UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
CHEEKS OF NORTH AMERICA, INC.,
Plaintiff,
v. Civil Action No. 10-1746 (CKK)
FORT MYER CONSTRUCTION
CORPORATION, et al.,
Defendants.
MEMORANDUM OPINION
(August 16, 2011)
This action was filed on October 15, 2010 by Plaintiff Cheeks of North America, Inc.
(“CNA”) seeking relief for injuries allegedly suffered when CNA lost a series of competitive bids
for construction contracts that were awarded by the D.C. Department of Transportation
(“DDOT”), the D.C. Department of Public Works (“DPW”), and the D.C. Water and Sewer
Authority (“WASA”). Among the claims asserted in its thirteen-count First Amended
Complaint, CNA alleges that it is the victim of a bid-rigging conspiracy by five of its main
competitors and their surety and that contracting officials at DDOT and WASA were negligent
for failing to stop the alleged conspiracy. CNA also asserts a variety of claims alleging antitrust
violations, fraud, and breach of procurement regulations. Presently pending before the Court are
motions to dismiss filed by nearly all of the defendants in this action, a motion for sanctions, and
a motion for discovery filed by CNA. These motions have been fully briefed by the parties and
are therefore ripe for resolution by this Court.
Based on a thorough review of the pleadings, the parties’ briefs, the applicable
authorities, and the record as a whole, the Court finds that CNA lacks standing to assert most of
the claims asserted in the First Amended Complaint and that where CNA does have standing,
CNA has failed to state a claim upon which relief can be granted. The Court also finds that
sanctions are not warranted against CNA’s counsel. Therefore, for the reasons explained below,
the Court shall grant the pending motions to dismiss, deny the motion for sanctions, and deny
CNA’s pending motion for discovery as moot.
I. BACKGROUND
The facts set forth in this section are derived from the First Amended Complaint, which
the Court must accept as true for purposes of evaluating a motion to dismiss.
A. The Parties
1. CNA
Plaintiff Cheeks of North America, Inc. (“CNA”) is a District of Columbia corporation
with its principal office at Suite 350, 1425 K Street, NW, Washington, DC 20005. First Am.
Compl. (“FAC”) ¶ 80. CNA is engaged primarily in specialized purchasing, contracting,
infrastructure, and strategic business planning and development. Id. John C. Cheeks (“Cheeks”)
is the founder and President of CNA. Id.
2. The Construction Company Defendants
Defendant Fort Myer Construction Corporation (“Fort Myer”) is a Virginia corporation
registered to conduct business in the District of Columbia. FAC ¶ 81. During the relevant time
period (August 20, 2008 to September 25, 2009), Fort Myer was engaged in infrastructure
construction. Id. ¶ 83. Defendant Jose Rodriguez (“Rodriguez”)1 serves as President of Fort
1
In the First Amended Complaint, CNA sometimes spells Rodriguez’s name as
“Rodrigues.” The Court adopts the spelling used by Rodriguez in the papers he has filed with the
Court.
2
Myer; Defendant Francisco R. Neto (“Neto”) serves as Vice President; and Defendant Lewis
Shrensky (“Shrensky”) serves as Treasurer and Secretary. Id. ¶ 81. Defendant George Batista
(“G. Batista”)2 is an employee of Fort Myer who is involved in pricing contracts for
infrastructure services. Id. ¶ 82.
Defendant Anchor Construction Corporation (“Anchor”) is a District of Columbia
corporation involved in general construction and contracting. FAC ¶ 85. Defendants Neto and
Rodriguez serve on the Board of Directors of Anchor. Id. ¶ 84. Defendants Cristina R. Gregorio
(“C. Gregorio”) and Florentino Gregorio (“F. Gregorio”) also served on the Board of Directors of
Anchor during the relevant time period. Id.
Defendant Civil Construction, LLC (“Civil”) is a Maryland corporation licensed to
conduct business in the District of Columbia that engages in construction work. FAC ¶ 87.
Defendants Shrensky and Rodriguez serve on the Board of Directors of Civil. Id. ¶ 86.
Defendant Capitol Paving of D.C., Inc. (“Capitol Paving”) is a District of Columbia
corporation engaged in general and specialty construction. FAC ¶ 88. Defendant Neto is the
President and Treasurer of Capitol Paving. Id.
Defendant A&M Concrete Corp. (“A&M”) is a Virginia corporation engaged in
construction business. FAC ¶ 89. Defendant Joe Alves (“Alves”) is the Executive Vice
President of A&M. Id. ¶ 90. Defendant Alexandra Batista (“A. Batista”) is the Administrative
Assistant for A&M. Id. ¶ 91. A. Batista is alleged to be related to G. Batista, who is also alleged
to work for A&M as a manager. See id. ¶¶ 7, 213.
2
This defendant has entered an appearance in this action as “Paulo J. Baptista.”
3
3. Western Surety
Defendant Western Surety Company (“Western Surety”) is a commercial fidelity surety
bond company. FAC ¶ 92. It is a subsidiary of CNA Surety. Id. ¶ 13. Defendant Paul T. Bruflat
(“Bruflat”) is a Senior Vice President of Western Surety. Western Surety is alleged to have
provided bid bonds for Fort Myer, Anchor, Civil, and Capitol Paving in connection with bids
they submitted to WASA and DDOT.
4. Contracting Agency Defendants
Defendant D.C. Water and Sewer Authority (“WASA”) is an independent authority of the
District of Columbia that provides water service to the District of Columbia. FAC ¶ 94. Also
named as defendants are the WASA Procurement Department, the WASA Board of Directors,
and the WASA Retail Services Committee. Id. ¶¶ 95, 98, 99. During the relevant time period,
the WASA Procurement Department was engaged in managing water and sewage projects for
residential, commercial, governmental, and institutional use in the District of Columbia. Id. ¶ 96.
The WASA Board of Directors was engaged in voting on such water and sewage projects. Id.
¶ 98. The WASA Retail Services Committee was responsible for the final voting on contracts
for these water and sewage projects. Id. ¶ 100. Defendant Joseph Cotruvo (“Cotruvo”) was a
member of the WASA Retail Services Committee. Id. Former WASA General Manager Jerry
Johnson and Contract Administrator Carlo Enciso are also named as defendants in this action, as
are former or present WASA Board of Directors members William M. Walker (“Walker”) and
Neil Albert (“Albert”). Id. ¶¶ 96-97. CNA also references an individual named Avis Russell
(“Russell”) in connection with WASA. See FAC at v.
The District of Columbia Department of Public Works (“DPW”) is an agency of the
4
District of Columbia government. The DPW Office of Contracting and Procurement is named as
a defendant in this action, as is James Roberts, who served as a contracting officer for DPW.
FAC ¶ 102.
Defendant D.C. Department of Transportation (“DDOT”) is also an agency of the D.C.
government. FAC ¶ 103. Defendant Jerry M. Carter (“Carter”) served as a Contracting Officer
for DDOT during the relevant time period; Defendant Gabe Klein (“Klein”) served as the
Director of DDOT during the relevant time period; and Defendant David P. Gragan (“Gragan”)
served as the Chief Procurement Officer during the relevant time period. Id.
5. District of Columbia Government Defendants
In addition to the contracting agency defendants listed above, CNA has named a number
of D.C. government officials as defendants in this action. These defendants include the
Committee on Public Works and Transportation of the Council of the District of Columbia
(“Public Works Committee”); its former chairperson, Councilmember Jim Graham
(“Councilmember Graham”); his former Chief of Staff, Ted G. Loza (“Loza”); and the
committee’s former legislative and budget director, Steven Hernandez (“Hernandez”). See FAC
¶¶ 104-07. CNA has also named former D.C. Mayor Adrian Fenty (“Fenty”) and the Executive
Office of the Mayor as defendants, as well as former D.C. Attorney General Peter Nickles
(“Nickles”) and the Office of the Attorney General. Id. ¶¶ 108-11.
CNA has also named the D.C. Department of Small and Local Business Development
(“DSLBD”) as a defendant. CNA contends that DSLBD officials endorsed Fort Myer, Anchor,
Civil, and Capitol Paving with affirmative action points in connection with bids they submitted
for contracts. See FAC ¶ 123. CNA also identifies an individual named Lee Smith (“Smith”) in
5
connection with DSLBD as a defendant in the First Amended Complaint. See FAC at v.
B. CNA Fails to Win Contracts Through Competitive Bidding Processes
The allegations in the First Amended Complaint revolve around six solicitations for bids
on construction contracts to be awarded by WASA, DDOT, and DPW.3 CNA submitted a bid for
each contract, but its bid was rejected in each case. CNA broadly alleges that the five
construction company defendants (Fort Myer, Anchor, Civil, Capitol Paving, and A&M) acted in
concert during the bidding process to fix their bids and allocate the contracts among themselves.
See FAC ¶¶ 4, 8, 15.4 According to CNA, these companies maintained interlocking directorates
and conspired to submit sham bids and submit false affidavits of noncollusion during the bidding
process. Id. ¶ 9. CNA further alleges that Western Surety aided and abetted the conspiracy by
issuing bid bonds to these five companies with knowledge of their interlocking directorates. Id.
¶ 10. CNA claims that the individual officers and employees of these companies who are named
as defendants are liable because they aided and abetted the conspiracy and committed fraud. See
id. ¶ 18. CNA also claims that WASA and the District of Columbia government and their
officials were negligent or grossly negligent in failing to stop the alleged conspiracy and failing
to conduct proper oversight. Id. ¶¶ 19-21.
1. WASA Contract No. 080020
On August 20, 2008, CNA submitted a bid for the total sum of $11,154,500 in response
3
CNA states in the First Amended Complaint that there are five contracts alleged to be
unlawful. See FAC ¶ 30. However, the facts alleged by CNA involve six contracts. Because
CNA’s allegations are inconsistent regarding the number of contracts at issue in this case, the
Court shall discuss all six contracts.
4
Although CNA alleges that all five of these companies were part of the alleged
conspiracy, see, e.g., FAC ¶¶ 4, 8, 15, the First Amended Complaint often refers to only four
companies as defendants, omitting A&M. See, e.g., id. ¶¶ 70, 135.
6
to WASA’s Invitation for Bid (“IFB”) No. 080020 (“Replacement of Small Diameter Priority
Water Mains for 2008 Construction”). See FAC ¶ 136 & Ex. D.9.1. CNA submitted a bid bond
representing 5% of the bid ($557,725) in the form of a company check. Id. ¶ 137 & Exs. D.7.1 &
D.7.5.5 Anchor, Civil, Fort Myer, and Capitol Paving also submitted bids; CNA alleges that
Western Surety issued guaranteed bid bonds on their behalf. Id. ¶¶ 138, 140. WASA
procurement officer Carlo Enciso opened the bids on August 20, 2008. Id. ¶ 139. CNA was
announced as the lowest bidder; Anchor submitted the next lowest bid. Id. ¶ 141.
On September 9, 2008, Cheeks received a letter from WASA informing him that CNA’s
bid had been declared non-responsive and therefore not eligible for award. Id. ¶ 141 & Ex.
H.1.1. The letter stated that “[e]lements considered in this decision were that your bid did not
include a completed Bid Bond with sureties or certified check(s) for five percent (5%) of the bid
amount.” Id., Ex. H.1.1. The record shows that on the Bid Form submitted with CNA’s bid,
Cheeks checked a box indicating that the bid guaranty would be submitted in the form of a
certified check. See id., Ex. D.7.1. The checks that Cheeks submitted for CNA were not
certified. See id., D.7.5. Cheeks also filled out a “Bid Bond” form that identified CNA as the
principal but did not identify a surety. Id., Ex. D.7.2. CNA filed a bid protest on September 30,
20086 alleging bid rigging, discrimination, and failure to give adequate notice and time to cure.
See id., Ex. K.1.1-2. On October 23, 2008, WASA Director of Procurement John P.
Christodoulakis sent Cheeks a letter informing him that CNA’s bid protest had been denied
5
The record shows that CNA submitted two checks in equal amounts signed by Cheeks
to cover this amount. See FAC Ex. D.7.5.
6
CNA misidentifies the date of this protest as September 28, 2009 in the First Amended
Complaint. See FAC ¶ 142.
7
because it was not filed within five days as required by WASA procurement regulations. See id.,
Ex. K.1.4-5. The letter also reiterated that procurement regulations require that bids be
guaranteed and that uncertified checks will not be accepted. Id. CNA was not provided an
opportunity to resubmit its bid with a proper guaranty. Id. ¶¶ 143, 169.
On November 6, 2008, the WASA Board of Directors resolved that the contract be
awarded to Anchor, the next-lowest bidder. Id. ¶ 143 & Ex. G.1.11.
2. WASA Contract No. 090080
On March 25, 2009, CNA submitted a bid in response to WASA’s IFB No. 090080
(“Sanitary Sewer Lateral Replacements”). See FAC ¶ 144 & Exs. D.1.10 & D.9.2. According to
the bid tabulation sheet, CNA’s bid was the highest out of seven bidders, including Fort Myer,
Civil, Anchor, and Capitol Paving. Id., Ex. D.9.2. The lowest bid was submitted by Corinthian
Contractors in the amount of $6,424,140. Id. CNA’s bid amount was $11,298,320; the other
bids submitted were all less than $8 million. Id.
On March 29, 2009, CNA filed a bid protest with WASA indicating that it had made a
calculation error in its initial bid and that its actual bid should have been $5,040,000, which
would make CNA the lowest bidder. See id., Ex. K.2.1-2. CNA contends that WASA never
responded to CNA’s bid protest and awarded the contract to Corinthian Contractors. Id. ¶ 145.
3. WASA Contract No. 090020
On April 1, 2009, CNA submitted a bid in response to WASA’s IFB No. 090020 (“Fire
Hydrant Replacement Contract 4”). See FAC, Exs. D.7.3-4 & D.9.3. According to the bid
tabulation sheet, CNA’s bid of $2,817,600 was the second lowest received. Id., Ex. D.9.3. The
lowest bid was submitted by Nastos Construction, Inc. in the amount of $2,703,160. Id. Fort
8
Myer, Civil, Anchor, and Capitol Paving also submitted bids. Id. WASA ultimately awarded the
contract to Nastos Construction, Inc. Id., Ex. D.1.10. CNA’s bid form indicates that neither a
bid bond nor a certified check was provided as a bid guaranty; the “Bid Bond” form submitted by
CNA was signed by Cheeks alone and lacked a surety. See id., Ex. D.7.3-4.
4. DDOT Contract No. DCKA-2009-B-0025
On March 18, 2009, CNA submitted a bid in response to DDOT’s IFB No. DCKA-2009-
B-0025 (“Pavement Restoration City-Wide”). See FAC, Exs. D.8.1 & D.10.3. Two days prior to
the opening of the sealed bids, on March 16, 2009, Cheeks received an email with information
regarding an amendment of the solicitation (“Amendment 6”). Id. ¶ 290. The amendment
addressed two issues, one involving insurance requirements and one involving subcontracting
requirements from the Office of Local, Small and Disadvantaged Business Enterprise. See id.,
Ex. D.14.1. CNA alleges that Amendment 6 was engineered by DDOT so as to favor Fort Myer
and Capitol Paving in the bidding. Id. ¶¶ 289, 291. CNA had to readjust its bid so as to
strategically compete for the contract award. Id. ¶ 292. CNA ultimately submitted a bid in the
amount of $54,252,805. Id., Ex. D.10.3. CNA was determined to be the lowest bidder, beating
five other bidders including Fort Myer and Capitol Paving. Id.
On May 27, 2009, DDOT Contracting Officer Jerry M. Carter sent CNA a letter
indicating that its bid was non-responsive and ineligible for award because CNA had incorrectly
submitted five separate, uncertified checks for the bid security. See id. ¶ 299 & Ex. H.4.1. The
record confirms that CNA submitted five separate uncertified checks. See id., Ex. D.8.1-3.
Carter did not allow CNA time to cure this defect. Id. ¶ 296. CNA filed a bid protest with the
D.C. Contract Appeals Board on June 17, 2009 alleging a bid-rigging conspiracy and contract
9
steering by DDOT. See id., Exs. K.4.2-5. CNA’s protest did not raise the bid security issue. See
id.7 The contract was ultimately awarded to Fort Myer. See id., Ex. L.1.3 & Att. 1.
5. DDOT Contract No. DCKA-2009-B-0193
CNA submitted a bid in response to DDOT’s IFP No. DCKA-2009-B-0193 (“Safe
Routes to School”). See FAC ¶¶ 130, 149 & Ex. D.11.3. CNA’s corrected bid was
$2,376,095.90. Id., Ex. D.11.3. Fort Myer, Capitol Paving, Civil, Anchor, and A&M also
submitted bids. Id. CNA’s corrected bid was the fourth lowest after those submitted by Anchor,
Capitol Paving, and Fort Myer. See id. ¶ 130(v)8 & Ex. D.11.3.9 The contract was awarded to
Anchor.
CNA filed a bid protest with the D.C. Contract Appeals Board challenging the award to
Anchor. See D.C. Defs.’ Mot. to Dismiss or, in the Alternative, for Summ. J., Ex. 1 (Protest of
CNA Corp. Solicitation No. DCKA-2009-B-0193, CAB No. P-0826). The District of Columbia
moved to dismiss the bid protest on the grounds that, inter alia, CNA’s bid was non-responsive
because it failed to include proper bid security. See id. at 1. The Contract Appeals Board found
that CNA had submitted a “bid bond” in the form of an unsigned letter from a company
7
It is unclear from the record how CNA’s bid protest was resolved, although CNA does
not allege that its bid protest was successful. CNA does allege that Adrian Fenty ignored a stop
work order issued by the judge presiding over the bid protest. See FAC ¶ 301. However, it is
unclear how this allegation relates to CNA’s claims.
8
Paragraph 130(v) references Ex. D.11.1 in support of this claim, but that exhibit is the
bid tabulation sheet for a different contract.
9
Paragraph 149 of the First Amended Complaint describes each of the bids submitted and
lists CNA as the sixth lowest bidder, with lower bids also submitted by Omni Excavators and
Potomac Construction Co. See id. ¶ 149. However, this information is clearly contradicted by
other evidence in the record showing that CNA was the fourth lowest bidder. Ultimately, this
factual dispute is immaterial to the Court’s ruling with respect to this contract solicitation.
10
promising to purchase invoices from CNA upon the completion of performance, and only if the
procurement officer verifies that the work has been performed. See id. at 4. The Contract
Appeals Board determined that this was not adequate bid security under the procurement
regulations and therefore CNA’s bid was non-responsive. Id. Because CNA was not in line for
the award, the Board ruled that CNA lacked standing to raise other challenges to the award. Id.
6. DPW Contract No. DCKT-2009-B-0003
CNA submitted a bid in response to DPW’s IFB No. DCKT-2009-B-0003 (“On-Site
Preventive Maintenance Services”). See FAC ¶ 130 & Ex. D.11.1. CNA was the lowest of three
bidders; the other bidders were Fleet Pro and Twilbar & Arnold, Inc. Id., Ex. D.11.1. On
December 30, 2008, DPW Contracting Officer James Roberts sent Cheeks a letter asking for
more information about CNA’s bid. See id., Ex. D.19.2-4. The letter explained that DPW was
not required to award the contract to the lowest bidder if that bidder is not responsible, and the
contracting officer may determine that the bidder is not responsible if there are doubts regarding
the productive capacity or financial strength of the bidder. Id. Roberts asked CNA to provide,
inter alia, a cash flow statement, a list of any back taxes owed to the D.C. or federal
governments, a list of current and expired contracts relative to the services to be provided, a list
of employees, proof of insurance, and a statement describing how the services would be
provided. See id. The allegations in the First Amended Complaint do not describe what
response CNA provided to DPW, but apparently DPW was not satisfied with CNA’s response.
C. The Claims Asserted in the First Amended Complaint
The Court begins by noting that the claims and allegations in this action are substantially
the same as those raised by Cheeks in a prior action filed pro se in this Court. See Cheeks v. Fort
11
Myer Constr. Corp., 722 F. Supp. 2d 93 (D.D.C. 2010). The Court dismissed Cheeks’s prior
lawsuit, holding that Cheeks lacked standing to assert claims that were based on competitive
injuries to CNA. See id. CNA has now filed this action seeking recovery for many of the same
alleged injuries. Although CNA is represented by counsel (as it must, being a corporate entity),
the wording of many of the claims and allegations is largely unchanged from the pro se
complaint filed by Cheeks. The First Amended Complaint is a sprawling, prolix document that
contains nearly two hundred pages of allegations in 754 separately numbered paragraphs,
incorporating by reference over five hundred pages of exhibits that were attached to the initial
complaint. Ultimately, CNA’s claims are outlined in thirteen counts, which the Court shall
describe below.
1. Counts One Through Four: Violations of § 1 of the Sherman Act
In Counts One, Two, Three, and Four of the First Amended Complaint, CNA asserts
claims under § 1 of the Sherman Act, which provides that “[e]very contract, combination in the
form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal.” 15 U.S.C. § 1.
In Count One, CNA alleges that Fort Myer, Anchor, Civil, and Capitol Paving were
engaged in a bid-rigging conspiracy in violation of the Sherman Act.10 CNA contends that these
four defendants collusively submitted bids for contracts so as to make the winning bid appear
competitive and reasonable. See FAC ¶ 159. “[C]onspiracies to submit collusive,
noncompetitive, rigged bids . . . are per se violations of the Sherman Act.” United States v. Rose,
10
CNA specifically identifies the defendants named with respect to each count under the
heading of each count in the First Amended Complaint. The Court accepts this as CNA’s official
statement of which claims are asserted against which defendants, notwithstanding the fact that
CNA references other parties within the description of each count.
12
449 F.3d 627, 630 (5th Cir. 2006) (internal citations omitted). CNA does not allege any specific
facts that indicate an agreement among these defendants. Rather, CNA alleges that these
companies shared directors and managers and therefore had common and overlapping interests.
See FAC ¶¶ 5-7, 9, 30-31, 43, 67, 162-67, 171. CNA contends that these defendants’ collusive
bidding prevented CNA from winning the contracts described above.11 CNA seeks damages
from Fort Myer, Anchor, Civil and Capitol Paving in the amount of $582,175,180,80. Id. ¶ 177.
Count Two asserts a claim against Western Surety. CNA alleges that Western Surety
issued bid bonds to Fort Myer, Anchor, Civil, and Capitol Paving in connection with the contract
solicitations and that therefore Western Surety should have known that these companies were
colluding and had interlocking directorates. Id. ¶¶ 184-85. CNA alleges that “but for the
intentional failure of [Western Surety] to recognize violations of federal law, none of the surety
bonds would have issued, and consequently, none of the contracts would have been awarded to
the conspiring and affiliated contractors.” Id. ¶ 188. CNA prays for damages from Western
Surety in the amount of $91,900,488.70. Id. ¶ 197.
Count Three asserts a claim against Fort Myer, Anchor, Civil, Capitol Paving, A&M,
WASA (and its Board of Directors and Retail Services Committee), the District of Columbia
(including DDOT and its Office of Contracting and Procurement), the Public Works Committee,
and Alves and A. Batista in their personal capacities. See FAC at 50. With respect to the Fort
Myer, Anchor, Civil, and Capitol Paving, the claims in Count Three appear to be identical to
those raised in Count One. Count Three alleges that A&M was also a part of the alleged bid-
11
CNA focuses almost entirely on the five contracts solicited by WASA and DDOT
throughout the First Amended Complaint. However, because CNA also makes references to the
DPW contract solicitation at various places, see FAC ¶¶ 128, 130, 373, 529, the Court shall
assume that CNA intends to assert claims based on all six contract solicitations described above.
13
rigging conspiracy and seeks damages in the amount of $500,000 from A&M and $100,000 from
G. Batista (who is not explicitly named as a defendant for Count Three). Id. ¶ 213. CNA alleges
that WASA and the District of Columbia became a part of the alleged conspiracy by “violat[ing]
a myriad of duties to control the actions of [their] own agents, officials, and boards.” Id. ¶¶ 203-
04. CNA claims that WASA and DDOT accepted bids from the defendant construction
companies when it had knowledge that they shared common ownership. Id. ¶¶ 208-09. CNA
contends that employees of WASA and DDOT should have known that the entire bidding
process would be voided by the alleged conspiracy. Id. ¶ 209. Although they are named as
defendants for Count Three, there are no specific allegations pertaining to Defendants Alves and
A. Batista. CNA concedes in its opposition brief that it has failed to allege any facts pertaining
to Alves and agrees that Alves may be dismissed as a defendant. See Pl.’s Opp’n to Defs. A&M,
Alves & A. Batista’s Mot. to Dismiss at 1.
Count Four asserts a claim for “price fixing” against Fort Myer, Anchor, Civil, and
Capitol Paving in violation of § 1 of the Sherman Act.12 CNA alleges that these companies
determined in advance what prices to use in the bids that were submitted to WASA and DDOT.
See FAC ¶ 220. CNA further alleges that the companies arranged their bids so as to completely
cover the range of bidding with the apparent intent to exclude competition. Id. ¶ 226. The Court
understands this claim to be essentially duplicative of the claim in Count One.
The Court notes that in paragraph 30 of the First Amended Complaint, CNA makes
reference to § 8 of the Clayton Act, 15 U.S.C. § 19, which prohibits interlocking directorates
among competing corporations whose capital, surplus, and undivided profits exceed a threshold
12
CNA also purports to name A&M as a defendant in this count. See FAC ¶ 228.
14
jurisdictional amount in excess of $10 million, subject to certain exceptions.13 See FAC ¶ 30
(“The presentation of the affiliation and interlocking nature of these four principal bidders and
their saffiliates establishes patent violations of 15 U.S.C. § 19 (prohibition against interlocking
directorates).”). Although CNA makes general references to the Clayton Act several times in the
First Amended Complaint, see FAC ¶¶ 3, 42, 233, 265, 317, 604, 750, the Court does not
understand CNA to be asserting a claim based on any alleged violation of § 8. CNA does not
identify § 8 of the Clayton Act as one of the thirteen counts it is asserting against the defendants
in this action, nor does it raise this claim in any of its briefs in opposition to defendants’ motions
to dismiss. CNA also does not specifically request relief in the form of an injunction against the
alleged interlocking directorates, which is the presumptive form of relief for a § 8 violation.
Furthermore, CNA does not plead facts that establish that the defendant construction companies
alleged to have interlocking directorates exceed the jurisdictional thresholds of § 8. See Reading
Int’l, Inc. v. Oaktree Capital Mgmt. LLC, 317 F. Supp. 2d 301, 326 n.16 (S.D.N.Y. 2003) (“In
order to state a claim under section 8, a plaintiff must also demonstrate that the corporations in
question are actual ‘competitors’ within the meaning of the antitrust laws, and that each
corporation meets a certain threshold for competitive sales, capital, surplus, and undivided
profits.”). Accordingly, the Court concludes that the First Amended Complaint does not state a
claim for violation of § 8 of the Clayton Act, and the Court shall not consider this to be a part of
CNA’s claims in this action.
13
Currently, competitor corporations are covered by Section 8 if each one has capital,
surplus, and undivided profits aggregating no more than $26,867,000, except that no corporation
is covered if the competitive sales of either corporation are less than $2,686,700. See Revised
Jurisdictional Thresholds for Section 8 of the Clayton Act, 76 Fed. Reg. 4349 (Jan. 25, 2011).
15
2. Counts Five and Six: Monopoly in Violation of § 2 of the Sherman Act
In Counts Five and Six of the First Amended Complaint, CNA purports to assert claims
for unlawful monopolization under § 2 of the Sherman Act, 15 U.S.C. § 2.
In Count Five, CNA generally reasserts its claims regarding the bid-rigging conspiracy
and alleges that Fort Myer, Anchor, Civil, and Capitol Paving “have achieved a near total
monopoly of infrastructure contracts in the District of Columbia.” FAC ¶ 239. CNA contends
that these companies achieved this monopoly power through their bid-rigging conspiracy. Id.
¶ 240. In Count Six, CNA asserts claims against the four construction companies along with
Defendants Neto, Rodriguez, Shrensky, F. Gregorio, C. Gregorio, and the District of Columbia
government. See id. at 67. CNA alleges that the individual defendants named actively
participated in the unlawful monopolization. Id. ¶ 263. CNA further alleges that District of
Columbia government employees gave preferential treatment to the defendant contracting
companies in connection with the contract solicitations. Id. ¶ 264. CNA contends that it is
entitled to damages in Counts Five and Six relating to its loss of the contracts during the bid
solicitations at issue. See id. ¶¶ 267-71.
3. Count Seven: Contract Steering
In Count Seven, which is captioned “Contract Steering,” CNA names as defendants the
District of Columbia, Fenty, Gragan, Carter, Klein, WASA, Carlo Enciso, and Jerry Johnson.
See FAC at 77. CNA alleges that these individuals were involved in contract steering and that
they steered contracts to Fort Myer, Anchor, Civil, and Capitol Paving. Id. ¶¶ 286-87. CNA
alleges that Carter planned Amendment 6 to IFB No. DCKA-B-2009-0025 to favor Fort Myer
and Capitol Paving. Id. ¶¶ 289-91. CNA further alleges that DDOT, along with the Executive
16
Office of the Mayor and former Mayor Fenty, steered several “unsolicited” contracts in July and
August 2009. See id. ¶ 302 & Exs. L.1.3-4. CNA alleges that WASA and Defendants Johnson
and Enciso steered contracts to Anchor between August 19, 2008 and May 15, 2009. Id. ¶ 303.
CNA contends that Johnson and Enciso should have known that Anchor was affiliated with Fort
Myer, Civil, and Capitol Paving. Id. ¶ 304. CNA also alleges that Defendants Johnson and
Enciso jointly steered WASA Contract Nos. 080020 and 090020 by removing CNA’s bid
package from the procurement department, failing to respond to his bid protest, failing to
document fraud, and failing to acknowledge the common ownership of the defendant
construction companies. Id. ¶ 305. CNA fails to cite any legal authority in Count Seven, so the
legal basis for CNA’s “contract steering” claim is unclear.
4. Count Eight: Violation of Non-Collusion Affidavit
In Count Eight, CNA appears to claim that various defendants violated solicitation rules
by falsely signing non-collusion affidavits in connection with their bids for contracts. See FAC
¶¶ 314, 316. The named defendants in this count are Fort Myer, Anchor, Civil, Capitol Paving,
Neto, Rodriguez, Shrensky, F. Gregorio, C. Gregorio, Western Surety, Bruflat, WASA, Johnson,
A&M, Alves, and A. Batista. See FAC at 84-85.
5. Count Nine: Violation of D.C. Code § 28-4502
In Count Nine, CNA asserts a claim under D.C. Code § 28-4502, which provides that
“[e]very contract, combination in the form of a trust or otherwise, or conspiracy in restraint of
trade or commerce all or any part of which is within the District of Columbia is declared to be
illegal.” The named defendants in this court are Fort Myer, Anchor, Civil, Capitol Paving, Neto,
Rodriguez, Shrensky, F. Gregorio, and C. Gregorio. See FAC at 90. CNA’s allegations for
17
Count Nine generally mirror his allegations with respect to Count One for a bid-rigging
conspiracy in violation of § 1 of the Sherman Act, and CNA makes clear that Count Nine is
based on the same conduct alleged to violate the Sherman Act. See id. ¶ 329.
6. Count Ten: Violations of Procurement Regulations
In Count Ten, CNA alleges that WASA and its defendant officials Johnson and Enciso
violated WASA procurement regulations by failing to notify CNA of mistakes in its bids and
allowing CNA time to cure them. See FAC ¶¶ 346-47. CNA contends that the procurement
regulations required the contracting officer to allow CNA to correct mistakes in its bids after they
were submitted. Id. ¶¶ 349-54.
7. Counts Eleven and Twelve: Common Law Fraud & Oversight Failure
Count Eleven of the First Amended Complaint purports to assert a claim for fraud against
Fort Myer, Anchor, Civil, Capitol Paving, Western Surety, Neto, Rodriguez, Shrensky, F.
Gregorio, C. Gregorio, Bruflat, the District of Columbia, Nickles, Gragan, Carter, WASA (and
its Board of Directors and Retail Services Committee), Johnson, Councilmember Graham, Loza,
Hernandez, and the DSLBD.14 See FAC at 100-01. CNA generally alleges that these defendants
committed fraud by participating in the bid-rigging conspiracy, submitting false non-collusion
affidavits, and failing to follow applicable laws and regulations. See id. ¶¶ 371-89. CNA also
alleges that DDOT unilaterally awarded a contract to Fort Myer without bidding, see id. ¶ 390,
but the record clearly shows that Fort Myer received the contract after CNA’s bid was deemed
non-responsive at the bid price that Fort Myer had previously submitted, see id., Exs. D.10.3 &
Att. 1.
14
CNA also lists as defendants “[a]bout 25 unknown Conspirators with unknown
addresses.” FAC at 101.
18
Count Twelve asserts a claim against Fort Myer, Anchor, Civil, Capitol Paving, Neto,
Rodriguez, Shrensky, F. Gregorio, C. Gregorio, the District of Columbia, Nickles, WASA, the
members of the Public Works Committee, Councilmember Graham, Hernandez, and Fenty. Id.
¶¶ 537-557. Count Twelve is captioned, “Oversight Failure, Gross Negligence and Fraud of
Governance Boards, Corporate Boards and the District of Columbia Government.” CNA
generally alleges that D.C. government and WASA officials enabled the bid-rigging conspiracy
by failing to engage in effective oversight and through gross negligence. Id. ¶¶ 566-67.
8. Count Thirteen: Tortious Interference with Business Relationships
In Count Thirteen, CNA asserts a claim against Fort Myer, Anchor, Rodriguez, WASA,
DDOT, Western Surety, and Bruflat for tortious interference with business relationships and with
contracts. FAC at 162. CNA alleges that the actions of the defendant construction companies
blocked CNA’s entry into the market for infrastructure contracts, causing CNA to be unable to
pay its debtors. Id. ¶ 605. CNA further alleges that these companies spread false information
that CNA owed a debt to Fort Myer (although CNA concedes it owed $56.00 to Fort Myer) in
order to ruin CNA’s reputation. Id. ¶ 606-07.
D. Procedural Background
CNA filed this action on October 15, 2010. CNA filed its First Amended Complaint on
November 9, 2010. On November 19, 2010, Defendants A&M, Alves, and A. Batista filed a
[28] Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6). On November 24, 2010,
Defendants Western Surety and Bruflat filed a [29] Rule 12(b)(6) Motion to Dismiss the First
Amended Complaint. On January 10, 2011, Defendant Anchor filed a [46] Motion to Dismiss
and Defendants Capitol Paving and Neto filed a [47] Motion to Dismiss the First Amended
19
Complaint. That same date, Defendants Shrensky, Rodriguez, and G. Batista filed a [49] Motion
to Quash Service of Process. Also on that date, Defendant Fort Myer filed a [50] Motion to
Dismiss Amended Complaint Pursuant to Fed. R. Civ. P. 12(b)(6); Defendant Civil filed a [51]
Motion to Dismiss Amended Complaint; Defendants WASA, Albert, Cotruvo, Enciso, Johnson,
Russell, and Walker filed a [52] Motion to Dismiss the Amended Complaint; Defendants District
of Columbia, Fenty, Executive Office of the Mayor, Nickles, Gragan, DDOT Office of
Contracting and Procurement, Carter, Klein, DPW Office of Contracting and Procurement,
Roberts, Smith, and DSLBD filed a [56] Motion to Dismiss the Complaint or, in the Alternative,
for Summary Judgment; and Defendants Councilmember Graham, Hernandez, and Loza filed a
[57] Motion to Dismiss. CNA filed oppositions to all of these motions (several of which were
consolidated into a single brief), and the defendants filed replies. On May 20, 2011, Fort Myer
filed a [88] supplemental brief in support of its motion to dismiss; CNA filed an opposition brief
in response and a [92] cross-motion to strike and for sanctions.15 Fort Myer then filed an
opposition to CNA’s cross-motion; CNA filed a reply; and Fort Myer filed a surreply.
On January 24, 2011, Defendants A&M, Alves, and A. Batista filed a [63] Motion for
Sanctions Against Plaintiff and Its Counsel pursuant to Federal Rule of Civil Procedure 11.
These defendants contend that the claims asserted against them by CNA are frivolous and
without factual basis. CNA has filed an opposition to the motion for sanctions, and these
defendants have filed a reply.
On March 1, 2011, Defendant F. Gregorio filed a [72] Second Motion to Quash Service
15
Although CNA is correct that Fort Myer did not seek leave to file a supplemental brief
in support of its motion to dismiss, the Court shall deny CNA’s cross-motion to strike and for
sanctions. The Court shall consider Fort Myer’s supplemental brief to the extent it is helpful to
the Court’s resolution of the disputed issues.
20
claiming that he had not been validly served with process pursuant to Rule 4. CNA filed an
opposition to this motion, and F. Gregorio filed a reply.
On March 17, 2011, CNA filed a [85] Motion for Voluntary Dismissal of Claims Against
Two Individual Defendants Without Prejudice with respect to Defendants Roberts and C.
Gregorio. Defendant Roberts filed an opposition to CNA’s motion, arguing that the Court should
proceed to rule on his pending motion to dismiss. The Court agrees that it is appropriate to rule
on the pending motions to dismiss rather than allow CNA to voluntarily dismiss these defendants
without prejudice. Accordingly, the Court shall deny CNA’s motion without prejudice.
On May 30, 2011, CNA filed a [89] Motion for Leave to Take One Deposition to
Preserve Evidence. The motion seeks permission to take the deposition of Defendant Loza prior
to the Rule 26(f) conference. Defendant Loza and the District of Columbia defendants filed an
opposition and [96] cross-motion for protective order to preclude the deposition. Defendants
argue that Loza enjoys legislative immunity and cannot be compelled to testify; furthermore, they
argue that his testimony is unnecessary because the First Amended Complaint fails to state a
claim upon which relief can be granted. These motions have been fully briefed and are ripe for
resolution.
II. LEGAL STANDARD
The defendants move to dismiss the First Amended Complaint in part for lack of subject
matter jurisdiction based on a lack of standing and in part for failure to state claim upon which
relief can be granted.
A. Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(1)
A court must dismiss a case pursuant to Rule 12(b)(1) when it lacks subject matter
21
jurisdiction. In determining whether there is 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.” Coalition for Underground
Expansion v. Mineta, 333 F.3d 193, 198 (D.C. Cir. 2003) (citations omitted); see also Jerome
Stevens Pharm., Inc. v. Food & Drug Admin., 402 F.3d 1249, 1253 (D.C. Cir. 2005) (“[T]he
district court may consider materials outside the pleadings in deciding whether to grant a motion
to dismiss for lack of jurisdiction.”). “At the motion to dismiss stage, counseled complaints, as
well as pro se complaints, are to be construed with sufficient liberality to afford all possible
inferences favorable to the pleader on allegations of fact.” Settles v. U.S. Parole Comm’n, 429
F.3d 1098, 1106 (D.C. Cir. 2005). In spite of the favorable inferences that a plaintiff receives on
a motion to dismiss, it remains the plaintiff’s burden to prove subject matter jurisdiction by a
preponderance of the evidence. Am. Farm Bureau v. Envtl. Prot. Agency, 121 F. Supp. 2d 84, 90
(D.D.C. 2000). “Although a court must accept as true all factual allegations contained in the
complaint when reviewing a motion to dismiss pursuant to Rule 12(b)(1), [a] plaintiff[’s] factual
allegations in the complaint . . . will bear closer scrutiny in resolving a 12(b)(1) motion than in
resolving a 12(b)(6) motion for failure to state a claim.” Wright v. Foreign Serv. Grievance Bd.,
503 F. Supp. 2d 163, 170 (D.D.C. 2007) (internal citations and quotation marks omitted).
B. Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6)
Under the Federal Rules of Civil Procedure, a complaint must contain “a short and plain
statement of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P. (8)(a), “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) (quoting Conley v. Gibson, 355
22
U.S. 41, 47 (1957)). Although “detailed factual allegations” are not necessary to withstand a
Rule 12(b)(6) motion to dismiss for failure to state a claim, a plaintiff must furnish “more than
labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Id. “Nor
does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual
enhancement.’” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at
557). Rather, a complaint must contain sufficient factual allegations that if accepted as true,
“state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. “A claim has
facial plausibility when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S.Ct.
1949 (citing Twombly, 550 U.S. at 556).
When considering a motion to dismiss for failure to state a claim, the court must construe
the complaint in a light most favorable to the plaintiff and must accept as true all reasonable
factual inferences drawn from well-pleaded factual allegations. In re United Mine Workers of
Am. Employee Benefit Plans Litig., 854 F. Supp. 914, 915 (D.D.C. 1994); see also Schuler v.
United States, 617 F.2d 605, 608 (D.C. Cir. 1979) (“The complaint must be liberally construed in
favor of the plaintiff, who must be granted the benefit of all inferences that can be derived from
the facts alleged”) (internal quotation omitted). However, a plaintiff must provide more than just
“a sheer possibility that a defendant has acted unlawfully.” Iqbal, 129 S.Ct. at 1950. When a
complaint’s well-pleaded facts do not enable a court, “draw[ing] on its judicial experience and
common sense,” “to infer more than the mere possibility of misconduct,” the complaint has not
shown that the pleader is entitled to relief. Id.
23
III. DISCUSSION
The defendants in this action have moved to dismiss the First Amended Complaint on a
variety of grounds. Many of the defendants contend that CNA has failed to allege sufficient facts
regarding their involvement in the alleged bid-rigging conspiracy to state a claim against them.
The construction company defendants (Fort Myer, Civil, Anchor, Capitol Paving) contend that
CNA lacks standing to assert its antitrust claims because the record clearly shows that its injuries
were not caused by any alleged antitrust violation. Other defendants argue that the allegations in
the First Amended Complaint are legally insufficient to state a claim upon which relief can be
granted. The Court shall analyze defendants’ arguments to the extent they are necessary to
resolve each claim asserted by CNA. Because standing is essential to the Court’s subject matter
jurisdiction, the Court shall determine whether CNA has standing before turning to the merits of
the claims asserted in the First Amended Complaint. Steel Co. v. Citizens for a Better Env’t, 523
U.S. 83, 98 (1998).
A. CNA Lacks Standing to Assert Most of Its Claims
To establish the “irreducible constitutional minimum of standing,” a plaintiff must show:
(1) that he or she suffered an injury in fact that is (a) concrete and particularized and (b) actual or
imminent; (2) a causal relationship between the injury and the challenged conduct; and (3) that
the injury will likely be remedied by a favorable court decision. Lujan v. Defenders of Wildlife,
504 U.S. 555, 560-61 (1992). In this case, it is the second prong of the standing
inquiry—causation—that poses a problem for CNA. Nearly all of the claims asserted in the First
Amended Complaint seek redress for CNA’s failure to obtain a final contract through the six
challenged solicitations. However, the facts as pled in the First Amended Complaint and
24
supporting exhibits reveal that CNA lost the contracts because of its own mistakes in the bidding
process or because it was outbid by companies that are not alleged to be a part of the bid-rigging
conspiracy. The Court shall review the facts relating to each contract solicitation to explain why
CNA lacks standing to assert claims based on these injuries.
1. Contracts for Which CNA’s Bid Was Deemed Non-responsive
With respect to both WASA Contract No. 080020 and DDOT Contract No. DCKA-2009-
B-0025, CNA was initially deemed the winning bidder but its bid was rejected as non-responsive
because it failed to include the required bid security. With respect to DPW Contract No. DCKT-
2009-B-0003, the record shows that DPW declined to award CNA the contract despite being the
lowest bidder because CNA did not establish that it was a responsible bidder in response to
DPW’s request for documentation. Therefore, with respect to these contract awards, CNA’s
injury was not caused by any alleged anticompetitive conduct among CNA’s competitors, but
rather by CNA’s own failure to comply with the bidding requirements.16 Consequently, CNA has
no standing to assert claims that his competitors were engaged in a bid-rigging conspiracy with
respect to these contracts.
CNA does have standing to challenge the actions of the contracting officers and agencies
in deeming its bids non-responsive, as it does in Count Ten alleging violations of procurement
regulations. However, the Court does not understand CNA to be claiming that the contracting
officers and agencies were an active part of the alleged bid-rigging conspiracy. Alternatively, to
the extent that CNA is alleging that the procurement agencies and officials were a part of the bid-
16
In addition, CNA does not allege that the other two bidders for DPW Contract No.
DCKT-2009-B-0003 (neither of which are defendants in this action) were engaged in the bid-
rigging conspiracy. Therefore, CNA has clearly failed to state any antitrust claim based on that
contract solicitation.
25
rigging conspiracy, the Court finds that CNA has failed to state a claim upon which relief can be
granted. Nowhere in the First Amended Complaint does CNA allege facts that plausibly suggest
there was an actual agreement between any of the contracting officials and the alleged conspiring
contracting companies to disadvantage CNA by disqualifying its bids.17 Rather, CNA contends
that the contracting officials and agencies aided and abetted the bid-rigging conspiracy by
accepting the collusive bids and that they were negligent in failing to stop the contracting
companies from colluding through the use of interlocking directorates. However, because the
contracting officers’ decisions to reject CNA’s bids are not causally connected to the alleged
conspiracy, CNA lacks standing to challenge that alleged conspiracy with respect to these
contract awards.
2. Contract Lost Due to CNA’s Own Bidding Error
With respect to WASA Contract No. 090080, CNA admits that it lost the bid because it
was the highest bidder due to CNA’s own error in submitting its bid. Therefore, CNA’s failure
to win the contract was not the result of any alleged bid-rigging conspiracy, and CNA lacks
standing to assert any such claim based on this contract solicitation. CNA does contend that it
filed a bid protest seeking to correct its error and that WASA failed to respond to it. CNA does
have standing to challenge WASA’s failure to respond, but this is a separate claim from CNA’s
antitrust claims.
17
The closest CNA comes to such an allegation is its claim that DDOT engineered
Amendment 6 to IFB No. DCKA-2009-B-0025 so as to favor Fort Myer. However, CNA was
the lowest bidder for that contract and its bid was disqualified for failure to submit proper bid
security; therefore, CNA cannot rely on this allegation to establish a connection between
DDOT’s rejection of its bid and the alleged bid-rigging conspiracy.
26
3. Contracts Where CNA Was Not the Lowest Bidder
a. WASA Contract No. 090020
With respect to WASA Contract No. 090020, CNA alleges that the contract was awarded
to Nastos Construction, Inc. (“Nastos”), the lowest bidder. CNA makes only three references to
Nastos throughout its entire First Amended Complaint. See FAC ¶¶ 146, 243, 585. These
references indicate only that Nastos submitted the lowest bid and that it was awarded the
contract. In one paragraph, CNA writes in parentheses that Nastos is “(Other [company] in
question), see id. ¶ 243; and in another paragraph, CNA marks Nastos with a double asterisk and
a note stating “Others affiliated with Defendants,” id. ¶ 146. To the extent that these minor
notations are intended to imply that Nastos was conspiring with the other alleged conspirators,
they are wholly inadequate. Alleging that Nastos was “in question” or “affiliated” with the
defendant companies is not the same as alleging that Nastos was involved in the conspiracy.
Without a competent allegation that Nastos was somehow involved in the conspiracy, however,
CNA cannot establish that it lost WASA Contract No. 090020 as a result of any anticompetitive
conduct. Accordingly, CNA lacks standing to assert any of its claims based on the loss of
WASA Contract No. 090020 to Nastos.
b. DDOT Contract No. DCKA-2009-B-0193
The record shows that CNA was the fourth lowest bidder for DDOT Contract No.
DCKA-2009-B-0193 behind Fort Myer, Anchor, and Civil. See FAC ¶ 130(v) & Ex. D.11.3.
Because these three companies are alleged to have participated in the bid-rigging conspiracy,
CNA may have standing to sue as a disappointed bidder if it can establish that it may have been
awarded the contract in the absence of the bid-rigging conspiracy. Cf. Free Air Corp. v. FCC,
27
130 F.3d 447, 450 (D.C. Cir. 1997) (“[S]ufficiently viable runners-up in a procurement process
have standing to allege that an illegality in the process caused the contract to go to someone else
and not to them.”); Nat’l Maritime Union of Am. v. Commander, Military Sealift Command, 824
F.2d 1228, 1237-38 (D.C. Cir. 1987) (“[I]njury to a bidder’s right to a fair procurement is
obviously an injury both traceable to the alleged illegality in a procurement and redressable by
any remedy that eliminates the alleged illegality.”). Assuming arguendo that the bids submitted
by Fort Myer, Anchor, and Civil would have been higher than CNA’s bid absent any collusion,
CNA could ordinarily establish standing by being the next lowest bidder. However, the Contract
Appeals Board ruled that CNA’s bid was non-responsive because it failed to include the required
bid security. Therefore, CNA could not have been awarded the contract even if it had been the
lowest bidder. Accordingly, CNA lacks standing to assert claims based on its failure to win this
contract.
4. Conclusion
Because the record clearly demonstrates that CNA’s failure to win the six contracts
described in the First Amended Complaint was not caused by any alleged bid-rigging conspiracy,
CNA lacks standing to assert any claims that are premised on the alleged conspiracy. These
claims include: Counts One, Two, Three, and Four, which charge that the various named
defendants violated § 1 of the Sherman Act by engaging in the alleged bid-rigging conspiracy;
Counts Five and Six, which charge that the bid-rigging conspiracy enabled defendants to
monopolize the market for infrastructure contracts in violation of § 2 of the Sherman Act; and
Count Nine, which charges that the bid-rigging conspiracy violates D.C.’s antitrust statute. Each
of these counts seeks to hold defendants directly liable for engaging in anticompetitive conduct,
28
but because CNA cannot demonstrate that it was actually harmed by any such conduct, it lacks
standing to assert these claims. Therefore, the Court shall dismiss these claims for lack of
subject matter jurisdiction.
Several other claims asserted in the First Amended Complaint also fail for lack of
standing. In Count Eight, CNA charges that the defendants violated solicitation rules by falsely
submitting affidavits of non-collusion. Even assuming that there is a private right of action for
such a claim, CNA lacks standing to assert it because it cannot demonstrate that its injury—its
failure to win the contract awards—is traceable to the allegedly false affidavits. In Count
Twelve, CNA charges that various procurement officials were negligent in failing to stop the
alleged bid-rigging conspiracy. However, CNA cannot demonstrate that such alleged negligence
played any causal role in its failure to win a contract. Therefore, these claims must also be
dismissed for lack of standing.
Count Eleven purports to assert a claim for common law fraud against a series of
defendants. However, it is clear from CNA’s allegations that its fraud claim is based on the
defendants’ alleged participation in the bid-rigging conspiracy in some way or another. See FAC
¶¶ 371-89. Therefore, the Court finds that CNA lacks standing to assert its claim for fraud as
alleged in the First Amended Complaint. To the extent that CNA purports to state a claim for
fraud based on other allegations, it is clear to the Court that CNA’s conclusory and generalized
allegations do not satisfy the particularized pleading requirements of Federal Rule of Civil
Procedure 9(b). Accordingly, the Court shall dismiss Count Eleven.
It appears to the Court that Counts Seven, Ten, and Thirteen rely at least in part on factual
allegations that are distinct from the allegations of a bid-rigging conspiracy. Therefore, the Court
29
shall proceed to analyze the merits of those claims. Because the Court shall dismiss the other
counts for lack of standing, the Court declines to reach the alternative arguments in favor of
dismissal raised by the various defendants.
B. CNA Has Failed to State a Claim for Contract Steering
In Count Seven, CNA purports to assert a claim against District of Columbia and WASA
officials for “contract steering.” The basis for CNA’s claim is not entirely clear. In its
opposition brief, CNA states that its contract steering claim is based on “systemic corruption
amongst the individuals, agencies, and corporations that control the IFB Solicitations market.”
See CNA’s [70] Opp’n to D.C. Defs.’ Mot. to Dismiss or, Alternatively, for Summ. J. at 14.
To the extent that CNA is alleging that these officials steered contracts to the defendant contract
companies through actions such as the allegedly preferential Amendment 6, see FAC ¶¶ 289-95,
CNA lacks standing to assert these claims because it cannot demonstrate that its injuries were
caused by the alleged contract steering rather than by its own actions or inactions. To the extent
that CNA is claiming that these defendants violated procurement regulations, see id. ¶ 296, its
claim is duplicative of Count Ten, which the Court shall address below.
CNA also appears to claim in Count Seven that the defendant officials violated D.C.
Code § 1-204.51, a statutory provision which, inter alia, requires that the Council of the District
of Columbia (“D.C. Council”) approve certain multi-year contracts awarded by the District of
Columbia. CNA alleges that defendants violated this provision with respect to three contracts
that were awarded in July and August 2009. See FAC ¶ 302. The D.C. Defendants contend that
this claim must be dismissed because there is no private right of action for violations of § 1-
204.51. The D.C. Court of Appeals has explained that in determining whether a statute creates
30
an implied right of action, courts must look to three factors: (1) whether the plaintiff is “one of
the class for whose especial benefit the statute was enacted”; (2) whether there is any indication
of legislative intent, explicit or implicit, either to create such a remedy or to deny one; and (3)
whether it is consistent with the underlying purposes of the legislative scheme to imply such a
remedy for the plaintiff. In re D.G., 583 A.2d 160, 166 (D.C. 1990) (quoting Cort v. Ash, 422
U.S. 66 (1975)). The ultimate issue is whether the legislature intended to create a particular
cause of action, and the burden is on the plaintiff to demonstrate that the D.C. Council intended
to imply a right of action. Coates v. Elzie, 768 A.2d 997, 1001 (D.C. 2001) (quotation marks and
citations omitted). CNA fails to respond to defendants’ argument, and therefore the Court finds
that CNA has conceded that there is no private right of action to enforce § 1-204.51.
Accordingly, the Court shall dismiss Count Seven insofar as it purports to assert a claim based on
a violation of this provision.
C. CNA’s Claims Based on Violations of Procurement Regulations
As the Court noted above, CNA does have standing to challenge violations of
procurement regulations by contracting officials to the extent that those violations can be shown
to have a causal connection to CNA’s failure to win the contract. In this case, CNA contends
that the WASA contracting officials violated procurement regulations by failing to notify CNA
that its bids were deficient and failing to allow CNA to correct the deficiencies. However, a
review of the relevant regulations reveals that the WASA contracting officials did not violate the
procurement regulations in rejecting CNA’s bids as non-responsive.
CNA relies primarily on a procurement regulation then in effect captioned, “Mistakes in
31
Bids Before Award.” See 21 D.C. Mun. Reg. § 5312 (1999).18 That regulation provided in
pertinent part as follows:
5312.1 Contracting Officer shall examine each bid for mistakes. In cases
where the Contracting Officer has reason to believe that a mistake is
contained within a bid/proposal, the Contracting Officer shall request
from the bidder/proposer verification of the mistake.
5312.2 The Contracting Officer may correct an apparent clerical mistake
before award. If the correction is made, the bid shall be corrected to
the intended correct bid and may not be withdrawn.
5312.3 A Contracting Officer’s authority to permit corrections of bids is
limited to bids that are responsive and shall not be used to permit
corrections to make the bid responsive or competitive.
Id. CNA also relies on a regulation captioned, “Mistakes in Bids After Award,” which provided
in pertinent part:
5313.1 If a mistake in a bid or proposal is not discovered until after award,
the Contracting Officer may correct the mistake by contract
amendment if the Contracting Officer makes a written determination
that correcting the mistake would be in the best interest of WASA
and that the correction would not change the essential requirements
of the contract.
Id. § 5313. CNA contends that pursuant to these provisions, WASA contracting officials should
have examined CNA’s bids, notified CNA of its failure to provide proper bid security, and
allowed CNA to correct the mistake. However, the language in these regulations is permissive
rather than mandatory, meaning that the Contracting Officer is not required to correct a mistaken
bid. Furthermore, § 5312 clearly states that the Contracting Officer cannot permit corrections to
make the bid responsive or competitive. The regulations then in effect stated that “[t]o be
18
WASA issued new procurement regulations on June 12, 2009, deleting the former
regulations in their entirety. See 56 D.C. Reg. 4484 (June 12, 2009). Because the contract
solicitations occurred prior to the effective date of the new regulations, the Court refers only to
the then-operative regulations.
32
considered for award, a bid shall be required to comply in all material respects with the
solicitation,” id. § 5310.1, and “[a] Contracting Officer shall reject bids and proposals
determined by the Contracting Officer to be non-responsive,” id. § 5318.7. Because the
solicitations at issue required bid security, CNA’s failure to include proper bid security rendered
its bids non-responsive, and the Contracting Officer could not permit CNA to amend its bid in
order to make it responsive.
CNA also relies on a regulation that provided, “A Contracting Officer shall give the
successful bidder/proposer an opportunity to resolve minor deficiencies in bids and proposals
prior to the award.” 21 D.C. Mun. Regs. § 5321.1 (1999). However, the lack of proper bid
security is not a “minor” deficiency in a bid. The applicable regulations explicitly stated that a
“Contracting Officer may reject bids and proposals that do not include security required to be
submitted with the bid/proposal unless the failure to include the security is waived by the General
Manager.” Id. § 5318.9. Therefore, CNA’s claim that WASA officials violated procurement
regulations by denying CNA the opportunity to correct its deficient bid security is without merit.
CNA also appears to claim that WASA improperly failed to respond to its bid protest
regarding WASA Contract No. 90080, where CNA mistakenly submitted a bid for over $11
million instead of its intended bid of $5,040,000. However, as discussed above, the applicable
procurement regulations would not have required the WASA Contracting Officer to accept
CNA’s corrected bid. Therefore, any failure to respond to CNA’s bid protest was harmless and
did not cause CNA any injury.
For these reasons, the Court shall grant the WASA Defendants’ motion to dismiss Count
Ten of the First Amended Complaint.
33
D. CNA Has Failed to State a Claim for Tortious Interference with Business
Relationships or with Contract
In Count Thirteen of the First Amended Complaint, CNA purports to assert claims for
tortious interference with business relationships and tortious interference with contract. To
survive a motion to dismiss on a claim for tortious interference with a business relationship or a
contract, the plaintiff must plead: (1) the existence of a valid business relationship or contract; (2)
knowledge of the business relationship or contract on the part of the tortfeasor; (3) intentional
interference inducing or causing a breach of the relationship or contract; and (4) damages
resulting from the breach. Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002); CASCO
Marina Dev., L.L.C. v. D.C. Redev. Land Agency, 834 A.2d 77, 83 (D.C. 2003).
The First Amended Complaint alleges the following facts in support of CNA’s tortious
interference claims. CNA alleges that Fort Myer, Anchor, Civil, and Capitol Paving spread false
information about CNA’s debts to creditors with the aim of tarnishing CNA’s reputation in the
marketplace. See FAC ¶¶ 606-10. CNA claims that these defendants’ actions “destroyed good
will intentions of [CNA] in fulfilling agreements to its debtor(s).” Id. ¶ 613. CNA lists liabilities
to debtors in the amount of $2,029,352. Id. ¶ 614. CNA claims that it defaulted on some of its
obligations to the debtors as a result of defendants’ actions. See id. ¶ 618. CNA also complains
that Fort Myer took aggressive actions to collect an unpaid debt and then complained about
CNA’s delinquency to DDOT and WASA. See id. ¶¶ 619-20.
The Court finds that CNA has failed to state a claim for tortious interference with
business relationships or contracts. First, CNA fails to allege that any of the defendants in this
count had any knowledge of CNA’s business relationships or contracts. Second, CNA has failed
to plead facts that plausibly suggest that it suffered damages resulting from any alleged
34
interference. CNA’s basic claim is that it was injured because it failed to win contracts from
DDOT and WASA and because its capacity to pay off its creditors was somehow diminished.
However, CNA fails to demonstrate a causal connection between any alleged tortious
interference and its failure to win infrastructure contracts (which, as the Court explained above,
was caused by CNA’s own failure to comply with bidding requirements), and CNA fails to
explain how its inability to pay its creditors for existing obligations was exacerbated by the
defendants’ alleged interference. Therefore, CNA has failed to state a plausible tortious
interference claim.
Furthermore, insofar as CNA asserts its claim against the District of Columbia, the claim
is barred by CNA’s noncompliance with D.C. Code § 12-309. CNA concedes that it has failed to
provide notice of its claim against the District of Columbia within six months of the alleged
injury as required by D.C. Code § 12-309. See CNA’s [70] Opp’n to D.C. Defs.’ Mot. to
Dismiss or, Alternatively, for Summ. J. at 9. Compliance with the statutory notice requirement is
mandatory, and a suit filed without the required notice must be dismissed. See Tucci v. District
of Columbia, 956 A.2d 684, 694 (D.C. 2008). Therefore, CNA’s failure to comply with § 12-309
provides an alternative basis for dismissal of this claim against the District of Columbia.
For these reasons, the Court shall dismiss Count Thirteen of the First Amended
Complaint.
E. Other Pending Motions
Having concluded that all of the claims asserted by CNA in the First Amended Complaint
must be dismissed for either lack of standing or failure to state a claim upon which relief can be
granted, the Court must now address the other motions pending on the docket. Defendants
35
Shrensky, Rodriguez, and G. Batista filed a [49] Motion to Quash Service of Process, which the
Court treats as a motion to dismiss lack of insufficient service of process pursuant to Federal
Rule of Civil Procedure 12(b)(5). CNA failed to file an opposition to this motion, and therefore
the Court shall treat it as conceded. See LCvR 7(b). Accordingly, the Court may alternatively
dismiss the claims against Defendants Shrensky, Rodriguez, and G. Batista for insufficient
service of process. Defendant F. Gregorio also filed a [72] Second Motion to Quash Service
claiming that he had not been validly served with process; the Court also construes this as a
motion to dismiss under Rule 12(b)(5). CNA filed an opposition to this motion, and F. Gregorio
filed a reply. However, because the Court has already found that the claims asserted against F.
Gregorio must be dismissed for either lack of standing or failure to state a claim, the Court
declines to rule separately on his motion to dismiss pursuant to Rule 12(b)(5).
Also pending before the Court is CNA’s [89] Motion for Leave to Take One Deposition
to Preserve Evidence and a [96] cross-motion for protective order filed by Defendants Loza and
the District of Columbia Defendants. The Court’s disposition of the defendants’ motions to
dismiss renders these cross-motions moot; therefore, the Court shall deny them.
Finally, the Court must address the [63] Motion for Sanctions Against Plaintiff and Its
Counsel filed by Defendants A&M, Alves, and A. Batista. These defendants seeks sanctions
against CNA and its counsel under Federal Rule of Civil Procedure 11. Rule 11 provides in
relevant part that when an attorney files a pleading with the court, he is certifying to the best of
his knowledge, information, and belief, formed after an inquiry reasonable under the
circumstances, that: (1) the pleading is not being presented for any improper purpose, such as to
harass, cause unnecessary delay, or needlessly increase the cost of litigation; (2) the claims,
36
defenses, and other legal contentions are warranted by existing law or by a nonfrivolous
argument for extending, modifying, or reversing existing law or for establishing new law; and (3)
the factual contentions have evidentiary support or will likely have evidentiary support after a
reasonable opportunity for further investigation or discovery. Fed. R. Civ. P. 11(b). If the Court
determines that Rule 11(b) has been violated, “the court may impose an appropriate sanction on
any attorney, law firm, or party that violated the rule or is responsible for the violation.” Fed. R.
Civ. P. 11(c)(1). “[T]he imposition of sanctions is left to the discretion of the district court
judge.” 1443 Chapin Street, LP v. PNC Bank, Nat’l Ass’n, 718 F. Supp. 2d 78, 86 (D.D.C.
2010).
Defendants A&M, Alves, and A. Batista contend that CNA and its counsel have violated
Rule 11 by asserting claims against them in the First Amended Complaint that are legally and
factually unsupported and which they believe are being asserted for the improper purpose of
harassment. They point to the lack of factual allegations pertaining to A&M, Alves, and A.
Batista in the First Amended Complaint and the lack of monetary relief sought against them.
Accordingly, the Court shall review the facts alleged in the First Amended Complaint regarding
each of these defendants.
With respect to A&M, the First Amended Complaint does clearly allege that A&M was a
part of the overall bid-rigging conspiracy along with Fort Myer, Civil, Anchor, and Capitol
Paving. See FAC ¶¶ 4-12. CNA has alleged facts demonstrating that A&M participated in
several of the bid solicitations and has alleged that A&M had connections to at least one of the
other companies through shared officers. A&M contends that sanctions are warranted, however,
because there are no specific factual allegations describing A&M’s involvement in the alleged
37
conspiracy. The Court certainly agrees that the First Amended Complaint is not a model of
clarity; it is repetitious, longwinded, rambling, and replete with conclusory allegations of
conspiracy. Indeed, if the Court were not dismissing CNA’s claims for lack of standing, it would
likely dismiss the claims for failure to plead facts that plausibly show an entitlement to relief.
However, the Court shall not award sanctions under Rule 11 simply because CNA’s counsel filed
a pleading that is poorly worded and fails to state a claim for relief. See Tahfs v. Proctor, 316
F.3d 584, 595 (6th Cir. 2003) (“A complaint does not merit sanctions under Rule 11 simply
because it merits dismissal pursuant to Rule 12(b)(6).”).
Defendants Alves and A. Batista have a more tenable argument for sanctions. Although
they are both named as defendants in the First Amended Complaint, the only factual allegations
pertaining to them in the entire pleading are in paragraph 90, where CNA alleges that Alves is the
Executive Vice President of A&M; paragraph 91, where CNA alleges that A. Batista is the
Administrative Assistant of A&M; and paragraph 7, where CNA alleges that A. Batista is related
by blood or marriage to G. Batista. CNA has conceded that it failed to allege any facts pertaining
to Alves and concedes that dismissal is appropriate with respect to him. See Pl.’s Opp’n to Defs.
A&M, Alves & A. Batista’s Mot. to Dismiss at 1. Although CNA has not made a similar
concession with respect to A. Batista, it is clear that there are no allegations against A. Batista
that could support a claim against her. CNA argues that it could not plead specific facts relating
to Alves and A. Batista because it has not had the opportunity to engage in discovery. While that
does not relieve CNA of its burden of pleading a claim against these individual defendants, the
Court is not persuaded that CNA’s sloppy pleading rises to the level of sanctionable conduct.
Accordingly, the Court shall deny the motion for sanctions filed by A&M, Alves, and A. Batista.
38
IV. CONCLUSION
For the foregoing reasons, the Court finds that CNA lacks standing to assert its claims
involving an alleged bid-rigging conspiracy because it cannot demonstrate a causal connection
between the alleged conspiracy and its failure to win infrastructure contracts awarded by DDOT,
DPW, and WASA. The Court also finds that CNA has failed to state a claim against the
contracting officers or agencies for violation of procurement regulations and has failed to state a
claim for tortious interference with a business relationship or contract. Accordingly, the Court
shall grant the pending motions to dismiss pursuant to Rule 12(b)(1) and Rule 12(b)(6) and
dismiss the First Amended Complaint in its entirety. The Court shall also grant the motion to
dismiss for insufficient service of process filed by Defendants Shrensky, Rodriguez, and G.
Batista as conceded and deny without prejudice the motion filed by Defendant F. Gregorio in
light of the Court’s other rulings. Because the Court finds that sanctions against CNA’s counsel
are not warranted under Rule 11, the Court shall deny the motion for sanctions filed by
Defendants A&M, Alves, and A. Batista. All other pending motions shall be denied without
prejudice. An appropriate Order accompanies this Memorandum Opinion.
/s/
COLLEEN KOLLAR-KOTELLY
United States District Judge
39