Miller v. Starkey Laboratories, Inc.
MEMORANDUM OPINION AND ORDER granting in part and denying in part plaintiffs' 9 Motion to Remand to State Court -- Motion to remand to state court is granted; motion for an award of costs and fees denied; denying as moot defendant's 21 Motion to Stay Litigation, or alternatively, to State Discovery; denying as moot USA's 26 Motion for Permissive Intervention; denying as moot USA's 27 Motion to Stay Discovery (Written Opinion) Signed by Chief Judge John R. Tunheim on December 29, 2016. (DML)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 16-2021 (JRT/LIB)
STARKEY LABORATORIES, INC.,
UNITED STATES OF AMERICA,
* * * * * * * * * * * * * * * * * * * * ** * * * *
Civil No. 16-2022 (JRT/LIB)
STARKEY LABORATORIES, INC.,
UNITED STATES OF AMERICA,
William Michael, Jr., MAYER BROWN LLP, 71 South Wacker Drive,
Chicago, IL 60606, and Mark J. Briol and William G. Carpenter, BRIOL
& ASSOCIATES, 80 South Eighth Street, Suite 3700, Minneapolis, MN
55402, for plaintiff Keith Guggenberger.
David H. Redden, FABIAN MAY & ANDERSON, PLLP, 1625 Medical
Arts Building, 825 Nicollet Mall, Minneapolis, MN 55402, for plaintiff
David Bradley Olsen and Scott Nielson, HENSON & EFRON, PA, 220
South Sixth Street, Suite 1800, Minneapolis, MN 55402, for defendant.
Benjamin F. Langner, Craig R. Baune, Erin M. Secord, and Lola
Velazquez-Aguilu, Assistant United States Attorneys, UNITED STATES
ATTORNEY’S OFFICE, 600 United States Courthouse, 300 South
Fourth Street, Minneapolis, MN 55415, for movant.
Plaintiffs Keith Guggenberger and Julie Miller filed these two related employment
cases in state court, seeking damages arising from their September 2015 termination by
Defendant Starkey Laboratories, Inc. (“Starkey”).
In state court, Guggenberger and
Miller served Starkey with various discovery requests. In separate proceedings, the
United States indicted a number of other former Starkey employees, who were also
terminated in September 2015, on federal conspiracy, mail fraud, wire fraud, and money
laundering charges; the indictment alleges that those employees defrauded Starkey of
more than $20 million. The United States attempted to permissively intervene in the civil
state-court matters for the purpose of delaying discovery pursuant to Minn. R. Civ.
P. 24.02, arguing discovery in the civil matters could disturb the integrity of the federal
criminal case. The state court denied intervention and the United States subsequently
removed both cases to federal court pursuant to 28 U.S.C. § 1442(a)(1).
Guggenberger and Miller move for remand to state court, arguing the Court lacks
jurisdiction; they also request an award to cover costs and fees related to the improper
removal. The United States moves for permissive intervention and a stay of discovery.
Starkey moves to stay the civil litigation, or alternatively, to stay discovery.
The Court will grant Guggenberger’s and Miller’s motions for remand because it
lacks jurisdiction and removal under § 1442(a)(1) was improper. However, because the
United States’ good-faith argument for removal was objectively reasonable, the Court
will deny Guggenberger’s and Miller’s requests for costs and fees. The Court will deny
as moot all other pending motions.
Federal Indictment of Former Starkey Executives
Starkey is a large hearing aid company based in Minnesota. (Guggenberger 1
Notice of Removal (“Guggenberger Removal Notice”), Ex. 1 (“Guggenberger Am.
Compl.”) ¶ 1, June 20, 2016, Docket No. 1.) Starkey terminated a number of employees
in September 2015, when an alleged large-scale fraud scheme orchestrated by top-level
executives came to light. (Id. ¶ 14; Guggenberger Second Decl. of Erin M. Secord
(“Guggenberger Second Secord Decl.”), Ex. M (“Indictment”) ¶ 1, Oct. 4, 2016, Docket
No. 37.) Guggenberger and Miller were among those fired. On September 21, 2016,
three of the terminated employees – Scott Nelson, Larry Miller, and former Starkey
President Jerry Ruzicka – were federally indicted on charges including mail fraud, wire
fraud, money laundering, and conspiracy. (Indictment ¶¶ 1, 17-55.) The indictment
alleges that the criminal defendants defrauded Starkey of more than $20 million over
many years. (Id. ¶ 64.)
Termination of Guggenberger and Miller
At the time of his termination, Guggenberger was a twenty-nine-year employee of
Starkey who most recently served as Senior Vice President of Operations; he reported to
Citations referencing “Guggenberger” denote the docket for Case No. 16-2021.
Citations referencing “Miller” denote the docket for Case No. 16-2022.
Ruzicka. (Guggenberger Am. Compl. ¶¶ 2, 9.) Miller worked at Starkey for almost forty
years; at the time of her termination she was Senior Executive Assistant to Ruzicka, and
she is married to Larry Miller. (Miller Notice of Removal (“Miller Removal Notice”),
Ex. 1 (“Miller Compl.”) ¶¶ 3, 9, June 20, 2016, Docket No. 1; Indictment ¶ 1.)
On September 30, 2015, Guggenberger filed a lawsuit against Starkey in
Minnesota state court, alleging breach of employment contract, breach of the implied
covenant of good faith and fair dealing, defamation, unpaid wages under Minn. Stat.
§ 181.13, unjust enrichment/quantum meruit, and a federal statutory claim under 29
U.S.C. § 1132. (Guggenberger Removal Notice ¶ 2; Guggenberger Am. Compl. ¶¶ 2445.) Guggenberger demands damages in excess of $11 million. (Guggenberger Am.
Compl. ¶¶ 29, 35.)
On December 22, 2015, Miller filed a lawsuit against Starkey in Minnesota state
court. Miller asserts three claims: marital status discrimination under the Minnesota
Human Rights Act, Minn. Stat. § 363A.08, subd. 2, breach of contract, and promissory
estoppel. (Miller Compl. ¶¶ 14-30.) Miller demands damages in excess of $50,000. (Id.
¶¶ 18, 24, 30.)
On March 16, 2016, the state court granted Starkey’s motion to companion
Guggenberger and Miller for discovery pursuant to Minn. Gen. R. Prac. 113 and Minn.
R. Civ. P. 42.01 because of the substantial overlap of fact and law between the cases.
(Guggenberger Aff. of William Carpenter (“Carpenter Aff.”), Ex. 2 at 33-34, July 1,
2016, Docket No. 15.) The state court reasoned that “[t]here will be identical questions
of law presented by discovery, particularly concerning Fifth Amendment protections for
witnesses while a criminal investigation is pending.” (Id. at 33.) 2 Starkey has not yet
filed an Answer in either case. 3
On April 29, 2016, Guggenberger served discovery requests on Starkey, seeking
the names of all Starkey employees and vendors who provided information about
Guggenberger to law enforcement; the names of the law enforcement officers who
received that information; a description of all such communications between Starkey and
law enforcement; and documents related to any law enforcement investigation of
Guggenberger in Starkey’s possession. (Id., Ex. 3 at 39-40, 46-47.) Guggenberger also
noticed a number of depositions, including a deposition of Starkey and Starkey’s private
investigation firm. (Id. at 49-50, 58; see also id. at 60-61.) 4
Ruzicka filed a separate civil action against Starkey, Ruzicka v. Starkey Laboratories,
Inc. Upon remand, Ruzicka will likely be consolidated with Guggenberger and Miller, though
the Ruzicka matter is currently stayed indefinitely pending mediation. (Carpenter Aff., Ex. 2 at
32, 34; Guggenberger Aff. of David Bradley Olsen, Ex. D, Oct. 4, 2016, Docket No. 32.)
Starkey plans to assert as a defense that Miller’s and Guggenberger’s contracts are not
enforceable because Ruzicka executed them on behalf of Starkey “incident to and in furtherance
of a scheme to defraud.” (Guggenberger Second Secord Decl., Ex. O at 2.) Starkey also
believes that though Guggenberger and Miller were not indicted, they were complicit in
Ruzicka’s fraud scheme, and thus Starkey plans to file counterclaims to seek to hold them civilly
liable and joining the Ruzicka, Nelson, and Larry Miller as third-party defendants.
(Guggenberger Tr. of Mots. Hr’g Held Oct. 25, 2016 (“Tr.”) at 46-47, 51-52, Nov. 16, 2016,
Docket No. 44.)
Guggenberger states he seeks this discovery for purposes germane to his claims, such
as: determining what information Starkey had at the time of termination; assessing whether
Starkey has continued to defame Guggenberger; ascertaining whether Starkey has waived
privileges with respect to discoverable information and documents; and uncovering impeachment
On May 9, 2016, Miller served Starkey with discovery requests. (Miller Decl. of
Erin M. Secord (“Miller Secord Decl.”), Ex. C at 37-50, Aug. 2, 2016, Docket No. 17.)
Miller requested, among other things, documents relating to and a detailed explanation of
the reasons for Miller’s and her spouse’s termination, and information regarding Miller’s
employment contract and Starkey’s anticipated defenses.
(Id. at 40-42.)
Guggenberger, Miller noticed depositions of Starkey executives. (Id. at 4.) Unlike
Guggenberger’s requests, Miller’s discovery requests make no mention of the criminal
investigation or Starkey’s communications with law enforcement. (See id. at 4-5, 37-50.)
On May 19, 2016, the United States filed Notices of Permissive Intervention in
Guggenberger and Miller pursuant to Minn. R. Civ. P. 24.02, 5 stating:
Guggenberger’s publicly-filed pleadings acknowledge the existence of a
criminal investigation, and he has served discovery requesting information
that [Starkey] provided or identified to law enforcement or “prosecutorial
The government is conducting an investigation into criminal conduct
of which Starkey may be a victim, and there are questions of fact or law
common to the investigation, this case, and the related cases, [Miller and
Rule 24 of the Minnesota Rules of Civil Procedure governs intervention. Under Rule
24.01, a non-party may make a timely application for of-right intervention
when the applicant claims an interest relating to the property or transaction which
is the subject of the action and the applicant is so situated that the disposition of
the action may as a practical matter impair or impede the applicant’s ability to
protect that interest, unless the applicant’s interest is adequately represented by
In contrast, Rule 24.02 governs permissive intervention, which is discretionary and is available
when “an applicant’s claim or defense and the main action have a common question of law or
fact.” Applicants for intervention must first file a “notice of intervention” – if there is no
objection, then intervention is “deemed to have been accomplished” after thirty days. Minn. R.
Civ. P. 24.03. If a party objects, then the applicant must “serve a motion to intervene.” Id.
The United States seeks to protect the integrity of its criminal
investigation by, among other things, preventing circumvention of
limitations on discovery pursuant to the Federal Rules of Criminal
Procedure. The government also seeks to protect from disclosure the focus
and scope of the grand jury investigation as well as information provided to
the grand jury. See Fed. R. Crim. P. 6(e). The discovery sought in this
matter and in the related Miller matter would undermine those interests.
(Carpenter Aff., Ex. 5 (citation omitted); see also Miller Secord Decl., Ex. D (nearidentical language).)
Guggenberger stipulated to the United States’ permissive
intervention for the sole purpose of allowing the United States to argue for a stay of
discovery and reserved the right to object to the motion to stay discovery. (Carpenter
Aff., Ex. 6.) Miller objected to the United States’ intervention, and the United States
moved to intervene as required by Minn. R. Civ. P. 24.03. (Miller Secord Decl., Exs. EF.) The United States argued that it sought intervention to “protect the integrity of its
criminal investigation” by (1) “preventing circumvention of limitations on discovery
pursuant to the Federal Rules of Criminal Procedure” and (2) “protect[ing] from
disclosure the focus and scope of the grand jury investigation as well as information
provided to the grand jury.” (Id., Ex. A ¶ 8.)
Five days before the state-court hearing on the United States’ motion for
permissive intervention, the United States filed briefing indicating, for the first time, its
intent to remove the case to federal court after intervention in order to “submit its Motion
to Stay Discovery to a federal judge authorized to receive and evaluate federal grand jury
materials that are subject to [Fed. R. Crim. P.] 6(e) protection.” (Carpenter Aff., Ex. 7;
id., Ex. 8 at 82.) Guggenberger responded that his prior “stipulation to intervention [was]
not valid for intervening for the purpose of removal,” and objecting to the United States’
intervention for that purpose. (Id., Ex. 9 at 85.)
Shortly before the state-court hearing began, the court issued a written order
granting the United States permissive intervention in Guggenberger based on the parties’
joint stipulation, apparently unaware of the United States’ plan to remove the case
immediately after intervening and Guggenberger’s opposition. (Guggenberger Decl. of
Erin M. Secord (“Guggenberger Secord Decl.”), Ex. K, July 21, 2016, Docket No. 23.)
At the hearing, the judge stated that he was inclined to grant permissive intervention in
Miller to allow the United States to argue for a stay of discovery. (Carpenter Aff., Ex. 10
(“State Tr.”) at 91.)
After the parties explained that the United States planned to immediately remove
the case after intervening, the court changed course, denying the United States’ motion
for permissive intervention in Miller and revoking intervention in Guggenberger. (Id. at
91-94.) The state court expressed irritation with the United States’ strategy to first
portray intervention as a path to argue for staying discovery in state court, then later
seeking intervention solely in order to generate removal jurisdiction. (Id. at 95-97; see
also Guggenberger Removal Notice, Ex. 2 at 3.) In a subsequent written order, the court
explained that “the court is aware of no authority – nor was any cited by [the United
States] – that mandates a permissive intervention so that a case may be removed to
(Guggenberger Removal Notice, Ex. 2 at 3.)
intervention, the state court instructed the parties to propose language for a protective
order and an order partially staying discovery. (State Tr. at 105-06.)
On June 20, 2016, after the state court denied permissive intervention, the United
States removed Guggenberger and Miller pursuant to 28 U.S.C. § 1442(a)(1). In the
Notices of Removal, the United States explained:
This notice of removal is filed pursuant to 28 U.S.C. § 1442(a)(1) because
the Hennepin County District Court’s Order Dated June 20, 2016 is
“against or directed to” the United States. See, e.g., People’s Nat’l Bank of
Mora v. BWHC, LLC, No. 08-408 (PJS/JJG), 2008 WL 10973336
(D. Minn. Oct. 10, 2008). Further, the United States has raised issues in
response to the Plaintiff’s requested discovery that . . . arise out of its
obligations to enforce federal law. See Fed. R. Crim. P. 6(e).
(Guggenberger Removal Notice at 2; Miller Removal Notice at 2.)
Guggenberger and Miller filed motions to remand pursuant to 28 U.S.C.
§ 1447(c). (Guggenberger Mot. for Remand, July 1, 2016, Docket No. 11; Miller Mot.
for Remand, July 12, 2016, Docket No. 9.)
Guggenberger and Miller argue that
§ 1442(a)(1) does not provide a basis for removal in this case. They seek an award of
costs and fees pursuant to § 1447(c).
After removal, the United States filed a letter with the Court under D. Minn. LR
7.1(j) requesting leave to file a motion to reconsider the state court’s denial of permissive
intervention. The Court denied the United States’ request and, instead, directed that the
Court would consider new motions for intervention and a stay. Subsequently, the United
States filed motions to stay discovery and motions for permissive intervention. On the
same date, Starkey filed motions to stay litigation, or alternatively, to stay discovery in
The Court first considers the threshold question of whether there is federal
jurisdiction in this case. Guggenberger and Miller assert two arguments to support their
claim that the Court lacks jurisdiction.
First, they argue the United States has not
satisfied the substantive requirements of § 1442(a)(1). Second, they argue the United
States’ notice of removal was not timely under 28 U.S.C. § 1446.
Standard of Review
Federal courts are obligated to examine and confirm the basis for their jurisdiction,
even where neither party to the controversy has raised the issue. Steel Co. v. Citizens for
a Better Env’t, 523 U.S. 83, 94 (1998). “[T]wo things are necessary to create [federal]
jurisdiction, whether original or appellate. The Constitution must have given to the court
the capacity to take it, and an act of Congress must have supplied it.” The Mayor v.
Cooper, 73 U.S. (6 Wall.) 247, 252 (1867). “Without jurisdiction the court cannot
proceed at all in any cause. Jurisdiction is power to declare the law, and when it ceases to
exist, the only function remaining to the court is that of announcing the fact and
dismissing the cause,” or, upon a motion to remand, remanding the case. Ex parte
McCardle, 74 U.S. (7 Wall.) 506, 514 (1868).
After removal, “[i]f at any time before final judgment it appears that the district
court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c).
The party seeking removal bears the burden of demonstrating that removal was proper.
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Cent. Iowa Power Coop. v. Midwest Indep. Transmission Sys. Operator, Inc., 561 F.3d
904, 912 (8th Cir. 2009).
In addition to the notice of removal and its exhibits, to
determine whether there is jurisdiction, the court may consider documents submitted after
the notice of removal as well as those attached to subsequent motions. See Willingham v.
Morgan, 395 U.S. 402, 407 n.3 (1969).
Jurisdiction Pursuant to 28 U.S.C. § 1442(a)(1)
Section 1442, 6 which is often referred to as the “federal officer removal statute,”
“confers jurisdiction as well as the right of removal.” Niagara Mohawk Power Corp. v.
The statute provides in relevant part:
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:
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 officer or on account of any right,
title or authority claimed under any Act of Congress for the
apprehension or punishment of criminals or the collection of the
In this section, the following definitions apply:
The terms “civil action” and “criminal prosecution” include any
proceeding (whether or not ancillary to another proceeding) to the
extent that in such proceeding a judicial order, including a
subpoena for testimony or documents, is sought or issued. If
(Footnote continued on next page.)
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Bankers Trust Co. of Albany, 791 F.2d 242, 244 (2d Cir. 1986). “The federal officer
removal statute has existed in some form since 1815.” In re Commonwealth’s Mot. to
Appoint Counsel Against or Directed to Def. Ass’n of Phila., 790 F.3d 457, 466 (3d Cir.
2015). Congress enacted the original federal officer removal statute during the War of
1812, when Congress instituted an unpopular trade embargo with England. Watson v.
Philip Morris Cos., 551 U.S. 142, 147-48 (2007). The statute provided a federal forum
for lawsuits against federal customs officials, tasked with enforcing the embargo, who
faced a barrage of state-court claims challenging their enforcement actions from
frustrated New England shipowners. Id. Congress intended the statute to “protect [these]
federal officers from interference by hostile state courts.” Id. (quoting Willingham, 395
U.S. at 405). Over time Congress expanded the statute to allow for removal of state
lawsuits against federal officers enforcing federal tariff laws and collecting taxes. Id. In
1948, Congress “dropp[ed] its limitation to the revenue context” and enacted the modern
federal officer removal statute, codified at § 1442. Id. at 148-49.
There have been two relevant amendments to § 1442. First, in 1996, Congress
amended § 1442(a)(1) to allow for removal by “the United States or any agency
removal is sought for a proceeding described in the previous
sentence, and there is no other basis for removal, only that
proceeding may be removed to the district court.
28 U.S.C. § 1442.
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thereof.” 7 Federal Courts Improvement Act of 1996, Pub. L. No. 104-317, § 206, 110
Stat. 3847, 3850 (codified as amended at 28 U.S.C. § 1442).
Second, in the Removal Clarification Act of 2011, Congress made a number of
significant changes to the statute. The Act added the definition of “‘civil action’ and
‘criminal prosecution’” that appears in § 1442(d)(1).
Removal Clarification Act of
2011, Pub. L. No. 112-51, § 2, 125 Stat. 545, 545 (codified as amended at 28 U.S.C.
§§ 1442, 1446, 1447 (2012)). By amending § 1442(a) to allow removal of actions
“against or directed to” federal entities, as opposed to just “against” them, the 2011
amendment allows for removal even when the removing entity is not a traditional
defendant. 8 Id.
The overall purpose of the Removal Clarification Act was “to ensure that any
individual drawn into a State legal proceeding based on that individual’s status as a
Federal officer has the right to remove the proceeding to a U.S. district court for
adjudication.” H.R. Rep. No. 112-17(I), at 1 (2011). The Act was a direct response to
the widespread state practice permitting pre-suit discovery in state court. Id. at 2.
Before 1996, § 1442(a)(1) only explicitly allowed for removal by “[a]ny officer of the
United States or any agency thereof, or person acting under him, for any act under color of such
office.” The 1996 amendment explicitly reversed International Primate Protection League v.
Administrators of the Tulane Education Fund, 500 U.S. 72, 79-87 (1991), where the Supreme
Court held that federal agencies were not entitled to remove under the pre-1996 version of
§ 1442(a)(1). S. Rep. No. 104-366, at 30-31 (1996); H.R. Rep. No. 104-798, at 19-20 (1996).
According to the House report, the 2011 amendment “clarifies that a civil action
‘commenced’ in State court includes those brought ‘against’ a Federal officer (which covers
suits) as well as those ‘directed to’ a Federal officer (which presumably covers discovery
proceedings).” H.R. Rep. No. 112-17(I), at 6 (2011).
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[T]he problem occurs when a plaintiff who contemplates suit against a
Federal officer petitions for discovery without actually filing suit in State
court. An increasing number of Federal courts maintain this conduct just
anticipates a suit; it is not a “cause of action” as contemplated by the
Federal removal statute.
Id. at 4. Congress amended the statute after the General Counsel’s Office recommended
the removal statute should “take into account the operation of these State pre-civil suit
discovery statutes” by permitting removal when discovery is sought from a federal entity,
even if there has been no lawsuit filed against it. Id.
Application of § 1442(a)(1)’s Substantive Requirements
When the federal government or a federal agency 9 removes an action under
§ 1442(a)(1), the statute requires satisfaction of two elements to permit removal. First,
there must be “[a] civil action or criminal prosecution that is commenced in a State court
and that is against or directed to” the federal government or agency. 28 U.S.C. § 1442(a).
Second, the federal government or agency must assert a “colorable federal defense.”
Mesa v. California, 489 U.S. 121, 129 (1989); United States v. Todd, 245 F.3d 691, 693
(8th Cir. 2001).
Courts interpreting § 1442(a)(1) have repeatedly held that “[u]nlike the general
removal statute, the federal officer removal statute is to be ‘broadly construed’ in favor of
a federal forum.” In re Commonwealth’s Mot., 790 F.3d at 466-67. However, while the
Supreme Court “has made clear that [§ 1442] must be ‘liberally construed[,]’ . . . broad
Additional jurisdictional elements apply when a federal officer or agent removes
pursuant to § 1442(a)(1). See Jacks v. Meridian Res. Co., 701 F.3d 1224, 1230 (8th Cir. 2012).
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language is not limitless. And a liberal construction nonetheless can find limits in a text’s
language, context, history, and purposes.”
Watson, 551 U.S. at 147. Keeping this
guidance in mind, the Court examines the two jurisdictional requirements.
“Civil action . . . against or directed to”
The United States asserts that because the state court issued a judicial order
denying the United States’ motion for permissive intervention, Guggenberger and Miller
are civil actions “against or directed to” the United States under § 1442(a).
The United States’ argument stretches the plain text much too far. The statute
defines “civil action” to mean “any proceeding (whether or not ancillary to another
proceeding) to the extent that in such proceeding a judicial order, including a subpoena
for testimony or documents, is sought or issued.” § 1442(d)(1). There is no dispute that
Guggenberger and Miller, and any ancillary discovery proceedings, are “civil actions.”
But Guggenberger and Miller did not file their actions “against” the United States, so the
only possible option for removal under § 1442(a) is that the civil actions were “directed
to” the United States.
The definition of the verb “direct” is “t[o] aim (something) in a particular direction
or at a particular person.” New Oxford American Dictionary 491 (3d ed. 2010). The
Court interprets the term “directed to” to require a party, other than the federal agency,
officer, or agent seeking removal, to “aim” the civil action at the federal entity in order
for the action to be removable under § 1442(a). A court’s response to a federal entity’s
motion for permissive intervention does not suffice, since in such a situation, the federal
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entity seeking removal “directed” or “aimed” the resulting judicial order at itself. See
Stephen L. LaFrance Holdings, Inc. v. Sorensen, 278 F.R.D. 429, 440 (E.D. Ark. 2011)
(rejecting the United States’ “novel argument that, because it intervened, the civil action
is now against the U.S. Government”). 10 If Congress had intended any judicial order
responding to a motion by the federal government to trigger removability, the statute
would simply say so. Instead, the statute requires a “civil action” to be “against or
directed to” the federal entity to enable removal.
In Guggenberger and Miller, no party sought any order to be directed to the
United States, named the United States as a defendant, sought to subpoena the United
States, or even initiated any motion in opposition to the United States. No party took any
action haling the United States into court. The judicial order denying intervention was
merely a response to the United States’ motion, rather than a result “directed” by any
party attempting to compel exercise of coercive state judicial power over the United
The Court’s holding that Miller and Guggenberger are not civil actions “directed
to” the United States is wholly consistent with the historical and modern purposes of the
statute. The purpose of the federal officer removal statute has always been to provide a
federal forum when a federal entity is haled into court by a party.
The court in Sorensen was interpreting the pre-2011 version of § 1442(a), which
required a civil action “against” the federal entity. See Sorensen, 278 F.R.D. at 439 & n.52. The
Court adopts Sorensen’s reasoning that when a state civil action involves permissive intervention
by a federal entity in order to seek enforcement of the Federal Rules of Criminal Procedure, that
civil action is not “against” the federal government, and further, the Court applies Sorensen’s
reasoning to conclude that such a civil action is also not “directed to” the federal government.
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[T]he removal statute’s “basic” purpose is to protect the Federal
Government from the interference with its “operations” that would ensue
were a State able, for example, to “arres[t]” and bring “to trial in a State
cour[t] for an alleged offense against the law of the State,” “officers and
agents” of the Federal Government “acting . . . within the scope of their
authority.” State-court proceedings may reflect “local prejudice” against
unpopular federal laws or officials. In addition, States hostile to the Federal
Government may impede through delay federal revenue collection or the
enforcement of other federal law. And States may deprive federal officials
of a federal forum in which to assert federal immunity defenses.
Watson, 551 U.S. at 150-51 (citations omitted).
When Congress added the term “directed to” to the statute in 2011, its narrow
purpose was “to establish that cases may be removed when federal documents are
sought in state court cases,” even when the federal entity is not a defendant. Rodgers v.
Gilbert, No. 11-604, 2012 WL 1567203, at *2 (W.D. Ky. Apr. 30, 2012); see generally
H.R. Rep. No. 112-17(I). While the statute’s broad language, rather than the House
Report, is binding on the Court, Congress’s stated purpose of preventing the coercive
exercise of state-court subpoena power against federal entities is a useful interpretive
touchstone. Although the 1996 and 2011 amendments did broaden the removal statute,
the overarching purpose has remained constant. See H.R. Rep. No. 112-17(I), at 3.
Congress never intended § 1442(a)(1) to provide a federal forum when the federal
government merely seeks to insert itself, at the discretion of a state court, into an action
between private parties.
The United States relies heavily on dicta from Peoples National Bank of Mora v.
BWHC, LLC, No. 08-408, 2008 WL 10973336 (D. Minn. Oct. 10, 2008), for the
argument that denial of a motion for permissive intervention amounts to a “civil action”
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that is “against or directed to” the United States. Mora involved a state-court action
between non-diverse parties asserting only state-law claims. Id. at *1. A defendant
sought discovery of certain documents created by the Office of the Comptroller of the
Currency of the United States (“OCC”) in the plaintiff’s possession. Id. OCC argued
that the documents were OCC property, as established by federal regulation, and that
federal regulation also prohibited the private party from providing the documents during
discovery. Id. at *2-3 & n.3. But OCC was not a party to the state proceeding and made
no motion to intervene before removing to federal court. Id. at *2.
Interpreting the pre-2011 version of § 1442(a), the court remanded, reasoning that
“when a party seeks in state court to compel the production from a third party of
documents that belong to the federal government, the state-court proceedings are
removable by the federal government if it has intervened in the state-court proceedings.”
Id. at *3. The court concluded that the action was not “against” OCC, but intervention
would solve this problem, converting the action into one “against” OCC. Id. at *3-4.
The court went on to explain:
If the state court allows the government to intervene and accepts its
arguments, the government will not need to remove the action to federal
court. This promotes judicial economy because the state court, which is
familiar with the case, will have the opportunity to rule on the federal
government’s arguments in the first instance. And if the state court either
denies the government’s motion to intervene, or allows intervention but
rejects the government’s arguments on the merits, removal under
§ 1442(a)(1) will be consistent with that statute’s text because it will be at
least plausible to characterize the state court’s action as directed “against”
Id. at *4.
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In this case, Mora is inapposite because Mora held that a proceeding may be
removable “when a party seeks in state court to compel the production from a third party
of documents that belong to the federal government.” Id. at *3 (emphasis added). To
the extent Mora could be read to justify removal based solely on the state court’s denial
of the United States’ motion for permissive intervention when no federal government
property is at issue, the Court respectfully disagrees with Mora’s reasoning, noting that
the relevant language is dicta. The Court holds that it is not “plausible to characterize” a
state court order denying the United States permissive intervention as a civil action
“against or directed to” the United States. 11 As explained above, the civil action itself –
not just the judicial order – must be aimed at the United States by another party to make a
proceeding removable. The better reading of Mora is that the court required both a
federal property interest in a document in a private party’s possession and a motion to
intervene as a matter of right before the statute permits the United States to remove.
The United States also relies on the Eighth Circuit’s opinion in Todd. There, a
defendant in a federal criminal case filed a civil action in state court pursuant to the
By the same reasoning, the Court also disagrees with Mora’s suggestion that a state
court order denying a federal government motion to limit discovery in some way converts an
action between private parties regarding federal property into an action “against or directed to”
the federal government. The court in Mora proposed that in such disputes, the state court should
first be given a chance to weigh in, and if the federal government dislikes the result, it can then
remove the case pursuant to § 1442(a)(1). Mora, 2008 WL 10973336, at *4. But the federal
officer removal statute was designed to allow federal officers, agents, and agencies to avoid
litigating their federal-law defenses in state court in the first instance, not to allow a second
chance to litigate when a state court decides an issue in their opponent’s favor. The Court should
not impose an extra-textual jurisdictional requirement – that the federal government must first try
and fail in state court before it may remove – as long as all statutory jurisdictional requirements
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Arkansas Freedom of Information Act seeking to compel the release of files in the
possession of state police. Todd, 245 F.3d at 692. The files related to investigations into
the defendant’s alleged criminal activities. Id. The United States Attorney intervened
because the files belonged to the United States and asserted that the federal Freedom of
Information Act prohibited their disclosure.
Id. at 692-93.
The United States
subsequently removed pursuant to § 1442(a)(1). Id. at 692.
In holding that the district court did have subject matter jurisdiction under the pre2011 version of § 1442(a)(1), the Eighth Circuit assumed that the civil action was
“against” the United States; the analysis focused on the colorable federal defense
element. Id. at 693. If Todd does stand for the proposition that the United States’
intervention in the state action converted it into an action “against” the United States,
Todd is distinguishable from this case because in Todd, like in Mora, the documents
sought were federal property. Id. at 692.
Similarly, when the federal government has a property interest in funds held by a
private party that are the subject of a state case, removal pursuant to § 1442(a)(1) may be
appropriate even when the federal entity is not originally named as a party, because the
United States is “the real party in interest.” See, e.g., Palmiter v. Action, Inc., 733 F.2d
1244, 1246 (7th Cir. 1984); see also Smith v. Hous. Auth. of Balt. City, No. 10-1806, 2011
WL 232006, at *2 & n.4 (D. Md. Jan. 24, 2011). It is this federal property interest in the
subject matter of a dispute – funds, documents, or something else – that makes that action
“against or directed to” the federal government.
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In this case, while counsel for the United States did assert at the hearing that the
documents sought in discovery “belong to the government,” (Guggenberger Tr. of
Mots. Hr’g Held Oct. 25, 2016 (“Tr.”) at 11, Nov. 16, 2016, Docket No. 44), if this were
the case, presumably the United States would have moved before the state court and
before this Court for intervention as a matter of right. See Fed. R. Civ. P. 24(a); Minn. R.
Civ. P. 24.01. Instead, the United States moved for permissive intervention to urge both
courts to follow its preferred interpretation of federal law when applying that law to
private parties and private property.
(See Guggenberger U.S. Mot. for Permissive
Intervention, Oct. 4, 2016, Docket No. 33; Miller U.S. Mot. for Permissive Intervention,
Oct. 4, 2016, Docket No. 26; Guggenberger Secord Decl., Ex. D; Miller Secord Decl.,
Exs. D, F.)
The United States has also provided no legal authority showing that the documents
Guggenberger and Miller seek are federal property. Rule 6(e) of the Federal Rules of
Criminal Procedure – the basis for the United States’ argument that discovery should be
stayed – runs contrary to the United States’ position. Rule 6(e) imposes an obligation of
secrecy regarding “matter[s] occurring before the grand jury,” but the obligation of
secrecy is restricted to individuals enumerated in Rule 6(e)(2)(B): grand jurors,
interpreters, court reporters, operators of recording devices, those who transcribe
recorded testimony, government attorneys, and other government personnel as provided
in Rule 6(e)(3)(A)(ii) or (iii). “No obligation of secrecy may be imposed on any person”
other than those listed in Rule 6(e)(2)(B). Fed. R. Crim. P. 6(e)(2)(A). Rule 6(e) does
not create a federal property right in privately-held documents that happen to be provided
- 21 -
to the grand jury or to law enforcement, nor does it prohibit disclosure of “grand jury
matters” by people not enumerated in Rule 6(e)(2)(B), including Starkey or any grand
The United States also asserts that Fed. R. Crim. P. 16 provides a defense to
discovery. Rule 16, applicable in federal criminal proceedings, governs the disclosures
the United States and the criminal defendant must make and limits such disclosures as
Except as permitted by [Rule 16(a)(1)], this rule does not authorize the
discovery or inspection of reports, memoranda, or other internal
government documents made by an attorney for the government or other
government agent in connection with investigating or prosecuting the case.
Nor does this rule authorize the discovery or inspection of statements made
by prospective government witnesses except as provided in 18 U.S.C.
§ 3500 [governing witness statements after the witness has testified on
Fed. R. Crim. P. 16(a)(2). While Rule 16(a)(2) does limit a criminal defendant’s access
to government witness statements, the rule only applies to discovery available to that
defendant from the United States during a federal criminal case. Rule 16 provides no
basis for concluding the United States has a property right in the discovery Guggenberger
and Miller seek from Starkey.
To summarize, the state court order denying the United States’ motion for
permissive intervention is not a “civil action . . . against or directed to” the United States.
The United States has not demonstrated that any discovery Guggenberger or Miller seeks
is the property of the federal government, such that those discovery proceedings could be
considered “against or directed to” the United States as a “real party in interest.” It is
- 22 -
within the state court’s discretion to grant the United States permissive intervention to
seek protection of its valid interests, but § 1442(a)(1) is narrower in scope than the
standard for permissive intervention.
Therefore, the Court lacks jurisdiction under
§ 1442(a)(1) because there is no “civil action . . . against or directed to” the United States.
Colorable Federal Defense
Even if there is a “civil action . . . against or directed to” the United States, the
United States must also assert a colorable federal defense for the Court to exercise
jurisdiction under § 1442(a)(1). Todd, 245 F.3d at 693.
“For a defense to be considered colorable, it need only be plausible; § 1442(a)(1)
does not require a court to hold that a defense will be successful before removal is
appropriate.” Todd, 245 F.3d at 693. Examples of colorable federal defenses include
federal immunity or defenses based on federal statutes or regulations. See Watson, 551
U.S. at 150-51 (federal immunity); Todd, 245 F.3d at 693 (federal statute); Mora, 2008
WL 10973336, at *2-3 (federal regulation). The colorable federal defense must be
something more than a desire to protect a generalized federal interest 12 or to encourage a
preferred interpretation of federal law in a dispute between private parties.
“Innumerable state-court proceedings affect federal interests, including every
proceeding in which a court must interpret and apply a federal statute or regulation.
The United States proposed in its briefing that a “federal interest” could substitute for a
colorable federal defense, relying on Smith, 2011 WL 232006. This argument is misguided
because the “interest” in Smith was a federal property interest in the funds at stake, rather than
the generalized federal interest in an interpretation of federal law favorable to the United States.
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Section 1442(a)(1) does not permit the removal of every order that, for example, too
narrowly construes a federal regulation and thereby threatens federal interests.” Mora,
2008 WL 10973336, at *4. Allowing a mere “federal interest” to justify removal under
§ 1442(a)(1), particularly when a federal entity has permissively intervened in a statecourt action, would expand to an absurd degree the opportunities for the federal
government to self-generate removal jurisdiction.
The United States concedes that § 1442(a)(1) requires a colorable federal defense,
but asserts that the parties “disagree about what colorable federal defense means in the
context of a case like this,” and that “the language . . . colorable federal defense, is really
a vestige of the pre-1996 existence of” the statute, which only applied to federal officers
and agents. (Tr. at 6-7.) But despite the 1996 and 2011 amendments, in the Eighth
Circuit a “colorable federal defense” is still required for removal under § 1442(a)(1). 13
Todd, 245 F.3d at 693.
The Court is bound by the Eighth Circuit’s holding that § 1442(a)(1) requires the
United States to assert a colorable federal defense, Todd, 245 F.3d at 693, even though there
appears to be a circuit split on the issue. Compare City of Cookeville v. Upper Cumberland Elec.
Membership Corp., 484 F.3d 380, 389-92 (6th Cir. 2007) (holding because Mesa’s requirement
of a colorable federal defense was tied to the words “under color of office” in the statute, federal
agencies need not provide a colorable federal defense because “under color of office” applies
only to federal officers or agents), with City of Jacksonville v. Dep’t of Navy, 348 F.3d 1307,
1313 n.2 (11th Cir. 2003) (recognizing that “it remains to be decided whether the requirement of
a federal defense also applies to removal by the United States or one of its agencies” but
declining to decide because the removing entity asserted the federal defense of sovereign
immunity), and Parker v. Della Rocco, 252 F.3d 663, 665 n.2 (2d Cir. 2001) (same). The Court
also finds the colorable federal defense requirement to be in keeping with Congress’s stated
intent, see S. Rep. No. 104-366, at 31 (explaining that the 1996 amendment did “not alter the
requirement that a Federal law defense be alleged for a suit to be removable pursuant to 28
U.S.C. § 1442(a)(1)”), and with the statute’s long-standing purpose of “ensuring that federal
(Footnote continued on next page.)
- 24 -
In this case, the United States posits that Fed. R. Crim. P. 6(e) and 16 provide
federal “defenses.” The United States unsuccessfully attempts to use these procedural
rules to prohibit or delay discovery in a civil case between private parties who are not
defendants in a federal criminal case. Rule 6(e) explicitly disclaims imposition of any
obligation of secrecy on any person other than those enumerated in Rule 6(e)(2)(B). Rule
16(a)(2) applies only in federal criminal proceedings and functions to limit only what
information the United States may provide to criminal defendants.
The United States urges the Court, citing no authority, to assume that
Guggenberger’s and Miller’s facially legitimate discovery requests are bad-faith efforts to
circumvent the Federal Rules on behalf of Miller’s spouse and Guggenberger’s friend and
former boss, both of whom are federal criminal defendants. The Court declines to equate
Miller with her spouse or Guggenberger with his friend, noting Plaintiffs’ willingness to
delay certain discovery and to stipulate to a protective order that would prohibit sharing
of information with the criminal defendants. (See Tr. at 23-24, 36-38, 66-69.)
This is not to say that the United States does not have a legitimate interest in
protecting the integrity of federal criminal proceedings. If the Court had jurisdiction, it
would certainly have discretion to stay discovery in some manner or to fashion an
appropriate protective order. But the Federal Rules of Criminal Procedure do not support
a colorable argument that the United States is entitled to intervention or entitled to block
defenses raised by federal actors are evaluated in a federal forum,” Rodas v. Seidlin, 656 F.3d
610, 618 (7th Cir. 2011).
- 25 -
the Plaintiffs’ discovery in its entirety.
See Sorensen, 278 F.R.D. at 440 (“The
Government has cited no case law supporting the removal of a civil case based solely on
the claimed enforcement of the Federal Rules of Criminal Procedure in a state court civil
case.”). In this case, no federal criminal defendant seeks any information from the
federal government or from a person bound to secrecy by Rule 6(e). Thus, the Federal
Rules of Criminal Procedure simply do not apply.
Because the United States asserts no colorable federal defense, the second
requirement of § 1442(a)(1) is not satisfied. The Court lacks subject matter jurisdiction. 14
Because there is no substantive basis for jurisdiction, the Court need not address
Guggenberger’s and Miller’s argument that the notice of removal was untimely.
The state court is prepared to work with the parties to protect the government’s
interests. The state court’s original decision to deny intervention was based on sound legal
reasoning; the federal government’s desire to create removal jurisdiction does not compel a state
court to allow the federal government to permissively intervene. The Court notes that even if the
state court had granted permissive intervention, the United States’ status as a permissive
intervenor would not create a basis for jurisdiction under § 1442(a)(1). The state court may have
discretion to reconsider its denial of permissive intervention; the Court trusts that the state court,
with the cooperation of the parties, will competently balance the interests at play.
This decision does not foreclose the possibility that there could be events in the future
that make one or both cases removable pursuant to § 1442(a)(1). At hearing, the parties
recognized that the propriety of removal depends on hypotheses about where the civil actions
might lead in the future, as opposed to the cases’ present status as reflected in court filings. The
Court may not take a shortcut on the issue of subject matter jurisdiction merely because there
may be a basis for jurisdiction in the future.
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COSTS AND FEES
In the event of improper removal, “[a]n order remanding the case may require
payment of just costs and any actual expenses, including attorney fees, incurred as a
result of the removal.” 28 U.S.C. § 1447(c). “[C]ourts may award attorney’s fees under
§ 1447(c) only where the removing party lacked an objectively reasonable basis for
seeking removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). “A
district court has ‘considerable discretion’ in determining whether to award attorney’s
fees pursuant to 28 U.S.C. § 1447(c).” Convent Corp. v. City of N. Little Rock, 784 F.3d
479, 482 (8th Cir. 2015) (quoting Wells Fargo Bank W., N.A. v. Burns, 100 F. App’x 599,
599 (8th Cir. 2004) (per curiam)).
The Court holds the United States removed Guggenberger and Miller in good faith
based on a plausible argument that removal was proper. The Court finds that the United
States’ decision to do so was not objectively unreasonable. Therefore, the Court declines
to award costs or fees.
OTHER PENDING MOTIONS
Because the Court lacks jurisdiction, it lacks authority to consider all other
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
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Plaintiffs’ Motions to Remand to State Court [Case No. 16-2021, Docket
No. 11; Case No. 16-2022, Docket No. 9] are GRANTED in part and DENIED in part
The motions to Remand to State Court [Case No. 16-2021, Docket
No. 11 and Case No. 16-2022, Docket No. 9] are GRANTED.
The motions for an award of costs and fees [Case No. 16-2021,
Docket No. 11 and Case No. 16-2022, Docket No. 9] are DENIED.
Guggenberger v. Starkey Laboratories, Inc. [Case No. 16-2021] and
Miller v. Starkey Laboratories, Inc. [Case No. 16-2022] are REMANDED to the
State of Minnesota District Court, Fourth Judicial District, County of Hennepin.
Defendant Starkey Laboratories, Inc.’s Motions to Stay Litigation, or
Alternatively, to Stay Discovery [Case No. 16-2021, Docket No. 28] [Case No. 16-2022,
Docket No. 21], the United States of America’s Motions for Permissive Intervention
[Case No. 16-2021, Docket No. 33] [Case No. 16-2022, Docket No. 26], and the United
States of America’s Motions to Stay Discovery [Case No. 16-2021, Docket No. 34] [Case
No. 16-2022, Docket No. 27] are DENIED as moot.
LET JUDGEMENT BE ENTERED ACCORDINGLY.
DATED: December 29, 2016
at Minneapolis, Minnesota.
JOHN R. TUNHEIM
United States District Court
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