Court Opinion

ID: 6335654
Source: CourtListenerOpinion
Date Created: 2022-04-28 00:00:28.361332+00
Date Added: 2024-06-11T09:23:59.663086
License: Public Domain

Case: 21-10686     Document: 00516297429         Page: 1    Date Filed: 04/27/2022

           United States Court of Appeals
                for the Fifth Circuit                               United States Court of Appeals
                                                                             Fifth Circuit

                                                                           FILED
                                                                       April 27, 2022
                                  No. 21-10686                        Lyle W. Cayce
                                                                           Clerk

   Douglas D. Box,

                                                            Plaintiff—Appellee,

                                      versus

   PetroTel, Incorporated; PetroTel Oman, L.L.C.;
   PetroTel Energy (Oman), Incorporated; PetroTel Oman
   Onshore, L.L.C.; Anil K. Chopra, PhD,

                                                       Defendants—Appellants.

                  Appeal from the United States District Court
                      for the Northern District of Texas
                           USDC No. 3:20-CV-3573

   Before Stewart, Clement, and Elrod, Circuit Judges.
   Edith Brown Clement, Circuit Judge:
          Douglas Box sued PetroTel Oman, LLC and affiliated entities in
   Texas state court, alleging that they breached an oral contract to compensate
   him for helping them raise funds for an oil and gas project in Oman. The
   PetroTel entities removed the action to federal court, arguing that removal
   was proper under the federal officer removal statute because they “acted
   under” a federal agency by partnering with the United States International
   Development Finance Corporation to raise funds for the project. They also
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   removed on federal question jurisdiction grounds, invoking the Grable
   doctrine. Mr. Box timely moved to remand.
           The district court remanded the action, rejecting both grounds for
   removal offered by the PetroTel entities. The PetroTel entities timely
   appealed. Because neither the federal officer removal statute nor the Grable
   doctrine provides a basis for federal subject-matter jurisdiction, we
   AFFIRM.
                                               I.
           The United States International Development Finance Corporation
   (DFC) is a federal agency that helps private businesses invest in emerging
   markets abroad. 1 PetroTel Oman, LLC (PetroTel) 2 is an oil and gas company
   that has been engaged in exploring for and developing hydrocarbons in the
   Sultanate of Oman since May 2009.
           According to Dr. Anil Chopra, CEO of the PetroTel entities, at some
   point prior to 2019, PetroTel approached the DFC for financial assistance in
   connection with its ongoing oil and gas operations in Oman (the Oman
   Project). In February 2019, the DFC approved PetroTel’s request for its
   assistance in securing financing for the Oman project, subject to PetroTel

           1
             The DFC was formerly known as the Overseas Private Investment Corporation
   (OPIC). After the passage of the Better Utilization of Investments Leading to
   Development (BUILD) Act in 2018, OPIC merged with the Development Credit Authority
   of the United States Agency for International Development to become the DFC. As the
   parties do in their briefing, and to avoid any confusion, we simply use the term “DFC”
   rather than use “OPIC” in certain instances and “DFC” in others.
           2
             The named defendants in this matter are PetroTel, Inc.; PetroTel Oman, LLC;
   PetroTel Energy (Oman), Inc.; and PetroTel Oman Onshore, LLC. Consistent with the
   parties’ briefing, we refer to the Appellants simply as “PetroTel” or, where applicable, the
   “PetroTel entities.”

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   meeting the DFC’s due diligence requirements. The mechanics of the
   PetroTel–DFC partnership were allegedly as follows.
          The DFC did not directly lend PetroTel any money for the Oman
   project. Instead, it directed PetroTel—using the DFC’s name and credit—
   to raise the funds through a public offering. In particular, it directed PetroTel
   to select a “placement agent” to find third-party investors by marketing and
   offering a type of security known as a Certificate of Participation (COP). It
   also directed PetroTel to select a “paying agent” to (a) hold the funds raised
   from the COP sales, (b) disburse those funds to PetroTel when appropriate,
   and (c) manage payments to the holders of the COPs. The DFC supervised,
   and had approval authority over, PetroTel’s selection of a placement agent
   and paying agent. In exchange, the DFC guaranteed the COPs and received
   a fee. The DFC was not itself obligated to provide any funds to PetroTel;
   rather, PetroTel understood that the entirety of the fundraising would come
   from public offerings of government-backed COPs.
          After soliciting bids and submitting them to the DFC for approval,
   PetroTel selected Janney Montgomery Scott as the placement agent and
   Regions Bank as the paying agent. PetroTel paid the placement agent’s fees,
   costs, and expenses, as well as coordinated with the placement agent. To the
   extent that PetroTel ever needed additional funds, it would notify the DFC,
   which would then direct the placement agent to issue and market additional
   COP certificates.
          In total, the DFC and PetroTel raised $300,000,000 in funding for the
   Oman project. Moreover, the DFC agreed to insure the Oman project
   against political risk up to a maximum of $150,000,000.               The first
   disbursement of funds to PetroTel occurred in August 2020. On PetroTel’s
   account of the facts, Douglas Box did not have any role, or assist in any way,
   in helping it raise funds for the Oman project.

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          Mr. Box tells a different story. Supposedly, in March or April 2017,
   one of PetroTel’s outside attorneys—Aamer Ravji—invited Mr. Box to
   lunch to discuss the prospect of PetroTel engaging him to help it fundraise
   for the Oman project. Mr. Ravji then arranged a dinner meeting between Mr.
   Box and Dr. Chopra, during which Dr. Chopra allegedly made Mr. Box the
   following offer: “PetroTel would pay Box $1,000,000 to $2,000,000 in
   exchange for Box’s assistance raising $200,000,000 to $300,000,000 in cash
   for the Oman Project. There was one condition, they could not have a written
   agreement.”
          Mr. Box claims that he accepted Dr. Chopra’s offer and subsequently
   pulled out all the stops to obtain the funding that PetroTel needed for the
   Oman project. This included, inter alia, at least one meeting with the DFC’s
   CEO to discuss the process of obtaining a DFC loan. Mr. Box relayed what
   he learned from that meeting to PetroTel, which allegedly provided the
   impetus for PetroTel to seek out the DFC for financial assistance. Mr. Box
   alleges that he was the primary point of contact between PetroTel and the
   DFC, claiming that PetroTel even gave him business cards and a title. Little
   did he know, however, that PetroTel apparently had no intention of paying
   him anything.
          When Mr. Box later learned that the DFC had “approved”
   PetroTel’s request for financing, he reached out to PetroTel to discuss
   payment. PetroTel informed him that it would not be paying him for his
   work. At first, PetroTel told Mr. Box that paying him would be “illegal.” It
   later told him that there had never been a contract between them at all.
          Accordingly, on September 23, 2020, Mr. Box filed a state court
   petition against the PetroTel entities in Dallas County, Texas. His petition
   alleged claims for breach of contract or anticipatory breach, quantum meruit
   (in the alternative), unjust enrichment (in the alternative), fraud or

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   fraudulent inducement, negligent misrepresentation, and gross negligence.
   PetroTel removed the case to the United States District Court for the
   Northern District of Texas pursuant to 28 U.S.C. §§ 1331, 1441, and
   1442(a)(1).
          Mr. Box moved to remand, which the district court granted. Box v.
   Petrotel Inc., No. 3:20-CV-03573-M, 2021 WL 2893857, at *6 (N.D. Tex. July
   6, 2021). The district court held first that removal under the federal officer
   removal statute was improper because PetroTel did not establish that it
   “acted under” a federal officer or agency. Id. at *2–5. It then held that
   federal question jurisdiction was lacking because Mr. Box’s petition alleged
   only state law claims, and PetroTel had “not established that resolving a
   federal issue [was] necessary to resolving” any of those claims. Id. at *6.
   PetroTel timely appealed.
                                        II.
          “We review the district court’s remand order de novo, without a
   thumb on the remand side of the scale.” Latiolais v. Huntington Ingalls, Inc.,
   951 F.3d 286, 290 (5th Cir. 2020) (en banc) (cleaned up).
                                        III.
          There are two issues on appeal. First, whether removal was proper
   under § 1442(a)(1). Second, whether federal question jurisdiction exists
   under the four-factor test established in Grable & Sons Metal Products v. Darue
   Engineering & Manufacturing, 545 U.S. 308 (2005). The district court held
   that PetroTel failed to establish removability under § 1442(a)(1), and it
   rejected PetroTel’s argument that Grable provided a basis for federal

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   jurisdiction.   Box, 2021 WL 2893857, at *2–6.             We agree with both
   conclusions.
                                          A.
          The district court properly concluded that this case does not fall
   within the ambit of the federal officer removal statute, under which a
   defendant may remove a state court action to federal court if the action was
   brought against:
          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.
   28 U.S.C. § 1442(a)(1). The removing defendant has the burden of showing:
   “(1) it has asserted a colorable federal defense, (2) it is a ‘person’ within the
   meaning of the statute, (3) that has acted pursuant to a federal officer’s [or
   agency’s] directions, and (4) the charged conduct is connected or associated
   with an act pursuant to a federal officer’s directions.” Latiolais, 951 F.3d at
   296. The parties’ dispute centers on the third prong: whether PetroTel acted
   pursuant to a federal agency’s directions.
          PetroTel argues that it acted under the DFC when it raised funds for
   the Oman project because it “found, pa[id] for, and manage[d] financial
   entities for DFC so that DFC [could] sell securities, disburse funds, and
   repay security holders.” In other words, PetroTel contends that because it
   had to follow certain DFC instructions and obtain the DFC’s approval for
   issuing COPs and managing payments to COP investors, it acted under the
   DFC within the meaning of § 1442(a)(1).

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           We disagree. While “[t]he words ‘acting under’ are broad[]” and
   must be “liberally construed,” their breadth is “not limitless.” Watson v.
   Philip Morris Cos., Inc., 551 U.S. 142, 147 (2007) (quoting Colorado v. Symes,
   286 U.S. 510, 517 (1932)). The Supreme Court defined those limits in
   Watson, which teaches that the relationship contemplated under § 1442(a)(1)
   “typically involves subjection, guidance, or control” and “must involve an
   effort [by the private party] to assist, or to help carry out, the duties or tasks
   of the federal superior.” Id. at 151–52 (cleaned up).
           PetroTel’s argument founders on the latter requirement: it did not
   show that it “assist[ed], or help[ed] carry out,” the DFC’s duties or tasks. See
   id. In fact, it was the other way around. PetroTel is a private company that
   approached the DFC for financial assistance in connection with its otherwise
   private oil and gas operations. By its own admission, PetroTel has been
   operating in Oman since May 2009, but it was only in recent years that it
   began to receive financial assistance from the DFC. There is no doubt that
   the Oman project is, and always has been, PetroTel’s—not the DFC’s.
           Put differently, PetroTel did not show that it helped the DFC carry
   out a duty, activity, or task that the DFC otherwise would have had to do
   itself. See id. at 154 (“Dow performed a job that, in the absence of a contract
   with a private firm, the Government itself would have had to perform.”); see
   also Zeringue v. Crane Co., 846 F.3d 785, 792 (5th Cir. 2017) (“[T]he Navy
   directed Crane to build parts, and, had Crane not done so, the Navy would
   have had to build those parts instead.”) 3; Wilde v. Huntington Ingalls, Inc.,

           3
             Zeringue was overruled on other grounds by our en banc decision in Latiolais.
   Specifically, Latiolais overturned our previous federal-officer-removal decisions that relied
   on a “causal nexus” test for determining the requisite connection between the charged
   conduct and the defendant’s alleged actions under color of federal law. Latiolais, 951 F.3d
   at 296. That prong of the test for federal officer removability is not at issue here.

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   616 F. App’x 710, 713 (5th Cir. 2015) (per curiam) (“Presumably, the federal
   government would have had to build those ships had Huntington not done
   so, and so it meets [the acting under] part of the test.”).
           PetroTel’s attempt to analogize this case to Butler v. Coast Electric
   Power Association, 926 F.3d 190 (5th Cir. 2019), is unavailing. In Butler,
   members of three rural cooperatives filed a state court action, alleging that
   the cooperatives unlawfully withheld patronage capital to which the members
   claimed entitlement under state law. Id. at 192–94. The cooperatives
   removed under § 1442(a)(1), and the district court remanded the action. Id.
   at 192. We reversed, holding that the cooperatives met the requirements for
   federal officer removal and thus were entitled to defend themselves in a
   federal forum. Id. at 201.
           The facts in Butler undeniably bear some similarities to those here.
   The dispute in Butler arose out of loans that the rural cooperative defendants
   received from the Rural Utilities Service (RUS)—a federal agency created by
   Congress with the mission of providing below-market loans to utilities
   providers in rural, underserviced areas. Id. at 193. Like all RUS borrowers,
   the rural cooperatives’ receipt of RUS loans was conditioned upon their
   compliance with strict RUS restrictions and approval requirements. Id. at
   193–94. Based on the “close and detailed lending relationship” between the
   RUS and the cooperatives, as well as their “shared goal of furthering
   affordable rural electricity,” we were satisfied that the cooperatives acted
   under a federal agency. 4 Id. at 201.

           4
             It is worth noting that the parties in Butler did not dispute the “acting under”
   prong of § 1442(a)(1). Id. at 201. We addressed it—albeit summarily—only to “satisfy
   ourselves that subject matter jurisdiction [was] proper.” Id. (citation omitted).

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          That sounds a little bit like our case. After all, the DFC—like the
   RUS—is a federal agency tasked with using federal financial resources to
   further a federal purpose.      And the DFC—like the RUS—regulates,
   supervises, and exerts a certain level of control over the entities to which it
   provides those resources. But that is where the comparisons end; Butler is
   distinguishable where it counts most.
          The rural cooperatives in Butler are a fundamentally different kind of
   entity than PetroTel. Whereas PetroTel is a for-profit, private entity that
   works primarily for its own ends, the rural cooperatives are nonprofit, state-
   law entities that “exist to provide a public function conceived of and directed
   by the federal government.” Caver v. Cent. Ala. Elec. Coop., 845 F.3d 1135,
   1142–44 (11th Cir. 2017) (holding, in a virtually identical context, that an
   Alabama rural electric cooperative acted under the RUS for purposes of
   § 1442(a)(1)); see also Butler, 926 F.3d at 193–94 (describing the cooperatives
   as “nonprofit, member-owned, state-law entities” that deliver electricity to
   areas not adequately serviced by commercial businesses).
          In the absence of a loan agreement with the cooperatives, the
   government itself would have to provide the service of delivering electricity
   to rural communities. See, e.g., Caver, 845 F.3d at 1144. In this sense, the
   cooperatives are “instrumentalities of the United States.” Butler, 926 F.3d
   at 201 (citation omitted). PetroTel is not, as there is no indication that the
   government itself would have to drill for hydrocarbons in Oman absent the
   PetroTel–DFC partnership.
          In sum, PetroTel did not assist or help the DFC carry out a task that
   the DFC—or any federal superior—otherwise would have had to do itself.
   Accordingly, PetroTel did not act under the DFC, so it was not entitled to
   remove under § 1442(a)(1).

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                                              B.
           The district court also correctly determined that Grable does not serve
   as a sound basis for federal jurisdiction. 5 The Grable doctrine provides that,
   even when a state court petition pleads only state law causes of action, federal
   jurisdiction nonetheless exists “if a federal issue is: (1) necessarily raised, (2)
   actually disputed, (3) substantial, and (4) capable of resolution in federal
   court without disrupting the federal-state balance approved by Congress.”
   Gunn v. Minton, 568 U.S. 251, 258 (2013) (citing Grable, 545 U.S. at 314
   (2005)). Grable confers federal jurisdiction in a “slim category” of cases.
   Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 701 (2006).
           PetroTel does not deny that Mr. Box’s state court petition alleged
   only state law causes of action. Rather, PetroTel argues that the state court
   petition necessarily raised a federal issue because Mr. Box’s breach of
   contract and fraudulent inducement claims depend on the existence of a valid
   contract, but the alleged contract at issue is void under federal securities law.
   Thus, PetroTel contends that federal jurisdiction exists under Grable
   because “the federal securities issue . . . necessarily must be resolved in order
   to grant Mr. Box relief on his claims.”
           The district court rejected this argument, observing that contract
   illegality is an affirmative defense under Texas law. Box, 2021 WL 2893857,
   at *6. And, it explained, affirmative defenses generally are insufficient to
   establish statutory “arising under” jurisdiction because they do not appear

           5
            We have jurisdiction to review this component of PetroTel’s appeal. Granted,
   § 1447(d) used to bar appellate courts from reviewing remand orders when the basis for
   removal was federal question jurisdiction. See 28 U.S.C. § 1447(d). But that changed in
   2021 with the Supreme Court’s decision in BP P.L.C. v. Mayor & City Council of Baltimore.
   There, the Court held that “a court of appeals may review the merits of all theories for
   removal that a district court has rejected.” 141 S. Ct. 1532, 1537 (2021) (emphasis added).

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   on the face of the well-pleaded complaint. Id. (citing Aetna Health Inc. v.
   Davila, 542 U.S. 200, 207 (2004)). So, the district court held, even though
   PetroTel was entitled to plead contract illegality as an affirmative defense, it
   did not follow that the state court petition “necessarily raised” the federal
   securities issue. Id. We agree.
          PetroTel argues that the district court should not have applied the
   well-pleaded complaint rule in determining whether it had subject-matter
   jurisdiction because Grable is an “exception to the well pleaded complaint
   rule.” But PetroTel misunderstands Grable. Neither the Supreme Court nor
   this court has ever characterized Grable as an “exception” to the well-
   pleaded complaint rule or as a way around its strictures. In fact, this court
   has said the very opposite. Venable v. La. Workers’ Comp. Corp., 740 F.3d
   937, 942 (5th Cir. 2013) (“A federal court can exercise jurisdiction only where
   the case satisfies the well-pleaded-complaint rule.” (emphasis added)).
   Therefore, a plaintiff invoking Grable as the basis for federal jurisdiction must
   still show that the alleged federal issue arises on the face of the state court
   petition.
          Here, a federal claim does not appear on the face of the state court
   petition. PetroTel observes correctly that Mr. Box has the burden to prove a
   valid contract in order to establish his breach of contract and fraudulent
   inducement claims. In Texas, to show the existence of a valid contract, the
   plaintiff must show: “(1) an offer was made; (2) the other party accepted . . . ;
   (3) the parties had a meeting of the minds . . . ; (4) each party consented . . . ;
   and (5) the parties executed and delivered the contract with the intent that it
   be mutual and binding.” USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479,
   502 n.21 (Tex. 2018) (citing E–Learning LLC v. AT&T Corp., 517 S.W.3d
   849, 858 (Tex. App.—San Antonio 2017, no pet. h.)). But none of those
   elements requires proving a federal issue. Venable, 740 F.3d at 943. Were it
   otherwise, plaintiffs alleging breach of contract and related claims would face

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   the virtually insurmountable burden of having to preemptively defeat, at the
   pleading stage, every available defense to contract validity. That is not the
   law.
           PetroTel’s affirmative defense of contract illegality belongs in a
   responsive pleading, which cannot itself support federal jurisdiction. E.g.,
   Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 832
   (2002).    That is true even for federal defenses that are “inevitable.”
   Bernhard v. Whitney Nat. Bank, 523 F.3d 546, 551 (5th Cir. 2008).
           Finally, PetroTel’s insistence that the court will have to resolve a
   federal securities issue to grant Mr. Box relief on his claims misses the point.
   “[A]lthough the parties may ultimately litigate a federal issue in their case,
   that fact does not ‘show that the suit, that is, the plaintiff’s original cause of
   action, arises under the Constitution’ or the laws of the United States.”
   Venable, 740 F.3d at 943 (quoting Louisville & Nashville R. Co. v. Mottley, 211
   U.S. 149, 152 (1908)).
           Accordingly, because Mr. Box’s state court petition does not satisfy
   the well-pleaded complaint rule, the district court correctly determined that
   Grable does not provide a basis for federal jurisdiction.
                                         IV.
           Because PetroTel has not shown a proper basis for federal jurisdiction,
   the district court properly remanded this action to the state court whence it
   came.
           The judgment is AFFIRMED.

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