Federal Officer Jurisdiction: Defense Contractor Successfully Removes Case under Federal Officer Jurisdiction Statute

provisions for contractors
In Stephenson v. Nassif et al., Case 1:15-cv-1409, 2015 WL 945614 (EDVa Dec. 21, 2015), Judge T.S. Ellis ruled in favor of the Defendant (a government contractor) on whether the contractor properly removed state law claims to federal court based on the Federal Officer jurisdiction in 28 USC § 1442(a)(1). The challenge for the EDVa Court was to keep this case in the federal court while not opening the door to the more common effort to remove contractor/subcontractor disputes under government contracts based on the argument that that compliance with FAR provisions and flow-down clauses meets the removal test. As explained below, the EDVa Court navigated this challenge by extracting and applying the “the principles of Watson.” Issue Focuses on NISPOM Mandatory Reporting Regulations Plaintiff, a former employee of Contractor, filed in the Alexandria Circuit Court defamation and other state law tort claims against the Contractor.   The Contractor removed the case to federal court asserting federal jurisdiction under 28 USC § 1442(a)(1). Plaintiff then moved for remand back to the state court. The Contractor contended that in making a required report to the Defense Security Service (“DSS”), it was “acting under” a federal officer when it complied with the NISPOM regulations (the federal regulations regarding security clearances). The argument continued that the remaining state court claims were covered by the ancillary jurisdiction provision of this jurisdiction statute. The EDVa Court, citing Mesa v. California, 489 U.S. 232 (1987) recognized first that § 1442(a)(1) creates an exception to the “well-pleaded complaint” rule.   Under this rule, federal defenses to state law claims typically do not create a federal question for purposes of federal court jurisdiction. The EDVa Court then turned to the specifics of 1442(a)(1) and the facts of the case. 28 USC § 1442(a)(1)’s Broad “Acting Under” Language 28 USC § 1442(a)(1) provides that “[a] civil action . . . that is commenced in a state court” may be removed to federal court if the action is against “any officer (or any person acting under that officer) of the United States . . . for or relating to any act under color of such office.”   Mesa establishes a 4-part test for removal under § 1442(a)(1):
  1. that the defendant is a “person” as used in the statute,
  2. that the defendant acted pursuant to a federal officer’s directions,
  3. a causal nexus between the defendant’s actions under color of a federal office and the plaintiff’s claims, and
  4. the existence of a colorable federal defense.
Key in the EDVa Court’s ruling is that the Court was persuaded that the Contractor’s reporting was dictated by NISPOM § 1-302(a).   The Court then found that the DSS reporting fell within the statute’s boundaries: . . . because compliance with NISPOM § 1-302(a) is mandatory, assists with the important federal task of protecting classified information, and invites the risk of state tort litigation that might disable the exercise of federal functions (as this lawsuit aptly illustrates), defendants’ [DSS] incident report falls within § 1442(a)(1)’s broad ‘acting under’ language. The “Principles of Watson The Court did not hesitate in making its finding on part (ii) of the Mesa test: “The first statutory requirement in issue—that a defendant acted pursuant to a federal officer’s directions—is plainly met.”   In the case, the Contractor was complying with the NISPOM regulations, and not acting pursuant to explicit directives from a federal officer (although the Contractor sought and received directions from its DSS contacts, the Court stayed focused on the NISPOM regulations).   The Supreme Court, in Watson v. Philip Morris Cos., Inc., 551 U.S. 142, 147 (2007), has held that “mere compliance” does not give rise to federal officer jurisdiction.   This is so, the Supreme Court reasoned, because “acting under” must involve “an effort to assist, or to help carry out, the duties or tasks of the federal superior.” To elevate the Contractor’s NISPOM report above “mere compliance,” the EDVa Court extracted “the principles of Watson.” The EDVa Court noted that the Contractor had “no discretion not to report” and that a “failure to report something that falls within the broad reach of ‘adverse information’ is not an exercise of discretion but a breach of the mandatory reporting obligation.”  The Court concluded that the Watson principles “point persuasively to the conclusion that defendant [Contractor] was ‘acting under’ a federal officer when it submitted the [DSS] incident report concerning plaintiff.” The Court’s Memorandum Opinion relegates discussion of other federal officer jurisdiction cases to a footnote. While the Opinion acknowledges “§ 1442(a)(1)’s broad ‘acting under’ language,” the ruling seems to navigate carefully so as not to expand what has been held to be a narrow jurisdictional statute.  In L-3 Commc’ns Corp. v. Serco Inc., 39 F. Supp. 3d 740 (EDVa 2014), the Court nixed the argument that reliance on alleged FAR violations necessarily creates federal question jurisdiction. The Court added that “removal under § 1442(a)(1) [was] not proper when Defendant had near full discretion over sub-contract award decisions and was therefore not ‘acting under’ color of a federal officer.” In other cases where removal has been upheld, courts have relied on facts showing “direct and detailed” control by a federal officer. For example, in CRGT, Inc. v. Northrop Grumman Sys. Corp., No. 1:12-CV-554, 2012 WL 3776369 (E.D. Va. Aug. 28, 2012), the court found that the challenged conduct was under direct and detailed control of a federal contracting officer because the officer expressly instructed the prime contractor to halt the provision of services that were the object of the subcontract.   Similarly, in an asbestos case involving Navy ships, the court found the defendant contractors were acting under the control of the Navy and its officers when constructing or repairing Navy ships.   Epperson v. Northrop Grumman Sys. Corp., No. 4:05CV2953, 2006 WL 90070, (E.D. Va. Jan. 11, 2006). Ancillary Jurisdiction for other State Court Claims Under 28 USC § 1442(a)(1) Plaintiff’s state court complaint asserted seven counts.   The EDVa Court’s ruling denied remand and kept all counts in the federal court.   After the Court ruled that the lead count would stay in federal court, the remaining part of the order was straightforward. By its plain language, § 1442(a)(1) provides for the removal of an entire “civil action,” so removal was not limited only to specific qualifying claims. The EDVa Court’s consistent skepticism on allowing removal under 28 USC § 1441(a)(1) remains in place.   While arguably the Court’s ruling that a Contractor’s compliance with the NISPOM regulations satisfies Mesa’s “acting under” requirement, the ruling is constrained by the facts, and perhaps limited the world of NISPOM regulations and security clearances, and it should not be read as opening a new path for federal jurisdiction on common government contracts litigation.
Disclosure:  Redmon, Peyton & Braswell, LLP, served as counsel of record for the Defendant in this case.