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FREIMAN v. LAZUR

April 29, 1996

FRANK FREIMAN, et al., Plaintiffs,
v.
EDWARD GLENN LAZUR, et al., Defendants.



The opinion of the court was delivered by: OBERDORFER

 I.

 This case concerns allegations that government contractors with and government employees of the U.S. Department of Energy, through its Office of Construction and Capital Projects, infringed plaintiffs' copyrights, conspired to infringe their copyrights, and other related pendant claims. Plaintiffs Frank Freiman and Freiman Parametric Systems, Inc. created and own the copyrights to twenty-one computer programs known by the name of "FAST", which plaintiffs developed under contract with the Department. Plaintiffs also created a combination of the FAST computer programs known by the name of "FAMAS" pursuant to a subcontract with the Department, the prime contractor being Kaiser Engineers. Defendant Edward G. Lazur is the Acting Director of the Office of Construction and Capital Projects and represented the Department with respect to both the FAST and FAMAS contracts. Defendants Richard F. Seel, individually, and Richard F. Seel, Inc. t/a Prime Time, along with defendants Kay Hudson Wohl, individually, and Kay Hudson Wohl d/b/a Wohl Associates, parties to a subcontract with Dames & Moore, one of the Department's prime contractors, developed for the Department and now purport to own a computer program named "INSITE". Defendants Seel and Prime Time are former agents of the plaintiffs; defendant Wohl formerly worked at the Department with defendant Lazur in representing the Department with respect to the FAST and FAMAS contracts. Plaintiffs allege that INSITE infringes their copyrights in FAST and FAMAS.

 The United States has moved to be substituted for defendant Lazur and has filed a motion to dismiss for lack of subject matter jurisdiction. Defendants Seel, Prime Time, Wohl, and Wohl Associates have moved to dismiss the complaint for lack of subject matter jurisdiction, lack of personal jurisdiction, and improper venue.

 II.

 The Complaint alleges the following facts: In 1980 plaintiffs Frank Freiman and Freiman Parametric Systems entered into a contract with the Department to design computer programs that could predict and estimate the costs of Department projects such as nuclear systems. Plaintiffs named these programs "FAST". In 1983 the Department and Freiman agreed to a clause in the contract that recognized his proprietary interests in the FAST computer programs. Compl. P 28. Throughout the 1980s, Department employees (and now defendants) Lazur and Wohl represented the Department in contracts that concerned the creation and production of the FAST computer programs. Id. at P 27.

 During this time that plaintiffs were parties to the contract with the Department to create and produce FAST, plaintiffs also sold the FAST computer program commercially. From 1981 to 1987, plaintiffs licensed defendants Seel and Prime Time as agents for sale of the FAST computer programs. Id. at P 31. In 1987 plaintiffs gave an exclusive license for the FAST programs to Seel and Prime Time for a term of five years, automatically renewable for two more years. A clause in the licensing agreement acknowledged plaintiffs' proprietary interest in the FAST programs. Id. at P 34.

 In 1991, the Department, through its prime contractor Kaiser Engineers, awarded Freiman three contracts to combine all of the FAST computer programs into a program named "FAMAS". Id. at P 29. Freiman subcontracted work on the FAMAS contracts to Seel and Prime Time; and Freiman "directed Defendants Seel and Prime Time as to the tasks that were to be performed as their subcontractors." Id. at P 40. Plaintiffs allege that "unbeknownst to the Plaintiffs, Defendants Seel and Prime Time, at the same time they were subcontractors to Freiman . . . bid and received their own contract for the FAMAS project." Id. at P 42; Ex. H. Therefore, plaintiffs allege, defendants Seel and Prime Time were simultaneously parties to a contract with Kaiser Engineers and to a subcontract on plaintiffs' contract with Kaiser Engineers, both on the same Department project to develop FAMAS. Id. at P 49.

 In 1993 plaintiffs and defendants Seel and Prime Time completed their work on the three FAMAS contracts. In September 1993, plaintiffs requested that as their subcontractors, defendants Seel and Prime Time provide them with the "complete set of source codes of the FAMAS project." Id. Defendants refused to release them. Id. Consequently, Freiman "was unable to bid on Phase II of the FAMAS project" because he did not have a complete set of the source codes. Id. at P 68.

 On June 2, 1994, Seel and Prime Time, while still under contract with Freiman, registered a copyright for a computer program known as "INSITE" with the U.S. Copyright Office. Id. at P 70, Ex. V (INSITE copyright application). Plaintiffs allege that the INSITE program is a "false and fraudulent registration for a copyright" because it is "actually computer language developed for use in the FAMAS program designed to use the FAST computer programs." Id. at P 70. Plaintiffs "discontinued" their licensing agreement with defendants Seel and Prime Time on or about June 30, 1994. Id. at P 147.

 On August 30, 1994, defendants Seel and Prime Time, joined by defendants Kay Hudson Wohl and her company Wohl Associates, allegedly solicited a contract from an entity identified in the Complaint only as "SAIC" (which was also under contract with the Department) for the development of the INSITE computer program for the Department. Id. at PP 73, 77. Defendant Wohl retired from the Department earlier that month. On October 21, 1994, defendant Lazur sent a memo to the Department's Project Management Division and the Program Budget Branch in Richland, Washington for the transfer of $ 180,000, originally intended for payment to plaintiffs for FAMAS, to defendant Prime Time for the generation of a proposal for INSITE. Id. at P 78, Ex. X (copy of the memorandum). "In or around October of 1994," the Department awarded a contract for INSITE to Seel, Prime Time, Wohl, and Wohl Associates, not through SAIC, but through another contractor, Dames & Moore. Id. at P 79.

 Plaintiffs also allege that in or around September 1994, defendants Seel and Prime Time began selling for their own account a computer program called "MAP", which is substantially similar to plaintiffs' FAST programs. Id. at PP 152, 89. Plaintiffs allege that defendant Wohl is a participant in the sale of the MAP program; she had the MAP manual translated from French into English. Id. at P 90.

 Accordingly, plaintiffs claim that the foregoing transactions by defendants infringed their copyrights in violation of 17 U.S.C. § 101 et seq.; constituted unfair competition, false designation of origin, false labeling, and false advertising in violation of 15 U.S.C. § 1125; and contributed to infringement of copyright. Plaintiffs also allege pendant state-law claims. Defendants have filed motions to dismiss for lack of subject matter jurisdiction, lack of personal jurisdiction, or improper venue. The United States has moved to be substituted for defendant Edward Lazur and has filed a motion to dismiss for lack of subject matter jurisdiction.

 III.

 Plaintiffs allege that defendant Edward Lazur, the Acting Director of the Office of Construction and Capital Projects in the Department, "caused and materially contributed to the infringement of the [plaintiffs'] copyright and proprietary data." Compl., Count I. Plaintiffs also allege that defendant Lazur entered into a civil conspiracy with the other defendants to violate the federal copyright laws, to violate state law in the misappropriation of trade secrets, and to intentionally interfere with plaintiffs' contracts and business. Compl., Count X. Defendant Lazur represented the Department in awarding Department contracts, first, to plaintiffs and then to defendants Seel, Prime Time, Wohl, and Wohl Associates.

 A.

 Plaintiffs' common law tort claims are governed by the Federal Employees Liability Reform and Tort Compensation Act of 1988, Pub. L. No. 100-694, 102 Stat. 4563. This Act shields federal employees from individual liability for common law torts and requires the substitution of the United States for the individual defendant upon certification by the Attorney General or her designee that the federal employee "was acting within the scope of his office or employment at the time of the incident out of which the claim arose." 28 U.S.C. § 2679(d)(1). The United States has moved to be substituted for defendant Lazur on the common law tort claims. A certificate from Mark E. Nagle, Acting Chief, Civil Division, United States Attorney's Office, states that the United States finds "that the defendant Edward Glenn Lazur was acting within the scope of his authority as an employee of the United States at the time of such alleged incidents:" U.S. Mot., Ex. A. This certification automatically substitutes the United States for the government employee named as defendant. 28 U.S.C. §§ 2679(b), (d)(1), (d)(4). Accordingly, the United States is substituted for defendant Lazur as a defendant in this action in Counts I and X to the extent that plaintiffs allege defendant Lazur is liable for common law torts.

 B.

 In order to sue the United States under a theory of tort, plaintiffs first must file an administrative claim with the appropriate agency. 28 U.S.C. § 2675. This administrative action is a jurisdictional prerequisite that cannot be waived. See Odin v. United States, 211 U.S. App. D.C. 209, 656 F.2d 798, 801 (D.C. Cir. 1981). Plaintiffs have not filed the required administrative claim and, in fact, concede that "this count [Count X] must be dismissed against Defendant Lazur." See Pls.' Reply at 6; U.S. Mot., Ex. B (Ralph D. Goldenberg Decl.) (stating that plaintiffs have not filed an administrative claim). This Court lacks subject matter jurisdiction over the common law tort claims against substituted defendant United States in Counts I and X because of plaintiffs' failure to file administrative claims. Accordingly, an accompanying Order dismisses those counts.

  C.

 In addition to common law tort claims, Count I charges defendant Lazur with copyright infringement. However, the same principle governs here that relieves government employees from common law tort liability: when government employees act within the scope of their official duties and allegedly infringe a copyright, the copyright owner's remedy lies exclusively against the United States and in the U.S. Court of Federal Claims. 28 U.S.C. § 1498(b). The United States has presented its certification that defendant Lazur acted within the scope of his employment at the relevant time. See U.S. Mot., Ex. A (Certification by Mark E. Nagle, Acting Chief, Civil Division, United States Attorney's Office). The Attorney General's certification constitutes prima facie evidence that the federal employee acted within his scope of employment. Kimbro v. Velten, 308 U.S. App. D.C. 134, 30 F.3d 1501 (D.C. Cir. 1994). This certification notwithstanding, plaintiffs allege that defendant Lazur did not act within his scope of his official duties because he violated federal procurement laws in the performance of his duties. Specifically, defendant Lazur allegedly caused Department contracts to be awarded to defendants in return for a promise of future employment.

 Plaintiffs who challenge a certification of the scope of employment have the burden to come forward with evidence supporting their allegations. "If there is a material dispute as to the scope issue the district court must resolve it at an evidentiary hearing." 30 F.3d at 1509. Plaintiffs proffer affidavits from Frank Freiman and H. Paul Douglas, which state that defendant Lazur sought employment from them. See Pls.' Reply (affidavits attached). In his own affidavit, defendant Lazur vigorously ...


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