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Liff v. Office of Inspector General for U.S. Department of Labor

United States District Court, District of Columbia

January 8, 2016

STEWART LIFF, et al., Plaintiffs,
v.
OFFICE OF THE INSPECTOR GENERAL FOR THE U.S. DEPARTMENT OF LABOR, et al., Defendants.

MEMORANDUM OPINION

JAMES E. BOASBERG, District Judge.

Plaintiff Stewart Liff, an experienced consultant in public-sector human-resources management, says he and his eponymous firm, Stewart Liff & Associates, have been wrongfully impugned by several arms of the federal government. Both thus sued the U.S. Department of Labor, its Office of Inspector General, the Office of Personnel Management, and several DOL and OPM officers. They allege that Defendants violated both the Fifth Amendment and the Administrative Procedure Act by falsely suggesting, in public statements and documents, that Plaintiffs lacked integrity and good character, and that those statements broadly curtailed their ability to secure government contracts. Defendants now move to dismiss, identifying a series of impediments that they maintain blocks this suit. As most are not insuperable at this stage, the Court will largely deny the Motion and permit the case to proceed to discovery.

I. Background

According to the Complaint, which the Court must accept as true in evaluating Defendants' Motion, Liff is a seasoned HR executive, having worked for several decades in senior positions within the U.S. Departments of Defense and Veterans Affairs. See Compl., ¶ 11. Upon retiring from civil service, Liff turned to government consulting, building a book of business consisting mostly of federal-agency clients. See id., ¶¶ 15-18.

A. Plaintiff's Government Contracts

After the inauguration of President Obama in 2009, Liff reached out to a member of the administration's transition team for the Department of Veterans Affairs to promote his skills and suggest reforms for the agency. See id., ¶ 19. The individual he contacted, Ray Jefferson, did not end up serving in the VA but was appointed instead as Assistant Secretary for DOL's Veterans' Employment and Training Service (DOL-VETS), which provides job training and other employment-related resources for returning service members. See id., ¶ 20. Convinced that Liff could be of assistance to DOL-VETS, Jefferson arranged for him to be hired "as a subcontractor under an existing contract" to that office, working with several individuals in DOL-VETS' Office of Agency Management and Budget to make that happen. See id., ¶ 21.

Beginning in late 2009, Liff began a series of consultancies for DOL-VETS, working as a subcontractor to three different prime contractors. From November 2009 to March 2010, he worked under a subcontract with For Your Information, Inc., and from April 2010 to August 2010, he subcontracted with MSTI, Inc.; both companies held contracts directly with DOL-VETS. See id., ¶¶ 22-23. From September 2010 to December 2010, he provided consulting services to DOL-VETS through a contract that a company named Information Experts, Inc., held with OPM. See id., ¶ 24. DOL-VETS was able to obtain Liff's services under that contract by establishing an interagency agreement with OPM in which DOL-VETS could reimburse OPM for using the latter's contract vehicle. See id.

In March 2011, Liff's work under the Information Experts contract expanded beyond his DOL-VETS client to include direct work for OPM. See id., ¶ 36. Under the terms of his contract with Information Experts, he was to be paid for performing discrete, fixed-price task orders. See id., ¶¶ 36-37. Liff claims that his work was going swimmingly when, in August 2011, OPM abruptly "terminat[ed] the task order under which Liff was providing human resources management consulting... to OPM." Id., ¶ 47.

B. DOL-OIG Investigation

At least a month before the task order was terminated, however, there were signs that all was not well from the government's perspective with Liff's contracts. In July 2011, after conducting an eight-month investigation, the Department of Labor's Office of Inspector General (DOL-OIG) issued a final report concluding that certain contracting improprieties had taken place at DOL-VETS during Jefferson's tenure. See id., ¶¶ 34, 35, 38. The primary focus of the investigation was whether Jefferson and other agency officials had improperly circumvented federal procurement laws in retaining Liff's services. See id., ¶ 38. The report concluded that Jefferson and other officials had in fact acted in such a way that "reflect[ed] a consistent disregard of federal procurement rules and regulations, federal ethics principles, and the proper stewardship of appropriated dollars." Id., ¶ 38; see also DOL-OIG Report No. 14-1301-0002 IA ("DOL-OIG Report"), Cover Memorandum at 1.[1] The primary basis for this conclusion, says Liff, is that Jefferson and his colleagues purportedly pressured certain procurement officials in DOL-VETS to hire Liff, regardless of whether that meant disregarding strict procurement policies. See Compl., ¶ 38. Even though Plaintiffs agree that the main purpose of the report was to expose procurement improprieties originating from government officials, including Jefferson, they contend that "Liff and his consulting services were the central focus of the [report], " id., and that it "contained numerous blatant misstatements and false characterizations specifically regarding Liff" that cast doubt on his honesty and integrity. See id., ¶¶ 42-43.

In Plaintiffs' view, the retaliatory motivations of certain DOL-VETS employees have undermined the legitimacy of the entire investigation. They allege that it came about because several disgruntled DOL-VETS employees were displeased with certain reforms he had proposed to senior officers, like Jefferson, within the agency. See id., ¶¶ 33-34. Liff acknowledges that he had been "highly critical" of the agency's budget office in various assessment reports he submitted to the agency, and he asserts that the office's deputy director, Angela Freeman, and another budget-office employee, Paul Briggs, struck back against Liff and Jefferson by lodging complaints with DOL-OIG. See id., ¶¶ 32-33, 41.

Whatever the reasons for its initiation, the investigation went forward under the auspices of Acting Inspector General Daniel Petrole, id., ¶ 5, who directed two of his subordinates to interview Liff as a "witness." Id., ¶¶ 78-79. Liff cooperated, id., ¶ 78, but insists that no one from DOL-OIG notified him that the investigation might yield a final report that reflected poorly on his reputation, or that other witnesses - like Freeman, Briggs, or perhaps even their union representatives - had already provided "false and vindictive accusations and characterizations of [Liff's] work at DOL-VETS." Id., ¶ 35; see id., ¶ 78. After reviewing the DOL-OIG Report upon its release in July 2011, Liff was displeased that the report repeated at least Freeman's assertions without indicating that she "was a person of highly suspect credibility with a strong bias to malign both... Jefferson and Liff." Id., ¶ 41.

Accompanying the report's release was a cover memorandum from Petrole to Seth Harris, then-Deputy Secretary of DOL, that summarized (inaccurately, says Liff) the contents of the report. See id., ¶ 38. The memorandum recommended that DOL take certain follow-up actions, including "review[ing]" the specific procurements identified in the DOL-OIG Report and "determin[ing] what, if any, further actions should be taken." Cover Memo. at 3.

On July 27, 2011, "DOL and DOL-OIG convened a joint press conference, announcing the findings and conclusions in the DOL-OIG report" and thus, according to Liff, repeating the report's "false depictions of Liff." Compl., ¶ 45. The press conference spawned a Washington Post article that "asserted that Liff had received approximately $700, 000... for services that could have been secured at a much lower cost through open competition" and noted that his work included giving "advice on the proper color scheme' for offices" at DOL-VETS, thus casting substantial doubt on whether the government had obtained good value for his services. See id.

At the end of August 2011, Deputy Secretary Harris released a follow-up memorandum to the July 2011 DOL-OIG Report. See id., ¶ 48. Liff contends that such memorandum "ratified" the DOL-OIG Report's inaccurate findings by "praising DOL-OIG for its report and setting forth concrete follow-up actions... relat[ing] to Liff." Id . Specifically, Harris stated in the memo that DOL would "aggressively pursue' Liff for all valid causes of action' under, inter alia, the False Claims Act." Id.

According to the Complaint, the investigation, report, press conference, and responsive memorandum are concrete acts taken by DOL and DOL-OIG that had an adverse effect on Plaintiffs. As a result, Liff claims, he lost a "prized" invitation to speak at an annual conference where numerous high-level federal officials - and presumably prospective clients - would be present. Id., ¶ 51. The National Labor Relations Board also rescinded an offer for Plaintiff to teach a seminar on how to manage federal employees. Id . And the Los Angeles Federal Executive Board revoked its invitation for Liff to speak at one of its events. Id.

He also states that "most" of his consulting work had previously originated with government officials' reaching out to him directly by way of his website, but that all inquiries effectively dried up in the aftermath of the government's damaging statements about him. Id., ¶ 52. Former federal-agency clients stopped doing business with him, including several branches of the Department of Veterans Affairs in California. Id., ¶ 53. Finally, Liff claims that the report and DOL memorandum caused a significant decline in his federal contracting work. Specifically, he notes that he

ha[d] submitted competitive bids on a variety of government contracts since the issuance of the DOL-OIG report, but with one exception, [was not] selected for any project. Government contractors that had expressed strong interest in teaming up with Liff later refused to partner with him because of the adverse publicity from the DOL-OIG report.

Id., ¶ 52. Liff does not, however, identify which agencies received his bids or which one ultimately decided to do business with him.

C. OPM Investigation

DOL's and DOL-OIG's actions also triggered a collateral investigation by OPM's inspector general in late July 2011. Around that time, OPM's then-director Berry held a press conference in which he "stated, inter alia, that Liff and/or Stewart Liff & Associates, Inc. would not be used again by OPM for consulting services, a statement reported in a Washington Post article the next day." Id., ¶ 50. (The Complaint does not make clear whether the article is the same one that reported on his purportedly overvalued consulting services.)

OPM's Office of Inspector General then set out to inquire "into how Liff's services as a subcontractor to OPM through the existing contract with [Information Experts] had been arranged." Id., ¶ 47. And, as previously noted, about a month later in August 2011, "Liff was advised that OPM was terminating the task order under which Liff was providing [HR] management consulting through [Information Experts] to OPM." Id . The value of that outstanding task order was, according to Liff, $350, 000. See id.

The OPM investigation proceeded similarly to the one conducted by DOL-OIG. The agency interviewed Liff in March 2012 and issued an interim report on April 2, 2013. See id., ¶ 49. Like the DOL-OIG Report, the OPM interim report also suggested "that Liff's services may have been wasteful' of taxpayer resources" due to improprieties in how his services were obtained. See id. As occurred with the DOL investigation, agency head Berry responded to the report with a publicly issued memorandum. See id., ¶ 50. In it, alleges Liff, Berry made clear that, "after the issuance of the DOL-OIG report" in July 2011, "he had taken steps to ensure that OPM immediately concluded any business involving [Stewart Liff & Associates, Inc.].'" Id . (quoting OPM's 2013 memorandum).

Although Plaintiffs' revenue stream had already been trending downward ever since July 2011, these "subsequent actions by OPM and Berry, " Liff claims, contributed to a sharp, 97% decline in revenue from 2011 to 2013 caused by his "broad[] preclu[sion]" from federal-government contracting. Id., ¶ 54.

In July 2014, Plaintiffs filed a three-count Complaint against Defendants. The first, asserted against DOL, DOL-OIG, and OPM, claims that the agencies ruined Plaintiffs' professional reputations and effectively debarred them from government contracting without affording them adequate process guaranteed by the Fifth Amendment. Count II, pled against individual Defendants Petrole, Harris, Berry, and two unknown agents of DOL-OIG, seeks damages flowing from a Fifth Amendment tort violation under Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971). Finally, Count III, asserted against the three federal-agency Defendants, alleges that they all violated the Administrative Procedure Act by, inter alia, terminating Liff's outstanding task order and constructively debarring him from government-contracting work without affording him any procedural protections.

II. Legal Standard

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of an action where a complaint fails "to state a claim upon which relief can be granted." In evaluating Defendants' Motion to Dismiss, the Court must "treat the complaint's factual allegations as true... and must grant plaintiff the benefit of all inferences that can be derived from the facts alleged.'" Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000) (quoting Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir. 1979)) (citation omitted); see also Jerome Stevens Pharms., Inc. v. FDA, 402 F.3d 1249, 1250 (D.C. Cir. 2005). The notice-pleading rules are "not meant to impose a great burden upon a plaintiff, " Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 347 (2005), who must be given every favorable inference that may be drawn from the allegations of fact. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 584 (2007).

Although "detailed factual allegations" are not necessary to withstand a Rule 12(b)(6) motion, id. at 555, "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) (quoting Twombly, 550 U.S. at 570). Plaintiff must put forth "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id . The Court need not accept as true "a legal conclusion couched as a factual allegation, " nor an inference unsupported by the facts set forth in the Complaint. Trudeau v. Fed. Trade Comm'n., 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)) (internal quotation marks omitted). For a plaintiff to survive a 12(b)(6) motion even if "recovery is very remote and unlikely, " moreover, the facts alleged in the complaint "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555-56 (citing Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

In evaluating the sufficiency of Plaintiffs' Complaint under Rule 12(b)(6), the Court may consider "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). The Court may thus consider those materials on a motion to dismiss without treating the motion "as one for summary ...


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