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L-3 Communs. Corp. v. Serco Inc.

United States District Court, E.D. Virginia, Alexandria Division

August 19, 2014

SERCO INC., Defendant

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For L-3 Communications Corporation, L-3 Applied Technologies, Inc., Plaintiffs: Benjamin G. Chew, LEAD ATTORNEY, Pillsbury Winthrop Shaw Pittman LLP (DC), Washington, DC; Nigel L. Wilkinson, Pillsbury Winthrop Shaw Pittman LLP (DC), Washington, DC.

For Serco Inc., Defendant: John A.C. Keith, LEAD ATTORNEY, Blankingship & Keith PC, Fairfax, VA; Laurie Lea Proctor, Blankingship & Keith PC(Fairfax), Fairfax, VA.

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Gerald Bruce Lee, United States District Judge.

THIS MATTER is before the Court on Plaintiffs L-3 Communications Corporation and L-3 Applied Technologies, Inc.'s (collectively " L-3" ) Motion to Remand. (Doc. 17.) This case concerns a dispute between Defendant Serco, a government contractor, and Plaintiffs L-3, sub-contractors for Serco, where L-3 alleges Serco unlawfully interfered with L-3's ability to secure future task orders and other subcontracts. The issue before the Court is whether the Court has subject-matter jurisdiction pursuant to either of two statutes: 1) under 28 U.S.C. § 1331 if a " substantial and disputed" federal question is present or if a " unique federal interest" is implicated; or 2) under Federal Officer Removal Statute 28 U.S.C. § 1442(a)(1), if Defendant was " acting under" color of a

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federal officer and has a " plausible colorable defense."

The Court holds that it does not have subject-matter jurisdiction over this dispute. Jurisdiction under § 1331 is not proper for two reasons. First, the Court does not find a " substantial and disputed" question is present and the Court is not required to interpret disputed federal law in this case, or answer a " nearly pure legal question" in this case. Second, although this dispute originates from government contract work, it is no more than a disagreement between two private contractors and therefore it does not invoke a " unique federal interest." Likewise, jurisdiction is not proper under § 1442(a)(1) for three reasons. First, Defendant was not " acting under" a federal officer as required by the statute because Defendant had nearly full discretion over subcontractor award decisions. Second, Defendant cannot successfully argue that Plaintiffs' claims arise as a consequence of Defendant carrying out the directives of a federal officer. Third, although Defendant argues it has a " colorable federal defense," its alleged Federal Tort Claims Act defense undermines the argument that it was " acting under" a federal officer, and therefore, Defendant does not satisfy all of the elements required for § 1442(a)(1) removal.

Accordingly, the Court GRANTS Plaintiffs' Motion to Remand. (Doc. 17.)


This case is before the Court on Plaintiffs L-3 Communications Corporation and L-3 Applied Technologies, Inc.'s Motion to Remand to the Circuit Court of Fairfax County. (Doc. 17.) Plaintiffs filed suit against Defendant Serco alleging tortious interference with Plaintiffs' confidentiality contracts with former employees, tortious interference with a contract or business expectancy, civil conspiracy, and statutory business conspiracy pursuant to Va. Code § 18.2-499, 500. (Doc. 1-9, at 17-22.)

Plaintiffs are in the business of providing various engineering testing and maintenance services for military and government applications. (Doc. 1-9.) Defendant is a prime contractor under the United States Air Force Space Command (" Air Force" ) tasked with managing the testing and upgrading of designated U.S. Military Air Force sites around the world in order to protect them from high-altitude electromagnetic pulse (" HEMP" ) events, such as nuclear explosions. (Doc. 1, at 3.) Defendant does not have the technical expertise and capability of providing such HEMP-related testing and maintenance required under its contract with the Air Force, but rather hires subcontractors to perform the specific testing. (Doc. 1-9.)

For a number of years leading up to 2008, Plaintiffs were repeatedly awarded subcontracts from Defendant because Plaintiffs had developed proprietary and specialized equipment and software for performing HEMP-testing services. (Doc. 1-9, at 6.) In preparing proposals for Defendant, Plaintiffs created custom spreadsheets that included L-3's labor categories, labor rates, estimated hours for specific projects at specific sites, overhead rates, and other related costs for the project. Rather than using General Services Administration approved labor rate categories, Plaintiffs developed their own proprietary specialized labor rates and categories ( Id. at 10.) Plaintiffs had their rates and categories audited and accepted by the Defense Contract Audit Agency (" DCAA" ) which provided Defendant with assurances that the rates and skill-sets attributed to Plaintiffs' labor categories would be accepted by the government in the event of an audit. ( Id.)

Plaintiffs allege that Defendant secretly worked with Plaintiffs' current and former

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employees to steal Plaintiffs' technology, business methods, and employees in order to create a new enterprise, Jaxon Engineering & Maintenance (" Jaxon" ) to which it would grant future HEMP sub-contracts and task orders. (Doc. 1-9.) Plaintiffs allege Defendant participated in and encouraged such conduct even though it knew Plaintiffs' employees were bound by employment confidentiality agreements not to disclose Plaintiffs' confidential proprietary and trade secret information. ( Id.) Further, Plaintiffs allege Defendant abused its relationship with the Air Force to wrongfully seek inventory, materials, and equipment from L-3 to transfer to Jaxon for Jaxon's use. (Doc. 41, at 19.)

Plaintiffs filed the present lawsuit in the Circuit Court of Fairfax County on May 1, 2014. (Doc. 1-9.) Defendant removed this action to the Eastern District of Virginia on May 27, 2014. (Doc. 1.) Plaintiffs filed a Motion to Remand (Doc. 17) and their brief in support of remand (Doc. 18) on June 6, 2014. Defendant filed its Opposition (Doc. 36) on June 20, 2014, to which Plaintiffs provided their reply on June 26, 2014. (Doc. 41.) On August 8, 2014, the Court heard oral argument on the Motion to Remand and issued an oral ruling granting the Motion for the reasons stated in open court. (Doc. 50.)


A. Standards of Review

Federal Courts have limited jurisdiction with specific jurisdictional requirements and limitations. See Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005). When a party seeks to adjudicate a matter in federal court, the party must demonstrate that the federal court has jurisdiction over the matter. Id. Accordingly, the party seeking removal bears the burden of establishing federal jurisdiction. See, e.g., Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994) (citing Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97, 42 S.Ct. 35, 66 L.Ed. 144 (1921)). " If federal jurisdiction is doubtful, a remand is necessary." Id. (citations omitted). Moreover, " courts should resolve all doubts about the propriety of removal in favor of retained state court jurisdiction." Hartley v. CSX Transp., Inc., 187 F.3d 422, 425 (4th Cir. 1999).

1. Federal Question § 1331 Removal

Section 1331 vests federal district courts with " original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. There is no single precise way to define when an action will " arise under" federal law. Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986). Rather, the Supreme Court has avoided a rigid test for § 1331 jurisdiction because " the phrase 'arising under' masks a welter of issues regarding the interrelation of federal and state authority and the proper management of the federal judicial system." Id. (quoting Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 8, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)).

A defendant may remove a civil action initially filed in state court to a federal district court if " the action could have originally been brought in federal court." Yarnevic v. Brink's, Inc., 102 F.3d 753, 754 (4th Cir. 1996); 28 U.S.C. 1441(a)(1). Defendants removing state-court actions, absent diversity of citizenship, must establish subject-matter jurisdiction in one of three ways. See Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). First,

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jurisdiction is proper when a federal question is presented on the face of the plaintiff's " well-plead complaint." Id; see Gully v. First National Bank, 299 U.S. 109, 112-13, 57 S.Ct. 96, 81 L.Ed. 70 (1936). Because the plaintiff is the master of the claim, he or she may avoid federal jurisdiction ...

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