United States District Court, E.D. Virginia, Alexandria Division
Ellis, III United States District Judge.
L-3 Communications Corporation and L-3 Applied Technologies,
Inc. (“plaintiffs”), specialize in High Altitude
Electro-Magnetic Pulse (“HEMP”) testing and
maintenance, which is necessary to prevent EMPs from damaging
mission-critical military equipment. Defendant Serco, Inc.
(“Serco”) held a prime contract with the United
States Air Force that included the provision of HEMP testing.
Because Serco did not have the ability to offer HEMP-related
services, Serco subcontracted with plaintiffs'
predecessor, L-3 Services, to provide HEMP services to the
Air Force. Plaintiffs argue that Serco then helped employees
at L-3 Services steal L-3 Services' trade secrets and
redirect bids for HEMP services to which plaintiffs were
entitled to Jaxon, a company formed by former L-3 employees.
extended litigation in three courts,  spanning over a decade and
involving many of the same issues, and after full discovery
in this case, Serco now moves for summary judgment. At issue
are the following questions: (i) whether plaintiffs'
claims are time-barred, and (ii) whether plaintiffs possessed
a valid contractual or business expectancy in receiving
HEMP-related Task Orders from Serco.
matter has been fully briefed and argued, and is now ripe for
entry of summary judgment is appropriate only where there are
no genuine disputes of material fact. See Celotex Corp.
v. Catrett, 477 U.S. 317, 322 (1986). That is the
situation here. Pursuant to Local Rule 56(B) and the Rule
16(b) Scheduling Order issued in this case, a motion for
summary judgment must contain a separately captioned section
listing in numbered-paragraph form all material facts as to
which the movant contends no genuine dispute exists. See
L-3 Commc'ns Corp. v. Serco, Inc., No. 1:15-cv-701
(E.D. Va. Aug. 5, 2015) (Order). Both parties fully complied
with Local Rule 56(B) and the Scheduling Order. The following
list of undisputed material facts is based on Serco's
statement of undisputed material facts and plaintiffs'
response to that statement.
• Plaintiff, L-3 Communications Corporation is a
Delaware corporation headquartered in New York, NY. The other
plaintiff, L-3 ATI, is a Delaware corporation with its
principal place of business in San Diego California. L-3 ATI
is the successor in interest to L-3 Services, which performed
• Defendant, Serco, Inc., is a defense contractor which
held the prime contract with the U.S. Air Force to provide a
number of services at the U.S. Air Force Space Command. Serco
is a New Jersey corporation headquartered in Reston, VA.
• On April 14, 2004, the Air Force awarded a prime
contract to Serco,  which required Serco to provide a number
of services to the Air Force, including testing and upgrading
Air Force sites to protect them from HEMP events, such as
nuclear explosions. The prime contract is performed in
Serco's Colorado Springs, Colorado office because the Air
Force headquarters is located in Colorado.
• On December 30, 2004, Serco awarded Subcontract No.
SI-2004-SC203333 (the “Subcontract”) to the Titan
Corporation (“Titan”), thepredecessor to L-3
Services. The Subcontract between Serco and Titan provides
that the Subcontract is the sole source of Task Orders and
that the Subcontract's terms govern any Task Orders Serco
might issue to Titan. See Id. § H.31. The
Subcontract further provides that the subcontractor is
prohibited from assigning the Subcontract without Serco's
written consent, which Serco may withhold in its discretion.
See Id. § H9. The Subcontract also includes a
limitation of liability clause, written in all capital
letters that limits the availability of lost profit damages.
• Under the Subcontract, Serco issued Requests for
Proposals (“RFPs”) to Titan seeking bids on
various Task Orders to be issued under the Subcontract. These
RFPs stated that “Serco also reserves the right to make
one award, multiple awards, or no award, depending on the
best interest of Serco, ” and that “Serco may
reject any and all offers or waive informalities and minor
irregularities in the proposals received.” See,
e.g., Ex. 7.
• On March 18, 2008, Serco and Titan entered into a
modification of the Subcontract for the purpose of
“chang[ing] the name of the Subcontractor to L-3
Services.” See Def. Ex. 3. This modification
identifies L-3 Services as the named Subcontractor, and L-3
Services is also the signatory. See id. L-3
Services' HEMP business was located in Colorado. L-3
Services was the predecessor to L-3 ATI, one of the
plaintiffs in this case. L-3 Communications Corporation, the
other plaintiff, was the parent company of L-3 Services.
• On June 6, 2008, L-3 Services' employee Randy
White incorporated Jaxon with his wife, Joni White, in
Colorado. In early December 2008, Randy White informed Serco
Program Manager Donald Eich that he planned to retire from
L-3, and later that month, White officially announced his
retirement from L-3 Services.
• Jaxon received its first RFP from Serco on March 3,
2009, and on June 30, 2009, Serco's Colorado Springs
office entered Subcontract No. S2TM9SC407 with Jaxon.
• Serco retained its Subcontract with L-3 Services and
continued to award Task Orders to L-3 Services, Jaxon, and
others from 2009 to 2014.
• On August 18, 2009, L-3 Services employee Charles
Crain recommended to L-3 Services that a letter be sent to
Serco warning that if Serco allowed Jaxon to use L-3
Service's technology, it would “become a party to
pirating IP and could be subject to civil litigation.”
See Ex. 27 at 83, 310-13, Ex. 16.
• In October and November 2009, Crain filed an ethics
complaint against Jaxon and Serco with L-3 Services and the
Air Force Inspector General. Plaintiffs contended in the
ethics complaint that Randy White, Scott White, Susie Rettig,
Jim Youngman, and John McClure breached their employment
agreements in 2008 by stealing L-3 Services' trade
secrets and customer lists to assist in the formation of
Jaxon. See Ex. 29 at 199. The Air Force investigated
the complaint, but no action was taken.
• On November 23, 2010, L-3 Services and L-3
Communications filed a complaint against Jaxon and various
Jaxon personnel in the U.S. District Court for the District
of Colorado (the “Colorado Action”). Although
Serco was not named in the suit, the lawsuit alleged that
Serco had participated in an “illegal scheme”
beginning in 2007. See Ex. 9 ¶ 75. On February 11, 2011,
L-3 Services and L-3 Communications filed an Amended
Complaint with similar allegations against Serco. The various
L-3 entities and Jaxon settled the Colorado action on March
4, 2016. All claims were settled and Jaxon obtained a release
from the L-3 entities.
• On November 9, 2011, while the litigation with Jaxon
was ongoing, L-3 went though a corporate restructuring. L-3
ATI, a new corporation and one of the plaintiffs in this
case, was incorporated in Delaware, and on December 11, 2011,
L-3 Services and L-3 ATI entered into a Contribution
Agreement by which certain assets were transferred from L-3
Services to L-3 ATI. The Contribution Agreement excluded
transfer of any asset for which prior consent was required.
This exclusion included L-3 Services' Subcontract with
• On May 1, 2014, L-3 Communications and L-3 ATI (but
not L-3 Services) filed a complaint against Serco in the
Circuit Court for Fairfax County (the Fairfax Action).
Plaintiffs alleged that collusion between Serco and Jaxon
began well before Serco first began awarding Task Orders to
Jaxon in 2009, including an allegation that White had
colluded with Serco in 2008. The Fairfax Action asserted
claims against Serco for: (i) tortious intereference with
employment agreements; (ii) tortious interference with a
contract or business expectancy; (iii) civil conspiracy; and
(iv) statutory business conspiracy under Va. Code §
18.2-499, 500. On September 30, 2014, plaintiffs filed an
Amended Complaint in the Fairfax Action, detailing further
misconduct of Serco and Jaxon beginning in 2008. Soon after
the filing of the Amended Complaint, Serco filed a Demurrer
and Plea in Bar.
• On May 1, 2015, the Fairfax Court sustained the
Demurrer in part, ruling that Colorado law applied to the
case and that plaintiffs' business expectancy and
business conspiracy claims must be dismissed because those
claims do not exist under Colorado law. The state court judge
identified five acts in Colorado that completed the alleged
tort and gave rise to L-3's claims: (i) Serco's
alleged exclusion of L-3 from the bidding process for the
2009 Task Orders; (ii) Serco's alleged failure to
publicly advertise most of the 2009 Task Orders; (iii)
Serco's alleged prevention of L-3 from submitting
competitive bids; (iv) Serco's alleged bid rigging; and
(v) Serco's alleged teaming with Jaxon, despite its
alleged knowledge that Jaxon was using L-3's proprietary
information. The state court judge held that “all the
alleged acts previously cited which occurred in Colorado and
prior to Serco's termination of L-3's business
expectancy were sufficient to be deemed the last act
necessary to make L-3's claim for tortious interference
with business expectancy actionable. As such, this Court has
determined that Colorado law applies.”
• Plaintiffs nonsuited the Fairfax Action effective May
• On June 3, 2015, shortly after non-suiting the Fairfax
action, plaintiffs filed a complaint in the Eastern District
of Virginia. On September 2, 2015, plaintiffs filed an
amended complaint, and Serco filed a motion to dismiss.
• On October 30, 2015, the federal district judge
originally assigned to the case granted Serco's Rule 12(b)(1)
motion to dismiss for lack of standing. As Judge Lee
explained, “the subcontract is the center of the
dispute . . . [a]nd since the subcontract does not name
either [plaintiff] and neither [plaintiff] is an assignee of
the contract, then they cannot have any business expectancy
which arise[s] outside of the contract.”
• Plaintiffs appealed and the Fourth Circuit reversed.
See L-3 Commc'ns Corp. v. Serco, Inc., 673
Fed.Appx. 284, 285 (4th Cir. 2016) (unpublished). The Fourth
Circuit explained that, while plaintiffs' allegations
were sufficient to establish standing at the pleading stage,
“[t]he separate but related question whether
[plaintiffs] have alleged business expectancy is one properly
considered under Federal Rule of Civil Procedure 12(b)(6) or
on a motion for summary judgment.” Id.
• The case was returned to the district court and a
scheduling order was entered. Serco sought leave to file a
12(b)(6) motion. By Order, the federal district judge
originally assigned to the case denied the request for leave
to file a 12(b)(6) motion and informed the parties that
neither was permitted to file or renew ant dispositive
motions until the completion of ...