United Aeronautical Corp. v. U.S. Air Force

• Decision Date: 02 March 2021
• Docket Number: Case No. 2:20-CV-01985-ODW (JDEx)
• Court: U.S. District Court — Central District of California
• Parties: UNITED AERONAUTICAL CORPORATION et al., Plaintiffs, v. UNITED STATES AIR FORCE et al., Defendants.

UNITED AERONAUTICAL CORPORATION et al., Plaintiffs, v. UNITED STATES AIR FORCE et al., Defendants.

Case No. 2:20-CV-01985-ODW (JDEx)

United States District Court Central District of California

March 2, 2021

ORDER GRANTING MOTION TO DISMISS [13]

I. INTRODUCTION

This action arises from a dispute involving proprietary intellectual property between Plaintiffs United Aeronautical Corporation ("UAC") and Blue Aerospace, LLC ("Blue Aero") (collectively "Plaintiffs") and Defendants United States Air Force and United States Air National Guard ("ANG") (collectively "Defendants"). Defendants move to dismiss for lack of subject matter jurisdiction. (Mot. to Dismiss ("Motion" or "Mot."), ECF No. 13.) The matter is fully briefed. (See Opp'n to Mot. ("Opp'n"), ECF No. 16; Reply ISO Mot. ("Reply"), ECF No. 17.) For the reasons below, the Court GRANTS the Motion.¹

II. BACKGROUND

The Mobile Airborne Fire Fighting System ("MAFFS") is a roll-on, roll-off mobile fire-retardant tank system designed for use in aerial firefighting. (Compl. ¶ 24, ECF No. 1.) In April 2000, manufacturer Aero Union entered into a contract (the "2000 Contract") with the United States Forest Service for the purpose of "designing, developing, fabricating, and verifying a new prototype" MAFFS II and manufacturing eight new MAFFS systems. (Id. ¶ 27.) The eight MAFFS II units are currently deployed in a joint program between the Forest Service, Air Force Reserve, and Air Force/ANG. (Id. ¶ 26.) The Forest Service is responsible for the maintenance, storage, and operation of the MAFFS II units, while the Air Force Reserve and ANG provide the aircraft, flight crews, maintenance, and support personnel to fly the missions. (Id.) Pursuant to the 2000 Contract, Aero Union owned the MAFFS II data rights, patents, and other intellectual property developed under the program, subject to the Forest Service's use rights derived from the 2000 Contract. (Id. ¶¶ 27, 30.) Over the years, Aero Union and the Forest Service executed numerous modifications to the 2000 Contract, the last of which required Aero Union to deliver a data package to the Forest Service for spare parts procurement, maintenance, and operations purposes. (Id. ¶ 28.)

Aero Union ceased business operations in 2012, and, through a foreclosure sale in 2013, UAC obtained certain of Aero Union's assets and property. (Id. ¶ 29; id. Ex. 1 ("Data Rights Agreement" or "DRA") at 1, ECF No. 1-1.) As relevant here, UAC obtained title to the intellectual property related to the MAFFS systems, "including inventions; patents and patent applications; trademarks; data rights; and all other relevant IP relating to the systems." (Id. ¶ 29.) Presently, UAC and Blue Aero are in a joint venture to develop, market, and sell the MAFFS systems. (Id. ¶ 14.)

In June 2014, pursuant to the final contract modification requiring delivery of a data package, UAC and the Forest Service executed a Data Rights Agreement for delivery of a hard drive containing a copy of the MAFFS II system proprietary data tothe Forest Service. (Id. ¶ 31.) Under the agreement, UAC and the Forest Service each acknowledged and agreed that:

[A]s set forth in [the 2000 Contract], the technical data produced or specifically used or related to the [MAFFS II] developed pursuant to such contract shall remain the property of UAC (as the purchaser of assets of Aero [Union] from its secured creditor, including the System) and [the Forest Service] shall have unlimited rights to view and use the data required for the continued operation and maintenance of the [MAFFS II] product.

(DRA 2.) Plaintiffs contend this agreement granted the Forest Service only limited use rights. (Compl. ¶¶ 30-31.) Plaintiffs allege the Forest Service conveyed the hard drive to ANG and that ANG also had full knowledge of the limited rights. (Id. ¶ 33.)

From January 2014, ANG has funded, and is currently funding, a program to upgrade and replace the MAFFS II systems with a derivative product called "iMAFFS." (Id. ¶ 32.) This program is managed by Redstone Defense Systems. (Id.) In or about July or August 2014, ANG turned the MAFFS II proprietary data over to Redstone Defense Systems to develop the iMAFFS. (Id. ¶ 33.) Beginning in November 2014, Plaintiffs levied a series of increasingly formal objections to ANG's use of the MAFFS II proprietary data. (Id. ¶¶ 35-37.) ANG rejected those objections and determined that the United States government either co-owned the data rights with Plaintiffs or had broad "government purpose" rights to use the data. (Id. ¶ 38.) Plaintiffs alternatively sought to be involved in developing the upgraded system but were ultimately unsuccessful. (Id. ¶ 34.)

In 2018, Plaintiffs confirmed that divisions of the Air Force were marketing the iMAFFS system to the international market. (Id. ¶ 41.) Plaintiffs contend that the iMAFFS system is derived from the MAFFS II, and therefore marketing and promotion of the iMAFFS will cause unlawful disclosure of Plaintiffs' MAFFS II proprietary data. (Id. ¶ 41.)

On February 20, 2019, Plaintiffs submitted claims of unlawful action in violation of Air Force regulations and procurement law to the responsible Air Forcedivisions. (Id. ¶ 44.) The Air Force agreed to cease certain activities surrounding the marketing of iMAFFS but maintained its intention to develop Foreign Military Sales ("FMS") procurements for the iMAFFS, which Plaintiffs contend will ultimately cause disclosure of MAFFS II proprietary data to the international market. (Id. ¶ 45.) On September 17, 2019, the Air Force issued its final decision on Plaintiffs' claims, finding that the United States government owned the MAFFS II proprietary data, had unlimited use rights in the data, including the rights to use the data to develop the iMAFFS system for sale to the international market, and the Air Force approved the iMAFFS for future marketing and sale under its FMS program. (Id. ¶ 52.)

Accordingly, in February 2020, Plaintiffs filed this action against Defendants asserting violations of the Administrative Procedure Act ("APA") and seeking declaratory and injunctive relief. (See generally Compl.) Plaintiffs contend that Defendants' use and disclosure of the MAFFS II proprietary data constitutes unlawful agency action in violation of the Trade Secrets Act and federal procurement law. (See id. ¶¶ 6, 56-57.) Plaintiffs seek a determination that Defendants have no ownership rights in, and may not use or disclose, the MAFFS II proprietary data to develop or market the iMAFFS. (Id. ¶¶ 65-66.)

Defendants move to dismiss Plaintiffs' Complaint for lack of subject matter jurisdiction and failure to state a claim.² (Mot. 4.)

III. LEGAL STANDARD

Pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(1), a party may move to dismiss a case for lack of subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). "Federal courts are courts of limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). "They possess only that power authorized by Constitution or a statute, which is not to be expanded by judicial decree." Id. (internal citations omitted). "It is to be presumed that a cause lies outsidethis limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction." Id. (internal citations omitted). Once a party has moved to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), the plaintiff bears the burden of demonstrating that the court has jurisdiction. Id.; see also Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010). "A plaintiff suing in a federal court must show in his pleading, affirmatively and distinctly, the existence of whatever is essential to federal jurisdiction, and, if he does not do so, the court . . . must dismiss the case . . . ." Tosco Corp. v. Communities for a Better Env't, 236 F.3d 495, 499 (9th Cir. 2001) (per curiam), abrogated on other grounds by Hertz Corp. v. Friend, 559 U.S. 77 (2010) (quoting Smith v. McCullough, 270 U.S. 456, 459 (1926)).

Where the United States is a defendant, a mere showing of federal jurisdiction does not suffice. This is because "the United States, as sovereign, is immune from suit save as it consents to be sued . . . and the terms of its consent to be sued in any court define that court's jurisdiction to entertain the suit." Lehman v. Nakshian, 453 U.S. 156, 160 (1981) (internal quotation marks omitted); Gabriel v. Gen. Servs. Admin., 547 F. App'x 829, 830 (9th Cir. 2013) ("The United States is immune from suit unless it has expressly waived its sovereign immunity by consenting to be sued; the existence of such consent is a prerequisite for jurisdiction." (internal quotation marks omitted)). Absent a waiver of sovereign immunity, courts have no subject matter jurisdiction over cases against the government. United States v. Mitchell, 463 U.S. 206, 212 (1983). The party suing the United States bears the burden to identify an unequivocal waiver of immunity. Holloman v. Watt, 708 F.2d 1399, 1401 (9th Cir. 1983).

IV. DISCUSSION

Defendants move to dismiss for lack of subject matter jurisdiction on the ground that Plaintiffs' claims arise from a government contract over which the Contract Disputes Act ("CDA") vests exclusive jurisdiction in the United States Courtof Federal Claims. (Mot. 4.) Plaintiffs respond that their claims are not contract disputes subject to the CDA, but instead concern Defendants' decision to unlawfully disclose Plaintiffs' MAFFS II proprietary data. (Opp'n 5, 9-16.) Plaintiffs contend their claims are cognizable under the APA and, accordingly, the APA and 28 U.S.C. § 1331 together provide this Court with subject matter jurisdiction. (Id. at 7-9.)

A. Subject Matter Jurisdiction & Sovereign Immunity

Plaintiffs contend the general jurisdiction statute, 28 U.S.C. § 1331, provides subject matter jurisdiction here. (Opp'n 7; Compl. ¶ 9.) That section provides original jurisdiction to district courts over "all civil...