Scharpenberg v. Carrington et al

Filing 34

MEMORANDUM OPINION to 29 Order on Deft McNeil Technologies, Inc.'s Motion to Dismiss Counts II and IV of the Amended Complaint,. /s/ by District Judge Gerald Bruce Lee on 2/12/10. (tbul, )

IN

THE

UNITED

STATES

DISTRICT OF

COURT

FOR

THE

EASTERN

DISTRICT

VIRGINIA

ALEXANDRIA

DIVISION

Henry S.

Scharpenberg,

et

al.,

)

Plaintiffs,
v.
Robert S. Carrington, et al.,

)
)
)

Case No.

l:09cvl058

(GBL)

Defendants.

)

MEMORANDUM OPINION

THIS MATTER is before the Court on Defendant McNeil

Technologies,

Inc.'s Motion to Dismiss Counts II and IV of the

Amended Complaint.

This case concerns Plaintiffs'

allegations

that Defendants published false statements about Plaintiff Henry
Scharpenberg's billing practices, tortiously interfered with his Inc.

at-will contract with Defendant McNeil Technologies,

(McNeil), business.

and conspired to financially harm Plaintiffs in their There are four issues before the Court. The first

issue is whether McNeil is immune from liability under the doctrine of absolute immunity for allegedly defamatory statements made by its Contracts Manager in response to a government inquiry

into Mr.

Scharpenberg's purportedly fraudulent conduct.

The second issue is whether McNeil's Consultant Agreement with
Mr. Scharpenberg permitted McNeil's Contracts Manager to make the

allegedly defamatory statements.

The third issue is whether Mr.
conspiracy claim under

Scharpenberg states a plausible business

Federal Rules

of

Civil

Procedure

12(b)(6)

and 9(b).

The

fourth

issue is whether the parties'

Consultant Agreement allowed McNeil
Scharpenberg without cause.
Count II

to terminate its contract with Mr.
The Court

grants McNeil's Motion to Dismiss

(defamation)
absolute
response

because McNeil,

as a government contractor,

has
in

immunity from civil
to a government

liability for statements made
inquiry, and

contracting officer's

alternatively,

because McNeil's Consultant Agreement with Mr. the

Scharpenberg permitted McNeil's Contracts Manager to make

statements at

issue

in this case.

The Court also grants McNeil's

Motion to Dismiss Count IV

(statutory business conspiracy)

because the facts set forth in the Amended Complaint

fail to

plausibly suggest a conspiracy under Virginia Code § 18.2-499 and

the parties' Consultant Agreement allowed McNeil to terminate its
contract with Mr. Scharpenberg at will.
I. BACKGROUND

McNeil Technologies,

Inc.

is a business that provides in the areas of record

professional services to the federal government language, intelligence,

information technologies,
In 2007,

management and aviation.

McNeil became a government which at

contractor through its purchase of ViStar Consulting,

the time of the acquisition had a contract with the Department of
the Army for a performance management system program known as the Strategic Management System ("SMS") Program. Mr. Robert

Carrington

is

a

Supervisory Director and

former

Contracting

Officer Representative

("COR")

for the McNeil

SMS

Program. into a contract owner of HSS &

After purchasing ViStar, ("Consultant Agreement")

entered

with Mr.

Scharpenberg,

Associates,
SMS Program.

LLC

("HSS"),

for his

services

in connection with the
contained two

The parties'

Consultant Agreement

provisions

relevant

to this

case.

The

"ETHICS" provision

permitted McNeil

to disclose

information pertaining to Mr.

Scharpenberg's "retention,

[]

duties performed and the
inquiry from such a [McNeil]

compensation paid should there be proper source as an authorized U.S.

Government agency or should

believe it has a legal obligation to disclose such information."
(Consultant Agreement, Am. Compl., Ex. 1.) The "TERMINATION"

provision permitted either McNeil or Mr.

Scharpenberg to

terminate the Consultant Agreement "at any time by giving a two (2) week notice to the other."
Ex. 1.)

(Consultant Agreement,

Am.

Compl.,

Beginning in 2008,

Mr.

Carrington observed Mr.

Scharpenberg's time and attendance at the SMS Program office and
suspected that Mr. Scharpenberg was improperly billing the

government

for time he did not work.

Mr.

Carrington shared his

suspicions regarding Mr.

Scharpenberg in a November 7,
The

2008,

Memorandum and accompanying documents with McNeil.

Memorandum summarized Mr. deemed to be Mr.

Carrington's

findings regarding what he financial misconduct,

Scharpenberg's purposeful
3

specifically, number of

the

falsification of

invoices

relating to the called for direct

hours worked.

The Memorandum also

and immediate action by McNeil.
Shortly thereafter, sent McNeil the following Ms. Ruby Mixon, the SMS Program COR, to investigate

letter ordering McNeil

Mr.

Scharpenberg's alleged fraudulent billing practices:

The above referenced documents1 allege your company has submitted fraudulent invoices for processing from August 2008 to the present relating to hours reported by Mr[.] Scharpenberg. It is imperative that you investigate this matter immediately and take the appropriate actions to correct it[.] If the allegation is determined to have merit, you shall notify this office immediately and remove
Mr. Scharpenberg from performing under this contract.

(Government Letter,
On November 13,

Am.

Compl.,

Ex.

9.)
the Government

2008,

before

receiving

Letter,

McNeil gave Mr.

Scharpenberg a two-week written notice of

its intent to terminate their Consultant Agreement based on Mr.
Scharpenberg's performed. fraudulent billings McNeil's for work not actually Mixon

Thereafter,

Contracts Manager sent Ms.

a letter indicating that McNeil's management had conducted a full

review of the matter using the documentation provided by Mr.

Carrington,

which included daily statements detailing his
Scharpenberg, daily logs capturing Mr.

observations of Mr.

Scharpenberg's billed hours October 2008, and reports of

for the months of September and two government access systems

1
2008,

Ms. Mixon's letter referenced Mr. Carrington's November 7,
Memorandum and accompanying documents to McNeil.

tracking Mr. Pentagon.

Scharpenberg's letter

entry and departure stated that n[t]he

from

the

The

further

allegations

appear to have merit based on documentation captured and provided

by Mr.
Am.

Carrington to McNeil Technologies[.]"
45, Ex. 6.)

(Response Letter,

Compl.

Following termination of

the parties'

Consultant Agreement,

Mr.

Scharpenberg filed suit

in the Circuit Court

for the City of

Alexandria against Mr.

Carrington and McNeil

for defamation,

tortious

interference with at-will contract,

and statutory

business conspiracy.
for the

Subsequently,
of

the United States Attorney
the case to this

Eastern District

Virginia removed

Court pursuant to 28 U.S.C.
Scharpenberg amended his

§ 2679{d)(3).

After removal,

Mr.
sets

Complaint.

The Amended Complaint

forth the

following

four causes of action:
(II) defamation

(I)

defamation

(against Mr.

Carrington);

(against McNeil);

(III)

tortious interference with at-will contract and (IV)

(against Mr. (against Mr.

Carrington);

statutory business conspiracy McNeil now moves

Carrington and McNeil).

for dismissal of the
it.

defamation and statutory business conspiracy counts against
II. STANDARD OF REVIEW

A Federal Rule

of

Civil

Procedure

12(b)(6)

motion

should be

granted unless an adequately stated claim is
showing any set of complaint." (2007) facts consistent with v.

"supported by
in the 561

the allegations 550 U.S. R. Civ.

Bell Atlantic Corp. citations

Twombly, see Fed.

544, P.

(internal

omitted);
5

12(b)(6).

WA pleading

that offers
the

labels
of

and conclusions
a cause of

or a

formulaic
not do."

recitation of

elements

action will

Ashcroft U.S. at

v. 555.

Iqbal,

129

S.

Ct. is

1937, also

1949

(2009); if

Twombly, it

550

A complaint

insufficient

relies upon

"naked assertions devoid of
129 S. Ct. at 1949 (internal

further factual
citations

enhancement."
Courts

Iqbal,
will

omitted).

disregard "unwarranted inferences,
[and] arguments."
615 n.26

unreasonable conclusions,
Ctr., Inc., 562
at

Wahi

v.

Charleston Area Med.
2009);

F.3d 599,
1951-52.

(4th Cir.

see also Iqbal,

129

S.Ct.

In order to survive a Rule
complaint must set forth

12(b)(6)

motion to dismiss,
that is

a
on

"a claim

for relief

plausible

its

face."

Id.-,

Twombly,

550 U.S.

at

570.

A claim is
content

facially
that allows

plausible

"when the plaintiff pleads

factual

the

court to draw the reasonable
for the misconduct
U.S. at 556.

inference
Iqbal,

that
129

the defendant
S. Ct. at

is

liable

alleged."

194 9;

Twombly,

555

In considering a Rule construe the complaint
read the

12(b)(6)

motion,

the Court must

in the

light most

favorable to the
and take the facts

plaintiff,

complaint as a whole,

asserted therein as

true.

Mylan Lab.,

Inc.

v.

Matkari,

7

F.3d

1130,

1134

(4th Cir.

1993).

In addition to the complaint,
incorporated into the

the

court may also examine

"documents

complaint

by reference,

and matters

of which a court may take

judicial

notice." Ct. 2499,

Tellabs, 2509

Inc.

v.

Makor Issues

& Rights,

Ltd.,

127

S.

(2007).

"Conclusory allegations

regarding

the

legal effect of

the

facts alleged"

need not be

accepted.

Labram

v.

Havel,

43

F.3d 918,

921
is

{4th Cir.

1995) .

Because

the central
"fair notice

purpose of of what

the complaint

to provide

the defendant

the plaintiff's

claim is and the grounds upon which it

rests," some

the plaintiff's

legal allegations must be

supported by to prepare a

factual basis sufficient Conley v.

to allow the defendant 355 U.S.
ANALYSIS

fair response.

Gibson,
III.

41,

47

(1957).

A.

Count

II

(defamation)

The Court grants McNeil's Motion to Dismiss Count II (defamation)
absolute
response

because McNeil,

as a government contractor,

has
in

immunity from civil
to a government

liability for statements made

contracting officer's

inquiry concerning

alleged fraudulent conduct by an independent contractor. Additionally, McNeil's Consultant Agreement with Mr. Scharpenberg

permitted McNeil's Contracts Manager to make the allegedly
defamatory statements at
1. Absolute Immunity

issue

in this

case.

In Mangold v.

Analytic Services,

77

F.3d 1442,

1444

(4th

Cir.

1996),

the Fourth Circuit extended the doctrine of absolute

immunity to private persons under contract with the government. Specifically, the court held that government contractors are

cloaked with absolute

immunity for statements made

in response

to

official

government

inquiries

in a government procurement

fraud Id.

investigation concerning their dealings with the government.
at 1444. In that case, the Air Force Office of Special

Investigations
a private a

inquired into allegations

that a colonel pressured
the government employees to hire responded

corporation under contract with Id. When the the

family friend.

corporation's

to queries

regarding

colonel's practices

and confirmed the

alleged misconduct,

the colonel Id. at

filed suit 1445.

for damage to his

reputation and position.
policy rationale, the

Relying on a public
the employees

Fourth Circuit concluded that

were necessarily immune

from liability for their statements
function is delegated the same to private

because when a governmental contractors, federal the

latter must receive in order

immunity afforded reporting.

employees

to encourage

truthful

Moreover,

the public's

interest

in avoiding
further

fraud,

waste and

government mismanagement would be

served by extending

absolute

immunity to government contractors.

Id.

at

1447. here Just

Like Mangold,

the allegedly defamatory statements contract

stemmed from an official government as the Air Force officers'

fraud inquiry.

queries to the corporation in Mangold

opened official inquiries into the colonel's improper practices,
the Government Letter was alleged an inquiry into Mr. Ms. Mixon sent Scharpenberg's the Government

fraudulent billings.

8

Letter in her capacity as
government's behalf. She

the

SMS Program COR acting on the
McNeil

expressly demanded that

"investigate th[e]
actions

matter immediately and take the appropriate
(Government Letter, Am. Compl., Ex.

to correct it [.]"

9.)

Thus,

there was no ambiguity as to the Government Letter's

origin-it came from the SMS Program COR acting on behalf of the
government--and purpose-to
fraudulent billings.

inquire

into Mr.

Scharpenberg's alleged

Additionally,

the government required McNeil to report its Scharpenberg had

findings if the allegations concerning Mr.
merit. Pursuant to Ms. Mixon's order,

McNeil had a

governmentally imposed duty to respond to the Government Letter. As such, when McNeil's Contracts Manager indicated to Ms. Mixon

that

"[t]he allegations appear to have merit"

and therefore

McNeil

"has released Mr.

Henry Scharpenberg from

[his]

contract
the

as an independent consultant working on the SMS contract[,]"
statements were responses to an official government inquiry.

(Response Letter,

Am.

Compl.

45,

Ex.

6.)

Compared to the

employees in Mangold who enjoyed absolute immunity from liability

for their responses to official Air Force inquiries,

McNeil must

also be afforded the same immunity for its Contracts Manager's

statements in response to the Government Letter if McNeil is to
properly carry out its
government contractor,

obligations under the SMS Program.
McNeil must be able to exercise its

As a

duties

free from fear of

damage suits.
9

To do so,

it must

enjoy

absolute

immunity from inquires

liability for statements made concerning the SMS that McNeil Program.

in response

to government Mr.

Scharpenberg contends

should not be awarded

absolute immunity for three reasons.

First,

he argues that

McNeil failed to investigate the matter before making the alleged defamatory statements that Mr. in its Response Letter. Second, he argues

Carrington's documents are unreliable because Mr.

Carrington was not the SMS Program COR at the time he sent the
November 7, 2008 Memorandum and accompanying documents to McNeil.

Finally, Mr.

Mr.

Scharpenberg argues that McNeil erred in relying on

Carrington's documents to conclude that the allegations
Scharpenberg's fraudulent billings had merit.

concerning Mr.

The Court is unpersuaded by Mr.
First,

Scharpenberg's arguments.
that McNeil's
the

McNeil's Response Letter explicitly states
conducted a full review of

management

the matter using

documentation provided by Mr.
statements detailing Mr. Scharpenberg, daily logs

Carrington,

which included daily

Carrington's observations of Mr. capturing Mr. Scharpenberg's billed

hours for the months of September and October 2008, of two government access systems tracking Mr.

and reports

Scharpenberg's

entry and departure from the Pentagon.

Contrary to Mr.

Scharpenberg's contention,
responding to the

McNeil investigated the matter before
inquiry.

government's

Second,

it is

immaterial

that Mr.

Carrington was not the SMS
conduct, recorded

Program COR when he observed Mr.

Scharpenberg's

10

it,

and sent his reports

to McNeil.

A government officer may

report what he deems

to be a fraud or waste of government subcontractor, even if his

resources committed by a government

job description does not require him to do so.
Mr. Carrington's position and authority as

Finally,

given

the SMS Program

Supervisory Director,

McNeil acted reasonably in relying on the Carrington to conclude that Mr.
engaged in fraudulent billings. Mangold

documents provided by Mr.
Scharpenberg had in fact

did not set forth restrictions on how a government contractor
must comply with an official government inquiry, but only that

the contractor is immune

from liability for responses

to the

inquiry.

Absent detailed instructions by Ms.

Mixon on how the

investigation should have been conducted,
faulted for relying on Mr. Carrington's

McNeil cannot be
in

findings and documents

completing its own investigation.
arguments regarding McNeil's

Therefore,

Mr.

Scharpenberg's

investigation,

Mr.

Carrington's

authority and the document's unreliability are unavailing.
2. Consultant Agreement

Even if McNeil does not enjoy absolute immunity,
dismisses Count II of

the Court

the Amended Complaint because the

Consultant Agreement contained an "ETHICS" provision which

permitted McNeil's Contracts Manager to make
defamatory statements at issue in this case.

the alleged
The principles

governing contract interpretation are well-established:

"when the

11

terms

of

a contract

are

clear and unambiguous,

a court must

give

them their plain meaning."
v. Jewell Ridge Coal Corp.,

Pocahontas Mining Ltd.
556 S.E.2d 769, 771

Liability Co.
2002)

(Va.

(citations omitted).

Courts must

look to

"the

intention of

the []

parties as expressed by them in the words
are bound to say that the parties

they have used,

and

intended what

the written

instrument plainly declares." 104 (Va. 1984). The "ETHICS"

Meade v.

Wallen,

311 S.E.2d 103,

provision provided that McNeil Scharpenberg's "compensation

could disclose []

facts relating to Mr.

should there be proper

inquiry from such a source as an [McNeil] believe it

authorized U.S.

Government agency or should

has a legal obligation to disclose such information."

(Consultant Agreement,
Government Letter was

Am.

Compl.,

Ex.

1.)

As discussed,
inquiry.

the

an official

government

The

inquiry came

from an authorized U.S.
As the SMS

government agency-the
contractor,

Department of

the Army.

Project's prime

McNeil reasonably believed it had a duty to disclose information
concerning one of its independent contractors.

An inquiry concerning Mr.
equivalent

Scharpenberg's billing practices

is
the

to an inquiry concerning his

compensation because

number of hours worked directly translated to the amount of

compensation received.
Contracts Manager had a

Applying the
right to make

"ETHICS"
the

provision,

McNeil's

allegedly defamatory

statements

in the Response Letter.

Therefore,

McNeil

is

shielded

12

from liability even without
government contractor.

the absolute

immunity it enjoys as a

B.

Count The

IV

(statutory business

conspiracy) Count IV

Court grants McNeil's Motion to Dismiss

(statutory business conspiracy)

because the Amended Complaint

fails to set forth sufficient facts which plausibility suggest a
conspiracy under Virginia Code § 18.2-499 and the parties'
Consultant Agreement allowed McNeil
with Mr. Scharpenberg at will.

to terminate its

contract

1.

Plausibility under Rule 12(b) (6) To state a claim for statutory conspiracy under Virginia

Code § 18.2-499,
or more persons

a plaintiff must show:

(1)

a combination of two

for the purpose of willfully and maliciously

injuring plaintiff

in his business;

and

(2)

resulting damage

to

plaintiff.
666, 676

Va.

Code § 18.2-499;

Simmons v.

Miller,

544

S.E.2d

(Va.

2001).

In addition to Iqbal's plausibility requirement, of "business conspiracy, particularity, like fraud,

allegations

must be pleaded with

and with more than 'mere conclusory language.'"

Gov't Employees Ins.
(E.D. Va. 2004)

Co.

v.

Google,

Inc.,

330 F.Supp.2d 700,

706

(citation omitted). [under Rule
false

"[Tjhe circumstances 9(b)] . . . . are the

to be time,
the

pled with particularity
place and contents of

the

representations,

as well as

identity of the person making the misrepresentation and what he

13

obtained thereby."
2009 WL 2902505, at

Feeley v.
*9 (E.D.

Total Realty Mgmt.,
Va. Aug. 28,

No.

08cvl212,

2009)(citation

omitted).

Failure to plead fraud with Rule

9(b) 's required

particularity is treated as a failure to state a claim under Rule 12(b)(6).
776, 783

Harrison v.
n.5 (4th Cir.

Westinghouse Savannah River Co.,
1999).

176 F.3d

In Count

IV of

the Amended Complaint,

Mr.

Scharpenberg

alleges that McNeil made defamatory statements Letter, as did Mr.

in its Response 2008, Memorandum factual

Carrington in his November 7,

to McNeil.

However,

the Amended Complaint is devoid of
and Mr.

allegations suggesting when or how McNeil

Carrington

entered into an agreement
Mr. Scharpenberg or HSS.

to act jointly to maliciously injure
There are no factual allegations

suggesting how McNeil allegedly acted in concert with Mr.

Carrington for the purpose of causing financial harm to Mr.
Scharpenberg or HSS. Court Instead, Mr. Scharpenberg is asking this

to assume that McNeil agreed with Mr.

Carrington to engage

in conduct intended to injure Mr.
mention of any reason why.

Scharpenberg or HSS,

without

Where McNeil was the SMS Program's prime contractor while Mr. Scharpenberg was merely a consultant hired at will, it is

unclear what motive McNeil would have to enter into an agreement

with Mr.

Carrington,

a government official, Additionally,

to harm Mr.

Scharpenberg or HSS.

the absence of any economic

14

incentive

for McNeil and Mr.

Carrington suggests a lack of motive

to injure Mr. allegations,

Scharpenberg and HSS. the Court

Without additional

factual

finds that a business

conspiracy is

implausible and insufficiently pled.

Mr.

Scharpenberg1 s argument that a conspiracy claim may be

established by proof of a tacit understanding is contrary to the
law of this jurisdiction. As stated, allegations of a business conclusory in estate

conspiracy must be pled with particularity beyond mere language. Feeley,

This requirement was made clear by this Court and real

wherein it granted the defendant banks

companies' motion to dismiss

claims of conspiracy to commit fraud

and civil conspiracy to defraud because the plaintiff homeowners'
amended complaint failed to allege sufficient facts from which to

infer a meeting of the minds.
amended complaint

2009 WL 2902505 at

*9.

The

there contained no allegations

showing how the

banks' conduct,

along with those of

their agents and the real

estate companies created an agreement to injure plaintiff
homeowners. Id. The plaintiffs' broad brush general allegations failed to comply with the Id. Likewise, Mr.

and statements of mere parallel conduct particularity requirements of Rule 9(b).

Scharpenberg's Amended Complaint suffers from the same deficiency

because it lacks sufficient facts suggesting an agreement between
McNeil and Mr. Carrington to harm Mr. Scharpenberg or HSS.

Because

the Amended Complaint

fails

to show the

elements of a

15

claim for statutory conspiracy,
pleading standards of

it thereby fails

to satisfy the
9(b)'s

Twombly and Iqbal and Rule

particularity requirement. Motion to Dismiss
conspiracy. 2. Consultant Agreement

Therefore,

the Court grants McNeil's

Plaintiffs' claim for statutory business

Pursuant

to the

Consultant Agreement,

McNeil

could terminate

its contract with Mr.

Scharpenberg at will by giving timely

notice.

On its face,

the "TERMINATION" provision permitted Scharpenberg to terminate the Consultant
(2) week notice to the

either McNeil or Mr.

Agreement "at any time by giving a two

other."

(Consultant Agreement,
finding of

Am.

Compl.,

Ex.

1.)

Therefore,
Scharpenberg,

even absent a

fraudulent

conduct by Mr.

McNeil could terminate a two-week notice,
Where

the Consultant Agreement simply by giving it properly did on November 13,
alone allowed McNeil it need not

which

2008.

the Consultant Agreement SMS

to remove Mr.

Scharpenberg from the

Program,

conspire with Mr.

Carrington to injure Mr.

Scharpenberg or HSS.
IV. CONCLUSION

The Court grants McNeil's Motion to Dismiss Count

II

(defamation)

because McNeil has absolute in response

immunity from civil to a government
because

liability for statements made
contracting officer's inquiry,

and alternatively,

McNeil's Consultant Agreement with Mr.

Scharpenberg permitted

16

McNeil's

Contracts Manager

to make

the

statements

at

issue

in

this case.

The Court also grants McNeil's Motion to Dismiss

Count IV

(statutory business conspiracy)

because the Amended

Complaint fails to set forth sufficient facts which plausibly
suggest a conspiracy under Virginia Code § 18.2-499 and the

parties' Consultant Agreement allowed McNeil
contract with Mr.
hereby

to terminate

its

Scharpenberg at will.

Accordingly,

it is

ORDERED that Defendant McNeil Technologies,

Inc.'s Motion to

Dismiss Counts II and IV of

the Amended Complaint is GRANTED.

The Clerk is directed to
Opinion to counsel.

forward a copy of

the Memorandum

Entered this

I"

day of February, 2010.

Alexandria,

Virginia

fef

Gerald Bruce Lee

United States District Judge

17