Kuwait Pearls Catering Co. v. Kellogg Brown & Root Servs., Inc.

Decision Date31 March 2016
Docket NumberCiv. A. H-15-0754
CourtU.S. District Court — Southern District of Texas

The above referenced cause alleges, purportedly under Texas state law, (1) breach of a subcontract1 for Defendant Kellogg Brown & Root Services, Inc. ("KBR") to lease one of Plaintiff Kuwait Pearls Catering Company, WLL's ("KPCC's") dining facilities and for KPCC to operate food services for U.S. troops at that military dining facility ("DFAC") in Kirkuk, Iraq, designated Forward Operation Base ("FOB") Warrior (C7)," during Operation Iraqi Freedom, and (2) fraud in the inducement. This case was removed from state court pursuant to 28 U.S.C. § 1442 (federal officer removal) and §§ 1331 and 1441 (federal question). Pending before the Court are two motions with overlapping and intertwined substantive legal issues: (1) KPCC's motion to remand (instrument #11) and (2) KBR's motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6)(#4).

KPCC contends that the second subcontract required KBR to lease the FOB Warrior (C7) and all the equipment needed to operate the DFAC and that it also gave KBR the option to purchase the DFAC on behalf of the United States. KPCC claims that KBR represented that it intended to purchase the facility. The Original Petition asserts that KBR and KPCC negotiated the purchase of FOB Warrior (C7) by KPCC from April to July 11, 2011. KPCC's suit alleges that KBR breached the subcontract by failing to purchase the DFAC at FOB Warrior (C7) on behalf of the United States Government and that KBR committed fraud in falsely representing to KPCC that KBR would purchase the facility.

With supporting documentary evidence,2 KBR claims that in these negotiations it acted at the direction of the United States Government and that it ultimately discontinued the negotiations, also under the direction of the United States, which tightly controlled KBR in its role operating the DFACs on military bases in Iraq. KBR explains that in October 2011 it was informed that the United States considered the DFACs to be "real property" that had to be turned over to the Government of Iraq after the withdrawal of U.S. troops,3 pursuant to Article 5, ¶ 1, at 4, of an Agreement Between the United States of America and the Republic of Iraq on Withdrawal of United States Forces from Iraq and the Organization of their Activities during Their Temporary Presence in Iraq (the "Security Agreement"), executed on November 17, 2008 and effective as of January 1, 2009, Ex. 7 to #1; also Ex. 2 to #5). This Security Agreement set the deadline of December 31, 2011 for withdrawal of all American military forces and stated, "Iraq owns all buildings, non-relocatable structures and assemblies connected to the soil that exist on agreed facilities and areas, including those that are used, constructed, altered, or improved by the United States Forces." Ex. 7 to #1, Art. 5, ¶ 1, at 4. It also called for the handover to the Iraqi Government of all military bases, facilities, and related real property upon the withdrawal of U.S. forces. Id. at ¶¶ 2, 6, at 4-5.

KPCC responds that this explanation for the United States' decision not to purchase the facility "made no logical sense" because the 2009 Security Agreement was entered into more than a year before the subcontract, and the subcontract made no mention of the Security Agreement. If KBR's explanation is true, it was never possible for KBR to meet the terms of the subcontract, and thus KPCC was denied the very consideration for which it had bargained. KPCC claims that in one of a series of emails in which the United States Government acknowledged that its failure to honor the purchase option was a breach of the subcontract, KBR admonished that it would be liable to KPCC under the subcontract if the FOB Warrior (C7) were seized by the United States Government without just compensation, i.e., a "taking" under the Fifth Amendment. Moreover, KPCC points out that after KBR notified KPCC that it would not purchase the facility, KBR continued to use it without making any further lease payments and refused to reimburse KPCC for its costs. In addition, according to the express term of the subcontract, the decision to purchase FOB Warrior (C7) was within the "sole discretion" of KBR.4

KBR contends that it removed this case to this Court based on its assertion of five affirmative defenses in state court that vested jurisdiction exclusively in the federal courts: "(1) a claim of derivative sovereign immunity, (2) involving non-justiciable political questions; (3) the act of state doctrine; (4) the government contractor defense; and (5) the Defense Production Act of 1950," § 1 et seq., 50 App. U.S.C.A. § 2061, et seq., #11 at p.4.

KPCC argues that none of these defenses is sufficient to support a removal of this case to federal court. Furthermore, although KBR insists that it can remove the suit because it was acting under the direction of a federal officer under 28 U.S.C. § 1442(a)(1), KPCC insists that KBR was not acting as an agent of the United States Government in performing the subcontract and that KBR retained "sole discretion" in its performance and in making its own decision not to purchase the FOB Warrior (C7). Therefore the federal removal statute, 28 U.S.C. § 1442, does not apply to KBR.

Because the removal/remand issue determines whether this Court has jurisdiction to rule on the motion to dismiss, the Court addresses the motion to remand first.

As a threshold matter, KPCC contends that in this breach of contract and fraud in the inducement case Texas law governs and there are no federal questions or federal statutes that will resolve the issues in this action. KBR correctly points out that Texas law does not govern this case. KPCC drew its erroneous conclusion from the subcontract's provision in section 11.0 5, "Alternative Dispute Resolution" clause, which by its own terms does not apply here: "AS AN EXCLUSIVE SUBSTITUTE FOR INITIATING ANY ACTION IN LAW OR EQUITY IN ANY COURT OR OTHER JUDICIAL PROCESS, THE PARTIES AGREE THAT THE FOLLOWING DISPUTE RESOLUTION PROCEDURE SHALL BE COMPLIED WITH: . . . ." First Amended Complaint, #12, Exhibit 1, at 000039, Instead the 2010 subcontract incorporated the FAR (see footnote 1)(at 000034), clause 52.233-4 (at 000035) for "Applicable Law for Breach of Contract Claim" (Oct. 2004), which states "United States law will apply to resolve any claim of breach of this contract." 48 C.F.R. § 52.233-4 (emphasis added).

Relevant Law: Federal Officer Jurisdiction

The "federal officer" statute, 28 U.S.C. § 1442(a)(1)("Federal officers or agencies sued or prosecuted"), as amended effective November 2011, provides in relevant part,

(a) A civil action or criminal prosecution that is commenced in a State court and that is against or directed to any of the following may be removed by them to the district court of the United States for the district and division embracing the place wherein it is pending:
(1) The United States or any agency thereof or any officer (or any person acting under that officer) of the United States or of any agency thereof, in an official or individual capacity, for or relating to any act under color of such office or on account of any right, title or authority claimed under any Act of Congress for the apprehension or punishment of criminals or the collection of the revenue.

"Acting under" has usually been interpreted to require "some federal directives of particular detail that relate to the conduct for which the person seeking to remove is being sued in state court." Kristine Cordier Karnezis, "Who is 'Person Acting Under' Officer of United States of Any Agency Thereof for Purposes of Availability of Right to Remove State Action to Federal Court Under 28 U.S.C.A. § 1442(a)(1)," 166 A.L.R. Fed. 297 (2000). Most courts have ruled that corporations can be "persons" within the meaning of § 1442(a)(1). Id. "The courts generally support the proposition that persons are 'acting under' a federal officer for purposes of removing actions against them to federal court, under 28 U.S.C.A. § 1442(a)(1), when the activities forming the basis of the suit against them were performed pursuant to federal directives (at §4)," "or pursuant to a federal officer's 'direct orders or comprehensive and direct regulations.'" Id. at § 2[a]. In Watson v. Philip Morris Companies, Inc., 551 U.S. 142, 151-52 (2007), the Supreme Court construed the phrase as meaning not only subject to the instruction, direction of" a federal officer, but also a private person's "effort to assist, or to help carry out, the duties of a federal superior." That "help or assistance necessary to bring a private person within the scope of the statute does not include simply complying with the law"; "under" requires being "subordinate or subservient to," "[s]ubject to guidance, tutorship, or direction of." Id. at 151-52. See also Bell v. Thornburg, 743 F.3d 84, 88-89 (5th Cir. 2014).

"The purpose of this [federal officer] removal statute is to protect the lawful activities of the federal government from undue state interference. It allows suits to be removed despite the non-federal cast to the complaint and reflects a congressional policy that federal officers and the federal government itself require the protection of a federal forum." Leonard v. Board of Supervisors of Louisiana State University and Agr. and Mechanical College, Civ. A. No. 13-565-JJB-SCR, 2014 WL 2197042, at *2 (M.D. La. Jan. 17, 2014), adopted, 2014 WL 2203876 (May 27, 2015). As the Supreme Court opined in Willingham v. Morgan, 395 U.S. 402, 406 (1969), quoting Tennessee v. Davis, 100 U.S. 257, 263 (1880), the federal government

'can only act through its officers and agents, and they must act within the States. If, when thus acting, and within the scope of their

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT