Toxco Inc. v. Steven Chu

724 F.Supp.2d 16

TOXCO INC., Plaintiff,

v.Steven CHU, in his official capacity as Secretary of the U.S. Department of Energy, Defendant.

Civil Action No.: 09-1925.

United States District Court,District of Columbia.

July 20, 2010.

COPYRIGHT MATERIAL OMITTED.

Charles A. Patrizia, Paul, Hastings, Janofsky & Walker, LLP, Washington, DC, for Plaintiff.

Michelle Lo, U.S. Attorney's Office, Washington, DC, for Defendant.

MEMORANDUM OPINION

Denying the Defendant's Motion to Dismiss for Failure to State a Claim for Which Relief Can be Granted; Denying the Plaintiff's Motion for a Preliminary Injunction; Denying as Moot the Plaintiff's Motion for Leave to File Supplemental Information

RICARDO M. URBINA, District Judge.

I. INTRODUCTION

The plaintiff, Toxco Inc., operates a waste disposal facility in Tennessee. It has brought this action pursuant to the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 553 et seq., and the due process clause of the Fifth Amendment, challenging the Department of Energy's (“DOE”) withdrawal of its consent to a subcontract entered into by the plaintiff. This matter is now before the court on the plaintiff's motion for a preliminary injunction and the defendant's motion to dismiss for failure to state a claim. The plaintiff seeks a preliminary injunction requiring the DOE to reinstate its consent to the plaintiff serving as a subcontractor on a DOE environmental clean-up project in Niskayuna, New York. The defendant opposes the entry of a preliminary injunction and has filed a Rule 12(b)(6) motion to dismiss. Because the plaintiff has failed to demonstrate that it will suffer irreparable harm absent injunctive relief and has not shown a likelihood of success on the merits, the court denies the plaintiff's motion for a preliminary injunction. Because, however, the court cannot conclude at this stage of the litigation that the plaintiff has no entitlement to relief under the APA or the due process clause of the Fifth Amendment, the court denies the defendant's motion to dismiss. ¹

II. BACKGROUND

A. Factual Background

Until 2000, the DOE operated a research facility known as the Separation Process Research Unit (“SPRU”) in Niskayuna, New York, which was used for research on the separation of atomic isotopes. Pl.'s Mot. for a Prelim. Inj. (“Pl.'s Mot.”) at 3. Although the SPRU facility has been largely unused since 2000, the research performed there resulted in radioactive contamination of the facilities and the surrounding soil. Id. In October 2004, the DOE engaged Accelerated Remediation Company (“ARC”) to return the site to a usable condition. Id.; Def.'s Consolidated Opp'n to Pl.'s Prelim. Inj. Mot. & Mot. to Dismiss for Failure to State a Claim (“Def.'s Mot.”) at 3. The work performed by ARC was to include the removal of contaminated soils, building debris and other waste materials containing low levels of radioactive contamination and disposing of these materials at qualified locations. Pl.'s Mot. at 3.

In September 2007, the DOE issued a task order to ARC for the rehabilitation of the lower level railbed area and the lower level parking lot of the SPRU facility (“the SP-15 Task Order”). Def.'s Mot. at 3. The SP-15 Task Order made ARC responsible for disposing of any waste generated by the remediation project and authorized ARC to use “existing contractual instruments between the Federal Government and waste disposal facilities ... when disposing of waste unless [ARC could] obtain more favorable cost arrangements.” Id., Decl. of Marilyn Long (“Long Decl.”), Ex. 1 at C-12.

In February 2009, the American Recovery and Reinvestment Act provided $37 million of funding to DOE to accelerate the rehabilitation of the SPRU site. Pl.'s Mot. at 4. As a result, in May 2009, ARC issued a request for subcontractors to submit proposals for the disposal of waste generated through work on the SP-15 Task Order containing low levels of radioactive contamination. Id. The plaintiff submitted a proposal in June 2009, and ARC determined that the plaintiff was the lowest-cost, qualifying bidder. Id.

The federal acquisition regulations in force at the time required agency consent for certain subcontracts entered into by a contractor without an approved purchasing system. Def.'s Mot. at 12-13. Furthermore, DOE Order 435.1 required a contractor to obtain an exemption from the DOE before disposing of radioactive waste at a non-DOE facility. Id. at 13. Both provisions applied to the plaintiff's proposed subcontract with ARC. Id. at 12-13. Accordingly, in July 2009, ARC requested DOE's consent to a subcontract between itself and the plaintiff. Pl.'s Mot. at 5-6.

On August 11, 2009, the DOE provided its formal consent to the subcontract in a letter from Marilyn Long, a DOE contracting officer. See id., Aff. of David Eaker (“Eaker Aff.”), Ex. 9. The same day, the plaintiff and ARC executed a subcontract for the disposal of low-level radioactive material pursuant to the SP-15 Task Order. See generally Eaker Aff., Ex. 10 (“Toxco Purchase Order”). The subcontract expressly incorporated several contractual provisions set forth in federal acquisition regulations, including Federal Acquisition Regulation (“FAR”) § 52.249-2. See id. at 3. That regulation contained a contractual provision entitled “Termination for Convenience of the Government,” which provided, in relevant part, that “[t]he Government may terminate performance of work under this contract in whole or, from time to time, in part if the Contracting Officer determines that a termination is in the Government's interest.” 48 C.F.R. § 52.249-2(a). The provision further specified that upon the delivery of the government's notice of termination to the prime contractor, the prime contractor shall, “[w]ith approval or ratification to the extent required by the Contracting Officer, settle all outstanding liabilities and termination settlement proposals arising from the termination of subcontracts; the approval or ratification will be final for purposes of this clause.” Id. § 52.249-2(b)(5).

After executing the subcontract, the plaintiff began to undertake its processing and disposal duties as set forth in the agreement. Pl.'s Mot. at 6. Yet on August 19, 2009, eight days after providing written consent to the plaintiff's subcontract, the DOE issued a notice to ARC that it had rescinded its consent to the plaintiff's subcontract. Eaker Aff., Ex. 13 at 1. The notice contained no explanation for the DOE's withdrawal of consent. See id. The withdrawal forced ARC to terminate its subcontract with the plaintiff. Pl.'s Mot. at 6-7.

B. Procedural History

The plaintiff commenced this action in October 2009, asserting that the DOE's withdrawal of consent constituted an arbitrary and capricious agency action in violation of the APA, and deprived it of property without due process of law in violation of the Fifth Amendment. See generally Compl. The plaintiff also moved for a preliminary injunction requiring the DOE to rescind its withdrawal and reinstate its consent to the plaintiff's subcontract with ARC. See generally Pl.'s Mot.

The defendant responded by filing a consolidated opposition to the plaintiff's motion for a preliminary injunction and a Rule 12(b)(6) motion to dismiss for failure to state a claim. See generally Def.'s Mot. In its motion to dismiss, the defendant argues that the plaintiff's APA claims must be dismissed because the DOE's decision to withdraw its consent was a matter committed to agency discretion by law and because the plaintiff has an alternative adequate remedy to APA review in the form of a breach of contract action against ARC. Id. at 12-14. Furthermore, the defendant argues that the plaintiff's due process claim must be dismissed because the subcontract did not give rise to a protectable property interest for Fifth Amendment purposes. Id. at 14-15.

On November 9, 2009, the plaintiff filed a document entitled “Reply Memorandum in Support of Toxco's Motion for Preliminary Injunction.” See generally Pl.'s Reply. The reply memorandum made no explicit reference to the defendant's motion to dismiss and failed to address numerous arguments contained in that motion. See generally id. After the plaintiff failed to file a response to the defendant's motion by the applicable deadline, the court ordered the plaintiff to show cause why the defendant's motion to dismiss should not be granted as conceded. Order (Dec. 1, 2009).

The plaintiff responded to the show cause order on December 4, 2009. See generally Pl.'s Response to Dec. 1, 2009 Order (“Pl.'s Resp.”). In its response, the plaintiff asserted that its reply memorandum in support of its motion for a preliminary injunction had “addressed the Defendants' arguments, including substantively the arguments underlying the motion to dismiss.” ² Id. at 2. The plaintiff proceeded to “summarize” its responses to the arguments made by the defendant in its motion to dismiss. Id. As noted below, the “summary” provided responses to certain arguments raised in the defendant's motion that were not addressed in the plaintiff's reply memorandum. See generally id.

On December 7, 2009, the court advised the parties that it would treat the plaintiff's response to the order to show cause and its reply memorandum in support of its motion for a preliminary injunction as its opposition to the defendant's motion to dismiss. Order (Dec. 7, 2009). The defendant subsequently filed a reply in support of its motion to dismiss. See generally Def.'s Reply. As the defendant's motion to dismiss and the plaintiff's motion for a preliminary injunction are now ripe for disposition, the court turns to the applicable legal standards and the parties' arguments.

III. ANALYSIS

A. The Court Denies the Defendant's Rule 12(b)(6) Motion to Dismiss

1. Legal Standard for Rule 12(b)(6) Motion to Dismiss

A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of a complaint. Browning v. Clinton, 292 F.3d 235, 242 (D.C.Cir.2002...