UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
CALABAZAS CREEK RESEARCH, INC.,
Plaintiff,
v. Civ. Action No. 21-2617 JENNIFER M. GRANHOLM, in her (EGS) official capacity as Secretary of the United States Department of Energy, et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
I. Introduction
Plaintiff Calabazas Creek Research, Inc. (“Plaintiff” or
“CCR”) brings this action under the Administrative Procedure Act
(“APA”) against Defendants Jennifer M. Granholm, in her official
capacity as Secretary of the United States Department of Energy,
and the United States Department of Energy (collectively,
“DOE”). See Compl., ECF No. 1 ¶¶ 46-50. 1 CCR alleges that DOE’s
failure to negotiate in good faith and its failure to direct
their contractor to negotiate in good faith constitute agency
action that is arbitrary capricious, and not in accordance with
1 When citing electronic filings throughout this Opinion, the Court refers to the ECF header page numbers, not the page numbers of the filed documents. 1 law in violation of Section 706(2)(A) of the APA. See id. ¶ 47.
CCR further alleges that DOE unlawfully withheld action in
violation of section 706(1) of the APA. See id.
Pending before the Court is Defendants’ Motion to Dismiss.
See Defs.’ Mot. Dismiss & Mem. Supp. Thereof (“Defs.’ Mot.”),
ECF No. 14. Upon careful consideration of the motion,
opposition, and reply thereto, the applicable law, and for the
reasons explained below, the Court GRANTS Defendants’ motion.
II. Background
A. Regulatory Framework
The Small Business Innovation Research (“SBIR”) program
requires federal agencies to make research and development
awards to small businesses and to purchase technology developed
from these awards. Compl., ECF No. 1 ¶ 6.
The SBIR program involves three phases. In Phases I and II,
small businesses must demonstrate the feasibility of the
proposed technology and build prototypes. Id. ¶ 9. Then, in
Phase III, federal agencies purchase the technologies that were
developed in Phases I and II. Id. Specifically, Phase III
consists of “‘work that derives from, extends, or completes
efforts made under prior funding agreements under the SBIR
program.’” Id. (quoting 15 § 638(e)(4)(C); SBIR Policy Directive
Section 4(c)).
2 Congress directed the Small Business Administration (“SBA”)
to issue a Policy Directive regulating the administration of the
SBIR program. 15 U.S.C. § 638(j). The Policy Directive provides
that “Agencies or their Government-owned, contractor-operated
(GOCO) facilities . . . shall issue Phase III awards relating to
the technology, including sole source awards, to the Awardee
that developed the technology under an [SBIR] award, to the
greatest extent practicable.” Policy Directive § 4(c)(7). To
implement this requirement, “Agencies must make a good faith
effort to negotiate with such Awardees regarding the performance
of the new, related, work, and to issue Phase III awards for the
work.” Id. § 4(c)(7)(i). “If pursuing the Phase III work with
the Awardee is found to be practicable, the agency must award a
non-competitive contract to the firm.” Id. § 4(c)(7)(ii).
The Policy Directive further provides that “[i]f pursuing
Phase III work with the Awardee on a sole source/non-competitive
basis does not meet the requirements . . . [regarding]
availability, practicality and capability, the Agency must
document the file and provide a copy of the decision, including
the rationale, to the SBA." Id. § 4(c)(7)(iii). “An agency or
its GOCO [facility] . . . that intends to pursue Phase III work
. . . . with an entity other than the Phase I or Phase III SBIR
. . . Awardee must notify SBA in writing prior to such award."
Id. § 4(c)(7)(iv). The notification must include, at a minimum,
3 the “steps the agency has taken to fulfill the special
acquisition requirement,” the “reasons why a follow-on Funding
Agreement with the [SBIR] Awardee is not practicable,” and the
“identity of the entity with which the agency intends to make
award . . . ." Id. § 4(c)(7)(iii). SBA may then appeal the
agency's decision. Id. § 4(c)(7)(v).
B. Factual
The Court assumes the following facts alleged in the
Complaint to be true for the purposes of deciding this motion.
See Baird v. Gotbaum, 792 F.3d 166, 169 n.2 (D.C. Cir. 2015).
CCR develops high power radiofrequency (“RF”) generation
and transmission technologies, including “the first 1 megawatt
(MW) load for testing RF sources for fusion heating and the
quasi-optical launcher technology used worldwide in these
sources.” Id. ¶ 16. DOE awarded CCR a series of SBIR Phase I and
Phase II awards. Id. ¶ 17. DOE funded these SBIR awards to CCR
to “meet an anticipated need for innovative, higher-performing
RF loads to be installed and used at a thermonuclear
experimental reactor called ITER.” Id. “The ITER facility is
being constructed in France, and the United States is one of
several countries that are contributing to its construction.”
Id. “DOE’s contributions to the project are made through a DOE
program called US-ITER, which is managed by DOE’s Oak Ridge
National Laboratory (‘ORNL’)”. Id.
4 In spring 2020, DOE announced that it would procure
prototype RF loads for evaluation and installation at ITER. Id.
¶ 26. “DOE’s procurement of RF loads was conducted through the
US-ITER organization at ORNL.” Id. ¶ 27. ORNL is a GOCO that is
owned by DOE but operated by UT-Battelle, LLC (“UTB”), a private
entity. Id. ¶ 27. On July 22, 2020, CCR emailed ORNL to ask that
DOE consider a Phase III award to procure the prototype RF
loads, stating that “a Phase III award would be consistent with
the law ‘based on the multiple SBIR awards [CCR had] received
for this product.’” Id. ¶ 28 (quoting Ex. 4, ECF No. 4-3 at 4).
However, on July 23, 2020, Lisa Cobb, the procurement manager at
ORNL, informed CCR that the procurement team “will not be
considering a Phase III sole-sourced award.” Id. ¶ 29. ORNL
stated that the reason was that “CCR ‘has yet to be awarded a
Phase II award, and even if awarded, completion of such work
isn’t expected until 18-months following August 24th program
start.” Id. ¶ 29 (quoting Ex. 4, ECF No. 4-3 at 3). However, at
that time, CCR had already received two Phase II awards. Id.
The next day, CCR emailed ORNL to clarify that CCR
previously completed two Phase II programs for the product,
identifying the award numbers and the power capacities of the
SBIR-developed RF loads. Id. ¶ 30. The email was addressed to
ORNL employees, the Director of DOE’s SBIR program and a Program
Manager for DOE’s Fusion Energy Science Program. Id. ¶ 31. DOE
5 did not respond to CCR’s email or negotiate with CCR for a Phase
III award. Id. ¶ 32. Instead, on July 28, 2020, ORNL posted an
open solicitation for the prototype RF load. Id. ¶ 32. CCR
submitted a proposal in response and also participated in a
teleconference with ORNL. Id. ¶ 33.
On February 19, 2021, ORNL announced that CCR would not
receive the procurement award. Id. ¶ 35. It awarded the
procurement contract to CURTI Costruzioni Meccaniche SpA and
Dymenso LLC—neither of which had previously won SBIR awards for
RF loads or had developed an RF load capable of safely absorbing
1 MW of power with the required performance. Id.
Later that month, CCR contacted the SBA to request an
investigation to determine whether DOE complied with 15 U.S.C. §
638(r)(4) and Section 4(c)(7) of the SBIR Policy Directive. Id.
¶ 37. In March 2021, Jennifer Shieh, the Chief Scientist and
Program Manager for SBA’s Office of Investment and Innovation,
contacted DOE and ORNL regarding the absence of a Phase III
award. Id. ¶ 38. Ms. Shieh reported that DOE told her: that it
“determined that [the RF load] procurement was not an SBIR Phase
III opportunity”; and that “[p]rior to release of the [RF load]
solicitation in 2020, ORNL’s technical team performed an
assessment of CCR SBIR projects for three awarded projects . . .
and determined that the proposed [RF load] requirement would not
derive from, extend, or complete the work performed by CCR on
6 these SBIR projects.” Id. ¶ 39 (quoting Ex. 6, ECF No. 4-5 at
2). She further stated that “ORNL determined this was not a
Phase III opportunity, with concurrence by DOE, permitting the
procurement to be released as an open solicitation.” Id.
(quoting Ex. 6, ECF No. 4-5 at 2). DOE did not provide any
records to SBA to support this evaluation, and SBA did not
attempt to verify DOE’s evaluation. Id. ¶ 40.
B. Procedural
CCR filed this lawsuit on October 6, 2021. See Compl., ECF
No. 1. On February 22, 2022, Defendants moved to dismiss the
Complaint. See Defs.’ Mot., ECF No. 14. CCR filed its opposition
brief on March 8, 2022, see Pl.’s Mem. Opp’n Defs.’ Mot. Dismiss
(“Opp’n”), ECF No. 15; and Defendants filed their reply brief on
March 15, 2022, see Reply Supp. Defs.’ Mot. Dismiss (“Reply”),
ECF No. 16. The motion is now ripe and ready for adjudication.
III. Legal Standard
A motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6) tests the legal sufficiency of a complaint.
Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). A
complaint must contain “a short and plain statement of the claim
showing that the pleader is entitled to relief, in order to give
the defendant fair notice of what the . . . claim is and the
grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550
7 U.S. 544, 555 (2007) (citation and internal quotation marks
omitted).
Despite this liberal pleading standard, to survive a motion
to dismiss, a complaint “must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible
on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citation and internal quotation marks omitted). “In determining
whether a complaint fails to state a claim, [the court] may
consider only the facts alleged in the complaint, any documents
either attached to or incorporated in the complaint and matters
of which [the court] may take judicial notice.” EEOC v. St.
Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C. Cir.
1997). A claim is facially plausible when the facts pled in the
complaint allow the court to “draw the reasonable inference that
the defendant is liable for the misconduct alleged.” Iqbal, 556
U.S. at 678. The standard does not amount to a “probability
requirement,” but it does require more than a “sheer possibility
that a defendant has acted unlawfully.” Id.
“[W]hen ruling on a defendant’s motion to dismiss [pursuant
to Rule 12(b)(6)], a judge must accept as true all of the
factual allegations contained in the complaint.” Atherton v.
D.C. Off. of the Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009)
(citation and internal quotation marks omitted). In addition,
the court must give the plaintiff the “benefit of all inferences
8 that can be derived from the facts alleged.” Kowal v. MCI
Commc’ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994).
IV. Analysis
Section 706 of the APA directs courts to: “(1) compel
agency action unlawfully withheld or unreasonably delayed; and
(2) hold unlawful and set aside agency action, findings, and
conclusions found to be—(A) arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.” 5 U.S.C. §
706.
Defendants argue that, in the Complaint, CCR “fails to
allege any final agency action performed by DOE” and “has failed
to plead any agency action unlawfully withheld.” Defs.’ Reply,
ECF No. 16 at 5, 9 (capitalization omitted).
A. CCR Has Failed to Allege Final Agency Action
“The APA limits judicial review to ‘final agency action for
which there is no other adequate remedy in a court.’” Soundboard
Association v. Federal Trade Comm’n, 888 F.3d 1261, 1267 (D.C.
Cir. 2018)(quoting 5 U.S.C. § 704). “While the requirement of
finality is not jurisdictional, without final agency action,
‘there is no doubt that [plaintiff] would lack a cause of action
under the APA.’” Id. (quoting Reliable Automatic Sprinkler Co.
v. Consumer Prod. Safety Comm’n, 324 F.3d 726, 731 (D.C. cir.
2003). To state a claim, CCR “must first identify the final
agency action being challenged.” Elk Run Coal Co. v. U.S. Dep’t
9 of Lab., 804 F. Supp. 2d 8, 30 (D.D.C. 2011) (citing 5 U.S.C. §
704 (limiting judicial review to “[a]gency action made
reviewable by statute and final agency action for which there is
no other adequate remedy in court”)).
“Agency actions are final if two independent conditions are
met: (1) the action ‘mark[s] the consummation of the agency’s
decisionmaking process’ and is not ‘of a merely tentative or
interlocutory nature;’ and (2) it is an action ‘by which rights
or obligations have been determined, or from which legal
consequences will flow.’” Soundboard Association, 888 F.3d at
1267 (quoting Bennett v. Spear, 520 U.S. 154, 177-78
(1997)(internal quotation marks omitted). “An order must satisfy
both prongs of the Bennett test to be considered final.” Sw.
Airlines Co. v. U.S. Dep’t of Transp., 832 F.3d 270, 275 (D.C.
Cir. 2016).
CCR argues that it has alleged agency action because the
Complaint alleges “that DOE made the central determination that
is challenged in this action—the determination that no Phase III
opportunity existed.” Opp’n, ECF No. 15 at 13 (emphasis
omitted); see also Compl., ECF No. 1 ¶ 39 (alleging that DOE
“determined that [the RF load] procurement was not an SBIR Phase
III opportunity”). CCR also argues that it has alleged agency
action because the Complaint alleges that “DOE responded to
SBA’s inquiry and provided false or misleading information as to
10 the rigor and timing of its determination.” Id. at 13 (emphasis
Defendants’ Motion to Dismiss and Reply memorandum focus on
the contractual relationship between DOE and UTB to argue that
the procurement at issue was not conducted by DOE, but rather by
UTB. See Mot. to Dismiss, ECF No. 14 at 6-7; Reply, ECF No. 16
at 6-9. In so doing, Defendants fail to address both the actual
allegations in the Complaint and the reasonable inferences that
can be made from them.
The Complaint fails to allege, however, that either of the
actions attributed to DOE constitute final agency action. See
generally Compl., ECF No. 1. Furthermore, in its opposition
memorandum, CCR fails to argue that the actions attributed to
DOE constitute final agency action. See Opp’n, ECF No. 15 at 11-
13. In so doing, CCR fails to provide any argument or legal
support whatsoever for the proposition that the agency action it
has alleged is final agency action. Because CCR has neither
alleged final agency action in the Complaint, nor provided any
argument or legal authority whatsoever for why the two agency
actions it has alleged constitute final agency action, CCR has
failed to state a claim. Accordingly, the Court DISMISSES this
claim WITHOUT PREJUDICE.
11 B. CCR Has Failed to State a Claim for Unlawfully Withheld Action
“[A] claim [concerning agency inaction] under § 706(1) can
proceed only where a plaintiff asserts that an agency failed to
take a discrete agency action that it is required to take.”
Norton v. S. Utah Wilderness All. (SUWA), 542 U.S. 55, 64
(2004). “SUWA teaches that the only action a court may compel an
agency to take under § 706(1) is a discrete action that the
agency has a legal duty to perform.” Western Organization of
Resource Councils v. Zinke, 892 F.3d 1234, 1241 (D.C. Cir. 2018)
(citing SUWA, 542 U.S. at 62-63). “The legal duty must be
‘ministerial or nondiscretionary’ and must amount to ‘a
specific, unequivocal command.’” Id. (quoting SUWA 542 U.S. at
63-64).
CCR argues that it has stated a claim for agency action
unlawfully withheld because the Complaint alleges that DOE: (1)
failed to negotiate with CCR, Opp’n, ECF No. 15 at 13, see also
Compl., ECF No. 1 ¶ 32; (2) failed to direct UTB employees to
negotiate with CCR for a Phase III contract, Opp’n, ECF No. 15
at 13; see also Compl., ECF No. 1 ¶ 44; and (3) failed to
provide advance notification to SBA of its decision to award the
procurement of RF loads to companies other than CCR, Opp’n, ECF
No. 15 at 13; see also Compl., ECF No. 1 ¶ 44. CCR fails,
however, to provide any argument or legal support whatsoever for
12 why the three withheld actions alleged constitute “discrete
action that [DOE] is required to take” within the meaning of the
relevant authority. See Opp’n, ECF No. 15 at 13-15. Rather, CCR
argues that whether or not the procurement of RF loads was a
Phase III opportunity is a factual question that the Court must
assume to be true at the Motion to Dismiss stage and therefore
the action it alleges was withheld was required. See id.
Defendants argue that UTB, not DOE, made decision as to
whether the procurement was a Phase III opportunity, Mot. to
Dismiss, ECF No. 14 at 10, Reply, ECF No. 16 at 9-10; and
disagree that the Court should assume that the procurement was a
Phase III opportunity at this stage of the proceedings, id. at
10-11.
Whether the agency action was potentially unlawfully
withheld is entirely contingent on whether the procurement was a
Phase III opportunity. CCR has alleged that DOE made the
decision that the procurement was not a Phase III opportunity,
and challenges that decision in its first claim here. With this
second claim, CCR seeks to bootstrap a claim for unlawfully
withheld agency action to the very agency action it challenges.
CCR has provided no authority to support the proposition that
the Court should assume to be true for the purpose of its second
claim the very decision that it challenges in its first claim.
13 Assuming that the action CCR alleges was unlawfully
withheld would have been required if DOE had determined that the
procurement was a Phase III opportunity, DOE had no “legal duty
to perform” the action based on its determination that the
procurement was not a Phase III opportunity. Western
Organization of Resource Councils, 892 F.3d at 1241.
Furthermore, Section 706(1) authorizes courts to “compel agency
action unlawfully withheld or unreasonably delayed.” 5 U.S.C. §
706(1). “[A] delay cannot be unreasonable with respect to action
that is not required.” SUWA, 542 U.S. at 63 n.1. Similarly, an
action that is withheld cannot be unlawful with respect to
action that is not required. See id. When DOE allegedly withheld
action, the action was not required because the determination
had been made that the procurement was not a Phase III
opportunity. And pursuant to that determination, a procurement—
in which CCR unsuccessfully participated—was conducted. Because
the allegedly withheld action was not a legal duty and was not
required based on the determination that the procurement was not
a Phase III opportunity, it was not unlawfully withheld.
Therefore CCR has failed to state a claim. Accordingly, the
Court DISMISSES this claim WITH PREJUDICE.
14 V. Conclusion and Order
For the foregoing reasons, it is hereby
ORDERED that Defendants’ Motion to Dismiss, see ECF No. 14;
is GRANTED. Plaintiff’s claim pursuant to 5 U.S.C. § 706(2)(A)
for agency action that is arbitrary, capricious, and not in
accordance with law is DISMISSED WITHOUT PREJUDICE. Plaintiff’s
claim pursuant to 5 U.S.C. § 706(1) for agency action unlawfully
withheld is DISMISSED WITH PREJUDICE. Plaintiff shall have leave
to file an Amended Complaint, if any, within 14 days of the date
of this Memorandum Opinion and Order. Any such filing shall
consider the effect of this Memorandum Opinion and Order on
Plaintiff’s claims. If Plaintiff does not timely file an Amended
Complaint, the Court will enter a final, appealable order
dismissing this case. See Ciralsky v. CIA 355 F.3d 661, 666-67
(D.C. Cir. 2004)(explaining the distinction between dismissing a
complaint and dismissing the action or case).
SO ORDERED.
Signed: Emmet G. Sullivan United States District Judge August 7, 2023