Cabalce v. Thomas E. Blanchard & Associates, Inc.

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

TERRANCE D. CABALCE, individually No. 13-15256

and as Personal Representative of

the Estate of Bryan Dean Cabalce; D.C. No.

GAIL S. CABALCE, 1:12-cv-00373-

Plaintiffs-Appellees, JMS-RLP

v.

THOMAS E. BLANCHARD &

ASSOCIATES, INC.; RICHARD BRATT;

HIDC SMALL BUSINESS STORAGE

LLC; HAWAIIAN ISLAND

DEVELOPMENT CO., INC.; HAWAIIAN

ISLAND HOMES LTD.; HAWAIIAN

ISLAND COMMERCIAL LTD.; FORD

ISLAND VENTURES, LLC,

Defendants,

v.

VSE CORPORATION,

Defendant-Third-Party-Plaintiff–

Appellant,

and

DONALD ENTERPRISES, INC.; UNITED

STATES OF AMERICA,

Third-Party-Defendants.

2 CABALCE V. VSE CORP.

CHARLIZE LEAHEY IRVINE, No. 13-15259

individually and as Personal

Representative of the Estate of D.C. No.

Robert Leahey, deceased; CHARLES 1:12-cv-00391-

LEAHEY, JR., individually; JAMES JMS-RLP

LEAHEY, individually; MICHAEL

LEAHEY, individually,

Plaintiffs-Appellees,

v.

THOMAS E. BLANCHARD &

ASSOCIATES, INC.; RICHARD BRATT;

HIDC SMALL BUSINESS STORAGE

LLC; HAWAIIAN ISLAND

DEVELOPMENT CO., INC.; HAWAIIAN

ISLAND HOMES LTD.; HAWAIIAN

ISLAND COMMERCIAL LTD.; FORD

ISLAND VENTURES, LLC,

Defendants,

v.

VSE CORPORATION,

Defendant-Third-Party-Plaintiff–

Appellant,

and

DONALD ENTERPRISES, INC.; UNITED

STATES OF AMERICA,

Third-Party-Defendants.

CABALCE V. VSE CORP. 3

GEORGE JOSEPH KELII, individually No. 13-15265

and as Co-Personal Representative

of the Estate of Justin Joseph Kellii, D.C. No.

Deceased; PRISCILLA ANN KELII; 1:12-cv-00376-

DANIELLE THERESA BATTISTI, JMS-RLP

individually and as Co-Personal

Representative of the Estate of Justin

Joseph Kellii, Deceased; DEBORAH

ANN DULARTE, individually and as

Co-Personal Representative of the

Estate of Justin Joseph Kellii,

Deceased; DENISE MARIE KELLII

HIRANO; JOSHUA KELLII; JAYMEE

KELLII,

Plaintiffs-Appellees,

v.

THOMAS E. BLANCHARD &

ASSOCIATES, INC.; RICHARD BRATT;

HIDC SMALL BUSINESS STORAGE

LLC; HAWAIIAN ISLAND

DEVELOPMENT CO., INC.; HAWAIIAN

ISLAND HOMES LTD.; HAWAIIAN

ISLAND COMMERCIAL LTD.; FORD

ISLAND VENTURES, LLC,

Defendants,

and

VSE CORPORATION,

Defendant-Third-Party-Plaintiff–

Appellant,

4 CABALCE V. VSE CORP.

and

DONALD ENTERPRISES, INC.; UNITED

STATES OF AMERICA,

Third-Party-Defendants.

HEATHER FREEMAN, Individually, No. 13-15266

and as Next Friend of Maleia Mika

Freeman, a minor, and as Personal D.C. No.

Representative of the Estate of 1:12-cv-00377-

Robert Kevin Donor Freeman, JMS-RLP

Deceased; ROBERT FREEMAN; EMMA

FREEMAN; MARTIN WILLIAM

SPRANKLE, Individually, and as OPINION

Personal Representative of the Estate

of Neil Benjamin Sprankle,

Deceased; UNHEE SEO,

Plaintiffs-Appellees,

v.

THOMAS E. BLANCHARD &

ASSOCIATES, INC.; RICHARD BRATT;

HIDC SMALL BUSINESS STORAGE

LLC; HAWAIIAN ISLAND

DEVELOPMENT CO., INC.; HAWAIIAN

ISLAND HOMES LTD.; HAWAIIAN

ISLAND COMMERCIAL LTD.; FORD

ISLAND VENTURES, LLC,

Defendants,

CABALCE V. VSE CORP. 5

and

VSE CORPORATION,

Defendant-Third-Party-Plaintiff–

Appellant,

and

DONALD ENTERPRISES, INC.; UNITED

STATES OF AMERICA,

Third-Party-Defendants.

Appeals from the United States District Court

for the District of Hawaii

J. Michael Seabright, District Judge, Presiding

Argued and Submitted

October 7, 2014—Honolulu, Hawaii

Filed August 13, 2015

Before: A. Wallace Tashima, Johnnie B. Rawlinson,

and Richard R. Clifton, Circuit Judges.

Opinion by Judge Rawlinson

6 CABALCE V. VSE CORP.

SUMMARY*

Removal

The panel affirmed the district court’s order remanding to

state court several actions that sought to impose liability on

VSE Corporation for a deadly explosion involving fireworks

that were seized by the federal government and which VSE

agreed to store and destroy.

The plaintiffs, who were the families or representatives of

people killed by the explosion of fireworks, filed complaints

in Hawaii state court. VSE removed the four state court

actions to federal district court pursuant to 28 U.S.C.

§ 1442(a)(1). VSE maintained that removal was proper

because it acted “under the color of the United States”

pursuant to its contract with the federal government, and

because it had colorable federal defenses premised on

derivative sovereign immunity and the government contractor

defense.

The panel held that VSE did not demonstrate by a

preponderance of the evidence the requisite casual nexus

between the plaintiffs’ claim and direction or control of the

project by a federal agency or official.

The panel also held that federal officer removal was not

warranted because VSE failed to demonstrate that it had a

colorable federal defense to the plaintiffs’ claims. The panel

held that VSE, as a non-military contractor, was not able to

*

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

CABALCE V. VSE CORP. 7

assert a plausible government contractor defense. The panel

further held that VSE did not establish that the federal

government reviewed in detail the destruction plan that had

been independently devised by VSE and others. Finally, the

panel held that VSE was unable to satisfy the requirements

for derivative sovereign immunity because VSE did not

plausibly demonstrate that it completely lacked discretion in

independently devising the destruction plan.

COUNSEL

Kurt James Hamrock (argued), Raymond B. Biagini, Lisa

Norrett Himes, and Shannon Gibson Konn, McKenna Long

& Aldridge LLP, Washington, D.C., for Defendant-

Appellant.

Steven K. Hisaka (argued) and Gail Y. Cosgrove, Hisaka

Yoshida & Cosgrove, Honolulu, Hawaii; and Jan M.

Weinberg, Honolulu, Hawaii, for Plaintiffs-Appellees.

OPINION

RAWLINSON, Circuit Judge:

Pursuant to a contract with the United States Department

of the Treasury, Appellant VSE Corporation (VSE) agreed to

store and destroy fireworks that had been seized by the

federal government. VSE challenges the district court’s order

remanding to state court several actions that sought to impose

liability on VSE for a deadly explosion involving the seized

fireworks. VSE contends that removal to federal court

pursuant to 28 U.S.C. § 1442 was proper because it acted

8 CABALCE V. VSE CORP.

under the directions of a federal officer when it stored and

attempted to destroy the fireworks. VSE also argues that

VSE adequately asserted two colorable federal defenses – the

government contractor defense and derivative sovereign

immunity. We disagree, and affirm the district court’s order.

I. BACKGROUND

This case stems from a deadly explosion involving seized

fireworks that were stored by VSE on behalf of the federal

government prior to the planned destruction of the fireworks.

VSE entered into a contract with the Treasury Executive

Office for Asset Forfeiture for the storage and disposal of

seized property. The contract specified that VSE “shall

provide all services, materials, supplies, supervision, labor,

and equipment, except that specified herein as Government-

furnished, to perform all property management and

disposition work . . .” VSE was responsible for the

disposition of seized property in accordance with instructions

“issued by the seizing or blocking agency. . . .” VSE was

required to “destroy General Property as prescribed and

directed by the responsible seizing or blocking agency

designated representative on the disposition order,” and to

comply with federal, state, and local laws and regulations

when destroying hazardous materials. Additionally, the

contract provided that “[a]ll destructions must be coordinated

and approved by the responsible seizing or blocking agency

designated representative. Failure to coordinate and obtain

prior approval of all destruction activity will result in

unallowable costs. . . .”

The contract’s indemnity clause specified that:

CABALCE V. VSE CORP. 9

The Contractor is “an Independent

Contractor” and shall obtain all necessary

insurance to protect Project Personnel from

liability arising out of the Contract. The

Contractor hereby agrees to indemnify and

hold the Government and its employees

harmless in connection with any loss or

liability from damage to or destruction of

property, or from injuries to or death of

persons (including the agents and employees

of both parties) if such damage, destruction,

injury, or death arises out of, or is caused by,

performance of work under the Contract,

unless such damage, destruction, injury, or

death is caused solely by the active negligence

of the Government or its employees. The

Contractor agrees to include this clause,

appropriately modified, in all subcontracts to

be performed under the Contract.

With respect to safety precautions, the contract delineated

that:

The Contractor shall be responsible for all

damages to persons or property that occurs as

a result of its, its subcontractors, or any of its

or its or its [sic] subcontractor’s employee’s

fault or negligence. The Contractor shall take

proper safety and health precautions to protect

the work, the workers, the public and property

of others. The Contractor shall also be

responsible for all materials delivered and

work performed until completion and

acceptance of the service.

10 CABALCE V. VSE CORP.

According to James Fallon (Fallon), a vice-president of

VSE, pursuant to the contract, VSE was storing fireworks that

had been seized by the federal government. The seizures,

referred to as the Haleamau and Chang seizures, were part of

a criminal case requiring maintenance of the fireworks as

evidence. Fallon related that the Haleamau seizure “consisted

of 1,370 cartons of fireworks” and that the Chang seizure

“consisted of a total of 296 cartons of fireworks. . . .”

The seized fireworks were actually stored by Donaldson

Enterprises, Inc. (Donaldson), a subcontractor utilized by

VSE. Tragically, storage and destruction of the fireworks did

not proceed as planned. An explosion of fireworks in a

commercial storage facility resulted in the deaths of five

individuals.

Terrance Cabalce, the father of Bryan Cabalce (Cabalce),

filed a complaint in Hawaii state court alleging that VSE was

liable for the death of his son. The complaint alleged that

Cabalce was employed by Donaldson, which was hired by

VSE to store, transport, dismantle, and dispose of the seized

fireworks. According to the complaint, VSE negligently

caused Cabalce’s death by failing to eliminate the dangers

associated with the fireworks; disposing of the fireworks in

the same area where the fireworks were stored; utilizing tools

and pumps that may have caused the ignition of the

fireworks; storing the fireworks in a confined area that was

susceptible to static electricity; and using diesel oil to

dismantle the fireworks. The complaint also alleged that

VSE’s dismantlement and transportation of the fireworks was

an ultra-hazardous activity and that VSE was liable “under

the theories of strict liability for breach of warranty, defective

design, conducting an ultra-hazardous activity, breach of

implied warranty of habitability, implied warranty of fitness

CABALCE V. VSE CORP. 11

for a particular purpose, other applicable warranties,

respondeat superior, res ipsa loquitor, agency liability,

partnership liability, and/or otherwise.”

Plaintiff Charlize Leahey Irvine (Irvine) filed a complaint

in Hawaii state court against VSE for the death of Robert

Leahey (Leahey), another Donaldson employee. According

to the complaint, Leahey was working in a storage unit leased

by Donaldson that contained “39 plastic wrapped pallets of

fireworks (1370 cartons containing 5480 fireworks”) and

“approximately 17–55 gallon barrels, some of which

contained diesel fuel oil and a mixture of other

combustible/explosive materials.” Irvine alleged that Leahey

and five other Donaldson employees were dismantling the

fireworks “by cutting open the casings of the fireworks with

a cutting tool similar to a scissors and mixing the gun powder

removed from the casings with the diesel fuel. The

employees used a small pump to move the diesel fuel from

full barrels of diesel fuel to the barrels containing gun

powder.” Irvine averred that, after the work was moved

inside the storage unit when it started to rain, an explosion

occurred that “was so great that debris was blown over 150

feet from the front doors of the storage unit. Three vehicles

parked outside of the storage unit caught fire and burned from

the intense heat and fire from the explosion.”

Irvine alleged that VSE was negligent because VSE

should have known that the premises were unsafe; VSE failed

to adequately warn the employees about the dangerous

conditions; VSE did not properly supervise and manage the

Donaldson employees in storing and disposing of the seized

fireworks; and VSE did not devise appropriate safety

procedures. Irvine also asserted theories of strict liability and

the performance of ultra-hazardous activities associated with

12 CABALCE V. VSE CORP.

storing, dismantling, handling, transporting, and disposing of

fireworks and explosives.

The families or representatives of the estates for two other

Donaldson employees killed in the explosion, Robert

Freeman and Justin Joseph Kelii, filed similar complaints

against VSE in Hawaii state court.

VSE removed all four state court actions to federal district

court pursuant to 28 U.S.C. § 1442(a)(1). VSE maintained

that removal was proper because it acted “under the color of

the United States” pursuant to its contract with the federal

government, and because it had colorable federal defenses

premised on derivative sovereign immunity and the

government contractor defense.

In addition, VSE filed a third-party complaint against the

United States seeking contribution and equitable indemnity

under the Federal Tort Claims Act (Tort Claims Act). VSE

alleged that the United States “had a duty to disclose and

provide a warning as to the severe risk of harm posed by the

fireworks that it controlled, possessed and/or owned.” VSE

also asserted that the United States failed to warn VSE or

Donaldson “concerning the potential for catastrophic risk of

harm” related to the fireworks and that the United States

failed to exercise ordinary care when it consigned the

fireworks to VSE.

The district court granted the United States’ motion to

dismiss VSE’s third-party complaint for lack of subject

matter jurisdiction. Applying the independent contractor

exception, the district court held that the United States was

not liable under the Tort Claims Act for the alleged negligent

CABALCE V. VSE CORP. 13

acts committed by VSE and Donaldson in destroying the

fireworks. The district court determined:

Neither the Complaints nor the Third-Party

Complaints allege (and the record contains no

such evidence) that any government employee

or agency controlled or substantially

supervised the day-to-day destruction of the

fireworks. Rather, all indications are that

Donaldson and VSE were performing under

their respective contracts. No one disputes

that Donaldson and VSE devised and prepared

the destruction plans (both the plan that [the

Bureau of Customs and Border Protection]

approved on April 28, 2010, and the modified

procedure discussed between Donaldson and

VSE on March 28, 2011). And, indeed, the

VSE prime contract specifically declares that

VSE is an Independent Contractor and shall

obtain all necessary insurance to protect

Project Personnel from liability arising out of

the Contract.

(citations, alteration, and internal quotation marks omitted)

(emphasis in the original). The district court observed that

“even assuming the VSE contract gave the government the

ability to enforce safety regulations, VSE or Donaldson

personnel were still not employees for purpose[s] of [Tort

Claims Act] liability.” (citation and internal quotation marks

omitted).

The district court held that dismissal of the third-party

complaint against the United States was warranted under the

discretionary function exception to the Tort Claims Act,

14 CABALCE V. VSE CORP.

because the United States contractually assigned the

destruction of the fireworks to VSE and Donaldson. The

district court observed that “[t]he record is undisputed that

Donaldson . . . prepared the destruction plan for VSE, and

that VSE obtained government approval only after Donaldson

obtained the necessary permit. VSE and Donaldson provided

the government with detailed safety parameters as part of the

plan, not the other way around. . . .” The district court also

observed that Donaldson was licensed to handle “high

explosives.”

The district court subsequently granted the plaintiffs’

motions to remand their cases to Hawaii state court. See

Cabalce v. VSE Corp., 922 F.Supp.2d 1113, 1115 (D. Haw.

2013). The district court noted that, in its prior order

dismissing VSE’s third-party complaint against the United

States, it determined that VSE was an independent contractor

under the Tort Claims Act. See id. at 1116. Consistent with

that determination, the district court concluded that VSE was

unable to demonstrate that it acted under the direct orders or

regulations of the federal government because VSE operated

as an independent contractor who devised and modified the

destruction plan in the absence of governmental supervision.

See id. at 1122–23. Because VSE functioned as an

independent contractor, the “independent contractor”

exception in the Tort Claims Act barred VSE’s claims against

the United States. See id. at 1116–17.

The district court also rejected VSE’s assertion that

removal was proper based on the government contractor

defense and derivative sovereign immunity. See id. at

1123–29. The district court explained that the government

contractor defense was inapplicable because VSE was not

acting under direct orders or regulations of the federal

CABALCE V. VSE CORP. 15

government and was unable to identify any precise

specifications precluding VSE’s ability to comply with its

duty to warn. See id. at 1123–25. The district court observed

that the broad discretion conferred upon VSE and Donaldson

in developing and implementing the destruction plan further

undermined a government contractor defense. See id. at

1124.

The district court held that derivative sovereign immunity

did not extend to VSE because the defense was unavailable

to independent contractors who acted negligently. See id. at

1125–27. The district court rejected VSE’s argument that

derivative sovereign immunity applied because VSE was

strictly liable for its performance of the ultra-hazardous

activity of destroying the fireworks. See id. at 1126–28. The

district court determined that VSE’s strict liability argument

was unavailing because that defense required proof of an

agency relationship, which VSE lacked as an independent

contractor. See id. at 1128–29. The district court granted

VSE’s motion to stay its order remanding the actions to state

court pending appeal.

VSE filed timely notices of appeal.

II. STANDARD OF REVIEW

“We review de novo a district court’s decision to remand

a removed case and its determination that it lacks subject

matter jurisdiction. . . .” Lively v. Wild Oats Markets, Inc.,

456 F.3d 933, 938 (9th Cir. 2006) (citations omitted).1

1

Because this case was removed from state court pursuant to 28 U.S.C.

§ 1442, we have jurisdiction to review the order remanding the action to

state court. See 28 U.S.C. § 1447(d) (“ An order remanding a case to the

16 CABALCE V. VSE CORP.

III. DISCUSSION

A. The Lack of a Causal Nexus Between the

Plaintiffs’ Claims and a Federal Officer’s

Directions

VSE contends that removal was proper pursuant to

28 U.S.C. § 1442(a)(1) because there was a causal nexus

between the work it performed at the direction of the United

States and the plaintiffs’ claims. VSE maintains that the

United States contractually delegated authority to VSE and

that there was a causal connection between VSE’s

performance of federal duties and the plaintiffs’ claims.

Pursuant to 28 U.S.C. § 1442(a)(1):

(a) A civil action or criminal prosecution that

is commenced in a State court and that is

against or directed to any of the following

may be removed by them to the district court

of the United States for the district and

division embracing the place wherein it is

pending: (1) 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

State court from which it was removed is not reviewable on appeal or

otherwise, except that an order remanding a case to the State court from

which it was removed pursuant to section 1442 or 1443 of this title shall

be reviewable by appeal or otherwise.”).

CABALCE V. VSE CORP. 17

Congress for the apprehension or punishment

of criminals or the collection of the revenue.

“[T]he federal officer removal statute authorizes removal

of a civil action brought against any person acting under an

officer of the United States for or relating to any act under

color of such office.” Leite v. Crane Co., 749 F.3d 1117,

1120 (9th Cir. 2014) (citation, footnote reference, and internal

quotation marks omitted). “To invoke the statute, [VSE]

must show that (1) it is a person within the meaning of the

statute, (2) a causal nexus exists between plaintiffs’ claims

and the actions [VSE] took pursuant to a federal officer’s

direction, and (3) it has a colorable federal defense to

plaintiffs’ claims.” Id. (citation and internal quotation marks

omitted).

VSE faces a steep hurdle in demonstrating the requisite

causal nexus between the plaintiffs’ claims and a federal

officer’s direction because VSE did not challenge the district

court’s factual findings supporting its dismissal of VSE’s

third-party complaint against the United States.2 As the

Supreme Court has articulated:

The relevant relationship is that of a private

person “acting under” a federal “officer” or

“agency.” In this context, the word “under”

must refer to what has been described as a

relationship that involves “acting in a certain

capacity, considered in relation to one holding

a superior position or office.” That

2

VSE’s counsel represented before the district court that he would not

“argue with the law of the case” concerning the district court’s prior

finding that VSE did not act at the direction of the federal government.

18 CABALCE V. VSE CORP.

relationship typically involves “subjection,

guidance, or control.”. . .

Watson v. Phillip Morris Cos., Inc., 551 U.S. 142, 151 (2007)

(citations omitted) (emphasis in the original). In dismissing

VSE’s third-party complaint, the district court determined

that “[n]either the Complaints nor the Third-Party Complaints

allege (and the record contains no such evidence) that any

government employee or agency controlled or substantially

supervised the day-to-day destruction of the fireworks. . . .”

The district court also concluded that “[t]he record is

undisputed that Donaldson . . . prepared the destruction plan

for VSE, and that VSE obtained government approval only

after Donaldson obtained the necessary permit. VSE and

Donaldson provided the government with detailed safety

parameters as part of the plan, not the other way around. . . .”

Thus, a significant flaw in VSE’s argument that the

federal government directed its work is the lack of any

evidence of the requisite federal control or supervision over

the handling of the seized fireworks. See Leite, 749 F.3d at

1122 (articulating that the party invoking federal officer

removal “bears the burden of proving by a preponderance of

the evidence that the colorable federal defense and causal

nexus requirements for removal jurisdiction have been met”)

(citation and footnote reference omitted); see also Autery v.

United States, 424 F.3d 944, 956 (9th Cir. 2005) (“With a

12(b)(1) motion, a court may weigh the evidence to determine

whether it has jurisdiction. . . .”) (citation omitted). The

record is bereft of any factual support for VSE’s assertion that

its conduct was causally connected to the federal

government’s “subjection, guidance, or control.” Watson,

551 U.S. at 151. Notably missing is any evidence reflecting

that Donaldson and VSE operated under federal supervision

CABALCE V. VSE CORP. 19

or control in developing the destruction plan itself. Rather,

“[t]he government was relying on the expertise of [VSE] and

not vice versa.” In re Hanford Nuclear Reservation Litig.,

534 F.3d 986, 1007 (9th Cir. 2008), as amended.

VSE also relies extensively on its contractual duties to

handle, store, and destroy the seized fireworks. However, the

contract defines VSE’s duties in handling hazardous and

dangerous materials in general terms and VSE points to no

contractual provisions or specifications from a federal officer

relevant to its destruction of the seized fireworks. Moreover,

VSE’s reliance on contractual generalities to shield it from

liability completely excises provisions establishing the nature

of VSE’s contractual relationship with the federal

government. In particular, the contract unambiguously

provides:

The Contractor is an Independent Contractor

and shall obtain all necessary insurance to

protect Project Personnel from liability arising

out of the Contract. The Contractor hereby

agrees to indemnify and hold the Government

and its employees harmless in connection with

any loss or liability from damage to or

destruction of property, or from injuries to or

death of persons (including the agents and

employees of both parties) if such damage,

destruction, injury, or death arises out of, or is

caused by, performance of work under the

Contract, unless such damage, destruction,

injury, or death is caused solely by the active

negligence of the Government or its

employees. The Contractor agrees to include

this clause, appropriately modified, in all

20 CABALCE V. VSE CORP.

subcontracts to be performed under the

Contract.

The contract provides with respect to safety precautions that:

The Contractor shall be responsible for all

damages to persons or property that occurs as

a result of its, its subcontractors, or any of its

or its or its [sic] subcontractor’s employee’s

fault or negligence. The Contractor shall take

proper safety and health precautions to protect

the work, the workers, the public and property

of others. The Contractor shall also be

responsible for all materials delivered and

work performed until completion and

acceptance of the service.

VSE’s parsing of the contract in an attempt to support federal

officer removal is unavailing.

Fundamentally, VSE challenges the district court’s

reliance on VSE’s status as an independent contractor.

Independent contractors may be afforded the benefits of

federal officer removal in theory, see Boyle v. United Tech.

Corp., 487 U.S. 500, 505 (1988), and the district court’s

analysis was not inconsistent with that theory. Rather than

holding that VSE was precluded as a matter of law from

seeking federal officer removal as an independent contractor,

the district court considered VSE’s independent contractor

status as a component of its analysis that VSE could not

demonstrate the requisite causal nexus for federal officer

removal. In particular, the district court referenced VSE’s

independent contractor status, other contract provisions, and

Donaldson’s and VSE’s independent development of the

CABALCE V. VSE CORP. 21

destruction plan, to support its conclusion that “VSE and

Donaldson were not acting under direct orders or

comprehensive and detailed regulations of the government.”

Cabalce, 922 F.Supp.2d at 1122 (citation and internal

quotation marks omitted). Given the paucity of evidence

presented by VSE, the district court determined that VSE, as

an independent contractor, simply could not “exclude the

possibility that the removed action was based on acts or

conduct of VSE not justified by VSE’s federal duty.” Id. at

1123 (citation and alteration omitted). The district court

concluded that acts “occurr[ing] under the general auspices of

federal direction” were not acts of a government agency or

official. Id. at 1122–23. This conclusion was not erroneous.3

3

VSE contends that the district court in Anchorage v. Integrated

Concepts & Research Corp., No. 3:13-cv-00063-SLG, 2013 WL 6118485

(D. Alaska 2013) rejected the Cabalce district court’s holding that an

independent contractor is not eligible for federal officer removal.

However, the district court in Integrated Concepts merely observed that

“whether a federal contractor is termed an independent contractor is not

dispositive of section 1442 removal. The focus for this inquiry is instead

whether the contractor assisted or helped the government, and performed

duties that the government would otherwise have to perform. . . .” Id. at

*4 (internal quotation marks omitted). As discussed, the district court in

Cabalce did not simply label VSE an independent contractor and conclude

that VSE was thereby barred from seeking federal officer removal.

Instead, the district court considered VSE’s independent contractor status,

particularly given VSE’s contract-based assertions, as one component of

its analysis; and VSE’s failure to proffer any evidence that it operated

under the federal government’s guidance, control, and supervision as

another component of its analysis. See Cabalce, 922 F.Supp.2d at

1122–23. Moreover, the district court in Integrated Concepts

distinguished Cabalce on the basis that, unlike in Integrated Concepts, the

government did not exercise extensive day-to-day control over the

contractors in Cabalce. See Integrated Concepts, 2013 WL 6118485, at

*4.

22 CABALCE V. VSE CORP.

Finally, VSE faults the district court for not following its

prior decision in Leite v. Crane Co., 868 F.Supp.2d 1023 (D.

Haw. 2012), which we recently affirmed. See Leite, 749 F.3d

at 1124. However, as reflected in our decision, Leite is

entirely distinguishable from the present appeal. The

defendant in Leite, a military contractor, was sued for failing

to warn about asbestos in military equipment. The contractor

demonstrated that federal officer removal was warranted by

producing extensive evidence of federal control, including

“detailed specifications governing the form and content of all

warnings that equipment manufacturers were required to

provide, both on the equipment itself and in accompanying

technical manuals.” Leite, 749 F.3d at 1123 (emphasis

added). Additionally, “the Navy was directly involved in

preparing the manuals, which included safety information

about equipment operation . . . [E]quipment manufacturers

could not include warnings beyond those specifically required

and approved by the Navy, and . . . the Navy’s specifications

did not require equipment manufacturers to include warnings

about asbestos hazards. . . .” Id. (emphasis added). In

contrast to the persuasive showing by the Defendant in Leite,

VSE failed to provide any evidence of federal control or

supervision over the planned destruction of the fireworks. If

anything, Leite bolsters our conclusion that VSE did not meet

its “burden of proving by a preponderance of the evidence

that the colorable federal defense and causal nexus

requirements for removal jurisdiction have been met.” Leite,

749 F.3d at 1122 (citation and footnote reference omitted).4

4

VSE’s reliance on Bennett v. MIS Corp., 607 F.3d 1076 (6th Cir. 2010)

and Isaacson v. Dow Chem. Co., 517 F.3d 129 (2d Cir. 2008) is

misplaced. Unlike VSE, the defendants in Bennett and Isaacson amply

demonstrated the requisite federal supervision, control, and direction. In

Bennett, a case involving mold remediation firms hired by the Federal

CABALCE V. VSE CORP. 23

B. Colorable Federal Defenses

Even if VSE presented sufficient evidence of the causal

nexus between the plaintiffs’ claims and the actions of a

federal officer, VSE’s pursuit of federal officer removal

would still falter because it did not demonstrate the requisite

colorable federal defense. See Leite, 749 F.3d at 1120 (“To

invoke the statute, [VSE] must show that (1) it is a person

within the meaning of the statute, (2) a causal nexus exists

between plaintiffs’ claims and the actions [VSE] took

pursuant to a federal officer’s direction, and (3) it has a

colorable federal defense to plaintiffs’ claims.”) (citation and

internal quotation marks omitted) (emphasis added).

1. Government Contractor Defense

Relying on Boyle, VSE contends that federal officer

removal was proper because it asserted a colorable

government contractor defense. In Boyle, the Supreme Court

held that military contractors involved in the design of

Aviation Administration (FAA), “[t]he FAA contracts included precise

specifications” and “Federal officers closely monitored [the defendant’s]

work. Specifically, each contract designated a federal officer who directly

supervised each remediation. These on-site federal officers . . . were

prohibited from modifying or deviating from the FAA’s specifications

without first obtaining the signature of the Lead Contractor Officer . . .”

607 F.3d at 1082, 1087 (alteration, footnote reference, and internal

quotation marks omitted). In Isaacson, the federal government contracted

with several chemical companies to develop Agent Orange. See 517 F.3d

at 133. The Second Circuit held that federal officer removal was proper

because “the Government knew that Agent Orange contained dioxin, and

the Government controlled the method of formulation. The action that

Plaintiffs challenge, the production of dioxin, naturally would have

occurred during the performance of these government-specified

duties. . . .” Id. at 138.

24 CABALCE V. VSE CORP.

military equipment should not be held liable for state law

claims. The Supreme Court articulated:

Liability for design defects in military

equipment cannot be imposed, pursuant to

state law, when (1) the United States approved

reasonably precise specifications; (2) the

equipment conformed to those specifications;

and (3) the supplier warned the United States

about the dangers in the use of the equipment

that were known to the supplier but not to the

United States. . . .

Boyle, 487 U.S. at 512. As we have recognized, “[t]his

defense protects government contractors from tort liability

that arises as a result of the contractor’s compliance with the

specifications of a federal government contract.” Getz v.

Boeing Co., 654 F.3d 852, 860 (9th Cir. 2011) (citations,

alteration, and internal quotation marks omitted).

“In the Ninth Circuit, however, [the government

contractor defense] is only available to contractors who

design and manufacture military equipment.” Snell v. Bell

Helicopter Textron, Inc., 107 F.3d 744, 746 n.1 (9th Cir.

1997) (citation omitted). This precedent renders the

government contractor defense unavailable to VSE, a non-

military contractor.5

5

VSE candidly acknowledges that “[t]his Court has not yet applied the

government contractor defense outside of military contracts . . .”

Nevertheless, VSE contends that it was entitled to invoke the government

contractor defense because it is plausible that the defense may apply

outside of the military context. For example, in Integrated Concepts, the

district court opined that “the government contractor defense could

plausibly be invoked by a contractor hired by a federal civilian agency to

CABALCE V. VSE CORP. 25

Even if applicable, VSE did not demonstrate by a

preponderance of the evidence a colorable government

contractor defense because “[t]he government’s approval of

a particular specification must be more than a cursory rubber

stamp approving the design.” Getz, 654 F.3d at 861 (citation

and internal quotation marks omitted). “Rather, approval

must result from a continuous exchange and back and forth

dialogue between the contractor and the government.” Id.

(citation and internal quotation marks omitted). “When the

government engages in a thorough review of the allegedly

defective design and takes an active role in testing and

implementing that design, [the] first element is met.” Id.

(citation omitted). As discussed, VSE failed to proffer any

evidence that the government approved “a particular

specification” for the fireworks’ destruction after “a

continuous exchange and back and forth dialogue between the

contractor and the government,” as opposed to “a cursory

rubber stamp.” Id.6

design and construct a local infrastructure project.” 2013 WL 6118485 at

*7 (footnote reference omitted). However, our binding precedent has not

reached a similar conclusion. See Snell, 107 F.3d at 746 n.1. Indeed, VSE

points to no authority permitting the panel to overrule its precedent

limiting the government contractor defense to military contractors. See

United States v. Hernandez-Estrada, 749 F.3d 1154, 1160 (9th Cir. 2014)

(en banc) (emphasizing that “[t]he three judge panel lack[s] the authority

to alter circuit law without an intervening Supreme Court or en banc

decision that was clearly irreconcilable with our circuit precedent”)

(citation omitted).

6

VSE insists that the district court improperly weighed the evidence and

made factual determinations in holding that VSE failed to present a

colorable government contractor defense. However, we have held in the

federal officer removal context that “[b]ecause plaintiffs have raised a

factual attack on [the defendant’s] jurisdictional allegations, [the

defendant] must support its allegations with competent proof.” Leite, 749

26 CABALCE V. VSE CORP.

2. Derivative Sovereign Immunity

Relying on Yearsley v. W.A. Ross Constr. Co., 309 U.S.

18 (1940), VSE asserts that it is entitled to derivative

sovereign immunity because VSE performed delegated

governmental functions pursuant to its federal contract.

In Yearsley, a company that built dikes on the Missouri

River pursuant to a federal contract was sued for “using large

boats with paddles and pumps to produce artificial erosion

[that] washed away a part of petitioners’ land. . . .” Id. at 19.

The Supreme Court observed that it was “undisputed that the

work which the contractor had done in the river bed was all

authorized and directed by the Government of the United

States for the purpose of improving the navigation of this

navigable river. . . .” Id. at 20 (internal quotation marks

omitted). The Supreme Court concluded that the company

was not liable because “if the authorized action in this

instance does constitute a taking of property for which there

must be just compensation under the Fifth Amendment, the

Government has impliedly promised to pay that

compensation and has afforded a remedy for its recovery by

a suit in the Court of Claims. . . .” Id. at 21 (citations

omitted). “It follows that as the Government in such a case

promises just compensation and provides a complete remedy,

action which constitutes the taking of property is within its

constitutional power and there is no ground for holding its

F.3d at 1122 (citation omitted). The defendant “bears the burden of

proving by a preponderance of the evidence that the colorable federal

defense and causal nexus requirements for removal jurisdiction have been

met.” Id. (citation and footnote reference omitted). Additionally, “if the

existence of jurisdiction turns on disputed factual issues, the district court

may resolve those factual disputes itself. . . .” Id. at 1121–22 (citations

omitted).

CABALCE V. VSE CORP. 27

agent liable who is simply acting under the authority thus

validly conferred. The action of the agent is the act of the

government.” Id. at 21–22 (citation and internal quotation

marks omitted).

We have held that derivative sovereign immunity, as

discussed in Yearsley, is limited to cases in which a

contractor “had no discretion in the design process and

completely followed government specifications.” In re

Hanford Nuclear Reservation Litig., 534 F.3d at 1001

(citation omitted). We clarified that “[n]othing in Yearsley

extended immunity to military contractors exercising a

discretionary governmental function.” Id. (citation omitted).

Even if we applied Yearsley, VSE would not benefit, because

the record does not reflect that VSE and Donaldson “had no

discretion” in devising the destruction plan for the fireworks.

Id. In fact, the record evinces a contrary conclusion. As the

district court aptly observed, it was undisputed that

Donaldson and VSE designed the destruction plan without

government control or supervision.

IV. CONCLUSION

The district court properly remanded the plaintiffs’

actions to state court. VSE did not demonstrate by a

preponderance of the evidence the requisite causal nexus

between the plaintiffs’ claims and direction or control of the

project by a federal agency or official. Indeed, VSE

presented no evidence reflecting that the destruction plan for

the fireworks was devised under the direction, supervision, or

control of a federal officer as required for federal officer

removal.

28 CABALCE V. VSE CORP.

Additionally, federal officer removal was not warranted

because VSE failed to demonstrate that it had a colorable

federal defense to the plaintiffs’ claims. As a non-military

contractor, VSE was not able to assert a plausible government

contractor defense. Neither did VSE establish that the federal

government reviewed in detail the destruction plan that had

been independently devised by VSE and Donaldson. Finally,

VSE was unable to satisfy the requirements for derivative

sovereign immunity. Our precedent precludes that defense

because VSE did not plausibly demonstrate that it completely

lacked discretion in independently devising the destruction

plan.

The judgment of the district court in each of these four

actions is AFFIRMED.