Brearley v. FDH Infrastructure Services LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF NORTH CAROLINA

WESTERN DIVISION

NO. 5:23-CV-047-FL

LADSON BREARLEY and RAKESH )

KHAN, )

)

Plaintiffs, )

)

v. ) ORDER

)

FDH INFRASTRUCTURE SERVICES )

LLC, )

)

Defendant. )

This matter is before the court on plaintiffs’ motion to remand pursuant to 28 U.S.C. §

1447(c). (DE 11). The issues raised by plaintiff’s motion have been briefed fully, and in this

posture, are ripe for ruling.

STATEMENT OF THE CASE

Plaintiffs commenced this action on December 28, 2023, in the Superior Court of Wake

County, North Carolina, alleging defendant terminated or constructively terminated plaintiffs

wrongfully after each objected to alleged fraud and mismanagement by defendant.

Defendant removed to this court February 2, 2023, on the basis of federal question

jurisdiction, under 28 U.S.C. §§ 1331, 1367(a), 1441, and 1446. Defendant asserts in its notice of

removal that plaintiffs’ claims arise under the laws of the United States, specifically 41 U.S.C. §

4712, which provides employees of federal contractors with “protection from reprisal for

disclosure of certain information.”

Plaintiffs filed the instant motion to remand February 8, 2023, asserting that their well-

pleaded complaint did not raise a federal question. As part of the motion to remand, plaintiffs

request payment of costs, including attorney’s fees, incurred as a result of removal. Defendant

responded in opposition and plaintiffs replied.

STATEMENT OF FACTS

The facts alleged in plaintiffs’ complaint may be summarized as follows. Plaintiff Ladson

Brearley (“Brearley”) worked as a “Facility Security Officer” for Defendant FDH Infrastructure

Services, LLC, which provides engineering services as a federal defense contractor, beginning in

May 2017. (See compl. ¶¶ 2, 11, 13). Plaintiff Rakesh Khan (“Khan”) “was the next line manager

. . . in the unit involved with the federal contract at issue.” (Id. ¶ 2).

Defendant allegedly sought to address cashflow issues by “circumventing governmental

rules,” (id. ¶ 14), including inter alia by submitting “fraudulent or deceptive billing submissions

to the Department of Defense,” (id. ¶ 17), and falsely certifying “how . . . federal funds were used

[and] how resources were allocated . . . to meet contractual achievement milestones.” (Id.).

Defendant terminated Plaintiff Brearley’s employment June 28, 2022, (see id. ¶ 11), allegedly “in

retaliation for his efforts to identify and stop the . . . mismanagement . . . of government funds.”

(Id. ¶ 18). “Pressed to continue the practices after [plaintiff] Brearley’s termination, [plaintiff]

Khan confronted [defendant’s] senior management and the foreign investor controlling

management operations . . . and refused, resigning his . . . employment.” (Id. at 7).

COURT’S DISCUSSION

A. Remand

1. Standard of Review

In any case removed from state court, “[i]f at any time before final judgment it appears that

the district court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. §

1447(c). “[I]t is the defendant who carries the burden of alleging in his notice of removal and, if

challenged, demonstrating the court’s jurisdiction over the matter.” Strawn v. AT&T Mobility

LLC, 530 F.3d 293, 296 (4th Cir. 2008).

2. Analysis

Under the federal removal statute, “any civil action brought in a [s]tate court of which the

district courts of the United States have original jurisdiction, may be removed by the defendant . .

. to the district court of the United States for the district and division embracing the place where

such action is pending.” 28 U.S.C. § 1441(a). There is no allegation of diversity of citizenship

between the parties in this case. “Accordingly, the propriety of removal depends on whether the

case falls within the provisions of 28 U.S.C. § 1331,” Mulchaney v. Columbia Organic Chemicals,

Inc., 29 F.3d 148, 151 (4th Cir. 1994), which specifies that a federal district court’s federal question

jurisdiction comprises “original jurisdiction of all civil actions arising under the Constitution, laws,

or treaties of the United States.” 28 U.S.C. § 1331.

“The presence or absence of federal question jurisdiction is governed by the well-pleaded

complaint rule, which provides that federal jurisdiction exists only when a federal question is

presented on the face of the plaintiff's properly pleaded complaint.” Caterpillar Inc. v. Williams,

482 U.S. 386, 392 (1987). This means that the “plaintiff [is] the master of the claim; he or she

may avoid federal jurisdiction by exclusive reliance on state law.” Id. Accordingly, the “first

step” in examining the complaint “is to discern whether federal or state law creates the cause of

action.” Pinney v. Nokia, Inc., 402 F.3d 430, 442 (4th Cir. 2005).1 This usually ends the inquiry,

because “the vast majority of cases brought under the general federal question jurisdiction of the

federal courts are those in which federal law creates the cause of action.” Merrell Dow

Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 808 (1986).

However, even “where a claim finds its origins in state rather than federal law,” there exists

“a special and small category of cases in which [federal question] jurisdiction still lies.” Gunn v.

Minton, 568 U.S. 251, 258 (2013). A case belongs to this special category when a moving party

shows that the “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.” Id. “Federal jurisdiction will lie only if a case meets all four requirements.” Pressl v.

Appalachian Power Co., 842 F.3d 299, 303 (4th Cir. 2016). “The mere presence of a federal issue

in a state cause of action is not enough to confer jurisdiction,” and “courts are to be cautious in

exercising jurisdiction of this type.” Burrell v. Bayer Corp., 918 F.3d 372, 380 (4th Cir. 2019);

see also Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S.

308, 313 (2005) (“[E]ven when the state action discloses a contested and substantial federal

question, the exercise of federal jurisdiction is subject to a possible veto.”).

a. Necessarily Raised

The instant case fails to fulfill the requirement that a federal issue is necessarily raised.

Under Fourth Circuit precedent, “a plaintiff’s right to relief for a given claim necessarily depends

on a question of federal law only when every legal theory supporting the claim requires the

resolution of a federal issue.” Flying Pigs, LLC v. RRAJ Franchising, LLC, 757 F.3d 177, 182

1 Throughout this order, internal quotation marks and citations are omitted unless otherwise specified.

(4th Cir. 2014) (emphasis in original). “In other words, if the plaintiff can support [the] claim with

even one theory that does not call for an interpretation of federal law, [the] claim does not arise

under federal law for purposes of § 1331.” Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 818 (4th

Cir. 2004).

Defendant argues that plaintiffs’ claim for “wrongful discharge under the public policy

exception to [North Carolina’s] employment at will doctrine,” (compl. ¶ 66), arises under federal

law because it requires plaintiffs to prove that defendant violated federal laws governing defense

contractors, (see DE 23 at 27), that “[p]laintiffs objected to the violations, and [that defendant]

terminated them in reprisal for their objections.” (DE 23 at 11). Plaintiffs, however, assert that

defendant not only violated federal laws, but also ran afoul of North Carolina’s prohibitions against

fraud. (See DE 1-2 at 6) (alleging that plaintiffs objected to “fraudulent or deceptive billing

submissions” and “false claims/certifications”). Plaintiffs assert in addition that defendant

terminated plaintiff “Brearley’s employment in retaliation for his efforts to identify and stop the .

. . gross mismanagement of the government contract and/or fraud[.]” (Compl. ¶ 18) (emphasis

added).

Plaintiffs’ wrongful discharge claim thus in that part could be resolved under North

Carolina law, without requiring “the resolution of a federal issue.” Flying Pigs, 757 F.3d at 182

(4th Cir. 2014). In North Carolina, “an employee without a definite term of employment

[ordinarily] is an employee at will and may be discharged without reason.” Coman v. Thomas

Manufacturing Co., Inc., 325 N.C. 172, 175 (1989). An exception to this general rule exists,

however, “when the employer’s acts violate the public policy of North Carolina.” Young v. Bailey,

368 N.C. 665, 668 (2016). “Although the definition of public policy approved by [the North

Carolina Supreme] Court does not include a laundry list . . . at the very least public policy is

violated when an employee is fired in contravention of express policy declarations contained in

the North Carolina General Statutes.” Amos v. Oakdale Knitting Co., 331 N.C. 348, 353 (1992).

The North Carolina General Statutes prohibit fraud. See, e.g., N.C.G.S. §75-1.1; Bumpers v.

Community Bank of Northern Virginia, 367 N.C. 81, 82 (2013) (“Section 75-1.1 has long

encompassed conduct tantamount to fraud.”); see also Baldine v. Furniture Comfort, 956 F. Supp.

580, 588 (M.D.N.C. 1996) (finding fraud to be “the gravamen” of an N.C.G.S. § 75-1.1 claim).

Accordingly, plaintiffs’ claim does not necessarily raise any issue of federal law.

In addition, plaintiffs’ claims for an injunction barring defendant from enforcing their non-

compete agreements and declaratory relief holding those agreements unenforceable arise entirely

under state law, and no argument has been made that federal question jurisdiction exists on either

of these claims. (See DE 23 at 22) (arguing that this court should exercise only supplemental

jurisdiction over these claims). Accordingly, the case should be remanded for lack of subject

matter jurisdiction.

Defendant argues that “each of the alleged violations, if proven, constitute a violation of

federal law.” (DE 23 at 9). Even so, these actions also may constitute violations of state law, and

federal question jurisdiction on a purely state law claim will not lie where “there is no reason that

the state court could not decide . . . on purely state law grounds . . . if it wished.” Vlaming v. West

Point School Board, 10 F.4th 300, 308 (4th Cir. 2021).

Defendant argues in addition that adjudication of plaintiffs’ claims “will inevitably and

necessarily require construction of [defendant’s] contract with the [Department of Defense],

construction of the federal statutes and regulations applicable to defense contractors, and

consideration of evidence and argument regarding the [defendant]-[Department of Defense]

contract and [defendant’s] measures to comply with its federal legal obligations.” The Fourth

Circuit sitting en banc has previously rejected a “restrictive reading” of a complaint alleging an

analogous wrongful discharge claim under South Carolina law, in a case in which plaintiff alleged

defendant fired him for exercising rights protected by both the United States and South Carolina

constitutions. Dixon v. Coburg Dairy, 369 F.3d 811, 818-19 (4th Cir. 2005). Finding that only

one of plaintiff’s three legal theories “even arguably involve[d] the resolution of a substantial

question of federal law,” the court held removal improper. Id. at 819. Where a legal avenue paved

entirely with state law is available to the instant plaintiff, removal likewise is improper in this case.

b. Substantial

In addition and in the alternative, the federal issues presented in this case fail to fulfill

Gunn’s substantiality requirement where defendant has not demonstrated that “the question is

significant to the federal system as a whole.” Gunn, 568 U.S. at 264. In general, “a nearly pure

issue of law, the resolution of which would establish a rule applicable to numerous . . . cases” is

substantial, while a “fact-bound and situation-specific” issue is not. Empire Healthchoice

Insurance, Inc. v. McVeigh, 547 U.S. 677, 681 (2006). The Fourth Circuit previously has held

that the resolution of questions requiring “fact-intensive inquiries into [defendant’s] compliance

with certain [federal] requirements” was not “substantial in the relevant sense.” Burrell, 918 F.3d

at 385. That court also found that claims which were “purely backward-looking, limited to

monetary relief for [defendant’s] alleged past non-compliance with federal . . . standards” were

not substantial enough to give rise to federal question jurisdiction.

Plaintiff’s claims are similarly fact-specific and retrospective. Plaintiffs allege that

defendant “sought to circumvent governmental rules . . . [by] re-directing cash reimbursed by the

government for use in the payment of subcontractors, reducing staff[,] and maintaining inadequate

staffing levels.” (Compl. ¶ 14). Whether this particular defendant complied with reimbursement

and staffing rules is not “significant to the federal system as a whole.” Gunn 568 U.S. at 264. Nor

is the question of whether this particular defendant sought to “circumvent federal governmental

restrictions involving the active managerial involvement of [defendant’s] foreign ownership by

Invica Holdings S.A.R.L. and its controlling interest holder, Julian Mash, a foreign national.”

(Compl. ¶ 22). Accordingly, no significant federal question exists in this case.

B. Costs and Attorneys’ Fees

“An order remanding the case may require payment of just costs and any actual expenses,

including attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447(c).

Absent unusual circumstances, courts may award attorney’s fees under § 1447(c) only

where the removing party lacked an objectively reasonable basis for seeking removal.

Conversely, when an objectively reasonable basis exists, fees should be denied. In applying

this rule, district courts retain discretion to consider whether unusual circumstances warrant

a departure from the rule in a given case. For instance, a plaintiff’s delay in seeking remand

or failure to disclose facts necessary to determine jurisdiction may affect the decision to

award attorney’s fees. When a court exercises its discretion in this manner, however, its

reasons for departing from the general rule should be faithful to the purposes of awarding

fees under § 1447(c).

Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005).

In addressing a request for attorneys’ fees in the context of remand, the United States Court

of Appeals for the Fourth Circuit has looked to whether removing defendants “provided detailed

arguments and comprehensively briefed the issues arising from their removal, including with

reference to a wide range of case law.” Common Cause v. Lewis, 956 F.3d 246, 257 (4th Cir.

2020). The Fourth Circuit also has looked to whether “[w]ithin our Circuit, indeed within North

Carolina, there is precedent for a defendant to remove . . . litigation to federal court under the”

basis advanced in the notice of removal. Id.

Though defendant’s arguments were unsuccessful, they were detailed and

comprehensively briefed, with defendant correctly citing appropriate caselaw and providing

thorough explanations of its position. (See, e.g., DE 23 at 3) (providing the four-part test upon

which the court relied). The Supreme Court has described this challenging legal area as a canvas

“that Jackson Pollock got to first.” Gunn, 568 U.S. at 258. Accordingly, the court declines in its

discretion to award attorneys’ fees.

CONCLUSION

Based on the foregoing, plaintiff's motion to remand (DE 11) is GRANTED in part and

DENIED in part as set forth herein. In particular, that part of the motion seeking remand 1s

GRANTED, whereas the remaining part of the motion seeking costs and attorney’s fees is

DENIED. This case is REMANDED to the Superior Court of Wake County, North Carolina, for

further proceedings. The clerk is DIRECTED to transmit a certified copy of this order to the clerk

of the Superior Court of Wake County, North Carolina, and to file in this case a copy of the clerk’s

transmittal letter with certified copy of the instant order.

SO ORDERED, this the 26th day of April, 2023.

LOUISE W. FLANAGAN

United States District Judge