Fdr Services Corporation of Virginia, Inc. v. District of Columbia

• Court: District Court, District of Columbia
• Decided: July 24, 2023
• Docket: Civil Action No. 2020-3852
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

FDR SERVICES CORPORATION OF VIRGINIA, INC., Civil Action No. 1:20-cv-03852 (JMC) Plaintiff,

v.

DISTRICT OF COLUMBIA,

Defendant.

MEMORANDUM OPINION

FDR Services sued the Not-For-Profit Hospital Corporation (NFPHC) and the District of

Columbia after NFPHC terminated its contract with FDR Services early. The District filed a

Motion to Dismiss, arguing that the District cannot be held liable for the NFPHC’s actions. The

Court grants the Motion.1

I. BACKGROUND

In 2014, FDR Services contracted with the NFPHC to provide linen rental services to the

hospital. ECF 1 ¶ 9. The NFPHC had the option to renew the contract annually for up to four years,

and the NFPHC exercised its option in each of those four years. Id. ¶ 11. After the NFPHC

exercised its option for the last year, the contract was scheduled terminate on September 6, 2018.

Id. However, the NFPHC sent FDR Services a notice on November 22, 2017, stating that it planned

to terminate the contract early. Id. ¶ 12. FDR Services submitted an invoice for $111,622.50 to

1 Unless otherwise indicated, the formatting of quoted materials has been modified throughout this opinion, for example, by omitting internal quotation marks and citations, and by incorporating emphases, changes to capitalization, and other bracketed alterations therein. All pincites to documents filed on the docket are to the automatically generated ECF Page ID number that appears at the top of each page.

1 compensate for the early termination. Id. ¶ 13; see also ECF 1-7. The NFPHC informed FDR

Services that it would not pay the invoice. ECF 1 ¶ 14; see also ECF 1-8. FDR Services tried

reaching out to the NFPHC again about the early termination fee but received no response for

months. Id. ¶¶ 18–19.

In June 2019, FDR Services appealed the issue to the District of Columbia Contract

Appeals Board. Id. ¶ 21. The Board concluded that it lacked jurisdiction over the NFPHC, and that

FDR Services failed to state a claim against the District upon which relief could be granted. ECF

7-1 at 4.2 FDR Services then sued the NFPHC3 and the District in this Court. With respect to its

claims against the District, FDR Services alleges that it violated the Fifth Amendment’s Takings

Clause, breached its contract, committed fraud, and breached its covenant of good faith and fair

dealing. See ECF 1 ¶¶ 25–35, 46–56. The District moved to dismiss the claims against it. ECF 7.

FDR Services responded, ECF 8, and the District replied, ECF 14.

II. LEGAL 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). The Court must grant the plaintiff “the benefit of all inferences that can be derived

from the facts alleged,” but the Court need not “accept legal conclusions cast in the form of factual

allegations.” Kowal v. MCI Commc’ns. Corp., 16 F3d 1271, 1276 (D.C. Cir. 1994).

2 “In evaluating a Rule 12(b)(6) motion to dismiss, a court may consider the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint, or documents upon which the plaintiff’s complaint necessarily relies even if the document is produced not by the parties.” Busby v. Capital One, N.A., 932 F. Supp. 2d 114, 133–34 (D.D.C. 2013). 3 The claims against the NFPHC were voluntarily dismissed without prejudice. See ECF 20 (granting Consent Motion to Dismiss Without Prejudice).

2 III. ANALYSIS

The District created the NFPHC via statute “as an instrumentality of the District

government.” D.C. Code § 44-951.02(a). However, the NFPHC was given “a separate legal

existence” from the District, id., and the District disclaimed liability from any “lawsuits or claims

arising from the operation of the [NFPHC],” D.C. Code § 44-951.14(e). The District argues that

this statutory backdrop precludes this lawsuit from proceeding against it. Because Plaintiff’s

claims derive from the NFPHC’s refusal to pay a termination fee for contracted services, the

District argues that those claims “aris[e] from the operation of the [NFPHC]” and therefore must

name the NFPHC as defendant, not the District. ECF 7 at 6.

The Court agrees with the District. The plain text of D.C. Code § 44-951.14(e) explicitly

disclaims the District’s liability and precludes the District from being “made a party to any lawsuits

or claims arising from the operation of the Corporation.” The statute further provides that the

NFPHC may be sued. D.C. Code § 44-951.06(1). The claims in this case arise from actions taken

by the NFPHC, not the District, so the NFPHC is the proper defendant. FDR Services’ argument

that the NFPHC is not legally distinct from the District runs contrary to the plain text of the statute.

See D.C. Code § 44-951.02(a). The Court therefore rejects that argument and adheres to the plain

text.

Finally, FDR Services’ invocation of Lebron v. National Railroad Passenger Corporation,

513 U.S. 374 (1995), does not save its claims against the District. Lebron set out a three-part test

for determining whether a corporation is part of the government for constitutional purposes. Id. at

400. FDR Services argues that because the NFPHC is part of the District’s government under the

Lebron framework, its claims should be allowed to proceed against the District. ECF 8 at 4. This

overextends Lebron’s holding. Even if the NFPHC is part of the government under the Lebron

test, that would mean only that FDR Services could bring a constitutional claim against the

3 NFPHC. See Herron v. Fannie Mae, 861 F.3d 160, 167 (D.C. Cir. 2017) (stating that the Lebron

framework is used for “determining whether a Government-created and -controlled corporation is

a government actor for constitutional purposes”). Lebron does not permit the substitution of one

governmental entity for another, even if they are both housed under a bigger umbrella unit. To the

extent FDR Services has a viable Takings Claim, it should have been brought against the NFPHC

because it is the government entity that allegedly committed the constitutional violation.4

IV. CONCLUSION

For the foregoing reasons, the Court ORDERS that the District of Columbia’s Motion to

Dismiss, ECF 7, is GRANTED.

SO ORDERED.

DATE: July 24, 2023

Jia M. Cobb U.S. District Court Judge

4 The Court does not opine on the application of the Lebron test in this case.