Phillips v. Spencer
390 F. Supp. 3d 136
D.C. Cir.2019Background
- Sebastian Phillips (MDD) is a naval-architecture firm that performed Navy/MSC/OPLOG work; suit alleges the Navy effectively "debarred" MDD from OPLOG and MSC contracting beginning in 2011.
- Key events: OPLOG program managers (Traugh, Robinson, Bosworth) directed changes reallocating ~$700,000 away from MDD in 2011; several senior MDD employees left in 2011 and later performed similar work for other contractors.
- MDD nonetheless received substantial Navy work after 2011 (including >$14 million and a $14.48M NAVSEA award in 2014) and multiple task orders, options, modifications, and SeaPort awards through 2016.
- Plaintiffs asserted due-process de facto-debarment claims (Counts I & II), tort/interference claims against federal employees (Count IX), and common-law claims (breach of fiduciary duty, civil conspiracy) against former MDD employees including Matthew Miller (Counts VI and VIII).
- Court conducted discovery, then resolved cross-motions: defendants sought dismissal/summary judgment on Counts I, II, IX; Miller and plaintiffs cross-moved on Miller-related claims.
- Court rulings: no de facto debarment as a matter of law; Traugh and Bosworth entitled to qualified immunity; Westfall Act substitution for Robinson and Traugh (United States substituted) and FTCA bars/scope problems; Miller entitled to summary judgment on breach-of-fiduciary-duty and civil-conspiracy claims (plaintiffs could proceed against other ex-employees).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Navy de facto debarred MDD (Fifth Amendment due process) | MDD was effectively blacklisted from OPLOG/MSC work (statements & conduct by Bosworth/Traugh; GAO/SBA/MSO reports show unfair treatment). | Navy points to numerous post-2011 awards, task orders, modifications and a major 2014 contract showing MDD was not broadly precluded. | No de facto debarment: plaintiffs failed the high standard of showing systematic, agency-wide exclusion; receipt of significant awards precludes finding. |
| Qualified immunity for Traugh & Bosworth (individual damages) | Plaintiffs: de facto debarment violated clearly established rights, so immunity not available. | Officials: reasonable official could not have known terminating a single subcontract amounted to agency-wide debarment. | Qualified immunity granted: plaintiffs did not show the officials in fact violated the constitutional right. |
| Whether Robinson & Traugh tort claims survive Westfall/FTCA/subrogation (Count IX) | Plaintiffs: claims allege interference and diversion of funds; FTCA inapplicable. | Federal Defs: Attorney General certified officials acted within scope; US substituted; claims fall within FTCA exceptions (e.g., §2680(h)) and plaintiffs failed to exhaust admin remedies. | Westfall Act substitution upheld; United States substituted and FTCA bars/exceptions and failure to exhaust deprive court of jurisdiction; Count IX dismissed. |
| Whether Miller breached fiduciary duty / conspired (Counts VI & VIII) | Plaintiffs: Miller prepared business plan, used MDD confidential SOW, solicited customers and diverted funds to AirClean, thereby breaching loyalty and conspiring with ex-employees. | Miller: never signed binding handbook/non-compete; conduct was preparatory, lawful competition; did not misuse confidential, non-public materials; no evidence of solicitation or agreement to conspire. | Miller entitled to summary judgment: handbook did not create enforceable post-employment restraints; no misuse of confidential material or solicitation shown; no actionable conspiracy. |
Key Cases Cited
- Old Dominion Dairy Prods., Inc. v. Secretary of Defense, 631 F.2d 953 (D.C. Cir.) (de facto debarment requires notice/hearing when government effectively bars contractor from virtually all government work)
- Reeve Aleutian Airways, Inc. v. United States, 982 F.2d 594 (D.C. Cir.) (de facto debarment concept and scope of government exclusion)
- Trifax Corp. v. District of Columbia, 314 F.3d 641 (D.C. Cir.) ("won some and lost some"—partial losses insufficient to show broad preclusion from government contracting)
- Highview Eng'g, Inc. v. U.S. Army Corps of Eng'rs, 864 F. Supp. 2d 645 (W.D. Ky. 2012) (explaining high standard for proving de facto debarment at summary judgment)
- Mitchell v. Forsyth, 472 U.S. 511 (U.S. 1985) (at summary judgment, plaintiff must produce evidence that defendant in fact committed acts violating clearly established law)
- Taylor v. Resolution Trust Corp., 56 F.3d 1497 (D.C. Cir.) (government action precluding future opportunities infringes liberty interest when sufficiently formal or broad)
- Council on Am.-Islamic Relations v. Ballenger, 444 F.3d 659 (D.C. Cir.) (scope-of-employment analysis: communications incidental to official duties fall within scope and can trigger substitution under Westfall Act)