K ORM EN DI /GAR DN ER P AR TN ER S, P la in t if f,
v. SURP LU S AC QU ISI TIO N V EN TU RE , LLC, et al. De fend ant s.

UNITED STAT ES DIS TRICT COURT F OR THE D ISTRIC T OF CO LU M BIA

Ci vi l A cti on 08 -00 42 3 (H HK)

M EM OR

AN DU M OP IN ION Kormendi/Ga

rdner Partners ( “KGP”) bring s this action as a third-pa rty benef iciary of a contra ct betwe en a United States Depa rtment of De fense ag ency , Def ense Reutilization and Marke ting Ser

vice ( “DRMS”), a

nd Surplus Acquisition Venture, L L C and Gover nment L iquidation.Com , L L C (collectively “Surplus”). The complaint, which see ks damag es for brea ch of contra ct or, in the a lternative, a rec overy in quantum meruit, was filed in the Super ior Court of the District of Columbia (“Super ior Court”). Surplus re moved the ac tion to thi s court. B e fo re the c ourt

are KG P’ s mo tio n to dis mis s ( #4 ) a nd its mot ion

re mand thi s a c tio n to the Superior Court [#9] . Upon consider ation of the motions, the oppositions t here to, and the
re c or d o f t

his c a se , th e c ourt

c on c lud e s th at K GP’ s mo tio n to re mand sh ou ld b e g ra

nte d a nd its mot ion to d ism iss lik e wi se sh ou ld b e re mand e d to the Sup e ri or Court . I The fa cts materia l to the issues presente d by KGP’s motion to remand ar e as f ollows. KGP provided fina

ncial advisory

service s to DRMS in connec tion with the sale by DRMS of mil ita ry surp lus pr op e rt

y on the pr ivate mark e t. K GP a nd DRMS a g re e d th at K GP w ou ld b e pa idSurplus also contends that fe dera l law applies ba sed on a c ontrac tual choice -of- law 1 provision, which states that disputes ar e re solved “by the law of

the United States of Ame rica .” (De f.’s Opp’ n 10.) This provision, howeve r, is mentioned only in Surplus’ brief; it does not a pp e ar i n a ny oth e r d oc ume nt f

ile d w iththi s c ourt . Surp lus ’ b ur de n is to p ro ve —n ot m e re ly to alleg e – the pr opriety

of re moval jurisdiction. See H arding-W right v. D.C. W

ater &Sewer Auth. , 350 F. Supp. 2d 102, 104 (D.D .C. 2005). Consequently , Surplus’ fails in its attempt to persuade this court that it has removal jurisdiction on the basis of a contra ctual choic e-of

-law pr ovision. 2 a pe rc e nta g e of

the ne t pr oc e e ds of

the se sa le s d ir e c tly

by the purc ha se r o f t

he pr op e rt

y . A t so me point therea fter, Surplus contr acte d with DRMS t o purcha se military surplus proper

ty from DRMS a nd to r e se ll this pr op e rt

y on the op e n ma

rk e t. P ur su ant t o th e te rm s o f i ts c on tr a c t w ith DRMS, Sur

plu s p a id a

pe rc e nta g e of

the purc ha se pr ic e and

a pe rc e nta g e of

the re sa le pr ic e to KG P. A c c or din gto K GP, DRMS a nd Sur plu s su bs e qu e ntl y

mod if ie d th e ir c on tr a c t to e lim inate the pa y me nts to K GP w ith out K GP’ s c on se nt. II KGP argues that this case should be rema nded to the Superior Court be cause this court does not have subject matter jur isdiction. S urplus rejoins that this court has subjec t matter jurisdiction over KGP’s c laim for two re asons. Fir st, Surplus arg ues that disputes, like this one, that ari se fr om f

e de ra l g ov e rnme nt c on tr a c ts o r c on tr a c ts i nv olv inga un iqu e ly fe de ra l inte re st
mus t be re so lve d und e r f

e de ra l c omm on

law, and thu s a re pr op e rl y

br ou g ht i n f

e de ra l c ourt . 1 Second, Surplus argues that this court has jurisdiction under the Fe dera l Office r Removal Statute, 28 U.S.C. § 1442(a)(1) (“F ORS”), bec ause K GP’s alleg ed dama g es re sulted from a c ontrac t mod if ic atio n in iti ate d b y

DRMS. Sur

plu s’ argume nts are wi tho ut a me ri t. A. F ederal Question Although Surplus does not c ontest that KGP’s complaint seeks r elief unde r state law , Surplus argues that fe dera l question jurisdiction ex ists because : (1) fe dera l common law must beThe lawof the District of Columbia is the func tional equivalent of “ state law” for the 2 purpose of

deter mining this court’s r emoval jurisdiction. 3 applied to fe dera l gove rnment contra cts, and (2) the contra ct at issue involves an a rea of unique fede ral intere st in which fede ral lawdisplaces state law. Ne ither ar g ument is availing
. 1. F ederal G overnm ent Contrac ts Surplus contends that fede ral c ommon law pre- empts state law when the c laim involves 2 a fe dera l gove rnment contra ct. Acc ordingto Surplus, the court must apply fede ral c ommon law t o K G P ’ s c l a i mb e c a

u s e th e c o n tr a c tg i v i n gr i s e t o K G P ’ s c l a i mw a s aw ar d e d t o S ur p l u s b y a fede ral a g ency . KGP rejoins that its complaint does not seek re lief pursua nt to feder al law a

nd that fede ral que stion jurisdi ction does not exist simply beca use principles of

fede ral lawmay g ov e rn the int e rp re tatio n a

nd e nf or c e me nt o f t

he c on tr a c t. K GP i s c or

re c t. Withve ry fe w e xce pti on s, “ [t]he pr e se nc e or a bs e nc e of fe de ra l qu e sti on

jur isd ic tio n is g ov e rn e d b y

the ‘w e ll- ple a de d c omp la int ru le ,’ wh ic h p ro vid e s th at f e de ra l juri sd ic tio n e xists only when a fede ral que stion is presented on the f ace of the plaintiff’ s proper ly pleade d complaint.” Caterpillar

, Inc. v . W

illiams , 482 U.S. 386, 392 (1987) (c itation omit ted). Unde r this rule, plaintiff is “the master of the c laim” and “ may

avoid fe dera l jurisdiction by exclusive relianc e on state la

w.” Id. KGP’s complaint sets forth a state law c ause of

action for

brea ch of contra ct. KGP’s complaint does not see k relief pursuant to fe dera l law or set f orth any claim that relies on f

eder al law. Surplus attempts to circumvent the “w ell-plea ded complaint rule ” by arguing that fede ral common law pre -empts state lawbeca use KGP is bring ing suit as a third party

benef iciary of a
c on tr a c t be tw e e n Surp lus and a fe de ra l a g e nc y . Surp lus ’ a rgume nt c ann ot b e su sta ine d. I t isBe cause Congr ess has not ena cted a statute that completely

pre- empts state contra ct law 3 in the are a of f

eder al contra ct disputes and the Supre me Court has made clea r that there is no uniform fe dera l law to be applied in g overnme nt contrac t case s, the complete pr e-e mption doctrine, a

n independe nt corollary

to the well-plea ded complaint rule , does not apply here
. See Caterpillar

, Inc. v . W

illiams , 4 82 U. S. 3 86 , 3 92 (1 98 7) ; Empire He althchoice Assurance , Inc. v
. McVe igh , 547 U.S. 677, 691-692 (2006) ( “the pr udent cour se . . . [is] to adopt the re ady made body of state law

as the fe dera l rule of de cision until C ong ress strikes a differ ent acc ommodation.”) (inter

nal citation and quotation omitted).

4 “ s e t t l e d l awth ata

c a s e m ay not

be re moved to fede ral c ourt on the basis of a fede ral de fense , including the defe nse of pr e-e mption.” Id. at 393. This bar to re moval applies “e ven if the defe nse is anticipated in the pla intiff’s complaint.” Id . Fur thermore , the fa ct that Surplus might ult imate ly

pr ov e that K GP’ s c la ims are pr e -e mpt e d s til l “ do e s n ot e sta bli shthat [th e c la im i s]
remova ble to fede ral c ourt.” Id. at 39 8. As KG P br ing s a state -l aw b re a c h- of

-c on tr a c t c la im 3 that do e s n ot a

ri se un de r o r s e e k r e lie f p ur su ant t o f e de ra l la w, Sur plu s’ re mov a l of

thi s c a se invoking this court’ s fede ral que stion jurisdi ction cannot be sustained. 2. The Boyle Exception In Boyle v . United Technologies Corp. , 487 U.S. 500, 504 (1988), the Supre me Court set forth an e x ception to the g ener al rule that state law is not displaced by fede ral lawabsent “ a cle ar statutory presc ription” or a dir ect c onflict betwe en the two bodies of law. This exception applies when two c riteria a

re me t: first, the case must invol ve “a n are a of unique ly

fede ral intere st”; and second, the re must exist“a sig nificant c onflict . . . betwe en an ide ntifiable fe dera l policy or interest and the [operation] of state law.” Id. at 50 7 ( int e rn a l qu otatio n o mitte d) . T he pa rt y seekingto displace state la w bea rs the burde n of demonstrating that both conditions exist
. Id. Bo y lewas a milit ary procur ement ca se conc erningthe impositi on of civil tort liability on a g overnme nt contrac tor for ma nufac turing a helicopte r with an a lleg edly defe ctive esc ape hatch,5

id . at 502-03, that ha d been ma nufac tured a ccor ding to g overnme nt specifications, id . at 509. The Bo y lecourt he ld that “the proc ureme nt of equipment by the United States is an ar ea of uniquely fede ral intere st,” id . at 507, and that the de sign a lleg edly require d by

state law w as “pre cisely contra ry” to the desig n specifie d by the g overnme nt contrac t, id
. at5 0 9
. A c c o r d i n g l y, the Bo y lecourt he ld that fede ral jurisdiction exist ed bec ause imposingtort liabilit y on contra ctors for f ollowing g overnme nt specifications in t he proc ureme nt context would “directly aff ect the t erm s o f G o v ern m en tco n tra ct s : ei th er th e c o n tra ct o r w i l l d ec l i n e t o m an u fa cture th e d es i gn specifie d by

the Gover

nment, or it will raise its price.” Id . at 507. Sur plu s argue s th at Bo

y leg overns he re. Spec ifically , Surplus contends that the sale of
surp lus mil ita

ry pr op e rt y imp lic ate s uniq

ue fe de ra l natio na l se c ur ity int e re sts and

that a signif ic ant c on fl ic t ma

y e xist b e tw e e n f

e de ra l and

state law i n th e int e rp re tatio n o f t he c on tr a c ts g overningthose sales. KG P counters that ther e ar e no national se curity or uniquely

fede ral interests implicated in the g overnme nt’s disposal of surplus or scr ap prope rty . KGP further contends that ther e ar e no sig nificant c onflicts betwee n state and f eder al law with re spect to the rig hts of third-par

ty benef iciarie s. The c ourt ag ree s with KGP. This case doe s not involve tort claims arising from military procur ement but rather c ontrac t claims relatingto the disposal of surplus fede ral prope rty ; as such, it does not fall within the Bo y lerule that military

procur ement implicates a unique fe dera l interest. Se e id . at 507. Indeed, the claims raise d by KGP do not impli cate unique fe dera l interests at a ll: KGP seeks relief from a pr ivate litiga

nt; and a judg ment in KGP’s favor will notEven if the c ourt had found a unique fe dera l interest, the cour t does not perc eive a 4
“ signif ic ant c on fl ic t” be tw e e n f

e de ra l and

state law r e g ard ingthe ri g hts of thi rd -p art

y benef iciarie s consideringthat courts ofte n resolve third- party benef iciary claims under the Restatement (Sec ond) of Contrac ts even whe n the fe dera l gove rnment is a par ty to the contra ct. See, e .g., J.G.B. Ente rs., Inc. v . United States , 4 97 F .3 d 1 25 9, 12 61 (F e d. Cir . 2 00 7) ; Fo rt Lincoln Ci vic Ass’n, I

nc. v. F ort Li ncoln New Town Corp. , 944 A.2d 1055, 1064-65 (D .C. 2008). The c ourt also finds that Surplus’ relianc e on New SD, Inc. v . Rock well Int’l Corp. , 79 5 F.3d 953 ( 9th Cir. 1996) (“ New SD ” ) f

or the pr op os iti on

that Bo y lea p p l i e s h e r e i s m i s p l a c e d
. In New SD , a subcontra ctor sued a g ener al contra ctor, whic h held the prime c ontrac t with the United States Air For ce to de velop ce rtain military equipment. Id . at 954. The a ction arose when the g e ne ra l c on tr a c tor

te rm inate d th e pr ime c on tr a c t ( and the c on c omi tant s ub c on tr a c t) a ft e r t he Ai r For ce or dere d a ser ies of wor k slow-downs and a

stop-work orde r. Id . Acc ording ly , the subcontrac tor sued the g ener al contra ctor for brea ch of c ontrac t. Id . F oc us ingon its pr e c e de nt, American P ipe &Steel Corp. v. Firestone Tire &Rubber Co. , 292 F.2d 640 ( 9th Cir. 1961) (“ American P ipe ”), r ather

than the Supreme Court’s later de cision in Bo y le , th e Ni nth

Cir c uit held that fe dera l law controlled. Id . at 954-55. Consideringthat the Ninth Circuit did not m e an i n g f u l l y a p p l y Bo y leand that, as discusse d above, the instant case doe s not involve feder al milit ary procur ement, nor obviously does it involve disputes betwee n g ener al and subc ontrac tors c on c e rn ingsu c h p ro c ur e me nt, the c ourt fi nd s American P ipe and its prog eny inapplicable he re. Moreove r, the c ourt notes that other c ourts have be en hig hly critica l of the New SD decision. See, e .g. , W

oodward Governor Co. v. Curtiss W right Flight

Sys., Inc

. , 164 F.3d 123, 128 ( 2d Cir. 1999). 6 a ff e c t th e fe de ra l g ov e rnme nt’ s a bil ity to d isp os e of

surp lus mil ita

ry pr op e rt y . Thus , th is c a se is 4 more like Mi re e v . D e

Kalb Co un ty , 433 U.S. 25 (1977), than it is like Bo y le
. Mireeinvolved the question of “whe ther c erta in private pa rties could sue a s third-party benef iciarie s to an ag ree ment betwee n a municipality

and the F eder al Aviation Administration.” Bo y le , 487 U.S. at 506 (citing Miree , 433 U.S. at 30.) The c ourt held that fe dera l common law did not gove rn the a ction based on its conclusion that “the re solution of petitioners’ brea ch-of -contra ct claim ag ainst responde nt [would] have no dir ect e ffe ct upon the United States or its trea sury .” Miree , 433 U.S. at 29. As in Miree , the claims her e will have no dir ect e ffe ct on the United States or its trea sury . Se e id
. Acc ording ly , the cour

t rejec ts Surplus’ contention that fede ral jurisdiction exist s under Bo y le
. 5 B. F ederal Off

icerRem oval Statute7

Th e F OR S is a

n e xce pti on

to t he we ll- ple a de d c omp la int ru le and pe rm its a de fe nd ant t o
remove an ac tion to federa l court if the a ction is broug ht ag ainst “[t] he United States or a ny ag ency there of or a

ny office r ( or any person ac ting under that off icer) of the United States or of
any a g e nc y the re of , s ue d in an o ff ic ia l or ind ivi du a l c a

pa c ity fo r a ny a c t under color of such office
. . . . ” 28 U. S.C. § 1 44 2( a )( 1) (e mph a sis a dd e d) ; se e Me sa v . Ca lif

or nia , 489 U.S. 121, 136 (1 98 9) (“ Th e re mov a l st atut e its e lf me re ly se rv e s to ov e rc ome the ‘w e ll- ple a de d c omp la int ’ r ule which would other

wise pre clude r emoval eve n if a fe dera l defe nse we re a lleg ed.”)
. To remove an ac tion from state to fede ral c ourt under the FORS, a g overnme nt contrac tor defe ndant must make a thre e-pa rt showing
. See J

efferson County v. Ac ker , 527 U.S. 423, 431 (1999) ; Isaacson v. Dow Chem. Co. , 517 F.3d 129, 136- 39 (2d Cir. 2008). F irst, the contra ctor must show that he was “ actingunder” an off icer of the United States by

demonstratingthat the conduct at issue occur

red while he wa s assisting or c arr ying out the duties of

the fe dera l office r. See I saacson, 517 F.3d at 136-37 (citation omitted). Second, the contra ctor must show that the conduct at issue was “unde r color of such off ice” by demonstratinga ca

usal conne ction betwee n the conduc t and asser

ted offic ial authority
. See id . at 13 7- 38 ; see also W illingham v. Morgan , 39 5 U .S. 40 2, 40 9 ( 19 69 ). Th ir d, the c on tr a c tor on ly may re mov e the a c tio n to fe de ra l c ourt if the contra ctor c an alleg e a c olorable f eder al def ense. See I

saacson, 517 F.3d at 138-39; se e als o Me sa , 489 U.S. at 129. Surplus contends that it meets all three require ments for re moval under the FORS. Specifica lly , Surplus asserts that bec ause D RMS i nitiated the contra ct modification that terminated the pay

ments to KGP, Surplus can invoke the g overnme nt contrac tor defe nse and
remove this action. KGP counters that Surplus cannot invoke the F ORS because it cannot makeNe ith e r p art y dis pute s th at K GP’ s c la im f or $1 .5 mil lio n s atis fi e s th e amou nt i n 6 controve rsy

require ment of 28 U.S.C. § 1332(a). 8 the thi rd sh ow ing —a c olo ra ble fe de ra l de fe ns e —a s th e g ov e rnme nt c on tr a c tor de fe ns e is
ava ila ble on ly fo r t or t c la ims wh e re a s K GP r a ise s o nly c on tr a c t c la ims . K GP’ s c on te nti on is
we ll- take n. “ Th e Go ve rnme nt c on tr a c tor de fe ns e . . . s hie lds c on tr a c tor s f ro m tor t li ab ili ty

for products manuf

actur ed for

the Gover

nment in acc ordanc e with Gover nment specific ations . . . .” Herc ules Inc. v . United States , 5 1 6 U. S
. 4 1 7 , 4 2 1 -2 2 (1 9 9 6 ) ( em p h as i s ad d ed ) ( ci t i n g Bo y le , 487 U. S. at 51 2) ; see also Isaacson, 51 7 F .3 d at 13 8 ( fi nd ingthat “ the g ov e rnme nt c on tr a c tor de fe ns e protec ts a g overnme nt contrac tor from liability under state tor t law . . . .”) ( emphasis adde d). Be cause KGP only

raises br eac h of contra ct and qua ntum meruit claims, not tort claims, Surplus cannot r ely

on the g overnme nt contrac tor defe nse as a colora ble def ense. A ccor dingly , Surplus lik e wi se c ann ot r e ly

on it a s a ba sis fo r r e mov a l. C. Jurisdi ctional Discover y I f the c ourt reje cts Surplus’ other a sserted ba ses of fe dera l jurisdiction (which it now has), Surplus asks the court to allow jurisdictional discover y and a he aringon whether this court may exercise diver sity

jurisdiction. KGP contends that there is no need for discovery

or a he aring beca use it is clear

that the par

ties are not diverse: KGP’s pa rtners r eside in the District of Columbi a, and the principal plac e of business of eac h defe ndant is also in the District of Col umb ia . Surp lus c ounte rs that th is c ourt may have div e rs ity

jur isd ic tio n b e c a

us e KG P is considere d a citizen of all of the states in which its partner s reside, a nd KGP has off

ere d no evidenc e that all its partner s reside in the D istrict of Columbia. 6 A def endant se ekingto remove a n action fr om state court be ars the bur den of e stablishing9

fede ral jurisdiction. See McNutt v. Ge neral Motors Acc eptanceCorp. of Indiana , 298 U.S. 178, 189 (1936). B efor e a c ourt will find that jurisdictional discovery is justi fied, the pa

rty seeking d i s co v ery mu s t“d em o n s tra t e[ ] th ati tca ns u p p l em en ti t s j uri s d i ct i o n al al l ega t i o n s th ro u gh discovery . . . .” GTE New Media Serv s. Inc. v . BellSouth Corp. , 199 F.3d 1343, 1351 ( D.C. Cir. 2000) (“ GTE”) . The pa

rty seekingjurisdictional discovery must make “a

detailed showingof what discove ry

it wishes to conduct or what results it thi nks such discover y would produce .” United States v. Phillip Morris Inc. , 116 F. Supp. 2d 116, 130 n.16 (D.D .C. 2000) (citing Naa rte xCon su lti ng

Cor p. v . W att , 722 F.2d 779, 788 ( D.C. Cir. 1983) (holding that it is notan abuse of discretion for

a Court to deny

a re quest for a dditional jurisdictional dis cover y wher e the pa rt y ha s a lr e a dy

ha d ampl e op po rt

un ity to c on du c t di sc ov e ry

); Car ibb e an Broa d. Sy

s. v . Ca ble &W ire le ss P LC , 148 F.3d 1080, 1090 ( D.C. Cir. 1998) (noting that “in orde r to g et jurisdictional dis c ov e ry a pla int if f m us t ha ve at le a st a

g oo d f a ithbe lie f t

hat su c h d isc ov e ry

wi ll e na ble it t o show that the cour

t has persona l jurisdiction over the def endant” ) (a dditional citation omit ted)). Th e c ourt fi nd s th at juri sd ic tio na l di sc ov e ry is n ot j us tif

ie d h e re . Surp lus ha s n ot s e t f or th specific alleg ations demonstratinghow jurisdictional discovery would serve a leg itimate purpose; Surplus asserts only

that no evidenc e esta

blishes that all partner s live in the District of Columbia. See Phillip Morris Inc. , 116 F. Supp. 2d at 130 n.16. Surplus has not, howeve r, indicate d how the pleading s or fa cts sug g est that the par tners re side elsewhe re. Se e id . Nor ha s Surplus
c ha lle ng e d th e c on te nti on that de fe nd ants are c iti zen s o f t he Di str ic t of

Col umb ia . B e c a

us e Surplus fails to ex plain how there is any thing to be g ained f

rom a jurisdictional discover y or a hear ing, the court de clines to order jurisdictional discovery
. Se e GTE , 199 F.3d a t 1351-52.10 III . CO NC LU SION F o r th e f o r e g o i n gr e a s o n s , i ti s th i s 3 1 s td a y o f M ar c h2 0 0 9 , h e r e b y OR DE RE D that KG P’ s mo tio n to re mand [#9] i s G RA NT ED ; and it is further OR DE RE D that Surplus’ motion to dismi ss [ #4] l ikewise is re manded to the Super ior for its re solution t here
. An appr opriate or der a ccompa nies this Memorandum Opinion.

Henr y H. Kenne dy , J r. Un i t edS t at es Di s tri ctJ u d ge