UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

SEBASTIAN PHILLIPS, et al.,

Plaintiffs, v. No. 11-cv-2021 (EGS) CARLOS DEL TORO, 1 Secretary of the Navy, et al.,

Defendants.

MEMORANDUM OPINION

I. Introduction

Plaintiff Sebastian Phillips (“Mr. Phillips”), a Naval

Architect, and his architecture and engineering firm, Plaintiff

Marine Design Dynamics, Inc. (“MDD”), allege that they have been

effectively debarred from future government contracts with the

United States Department of the Navy since 2011. Plaintiffs sued

eleven individuals on various federal constitutional and state

common-law claims.

Plaintiffs brought federal constitutional claims against

the Secretary of the Navy, the Chief and Deputy Chief of Naval

Operations, and four officials of the Naval Sea Systems Command

(“NAVSEA”) and Operational Logistics Integration Program

1 Pursuant to Rule 25(d) of the Federal Rules of Civil Procedure, Carlos Del Toro has been automatically substituted as the lead defendant in this case. See Fed. R. Civ. P. 25(d). 1 (“OPLOG”) (collectively, the “Federal Defendants”). In a

Memorandum Opinion issued on July 15, 2019, the Court dismissed

all of these claims. No federal claims remain before the Court.

Plaintiffs also sued four private individuals, who are

former employees of MDD: Michael J. Mazzocco (“Mr. Mazzocco”),

William J. Muras (“Mr. Muras”), Volker Stammnitz (“Mr.

Stammnitz”), and Matthew K. Miller (“Mr. Miller”). Plaintiffs

contend that these defendants are liable for breach of fiduciary

duty, defamation, and civil conspiracy. The Court dismissed all

claims against Mr. Miller in its July 15, 2019, Memorandum

Opinion.

Pending before the Court is a Motion to Dismiss filed by

Mr. Mazzocco, Mr. Muras, and Mr. Stammnitz (collectively, the

“Individual Defendants”). The Individual Defendants move to

dismiss the remaining breach of fiduciary duty, defamation, and

civil conspiracy claims against them. Upon careful consideration

of the Parties’ submissions, the applicable law, and the entire

record, the Court will retain supplemental jurisdiction over the

remaining claims in the case. Accordingly, the Court DENIES the

Individual Defendants’ Motion to Dismiss.

2 II. Background

A. Factual

The Court assumes the Parties’ familiarity with the factual

background and the long history of this litigation, which are

set forth in the Court’s three prior opinions. See Phillips v.

Mabus (“Phillips I”),

(D.D.C. 2012); Phillips

v. Mabus (“Phillips II”),

(D.D.C. 2016); Phillips v.

Spencer (“Phillips III”),

(D.D.C. 2019).

Accordingly, the Court provides only a brief summary of those facts

that are relevant to resolving the instant motion to dismiss.

In 2005, Mr. Phillips, a Naval Architect, formed MDD, a

District of Columbia-based Naval Architecture firm specializing

in ship energy conservation for the Department of the Navy and

other government clients. See Am. Compl., ECF No. 42 at 4 ¶¶ 6-

7. 2 Between 2006 and 2011, MDD was one of the subcontractors for

Computer Sciences Corporation (“CSC”),

at 6 ¶ 23; which

served as one of the contractors supporting the Navy's

Operational Logistics Integration Program (“OPLOG”),

at 7-8

¶¶ 25-30.

Between March 2011 and July 2011, four MDD employees who

had performed significant work on the OPLOG projects left MDD:

2When citing electronic filings throughout this opinion, the Court cites to the ECF header page number, not the original page number of the filed document. 3 Mr. Mazzocco, Mr. Stammnitz, Mr. Muras, and Mr. Miller.

at

14-21 ¶¶ 45-67. In their Amended Complaint, Plaintiffs allege

that all four former employees either started or joined business

entities that competed with MDD to perform the same work for

OPLOG. See

Plaintiffs also allege that Mr. Mazzocco spread

false rumors that MDD was double- or triple-billing the

government for its work.

at 16 ¶¶ 52-54.

Shortly thereafter, on or about May 18, 2011, Mr. Mazzocco,

Mr. Stammnitz, and Mr. Muras met in Boston with Naval Sea

Systems Command (“NAVSEA”) and OPLOG employees.

at 21-23 ¶¶

68-77. Plaintiffs allege that during that meeting, two federal

Navy officials, working with the Individual Defendants, decided

to eliminate MDD entirely from the OPLOG budget for the

following year and redirect Plaintiffs' work to the departing or

already-departed MDD employees.

Plaintiffs further allege

that they have been awarded no new work for OPLOG, through the

CSC contract or any other contract, since July 2011.

at 25 ¶

83.

4 B. Procedural

On January 3, 2012, Plaintiffs filed the Amended Complaint.

See generally

Counts I and II assert federal-question claims

against the Federal Defendants,

at 29-35 ¶¶ 99-126; and

Count IX asserts common-law claims against two of the Federal

Defendants,

at 47-49 ¶¶ 193-200. Counts III, IV, V, and VI

assert a breach of fiduciary duty claim against Mr. Mazzocco,

Mr. Stammnitz, Mr. Muras, and Mr. Miller, respectively.

at

35-44 ¶¶ 127-78. Count VII asserts a defamation claim against

Mr. Mazzocco.

at 44-45 ¶¶ 179-86. Count VIII asserts a civil

conspiracy claim against all four individual defendants.

at

46 ¶¶ 187-92.

On September 30, 2012, the Court denied the following

motions: (1) the Federal Defendants’ Motion to Dismiss, or in

the alternative, Motion for Summary Judgment, (2) Plaintiffs’

Motion to Enforce the Stipulated Preliminary Injunction, and (3)

the Motions to Dismiss filed by Mr. Mazzocco, Mr. Stammnitz, and

Mr. Muras. Phillips I,

. The Parties

engaged in limited discovery and settlement discussions as to

the Federal Defendants only but never reached a resolution.

Phillips II,

.

On July 15, 2019, after full rounds of briefing, the Court

granted the Federal Defendants’ Renewed Motion to Dismiss, or in

5 the alternative, for Summary Judgment as to Counts I, II, and

IX. Phillips III,

. The Court also granted

Mr. Miller’s Motion for Summary Judgment as to Counts VI and

VIII.

Thereafter, the Individual Defendants filed the instant

Motion to Dismiss the remaining claims for breach of fiduciary

duty, defamation, and civil conspiracy. See Defs.’ Mot. Dismiss,

ECF No. 140; Defs.’ Br. Supp. Mot. Dismiss (“Defs.’ Mot.”), ECF

No. 140-1. Plaintiffs filed a brief in opposition, see Pls.’

Opp’n Defs.’ Mot. Dismiss (“Pls.’ Opp’n), ECF No. 141, and

Defendants filed a reply in support of their motion, see Defs.’

Reply Supp. Mot. Dismiss (“Defs.’ Reply”), ECF No. 142. This

motion is ripe and ready for the Court's adjudication.

III. Standard of Review

Federal Rule of Civil Procedure 12(b)(1) provides for

dismissal of an action for “lack of subject matter

jurisdiction.” Fed. R. Civ. P. 12(b)(1). On a Rule 12(b)(1)

motion to dismiss, the party asserting jurisdiction has the

burden of establishing that the Court has subject matter

jurisdiction over the case. See Logan v. Dep't of Veterans

Affs.,

(D.D.C. 2004) (citing McNutt v.

Gen. Motors Acceptance Corp. of Ind.,

, 182–83,

(1936)). “Because Rule 12(b)(1) concerns a court's ability to

6 hear a particular claim, the court must scrutinize the [party]’s

allegations more closely when considering a motion to dismiss

pursuant to Rule 12(b)(1) than it would under a motion to

dismiss pursuant to Rule 12(b)(6).” Schmidt v. U.S. Capitol

Police Bd.,

(D.D.C. 2011) (citations

omitted).

To assess whether a complaint sufficiently alleges subject

matter jurisdiction, the Court accepts as true the allegations

of the complaint, see Ashcroft v. Iqbal,

(2009); and liberally construes the pleadings in the plaintiff’s

favor, see Barr v. Clinton,

(D.C. Cir.

2004). The Court may also consider “undisputed facts evidenced

in the record” as well as its own “resolution of disputed

facts.” Herbert v. Nat'l Acad. of Scis.,

(D.C.

Cir. 1992).

IV. Analysis

“Federal courts are courts of limited jurisdiction.”

Kokkonen v. Guardian Life Ins. Co. of Am.,

(1994). They “possess only the power authorized by the

Constitution and by statute.” Jarkesy v. S.E.C.,

(D.C. Cir. 2015). “When a federal court has an independent basis

for exercising federal jurisdiction, it may, in certain

circumstances, also exercise pendent, or supplemental

jurisdiction over related claims under state law.” Women 7 Prisoners of D.C. Dep’t of Corr. v. Dist. of Columbia,

(D.C. Cir. 1996).

In United Mine Workers of America v. Gibbs,

,

,

(1966), the Supreme Court crafted a two-part test to determine when the assertion of jurisdiction over a state law claim is appropriate. First, the district court must determine whether the state and the federal claims “derive from a common nucleus of operative fact”; if they do, the court has the power, under Article III of the Constitution, to hear the state claim.

,

. Second, even if it concludes that it has that power, the district court must then decide whether to exercise its discretion to assert jurisdiction over the state issue.

,

. The Supreme Court cautioned that

pendent jurisdiction is a doctrine of discretion, not of plaintiff's right. Its justification lies in considerations of judicial economy, convenience and fairness to litigants; if these are not present a federal court should hesitate to exercise jurisdiction over state claims . . . . Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law.

(quoting United Mine Workers of Am. v. Gibbs,

(1966)). “A district court's decision to resolve state law

claims is reviewed for an abuse of discretion.”

(citing

Edmondson & Gallagher v. Alban Towers Tenants Ass'n,

,

1265–66 (D.C. Cir. 1995)).

8 In 1990, Congress enacted the supplemental jurisdiction statute, which provides in relevant part:

(a) Except as provided in subsections (b) and (c) . . . , in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution . . . .

* * * * * *

(c) The district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if—

(1) the claim raises a novel or complex issue of State law,

(2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction,

(3) the district court has dismissed all claims over which it has original jurisdiction, or

(4) in exceptional circumstances, there are other compelling reasons

9 for declining jurisdiction.

Id. at 920-21. Each Section 1367(c) basis provides an

independent reason for a court to decline supplemental

jurisdiction. Edmondson & Gallagher, 48 F.3d at 1266.

A. The Common-Law Claims Form Part of the Same Case or Controversy

The Amended Complaint invoked the Court’s supplemental

jurisdiction over the state-law claims on the grounds that those

claims were “so related to claims in the action within such

original jurisdiction that they form part of the same case or

controversy.”

(a); compare Am. Compl., ECF No.

42 at 29-35 ¶¶ 99-126, with

at 35-48 ¶¶ 127-199. The Court

concludes that the remaining common-law claims form part of the

same case or controversy. Defendants do not suggest otherwise.

See generally Defs.’ Mot., ECF No. 140-1.

B. The Court Will Exercise Supplemental Jurisdiction Over the Remaining Claims

In light of the dismissal of the federal constitutional

claims, Phillips III,

; the Amended

Complaint contains no further federal causes of action over

which the Court has original subject matter jurisdiction. The

Court therefore must consider whether it “may decline to

exercise supplemental jurisdiction” over the remaining claims.

10

(c). Defendants invoke two of the Section

1367(c) bases, arguing that the Court should decline to exercise

supplemental jurisdiction over the remaining claims because: (1)

they raise novel issues of state law; and (2) the Court has

dismissed all of the federal claims. Defs.’ Mot., ECF No. 140-1

at 2, 6. For the reasons that follow, the Court concludes in its

discretion that it will exercise supplemental jurisdiction over

the remaining state-law claims.

1. The Remaining Claims Do Not Raise Novel or Complex Issues of State Law

The supplemental-jurisdiction statute permits federal

courts to decline to exercise jurisdiction over novel and

complex issues of state law,

(c)(1); because

“[n]eedless decisions of state law should be avoided both as a

matter of comity and to promote justice between the parties,”

Gibbs,

.

Defendants assert that the common-law claims raise

“unresolved issues of District of Columbia law” because with

regard to the breach of fiduciary duty claim, “[t]here does not

appear to be much, if any, law in the District of Columbia

clearly telling” the Individual Defendants what their duty was.

Defs.’ Mot., ECF No. 140-1 at 6. Defendants provide no caselaw

to support their assertion. See generally

In their Reply

brief, they acknowledge that while breach of fiduciary duty is 11 not a novel issue on its own, “the peculiar factual

circumstances” here make it so. Defs.’ Reply, ECF No. 142 at 1-

2. Plaintiffs respond that “there are no uncertain questions of

District of Columbia law with respect to the [remaining] breach

of fiduciary duty, defamation, and civil conspiracy claims.”

Pls.’ Opp’n, ECF No. 141 at 5; and point out that the Court has

already ruled on the breach of fiduciary duty and civil

conspiracy claims with regard to Mr. Miller,

Defendants have failed to identify any novel or complex

issues of state law regarding the remaining claims of breach of

fiduciary duty, defamation, and civil conspiracy. As an initial

matter, they asserted only that the breach of fiduciary duty

claim raised an unsettled issue of District of Columbia law,

raising no issue with respect to the defamation and civil

conspiracy claims. See Defs.’ Mot., ECF No. 140-1 at 6-7.

Defendants then acknowledged that the factual scenario in this

case, not the applicable law, is unusual. Defs.’ Reply, ECF No.

142 at 1-2. However, while “the facts underlying the [state-law]

claim[s] may be novel, [here] the question presented” is not.

Powers v. United States,

(5th Cir. 2015).

That the state law claims do not raise novel issues of

District of Columbia law is demonstrated in the Court’s 2019

Memorandum Opinion. In that Opinion, the Court ruled on cross-

12 motions for summary judgment with respect to the breach of

fiduciary duty and civil conspiracy claims against Mr. Miller.

Phillips III,

. On the breach of

fiduciary duty claim, the Court concluded that that Plaintiffs

proved Mr. Miller’s duty of loyalty but not breach of that duty

or proximate cause. See

. On the civil conspiracy

claim, the Court concluded that Plaintiffs did not establish

that there was an agreement between two or more persons. See

.

For these reasons, the Court need not decline to exercise

supplemental jurisdiction on this basis.

2. The Court Can Exercise Supplemental Jurisdiction Even Though It Dismissed the Federal Claims Section 1367(c)(3) permits district courts to decline to

exercise supplemental jurisdiction when they have already

dismissed the claims that supported original jurisdiction.

(c)(3); see also Karim-Panahi v. 4000 Mass.

Apartments, No. 18-7054,

, at *1 (D.C. Cir. Nov.

1, 2018) (per curiam) (affirming dismissal on this ground

alone). Defendants argue that when a district court has

dismissed all the claims over which it had original

jurisdiction, “the law makes clear that the greatly favored

course is to dismiss the supplemental claims without prejudice.

There is nothing about this case that makes it an exception to

13 that rule.” Defs.’ Reply, ECF No. 142 at 2. At the same time,

however, they acknowledge, as they must, that “[w]hether to

retain jurisdiction over pendent state and common law claims

after the dismissal of the federal claims is ‘a matter left to

the sound discretion of the district court.’” Defs.’ Mot., ECF

No. 140-1 at 2 (quoting Edmondson & Gallagher, 48 F.3d at 1265-

66).

“[I]n the usual case in which all federal-law claims are

dismissed before trial, the balance of factors to be considered

under the pendent jurisdiction doctrine—judicial economy,

convenience, fairness, and comity—will point toward declining to

exercise jurisdiction over the remaining state-law claims.”

Shekoyan v. Sibley Int'l,

(D.C. Cir. 2005)

(quoting Carnegie–Mellon Univ. v. Cohill,

, 350 n.7

(1988)). The Court finds, however, that this litigation does not

present “the usual case” and that the balance weighs in favor of

exercising supplemental jurisdiction.

Both judicial economy and convenience weigh strongly in

favor of the Court retaining jurisdiction over the remaining

claims. This case has been before the Court for over ten years.

See generally Docket for Civil Action No. 11-2021; cf. White V.

Bank of Am., N.A.,

(D.D.C. 2016)

(determining that the Court would exercise supplemental

jurisdiction over the remaining state-law claim where the case

14 had been pending in federal court for almost four years).

Although the Parties have not conducted discovery on the

remaining claims, see Defs.’ Mot., ECF No. 140-1 at 3; the Court

has issued three Memorandum Opinions, thereby becoming familiar

with the facts, see Phillips III,

;

Phillips II,

; Phillips I,

. Furthermore, the Court has already considered the breach

of fiduciary duty and civil conspiracy claims in light of these

facts, albeit with respect to a different Defendant in the case.

See Phillips III,

(considering claims

against Mr. Miller). Furthermore, and as explained supra,

because the state-law issues are neither novel nor complex,

comity does not demand dismissal.

For these reasons, the Court will exercise supplemental

jurisdiction over the remaining state-law claims in this case. 3

3 Since the Court will exercise supplemental jurisdiction over the state-law claims, the Court need not reach Plaintiffs’ argument that diversity jurisdiction now exists. 15 V. Conclusion

For the reasons set forth above, the Court DENIES the

remaining Individual Defendants’ Motion to Dismiss, ECF No. 140.

A separate Order accompanies this Memorandum Opinion.

SO ORDERED.

Signed: Emmet G. Sullivan United States District Judge May 19, 2022

16