact in this opinion other than for the purpose
of determining its jurisdiction over plaintiff’s suit.
2
point in time:
RQ2 . . . successfully worked with Nextel
Communications, Inc. (“Nextel”) on a web-based
program used to assist customers in retrieving used,
damaged or defective cell phones for Nextel. As a result
of the project, Nextel realized it would be beneficial to
find a way to increase the frequency with which an
individual who used RQ2’s web-based application
actually followed through with the shipping of the
defective phone, which at the time, required the customer
to appear physically at a Federal Express box, kiosk or
depot. In response, while RQ2 began developing
additional shipping options for Nextel, it conceived of
the RQ2 Idea; an idea for dual labels – a label with a bar
code[] or codes that would allow a package to be
processed and shipped by both Federal Express and
USPS, allowing the customer/shipper to choose
whichever carrier was more convenient and thereby
increasing the volume and efficiency of the delivery and
handling of these packages.
Compl. Ex. 1 at 3.
Thus, one innovation in the allegedly proprietary information developed by
RQ2 in 2005 was the dual bar code label:
In or around June of 2005, RQ2 conceived of the novel
idea[] of Dual Labels: a single label with multiple bar
codes that would allow a package to be processed and
shipped by either FedEx or USPS.
Compl. ¶ 13. The other allegedly proprietary material developed by RQ2 at this
time was the technology behind the label, sometimes referred to as the product
return program’s “back end,” Grubb Decl. ¶ 30, an important component of the
“Dual Label System”:
3
RQ2’s proprietary web-based program allowing for
embedded information in label bar codes and RQ2’s
proprietary logistical and tracking software (collectively
referred to as the “Dual Label System”) were essential to
the function of the Dual Label.
Compl. ¶ 23; see Grubb Decl. ¶ 32 (asserting that RQ2 developed “necessary
computer programs, embedded bar codes and simultaneous tracking and billing”
for its “Dual Label Dynamic Back End System,” a system that was not “in
existence anywhere in the industry at the time”).
III. Postal Service Product Return Programs
The USPS, meanwhile, had been experimenting with product return mailing
programs, too, which involved collaboration between USPS and independent
delivery companies. There was, for example, an existing program called Parcel
Select, which used a combination of USPS delivery to customers’ homes, or
customers dropping off packages for return at their local post office, with long-
distance transport to or from the seller by a company such as United Parcel Service
of America, Inc. (UPS) or FedEx Corporation (FedEx). Cochrane Decl. ¶ 2; Def.’s
Mot. at 3. To complement this existing system, USPS launched a pilot program
called Parcel Return Service in 2003, which later became permanent. Compl. ¶¶
24-25; Def.’s Mot. at 3.
The Parcel Return Service (PRS) pilot program defies succinct description,
because it involves a number of highly technical specifications for the sharing of
tasks between USPS and the PRS provider, as well as various tracking and
accounting mechanisms. A PRS overview is provided in the complaint:
[I]n an effort to facilitate more efficient package
handling, the USPS began an experimental program of
preprinted, prepaid return labels provided to customers
by merchants so that customers could more efficiently
ship packages that needed to be returned, repaired,
recycled, or recalled.
Compl. ¶ 24. As further explained by defendant, PRS
4
allows customers to return merchandise to a
retailer by simply placing the merchandise
back in a package, affixing the label
provided by the merchant, and either
bringing the package to their local post
office for return to the merchant, handing it
to a mailperson, or scheduling a home
pickup. The customer is not required to pay
postage for the return, while the merchant is
required to pay certain annual fees to
participate in the program, as well as the
postage for any packages actually returned
to the merchant through the program. In
order to be approved to participate in the
PRS, merchants or participating service
providers need to comply with USPS’s
detailed specifications, including
specifications regarding the return mailing
label they would use. A deviation from
USPS’s specifications requires USPS
granting a waiver. The standard label for
the PRS program is not a so-called “dual
label” because it contains a single USPS bar
code and is not intended for use in
conjunction with other carriers, such as UPS
or Federal Express.
Def.’s Mot. at 3-4 (citations omitted). It appears that only one or two PRS
providers participated in the PRS program in the early years. See Grubb Decl.
¶ 111; Cochrane Decl. ¶ 10; Def.’s Mot. Ex. 1 Att. A at 2; Pl.’s Opp. at 23. The
only PRS provider identified by the parties is a company named Newgistics.
Grubb Decl. ¶ 111; Cochrane Decl. ¶ 10; Def.’s Mot. Ex. 1 Att. A at 2; Pl.’s Opp.
at 23.
IV. RQ2 Attempts to Become a Product Return Service Provider for USPS
There are two versions of the history of negotiations between RQ2 and
5
USPS regarding a potential business collaboration between the two entities.
According to plaintiff, the negotiations began in June of 2005:
[I]n line with the USPS’ concern over increased
efficiency in package handling, RQ2 brought its idea for
dual labeling to USPS with the express intent of
convincing USPS to use the RQ2 Idea so that RQ2 could
profit from that use in June of 2005.
Compl. Ex. 1 at 3. Negotiations continued with increasing interest from USPS.
According to plaintiff, USPS’s eagerness to close a deal was evidenced by RQ2’s
participation in a USPS vendor conference; a site visit by USPS officials to RQ2’s
business location; a number of face-to-face meetings; and exchanges of
documents, emails and telephone calls. Id. ¶¶ 27, 31-33, 36, 38, 54-55, 58, 60-61,
65, 67-68. USPS and RQ2, along with the participation of FedEx, eventually
developed a plan and schedule to launch RQ2 as a PRS provider. Id. ¶¶ 65, 67-68.
Nonetheless, USPS, perhaps because of a dispute with FedEx, delayed finalization
of the launch plan, never approved RQ2’s application to become a PRS provider,
and eventually stopped answering any communications from RQ2. Id. ¶¶ 69-72.
Defendant does not specifically dispute the facts presented by RQ2 that
suggest that negotiations were in progress between USPS and RQ2, or that certain
milestones of those negotiations occurred in 2005 and 2006. Instead, a declaration
submitted by James P. Cochrane of USPS notes that Mr. Cochrane was involved in
“dealings . . . in connection with RQ Squared’s efforts to become a Parcel Return
Service provider.” Cochrane Decl. ¶ 3. In his view, USPS was not interested in
any “dual label” idea or system that RQ2 could provide; it was interested in having
an additional PRS provider. Id. ¶¶ 4-5. Thus, the primary difference in the two
versions of the negotiations between RQ2 and USPS is that plaintiff asserts that
USPS was eager to obtain RQ2’s technology, whereas the government’s declarant
asserts that USPS merely desired another PRS provider to participate in its pilot
program.
V. Alleged Misuse of RQ2’s Proprietary Information
In general, plaintiff asserts that:
6
The dual label system was developed solely by RQ2 for
USPS. Relying on the understanding that USPS would
not exploit the RQ2 Idea without compensation to RQ2
and that USPS would keep confidential the details of the
RQ2 Idea, RQ2 collaborated with USPS over the course
of two years to integrate RQ2’s concept and launch it
with USPS and Federal Express. Without warning, and
instead of proceeding to launch with RQ2, USPS cut off
communication with RQ2, misappropriated the RQ2 Idea
and breached its implied agreement with RQ2 to not
exploit RQ2’s idea without compensation to RQ2 and to
keep the details of RQ2’s idea confidential.
Compl. Ex. 1 at 5. More specifically, plaintiff points to various markings on
documents related to the PRS application process which identify certain material
as confidential and/or proprietary. Id. ¶¶ 34, 40, 42, 51-52, 66. Plaintiff asserts
that RQ2 revealed proprietary information to USPS as part of the PRS application
process during 2005-06. Id. ¶¶ 35, 38-39, 41, 43, 53. Plaintiff further asserts that
these facts show that RQ2 and USPS entered into an implied-in-fact contract to
keep RQ2’s proprietary information confidential, and to not use RQ2’s
information without compensating RQ2 for its valuable “dual label” trade secret.
The alleged breach of this implied-in-fact contract was manifested in two
ways, according to the complaint. UPS announced early in 2009 that it would
launch a collaborative product return service with USPS – the “Flexible Access
Program.” Compl. ¶¶ 77-79. Plaintiff asserts that Flexible Access “replicates
RQ2’s Dual Label program.” Id. ¶ 79. Similarly, FedEx launched a collaborative
product return service with USPS later in 2009 called SmartPost, which also,
according to plaintiff, replicates RQ2’s Dual Label program. Id. ¶ 82.
These facts, according to the complaint, show that USPS disclosed RQ2’s
proprietary information to UPS and FedEx and that USPS did not compensate
RQ2 for its proprietary information. USPS therefore allegedly breached the
implied-in-fact contract between RQ2 and USPS:
USPS through its employees disclosed RQ2’s proprietary
Dual Label System, including proprietary programs and
7
software, to UPS and FedEx [and] USPS used the
proprietary RQ2 Dual Label System to develop and
implement the UPS Flexible Access Program and the
FedEx SmartPost programs.
Compl. ¶¶ 73-74. These basic factual allegations have been alleged by RQ2 to
support a variety of legal claims in this court and elsewhere.
VI. History of Business Difficulties for RQ2 and Litigation
In late 2006, RQ2, Christopher Grubb, Valerie J. Grubb (RQ2’s vice
president, according to an exhibit filed in this case), and RQ2’s parent corporation
Reliable Communications, Inc., along with other defendants, were sued in the
United States District Court for the Western District of Missouri for an alleged
failure to make payments on a business loan and related guarantees. U.S. Bank
Nat’l Assoc. v. RQ Squared, L.L.C., No. 06-6132-CV-FJ-JTM, (W.D. Mo. filed
Nov. 15, 2006). The district court appointed a receiver to operate RQ2 on
December 22, 2006. Summary judgment in that case was granted against RQ2,
Mr. Grubb, Valerie Grubb, and Reliable Communications, Inc., in the amount of
$2,199,087.56 on July 19, 2007. According to the complaint filed in that case,
Reliable Communications, Inc. had let its corporate registry lapse before
November 15, 2006.
In 2010, RQ2 sued the United States in two courts regarding its PRS
application with the USPS, alleging that its proprietary information had been
misappropriated. In the first suit, which was filed in this court, RQ2 alleged in its
complaint that a taking of its dual label system trade secret had occurred and that it
was owed at least $786,500,000. RQ Squared, L.L.C. v. United States, No. 10-567
(Fed. Cl. filed Aug. 20, 2010). That case was voluntarily dismissed on March 29,
2011 by the plaintiff. The second suit was filed in the United States District Court
for the Western District of Missouri on the same facts and alleged that under the
Federal Tort Claims Act, 28 U.S.C. §§ 1346, 2671-2680 (2012) (FTCA), the
United States was liable to plaintiff for a breach of fiduciary duty for at least
$786,500,000. RQ Squared, L.L.C. v. United States, No. 10-6108-CV-SJ-JTM,
(W.D. Mo. filed Sept. 10, 2010). That case was dismissed on March 8, 2011 after
the district court granted the government’s motion to dismiss on the grounds that
the FTCA had not waived the United States’ sovereign immunity against claims
8
that relied in any part on alleged government misrepresentations.
Next, on June 21, 2011, RQ2 submitted a claim, on exactly the same facts as
in the prior suits, under the Contract Disputes Act, 41 U.S.C. §§ 7101-7109 (2012)
(CDA), to a USPS “Field Contracting Officer.” Compl. ¶ 7, Ex. 1. Plaintiff
contests USPS’s deemed denial of the CDA claim in the instant suit, through a
complaint filed in this court on August 21, 2012. Accompanying the complaint
was the required corporate disclosure statement, also filed August 21, 2012, which
stated that Reliable Communications, Inc. is the sole shareholder of RQ2. A few
days later, on August 29, 2012, the State of Missouri recognized that the corporate
registration of Reliable Communications, Inc. had lapsed.2 See Missouri Online
Business Filing, at http://bsd.sos.mo.gov, last visited January 5, 2015.
Once the complaint and answer were filed in this case, but before the
parties’ Joint Preliminary Status Report was filed, the attorney representing RQ2
requested leave to withdraw, citing nonpayment of fees by RQ2. See Mot. of June
26, 2013. After much delay, RQ2 obtained new counsel. See Order of March 21,
2014. Mr. Grubb has alleged that RQ2 has “lost its business entirely.” Grubb
Decl. ¶ 108. After further delays, Defendant’s Corrected Motion for Judgment on
the Pleadings, or, in the Alternative, for Summary Judgment in Favor of the
Government, was submitted and is now fully briefed. The government’s motions
will be discussed in detail in the analysis section of this opinion.
DISCUSSION
I. Standard of Review for Judgment on the Pleadings
When this court considers defendant’s “motion for judgment on the
pleadings, each of the well-pled allegations in the complaint[] is assumed to be
correct, and the court must indulge all reasonable inferences in favor of the
plaintiff[].” Atlas Corp. v. United States, 895 F.2d 745, 749 (Fed. Cir. 1990)
(citing Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), abrogated on other grounds
by Harlow v. Fitzgerald, 457 U.S. 800 (1982); Owen v. United States, 851 F.2d
1404, 1407 (Fed. Cir. 1988)). The court applies substantially the same test as it
2
/ A supplemental filing identifying a change in corporate disclosure information,
required by RCFC 7.1(b)(2), appears to be over two years overdue.
9
does for a motion to dismiss for failure to state a claim under RCFC 12(b)(6). See
Perez Acevedo v. Rivero Cubano, 520 F.3d 26, 29 (1st Cir. 2008) (“A motion for
judgment on the pleadings is treated much like a Rule 12(b)(6) motion to dismiss.”
(citing Curran v. Cousins, 509 F.3d 36, 43-44 (1st Cir. 2007))); Guidry v. Am.
Pub. Life Ins. Co., 512 F.3d 177, 180 (5th Cir. 2007) (“The standard for deciding a
Rule 12(c) motion is the same as a Rule 12(b)(6) motion to dismiss.”) (citation
omitted); Peterson v. United States, 68 Fed. Cl. 773, 776 (2005) (“The legal
standard applied to evaluate a motion for judgment on the pleadings is the same as
that for a motion to dismiss [under RCFC 12(b)(6)].”); see also Xianli Zhang v.
United States, 640 F.3d 1358, 1364 (Fed. Cir. 2011) (“When reviewing a decision
of the Court of Federal Claims to grant judgment on the pleadings under RCFC
12(c), ‘we apply the same standard of review as a case dismissed pursuant to Rule
12(b)(6) . . . .’” (quoting Cary v. United States, 552 F.3d 1373, 1376 (Fed. Cir.
2009))).
“Factual allegations [in the complaint] must be enough to raise a right to
relief above the speculative level . . . .” Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 555 (2007) (Twombly) (citation omitted). Plaintiffs must go beyond “a
formulaic recitation of the elements of a cause of action.” Id. (citation omitted).
Further, the court must not mistake legal conclusions presented in a complaint for
factual allegations which are entitled to favorable inferences. See, e.g., Papasan v.
Allain, 478 U.S. 265, 286 (1986) (“[W]e are not bound to accept as true a legal
conclusion couched as a factual allegation.”) (citations omitted). Nonetheless,
“the court should only grant a defendant’s motion for judgment on the pleadings if
the defendant is clearly entitled to judgment on the basis of the facts as the
plaintiff has presented them.” Owen, 851 F.2d at 1407.
The court must inquire whether the complaint meets the plausibility
standard described by the United States Supreme Court, i.e., whether it adequately
states a claim and provides a “showing [of] any set of facts consistent with the
allegations in the complaint.” Twombly, 550 U.S. at 563 (citations omitted). “To
survive a motion [of this nature], a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (Iqbal) (quoting Twombly, 550 U.S. at
570). Plausibility is a context-specific inquiry. See, e.g., id. at 679 (“Determining
whether a complaint states a plausible claim for relief will . . . be a
context-specific task that requires the reviewing court to draw on its judicial
10
experience and common sense.”) (citation omitted).
After according all reasonable inferences to the factual allegations of the
complaint, “[j]udgment on the pleadings . . . is appropriate where there are no
material facts in dispute and the [movant] is entitled to judgment as a matter of
law.” New Zealand Lamb Co. v. United States, 40 F.3d 377, 380 (Fed. Cir. 1994)
(citation omitted). A party may present facts outside of the pleadings when
bringing or resisting a motion for judgment on the pleadings; upon consideration
of these materials the court would then treat the motion as one for summary
judgment under RCFC 56. RCFC 12(d).
II. Standard of Review for Summary Judgment
“[S]ummary judgment is a salutary method of disposition designed to secure
the just, speedy and inexpensive determination of every action.” Sweats Fashions,
Inc. v. Pannill Knitting Co., 833 F.2d 1560, 1562 (Fed. Cir. 1987) (internal
quotations and citations omitted). The party moving for summary judgment will
prevail “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.” RCFC 56(a). A
genuine issue of material fact is one that could “affect the outcome” of the
litigation. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
“The moving party . . . need not produce evidence showing the absence of a
genuine issue of material fact but rather may discharge its burden by showing the
court that there is an absence of evidence to support the nonmoving party’s case.”
Dairyland Power Coop. v. United States, 16 F.3d 1197, 1202 (Fed. Cir. 1994)
(citing Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)). A summary judgment
motion is properly granted against a party who fails to make a showing sufficient
to establish the existence of an essential element to that party’s case and for which
that party bears the burden of proof at trial. Celotex, 477 U.S. at 324.
The Supreme Court has instructed that “the mere existence of some alleged
factual dispute between the parties will not defeat an otherwise properly supported
motion for summary judgment; the requirement is that there be no genuine issue of
material fact.” Anderson, 477 U.S. at 247-48. A non-movant will not defeat a
motion for summary judgment “unless there is sufficient evidence favoring the
nonmoving party for a jury to return a verdict for that party.” Id. at 249 (citation
11
omitted). “A nonmoving party’s failure of proof concerning the existence of an
element essential to its case on which the nonmoving party will bear the burden of
proof at trial necessarily renders all other facts immaterial and entitles the moving
party to summary judgment as a matter of law.” Dairyland, 16 F.3d at 1202
(citing Celotex, 477 U.S. at 323).
III. Standard of Review for Requests for Discovery Under RCFC 56(d)3
RCFC 56(d) governs discovery afforded to a party opposing a summary
judgment motion:
When Facts Are Unavailable to the Nonmovant. If a
nonmovant shows by affidavit or declaration that, for
specified reasons, it cannot present facts essential to
justify its opposition, the court may:
(1) defer considering the motion or deny it;
(2) allow time to obtain affidavits or declarations or to
take discovery; or
(3) issue any other appropriate order.
RCFC 56(d). The nonmovant will generally be given a chance to conduct
discovery that is reasonably directed to obtaining facts essential to its case.
Opryland USA Inc. v. Great Am. Music Show, Inc., 970 F.2d 847, 852 (Fed. Cir.
1992) (citations omitted); see Dunkin’ Donuts of Am., Inc. v. Metallurgical
Exoproducts Corp., 840 F.2d 917, 919 (Fed. Cir. 1988) (vacating a grant of
summary judgment because no opportunity for the discovery of pertinent facts was
afforded the nonmovant). If a continuance is granted under this rule, the court
must ensure that the nonmovant has “adequate time for discovery.” Dunkin’
Donuts, 840 F.2d at 919 (citing Celotex, 477 U.S. at 322-23).
The opportunity provided by RCFC 56(d) to conduct discovery while
resisting summary judgment is not unlimited, however. Rule 56(d) “provides for
comparatively limited discovery for the purpose of showing facts sufficient to
withstand a summary judgment motion.” First Nat’l Bank of Ariz. v. Cities Serv.
3
/ RCFC 56(d) was formerly RCFC 56(f); the language of the former rule was
substantially similar but not identical to RCFC 56(d).
12
Co., 391 U.S. 253, 265 (1968). The non-moving party will not be allowed to
conduct discovery that has no chance of leading to the denial of summary
judgment for the movant. See Simmons Oil Corp. v. Tesoro Petroleum Corp., 86
F.3d 1138, 1144 (Fed. Cir. 1996) (stating that a court may deny a motion for
additional discovery if “‘there is no reason to believe that [the discovery
requested] will lead to the denial of a pending motion for summary judgment’”
(citing Pac. Serv. Stations Co. v. Mobil Oil Corp., 689 F.2d 1055, 1066 (Temp.
Emer. Ct. App. 1982))). In particular, the court may deny the nonmovant
discovery of facts which, because of prior court rulings, could not be of any use in
resisting a pending summary judgment motion. See id. (citing Fleetwing Corp. v.
Mobil Oil Corp., 726 F.2d 768, 771 (Temp. Emer. Ct. App. 1983)); Wallace v.
Brownell Pontiac GMC Co., 703 F.2d 525, 528 (11th Cir. 1983) (“It would have
been useless to continue discovery because the Fifth Circuit previously had
decided the issue in question adversely to the appellants.”).
There may be other criteria for ruling on a RCFC 56(d) motion, but
precedential caselaw is sparse on this topic. See Flowers v. United States, 75 Fed.
Cl. 615, 626 (2007) (stating that the Federal Circuit “has not established criteria to
consider in evaluating a motion for discovery under RCFC 56([d])” (citing
Theisen Vending Co. v. United States, 58 Fed. Cl. 194, 198 (2003))). This court
interprets RCFC 56(d) liberally, in favor of the party resisting summary judgment.
See, e.g., News Publ’g Co. v. United States, 218 Ct. Cl. 712, 715 (1978) (citation
omitted); Theisen Vending, 58 Fed. Cl. at 197 (citation omitted); Gregory Lumber
Co. v. United States, 9 Cl. Ct. 503, 532 (1986) (stating that “we embrace with
approval [t]he requirement of a liberal construction of Rule 56([d])”) (citations
omitted); see also Monarch Assurance P.L.C. v. United States, 244 F.3d 1356,
1364-65 (Fed. Cir. 2001) (sanctioning additional discovery even where “the
likelihood that plaintiffs can cobble together enough evidence to persuade the trial
court . . . seems quite remote”). One primary question for the court to consider is
whether the requested discovery will be necessary or relevant to the nonmovant’s
opposition to the motion for summary judgment. See Paalan v. United States, 57
Fed. Cl. 15, 18 (2003) (requiring that a plaintiff explain how the requested
discovery materials “are relevant and necessary to the preparation of his
opposition to defendant’s motion for summary judgment”). In addition, discovery
under this rule should be limited to the legal issues upon which the resolution of a
motion for summary judgment will turn. E.g., Chevron U.S.A. Inc. v. United
States, 72 Fed. Cl. 817, 819 (2006) (stating that discovery under the rule should be
13
limited to the legal issues presented in the summary judgment motion).
IV. Analysis
A. RQ2’s Claims
The complaint filed in this case contains two closely-related breach of
implied-in-fact contract counts. The first count is labeled breach of a contractual
obligation to “not make independent commercial use or unauthorized disclosure
of proprietary information submitted to the USPS regarding RQ2’s proprietary
Dual Label concept.” Compl. ¶ 85. The second count asserts that USPS
misappropriated RQ2’s Dual Label trade secret, id. ¶ 96, but also relies upon the
alleged implied-in-fact contract that USPS would not disclose or make use of
RQ2’s Dual Label idea, id. ¶¶ 93, 96, 98.
As defendant notes, the two counts in the complaint allege breach of an
implied-in-fact contract. Def.’s Mot. at 13 n.3. The court views the two counts in
the complaint as overlapping if not identical.4 The court therefore refers to the
claim in the complaint as a claim for breach of an implied-in-fact contract between
USPS and RQ2. The nature of the breach is unauthorized disclosure and
unauthorized use by USPS of RQ2’s proprietary information.
Rather than seek leave to amend the complaint, plaintiff presented an
additional, new claim in its opposition brief. As a general matter, claims raised in
responsive briefing do not serve to amend a complaint. E.g., Michels v. United
States, 72 Fed. Cl. 426, 432 (2006) (citations omitted). As such, RQ2’s new
4
/ The court notes that plaintiff’s opposition brief, too, describes this case as presenting
issues of breach of an implied-in-fact contract between RQ2 and USPS. See, e.g., Pl.’s Opp. at
2-3 (describing, in Statement of the Issues paragraphs 1-3, breaches of a implied-in-fact
contract), 10 (“USPS is liable for its breach of implied contract with RQ2 as a result of its
conduct . . . manifesting an agreement between USPS and RQ2.”), 11 (“Though the
misappropriation of trade secrets is often considered to be a tort, USPS here is liable for that
claim under the CDA because any obligation of the United States not to misuse any trade secrets
arises from the implied contract created as part of the disclosure of the trade secret.”), 12 (“[I]t is
clear by review of the Plaintiff’s Complaint and the Defendant’s Answer that RQ2’s claim of
breach of an implied in fact contract had been adequately pled, that the facts supporting those
pleadings have been stated with specificity, and that those facts are not speculative.”).
14
claim, as presented in its opposition brief, is not properly before the court. Id. In
the interests of judicial economy, however, the court will address this claim as
well as the challenge to this new claim brought by defendant.
Plaintiff alleges in this new claim that the implied-in-fact contract between
USPS and RQ2 contains an additional term – that USPS promised to engage RQ2
as a PRS provider. See Pl.’s Opp. at 2 (asserting that “RQ2 has pled sufficient
non-speculative facts in its Complaint alleging that the United States Postal
Service breached an implied contract in fact with RQ2 to approve RQ2 as the third
only ever Parcel Return Service provider”), 13 (asserting that “RQ2 not only
rightly anticipated, but was absolutely entitled to, earn remuneration for its
contractual bargain as the third ever approved USPS PRS vendor”); 22 (asserting
that “USPS’ conduct clearly manifested an agreement between USPS and RQ2 to
develop the RQ2 Dual Label System”), 22 (asserting that “USPS . . . would
position RQ2 as the third approved PRS vendor [s]o RQ2 could profit from the
RQ2 Dual Label . . . System”). Defendant persuasively argues that the factual
allegations in the complaint render this new claim speculative, implausible and
untenable. Def.’s Reply at 2-5.
The facts alleged by plaintiff show that RQ2 had commenced an approval
process with USPS which required a final application approval from USPS and
which would culminate in an executed service agreement between the two parties.
See Compl. ¶¶ 67-68. The new claim presented in plaintiff’s opposition brief, that
USPS entered into an implied-in-fact contract with RQ2 approving RQ2 as a PRS
provider in advance of and in lieu of issuing a final approval and executing a
service agreement, is not legally plausible. See, e.g., Pac. Gas & Elec. Co. v.
United States, 3 Cl. Ct. 329, 339 (1983) (“[I]n negotiations where the parties
contemplate that their contractual relationship would arise by means of a written
agreement, no contract can be implied.”) (citations omitted), aff’d, 738 F.2d 452(Fed. Cir. 1984). Under the standard applicable here, Iqbal, 556 U.S. at 678,
defendant is entitled to judgment on the pleadings regarding any such claim
brought by plaintiff, if such a claim could be viewed as properly before the court.
The court now turns to plaintiff’s claim regarding USPS’s unauthorized
disclosure and use of RQ2’s proprietary information.
B. Materials Outside the Pleadings Must Be Considered to Resolve
15
Defendant’s Challenge to RQ2’s Breach Claim
In the court’s view, plaintiff’s claim as to USPS’s unauthorized disclosure
and use of RQ2’s proprietary information treads the line between plausibility and
mere speculation. Defendant argues, for example, that RQ2’s claim as to breach
of a contractual duty, only one of the four required elements of a breach claim,
“rest[s] on guesswork wholly unsupported by facts.” Def.’s Mot. at 14. In
essence, defendant asserts that the “replication” of RQ2’s Dual Label idea in
UPS’s Flexible Access and in FedEx’s SmartPost is pure speculation. Id.Plaintiff’s opposition brief is not particularly helpful in this regard. RQ2
relies on general ipse dixit pronouncements as to the sufficiency of the factual
allegations in the complaint. See Pl.’s Opp. at 2-3 (suggesting that RQ2’s
“proprietary information was necessary for UPS to implement an exact duplicate
of the RQ2 Dual Label System with USPS two years later”), 3 (suggesting that
“the United States Postal Service necessarily must have disclosed RQ2’s admitted
proprietary information and trade secrets to UPS at least”), 17 (“RQ2 argues that
the pleadings standing alone, without Defendant having mashed and confused the
basis for the Rule 12(c) motion by the Defendant’s fact witnesses are sufficient to
survive Rule 12(c) scrutiny.”). Plaintiff also relies on exhibits and declarations
submitted by the parties, which the court may decline to consider for the resolution
of a motion brought under RCFC 12(c). See RCFC 12(d).
The court’s analysis is therefore founded, to a large extent, on the complaint
and defendant’s criticism of the complaint. According to defendant, plaintiff’s
breach allegations are not plausible because plaintiff’s hypothesis regarding
misappropriated proprietary information relies upon a chain of highly speculative
events. Def.’s Reply at 5-6. The government’s arguments are buttressed with
citations to Mr. Grubb’s declaration, a document not contained within the
pleadings. See id. at 6.
Defendant also compares the allegations in RQ2’s complaint to the facts
alleged in Twombly. Def.’s Reply at 7-9. However, in the court’s view, the facts
in this case are quite different from those in Twombly. As the Supreme Court has
stated, the inquiry into plausibility is a context-specific inquiry. Iqbal, 556 U.S. at
679. The facts in Twombly are not sufficiently analogous to resolve the RCFC
12(c) motion in this case.
16
Having duly considered the complaint’s factual allegations and the breach
claim, and having afforded all favorable inferences to the factual allegations in the
complaint, as it must, the court concludes that RQ2’s claim is plausible, if only
barely so. To further test RQ2’s claim, the court would need to consider materials
outside the pleadings. Because such consideration would bring the court’s review
outside the ambit of RCFC 12(c), see RCFC 12(d), defendant’s motion for
judgment on the pleadings, except as to judgment on the “new” claim for breach of
an implied-in-fact contract to approve RQ2 as a PRS provider, must be denied.
C. Summary Judgment Should Be Deferred Pending Limited,
Targeted Discovery
The court also has before it defendant’s motion for summary judgment,
which relies on three declarations as well as exhibits attached thereto. The court
will not recount the specifics of defendant’s arguments, but notes that the evidence
relied upon by defendant calls into question whether RQ2’s Dual Label System
was indeed novel, and whether the dual label concept and related technology were
already in use in the market by the time RQ2 disclosed its system to USPS. Def.’s
Mot. at 16. Of particular note is a declaration that avers that UPS already had a
like concept and technology before RQ2 is said to have disclosed its system to
USPS. Def.’s Mot. Ex. 3 ¶¶ 10, 12 (Shepherd West Decl.). None of the evidence
submitted by RQ2 thus far is sufficient to create a genuine issue of material fact on
this issue. See Def.’s Reply at 13 (discussing the declaration of Mr. Grubb and
concluding that “Mr. Grubb effectively does not challenge Ms. Shepherd West’s
declaration, underscoring that summary judgment is warranted”).
Plaintiff argues that summary judgment is not warranted on the record
before the court. Pl.’s Opp. at 28. The court need not decide the issue at this
point, because plaintiff has also requested discovery in order to resist summary
judgment.5 Id. at 4, 14, 17, 28-29. Plaintiff frames its discovery request broadly:
Discovery on the several germane questions of fact that
. . . are now within the exclusive control of USPS, may
unearth proof and relevant evidence substantiating the
5
/ Had plaintiff not requested discovery, the court notes that the government has set forth
a strong argument for summary judgment.
17
RQ2 circumstantial evidence of multiple contract
breaches.
Id. at 29; see also id. at 14 (“[I]t is respectfully submitted that Rule 56 decision
should be deferred until further discovery is had on the issues of USPS’ handling
of the RQ2 Dual Label System information, the yet unresolved RQ2 PRS
application, the unknown/unstated reasons for USPS termination of all
communications with RQ2 and a host of other germane questions relevant to this
dispute.”).
Defendant suggests that discovery would be wasteful and futile. Def.’s
Reply at 15. Although the court concedes that defendant may be right, requests
for discovery under RCFC 56(d) are liberally granted. E.g., Theisen Vending, 58
Fed. Cl. at 197. Defendant is on firmer ground when the government contends
that plaintiff’s broad discovery request indicates that “RQ2 makes clear that it
seeks to engage in a classic fishing expedition through USPS’s nationwide
workforce in an attempt to find evidence to support its speculative claims.” Def.’s
Reply at 15. The court must agree with defendant that plaintiff’s opposition brief
indicates that RQ2 “seeks to pursue discovery on far-ranging and questionable
topics.” Id.
The proper resolution of plaintiff’s broad request for discovery is to
narrowly tailor discovery to the material issue that might prevent summary
judgment for the government. E.g., Simmons Oil, 86 F.3d at 1144. In this case,
the dispositive issue accurately highlighted by the government is whether UPS
already possessed the concept and technology for its dual label system that became
Flexible Access, before RQ2 allegedly shared its concept and technology with
USPS. Defendant suggests that, in practical terms, the parties’ discovery should
therefore be limited to the relevant factual contentions in the declaration submitted
by Ms. Linda Shepherd West of UPS. See Def.’s Mot. Ex. 3. The court agrees.6
CONCLUSION
6
/ At this point in the dispute, the court encourages plaintiff to carefully weigh the costs
of discovery, as well as the costs of opposing a renewed summary judgment motion, against
RQ2’s prospects of success on its claim.
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For these reasons, it is hereby ORDERED that:
(1) Defendant’s Corrected Motion for Judgment on the Pleadings, filed
June 9, 2014, is GRANTED in part, as to plaintiff’s contention that
an implied-in-fact contract to approve RQ2 as a PRS provider was
formed between plaintiff and the United States, and DENIED in
part, as to plaintiff’s contention that an implied-in-fact contract
concerning the government’s disclosure and use of plaintiff’s
proprietary information was breached;
(2) Defendant’s Motion, in the Alternative, for Summary Judgment in
Favor of the Government, filed June 9, 2014, is DEFERRED
pending targeted discovery limited in scope to the relevant factual
contentions in the declaration submitted by Ms. Linda Shepherd West
of UPS; and,
(3) On or before February 6, 2015, the parties shall FILE a Joint
Proposed Limited Discovery Schedule.
/s/Lynn J. Bush
LYNN J. BUSH
Senior Judge
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