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National Railroad Passenger Corporation v. Veolia Transportation Services

May 9, 2011

NATIONAL RAILROAD PASSENGER CORPORATION, PLAINTIFF,
v.
VEOLIA TRANSPORTATION SERVICES, INC.,AND VEOLIA TRANSPORTATION, INC., DEFENDANTS.



The opinion of the court was delivered by: Reggie B. Walton United States District Judge

MEMORANDUM OPINION

The plaintiff, National Railroad Passenger Corporation ("Amtrak"), filed this action on July 16, 2007, against Veolia Transportation Services, Inc. and Veolia Transportation, Inc. (collectively "Veolia"), asserting, in Count I, that Veolia aided and abetted the breach by several former Amtrak employees of the fiduciary duties they owed to Amtrak and, in Count II, that Veolia tortiously interfered with Amtrak's prospective economic advantage with regard to a public transportation operation in Southern Florida. See generally Complaint ("Compl."). Currently before the Court is the plaintiff's motion for partial summary judgment on Count I of its Complaint and the defendants' cross-motion for summary judgment on both Counts I and II of the Complaint. Upon consideration of the parties' submissions and for the reasons set forth below,*fn1 both parties' motions for summary judgment must be denied.

I. Background

The factual background giving rise to the allegations in the plaintiff's Complaint was set forth in this Court's earlier opinion denying the defendants' motion to dismiss. See Nat'l R.R. Passenger Corp. v. Veolia Transp. Servs., Inc., 592 F. Supp. 2d 86 (D.D.C. 2009) (Walton, J.) ("Amtrak I"). While that background was drawn solely from the allegations made in the plaintiff's Complaint, the following is based upon facts that are either undisputed or are matters of public record, except where otherwise noted.

Veolia and Amtrak are both "providers of transportation services, including operations services for commuter rail systems." Compl. ¶ 6. Both have "the infrastructure, personnel, and institutional experience necessary to operate major urban commuter rail services." Plaintiff's Statement of Material Facts Not in Dispute ("Pl.'s Facts") ¶ 6; Defendants' Local Rule 7(h) Counterstatement of Facts in Opposition to Plaintiff's Motion for Partial Summary Judgment ("Defs.' Counter Facts") § I ¶ 6.

The controversy in this case arises from the two companies' participation in a competitive bidding process for a contract to provide commuter rail operation service for the South Florida Regional Transportation Authority (the "SFRTA") for "seven years with one three-year option period." Compl. ¶ 11; Plaintiff's Motion for Partial Summary Judgment on Count I ("Pl.'s Mot."), Declaration of Gary A. Orseck ("Orseck Decl."), Exhibit ("Ex.") 8 (RFP No. 06-112) at AMTH 003757-3761.*fn2 Amtrak alleges that Veolia aided and abetted three former Amtrak employees in breaching their fiduciary duties to Amtrak in connection with Veolia's efforts to acquire the SFRTA contract. Compl. ¶¶ 53-59. Amtrak also contends that Veolia interfered with its prospective economic advantage by soliciting the employment of those former Amtrak employees and causing two of them to refuse to be listed as part of Amtrak's management team in its bid to acquire the SFRTA contract. Id. ¶¶ 60-66.

A. The Request for Proposals The SFRTA is a public transit agency that receives public funds and operates the commuter rail service known as the Tri-Rail in Miami-Dade, Broward, and Palm Beach counties in South Florida. Defendants' Local Rule 7(h) Statement of Material Facts as to Which There Is No Genuine Issue to be Litigated in Support of Defendants' Motion for Summary Judgment ("Defs.' Facts") ¶ 1; Plaintiff's Responses to Statements of Material Facts by Defendants Veolia Transportation Services, Inc. and Veolia Transportation, Inc. and Plaintiff's Supplemental Statements of Facts Precluding Summary Judgment ("Pl.'s Supp. Facts") § I ¶ 1. In the latter part of 2006, the SFRTA issued a request for bid proposals ("RFP" or "Request for Proposals"),inviting service providers to submit bids to operate and maintain the Tri-Rail commuter system. Defs.' Facts ¶ 4; Pl.'s Supp. Facts § I ¶ 4. Eight companies purchased the SFRTA's Operations Request for Proposal information, Defs.' Counter Facts § I ¶ 19, and representatives from four of those companies, Herzog Transit Services, Inc. ("Herzog"), Veolia, Amtrak, and the Washington Group International attended a Tri-Rail pre-proposal conference on October 18, 2006, id.; Pl.'s Facts ¶ 19. Proposals for the Tri-Rail contract were due on or before January 11, 2007. Compl. ¶ 12. According to the RFP, the requirements needed for a successful bid included, inter alia, the composition of a "Key Management Team" that would be responsible for operating and managing the Tri-Rail system. Id. ¶ 13. Specifically, "[t]he Operations [Request for Proposals] required that each bidder propose a general manager and an on-site Key Management Team[] comprised of members responsible for the following functions: Transportation, Safety, Human Resources/Labor Relations, and Communications (Operations Center)." Defs.' Facts ¶ 23; Pl.'s Supp. Facts § I ¶ 23. "The Operations [Request for Proposals] set forth strict requirements concerning the qualifications of the Key Management Team [M]embers," which required each team member to "possess a minimum of [three] years of recent experience . . . as the operator of a passenger railroad service." Compl. ¶ 14 (internal quotation marks omitted). Further, it required that the Key Management Team as a whole "demonstrate relevant experience with the key railroad functions," including "[t]rain operations in a multiple user environment[;] . . . [c]rew management; . . . [c]ustomer service[;] . . . [r]ailroad employee training and certification; [r]ail operations interface management with maintenance and new construction; [f]inancial management and reporting of rail operations[;] . . . [and r]ailroad safety program management." Id. Amtrak and Veolia were the only two companies that submitted proposals. Defs.' Facts ¶ 200; Pl.'s Supp. Facts § I ¶ 200.

B. Veolia's Proposed Key Management Team On Its Tri-Rail Bid Veolia began recruiting for its Tri-Rail general manager position in early 2006. Defs.'

Facts ¶ 36. Recruiting a general manager was "[o]ne of Veolia's first priorities in pursuing the Tri-Rail" contract because the person selected could then "help manage the proposal effort and . . . manage the contract if it was awarded to Veolia." Id. ¶ 35. Among the candidates Veolia considered for the position was Joseph Yannuzzi, an Amtrak employee. Id. ¶ 38. Several months before the proposal due date, Veolia contacted Mr. Yannuzzi about potentially working for Veolia, but Veolia and Amtrak dispute whether Mr. Yannuzzi was aware that Veolia's potential offer would be contingent on the success of its bid for the Tri-Rail Operations contract. Id. ¶¶ 90-92; Pl's Supp. Facts § I ¶¶ 90-92.*fn3 Following Veolia's "entreaty,"*fn4 Mr. Yannuzzi informed Gilbert Mallery, Amtrak's Vice President of Strategic Planning and Contract Administration, regarding the contact he had with Veolia. Defs.' Facts ¶ 92.

Ultimately, on June 15, 2006, Veolia hired Sidney Birckett for the position of general manager, id. ¶ 41, who had been an at-will employee with Amtrak, id. ¶ 37. His selection for the position with Veolia was not contingent upon it securing the Tri-Rail Operations contract.

Id. ¶¶ 37, 41; Pl.'s Facts ¶ 31.*fn5 As general manager, Mr. Birckett worked with Neil Shah, Veolia's Manager of Rail Development, John Kerins, Veolia's Vice President for Rail Development, and Veolia's Human Resources Department to identify and recruit candidates for the other members of Veolia's Key Management Team. Defs.' Facts ¶¶ 42, 44; Pl.'s Supp. Facts § I ¶ 42.

For its Transportation position, Veolia considered James Turngren and Victor Salemme, both Amtrak empoyees,*fn6 as well as Marcus Moore, an independent consultant, and Deborah Wetter, a Veolia employee. Defs.' Facts ¶ 45; Pl.'s Supp. Facts § I ¶ 45.*fn7 Veolia ultimately extended a contingent offer of employment to Mr. Salemme, who accepted the offer on November 3, 2006. Defs.' Facts ¶¶ 45, 56; Pl.'s Supp. Facts § I ¶ 45, 56. Although, the offer was contingent upon Veolia being awarded the Tri-Rail Operations Contract, Mr. Salemme permitted Veolia to list him and his resume on its bid. Defs.' Facts ¶ 56. At the time of the offer, Mr. Salemme was the Assistant Superintendent for Amtrak's Maine Passenger Service, and he had previously been recognized by Amtrak for his exceptional service. Id. ¶¶ 49, 52;

Pl.'s Supp. Facts § I ¶¶ 49, 52.

For its Safety position, Veolia considered Amtrak employees Doug Stencil and Jewel Picket,*fn8 along with James Waterman, a Veolia employee. Defs.' Facts ¶ 59. Veolia interviewed Mr. Stencil, a Senior Analyst in the Operation Practices Section, id. ¶¶ 60, 63; Pl.'s Mot., Orseck Decl., Ex. 33 (May 7, 2008 Deposition Transcript of Douglas Stencil) ("Stencil Dep.") at 44:11-19, who had an exceptional record as an Amtrak employee, see Defs.' Facts ¶ 65 (noting that he had "never been disciplined or reprimanded"). On October 31, 2006, Veolia extended Mr. Stencil an offer of employment contingent on it being awarded the Tri-Rail Operations contract, which Mr. Stencil accepted on November 3rd of the same year. Id. ¶ 68. Veolia's offer to Mr. Stencil was identical in nature to the offer accepted by Mr. Salemme. Id. ¶¶ 56, 68.

For its Communications position, Veolia considered Amtrak employee Gary Mauck,*fn9 James Tylick of Veolia,*fn10 and Mr. Moore, who also had been considered for the Transportation position. Id. ¶ 71. Veolia first heard of Mr. Mauck's potential availability from Tom Kirk, an Amtrak Assistant Superintendent in Florida, who said that Mr. Mauck was planning to retire from his position with Amtrak. Defs.' Facts ¶ 76; Pl.'s Supp. Facts § I ¶ 76. Mr. Moore had been Veolia's first choice for the position; however, after learning that Mr. Moore would be unavailable for the initial proposal deadline, Defs.' Facts ¶ 72, Veolia "called Mr. Mauck and asked him if he would be interested in the potential Communications Manager position with Veolia for the Tri-Rail Operations [C]ontract," id. ¶ 77. Mr. Mauck submitted his resume to Veolia for the position on November 8, 2006, id. ¶ 78, and within a few days he was extended a contingent offer similar to the terms offered to Mr. Salemme and Mr. Stencil, which he accepted, id. ¶ 83. At that time, Mr. Mauck was the District Manager for Amtrak in New Mexico and had an exceptional employment record. Id. ¶¶ 73, 81.

Finally, Veolia filled the Human Resources and Labor Relations position with a contractor employed by CSX Transportation, Inc.,*fn11 proposing the identical contingent offer that was made to the other potential members on the Key Management Team. Id. ¶¶ 87-89.

Veolia submitted its proposal to the SFRTA on January 11, 2007, with a price proposal of $97,155,817. Id. ¶¶ 155-56.

C. Amtrak's Tri-Rail Proposal

On November 2, 2006, Amtrak posted openings on its public website for its Key

Management Team positions for the Tri-Rail contract, and stated that it would accept applications for the positions from both external and internal candidates. Id. ¶¶ 110, 112; Pl.'s Supp. Facts § I ¶¶ 110, 112. Ultimately, Amtrak selected three individuals for its Key Management Team from existing Amtrak employees, Defs.' Facts ¶¶ 113, 159 (Joe Yannuzzi as General Manager, Lou Pescevic as Assistant Superintendent of Transportation, and Doug Stencil as Principal, Safety/Training), along with Guy Whitney, a Herzog employee to whom Amtrak extended a contingent offer as its choice for the Communications position. Id. ¶¶ 113, 133, 134; Pl.'s Supp. Facts § I ¶¶ 113, 133, 134. Angel Torress, who did not possess the level of railway experience required by the Operations Request for Proposals,*fn12 nonetheless was selected by Amtrak for the Human Resources and Labor Relations position. Defendants' Local Rule 7(h) Reply Statement of Material Facts in Further Support of Defendants' Motion for Summary Judgment ("Defs.' Reply Facts") § III ¶¶ 41-44. Amtrak identified Mr. Stencil as the person who would occupy the Safety position, Defs.' Facts ¶¶ 125-26; Pl.'s Supp. Facts § I ¶¶ 125-26, and he signed the Key Employee Certification submitted with Amtrak's December 21, 2006 bid, but the parties dispute whether Mr. Stencil and Amtrak ever agreed to do more than merely permit his name and resume to be submitted with the bid, Defs.' Facts ¶¶ 129, 130; Pl.'s Supp. Facts § I ¶ 129. Finally, Amtrak asked Mr. Salemme about his interest in the Transportation position, but Mr. Salemme refused to be considered for that position, Pl.'s Facts ¶ 57; however, the parties disagree on whether he rejected Amtrak's overtures because he "was involved with [Veolia] already," id., or for other reasons, Defs.' Facts ¶ 119. Ultimately, Amtrak selected Lou Pescevic for the Transportation position. Pl.'s Supp. Facts § I ¶¶ 118, 121.*fn13

Amtrak also assembled a team to prepare its proposal for the Tri-Rail contract. Defs.' Facts ¶ 157. In preparing Amtrak's bid, the team considered various factors affecting price, including statutory requirements, labor costs, overhead rates, potential liabilities, and management fees. Id. ¶¶ 161-192. Amtrak had particular "concern[s] that [its] total cost package was already higher than [its] competitors and that increasing the management fee would only further increase Amtrak's costs." Id. ¶ 189; Pl.'s Supp. Facts § I ¶ 189. Despite these concerns, Amtrak's team received final approval for its proposal from senior Amtrak management officials sometime between late December 2006 and early January 2007. Defs.' Facts ¶¶ 193, 195; Pl.'s Supp. Facts § I ¶¶ 193, 195. Consequently, Amtrak submitted its proposal to the SFRTA on January 4, 2007, with a price proposal of $162,639,724. Defs.' Facts ¶¶ 197, 198; Pl.'s Supp. Facts § I ¶¶ 197, 198.

D. The SFRTA Awards the Contract to Veolia Upon receiving the two bids for the Tri-Rail contract, a SFRTA evaluation committee

assigned numerical scores to each bid in four categories for purposes of determining which bid to select. Compl. ¶¶ 43-47; Pl.'s Mot., Orseck Decl., Ex. 13 (Evaluation Memo). Those four categories and the scores assigned to each category were the following: the price of the bid (which accounted for 15 points of the final score), the technical approach of the bid (worth 25 points of the final score), the operating plans (worth 25 points of the final score), and the qualifications and experience of the Key Management Team (worth 35 points of the final score). See Memorandum of Points and Authorities in Support of Defendants' Motion for Summary Judgment ("Defs.' Mem."), Declaration of T. Stewart Rauch ("Rauch Decl."), Ex. 1 (Operations RFP) at AMTH004101-02, AMTH004169-70. In reviewing the bids, the SFRTA retained the right to reject both proposals if, for example, neither proposal was sufficiently responsive to the SFRTA's requirements. See Pl.'s Mot., Orseck Decl., Ex. 15 (May 27, 2008 Deposition Transcript of Bonnie Arnold) ("Arnold Dep.") at 26:2-30:25. Excluding the score awarded to the price component, Veolia's bid received a total score of 70 points, while Amtrak's bid received a score of 62.3 points. Defs.' Mem., Rauch Decl., Ex. 62 (SFRTA Evaluation Committee Rankings) at AMTH002916. As to the price component of its equation, the SFRTA adopted a policy of not awarding any points to bids that were priced more than 15 points higher than the lowest price proposal, id., Rauch Decl., Ex. 1 (Operations RFP) at AMTH004170, and because Veolia had underbid Amtrak by 66%, the SFRTA awarded Veolia 15 points, while Amtrak received a score of zero,*fn14 id., Rauch Decl., Ex. 62 (SFRTA Evaluation Committee Rankings) at AMTH002916. Amtrak's and Veolia's scores were nearly identical in the qualifications and experience category, with Veolia receiving 28.0 points and Amtrak receiving

27.3 points for the composition of their respective Key Management Teams. Id.; id., Affidavit of Joseph Giulietti ("Giulietti Aff.") ¶ 7. The scores in this category were based on the individual reviewers' assessments of each Key Management Team based on criteria identified in the SFRTA's Request for Proposals. See id., Rauch Decl., Ex. 1 (Operations RFP) at AMTH004169-70.*fn15 Accordingly, the SFRTA's Evaluation Committee awarded Veolia's proposal a total score of 85 points, and Amtrak's proposal received a total score of 62.3. Defs.' Facts ¶ 212; Pl.'s Supp. Facts ¶ 212. As a result of this large disparity, the SFRTA selection committee voted unanimously to award Veolia the Operations contract. Defs.' Mem., Rauch Decl., Ex. 61 (SFRTA Recommendation Memo) at 2; see id., Giulietti Aff. ¶ 7.

On January 24, 2007, Amtrak was notified by the SFRTA that it had not been awarded the Tri-Rail contract. Id., Rauch Decl., Ex. 68 (Notice of Intent to Award for RFP 06-112). As a result of not being selected, Amtrak filed a notice of intent to file a bid protest and requested copies of Veolia's proposal, Defs.' Mem., Rauch Decl., Ex. 71 (January 25, 2007 Letter from Thomas Moritz of Amtrak to Christopher C. Bross of SFRTA), which it received on January 26, 2007, Compl. ¶ 52. Receipt of Veolia's proposal provided Amtrak access to information not only about Veolia's price proposal, but also about the fact that Mauck, Salemme, and Stencil had appeared on Veolia's bid as members of its proposed Key Management Team. Id. ¶¶ 51-52.

On February 8 and 9, 2007, Amtrak informed Salemme and Mauck that they had violated its conflict-of-interest policy by permitting their names to be associated with Veolia's bid, and that they had to resign from their positions with Amtrak or they would be involuntarily terminated.*fn16 Pl.'s Facts ¶¶ 95, 99; Defs.' Facts ¶¶ 228, 233. Both opted to resign. Defs.' Facts ¶¶ 228, 233; Pl.'s Mot., Orseck Decl., Ex. 32 (May 8, 2008 Deposition Transcript of Victor Salemme) ("Salemme Dep.") at 36:18-43:14; id., Orseck Decl., Ex. 31 (May 8, 2008 Deposition Transcript of Gary Mauck) ("Mauck Dep.") at 85:4-14. In addition, Amtrak terminated Mr. Stencil's employment based on its conflict-of-interest policy. Defs.' Facts ¶¶ 231-32.

On February 12, 2007, Salemme, Stencil, and Mauck received permanent offers from Veolia. See Defs.' Mem., Rauch Decl., Ex. 75 (Offer letter from John Kerins to Mr. Salemme); id., Rauch Decl., Ex. 76 (Offer letter from Mr. Kerins to Mr. Stencil); id., Affidavit of Gary F. Mauck ("Mauck Aff."), Ex. C (Offer letter from Mr. Kerins to Mr. Mauck). All three commenced their employment with Veolia shortly thereafter and are currently employed by Veolia on the SFRTA Tri-Rail project. See Pl.'s Mot., Orseck Decl., Ex. 31 (Mauck Dep.) at 21:14-22:17; id., Orseck Decl., Ex. 32 (Salemme Dep.) at 43:15-44:9; id., Orseck Decl., Ex. 33 (Stencil Dep.) at 9:11-22.

Salemme, Stencil, and Mauck had been at-will Amtrak employees, Defs.' Facts ¶¶ 50, 64, 79; Pl.'s Supp. Facts § I ¶¶ 50, 64, 79, and none of them had signed documents barring them from competing with Amtrak after their employment with Amtrak terminated, Defs.' Facts ¶¶ 50, 64, 80; Pl.'s Supp. Facts § I ¶¶ 50, 64, 80. The parties disagree on whether any of the three Amtrak employees knew that Amtrak was seeking to acquire the Tri-Rail contract before signing contingent offers with Veolia. Defs.' Facts ¶¶ 54, 70, 85; Pl.'s Supp. Facts § I ¶¶ 54, 70, 85. It is also disputed whether Veolia asked the employees "not to sign up with Amtrak" on its bid to acquire the Tri-Rail contract. Defs.' Facts ¶¶ 57, 69, 84; Pl.'s Supp. Facts § I ¶¶ 57, 69, 84.

E. The Current Litigation

In this action, Amtrak seeks to recover damages it has allegedly suffered as a result of not

being awarded the SFRTA contract. Compl. at 1-2. As noted earlier, Amtrak asserts two claims against Veolia. The first count of the Complaint alleges that Veolia aided and abetted the three former Amtrak employees' breach of their fiduciary duties owed to Amtrak, resulting in Amtrak not being awarded the SFRTA contract. Id. ¶¶ 53-59. The second count of the Complaint alleges that Veolia tortiously interfered with Amtrak's prospective business expectancy associated with the Tri-Rail contract. Id. ¶¶ 60-66.

Pursuant to Federal Rule of Civil Procedure 56, Amtrak has moved for partial summary judgment on the first count of its Complaint. Pl.'s Mot. at 1. Amtrak contends as support for its motion that (1) its three former employees each owed a fiduciary duty to Amtrak, Memorandum of Law in Support of Plaintiff's Motion for Summary Judgment as to Liability on Count I ("Pl.'s Mem.") at 15-17, and (2) Veolia helped the employees breach those duties by extending contingent offers to them, id. at 23-24, including their names and resumes on its bid for the Tri-Rail contract, and inducing them to exclude their names from Amtrak's bid, id. at 24.

Veolia opposes the motion on the ground that genuine issues of material fact exist as to the claim asserted in Count I. Defendant's Memorandum of Points and Authorities in Opposition to Amtrak's Motion for Partial Summary Judgment ("Defs.' Opp'n") at 1. In addition, Veolia has filed a cross-motion for summary judgment on both counts of the Complaint, asserting, as to Count I, that there is no genuine issue of material fact as to the following: (1) that Amtrak's former employees did not breach any fiduciary duties owed to Amtrak because the SFRTA contract was outside the scope of their employment, Defs.' Mem. at 13; Defs.' Opp'n at 9-10; (2) that signing the contingent offers did not constitute a breach of a fiduciary duty, Defs.' Opp'n at 21; Defs.' Mem. at 15-18; (3) that Veolia did not know its behavior would be aiding and abetting the breach of any fiduciary duty by Amtrak's former employees, Defs.' Opp'n at 18-20; and (4) that Amtrak cannot show that the inclusion of its then-employees on Veolia's bid caused it to lose the SFRTA contract, id. at 15-17; Defs.' Mem. at 25-28. As to Count II, Veolia argues that (1) as a competitive bidder Amtrak did not have a valid business expectancy in the SFRTA contract, Defs.' Mem. at 31-35; (2) Veolia could not have known of ...


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