# Martin v. Hyundai Translead Inc

> District Court, N.D. Texas · November 13, 2020

URL: https://www.frixlaw.com/law-library/cases/10449650

## Case

- **Court:** District Court, N.D. Texas
- **Decided:** November 13, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10449650

## Opinion text

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

AMANDA MARTIN, SHAWNKEEDRA §
MARTIN, and HAROLD MARTIN, §
§
Plaintiffs, §
§
v. § Civil Action No. 3:20-CV-2147-K
§
HYUNDAI TRANSLEAD, INC., §
MID-WAY TRANSPORTATION, INC., §
DAVID WAYNE GARTH, and SEWELL §
VILLAGE CADILLAC COMPANY, INC., §
§
Defendants. §
______________________________________ §
§
MID-WAY TRANSPORTATION, INC., §
§
Third-Party Plaintiff, §
§
v. §
§
ARMY AND AIR FORCE EXCHANGE §
SERVICE, RAYMUNDO CONTRERAS, §
PARITOSH ARORA, MINAHJ FORD, §
KIRBY DEAN DUNKIN, JAKE §
SCHOMBURG, ROGELIO PARRA, §
JAMES DALE ROSE, RICHARD §
FERRIN, and JORYAN JOHNSON, §
§
Third-Party Defendants. §

MEMORANDUM OPINION AND ORDER

ORDER – PAGE 1
Before the Court are: (1) Third-Party Defendant Army and Air Force Exchange
Service’s Motion to Dismiss (Doc. No. 5); (2) Plaintiffs Amanda Martin, Shawnkeedra

Martin, and Harold Martin’s Motion to Dismiss (Doc. No. 7); (3) Plaintiffs Amanda
Martin, Shawnkeedra Martin, and Harold Martin’s Motion to Remand (Doc. No. 9);
and (4) Defendant/Third-Party Plaintiff Mid-Way Transportation, Inc.’s Motion for
Limited Discovery on Derivative Sovereign Immunity (Doc. No. 25). The Court has
carefully considered the motions, the responses, the replies, the applicable law, and the

relevant portions of the record. Because the Court finds that Defendant/Third-Party
Plaintiff Mid-Way Transportation, Inc.’s claims against Third-Party Defendant Army
and Air Force Exchange Service must be dismissed under the doctrines of derivative
jurisdiction and sovereign immunity, the Court GRANTS Third-Party Defendant

Army and Air Force Exchange Service’s Motion to Dismiss. The Court finds that
remand-related discovery would serve no useful purpose under these facts, therefore,
the Court DENIES Defendant/Third-Party Plaintiff Mid-Way Transportation, Inc.’s
Motion for Limited Discovery. Because the Court finds it lacks subject matter

jurisdiction over this matter, the Court GRANTS Plaintiffs’ motion to remand.
Because this case must be remanded for lack of subject-matter jurisdiction and a post-
removal amendment cannot cure a jurisdictional defect, the Court does not rule on
Mid-Way’s motion for leave to amend, leaving this instead for the state court.

ORDER – PAGE 2
I. Factual and Procedural Background
This action arises out of a fatal vehicle collision. Defendant Mid-Way

Transportation, Inc. (“Mid-Way”) had allegedly agreed to transport a trailer owned by
Army and Air Force Exchange Service (“AAFES”) that contained goods. Mid-Way’s
employee, Defendant David Wayne Garth (“Mr. Garth”), was driving Mid-Way’s
tractor with AAFES’s trailer attached. Plaintiff Harold Martin was driving a vehicle

behind Mr. Garth, with his ten-year-old daughter (Plaintiff Amanda Martin is her
mother) and his wife, Plaintiff Shawnkeedra Martin, as passengers. Mr. Garth allegedly
stopped suddenly because of a multi-vehicle accident ahead of him which then caused
Mr. Martin to collide with the back of the truck. Sadly, Plaintiffs’ daughter did not
survive the accident.

Plaintiffs Amanda Martin, Shawnkeedra Martin, and Harold Martin
(collectively “Plaintiffs”) filed this action in state court in Dallas County, Texas on
August 29, 2019, against Defendants Hyundai Translead, Inc. (“Hyundai”), Mid-Way,
Mr. Garth, and Sewell Village Cadillac Company, Inc. (“Sewell”) (collectively

“Defendants”). Plaintiffs non-suited Defendants Hyundai, Mr. Garth, and Sewell
while the case was still pending in state court, leaving Mid-Way as the sole defendant.
In their Second Amended Petition (“Petition”) filed on July 9, 2020, Plaintiffs asserted
claims against Mid-Way for vicarious liability and negligence.

ORDER – PAGE 3
On July 16, 2020, Mid-Way filed a Third-Party Petition naming numerous
individual third-party defendants as well as AAFES, the owner of the trailer. On that

same day, Plaintiffs filed a Plea to the Jurisdiction over Mid-Way’s claim against
AAFES. Before the hearing, Mid-Way itself removed the case to federal court on July
24, 2020 on the basis of its own Third-Party Petition asserting a claim against AAFES.
Plaintiffs and Mid-Way agreed to remand the case back to state court on August 11,
2020, and the case was remanded that same day. AAFES then removed the case to

federal court pursuant to 28 U.S.C. § 1442(a) on August 13, 2020. AAFES filed its
Motion to Dismiss on August 19, 2020, Plaintiffs filed their Motion to Dismiss on
August 20, 2020 and their Motion to Remand on August 21, 2020. The Court
addresses those motions herein.

II. Removal Under 28 U.S.C. § 1442(a)
Section 1442(a) provides that a civil action initiated in state court “that is
against or directed to . . . [t]he United States or any agency thereof . . . for or relating
to any act under color of such office” may be removed to federal court. § 1442(a)(1).

Section 1442(a) is an exception to the well-pleaded complaint rule. Jefferson Cty. v.
Acker, 527 U.S. 423, 431 (1999). “[I]t is the raising of a federal question in the officer’s
removal petition that constitutes the federal law under which the action against the
federal officers arises for Art. III purposes.” Mesa v. California, 489 U.S. 121, 136

ORDER – PAGE 4
(1989); see Latiolais v. Huntington Ingalls, Inc., 951 F.3d 286, 296 (5th Cir. 2020).
Section 1442(a) does not “independently support Art. III ‘arising under’ jurisdiction.”

Mesa, 489 U.S. at 136.
A removing federal agency named as a third-party defendant may remove under
§ 1442(a). IMFC Prof’l Servs. of Fla., Inc. v. Latin Am. Home Health, Inc., 676 F.2d 152,
156 (5th Cir. 1982). The Army and Air Force Exchange Service is a recognized agency
of the United States. See Sheehan v. Army & Air Force Exch. Serv., 619 F.2d 1132, 1136-

37 (5th Cir. 1980), rev’d on other grounds, 456 U.S. 728 (1982); see also Manning v.
Military Star, Civ. Action No. 3:10-CV-1153-L, 2000 WL 35821503, at * 1-2 (N.D.
Tex. Oct. 29, 2000)(Lindsay, J.). In its Notice of Removal, AAFES contends removal
is proper because it is an instrumentality of the United States and the allegations

involve AAFES property as well as AAFES’s assertion of a sovereign immunity defense.
AAFES’s removal of this case was not objected to by any party. Accordingly, the Court
concludes AAFES properly removed this case under § 1442(a). Although the case was
properly removed, the Court must now determine whether it has subject-matter

jurisdiction over this case. 28 U.S.C. § 1447(c).
III. Motion to Dismiss
AAFES filed its motion to dismiss asserting this Court has no jurisdiction over
Mid-Way’s Third-Party Petition claims against it because the doctrines of sovereign

ORDER – PAGE 5
immunity and derivative jurisdiction apply. Therefore, AAFES argues the Court must
dismiss all claims against it. In its response, Mid-Way “agrees” that AAFES is entitled

to sovereign immunity and “prays” that AAFES be dismissed from this action. (Mid-
Way did not address the applicability of derivative jurisdiction in its response to
AAFES’s motion, but did so in its response to Plaintiffs’ motion to dismiss, stating that
“Mid-Way does not disagree” that AAFES should be dismissed pursuant to binding
Fifth Circuit case addressing the derivative jurisdiction doctrine.) Mid-Way bears the

burden of proof on this issue and the Court construes Mid-Way’s agreement as
conceding that derivative jurisdiction is applicable and that AAFES is entitled to
sovereign immunity. Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001) (per
curiam). Accordingly, the Court finds that all claims asserted against AAFES must be

dismissed under Rule 12(b)(1).
If Mid-Way were to dispute that it conceded dismissal of AAFES was required,
the Court would nevertheless reach that exact conclusion for the following reasons.
A. Rule 12(b)(1) Standard

“Federal courts are courts of limited jurisdiction, and absent jurisdiction
conferred by statute, lack the power to adjudicate claims.” Stockman v. Fed. Election
Comm’n, 138 F.3d 144, 151 (5th Cir. 1998). When a federal court determines subject
matter jurisdiction does not exist, the court must dismiss the action. Id. Federal Rule

ORDER – PAGE 6
of Civil Procedure 12(b) provides that a party may file a motion asserting various
defenses, including lack of subject matter jurisdiction. FED. R. CIV. P. 12(b)(1). When

a Rule 12(b)(1) motion is filed, the party asserting jurisdiction bears the burden of
proof. Ramming, 281 F.3d at 161. In determining a Rule 12(b)(1) motion, the court
may consider “(1) the complaint alone, (2) the complaint supplemented by undisputed
facts evidenced in the record, or (3) the complaint supplemented by undisputed facts
plus the court’s resolution of disputed facts.” Den Norske Stats Oljeselskap As v. HeereMac

Vof, 241 F.3d 420, 424 (5th Cir. 2001). If a Rule 12(b)(1) motion is made without
including evidence, the attack on the court’s subject matter jurisdiction is facial rather
than factual. Paterson v. Weinberger, 644 F.2d 521, 523 (5th Cir. 1981). In that
instance, the court “looks only at the sufficiency of the allegations in the pleading and

assumes them to be true.” Id. (citation omitted).
B. Derivative Jurisdiction
Under the doctrine of derivative jurisdiction, when a case is removed from state
court to federal court, the jurisdiction of the federal court is derived from the state

court’s jurisdiction. Minnesota v. United States, 305 U.S. 382, 389 (1939); Lopez v.
Sentrillon Corp., 749 F.3d 347, 350 (5th Cir. 2014). “Where the state court lacks
jurisdiction of the subject matter or of the parties, the federal court acquires none,
although in a like suit originally brought in a federal court it would have had

ORDER – PAGE 7
jurisdiction.” Minnesota, 305 U.S. at 389. The Fifth Circuit confirmed this doctrine
applies to cases removed under § 1442. Lopez, 749 F.3d at 351. Accordingly, this

Court’s jurisdiction is limited to that of the state court.
For the following reasons, the state court lacked jurisdiction over Mid-Way’s
third-party claims against AAFES. Pursuant to this binding and well-established
precedent of derivative jurisdiction, the Court did not acquire jurisdiction over any
claim against AAFES on removal, and the Third-Party Petition against AAFES must be

dismissed.
C. Subject Matter Jurisdiction
The United States is immune from being sued except to the extent that it
consents or waives its immunity. FDIC v. Meyer, 510 U.S. 471, 475 (1994); Gonzalez

v. United States, 851 F.3d 538, 543 (5th Cir. 2017); see In re FEMA Trailer Formaldehyde
Prod. Liab. Litig., 668 F.3d 281, 287 (5th Cir. 2012) (“A plaintiff may only sue the
United States if a federal statute explicitly provides for a waiver of sovereign
immunity.”). “Waiver of sovereign immunity is strictly construed, meaning

uncertainty is decided in favor of the government.” Tsolmon v. United States, 841 F.3d
378, 382 (5th Cir. 2016) (Willoughby v. United States ex rel. U.S. Dep’t. of the Army, 730
F.3d 476, 480 (5th Cir. 2013)). Sovereign immunity extends to agencies of the United
States. See Meyer, 510 U.S. at 475. The Army and Air Force Exchange Service is a

ORDER – PAGE 8
recognized agency of the United States and, therefore, it enjoys sovereign immunity.
See Sheehan, 619 F.2d at 1136-37; see also Manning, 2000 WL 35821503, at * 1-2.

The Federal Torts Claim Act (the “FTCA”) is the sole waiver of the United
States’ sovereign immunity for tort claims and federal courts have exclusive jurisdiction
over such claims. 28 U.S.C. §§ 1346(b)(1), 2679(b); see Lopez, 749 F.3d at 351.
Furthermore, an FTCA claim may be brought against the United States, not against a
federal agency. § 2679(a); see Galvin v. OSHA, 860 F.2d 181, 183 (5th Cir. 1988).

“An FTCA claim brought against a federal agency or employee rather than the United
States shall be dismissed for want of jurisdiction.” Esquivel-Solis v. United States, 472 F.
App’x 338, 339 (5th Cir. 2012) (citing Galvin, 860 F.2d at 183).
In its Third-Party Petition filed in state court, Mid-Way sued AAFES, a federal

agency, alleging claims of negligence and/or other tortious conduct and seeking
“contribution damages” that may be owed to Plaintiffs for their alleged injuries and
damages. Doc. No. 1-8 at 49. These claims most certainly fall within the scope of the
FTCA. See Guevara v. United States, Civ. Action No. 3:20-CV-0022-D, 2020 WL

1529005, at *3 (N.D. Tex. Mar. 31, 2020)(Fitzwater, J.) (plaintiffs asserted state-law
negligence claims against government employees acting in scope of their employment
and “[a]s such, the claims could only have been pursued under the FTCA.”). It is well-
established that such claims are within the exclusive jurisdiction of the federal courts.

ORDER – PAGE 9
28 U.S.C. § 1346(b)(1); see Lopez, 749 F.3d at 351. The state court lacked subject-
matter jurisdiction over AAFES by virtue of these third-party claims Mid-Way asserted;

accordingly, the doctrine of derivative jurisdiction dictates that this Court did not
acquire jurisdiction over AAFES upon removal under § 1442(a). Lopez, 749 F.3d at
351 (“[F]ederal sovereign immunity deprived the state court of subject matter
jurisdiction” therefore the federal district court had no jurisdiction over claims against
federal government); see Guevara, 2020 WL 1529005, at *3. The Court must dismiss

these claims against AAFES. See Cummings v. United States, 648 F.2d 289, 291-92 (5th
Cir. 1981) (federal court must dismiss “a case that falls within its exclusive jurisdiction
if the case was first instituted in, and then removed from, a state court.”).
Moreover, Mid-Way was required to bring its claims against the United States;

these claims against AAFES, a federal agency, are not permitted. See § 2679(a); Galvin,
860 F.2d at 183. Mid-Way failed to identify any express waiver of sovereign immunity
as to AAFES that would permit its claims to proceed. See Guevara, 2020 WL 1529005,
at *3. Mid-Way bears “the burden of showing Congress’s unequivocal waiver of

sovereign immunity.” Freeman v. United States, 556 F.3d 326, 334 (5th Cir. 2009)
(internal quotation omitted). It wholly failed to satisfy its burden. Mid-Way’s third-
party claims against AAFES must be dismissed for lack of jurisdiction. See Galvin, 860
F.2d at 183 (FTCA claim brought against federal agency instead of the United States

ORDER – PAGE 10
shall be dismissed for lack of jurisdiction); Guevara, 2020 WL 1529005, at *3 (failure
to identify waiver of sovereign immunity requires dismissal of those claims for lack of

subject matter jurisdiction).
The Court concludes it lacks subject-matter jurisdiction over Mid-Way’s Third-
Party Petition claims against AAFES for all the foregoing reasons. Therefore, the Court
grants AAFES’s Rule 12(b)(1) Motion to Dismiss and dismisses Mid-Way’s third-

party claims against AAFES. Plaintiffs also filed a Motion to Dismiss under Rule
12(b)(1) and Rule 12(h) (Doc. No. 7) asserting similar arguments that Mid-Way’s
third-party claims against AAFES must be dismissed. Because the Court granted
AAFES’s Motion to Dismiss under Rule 12(b)(1), the Court need not address Plaintiffs’
motion to dismiss.

III. Motion to Remand
The Court now turns to Plaintiffs’ timely-filed Motion to Remand (Doc. No. 9)
that is ripe for determination. Plaintiffs contend generally that, upon dismissal of the
federal agency AAFES, this Court must remand the case because there is no basis for

this Court’s jurisdiction. Plaintiffs first assert that remand is required under the
doctrine of derivative jurisdiction because this Court never acquired jurisdiction over
Mid-Way’s claims against AAFES, the federal agency that removed the case, so the
Court cannot assert jurisdiction over any of the remaining claims or parties in this case.

ORDER – PAGE 11
If the Court finds remand is not mandated, Plaintiffs urge the Court to decline to
exercise its supplemental jurisdiction under 28 U.S.C. § 1367(c) and remand the case

in its discretion. In its response, Mid-Way contends that derivative jurisdiction does
not mandate remand of this case because the state court had jurisdiction over Mid-
Way and because Mid-Way enjoys “derivative sovereign immunity” as a federal
government subcontractor, this Court is vested with original jurisdiction. Mid-Way
argues alternatively that the Court should not decline to exercise its supplemental

jurisdiction because this case involves “the protection of government contractors.” In
their reply, Plaintiffs argue that this immunity defense was untimely asserted, but even
so, federal question jurisdiction cannot be predicated on an affirmative defense and
that type of immunity defense is not applicable under these facts.

A. Applicable Law
A federal court has subject matter jurisdiction over cases involving a question of
federal law or where diversity of citizenship exists between the parties. See 28 U.S.C.
§§ 1331, 1332(a). The party seeking the federal forum bears the burden of establishing

the federal court’s subject matter jurisdiction. See Manguno v. Prudential Prop. & Cas.
Inc. Co., 276 F.3d 720, 723 (5th Cir. 2002). “If at any time before a final judgment it
appears that the district court lacks subject matter jurisdiction, the case shall be
remanded.” 28 U.S. § 1447(c).

ORDER – PAGE 12
B. Analysis
The Court has already determined that the doctrine of derivative jurisdiction

applies in this case. If derivative jurisdiction created a jurisdictional defect upon
removal, then this Court was deprived of original jurisdiction at the outset and the case
must be remanded. If derivative jurisdiction resulted in a procedural defect, AAFES’s
removal under § 1442(a) did not itself vest the Court with original jurisdiction over

the remaining claims in this case and Mid-Way was required to establish another basis
for this Court’s original jurisdiction which it failed to do. Finally, the Court declines
to exercise its supplemental jurisdiction over the remainder of the claims in this case
after consideration of the relevant factors. All told, the Court finds that it lacks subject-
matter jurisdiction over this case and, therefore, it must be remanded.

1. Jurisdictional Defect
Because the state court could not exercise jurisdiction over AAFES pursuant to
the doctrine of derivative jurisdiction, this Court never acquired jurisdiction over
AAFES upon removal. Plaintiffs contend that remand is required pursuant to Lopez v.

Sentrillon Corp., 749 F.3d 347 (5th Cir. 2014) because the Court dismissed AAFES for
lack of subject-matter jurisdiction and AAFES was the only possible “jurisdictional
hook” for this Court’s original jurisdiction. Despite Plaintiffs’ argument, it is not

ORDER – PAGE 13
entirely clear that Lopez demands this result. See Schlorff v. Digital Eng’g & Imaging, Inc.,
Civ. Action No. 16-11016, 2016 WL 6276882, at *3 (E.D. La. Oct. 27, 2016).

In Lopez, the plaintiff sued defendant Sentrillon for injuries he sustained while
working for a sub-contractor on a federal government project. Lopez, 749 F.3d at 348.
Sentrillon was the general contractor for the United States Customs and Border Patrol
on the project. Sentrillon then filed a third-party petition in state court against the
United States seeking contribution and indemnification for any liability on the

plaintiff’s claims. Id. The United States removed the case to federal court under
§ 1442(a) and then moved to dismiss for lack of jurisdiction. Id. The district court
ultimately found derivative jurisdiction applied and the state court lacked jurisdiction
because of sovereign immunity which required the court to dismiss Sentrillon’s claims

against the United States. Id. The district court then found the doctrine of derivative
jurisdiction created a jurisdictional defect because the court from precluded from
acquiring “original jurisdiction as to the only asserted federal claim” and without this
“jurisdictional anchor” supporting jurisdiction over the remaining claims, remand was

required. Id. at 352. Alternatively, the district court concluded that if derivative
jurisdiction had not deprived it of original jurisdiction, the court nevertheless declined
to exercise its supplemental jurisdiction and remand was required. Id.

ORDER – PAGE 14
Sentrillon appealed both the dismissal of its claims against the United States
and the court’s remand of the case. Id. at 349. The Fifth Circuit affirmed that

derivative jurisdiction unequivocally applies to cases removed under § 1442(a) and also
affirmed the district court’s remand. However, the Fifth Circuit did not decide that
derivative jurisdiction requires remand under § 1447(c) if the party or claim that is the
“jurisdictional anchor” is dismissed. Id. The Fifth Circuit affirmed the district court’s
remand because Sentrillon failed to appeal the district court’s alternative grounds for

remand in declining to exercise its supplemental jurisdiction and, therefore, waived the
challenge. Lopez, 749 F.3d at 352 (“Sentrillon cannot prevail in its challenge to the
district court’s remand of the state-law claims whether we determine the district court
was correct in ruling it lacked jurisdiction, because then the claims must be remanded,

or whether we determine the district court was incorrect in ruling it lacked jurisdiction,
because Sentrillon did not challenge the alternative basis for remand and thus waived
it.”).
Despite Plaintiffs’ argument to the contrary, Lopez does not undoubtedly require

remand in this instance. However, the Court finds that if derivative jurisdiction created
a jurisdictional defect because the Court did not acquire original jurisdiction over
AAFES, the sole “jurisdictional anchor” upon removal, then the case must be remand

ORDER – PAGE 15
under § 1447(c) because the Court never acquired original jurisdiction in the first
instance.

2. Other Basis for Original Jurisdiction Upon Removal
The case law is not clear on whether derivative jurisdiction creates a procedural
defect, rather than a jurisdictional one. Therefore, the Court will examine whether any
other basis existed at the time of removal supporting the Court’s original jurisdiction

in the case a procedural defect resulted.
Mid-Way suggests that AAFES’s removal under § 1442(a) vested this Court with
subject-matter jurisdiction over this case. Mid-Way is mistaken. The mere action of
AAFES removing this case under § 1442(a) did not vest this Court with original
jurisdiction. The Supreme Court explicitly held that § 1442(a) is “a pure jurisdictional

statute” and, “therefore, it cannot independently support Art. III ‘arising under’
jurisdiction.” See Mesa, 489 U.S. at 136. The only potential basis giving rise to this
Court’s original jurisdiction was AAFES’s removal under § 1442(a) because it is a
federal agency and also its assertion of the defense of sovereign immunity. The record

before the Court does not establish any other source for this Court’s original
jurisdiction at the time of removal. See Gebbia v. Wal-Mart Stores, Inc., 233 F.3d 880,
883 (5th Cir. 2000) (“The jurisdictional facts that support removal must be judged at
the time of removal.”). Plaintiffs’ Petition on its face does not present any claims giving

ORDER – PAGE 16
rise to federal question jurisdiction, and Mid-Way’s third-party claims cannot provide
“arising under” jurisdiction. See Vaden v. Discover Bank, 556 U.S. 49, 60 (2009). The

facts giving rise to this Court’s original jurisdiction are considered as they exist at the
time of removal. Because the Court dismissed AAFES and finds there is no other source
of original jurisdiction in this case supported by the record at the time of removal,
remand is required. § 1447(c) (“If at any time before final judgment it appears that
the district court lacks subject matter jurisdiction, the case shall be remanded.”).

3. Derivative Sovereign Immunity
Mid-Way argues that remand is not required despite derivative jurisdiction
because there is another basis for the Court’s original jurisdiction. Mid-Way asserts
that it is entitled to the defense of “derivative sovereign immunity” as a government

contractor and “this Federal Court maintains original jurisdiction over this lawsuit due
to Mid-Way’s derivative sovereign immunity.” Resp. (Doc. No. 20) at 5. For the
previously stated reasons, the Court has determined there is no original jurisdiction in
this case. However, in an abundance of caution, the Court addresses this argument

Mid-Way puts forth. See Powerex Corp. v. Reliant Energy Servs., Inc., 551 U.S. 224, 233
(2007) (“Though we have not passed on the question whether, when sovereign
immunity bars the claims against the only parties capable of removing the case, subject-
matter jurisdiction exists to entertain the remaining claims, the point is certainly

ORDER – PAGE 17
debatable.”). Without addressing the merits of any such defense, the Court finds that
this “derivative sovereign immunity” defense does not vest the Court with original

jurisdiction under these facts and, as the Court has already concluded, remand is
required.
a. Timeliness and Preservation of Right to Federal Forum
For the first time in this litigation, Mid-Way argues in its response that it enjoys
“derivative sovereign immunity” and, as a result, “this Federal Court maintains original

jurisdiction over this lawsuit.” Mid-Way contends that as a subcontractor for the
federal government, AAFES in this instance, Mid-Way should be insulated from any
liability for transporting goods, citing the Supreme Court case Yearsley v. W.A. Ross
Constr. Co., 309 U.S. 18 (1940). Mid-Way argues that it is “entitled to the protection

of derivative sovereign immunity, and that determination should be made in this
federal forum.” As an initial matter, the Court notes that it will not address whether
the Yearsley defense is appropriately referred to as “derivative sovereign immunity.”
The Fifth Circuit noted that the Supreme Court in Yearsley did not address sovereign

immunity in holding a federal government contractor may avoid liability if certain
conditions are satisfied. Ackerson v. Bean Dredging LLC, 589 F.3d 196, 207-08 (5th Cir.
2009). However, solely for the purpose of avoiding confusion, the Court will refer to
“derivative sovereign immunity” as that is the term the parties use.

ORDER – PAGE 18
Mid-Way asserts this “derivative sovereign immunity” defense for the first time
in its responses to the briefing before the Court. This defense was never pled by Mid-

Way prior to removal; no where in its state court pleadings or other filings does Mid-
Way assert this defense. See Brown v. Sw. Bell Tel. Co., 901 F.2d 1250, 1254 (5th Cir.
1990) (jurisdiction determined looking at state court pleadings at time of removal). It
was raised for the first time in Mid-Way’s responses to the motions currently before
this Court. The Court must judge the jurisdictional facts as they existed at the time of

removal. See Gebbia, 233 F.3d at 883. Therefore, Mid-Way cannot now attempt to
create subject-matter jurisdiction in this Court after-the-fact in its responsive briefing.
Id.
The Court also concludes that Mid-Way did not preserve its right to invoke

federal jurisdiction on this defense because it failed to allege it in any filing with the
state court where it had litigated for almost one year before it was removed. See
Humphries v. Elliott Co., 760 F.3d 414, 417 (5th Cir. 2014) (a defendant served after
removal “asserted its government contractor defense in the very first pleading it filed,

such that it preserved its claim to a federal forum” even though co-defendant who had
removed under § 1442(a) had been dismissed); Pitre v. Huntington Ingalls, Inc., Civ.
Action No. 17-7029, 2017 WL 6033032, at * 7 (E.D. La. Dec. 6, 2017) (defendant,
who had been served prior to removal, preserved its right to assert federal jurisdiction

ORDER – PAGE 19
on its federal contractor defense because it asserted that defense in its answer in state
court to plaintiff’s petition). Mid-Way does not cite the Court to any of its state court

filings in which it asserted or otherwise alleged this “derivative sovereign immunity”
defense prior to removal. See Pullman Co. v. Jenkins, 305 U.S. 534, 537 (1939) (removal
jurisdiction depends on state court pleadings at time of removal); Cavallini v. State Farm
Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir. 1995). Mid-Way’s failure to timely
assert this defense and to preserve its claim to a federal forum eliminates the only

arguable basis Mid-Way puts forth for this Court’s original jurisdiction. Accordingly,
the Court again finds it lacks subject-matter jurisdiction and remand is required under
§ 1447(c).
b. Federal Defense Not Basis for Original Jurisdiction

Timeliness and preservation issues aside, Mid-Way’s argument that this defense
vests this Court with original jurisdiction fails for other reasons as well. First, it is well-
established that a federal defense, actual or anticipated, may not serve as the basis for
federal question jurisdiction. See Vaden, 556 U.S. at 60. “[T]he federal question must

be presented by plaintiff’s complaint as it stands at the time the petition for removal is
filed and the case seeks entry into the federal system. It is insufficient that a federal
question has been raised as a matter of defense or as a counterclaim.” Metro Ford Truck
Sales, Inc. v. Ford Motor Co., 145 F.3d 320, 326-27 (5th Cir. 1998); see Stump v. Potts,

ORDER – PAGE 20
322 F. App’x 379, 380 (5th Cir. 2009) (possible federal question raised in answer and
counterclaim could not be considered in determining the district court’s jurisdiction).

“[A] suit ‘arises under’ federal law ‘only when the plaintiff’s statement of his own cause
of action shows that it is based upon [federal law].’” Vaden, 556 U.S. at 60 (quoting
Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149, 152 (1908)); see Beneficial Nat’l
Bank v. Anderson, 539 U.S. 1, 6 (2003) (“As a general rule, absent diversity jurisdiction,
a case will not be removable if the complaint does not affirmatively allege a federal

claim.”). Although removal under § 1442(a) is an exception to the well-pleaded
complaint rule as previously noted, Mid-Way itself did not remove this case under that
statute. The Court cannot find any basis in the law or other authority to conclude that
this binding precedent does not apply in this instance under these facts. Therefore, the

Court finds Mid-Way is not exempt from the well-pleaded complaint rule in attempting
to establish this Court’s subject-matter jurisdiction.
The Court considers this an attempt by Mid-Way to “piggyback” onto AAFES’s
removal under § 1442(a) in an effort to create subject-matter jurisdiction where there

is none. The Court determined, and Mid-Way conceded, that AAFES must be
dismissed from the case. The Court also determined that AAFES was “the only
potential jurisdictional hook” based on the pleadings at the time of removal. The Court
views this argument as a last-ditch-effort by Mid-Way to secure a federal forum to

ORDER – PAGE 21
litigate this case when the Court has no original jurisdiction. Cf. Heritage Select LLC v.
Gilford, Civ. Action No. 1:18-CV-2780-SCJ-JSA, 2018 WL 4495494, at *5 (N.D. Ga.

July 6, 2018), report and recommendation adopted by 2018 WL 4481988 (N.D. Ga. July
30, 2018) (removing party “cannot ‘piggyback’ new claims or counterclaims onto his
Notice of Removal in order to provide subject matter jurisdiction” in federal court
where original basis for removal “did not confer jurisdiction on [federal court] over an
action removed from state court.”).

Mid-Way may not now urge this defense in an attempt to create subject-matter
jurisdiction in this Court. See Vaden, 556 U.S. at 60 (federal defense, actual or
anticipated, may not serve as the basis for federal question jurisdiction). The case must
be remanded as the Court lacks subject-matter jurisdiction.

c. Federal Courts Not Exclusive Jurisdiction For Defense
Although Mid-Way contends that the determination of its entitlement to this
defense “should be made in this federal forum,” this argument is not persuasive. The
Court already concluded that Mid-Way did not preserve its right to a federal forum.

Moreover, Mid-Way submits no case law or other authority for the suggestion that
federal courts have exclusive jurisdiction over such a defense asserted by a federal
contractor and that it may not be heard in state court. See JAJ Ventures, L.L.C. v. Envtl.
Chem. Corp., Civ. Action No. 07-2718, 2009 WL 911020, at *4 (E.D. La. Mar. 31,

ORDER – PAGE 22
2009) (court dismissed third-party federal government defendants under derivative
jurisdiction doctrine after they had removed under § 1442(a), then found remand of

the plaintiff’s claims appropriate so “the parties can, as they already had begun prior
to removal, litigate” which included “the defendants’ assertion of their governmental
contractor defense.”)(emphasis added); cf. Willingham v. Morgan, 395 U.S. 402, 407
(1969) (it is “the validity of the defense of official immunity” asserted by federal officers
that is to be “tried in a federal court.”)(emphasis added).

For all the foregoing reasons, the Court finds it does not have original
jurisdiction over this case after dismissing AAFES and the case must be remanded under
§ 1447(c).
4. Supplemental Jurisdiction

In the event the doctrine of derivative jurisdiction creates a procedural, rather
than jurisdictional, defect and the Court did have original jurisdiction upon removal,
the Court alternatively declines to exercise its supplemental jurisdiction over the
remaining claims in this case now that AAFES has been dismissed.

In a case in which the district court has original jurisdiction, the court also has
supplemental jurisdiction over claims in the action which are “so related” to the claims
giving rise to the court’s original jurisdiction “that they form part of the same case or

ORDER – PAGE 23
controversy under Article III.” § 1367(a). Section 1367 further provides that the
district court may decline to exercise its supplemental jurisdiction if:

(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or
claims over which the district court has original
jurisdiction,
(3) the district court has dismissed all claims over which it
has original jurisdiction, or
(4) in exceptional circumstances, there are other
compelling reasons for declining jurisdiction.

§ 1367(c). The Supreme Court further instructed that district courts should consider
certain factors in deciding whether to exercise its supplemental jurisdiction, including
the values of judicial economy, convenience, fairness, and comity. Carnegie-Mellon Univ.
v. Cohill, 484 U.S. 343, 350 (1988). “When the balance of these factors indicates that
a case properly belongs in state court, as when the federal-law claims have dropped out
of the lawsuit in its early stages and only state-law claims remain, the federal court
should decline the exercise of jurisdiction by dismissing the case without prejudice.”
Id. In the Fifth Circuit, a district court has “wide discretion” in declining to exercise
its supplemental jurisdiction over state law claims where the court has dismissed the
federal claims. Guzzino v. Felterman, 191 F.3d 588, 595 (5th Cir. 1999).
In light of the facts in this case, the § 1367(c) factors and the Carnegie-Mellon
factors indicate the Court should decline to exercise its supplemental jurisdiction.
Considering the § 1367(c) factors, the only possible basis for this Court’s original

ORDER – PAGE 24
jurisdiction, AAFES, has been dismissed from this action. Additionally, the record clear
reflects that only state law claims have been alleged; therefore, state law clearly

predominates in the remainder of this case. The Carnegie-Mellon factors also favor the
Court declining to exercise its supplemental jurisdiction. The only federal claim was
resolved early with AAFES being dismissed soon after removal, no discovery has taken
place in federal court, and the Court has not set a trial date or even entered a
Scheduling Order. Likewise, judicial economy does not weigh in favor of the Court

exercising supplemental jurisdiction as little time and resources have been expended by
the Court at this very early stage. Further, the Court can find no reasons to suggest
that the parties will be inconvenienced or that unfairness will result from remanding
this case to state court. Plaintiffs and Mid-Way, Texas citizens, litigated in state court

for approximately one year before it was removed to this Court, and it is unclear from
the record whether all the remaining third-party defendants have even been served.
Comity and fairness weigh in favor of declining to exercise supplemental jurisdiction.
If the Court had original jurisdiction in the first instance upon AFFES’s removal,

the Court declines to exercise its supplemental jurisdiction having taken all the above-
mentioned factors into consideration.

ORDER – PAGE 25
5. Conclusion
Even though this case was properly removed by AAFES, the Court nevertheless

finds that remand is required under the facts of this case because subject-matter
jurisdiction is completely lacking in this matter. See § 1447(c); see Powerex, 551 U.S. at
225 (even if a case was properly removed, the district court may still remand the case
for lack of subject-matter jurisdiction pursuant to § 1447(c)); see also Manguno v.
Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002) (any doubts as to

whether jurisdiction exists after removal must be construed strictly in favor of remand).
IV. Motion for Leave to Amend
Well after the motions to dismiss and motion to remand had been filed, Mid-
Way filed a Motion to Leave to File Second Amended Answer and Cross-Claims (Doc.

No. 16). Although Mid-Way does not acknowledge as much in its motion, the
proposed amended answer and “cross-claims” alleges, for the first time, an affirmative
defense of “derivative sovereign immunity” as a federal government contractor.
The Court already concluded that it did not acquire original jurisdiction upon

removal if the doctrine of derivative jurisdiction created a jurisdictional defect.
Therefore, without subject-matter jurisdiction, this case must be remanded and the
Court may not rule on this motion. Even if derivative jurisdiction resulted in a
procedural defect, rather than jurisdictional, the Court demurs ruling on Mid-Way’s

ORDER – PAGE 26
motion because the Court does not otherwise have original jurisdiction in this matter
and, alternatively, declines to exercise its supplemental jurisdiction. “The jurisdictional

facts that support removal must be judged at the time of removal.” Gebbia, 233 F.3d
at 883. An “amendment may not create subject matter jurisdiction when none exists.”
See also In re Katrina Canal Breaches Litig., 342 F. App’x 921, 931 (5th Cir, 2009). Mid-
Way cannot cure the jurisdictional defect in this case by amending its answer and
“cross-claims” to allege a new defense of “derivative sovereign immunity” in an attempt

to create federal question jurisdiction for this Court. Id. Because this case must be
remanded for lack of subject-matter jurisdiction, the Court does not rule on Mid-Way’s
motion for leave to amend, leaving this for the state court.
V. Motion for Limited Discovery

Mid-Way also moves for limited discovery related to derivative sovereign
immunity. For all the previously stated reasons, the Court finds that any discovery,
however limited, would serve no useful purpose and only operate to delay this action
further. See In re Katrina Canal Breaches Litig., 342 F. App’x at 931 (amended claims

cannot “create an entirely new jurisdictional basis to provide competence in a court
which lacked authority over the case ab initio.”). The Court denies this motion as
moot.

ORDER – PAGE 27
VI. Conclusion
For the foregoing reasons, the Court GRANTS Third-Party Defendant AAFES’s
Motion to Dismiss (Doc. No. 5). All claims asserted by Defendant/Third-Party
Plaintiff Mid-Way against AAFES are hereby dismissed. The Court also GRANTS
Plaintiffs’ Motion to Remand (Doc. No. 9). The Court lacks subject-matter jurisdiction
over this case. See 28 U.S.C. § 1447(c); of Powerex, 55) U.S. at 225 (remand
encompassed by § 1447(c) where “a district court remands a properly removed case
because it nonetheless lacks subject-matter jurisdiction.”). This case is hereby
remanded to the District Court of 192nd Judicial District, Dallas County, Texas.
SO ORDERED.
Signed November 13", 2020.

ED KINKEADE
UNITED STATES DISTRICT JUDGE

ORDER — PAGE 28

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10449650. Public record. Not legal advice.