L-3 Commc'ns Corp. v. Serco, Inc.

L-3 COMMUNICATIONS CORPORATION, et al., Plaintiffs, v. SERCO, INC., Defendant.

Case No. 1:15-cv-00701-GBL-JFA

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA ALEXANDRIA DIVISION

November 3, 2015

MEMORANDUM OPINION AND ORDER

This matter is before the Court on Defendant Serco, Inc. ("Serco" or "Defendant")'s 12(b)(1) Motion to Dismiss (Doc. 34). This is a contract dispute case where Plaintiffs L-3 Communications Corporation and L-3 Applied Technologies, Inc. have asserted claims against Serco for common law and statutory conspiracy, aiding and abetting tortious interference, negligent misrepresentation of a business relationship, violations of the Colorado Organized Crime Control Act, breach of fiduciary duty, and violation of the Virginia Uniform Trade Secrets Act.

There are two issues before the Court. The first issue is whether the Court has subject matter jurisdiction over this action under Virginia law where the named Plaintiffs fail to provide sufficient evidence of any right or business expectancy to the losses alleged. The second issue is whether the Court has subject matter jurisdiction over this action under Virginia law where Plaintiffs' declaratory judgment claims are not ripe for adjudication.

The Court grants Defendant's Motion to Dismiss under Rule 12(b)(1) of the Federal Rules of Civil Procedure for two reasons. First, the Court finds that each entity has failed to provide sufficient evidence of any right or business expectancy to the losses alleged because: (1) any right or business expectancy necessarily arose from the Subcontract in dispute; (2) Plaintiffs failed to sufficiently establish that they are parties to or assignees of the Subcontract; and (3) Plaintiffs failed to establish the requisite elements of standing under Article III. Second, the Court finds that Plaintiffs' declaratory judgment claims are not ripe for adjudication because Plaintiffs' injuries alleged in Counts 80 and 81 of the Amended Complaint have not yet occurred. Accordingly, the Court GRANTS Defendant's Motion (Doc. 34).

I. BACKGROUND

A. Basic Contractual Background

In April 2004, the United States Air Force Space Command ("USAFSC") awarded an indefinite delivery, indefinite quantity ("IDIQ") contract to SI International, Inc. ("SI International")¹ (Doc. 63). Under the IDIQ contract, the USAFSC tasked SI International, as the prime contractor, with managing the testing and upgrading of USAFSC sites around the world to protect them from high-altitude electromagnetic pulse ("HEMP") events, among other tasks. Id. Under the IDIQ, SI International awarded task orders for HEMP work to parties with which it had subcontracted. Id. In December 2004, SI International and The Titan Corporation ("Titan") entered into a subcontract ("Subcontract") whereby Titan, as the subcontractor to SI International, would perform HEMP work under the IDIQ (Doc. 35). All subcontractor work under the IDIQ contract flowed through the Subcontract. Id.

B. Assignment of the Subcontract²

In January 2002, Titan merged with Jaycor and remained The Titan Corporation (Doc. 35). On June 2, 2005, Titan entered into a merger agreement with the L-3 Communications Corporation's subsidiary Saturn VI Acquisition Corp., and Titan survived the merger as a wholly-owned subsidiary of L-3 Communications Corporation. Id. On December 6, 2005, Titan changed its name to L-3 Communications Titan Corporation. Id. On December 13, 2007, L-3 Communications Titan Corporation changed its name to L-3 Services, Inc. Id. Through a December 20, 2011 Contribution Agreement, L-3 Services, Inc. assigned all of its assets in its Applied Technologies Division to the newly formed L-3 Applied Technologies, Inc. and L-3 Applied Technologies, Inc. became a subsidiary to L-3 Services, Inc. Id.

Plaintiffs allege that this Contribution Agreement transferred the Subcontract from L-3 Services, Inc. to L-3 Applied Technologies, Inc.³ (Doc. 35). Defendant argues that the Subcontract, by its terms, is an asset that required Serco's express, written consent for L-3 Services, Inc. to assign it to L-3 Applied Technologies, Inc.⁴ (Doc. 123). Therefore, Defendant argues this Contribution Agreement did not transfer the Subcontract to L-3 AppliesTechnologies, Inc. because the prime contractor (SI International) did not provide the specific consent required in the language of the Subcontract.⁵ Id.

C. Plaintiffs' Conspiracy Allegations

Plaintiffs allege that in or around June 2009, Defendant and Jaxon (a newly formed business) entered in to a coordinated and fraudulent scheme (the "Jaxon-Serco Scheme") to rig the subcontract bidding process in favor of Jaxon for HEMP-Testing related task orders (Doc. 63). Plaintiffs contend that Defendant, in collusion with Jaxon, hired Plaintiffs' former engineers, and technicians, in order to exploit proprietary and confidential information. Id.

In addition, Plaintiffs allege that Defendant knowingly used this tactic to exclude Plaintiffs from receiving information about the task orders on time, making it practically impossible for Plaintiffs to participate in the bidding process. Id. Specifically, Plaintiffs argue that their business expectancy of receiving task orders was "based on its unique scientific excellence, proprietary technical know-how, and recognized preeminence in the field of HEMP-testing and maintenance" as well as their prior performance as a subcontractor (Doc. 114). Plaintiffs allege that but-for Defendant's scheme of hiring Plaintiffs' former employees and rigging the bidding process, the task orders would have been awarded to them. Id.

D. Injuries for Which Plaintiffs Seek Relief in This Action

Plaintiffs' Amended Complaint sets forth 81 counts against Serco, including tortious interference with nondisclosure agreements (Counts 1-5), tortious interference with business expectancy (Counts 6-39), aiding and abetting tortious interference (Counts 40-74), conspiracy (Counts 75-76), violations of the Colorado Organized Crime Control Act ("COCCA") (Counts 77-79), and declaratory judgment for breach of an alleged fiduciary duty to L-3 and misappropriation of trade secrets under the Virginia Uniform Trade Secrets Act ("VUTSA") (Counts 80-81) (Doc. 63).

In their declaratory judgment claims (Counts 80 and 81), Plaintiffs seek declarations that Defendant's use of L-3 proprietary information, acquired in Subcontract bids, which Jaxon uses in any future competition, is a breach of Defendant's fiduciary duty to Plaintiffs and a violation of the Virginia Uniform Trade Secrets Act (Doc. 63). Plaintiffs seek damages in excess of $80,000,000.00, including lost profits, unjust enrichment, and disgorgements of unlawful profits from the alleged Jaxon-Serco scheme (Doc. 35). Defendant argues that these declaratory claims are not ripe for adjudication because they are based on injuries that might occur if Defendant competes with Plaintiffs for future projects "currently being planned" by the USAFSC. Id.

III. STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(1) allows a defendant to move for dismissal when the court lacks jurisdiction over the subject matter of the action. Fed. R. Civ. P. 12(b)(1). In considering a 12(b)(1) motion to dismiss, the burden lies with the plaintiff to prove that federal subject matter jurisdiction is proper. See United States v. Hays, 515 U.S. 737, 743 (1995) (citing McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189 (1936)); Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). There are two ways in which a defendant may present a12(b)(1) motion. First, a defendant may attack the complaint on its face when the complaint "fails to allege facts upon which subject matter jurisdiction may be based." Adams, 697 F.2d at 1219. In such a case, all facts as alleged by the plaintiff are assumed to be true. Id.

Alternatively, a 12(b)(1) motion to dismiss may attack the existence of subject matter jurisdiction over the case apart from the pleadings. See Williams v. United States, 50 F.3d 299, 304 (4th Cir. 1995) (citing Mortensen v. First Fed Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977)); White v. CMA Constr. Co., 947 F. Supp. 231, 233 (E.D. Va. 1996). In such a case, the court may consider evidence outside the pleadings and regard the pleadings as mere evidence to determine the existence of jurisdiction. Velasco v. Gov't of Indonesia, 370 F.3d 392, 398 (4th Cir. 2004). As a result, plaintiff's allegations find no presumption of truth, and a dispute of material facts will not preclude the trial court from evaluating the merits of claims underlying jurisdiction. U.S. ex. rel. Vuyyuru v. Jadhav, 555 F.3d 337, 347 (4th Cir. 2009).

IV. ANALYSIS

The Court GRANTS Defendant's 12(b)(1) Motion to Dismiss because (1) any right or business expectancy necessarily arose from the Subcontract in dispute; (2) Plaintiffs failed to sufficiently establish that each entity is a party to or assignees of the Subcontract; (3) Plaintiffs failed to establish the requisite elements of standing under Article III; and (4) Plaintiffs' injuries alleged in Counts 80 and 81 of the Amended Complaint are not ripe for adjudication because they have not occurred.

A. Plaintiffs' Contractual Rights and/or Business Expectancy

1. Any Rights Or Business Expectancy Necessarily Arose From The Subcontract

The Court finds that each entity fails to provide sufficient evidence of any contractual right or business expectancy to the losses alleged. Under Virginia law, in order to state a claimfor intentional interference with contractual rights or business expectancy a plaintiff must plead facts showing: (1) the existence of a valid contractual relationship or business expectancy; (2) the putative interfered knowledge of the relationship or expectancy; (3) an intentional interference inducing or causing a breach or termination of the relationship or expectancy; and (4) resulting damage to the plaintiff. Priority Auto Grp., Inc. v. Ford Motor Co., 757 F.3d 137, 143 (4th...