UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

CALABAZAS CREEK RESEARCH, INC.,

Plaintiff,

v. Civ. Action No. 21-2617 JENNIFER M. GRANHOLM, in her (EGS) official capacity as Secretary of the United States Department of Energy, et al.,

Defendants.

MEMORANDUM OPINION AND ORDER

I. Introduction

Plaintiff Calabazas Creek Research, Inc. (“Plaintiff” or

“CCR”) brings this action under the Administrative Procedure Act

(“APA”) against Defendants Jennifer M. Granholm, in her official

capacity as Secretary of the United States Department of Energy,

and the United States Department of Energy (collectively,

“DOE”). See Compl., ECF No. 1 ¶¶ 46-50. 1 CCR alleges that DOE’s

failure to negotiate in good faith and its failure to direct

their contractor to negotiate in good faith constitute agency

action that is arbitrary capricious, and not in accordance with

1 When citing electronic filings throughout this Opinion, the Court refers to the ECF header page numbers, not the page numbers of the filed documents. 1 law in violation of Section 706(2)(A) of the APA. See id. ¶ 47.

CCR further alleges that DOE unlawfully withheld action in

violation of section 706(1) of the APA. See id.

Pending before the Court is Defendants’ Motion to Dismiss.

See Defs.’ Mot. Dismiss & Mem. Supp. Thereof (“Defs.’ Mot.”),

ECF No. 14. Upon careful consideration of the motion,

opposition, and reply thereto, the applicable law, and for the

reasons explained below, the Court GRANTS Defendants’ motion.

II. Background

A. Regulatory Framework

The Small Business Innovation Research (“SBIR”) program

requires federal agencies to make research and development

awards to small businesses and to purchase technology developed

from these awards. Compl., ECF No. 1 ¶ 6.

The SBIR program involves three phases. In Phases I and II,

small businesses must demonstrate the feasibility of the

proposed technology and build prototypes. Id. ¶ 9. Then, in

Phase III, federal agencies purchase the technologies that were

developed in Phases I and II. Id. Specifically, Phase III

consists of “‘work that derives from, extends, or completes

efforts made under prior funding agreements under the SBIR

program.’” Id. (quoting 15 § 638(e)(4)(C); SBIR Policy Directive

Section 4(c)).

2 Congress directed the Small Business Administration (“SBA”)

to issue a Policy Directive regulating the administration of the

SBIR program.

(j). The Policy Directive provides

that “Agencies or their Government-owned, contractor-operated

(GOCO) facilities . . . shall issue Phase III awards relating to

the technology, including sole source awards, to the Awardee

that developed the technology under an [SBIR] award, to the

greatest extent practicable.” Policy Directive § 4(c)(7). To

implement this requirement, “Agencies must make a good faith

effort to negotiate with such Awardees regarding the performance

of the new, related, work, and to issue Phase III awards for the

work.” Id. § 4(c)(7)(i). “If pursuing the Phase III work with

the Awardee is found to be practicable, the agency must award a

non-competitive contract to the firm.” Id. § 4(c)(7)(ii).

The Policy Directive further provides that “[i]f pursuing

Phase III work with the Awardee on a sole source/non-competitive

basis does not meet the requirements . . . [regarding]

availability, practicality and capability, the Agency must

document the file and provide a copy of the decision, including

the rationale, to the SBA." Id. § 4(c)(7)(iii). “An agency or

its GOCO [facility] . . . that intends to pursue Phase III work

. . . . with an entity other than the Phase I or Phase III SBIR

. . . Awardee must notify SBA in writing prior to such award."

Id. § 4(c)(7)(iv). The notification must include, at a minimum,

3 the “steps the agency has taken to fulfill the special

acquisition requirement,” the “reasons why a follow-on Funding

Agreement with the [SBIR] Awardee is not practicable,” and the

“identity of the entity with which the agency intends to make

award . . . ." Id. § 4(c)(7)(iii). SBA may then appeal the

agency's decision. Id. § 4(c)(7)(v).

B. Factual

The Court assumes the following facts alleged in the

Complaint to be true for the purposes of deciding this motion.

See Baird v. Gotbaum,

, 169 n.2 (D.C. Cir. 2015).

CCR develops high power radiofrequency (“RF”) generation

and transmission technologies, including “the first 1 megawatt

(MW) load for testing RF sources for fusion heating and the

quasi-optical launcher technology used worldwide in these

sources.” Id. ¶ 16. DOE awarded CCR a series of SBIR Phase I and

Phase II awards. Id. ¶ 17. DOE funded these SBIR awards to CCR

to “meet an anticipated need for innovative, higher-performing

RF loads to be installed and used at a thermonuclear

experimental reactor called ITER.” Id. “The ITER facility is

being constructed in France, and the United States is one of

several countries that are contributing to its construction.”

Id. “DOE’s contributions to the project are made through a DOE

program called US-ITER, which is managed by DOE’s Oak Ridge

National Laboratory (‘ORNL’)”. Id.

4 In spring 2020, DOE announced that it would procure

prototype RF loads for evaluation and installation at ITER. Id.

¶ 26. “DOE’s procurement of RF loads was conducted through the

US-ITER organization at ORNL.” Id. ¶ 27. ORNL is a GOCO that is

owned by DOE but operated by UT-Battelle, LLC (“UTB”), a private

entity. Id. ¶ 27. On July 22, 2020, CCR emailed ORNL to ask that

DOE consider a Phase III award to procure the prototype RF

loads, stating that “a Phase III award would be consistent with

the law ‘based on the multiple SBIR awards [CCR had] received

for this product.’” Id. ¶ 28 (quoting Ex. 4, ECF No. 4-3 at 4).

However, on July 23, 2020, Lisa Cobb, the procurement manager at

ORNL, informed CCR that the procurement team “will not be

considering a Phase III sole-sourced award.” Id. ¶ 29. ORNL

stated that the reason was that “CCR ‘has yet to be awarded a

Phase II award, and even if awarded, completion of such work

isn’t expected until 18-months following August 24th program

start.” Id. ¶ 29 (quoting Ex. 4, ECF No. 4-3 at 3). However, at

that time, CCR had already received two Phase II awards. Id.

The next day, CCR emailed ORNL to clarify that CCR

previously completed two Phase II programs for the product,

identifying the award numbers and the power capacities of the

SBIR-developed RF loads. Id. ¶ 30. The email was addressed to

ORNL employees, the Director of DOE’s SBIR program and a Program

Manager for DOE’s Fusion Energy Science Program. Id. ¶ 31. DOE

5 did not respond to CCR’s email or negotiate with CCR for a Phase

III award. Id. ¶ 32. Instead, on July 28, 2020, ORNL posted an

open solicitation for the prototype RF load. Id. ¶ 32. CCR

submitted a proposal in response and also participated in a

teleconference with ORNL. Id. ¶ 33.

On February 19, 2021, ORNL announced that CCR would not

receive the procurement award. Id. ¶ 35. It awarded the

procurement contract to CURTI Costruzioni Meccaniche SpA and

Dymenso LLC—neither of which had previously won SBIR awards for

RF loads or had developed an RF load capable of safely absorbing

1 MW of power with the required performance. Id.

Later that month, CCR contacted the SBA to request an

investigation to determine whether DOE complied with

(r)(4) and Section 4(c)(7) of the SBIR Policy Directive.

. In March 2021, Jennifer Shieh, the Chief Scientist and

Program Manager for SBA’s Office of Investment and Innovation,

contacted DOE and ORNL regarding the absence of a Phase III

award.

. Ms. Shieh reported that DOE told her: that it

“determined that [the RF load] procurement was not an SBIR Phase

III opportunity”; and that “[p]rior to release of the [RF load]

solicitation in 2020, ORNL’s technical team performed an

assessment of CCR SBIR projects for three awarded projects . . .

and determined that the proposed [RF load] requirement would not

derive from, extend, or complete the work performed by CCR on

6 these SBIR projects.”

¶ 39 (quoting Ex. 6, ECF No. 4-5 at

2). She further stated that “ORNL determined this was not a

Phase III opportunity, with concurrence by DOE, permitting the

procurement to be released as an open solicitation.”

(quoting Ex. 6, ECF No. 4-5 at 2). DOE did not provide any

records to SBA to support this evaluation, and SBA did not

attempt to verify DOE’s evaluation.

.

B. Procedural

CCR filed this lawsuit on October 6, 2021. See Compl., ECF

No. 1. On February 22, 2022, Defendants moved to dismiss the

Complaint. See Defs.’ Mot., ECF No. 14. CCR filed its opposition

brief on March 8, 2022, see Pl.’s Mem. Opp’n Defs.’ Mot. Dismiss

(“Opp’n”), ECF No. 15; and Defendants filed their reply brief on

March 15, 2022, see Reply Supp. Defs.’ Mot. Dismiss (“Reply”),

ECF No. 16. The motion is now ripe and ready for adjudication.

III. Legal Standard

A motion to dismiss pursuant to Federal Rule of Civil

Procedure 12(b)(6) tests the legal sufficiency of a complaint.

Browning v. Clinton,

(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

, 555 (2007) (citation and internal quotation marks

omitted).

Despite this liberal pleading standard, to survive a motion

to dismiss, a complaint “must contain sufficient factual matter,

accepted as true, to state a claim to relief that is plausible

on its face.” Ashcroft v. Iqbal,

(2009)

(citation and internal quotation marks omitted). “In determining

whether a complaint fails to state a claim, [the court] may

consider only the facts alleged in the complaint, any documents

either attached to or incorporated in the complaint and matters

of which [the court] may take judicial notice.” EEOC v. St.

Francis Xavier Parochial Sch.,

(D.C. Cir.

1997). A claim is facially plausible when the facts pled in the

complaint allow the court to “draw the reasonable inference that

the defendant is liable for the misconduct alleged.” Iqbal,

. The standard does not amount to a “probability

requirement,” but it does require more than a “sheer possibility

that a defendant has acted unlawfully.”

“[W]hen ruling on a defendant’s motion to dismiss [pursuant

to Rule 12(b)(6)], a judge must accept as true all of the

factual allegations contained in the complaint.” Atherton v.

D.C. Off. of the Mayor,

(D.C. Cir. 2009)

(citation and internal quotation marks omitted). In addition,

the court must give the plaintiff the “benefit of all inferences

8 that can be derived from the facts alleged.” Kowal v. MCI

Commc’ns Corp.,

(D.C. Cir. 1994).

IV. Analysis

Section 706 of the APA directs courts to: “(1) compel

agency action unlawfully withheld or unreasonably delayed; and

(2) hold unlawful and set aside agency action, findings, and

conclusions found to be—(A) arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law.”

.

Defendants argue that, in the Complaint, CCR “fails to

allege any final agency action performed by DOE” and “has failed

to plead any agency action unlawfully withheld.” Defs.’ Reply,

ECF No. 16 at 5, 9 (capitalization omitted).

A. CCR Has Failed to Allege Final Agency Action

“The APA limits judicial review to ‘final agency action for

which there is no other adequate remedy in a court.’” Soundboard

Association v. Federal Trade Comm’n,

(D.C.

Cir. 2018)(quoting

). “While the requirement of

finality is not jurisdictional, without final agency action,

‘there is no doubt that [plaintiff] would lack a cause of action

under the APA.’”

(quoting Reliable Automatic Sprinkler Co.

v. Consumer Prod. Safety Comm’n,

(D.C. cir.

2003). To state a claim, CCR “must first identify the final

agency action being challenged.” Elk Run Coal Co. v. U.S. Dep’t

9 of Lab.,

(D.D.C. 2011) (citing

(limiting judicial review to “[a]gency action made

reviewable by statute and final agency action for which there is

no other adequate remedy in court”)).

“Agency actions are final if two independent conditions are

met: (1) the action ‘mark[s] the consummation of the agency’s

decisionmaking process’ and is not ‘of a merely tentative or

interlocutory nature;’ and (2) it is an action ‘by which rights

or obligations have been determined, or from which legal

consequences will flow.’” Soundboard Association,

(quoting Bennett v. Spear,

(1997)(internal quotation marks omitted). “An order must satisfy

both prongs of the Bennett test to be considered final.” Sw.

Airlines Co. v. U.S. Dep’t of Transp.,

(D.C.

Cir. 2016).

CCR argues that it has alleged agency action because the

Complaint alleges “that DOE made the central determination that

is challenged in this action—the determination that no Phase III

opportunity existed.” Opp’n, ECF No. 15 at 13 (emphasis

omitted); see also Compl., ECF No. 1 ¶ 39 (alleging that DOE

“determined that [the RF load] procurement was not an SBIR Phase

III opportunity”). CCR also argues that it has alleged agency

action because the Complaint alleges that “DOE responded to

SBA’s inquiry and provided false or misleading information as to

10 the rigor and timing of its determination.” Id. at 13 (emphasis

omitted).

Defendants’ Motion to Dismiss and Reply memorandum focus on

the contractual relationship between DOE and UTB to argue that

the procurement at issue was not conducted by DOE, but rather by

UTB. See Mot. to Dismiss, ECF No. 14 at 6-7; Reply, ECF No. 16

at 6-9. In so doing, Defendants fail to address both the actual

allegations in the Complaint and the reasonable inferences that

can be made from them.

The Complaint fails to allege, however, that either of the

actions attributed to DOE constitute final agency action. See

generally Compl., ECF No. 1. Furthermore, in its opposition

memorandum, CCR fails to argue that the actions attributed to

DOE constitute final agency action. See Opp’n, ECF No. 15 at 11-

13. In so doing, CCR fails to provide any argument or legal

support whatsoever for the proposition that the agency action it

has alleged is final agency action. Because CCR has neither

alleged final agency action in the Complaint, nor provided any

argument or legal authority whatsoever for why the two agency

actions it has alleged constitute final agency action, CCR has

failed to state a claim. Accordingly, the Court DISMISSES this

claim WITHOUT PREJUDICE.

11 B. CCR Has Failed to State a Claim for Unlawfully Withheld Action

“[A] claim [concerning agency inaction] under § 706(1) can

proceed only where a plaintiff asserts that an agency failed to

take a discrete agency action that it is required to take.”

Norton v. S. Utah Wilderness All. (SUWA),

(2004). “SUWA teaches that the only action a court may compel an

agency to take under § 706(1) is a discrete action that the

agency has a legal duty to perform.” Western Organization of

Resource Councils v. Zinke,

(D.C. Cir. 2018)

(citing SUWA,

). “The legal duty must be

‘ministerial or nondiscretionary’ and must amount to ‘a

specific, unequivocal command.’”

(quoting SUWA

).

CCR argues that it has stated a claim for agency action

unlawfully withheld because the Complaint alleges that DOE: (1)

failed to negotiate with CCR, Opp’n, ECF No. 15 at 13, see also

Compl., ECF No. 1 ¶ 32; (2) failed to direct UTB employees to

negotiate with CCR for a Phase III contract, Opp’n, ECF No. 15

at 13; see also Compl., ECF No. 1 ¶ 44; and (3) failed to

provide advance notification to SBA of its decision to award the

procurement of RF loads to companies other than CCR, Opp’n, ECF

No. 15 at 13; see also Compl., ECF No. 1 ¶ 44. CCR fails,

however, to provide any argument or legal support whatsoever for

12 why the three withheld actions alleged constitute “discrete

action that [DOE] is required to take” within the meaning of the

relevant authority. See Opp’n, ECF No. 15 at 13-15. Rather, CCR

argues that whether or not the procurement of RF loads was a

Phase III opportunity is a factual question that the Court must

assume to be true at the Motion to Dismiss stage and therefore

the action it alleges was withheld was required. See

Defendants argue that UTB, not DOE, made decision as to

whether the procurement was a Phase III opportunity, Mot. to

Dismiss, ECF No. 14 at 10, Reply, ECF No. 16 at 9-10; and

disagree that the Court should assume that the procurement was a

Phase III opportunity at this stage of the proceedings, id. at

10-11.

Whether the agency action was potentially unlawfully

withheld is entirely contingent on whether the procurement was a

Phase III opportunity. CCR has alleged that DOE made the

decision that the procurement was not a Phase III opportunity,

and challenges that decision in its first claim here. With this

second claim, CCR seeks to bootstrap a claim for unlawfully

withheld agency action to the very agency action it challenges.

CCR has provided no authority to support the proposition that

the Court should assume to be true for the purpose of its second

claim the very decision that it challenges in its first claim.

13 Assuming that the action CCR alleges was unlawfully

withheld would have been required if DOE had determined that the

procurement was a Phase III opportunity, DOE had no “legal duty

to perform” the action based on its determination that the

procurement was not a Phase III opportunity. Western

Organization of Resource Councils,

.

Furthermore, Section 706(1) authorizes courts to “compel agency

action unlawfully withheld or unreasonably delayed.”

(1). “[A] delay cannot be unreasonable with respect to action

that is not required.” SUWA,

n.1. Similarly, an

action that is withheld cannot be unlawful with respect to

action that is not required. See

When DOE allegedly withheld

action, the action was not required because the determination

had been made that the procurement was not a Phase III

opportunity. And pursuant to that determination, a procurement—

in which CCR unsuccessfully participated—was conducted. Because

the allegedly withheld action was not a legal duty and was not

required based on the determination that the procurement was not

a Phase III opportunity, it was not unlawfully withheld.

Therefore CCR has failed to state a claim. Accordingly, the

Court DISMISSES this claim WITH PREJUDICE.

14 V. Conclusion and Order

For the foregoing reasons, it is hereby

ORDERED that Defendants’ Motion to Dismiss, see ECF No. 14;

is GRANTED. Plaintiff’s claim pursuant to

(2)(A)

for agency action that is arbitrary, capricious, and not in

accordance with law is DISMISSED WITHOUT PREJUDICE. Plaintiff’s

claim pursuant to

(1) for agency action unlawfully

withheld is DISMISSED WITH PREJUDICE. Plaintiff shall have leave

to file an Amended Complaint, if any, within 14 days of the date

of this Memorandum Opinion and Order. Any such filing shall

consider the effect of this Memorandum Opinion and Order on

Plaintiff’s claims. If Plaintiff does not timely file an Amended

Complaint, the Court will enter a final, appealable order

dismissing this case. See Ciralsky v. CIA

(D.C. Cir. 2004)(explaining the distinction between dismissing a

complaint and dismissing the action or case).

SO ORDERED.

Signed: Emmet G. Sullivan United States District Judge August 7, 2023

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