Kinetic Systems, Inc. v. Federal Financing Bank
895 F. Supp. 2d 983
N.D. Cal.2012Background
- Solyndra, a Fremont solar manufacturer, entered in Sept 2009 into a Note Purchase Agreement with FFB, guaranteed by DOE, for $535 million to fund a manufacturing facility.
- FFB purchased the Solyndra note and funded advances to Solyndra’s creditors as directed, up to $535 million, with Secretary of Energy approval required for each disbursement.
- Solyndra closed in Aug 2011 before facility completion; plaintiff, a California contractor, alleges $2.870 million in work on the project with $1.187 million unpaid.
- Plaintiff served a bonded stop notice on FFB; FFB refused to set aside funds, and plaintiff sued in state court for enforcement of the stop notice, which FFB removed to federal court.
- FFB moved to dismiss or, in the alternative, for summary judgment; plaintiff moved to remand; the court analyzed removal under 28 U.S.C. § 1442 and sovereign-immunity issues.
- Court denies remand, finding colorable federal defenses exist; retains jurisdiction but requires amended removal notice; and denies dismissal on sovereign immunity and preemption, while denying summary judgment on construction-lender status.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether removal under § 1442 is proper | Remand required due to defective removal grounds. | FFB has colorable federal defenses and proper grounds under § 1442. | Remand denied; jurisdiction retained; must amend removal to state grounds under § 1446. |
| Whether FFB is shielded by sovereign immunity | California stop-notice law can reach FFB despite immunity. | Sovereign immunity blocks state-law enforcement under stop-notice. | Sovereign-immunity defenses denied; California stop-notice can reach FFB as a construction lender. |
| Whether California stop-notice conflicts with federal law | Stop-notice enforcement would support labor and materials rights consistent with state law. | Stop-notice would conflict with FFB Act and Energy Policy Act. | Conflict-preemption rejected; enforcing stop-notice does not impermissibly impede federal objectives. |
Key Cases Cited
- Durham v. Lockheed Martin Corp., 445 F.3d 1247 (9th Cir. 2006) (colorable federal defense required for removal under § 1442)
- Mesa v. California, 489 U.S. 121 (Supreme Court 1989) (removal under § 1442 requires a federal question; document must show grounds for removal)
- Meyer v. Federal Home Loan Bank Bd. (FDIC v. Meyer), 510 U.S. 471 (U.S. 1994) (two-step sovereign immunity analysis: waiver and whether the claim provides relief)
- Flamingo Industries vs. USPS, 540 U.S. 736 (U.S. 2004) (sovereign immunity and whether agency is a 'person' for antitrust purposes)