Mobilizegreen, Inc. v. Community Foundation National Capital Region , 101 F. Supp. 3d 36 ( 2015 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
__________________________________
)
MobilizeGreen, Inc., et al, )
)
Plaintiffs, )
)
v. ) Civil Action No. 14-1698 (RMC)
)
The Community Foundation for the )
National Capital Region, et al., )
)
Defendants. )
_________________________________ )
OPINION
Plaintiffs MobilizeGreen and its founder, Leah Allen (collectively
MobilizeGreen), move to remand this matter to the Superior Court for the District of Columbia,
where MobilizeGreen first filed suit. Defendants The Community Foundation for the National
Capital Region and its executives, Terri Lee Freeman, Mark B. Hansen, and Angela Jones
Hackley (collectively the Community Foundation), having removed the case to federal court,
oppose remand. As explained below, the motion to remand will be granted.
I. FACTS
MobilizeGreen is a non-profit corporation organized under the laws of the District
of Columbia and located in D.C. Compl. [Dkt. 1-1] ¶ 6. Its mission is “to build the next
generation of environmental leaders, stewards, and volunteers from under-represented
communities using MobilizeGreen’s innovative internship, mentoring, career coaching, and
collaborative partnership model.” Id. Leah Green is MobilizeGreen’s Founder and serves as its
President. Id. ¶ 7. The Community Foundation is a 501(c)(3) 1 non-profit organization based in
1
Certain organizations can become exempt from federal income taxation under section 501(c)(3)
of the Internal Revenue Code. “Corporations . . . organized and operated exclusively for
1
the District of Columbia that “manages donor-advised funds, gives grants to non-profits, and
fiscally sponsors new organizations.” Id. ¶ 16.
In 2011, MobilizeGreen proposed to develop a “national diversity internship pilot
program” (Internship Project) for the U.S. Forest Service, an agency of the U.S. Department of
Agricultur. The Forest Service agreed to provide funding for the Internship Project. Id. ¶ 18. As
“a then new non-profit with no employees, no revenues, and no federal or state tax-exempt
status,” MobilizeGreen asked the Community Foundation to serve as its fiscal sponsor. Id.
“Fiscal sponsorship is a relationship between a tax exempt organization like [the Community
Foundation] that serves as the official recipient of charitable donations for a new or smaller
organization that is not yet recognized as tax-exempt.” Id. ¶ 16. The Community Foundation
agreed to serve as a temporary fiscal sponsor for MobilizeGreen. Id. ¶ 21. To that end, the
parties executed an Agreement to Create a Sponsored Program Fund on July 28, 2011, which
was “established to provide temporary fiscal sponsorship for a period not to exceed November 1,
2011, at which time [MobilizeGreen] will transfer to another fiscal sponsor.” See Opp’n, Ex. 1
[Dkt. 13-1] (Sponsor Agreement) at 2. As consideration for the services provided by the
Community Foundation to MobilizeGreen, MobilizeGreen agreed to pay an annual
administrative fee of two percent of monies managed under the Sponsor Agreement. See id. at 1.
Shortly after entering into the Sponsor Agreement, the Community Foundation
executed a Challenge Cost Share Agreement with the Forest Service, which awarded funds to the
Community Foundation as authorized under the Interior and Related Appropriations Act of 1992.
religious, charitable, scientific, testing for public safety, literary, or educational purposes . . . no
part of the net earnings of which inures to the benefit of any private shareholder or individual”
are eligible for exemption from taxation. 26 U.S.C. § 501(a), (c)(3).
2
See Opp’n, Ex. 2 [Dkt. 13-2] (Forest Service Agreement) at 1. The stated purpose of the
agreement was:
to document the cooperation between the parties to help build the
next generation of environmental leaders, stewards, and volunteers
from under-represented and minority communities through a new
national program of the Community Foundation for National Capital
Region, a program called MobilizeGreen, in accordance with the
following provisions . . . .
Id. at 2. The Forest Service agreed to reimburse the Community Foundation for actual expenses
incurred for the Internship Project, up to a maximum of $273,805. Compl. ¶ 23. The
Community Foundation was required to submit monthly invoices to the Forest Service. See
Forest Service Agreement at 3.
As relevant to the instant motion, the Complaint alleges that the Community
Foundation failed to comply with the terms of the Sponsor Agreement by, inter alia, failing to
transfer the Internship Project to MobilizeGreen’s new fiscal sponsor, Social and Environmental
Entrepreneurs, and failing to pay legitimate Internship Project bills in a timely fashion. Compl.
¶¶ 24-28, 30-43. In addition, the Complaint alleges that the Community Foundation failed to
provide fiduciary oversight, financial management, and other administrative services, which
harmed MobilizeGreen. Id. ¶¶ 29-30, 44-50.
The following seven Counts are recited in the Complaint:
• Count 1: Breach of Fiduciary Duty (All Defendants)
• Count II: Fraud (Defendants Community Foundation and Brown)
• Count III: Negligence (All Defendants)
• Count IV: Breach of Contract (Defendant Community Foundation)
• Count V: Defamation (Defendant Brown)
• Count VI: Defamation Per Se (Defendant Brown)
• Count VII: Negligent Supervision (Defendants CFNCT, Freeman, Hanson,
and Jones Hackley)
Id. ¶¶ 103-140.
3
The Community Foundation has not yet filed an Answer to the Complaint.
Instead, as indicated above, it filed a Notice of Removal and brought the case to federal court.
MobilizeGreen prefers to litigate in Superior Court and seeks a remand.
II. LEGAL STANDARDS
Federal courts are courts of limited jurisdiction and the law presumes “that a
cause lies outside this limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of America, 511
U.S. 375, 377 (1994). The court must respect the jurisdiction of state courts if our system of
federalism is to work properly. See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108–09
(1941). The removing party bears the burden of establishing federal jurisdiction.
Kormendi/Gardner Partners v. Surplus Acquisition Venture, LLC, 606 F. Supp. 2d 114, 120
(D.D.C. 2009); see also McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189 (1936).
“[I]f federal jurisdiction is doubtful, a remand to state court is necessary.” Dixon v. Coburg
Dairy, Inc., 369 F.3d 811, 815-16 (4th Cir. 2004) (en banc).
A plaintiff is normally the master of its own complaint and can select its own
court, even if it means forgoing remedies that might be available elsewhere. See Caterpillar,
Inc. v. Williams, 482 U.S. 386, 392 (1987). In addition, “federal jurisdiction exists only when a
federal question is presented on the face of the plaintiff's properly pleaded complaint.” Id.
Accordingly, it “cannot be predicated on an actual or anticipated defense: ‘It is not enough that
the plaintiff alleges some anticipated defense to his cause of action and asserts that the defense is
invalidated by some provision of [federal law].’” Vaden v. Discover Bank, 556 U.S. 49, 60
(2009). On the other hand, if a complaint satisfies the requirements of federal jurisdiction, a
4
defendant has a right to have a federal court hear the matter. The Community Foundation cited
28 U.S.C. §§ 1441, 2 1442 and 1446 3 as the bases for removal.
III. ANALYSIS
The Community Foundation argues that this Court has subject matter jurisdiction
under 28 U.S.C. § 1441 because MobilizeGreen’s breach of fiduciary duty and breach of contract
claims necessarily raise substantial, disputed questions of federal law. The Community
Foundation also argues that the Federal Officer Removal Statute provides an independent basis
for federal jurisdiction because it was acting at all times under the direction of the Forest Service.
A. Federal Officer Removal Statute
The Federal Officer Removal Statute, 28 U.S.C. § 1442(a)(1), provides in relevant
part that:
A civil action . . . 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, sued in an
official or individual capacity.
(Emphasis added). “Four elements are required for removal under § 1442(a)(1): (1) a defendant
has acted under the direction of a federal officer, (2) there was a causal connection between the
defendant's actions and the official authority, (3) the defendant has a colorable federal defense to
2
28 U.S.C. § 1441 provides that “any civil action brought in a State court of which the district
courts of the United States have original jurisdiction, may be removed by the defendant or the
defendants, 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). As relevant here, the original
jurisdiction of a federal district court is defined by 28 U.S.C. § 1331.
3
28 U.S.C. § 1446 sets forth the procedures for removal. There is no dispute regarding the
procedural propriety of the Community Foundation’s notice of removal.
5
the plaintiff's claims, and (4) the defendant is a ‘person,’ within the meaning of the statute.”
Jacks v. Meridian Resource Co., LLC, 701 F.3d 1224, 1230 (8th Cir. 2012). The burden of
establishing the existence of federal jurisdiction under section 1142(a)(1) is upon the removing
party. Winters v. Diamond Shamrock Chemical Co., 149 F.3d 387, 398 (5th Cir. 1998).
The well-pleaded complaint rule, see Caterpillar, 482 U.S. at 392, does not
preclude reliance on the Federal Officer Removal Statute if a colorable federal defense exists as
to some claims and they otherwise meet the statute’s four criteria. See Jefferson County, Ala. v.
Acker, 527 U.S. 423, 431 (1999) (“Under the federal officer removal statute, suits against federal
officers may be removed despite the nonfederal cast of the complaint; the federal-question
element is met if the defense depends on federal law.”). MobilizeGreen does not dispute that the
Community Foundation is a “person,” as corporations are deemed “persons” under the statute,
see Winters v. Diamond Shamrock Chem. Co., 149 F.3d 387, 398 (5th Cir. 1998), or that the
Community Foundation has colorable federal defenses to its claims. The points of contention are
whether the Community Foundation “acted under” the direction of a Forest Service officer and
whether a causal nexus exists between the Community Foundation’s complained-of actions and
specific Forest Service directions.
Watson v. Philip Morris Cos., Inc., 551 U.S. 142 (2007) clarified the nature of the
relationship between a federal officer and a private actor that is needed to satisfy the “acting
under” requirement. The Supreme Court held that:
[A] private firm’s compliance (or noncompliance) with federal laws,
rules, and regulations does not by itself fall within the scope of the
statutory phrase ‘acting under’ a federal ‘official,’ even if the
regulation is highly detailed and even if the private firm's activities
are highly supervised and monitored.
Id. at 143. Instead, an entity “act[s] under” a federal officer when it “assist[s], or [] help[s] carry
out, the duties or tasks of the federal superior.” Id. at 152. An express delegation of authority
6
may satisfy this requirement. See Watson, 551 U.S. at 157. “Cases in which the Supreme Court
has approved removal involve defendants working hand-in-hand with the federal government to
achieve a task that furthers an end of the federal government.” Ruppel v. CBS Corp., 701 F.3d
1176, 1181 (7th Cir. 2012).
The Community Foundation argues that the “acting under” requirement of Section
1142(a)(1) is satisfied because it had a partnership relationship with the Forest Service under the
Forest Service Agreement, which involved close regulation and supervision, and it performed the
complained-of acts under comprehensive and detailed regulations. MobilizeGreen fails to
address the contractual relationship between the Community Foundation and the Forest Service.
Nonetheless, close review of the Forest Service Agreement reveals that the Community
Foundation was not assisting or helping to carry out the duties or tasks of the Forest Service. To
the contrary, the Community Foundation was helping to implement an outreach program that
was perhaps beneficial but ancillary to the Forest Service’s mandate to “manage[] 193 million
acres on 155 national forests and 20 grasslands in 44 states and Puerto Rico, and help[]
improve[] land stewardship outside the National Forest System.” Forest Service Agreement at 1.
The stated purpose of the Forest Service Agreement was to “document the
cooperation” between the Forest Service and the Community Foundation to “help build the next
generation of environmental leaders, stewards, and volunteers from under-represented and
minority communities.” Forest Service Agreement at 2. This may well have been consistent
with the Forest Service’s goal of increasing the capacity of its volunteer programs. Id. at 1.
Agreeing to a “Statement of Mutual Benefit and Interests,” the Forest Service and the
Community Foundation identified the following goals for the Internship Project:
• Increase the diversity and numbers of volunteers and
community partners engaged in each forest in each region;
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• Expose diverse college students to potential careers at the
Forest Service;
• Teach core content about environmental issues (climate,
energy, and sustainability), professional skills, and
stewardship to interns; and
• Increase youth volunteerism and stewardship.
Id. at 2. Although the Forest Service Agreement stated that the Forest Service needed to improve
its infrastructure for managing volunteer programs, the Community Foundation does not argue
that the Forest Service is directed by Congress (or the Secretary) to increase the diversity of its
volunteers or teach them core content concerning environmental issues. The Agreement gives no
indication that the Forest Service delegated authority to the Community Foundation to complete
the Internship Project or that the Forest Service would have independently undertaken the
Internship Project without the involvement of MobilizeGreen or the Community Foundation. 4
See Ruppel, 701 F.3d at 1181 (“‘Acting under’ covers situations . . . where the federal
government uses a private corporation to achieve an end it would have otherwise used its own
agents to complete.”).
In support of its argument, the Community Foundation cites directives from a
Forest Service Handbook 5 that characterize “challenge cost share agreements.” These directives,
however, reinforce the Court’s conclusion that the Community Foundation was not fulfilling
congressionally-assigned Forest Service duties or tasks under the Forest Service Agreement. To
4
MobilizeGreen emphasizes that it—not the Community Foundation—ran the Internship
Project; the Community Foundation functioned only as an intermediary between the Forest
Service and MobilizeGreen to receive and disburse funds. See Reply [Dkt. 14] at 8 n. 8.
5
“Forest Service Handbooks (FSH) are the principal source of specialized guidance and
instruction for carrying out the direction issued in the FSM (Forest Service Manuals). Specialists
and technicians are the primary audience of Handbook direction. Handbooks may also
incorporate external directives with related USDA and Forest Service directive supplements.”
Forest Service Directives, http://www.fs.fed.us/im/directives/ (last visited Apr. 10, 2015).
8
the contrary, the Forest Service Handbook states that “Challenge Cost-share Agreements (CS)
are the instruments used when the Forest Service cooperatively develops, plans, and implements
projects with other parties that are mutually beneficial to the parties and that enhance Forest
Service activities.” FSH 1509.11 § 72.31.1 (emphasis added). With a Challenge Cost-share
Agreement, the “Forest Service and the cooperator(s) shall share mutual interests and benefit in
the same qualitative way from the objective of the agreement.” Id. § 70.3 (emphasis added).
Successful execution of the Internship Project could well have benefited the Forest Service and
enhanced its activities, as well as those of MobilizeGreen, but such accomplishments do not
satisfy the statute’s “acting under” requirement, which requires direction to fulfill an agency’s
specific purpose. See, e.g., Maryland v. Soper (No. 1), 270 U.S. 9, 30 (1926) (chauffeur acting
under orders of federal prohibition agents in distillery raid “has the same right to the benefit” of
the federal officer removal statute as the agents); Winters, 149 F.3d at 389-99 (private defense
contractor satisfies “acting under” requirement when it produced Agent Orange, pursuant to
strict governmental specifications, control and inspection, to help the government conduct a
war); Jacks, 701 F.3d at 1234 (concluding that “[Federal Employees Health Benefits Act]
program carriers contracting with the federal government to provide health care insurance for
federal employees . . . conduct business under the delegation of the federal government”).
Simply put, providing a benefit to a federal agency is not equivalent to fulfilling one of the
federal agency’s duties or tasks.
The Community Foundation identifies e-mail correspondence with the Forest
Service’s program manager as evidence that it was closely monitored and supervised by the
Forest Service in its administration of federal funds to MobilizeGreen. See Opp’n at 28. This
evidence reveals that on May 24, 2012, a Forest Service program manager e-mailed the
9
Community Foundation to notify the Community Foundation of its noncompliance with the
requirements of the Forest Service Agreement, requiring the Community Foundation to submit
signed monthly invoices and quarterly program performance reports. See Opp’n, Ex. 3; Compl.
¶ 41. The Forest Service asked to be updated immediately and proposed biweekly calls to
increase Forest Service’s confidence that the Community Foundation and the Forest Service
could accomplish their goals. See Opp’n, Ex. 3. Subsequent emails from June 20, 2012 and
June 26, 2012 between the Community Foundation and the Forest Service demonstrate that the
Community Foundation submitted a financial report, performance report and invoices for
February, March, April and May 2012, but that the invoices were not sent by the appropriate
method and that the Community Foundation and Leah Allen had not joined a scheduled biweekly
call. See, Opp’n, Ex. 4 at 1-2. An exchange of three e-mails in the course of a thirteen-month
contract period 6 is hardly suggestive of close supervision and monitoring. The Forest Service
Agreement was executed on August 29, 2011 and the Internship Project began on September 1,
2011, almost nine months before the first e-mail. See Compl. ¶¶ 23, 31. There is no other
evidence that the Forest Service provided direct oversight to the Community Foundation.
The e-mails further suggest that the Forest Service decided to monitor the
Community Foundation only because the Community Foundation failed to comply with the
terms of the Forest Service Agreement. Critically, some of the issues that prompted the Forest
Service to scrutinize the Community Foundation’s actions are those that form the allegations in
the Complaint. See, e.g., Forest Service Agreement at 3 (requirement to submit monthly
invoices to Forest Service); Compl. ¶¶ 40, 42, 43 (alleging the Community Foundation’s delay in
6
The Complaint alleges that the Community Foundation submitted its final accounting to the
Forest Service to close out funding for the Internship Project on September 30, 2012, the
project’s end date. Compl. ¶¶ 57, 60.
10
paying bills after receiving MobilizeGreen’s expense reimbursement invoice). The Community
Foundation has not shown that it acted on the subjects of MobilizeGreen’s Complaint at the
direction of the Forest Service. See Watson, 551 U.S. at 147 (“The federal statute permits
removal only if [Defendant], in carrying out the ‘act[s]’ that are the subject of the petitioners'
complaint, was ‘acting under’ any ‘agency’ or ‘officer’ of ‘the United States.’”).
Jacks identifies four factors that must be satisfied before a district court may
exercise subject matter jurisdiction under Section 1142(a)(1). Because the Court’s analysis of
the first factor is dispositive, the Court does not reach the other factors of the test. The Federal
Officer Removal Statute does not provide an independent basis for jurisdiction in this case.
B. Federal Question Jurisdiction
Subject matter jurisdiction may exist for removal purposes where a case involves
a federal question “arising under the Constitution, laws, or treaties of the United States.”
28 U.S.C. § 1331. A suit will arise under federal law “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 (citing
Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149, 152 (1908)); see also Steele v. Salb, 681
F. Supp. 2d 34, 36 (D.D.C. 2010). “But even where a claim finds its origins in state rather than
federal law,” the Supreme Court has “identified a special and small category of cases in which
arising under jurisdiction still lies.” Gunn v. Minton, 133 S. Ct. 1059, 1064 (2013). “[F]ederal
jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually
disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the
federal-state balance approved by Congress.” Id. at 1065 (referencing Grable & Sons Metal
Products, Inc. v. Darue Engineering and Mfg., 545 U.S. 308 (2005)). A federal issue is
“necessarily raised” when an essential element of a plaintiff’s case “will necessarily require the
application of [federal] law to the facts of [plaintiff’s] case.” Gunn, 133 S. Ct. at 1064. For a
11
federal issue to be “actually disputed,” there must be a “dispute respecting the effect of federal
law.” Id. at 1065-66. To show that the federal issue is “substantial,” “it is not enough that the
federal issue be significant to the particular parties in the immediate suit.” Id. at 1066. The
substantiality inquiry “looks instead to the importance of the issue to the federal system as a
whole.” Id. This last requirement seeks to ensure that resolving an issue in federal court “would
not materially affect, or threaten to affect, the normal currents of litigation” in the federal system.
Grable, 545 U.S. at 319. Federal jurisdiction is favored in cases that present “a nearly pure issue
of law, the resolution of which would establish a rule applicable to numerous [other] cases.”
Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 681 (2006) (characterizing Grable).
In contrast, “‘fact-bound and situation-specific’ effects are not sufficient to establish federal
arising under jurisdiction.” Gunn, 133 S. Ct. at 1068 (citing Empire, 547 U.S. at 701).
The Community Foundation argues that this Court has original subject matter
jurisdiction under 28 U.S.C. § 1331 over the claim that it breached its fiduciary duty and
breached the contract—both quintessential state law claims—because both claims implicate
substantial questions of federal law and satisfy the inquiry set forth in Grable, which Gunn
distilled into four factors. This argument must be resolved by an analysis of each claim to
determine if it “necessarily raise[s] a stated federal issue, actually disputed and substantial,
which a federal forum may entertain without disturbing any congressionally approved balance of
federal and state judicial responsibilities.” Grable, 545 U.S. at 314.
1. Count I: Fiduciary Duty Claim
The Community Foundation contends that the allegation that it had a fiduciary
duty to MobilizeGreen is based on allegations that the Community Foundation was entrusted to
manage money “belonging to” MobilizeGreen. See Opp’n at 14-15 (citing Compl. ¶¶ 2, 18, 20,
29, 105). From this starting point, the Community Foundation argues that its alleged breach of
12
fiduciary duty turns on whether MobilizeGreen had a valid claim to “ownership” of Forest
Service funds intended for its performance on the Internship Project, which necessarily implicate
regulations governing federal financial awards. See Opp’n at 15. The Community Foundation
further argues that these allegations assert a substantial, disputed question of federal law. In
response, MobilizeGreen argues that a fiduciary relationship existed between the parties “by
virtue of the facts and circumstances of their relationship” and not by federal law or regulation.
Mot. to Remand at 9. MobilizeGreen emphasizes that the Community Foundation acted only as
fiscal sponsor for MobilizeGreen and that it is “axiomatic that fiscal sponsors have a fiduciary
duty to the non-profits they sponsor.” Id. at 9-10.
“Whether a fiduciary relationship exists is a fact-intensive question, and the fact-
finder must consider the nature of the relationship, the promises made, the type of services or
advice given and the legitimate expectations of the parties.” Millennium Square Residential
Ass'n v. 2200 M Street LLC, 952 F. Supp. 2d 234, 248-49 (D.D.C. 2013) (internal quotation
marks and citation omitted). 7 “Fiduciary relationships arise when parties develop a certain
amount of trust between themselves.” Cordoba Initiative Corp. v. Deak, 900 F. Supp. 2d 42, 49
(D.D.C. 2012).
By focusing exclusively on whether MobilizeGreen “owned” funds disbursed by
the Forest Service, the Community Foundation ignores the Complaint’s additional factual
allegations that, if proved, could enable a fact-finder to conclude that a fiduciary relationship
existed between the parties irrespective of federal actors. In particular, the Complaint alleges
that the Community Foundation served as fiscal sponsor and that “fiscal sponsorships by their
nature are relationships of good faith, demanding trust and confidence.” Compl. ¶¶ 20, 21.
7
The Community Foundation does not dispute application of District of Columbia law.
13
These broader allegations of a fiduciary relationship are not dependent on whether
MobilizeGreen “owned” Forest Service funds disbursed to the Community Foundation. The
Coutr finds that the alleged fiduciary relationship does not “necessarily depend[] on resolution of
a substantial question of federal law” and does not provide a basis for federal jurisdiction under
28 U.S.C. § 1331. Bender v. Jordan, 623 F.3d 1128, 1130 (D.C. Cir. 2010).
2. Count IV: Breach of Contract Claim
The Complaint alleges that the Sponsor Agreement “constituted a valid and
enforceable contract under which the Foundation promised to allow MobilizeGreen to transfer to
another fiscal sponsor and manage MobilizeGreen’s Project Funds.” Compl. ¶ 121. The
Complaint further alleges that the Community Foundation breached the Sponsor Agreement by,
inter alia, failing to transfer the Internship Project to MobilizeGreen’s new fiscal sponsor, Social
and Environmental Entrepreneurs. Id. ¶¶ 26, 123. The Community Foundation argues that
whether the transfer provision in the Sponsor Agreement was valid and enforceable necessarily
raises a substantial and disputed question of federal law and regulation. It cites the Anti-
Assignment Act, 41 U.S.C. § 6305, which provides that “[t]he party to whom the Federal
Government gives a contract or order may not transfer the contract or order, or any interest in the
contract or order, to any party,” and a Department of Agriculture regulation, which requires a
recipient to obtain prior approval from the Forest Service for the “transfer or contracting out of
any work under an award,” 7 C.F.R. § 3019.25. Based on these authorities, the Community
Foundation argues impossibility of performance due to federal law. MobilizeGreen responds
that the Community Foundation has merely raised a federal defense, which cannot provide a
basis for removal. MobilizeGreen is right.
14
The Community Foundation cites Grable & Sons Metal Products, which involved
claims of title to land obtained at a federal tax sale; the only disputed issue was a question of
federal law that constituted an essential element of the plaintiff’s state law claim:
Grable’s state complaint must specify “the facts establishing the
superiority of [its] claim,” Mich. Ct. Rule 3.411(B)(2)(c) (West
2005), and Grable has premised its superior title claim on a failure
by the IRS to give it adequate notice, as defined by federal law.
Whether Grable was given notice within the meaning of the federal
statute is thus an essential element of its quiet title claim, and the
meaning of the federal statute is actually in dispute; it appears to be
the only legal or factual issue contested in the case.
Grable, 545 U.S. at 314-15. Under D.C. law, a plaintiff alleging breach of contract must
establish four elements: “(1) a valid contract between the parties; (2) an obligation or duty
arising out of the contract; (3) a breach of that duty; and (4) damages caused by breach.”
Tsintolas Realty Co.v. Mendez, 984 A.2d 181, 187 (D.C. 2009). To prevail on its breach of
contract claim, MobilizeGreen must show that the transfer provision of the Sponsor Agreement
was a valid clause. The Community Foundation contends that the enforceability of the transfer
provision depends on whether the Anti-Assignment Act and the Department of Agriculture
regulation render it void.
The Department of Agriculture regulation, which by its terms anticipates the
possibility of a transfer, does not appear to be so forbidding. See 7 C.F.R. § 3019.25
(“[R]ecipients shall request prior approvals from Federal awarding agencies for [the] . . . transfer
or contracting out of any work under an award.”). The Community Foundation could have, in
good faith, asked to transfer the Forest Service grant to MobilizeGreen’s new fiscal sponsor.
The Anti-Assignment Act generally prohibits a contracting party from
transferring a government contract to another party. See 41 U.S.C. § 6305. However,
MobilizeGreen’s breach of contract claim does not depend on the Community Foundation’s
15
failure to transfer a government contract, i.e., the Forest Service Agreement, to its new fiscal
sponsor. To the contrary, the Complaint alleges that to transfer the Internship Project to the new
fiscal sponsor without harming the Internship Project, the Community Foundation only had to re-
grant the funds to the new fiscal sponsor so that it could administer the Internship Project. See
Compl. ¶ 26. This theory of recovery demonstrates that MobilizeGreen’s breach of contract
claim does not “necessarily” turn on analysis of the Anti-Assignment Act. See Mulcahey v.
Columbia Organic Chems Co., Inc., 29 F.3d 148 (4th Cir. 1994) (“[I]f a claim is supported not
only by a theory establishing federal subject matter jurisdiction but also by an alternative theory
which would not establish such jurisdiction, then federal subject matter jurisdiction does not
exist.”).
Finally, the Community Foundation’s reliance on Bender v. Jordan, 623 F.3d
1128, 1130 (D.C. Cir. 2010) is also inapt. Bender held that a breach of contract claim that is
premised on an agreement based in federal law belongs in federal court:
Although breach of contract is a state law cause of action, the
agreements themselves are ‘creatures of federal law,’ in the sense of
being intended to implement the scheme designed by 12 C.F.R.
§ 545.121. The [parties] entered into the agreements because federal
law requires the execution of such contracts before legal fees can be
advanced to defendant officers and directors. And the parties’ legal
duties turn almost entirely on the proper interpretation of that
regulation.
Id. at 1131. By contrast, federal law did not mandate that MobilizeGreen and the Community
Foundation execute the Sponsor Agreement. The Forest Service Agreement is a federal
contract, 8 but it is not the focus of the dispute here. Notably, the Community Foundation does
8
The Interior and Related Appropriations Act of 1992 (Pub. L. 102-154) authorizes the Forest
Service to enter into challenge cost-share agreements. See FSH 1509.11 §§ 70.1, 71.2.
16
not cite the terms of the Forest Service Agreement or identify federal regulations that purportedly
governed the Sponsor Agreement. Bender does not control here.
The Community Foundation’s over-reading of the Department of Agriculture
regulation and the Anti-Assignment Act is insufficient to demonstrate that the Complaint
necessarily raises a substantial federal issue. The Court need not reach the remaining Gunn
factors. See Gunn, 133 S. Ct. at 1064. Remand is appropriate because no federal question
jurisdiction arises from MobilizeGreen’s breach of contract claim.
IV. CONCLUSION
For the foregoing reasons, the Court concludes that MobilizeGreen’s Motion to
Remand should be granted. This case will be remanded to the Superior Court for the District of
Columbia. A memorializing Order accompanies this Opinion.
Date: April 29, 2015
/s/
ROSEMARY M. COLLYER
United States District Judge
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