Bowhead Information Tech. v. Catapult Technology

• Decision Date: 18 July 2005
• Docket Number: No. CIV.A. 04-1668 JDB.,CIV.A. 04-1668 JDB.
• Citation: 377 F.Supp.2d 166
• Parties: BOWHEAD INFORMATION TECHNOLOGY SERVICES, LLC., Plaintiff, v. CATAPULT TECHNOLOGY, LTD., Defendant.
• Court: U.S. District Court — District of Columbia

377 F.Supp.2d 166

BOWHEAD INFORMATION TECHNOLOGY SERVICES, LLC., Plaintiff, v. CATAPULT TECHNOLOGY, LTD., Defendant.

No. CIV.A. 04-1668 JDB.

United States District Court, District of Columbia.

July 18, 2005.

Andrew Michael Friedman, Michael D. White, Patton Boggs, LLP, Washington, DC, Counsel for plaintiff.

George Alexander Lehner, U.S. Department of State, Washington, DC, Counsel for defendant.

MEMORANDUM OPINION

BATES, District Judge.

Plaintiff Bowhead Information Technology Services, LLC ("Bowhead") is a government contractor that provides information technology ("IT") services to the Department of Transportation ("DOT"). Bowhead brings this action against defendant Catapult Technology, LTD ("Catapult"), a government contractor that formerly provided IT services to the DOT, alleging that Catapult's unwillingness to release its employees from the non-compete provision in its employment agreements violates the "Continuity of Service" provision in its contract with the DOT. Bowhead alleges that this provision requires Catapult to exercise its best efforts to facilitate an orderly transition of a government contract to a successor company — in this case, Bowhead.

Bowhead's complaint seeks a declaratory judgment enforcing the "Continuity of Service" provision and voiding the non-compete provisions in Catapult's employment agreements. The complaint also seeks damages from Catapult, on the theory that Catapult's threats of civil litigation against its employees and Bowhead amount to tortious interference with Bowhead's prospective business relationships with those employees and its existing business relationship with the DOT. Catapult has now filed a motion to dismiss the complaint in its entirety. For the reasons explained below, the Court grants the motion to dismiss those claims in the complaint that requested a declaratory judgment. But because the allegations in the complaint can conceivably be read to encompass a tortious interference claim, the Court denies the motion to dismiss the damages claim in the complaint at this time.

BACKGROUND

The factual background set out below is drawn from the allegations in plaintiff's complaint. Bowhead and Catapult are competitors in the field of computer and information technology. Am. Compl. ¶ 9. For a number of years, Bowhead and Catapult employees worked together in the same offices at DOT headquarters in Washington, D.C., providing information technology, telecommunications, networking and technical support services to the DOT. Id. Throughout this period, Bowhead and Catapult remained under separate government contracts with the DOT. Id. ¶ 10.

Consistent with Federal Acquisition Regulation ("FAR") § 52.237-3, the contract between Catapult and the DOT contained a "Continuity of Services" provision. That provision reads, in relevant part:

a. The Contractor recognizes that the services under this contract are vital to the Government and must be continued without interruption and that, upon contract expiration, a successor, either the Government or another contractor, may continue them. The Contractor agrees to —

1. Furnish phase-in training; and

2. Exercise its best efforts and cooperation to effect an orderly and efficient transition to a successor....

c. ... The Contractor shall allow as many personnel as practicable to remain on the job to help the successor maintain the continuity and consistency of the services required by this contract. The Contractor also shall disclose necessary personnel records and allow the successor to conduct on-site interviews with these employees. If selected employees are agreeable to the change, the Contractor shall release them at a mutually agreeable date and negotiate transfer of their earned fringe benefits to the successor.

Id. ¶ 13. Bowhead alleges that, notwithstanding this language, Catapult requires its employees to sign contracts that prohibit the employees from working for Catapult's competitors or customers for a period of one year from the date that they end their employment with Catapult. Id. ¶ 14.

On August 24, 2004, the DOT notified Catapult that it did not intend to renew its contract with the company, and that it would instead consolidate its IT support services into a sole source contract with Bowhead to commence on October 1, 2004. Id. ¶¶ 15, 16. Bowhead claims that Catapult then embarked on a campaign to prevent the DOT from cancelling its contract and consolidating the services thereunder with Bowhead. Id. ¶ 18. As one example of Catapult's conduct during this period, Bowhead alleges that Catapult solicited the support of the Small Business Administration, the Disabled Veterans' Association, executives of DOT, and members of Congress, in an attempt to dissuade the DOT from contracting exclusively with Bowhead. Id.

Bowhead also maintains that Catapult took improper steps to prevent Bowhead from hiring Catapult's employees to perform work under the new consolidated contract. After the DOT's August 24, 2004 notification, a number of Catapult employees approached Bowhead to inquire about possible employment opportunities with the company. Id. ¶ 17. On September 16, 2004, Catapult wrote a letter to Bowhead accusing the company of "aggressively soliciting for hire" Catapult's employees, and threatening to file suit against the company if it were to hire any of the employees from Catapult. Id. ¶ 22. Bowhead responded with a letter dated September 17, 2004, requesting that Catapult release certain identified employees from their employment contracts so that Bowhead could assemble the team necessary to provide continuous and uninterrupted services to the DOT. Id. ¶ 23. Bowhead alleges that it did not recruit employees from the general population because only those individuals currently employed by Catapult under its DOT contract possessed the institutional knowledge and mission-critical information necessary to maintain continuity and consistency of service. Id. ¶ 30.

On September 21, 2004, the DOT issued a Task Order confirming that Bowhead would be required to staff and operate the consolidated IT services by October 1, 2004. Id. ¶ 24. That day, Catapult wrote a letter to Bowhead denying that Catapult was obliged to release its employees from their contracts, and again threatening to sue Bowhead if it attempted to hire any Catapult employees. Id. ¶ 25. Bowhead alleges that it made numerous attempts during this period to meet with Catapult to discuss a mutually agreeable date for the release of employees to work for Bowhead, but Catapult refused to do so in a deliberate effort to delay or sabotage Bowhead's performance under the new contract. Id. ¶ 27.

Bowhead alleges that on or about the afternoon of September 30, 2004, Catapult instructed its employees not to entertain any employment offers from Bowhead. Id. ¶ 29. Catapult told the employees that it would be filing suit against Bowhead, and would also seek to enforce the non-compete provisions of the employment agreement against any person who went to work for Bowhead. Id. On the evening of September 30, 2004, Bowhead made offers of employment to fourteen Catapult employees. Id. ¶ 30. The following day officials from Bowhead and Catapult met to discuss the dispute, and Bowhead again requested that Catapult release the fourteen individuals from the non-compete provisions of the Catapult employment contract. Id. ¶ 32. Once again, Catapult refused Bowhead's request, and informed Bowhead that it would sue. Id. On the afternoon of October 1, 2004, Bowhead officially hired twelve of the fourteen Catapult employees to whom it had extended offers. Id. ¶ 33.¹

To the Court's knowledge, Catapult never filed suit against Bowhead. Bowhead, on the other hand, commenced this action against Catapult on September 28, 2004. Bowhead's complaint² contains three counts. In Count One, Bowhead seeks a declaratory judgment that the "Continuity of Service" provision in the contract between the DOT and Catapult requires Catapult to release those of its former employees who were hired by Bowhead from the non-compete provisions of their employment agreements with Catapult. Id. ¶ 39. In Count Two, Bowhead seeks a declaratory judgment that the non-compete restrictions in Catapult's employment contracts are unenforceable as a matter of law and public policy. Id. ¶ 51. Finally, in Count Three, Bowhead asserts a claim of damages for tortious interference with prospective or existing contractual relations. Bowhead premises this claim on the theory that Catapult's repeated threats of litigation represent an improper interference with Bowhead's current business relationship with the DOT and Bowhead's prospective contractual relationship with former Catapult employees. Pl. Opp. at 7.

On October 25, 2004, Catapult filed a motion to dismiss each of the counts of the complaint. Catapult moves to dismiss Counts One and Two on the ground that Bowhead lacks standing to sue on a contract to which it is neither a party nor an intended third-party beneficiary. Catapult argues that Count Three should be dismissed on the ground that its various efforts to preserve its contractual relations with the DOT cannot support a tortious interference claim, and in particular that its threats of litigation constituted a lawful effort to enforce a valid, legally binding non-compete provision.

STANDARD OF REVIEW

A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) will not be granted unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see also Haynesworth v. Miller, 820 F.2d 1245, 1254 (D.C.Cir.1987). All that the Federal Rules of Civil Procedure require of a complaint is that it contain "`a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Dura...