Northrop Grumman Technical Servs., Inc. v. Dyncorp Int'l LLC

• Decision Date: 28 July 2017
• Docket Number: No. 16-1644,16-1644
• Parties: NORTHROP GRUMMAN TECHNICAL SERVICES, INC., Plaintiff-Appellant, v. DYNCORP INTERNATIONAL LLC, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

865 F.3d 181

NORTHROP GRUMMAN TECHNICAL SERVICES, INC., Plaintiff-Appellant,

v.DYNCORP INTERNATIONAL LLC, Defendant-Appellee.

No. 16-1644

United States Court of Appeals, Fourth Circuit.

Argued: May 9, 2017

Decided: July 28, 2017

ARGUED: Catherine Carroll, WILMER CUTLER PICKERING HALE & DORR LLP, Washington, D.C., for Appellant. Attison Leonard Barnes, III, WILEY REIN, LLP, Washington, D.C., for Appellee. ON BRIEF: William B. Porter, BLANKINGSHIP & KEITH, P.C., Fairfax, Virginia; Edward N. Siskel, Howard M. Shapiro, Madhu Chugh, Jamie S. Gorelick, WILMER CUTLER PICKERING HALE & DORR LLP, Washington, D.C., for Appellant. Rand L. Allen, Nicole J. Owren-Wiest, Rebecca L. Saitta, WILEY REIN LLP, Washington, D.C.; Richard C. Sullivan, Jr., BEAN KINNEY & KORMAN PC, Arlington, Virginia, for Appellee.

Before GREGORY, Chief Judge, and KING and KEENAN, Circuit Judges.

Affirmed by published opinion. Judge Keenan wrote the opinion, in which Chief Judge Gregory and Judge King joined.

BARBARA MILANO KEENAN, Circuit Judge:

In 2007, Northrop Grumman entered into a contract with DynCorp, which served as a subcontract for DynCorp to supply personnel in support of Northrop Grumman's performance of a prime contract with the United States Department of Defense. A dispute arose regarding DynCorp's billing practices and, in March 2015, Northrop Grumman filed suit against DynCorp in a Virginia state court seeking to compel DynCorp to provide documentation to substantiate DynCorp's invoices. DynCorp later filed counterclaims against Northrop Grumman based on Northrop Grumman's refusal to pay over $40 million in outstanding invoices.

After the state case had been pending for over a year, and shortly before trial, Northrop Grumman filed a notice of removal to federal court. Northrop Grumman asserted removal jurisdiction under the federal officer removal statute, 28 U.S.C. § 1442, claiming as a federal defense that the case was unripe and thus should be litigated in a federal forum. The district court granted DynCorp's motion to remand. Among other things, the district court held that the notice of removal was untimely, and that Northrop Grumman had waived any right to removal.

Upon our review, we affirm the district court's order remanding the case to the state court. Northrop Grumman filed an untimely notice of removal after demonstrating a clear intent to pursue the case to completion in the state court.¹

I.

In 2007, the United States Department of Defense (DOD, or the government) awarded Northrop Grumman a prime contract to support the government's efforts to reduce narcotics trafficking in Afghanistan. Shortly thereafter, Northrop Grumman and DynCorp entered into a subcontract for DynCorp to supply personnel for Northrop Grumman's performance of the prime contract. The subcontract and associated task orders incorporated descriptions of certain "labor categories" established by the government in the prime contract. These descriptions included the duties, experience, and qualifications for persons assigned, or "mapped," to each labor category. DynCorp proposed hourly rates of payment for the labor categories to which its employees would be assigned, and the subcontract required DynCorp to provide documentation substantiating the labor costs in its invoices.

The parties agree that the labor categories in the prime contract were a poor fit for the type of work being performed by DynCorp personnel. Nevertheless, because the government declined to revise the labor categories, Northrop Grumman advised DynCorp to map its employees based on the existing categories.² In 2014, citing concerns that federal investigators were questioning DynCorp's labor mapping practices, Northrop Grumman sought documentation from DynCorp to substantiate DynCorp's labor mapping and billing. When DynCorp refused these requests, Northrop Grumman stopped submitting DynCorp's invoices to the government for payment and, in November 2014, informed DynCorp that Northrop Grumman rejected the labor charges reflected in all current invoices.

In March 2015, Northrop Grumman filed suit against DynCorp in Fairfax County Circuit Court (the state court). In an amended complaint filed in June 2015, Northrop Grumman sought an order compelling DynCorp to provide requested documentation to substantiate its invoices. Northrop Grumman also asserted a breach of contract claim based on DynCorp's alleged refusal to maintain and produce records as required by the subcontract.

In September 2015, DynCorp filed counterclaims in the state court against Northrop Grumman for breach of contract, breach of the duty of good faith and fair dealing, and unjust enrichment. The counterclaims were based on Northrop Grumman's failure to pay DynCorp over $40 million in outstanding invoices.

Northrop Grumman later filed a demurrer to the counterclaims. The state court overruled the demurrer on the claims for breach of contract and breach of the duty of good faith and fair dealing, and sustained the demurrer without prejudice on the unjust enrichment count. Following this ruling, DynCorp filed amended counterclaims in November 2015, alleging the same three causes of action.

In December 2015, Northrop Grumman filed an answer to the amended counterclaims. In its answer, Northrop Grumman asserted 21 affirmative defenses, including that the counterclaims were not ripe for adjudication. The parties also engaged in extensive discovery up to the day the notice of removal was filed. Trial originally was scheduled for April 2016, but was postponed until July 2016 after DynCorp filed its counterclaims.

In the midst of these state court proceedings, on April 22, 2016, Northrop Grumman filed a separate, administrative claim for contract interpretation with the United States Army, pursuant to the Contract Disputes Act, 41 U.S.C. §§ 7101 - 09 (the CDA claim). In the CDA claim, Northrop Grumman sought a determination from the government whether DynCorp properly had assigned its employees to particular labor categories in accordance with the DOD's task orders. Under the terms of the parties' subcontract, the outcome of the CDA claim would be binding on both parties.

The DOD acknowledged receipt of the CDA claim on April 29, 2016. On the same day, Northrop Grumman filed a motion to dismiss or stay in state court based on the pending CDA claim. Nevertheless, one week later, Northrop Grumman proceeded to advance the state court litigation by filing a motion in that court requesting a jury trial.

Northrop Grumman filed its notice of removal on May 12, 2016. This notice was filed 244 days after DynCorp filed its original counterclaims, and 178 days after Northrop Grumman received DynCorp's amended counterclaims. Northrop Grumman asserted federal jurisdiction under the federal officer removal statute, 28 U.S.C. § 1442, claiming that the pending CDA claim rendered DynCorp's counterclaims unripe because the government's decision would be dispositive of the counterclaims and binding on the parties.³ According to Northrop Grumman, this defense of lack of ripeness constituted a colorable federal defense that Northrop Grumman, as a federal contractor, was entitled to litigate in federal court.

DynCorp filed a motion in the district court to remand to the state court on several bases, including that the notice of removal was untimely and that Northrop Grumman had waived its right to removal. The district court granted DynCorp's motion to remand, and this appeal followed.

II.

Northrop Grumman argues that its notice of removal was timely under 28 U.S.C. § 1446(b) (the removal statute) because the notice was filed within 30 days of Northrop Grumman's submission of its CDA claim to the government on April 22, 2016, and the government's acknowledgement of that claim one week later. In Northrop Grumman's view, its federal ripeness defense did not become available until the CDA process was initiated. Northrop Grumman contends that it could not have filed the CDA claim earlier because Northrop Grumman was awaiting certain DynCorp documents that were produced during the course of the state court discovery. Relatedly, Northrop Grumman argues that it did not waive its right to removal by participating in the state court litigation, because Northrop Grumman filed the notice of removal as early as possible in the state court proceedings.

In response, DynCorp contends that the 30-day timeline for removal began when DynCorp filed its original counterclaims in September 2015 or, at the latest, when DynCorp filed its amended counterclaims in November 2015, because the substance of the counterclaims put Northrop Grumman on notice that the claims could be resolved by the CDA process. According to DynCorp, Northrop Grumman's contention that it may remove a case six to eight months after receiving notice of the nature of DynCorp's claims is contrary to the plain language and purpose of the 30-day deadline fixed by the removal statute. DynCorp further contends that Northrop Grumman demonstrated its clear and unequivocal intent to remain in state court by engaging in defensive litigation for months after receiving the counterclaims, and thereby waived any right to removal. We agree with DynCorp's arguments.

We review de novo the district court's decision granting a motion to remand for lack of jurisdiction under the federal officer removal statute, 28 U.S.C. § 1442.⁴ Ripley v. Foster Wheeler LLC , 841 F.3d 207, 209 (4th Cir. 2016). When a district court concludes that a party has waived its right to removal, we review this factual finding for clear error. Grubb v. Donegal Mut. Ins. Co. , 935 F.2d 57, 59 (4th Cir. 1991).

Under Section 1442, a federal officer "or any person acting under that officer" under certain circumstances may remove to federal district court a civil action brought against him in state court. 28 U.S.C. § 1442. A defendant seeking to remove a case under Section 1442 must establish "(1) [the defendant] is a federal officer or a person acting under that...