Court Opinion

ID: 2661712
Source: CourtListenerOpinion
Date Created: 2014-04-03 11:15:02.638951+00
Date Added: 2024-06-11T13:01:02.805227
License: Public Domain

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