PHILLIPS v. MABUS
1:11-cv-02021
D.D.C.Sep 30, 2012Background
- MDD is a DC-based naval contractor whose OPLOG and MSC work relied on Navy contracts; MDD’s key employees left in 2011 and allegedly took work with them.
- Allegations include that Navy officials coordinated with former employees to cut MDD out of future OPLOG and MSC work, and that rumors of fraudulent invoicing were used to justify the exclusion.
- MDD sought a TRO/injunction; court entered a consent preliminary injunction preventing further de facto debarment and requiring equal treatment for MDD in future Navy work and to inform CSC and Gryphon.
- MDD later amended the complaint asserting due process de facto debarment (Count I), damages against Bosworth/Traugh (Count II), and various state-law claims against the four ex-employees, including fiduciary breach, civil conspiracy, defamation (Mazzocco), and interference with contract (Count IX).
- Federal defendants and two former employees moved to dismiss or for summary judgment; plaintiffs sought enforcement of the injunction.
- Court’s disposition: motions denied in large part; de facto debarment plausibly alleged; limited discovery allowed on scope of employment; injunction enforcement denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs state a claim for de facto debarment under the Fifth Amendment. | Phillips (MDD) alleges Navy officials’ statements and conduct systematically deprived MDD of future work. | Defendants contend no de facto debarment occurred; MSC contract activity undermines claim. | Plaintiffs state a plausible de facto debarment claim at the motion to dismiss stage. |
| Sovereign immunity and FTCA applicability to Count IX. | FTCA waiver allows claims against United States for torts; certification issues unresolved. | Westfall Act certification and scope-of-employment issues require dismissal or substitution. | Sovereign immunity under 5 U.S.C. § 702 waived for Count I; FTCA scope issues reserved, Count IX denied dismissal without prejudice to later refiling. |
| Standing and mootness of the de facto debarment claims. | Injury-in-fact from loss of contracts supports standing; ongoing threat of future violations supports relief. | Post-filing actions moot the claim; voluntary compliance undermines standing. | Court finds injury in fact and ongoing controversy; case not moot at this stage. |
| Qualified immunity for Traugh and Bosworth on Count II. | De facto debarment violates clearly established rights; officials’ actions were not objectively reasonable. | Actions within scope of duties and policy discretion; not clearly established. | Count II not dismissed on qualified immunity at this stage; factual development needed. |
| Enforcement of the Stipulated Consent Preliminary Injunction. | Navy breached injunction by neutral communications and TPOC choices; status quo ante not restored. | Communications complied with injunction; TPOC replacement and status restoration adequate. | Enforcement denied at this stage; no clear and convincing violation proved. |
Key Cases Cited
- Trifax Corp. v. District of Columbia, 314 F.3d 641 (D.C. Cir. 2003) (de facto debarment requires a systematic agency effort to deny future contracts)
- TLT Constr. Corp. v. United States, 50 Fed. Cl. 212 (Fed. Cl. 2001) (de facto debarment alternatives: express future-contract denial or conduct precluding future contracting)
- CRC Marine Servs. v. United States, 41 Fed. Cl. 66 (Fed. Cl. 1998) (contractor may be de facto debarred by government actions precluding future work)
- Leslie & Elliott Co. v. Garrett, 732 F. Supp. 191 (D.D.C. 1990) (de facto debarment shown by agency’s broad exclusion from government work)
- Reeve Aleutian Airways, Inc. v. United States, 982 F.2d 594 (D.C. Cir. 1993) (due process liberty interest in avoiding stigma from broad preclusion from government contracting)