Babcock Services Inc v. CH2M Hill Plateau Remediation Company Inc, No. 2:2013cv05093 - Document 14 (E.D. Wash. 2013)
Court Description: ORDER GRANTING PLAINTIFF'S MOTION TO REMAND. Plaintiffs Motion to Remand ECF No. 6 is GRANTED. This case is hereby REMANDED to the Benton County Superior Court for all further proceedings. The case is CLOSED. Signed by Judge Thomas O. Rice. (LLH, Courtroom Deputy)
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Babcock Services Inc v. CH2M Hill Plateau Remediation Company Inc Doc. 14 1 2 3 4 5 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON 6 7 BABCOCK SERVICES, INC, NO: 13-CV-5093-TOR Plaintiff, 8 9 10 ORDER GRANTING PLAINTIFF’S MOTION TO REMAND v. CH2M HILL PLATEAU REMEDIATION COMPANY, INC., 11 Defendant. 12 13 BEFORE THE COURT is Plaintiff’s Motion to Remand (ECF No. 6). This 14 matter was submitted for consideration without oral argument. The Court has 15 reviewed the briefing and the record and files herein, and is fully informed. 16 BACKGROUND 17 Plaintiff Babcock Services, Inc. (“BSI”) filed this action in Benton County 18 Superior Court, asserting state law breach of contract claims arising from alleged 19 violations of a subcontract between itself and Defendant CH2M Hill Plateau 20 Remediation Company, Inc. (“CHPRC”). CHPRC timely removed the case to this ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ~ 1 Dockets.Justia.com 1 Court pursuant to 28 U.S.C. § 1441(a). ECF No. 1. Plaintiff subsequently moved 2 to remand the case for lack of subject-matter jurisdiction. ECF No. 6. For the 3 reasons discussed below, the Court concludes that CHPRC has failed to carry its 4 burden of establishing federal subject matter jurisdiction. Accordingly, the case 5 will be remanded to Benton County Superior Court for all further proceedings. 6 FACTS 7 CHPRC contracts with the Department of Energy (“DOE”) to provide 8 environmental cleanup of the Hanford Site in Richland, Washington. In 2008, 9 CHPRC entered into a subcontract (the “Shared Resource Agreement” or “SRA”) 10 with BSI for various professional services. The subcontract’s “base period” ran 11 from October 2008 to September 2013. The subcontract also provided for an 12 “option period” extending from October 2013 to September 2018. 13 According to BSI, the parties agreed that the subcontract would continue 14 through the option period unless it was specifically terminated for convenience by 15 the DOE. In support of this assertion, BSI cites the subcontract’s termination 16 clause, which provides: 17 18 19 20 The subcontract may be terminated at any time by mutual agreement of the Parties. It is anticipated that this subcontract shall continue [for] the duration of the CHPRC Contract and any extension thereof, unless during the term of the subcontract, DOE directs in writing the termination of the Subcontract in accordance with FAR 52.249-6 or unless DOE removes substantially all the Subcontractor scope of work [from] the Prime Contract. Buyer will terminate by delivering to the ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ~ 2 1 Contractor a Notice of Termination for Convenience specifying the extent of termination and the effective date. 2 Despite this agreement, BSI alleges, CHPRC declined to extend the 3 subcontract into the option period. BSI claims that this decision was not prompted 4 by a termination of the subcontract for convenience by the DOE or by a removal of 5 substantially all of BSI’s scope of work from the prime contract. 6 BSI further alleges that, after deciding not to extend the subcontract, 7 CHPRC actively solicited BSI employees in violation of the subcontract’s non8 solicitation clause. The non-solicitation clause provides: 9 During the term of the SRA, neither Party shall, without the written approval of the other party, directly or indirectly or through the use of a third party, solicit for employment an employee of the other Party. This prohibition shall extend for a period of ninety (90) days after the employee terminates employment with the other Party. The foregoing shall not apply to employees of either Party who have not been substantially involved in the performance of the initial Teaming Agreement or PRC Project, clerical or administrative employees, or individuals hired as a result of the use of a general solicitation (e.g., PRC solicitation) not specifically directed to the employees of the other Party. 10 11 12 13 14 15 BSI filed the instant lawsuit in Benton County Superior Court, alleging state 16 17 law breach of contract claims. After being served with the Complaint, CHPRC 18 removed the case to this Court on federal question grounds. BSI now moves to 19 remand the case for lack of subject matter jurisdiction. 20 // ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ~ 3 1 DISCUSSION 2 CHPRC removed this case from state court pursuant to 28 U.S.C. § 1441(a) 3 on the ground that BSI’s claims present a federal question. Section 1441(a) allows 4 removal of “any civil action brought in a State court of which the district courts of 5 the United States have original jurisdiction.” 28 U.S.C. § 1441(a). Pursuant to 28 6 U.S.C. § 1331, federal district courts have original jurisdiction over all claims 7 “arising under the Constitution, laws, or treaties of the United States.” 8 Whether a suit “arises under” federal law is determined by the well-pleaded 9 complaint rule, which provides that federal jurisdiction exists “only when a federal 10 question is presented on the face of the plaintiff’s properly pleaded complaint.” 11 Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). “Because a defense is not 12 part of a plaintiff’s properly pleaded statement of his or her claim, a defense that 13 raises a federal question is inadequate to confer federal jurisdiction.” Wash. 14 Consulting Grp., Inc. v. Raytheon Technical Servs. Co., LLC, 760 F. Supp. 2d 94, 15 100 (D. D.C. 2011) (internal quotations and citations omitted). As a result, under 16 the well-pleaded complaint rule, “the plaintiff is the master of his complaint and 17 may avoid federal jurisdiction by relying exclusively on state law.” Hunter v. 18 Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009) (quotations and citation 19 omitted). 20 ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ~ 4 1 There are two ways in which a claim can “arise under” federal law. “Most 2 directly, a case arises under federal law when federal law creates the cause of 3 action asserted.” Gunn v. Minton, --- U.S. ---, 133 S. Ct. 1059, 1064 (2013). Such 4 claims “account[] for the vast bulk of suits that arise under federal law.” Id. In a 5 much narrower category are state law claims that “implicate significant federal 6 issues.” Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 7 312 (2005); see also Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 8 677, 699 (2006) (explaining that such claims are in a “special and small category” 9 of federal “arising under” jurisdiction). Claims in this category fall within a 10 limited exception to the well-pleaded complaint rule, which is grounded in “the 11 commonsense notion that a federal court ought to be able to hear claims recognized 12 under state law that nonetheless turn on substantial questions of federal law, and 13 thus justify resort to the experience, solicitude, and hope of uniformity that a 14 federal forum offers on federal issues.” Id. To fall within this so-called 15 “substantial federal question” exception, a state law claim must present a federal 16 issue which is: “(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) 17 capable of resolution in federal court without disrupting the federal-state balance 18 approved by Congress.” Gunn, 133 S. Ct. at 1064 (citing Grable, 545 U.S. at 314). 19 20 At issue in the instant motion is whether Plaintiff’s state law claims raise an issue of federal law that is “substantial” enough to warrant the exercise of federal ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ~ 5 1 question jurisdiction. As the party that removed the case from state court, CHPRC 2 bears the burden of demonstrating that the exercise of federal question jurisdiction 3 is proper. Hunter, 582 F.3d at 1042. There is a “strong presumption” against 4 removal. Id. Any doubts about the propriety of the removal must be resolved in 5 favor of remand. Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th 6 Cir. 2009). 7 A. Substantial Federal Question Jurisdiction 8 CHPRC asserts that the Shared Resource Agreement, as a subcontract let 9 under a prime contract with the federal government, is governed by federal law. 10 ECF No. 1 at 4. Citing to American Pipe & Steel Corp. v. Firestone Tire & 11 Rubber Co., 292 F.2d 640 (9th Cir. 1961) and New SD, Inc. v. Rockwell Int’l 12 Corp., 79 F.3d 953 (9th Cir. 1996), CHPRC argues that the federal government has 13 a strong interest in having disputes relating to such contracts adjudicated uniformly 14 in federal court. This interest, CHPRC contends, warrants the exercise of 15 “substantial federal question” jurisdiction over BSI’s claims. ECF No. 10 at 8-10. 16 At first glance, American Pipe and New SD appear to support CHPRC’s 17 assertion that this case presents a substantial federal question. In American Pipe, a 18 diversity case, the Ninth Circuit chose to apply federal law rather than California 19 law to claims arising from an alleged breach of a subcontract for the manufacture 20 of missile containers for the federal government. 292 F.2d at 644. In reaching this ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ~ 6 1 decision, the court noted that the plaintiff’s requested remedy—an “equitable 2 adjustment” in the subcontract price—would result in increased national security 3 costs to the federal government. Id. In light of Congress’s expressed desire to 4 reduce national security costs, the court reasoned, the federal government had a 5 substantial interest in having such cases adjudicated “uniform[ly] throughout the 6 country.” Id. at 643. Thus, the court concluded that “the construction of contracts, 7 let under prime contracts connected with the national security, should be regulated 8 by a uniform federal law.” Id. 9 In New SD, the Ninth Circuit was asked to decide whether the federal 10 government’s interest in uniform adjudication of government contract disputes 11 between private parties could support the exercise of federal question jurisdiction 12 over state law breach of contract claims. As in American Pipe, the plaintiff’s claim 13 was for breach of a subcontract let under a prime government contract which 14 implicated national security. New SD, 79 F.3d at 955. After reviewing its prior 15 decision in American Pipe, the court concluded that the case could not be 16 “meaningfully distinguish[ed].” Id. Thus, the court held that federal question 17 jurisdiction had been properly established: 18 19 20 [O]n government contract matters having to do with national security, state law is totally displaced by federal common law. Where the federal interest requires that “the rule must be uniform throughout the country,” as we said was the case in American Pipe, then the entire body of state law applicable to the area conflicts and is replaced by federal rules.” [Boyle v. United Techs. Corp., 487 U.S. 500, 508 ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ~ 7 1 2 3 4 (1988)]. When federal law applies, as American Pipe holds that it does to this type of contract, it follows that the question arises under federal law, and federal question jurisdiction exists. Id. (internal quotations and citations omitted). Having carefully reviewed these and other applicable authorities, however, 5 the Court concludes that American Pipe and New SD do not support the exercise of 6 federal question jurisdiction. As an initial matter, both cases were decided before 7 the Supreme Court’s decisions in Grable and Empire, which clarified the proper 8 scope of the substantial federal question doctrine. In Grable, the Court granted 9 certiorari to review its jurisdiction over a state law quiet title action which required 10 an interpretation of a federal tax statute. The Court began by emphasizing that the 11 mere presence of a federal issue is insufficient “to open the ‘arising under’ door.” 12 Grable, 545 U.S. at 313. To warrant the exercise of federal question jurisdiction, 13 the Court explained, the federal issue must be “a substantial one, indicating a 14 serious federal interest in claiming the advantages thought to be inherent in a 15 federal forum.” Id. (emphasis added). 16 The Court further emphasized that, before exercising jurisdiction over a state 17 law claim on substantial federal question grounds, a district court must consider the 18 potential for disruption of the balance of power between state and federal 19 government: 20 Because arising-under jurisdiction to hear a state-law claim always raises the possibility of upsetting the state-federal line drawn (or at ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ~ 8 1 2 least assumed) by Congress, the presence of a disputed federal issue and the ostensible importance of a federal forum are never necessarily dispositive; there must always be an assessment of any disruptive portent in exercising federal jurisdiction. 3 4 Id. at 314. With these principles in mind, the Court framed the substantial federal 5 question inquiry as follows: “[D]oes a state-law claim necessarily raise a stated 6 federal issue, actually disputed and substantial, which a federal forum may entertain 7 without disturbing any congressionally approved balance of federal and state judicial 8 responsibilities[?]” Id. 9 Turning to the merits of the case, the Court found that federal jurisdiction 10 had been properly established. In reaching this conclusion, the Court noted that the 11 state claim hinged on whether the IRS had properly served the plaintiff with notice 12 of a tax sale under federal law. Id. at 314-15. This question, the Court reasoned, 13 implicated an important federal issue that could be adjudicated in federal court 14 without upsetting the balance of state and federal power: 15 16 17 18 19 20 The meaning of the federal tax provision is an important issue of federal law that sensibly belongs in a federal court. The Government has a strong interest in the prompt and certain collection of delinquent taxes, and the ability of the IRS to satisfy its claims from the property of delinquents requires clear terms of notice to allow buyers like [the defendant] to satisfy themselves that the Service has touched the bases necessary for good title. The Government thus has a direct interest in the availability of a federal forum to vindicate its own administrative action, and buyers (as well as tax delinquents) may find it valuable to come before judges used to federal tax matters. Finally, because it will be the rare state title case that raises a contested matter of federal ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ~ 9 1 2 3 law, federal jurisdiction to resolve genuine disagreement over federal tax title provisions will portend only a microscopic effect on the federal-state division of labor. Id. at 315 (internal quotation and citation omitted). 4 Empire was decided one year after Grable. In that case, a health insurance 5 carrier for federal employees filed suit in federal court, seeking reimbursement of 6 health insurance benefits paid on behalf of its insured after the insured’s estate 7 negotiated a substantial settlement in a state-law tort action. The insurer, which 8 was under contract with the federal government, argued that federal question 9 jurisdiction existed under Grable because federal law provided a necessary 10 element of its claim for relief. Empire, 547 U.S. at 699. The Court rejected this 11 argument, explaining that the case was “poles apart from Grable.” Id. at 700. 12 First, the Court noted that Grable, unlike the case before it, “centered on the action 13 of a federal agency (IRS) and its compatibility with a federal statute.” Id. Second, 14 the Court explained that the “substantial” federal question at issue in Grable “was 15 both dispositive of the case and would be controlling in numerous other cases”—a 16 description which did not apply to the “bottom-line practical issue” of whether the 17 insurer was entitled to a share of the settlement proceeds. Id. Finally, the Court 18 reasoned that while Grable presented “a nearly pure issue of law,” the case before 19 it was “fact-bound and situation-specific.” Id. at 700-01 (citation omitted). Thus, 20 ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ~ 10 1 the Court concluded that the insurer’s claim for reimbursement could not be 2 “squeezed into the slim category Grable exemplifies.” Id. at 701. 3 As illustrated above, American Pipe and New SD rest on a single premise: 4 that private disputes relating to a government contract should be uniformly 5 adjudicated in federal court when “the cost of national security stands to be 6 increased in the process.” New SD, 79 F.3d at 955 (citing American Pipe, 292 F.2d 7 at 644). Under Grable and Empire, this premise is no longer sound. For one thing, 8 neither American Pipe nor New SD addresses the potential for disruption of the 9 balance of power between state and federal government. This is a crucial 10 component of the substantial federal question analysis; as the Court explained in 11 Grable, “the presence of a disputed federal issue and the ostensible importance of a 12 federal forum are never necessarily dispositive; there must always be an 13 assessment of any disruptive portent in exercising federal jurisdiction.” 545 U.S. 14 at 314 (emphasis added). As at least one other court has recognized, the reasoning 15 in New SD could support the exercise of federal jurisdiction in virtually any case 16 involving a government contract. See Woodward Governor Co. v. Curtiss Wright 17 Flight Sys., Inc., 164 F.3d 123, 128 (2d Cir. 1999) (“[T]he reasoning behind New 18 SD is, in our opinion, flawed. While there is no question that contracts relating 19 directly to government liability for procurement decisions are governed by federal 20 common law, the issue gets muddier as the contract gets further removed from the ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ~ 11 1 government.”) (emphasis in original). Because the reasoning in American Pipe 2 and New SD cannot accommodate a case-by-case balancing of competing state and 3 federal interests, there is reason to believe that the Supreme Court would reject it. 4 Furthermore, under Empire, the mere potential for increased costs to the 5 federal government does not automatically warrant uniform adjudication of private 6 contract disputes. Although Empire did not specifically address the issue, the 7 Court’s refusal to allow a government contractor to recoup its expenses in federal 8 court is instructive. Given that a federal contractor’s attempt to recover funds paid 9 pursuant to a federal contract does not trigger the federal government’s interest in 10 uniform adjudication, the need for uniformity can hardly support the exercise of 11 federal question jurisdiction over disputes in which the government’s financial 12 interest is more attenuated. 13 In any event, assuming for the sake of argument that American Pipe and 14 New SD remain good law, the cases are distinguishable from the instant case. 15 Unlike the prime contracts in those cases, the contract between CHPRC and the 16 Department of Energy does not implicate national security interests. Thus, the 17 government does not have the same “substantial” interest in uniform adjudication 18 that existed in American Pipe and New SD. See Vetro, Inc. v. Active Plumbing and 19 Heating, Inc., 403 F. Supp. 2d 1033, 1038 (D. Colo. 2005) (distinguishing New SD 20 on the ground that a government contract for renovation of a building at the Air ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ~ 12 1 Force Academy did not concern matters of national security). As BSI correctly 2 notes, accepting CHPRC’s theory of removal in this case would effectively open 3 the door to federal question jurisdiction in any breach of contract case involving a 4 subcontract let under a prime government contract. Such a result would be directly 5 at odds with the Supreme Court’s directives in Grable and Empire that the 6 substantial federal question doctrine be construed narrowly. Accordingly, the 7 Court concludes that CHPRC has failed to carry its burden of demonstrating that 8 this case was properly removed. The case will be remanded to the Benton County 9 Superior Court for all further proceedings. 10 B. Attorney’s Fees and Costs 11 BSI has requested an award of attorney’s fees and costs pursuant to 28 12 U.S.C. § 1447(c). Section 1447(c) provides, in relevant part, that “[a]n order 13 remanding [a] case may require payment of just costs and any actual expenses, 14 including attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447(c). 15 “Absent unusual circumstances, courts may award attorney’s fees under § 1447(c) 16 only where the removing party lacked an objectively reasonable basis for seeking 17 removal. Conversely, where an objectively reasonable basis exists, fees should be 18 denied.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). The Court 19 finds that CHPRC had an objectively reasonable basis for removing this case under 20 ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ~ 13 1 the Ninth Circuit’s decisions in American Pipe and New SD. Accordingly, BSI’s 2 request for attorney’s fees and costs is denied. 3 IT IS HEREBY ORDERED: 4 Plaintiff’s Motion to Remand (ECF No. 6) is GRANTED. This case is 5 hereby REMANDED to the Benton County Superior Court for all further 6 proceedings. 7 The District Court Executive is hereby directed to enter this Order, furnish 8 copies to counsel, mail a certified copy to the Clerk of the Benton County Superior 9 Court, and CLOSE the file. 10 DATED October 21, 2013. 11 12 THOMAS O. RICE United States District Judge 13 14 15 16 17 18 19 20 ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ~ 14
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