Kenneth Lake v. Ohana Military Communities

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

KENNETH LAKE; CRYSTAL LAKE; No. 19-17340
KYLE PAHONA; RYAN WILSON;
HEATHER WILSON; ASHLEY D.C. No.
MOSELEY; TIMOTHY MOSELEY, 1:16-cv-00555-
Plaintiffs-Appellants, LEK-KJM

v.
OPINION
OHANA MILITARY COMMUNITIES,
LLC; FOREST CITY RESIDENTIAL
MANAGEMENT, INC.,
Defendants-Appellees.

Appeal from the United States District Court
for the District of Hawaii
Leslie E. Kobayashi, District Judge, Presiding

Argued and Submitted February 3, 2021
Honolulu, Hawaii

Filed September 27, 2021

Before: Richard R. Clifton, Ryan D. Nelson, and
Daniel P. Collins, Circuit Judges.

Opinion by Judge R. Nelson
2 LAKE V. OHANA MILITARY COMMUNITIES

SUMMARY *

Federal Jurisdiction

The panel reversed the district court’s order denying
plaintiffs’ motion to remand an action to state court, vacated
all subsequent district court decisions for lack of jurisdiction,
and remanded with instructions to remand to state court.

Military servicemember families sued Ohana Military
Communities, LLC, and Forest City Residential
Management, Inc., in Hawaii state court, alleging state law
claims based on defendants’ failure to provide residential
tenants with notice of pesticide contamination and
remediation efforts on Marine Corps Base Hawaii.
Defendants removed the action to federal court based on
federal jurisdiction.

The panel held that federal jurisdiction did not exist
because, first, under the Hawaii Admission Act, the State of
Hawaii had concurrent legislative or political jurisdiction
over Marine Corps Base Hawaii, and so state law had not
been assimilated into federal law. Second, the panel rejected
a rule that, regardless of any concurrent state jurisdiction,
federal jurisdiction exists where federally owned or
controlled land is involved, and a substantial federal interest
exists. Third, the panel held that there was no federal officer
or agency jurisdiction because there was no causal nexus
between the Navy and Ohana under 28 U.S.C. § 1442, and
Ohana was not a federal agency for purposes of federal

*
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
 LAKE V. OHANA MILITARY COMMUNITIES 3

jurisdiction. Finally, under the Gunn test, no federal issue
was “necessarily raised.”

COUNSEL

P. Kyle Smith (argued), Law Office of Kyle Smith, Kailua,
Hawaii; Terry Revere, Revere & Associates, Kailua, Hawaii;
for Plaintiffs-Appellants.

Randall C. Whattoff (argued), Kamala S. Haake, and
Christine A. Terada, Cox Fricke LLP, Honolulu, Hawaii, for
Defendants-Appellees.

OPINION

R. NELSON, Circuit Judge:

We are asked to decide whether federal subject matter
jurisdiction exists and whether the district court properly
denied Plaintiffs’ motion to remand to state court. The
district court held federal jurisdiction exists because
Plaintiffs’ state law claims implicated a federal interest in
military housing. We reject the asserted grounds for federal
jurisdiction and reverse, vacate, and order remand to state
court.

I

Defendants-Appellees Ohana Military Communities,
LLC (“Ohana”) and Forest City Residential Management,
Inc. (collectively, “Defendants”) began a major housing
construction project on Marine Corps Base Hawaii
(“MCBH”) in 2006. Because MCBH was allegedly widely
4 LAKE V. OHANA MILITARY COMMUNITIES

contaminated with pesticides potentially impacting human
health, Defendants developed and implemented a Pesticide
Soil Management Plan (“Plan”). Defendants allegedly never
informed residential tenants of the Plan, the decade-long
remediation efforts, or known pesticide contamination at
MCBH. Plaintiffs-Appellants Kenneth Lake, Crystal Lake,
and other military servicemember families (collectively,
“Plaintiffs”) filed an action in Hawaii state court alleging
11 different claims under state law. Defendants removed to
federal court. The district court denied Plaintiffs’ motion to
remand, which we review on this appeal from the subsequent
judgment on the merits.

We begin in 1959 when Hawaii was admitted as the 50th
state. Act to Provide for the Admission of the State of
Hawaii into the Union, Pub. L. No. 86-3, 73 Stat. 4 (1959)
(“Admission Act”). The United States reserved “the power
of exclusive legislation, as provided by” the Enclave Clause
of the U.S. Constitution,1 over “tracts or parcels of land as,
immediately prior to the admission of said State, are
controlled or owned by the United States and held for
Defense or Coast Guard purposes.” Id. § 16(b); see also id.
§ 7(b) (providing for popular referendum approving, inter
alia, Hawaii’s consent to the U.S.’s reserved rights and
powers); Proclamation 3309, 24 Fed. Reg. 6868 (Aug. 25,
1959) (affirming approval of referenda and declaring
Hawaii’s admission to the Union). Before Hawaii’s

1
The Enclave Clause states “Congress shall have Power . . . To
exercise exclusive Legislation in all Cases whatsoever . . . over all Places
purchased by the Consent of the Legislature of the State in which the
Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-
Yards, and other needful Buildings . . . .” U.S. Const. Art. 1, § 8, cl. 17.
“Exclusive legislation” means exclusive legislative jurisdiction. See
Surplus Trading Co. v. Cook, 281 U.S. 647, 652 (1930).
 LAKE V. OHANA MILITARY COMMUNITIES 5

admission, MCBH was both owned by the United States and
used for military purposes. See, e.g., John Gunther, Our
Pacific Frontier, 18 Foreign Affairs 583, 595 (1940).

However, the Admission Act also granted Hawaii
concurrent jurisdiction over these lands. Section 16(b)
provided that the federal reservation of authority “shall not
operate to prevent such lands from being a part of the State
of Hawaii, or to prevent [Hawaii] from exercising over or
upon such lands, concurrently with the United States, any
jurisdiction whatsoever which it would have in the absence
of such reservation of authority and which is consistent with
the laws hereafter enacted by the Congress pursuant to such
reservation of authority.” Admission Act, § 16(b).
Congress then added a second proviso “[t]hat the United
States shall continue to have sole and exclusive jurisdiction
over such military installations as have been heretofore or
hereafter determined to be critical areas as delineated by the
President of the United States and/or the Secretary of
Defense.” Id. § 16(b).

In 1996, Congress undertook the Military Housing
Privatization Initiative (“MHPI”) to privatize military
housing, allowing private companies to own and manage
housing on military installations. See generally National
Defense Authorization Act for Fiscal Year 1996, Pub. L. No.
104-106, § 2801(a)(1), 110 Stat. 186, 544–51 (codified at 10
U.S.C. §§ 2871–85). Servicemembers such as Lake receive
a Basic Allowance for Housing (“BAH”) with which “they
can choose to live in private sector housing” off base “or
privatized housing” on base. See, e.g., Military Housing
Privatization, Off. of the Assist. Sec’y of Def. for
Sustainment, https://bit.ly/3iFbvv3.
6 LAKE V. OHANA MILITARY COMMUNITIES

In 2004, Hawai‘i 2 Military Communities, LLC (“HMC”)
and the Navy formed Ohana Military Communities, LLC as
a Public Private Venture (“PPV”). Ohana was assigned the
rights and obligations to a 50-year Initial Ground Lease
subject to an operating agreement and a property
management agreement. The Navy retained fee title
ownership of the land and conveyed ownership of the
residential units and future improvements for the lease term
to Ohana through HMC. The Operating Agreement between
HMC and the Navy gives “sole and exclusive management
and control” of Ohana to HMC as the “Managing Member.”

Before its new construction, Ohana developed its
Pesticide Soil Management Plan in 2006. The Plan
mandated that “[w]ritten notifications will be provided
where residents and contractors may contact soils impacted
with pesticides.” The Navy reviewed and commented on
later versions of the Plan, beginning in 2008. Ohana
engaged in systematic cleanup efforts while demolishing old
homes and building new ones over the next decade.

Ohana allegedly never informed existing or potential
tenants of the Plan, its remediation efforts, or known
pesticide contamination at MCBH. Ohana’s Community
Handbook given to new residents stated “[f]amilies can
safely work and play in their yards.” After lawsuits were
filed, Ohana warned that children and pets should not be
allowed to play and families should not grow fruits or
vegetables in the yards near old house foundations.

In 2016, Plaintiffs filed an action in Hawaii state court
alleging 11 different claims under state law, including

2
The entity name uses this spelling, but we spell Hawaii consistent
with the Admission Act.
 LAKE V. OHANA MILITARY COMMUNITIES 7

contract, Hawaii Landlord Tenant Code, Hawaii Deceptive
Acts or Practices (“UDAP”), negligence, intentional
infliction of emotional distress, fraud and misrepresentation,
unfair method of competition (“UMOC”), trespass, and
nuisance claims. Defendants removed the action to the
District of Hawaii based on federal question jurisdiction
under 28 U.S.C. §§ 1331 and 1442(a)(1). Plaintiffs moved
to remand to state court.

The district court denied Plaintiffs’ motion to remand.
The district court then granted Defendants’ motion to
dismiss the UDAP, UMOC, and trespass claims with
prejudice. Plaintiffs amended their complaint for the
remaining claims. After discovery, the district court granted
Defendants’ motion for summary judgment on all remaining
claims except for some of Plaintiffs’ nuisance claims
regarding construction dust. 3 The parties stipulated to
dismiss those latter claims and Plaintiffs appealed. We have
appellate jurisdiction under 28 U.S.C. § 1291.

II

“We review questions of statutory construction and
subject-matter jurisdiction de novo.” City of Oakland v. BP
PLC, 969 F.3d 895, 903 (9th Cir. 2020). Removal is proper
when the district court has original jurisdiction. 28 U.S.C.
§ 1441. The parties agree there is no diversity jurisdiction
under 28 U.S.C. § 1332. Thus, to fit within § 1441, the
removed claims here must “aris[e] under the Constitution,
laws, or treaties of the United States.” 28 U.S.C. § 1331; see
Gunn v. Minton, 568 U.S. 251, 257 (2013). To support

3
We do not reach Plaintiffs’ arguments on the district court’s rulings
on the UMOC, deceit, and contract claims. The district court lacked
jurisdiction to consider any of Plaintiffs’ state law claims.
8 LAKE V. OHANA MILITARY COMMUNITIES

removal under § 1442, the removing party “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
[it] took pursuant to a federal officer’s direction, and (3) it
has a ‘colorable’ federal defense to plaintiffs’ claims.” Leite
v. Crane Co., 749 F.3d 1117, 1120 (9th Cir. 2014) (citation
omitted).

III

“A federal court is presumed to lack jurisdiction in a
particular case unless the contrary affirmatively appears.”
Stock W., Inc. v. Confederated Tribes of the Colville Rsrv.,
873 F.2d 1221, 1225 (9th Cir. 1989). “Removal and subject
matter jurisdiction statutes are ‘strictly construed . . . .’”
Hawaii ex rel. Louie v. HSBC Bank Nev., N.A., 761 F.3d
1027, 1034 (9th Cir. 2014) (quoting Luther v. Countrywide
Home Loans Servicing LP, 533 F.3d 1031, 1034 (9th Cir.
2008)).

Generally, a “defendant seeking removal has the burden
to establish that removal is proper and any doubt is resolved
against removability.” Id. (quoting Luther, 533 F.3d at
1034). Though the federal officer and agency removal
statute, 28 U.S.C. § 1442, is read “broadly in favor of
removal,” Durham v. Lockheed Martin Corp., 445 F.3d
1247, 1252 (9th Cir. 2006), Defendants still “bear[] the
burden of proving by a preponderance of the evidence that
the colorable federal defense and causal nexus requirements
for removal jurisdiction” are factually supported. Leite,
749 F.3d at 1122. Defendants have not met their burden to
show federal jurisdiction over Plaintiffs’ state law claims
based on their asserted grounds.

First, state law has not been assimilated into federal law,
because Hawaii has concurrent legislative jurisdiction over
 LAKE V. OHANA MILITARY COMMUNITIES 9

MCBH. See Pratt v. Kelly, 585 F.2d 692, 695 (4th Cir.
1978). Second, the district court’s novel ground for subject
matter jurisdiction is unsupported. Third, there is no federal
officer or agency jurisdiction because there is no causal
nexus under 28 U.S.C. § 1442, see Durham, 445 F.3d
at 1251, and Ohana is not a federal agency, see In re Hoag
Ranches, 846 F.2d 1225, 1227–28 (9th Cir. 1988). Fourth,
no federal issue was “necessarily raised.” Gunn, 568 U.S.
at 258. Thus, this case must be remanded to state court.

A

We first address whether Hawaii has concurrent
legislative (also known as political) jurisdiction over
MCBH. “Jurisdiction, it has been observed, is a word of
many, too many, meanings.” Steel Co. v. Citizens for a
Better Env’t, 523 U.S. 83, 90 (1998) (internal quotation
marks and citations omitted). It is important not to
“confuse[] the political jurisdiction of a State with its
judicial jurisdiction.” Gulf Offshore Co. v. Mobil Oil Corp.,
453 U.S. 473, 482 (1981) (emphases added); compare
Territorial Jurisdiction, Black’s Law Dictionary 1642 (4th
ed. 1951) (“Territory over which a government or
subdivision thereof has jurisdiction.”), with Jurisdiction,
Black’s Law Dictionary 991 (4th ed. 1951) (“[T]he authority
by which courts and judicial officers take cognizance of and
decide cases”). Federal courts generally have no judicial
jurisdiction under 28 U.S.C. § 1331 to hear state law claims–
–even where there is concurrent state-federal legislative (i.e.
political) jurisdiction––where the state claims do not arise
under federal law. See Gulf Offshore Co., 453 U.S. at 481.

The Admission Act reserves the power of exclusive
legislation under the Enclave Clause, but also permits
Hawaii to exercise concurrent jurisdiction, while reserving
the United States’ right to exercise exclusive jurisdiction
10 LAKE V. OHANA MILITARY COMMUNITIES

over areas it designates as critical. Because the United States
has not designated MCBH as a critical area, Hawaii’s
concurrent legislative jurisdiction continues to apply here.

Defendants argue that any event occurring on a federal
military installation presents a federal question. But
Defendants’ “locus” theory ignores Congress’s express
decision to allow Hawaii to exercise concurrent jurisdiction
notwithstanding Congress’s formal retention of “the power
of exclusive legislation.” Admission Act, § 16(b). Hawaii’s
concurrent legislative jurisdiction over MCBH means that
the “locus” theory does not apply. See James Stewart & Co.
v. Sadrakula, 309 U.S. 94, 100 (1940); Pratt, 585 F.2d
at 695.

1

We first address Hawaii’s concurrent legislative
jurisdiction over MCBH. Subject to specified exceptions,
the federal government ceded its land to Hawaii’s new state
government in the Admission Act. Admission Act, §§ 5(b),
(c); see also Hawaii v. Off. of Hawaiian Affs., 556 U.S. 163,
168 (2009). The United States reserved the power of
exclusive legislation under the Enclave Clause over military
areas including MCBH. Admission Act, § 16(b). The Act
then permitted Hawaii to exercise any concurrent
jurisdiction “which it would have in the absence of such
reservation of [exclusive] authority,” so long as it does so
“consistent with the laws hereafter enacted by the Congress
pursuant to such reservation of authority.” Id. However, the
President or Secretary of Defense could delineate a military
area as “critical” to revoke Hawaii’s concurrent jurisdiction.
Id. This reading is supported by the statutory structure and
text, relevant judicial precedent, and the federal
government’s own understanding of the Admission Act.
 LAKE V. OHANA MILITARY COMMUNITIES 11

First, we read the Admission Act as a whole. See
Beecham v. United States, 511 U.S. 368, 372 (1994).
Considering the whole structure, we read the Admission Act
in the order it was written: Congress reserved the power of
legislative jurisdiction, but then permitted Hawaii to exercise
concurrent jurisdiction, subject to future congressional
control. But the President or the Secretary of Defense may
at any time reassert “sole and exclusive jurisdiction” over
military installations by delineating them as “critical areas.”
See Admission Act, § 16(b).

Second, judicial precedent favors reading the Admission
Act to grant Hawaii concurrent jurisdiction over non-critical
areas. Three years before the Admission Act, the Supreme
Court held that Congress may permit the States some
measure of concurrent jurisdiction over federal lands held
under Enclave Clause authority. See Offutt Hous. Co. v.
Sarpy Cnty., 351 U.S. 253, 260–61 (1956). We presume
“that Congress . . . was aware of the settled judicial
construction.” Shapiro v. United States, 335 U.S. 1, 16
(1948). Congress, “in the exercise of this power” of
exclusive legislation under the Enclave Clause, thus
permitted Hawaii to exercise concurrent jurisdiction over
MCBH. See Offutt Hous. Co., 351 U.S. at 260–61. Congress
did not “relinquish[] this power” of exclusive legislation by
allowing Hawaii tort and contract law to apply here. See id.
at 260. These military areas remain federal land, over which
Congress has permitted Hawaii to exercise concurrent
jurisdiction.

Third, the federal government recognized that it granted
concurrent jurisdiction to Hawaii. For example, in 1969, the
Department of Justice stated that “Navy properties in those
States [of Hawaii and Alaska,] in accord with provisions of
both statehood acts, are held in concurrent jurisdiction.”
12 LAKE V. OHANA MILITARY COMMUNITIES

U.S. Dep’t of Just., Federal Legislative Jurisdiction: Report
Prepared for U.S. Public Land Law Review Commission 117
(1969) (“1969 DOJ Report”). The federal government
understood the Admission Act to permit Hawaii to exercise
concurrent jurisdiction over these federal lands.

We have not found evidence that MCBH is such a
designated “critical area.” Cf. 1969 DOJ Report at 125 (“No
Air Force installations [in Hawaii] have been delineated as
critical areas . . . .”). A general designation of military
installations as “critical infrastructure” is insufficient. See,
e.g., Tharp v. Alutiiq Pac., LLC, No. CV 18-00135 KJM,
2018 WL 6628945, at *8 (D. Haw. Sept. 10, 2018). There
has been no “formal” pronouncement of the sort
contemplated by the Act. See Adams v. United States,
319 U.S. 312, 314 (1943). As such, the United States
allowed Hawaii to assert concurrent legislative power over
MCBH when it became a state.

2

Where the United States acquires exclusive jurisdiction
under the Enclave Clause and does not permit any exercise
of state concurrent jurisdiction, the general rule is that those
state-law “rules existing at the time of the surrender of
sovereignty” to the United States will continue to “govern
the rights of the occupants of the territory transferred.”
James Stewart, 309 U.S. at 99; see also id. at 100 (“Since
only the law in effect at the time of the transfer of jurisdiction
continues in force, future statutes of the state are not a part
of the body of laws in the ceded area.”); see generally
Chicago, Rock Island & Pac. Ry. Co. v. McGlinn, 114 U.S.
542, 546–47 (1885). In such circumstances, “those state
laws which are effective within the enclave ‘lose their
character as laws of the state and become laws of the
Union.’” Celli v. Shoell, 40 F.3d 324, 328 n.4 (10th Cir.
 LAKE V. OHANA MILITARY COMMUNITIES 13

1994) (quoting Stokes v. Adair, 265 F.2d 662, 665 (4th Cir.
1959)). The question here is whether the same federalization
of state law applies when Congress retains exclusive
jurisdiction over an area under the Enclave Clause but then,
in the exercise of that jurisdiction, allows current state law
to be applied within that area. We conclude that it does not.

Because Hawaii maintained broad and ongoing
concurrent legislative jurisdiction over MCBH, there is no
reason to treat the resulting state laws as if they were
assimilated into federal law. See Pratt, 585 F.2d at 695. The
federalization of then-existing state-law rules upon the
creation of a federal enclave rests on the premise that,
precisely because Congress has excluded all exercise of state
jurisdiction, the only laws that can apply are federal, and
federal law will be deemed to incorporate existing state law
in order to ensure “that no area however small will be left
without a developed legal system for private rights.” James
Stewart, 309 U.S. at 100. This rationale has no application
when, as here, Congress has expressly allowed concurrent
state legislative jurisdiction subject to Congress’s
reservation of ultimate authority. Hawaii’s concurrent
jurisdiction means state law governing Plaintiffs’ state
claims is still Hawaii law––not federal law. Hawaii law has
not been assimilated into federal law. Congress did not
transmute Hawaii law into federal law by permitting Hawaii
to exercise concurrent jurisdiction over military
installations. No one believed that Congress federalized
Nebraska tax law by permitting state taxation of military
housing while otherwise retaining Enclave Clause
jurisdiction. See Offutt Hous. Co., 351 U.S. at 260–61. Nor
did Congress otherwise adopt the state law at issue as federal
law, as it has for other laws. See, e.g., 28 U.S.C. § 5001;
18 U.S.C. §§ 7(3), 13; 43 U.S.C. § 1333(a)(2)(A).
14 LAKE V. OHANA MILITARY COMMUNITIES

Therefore, federal question jurisdiction is lacking on this
basis.

3

The district court’s decision below relied on Federico v.
Lincoln Military Housing, 901 F. Supp. 2d 654 (E.D. Va.
2012), in finding a novel ground for subject matter
jurisdiction. The district court essentially adopted
Federico’s reasoning, which found federal jurisdiction
“where concurrent jurisdiction over claims arising on a
federal enclave exists, and matters involve substantial
federal interests such that a federal question is presented.”
Id. at 675; see also Lake v. Ohana Mil. Communities, No.
CV 16-00555 LEK, 2017 WL 11515424, at *10–13 (D.
Haw. Mar. 15, 2017). Federico (and the district court by
adoption), however, misread our precedent in Durham,
445 F.3d at 1250, and Willis v. Craig, 555 F.2d 724, 726 (9th
Cir. 1977) (per curiam), to broadly apply “to cases of full
concurrent jurisdiction as well.” Federico, 901 F. Supp. 2d
at 666. The district court here thus created a new rule:
federal question jurisdiction exists where (1) federally
owned or controlled land is involved––even if the state has
full concurrent jurisdiction and state laws have not
assimilated into federal law; and (2) a substantial federal
interest––not meeting any of the other Gunn factors––exists.
See Lake, 2017 WL 11515424, at *11.

But the broad concurrent legislative jurisdiction over
MCBH distinguishes this case from others dealing with
exclusive federal jurisdiction. We have only found federal
question jurisdiction in enclaves in which Congress has not
permitted concurrent jurisdiction, and we have not extended
that rule to federal land that is subject to broad state
concurrent jurisdiction. See Durham, 445 F.3d at 1250;
 LAKE V. OHANA MILITARY COMMUNITIES 15

Willis, 555 F.2d at 726; see also Macomber v. Bose, 401 F.2d
545, 546 & n.2 (9th Cir. 1968).

Durham, for instance, dealt with a fully exclusive
jurisdiction federal enclave. We stated, “[f]ederal courts
have federal question jurisdiction over tort claims that arise
on ‘federal enclaves.’” 445 F.3d at 1250. This statement is
generally true for federal enclaves where there is no state
concurrent jurisdiction. Here, however, we deal with an
enclave where Congress has explicitly permitted state
concurrent jurisdiction. Thus, Durham does not apply; its
statement is aptly read to only apply to exclusive jurisdiction
federal enclaves with no concurrent state jurisdiction.

Likewise, the cases Durham cited also dealt with
exclusive jurisdiction federal enclaves. The Navy base in
Willis was either an exclusive jurisdiction federal enclave or
not an enclave at all, depending on whether it had been
purchased by the federal government and ceded by
California. See 555 F.2d at 726. We remanded to determine
jurisdiction because “[n]either party discussed subject
matter jurisdiction” and after a “thorough[] search[] [of] the
record” there remained “unresolved and disputed facts
surrounding this question.” Id. In a footnote, we noted “no
quarrel with the propriety of enclave jurisdiction in this case
(if the facts support it), even though the state courts may
have concurrent jurisdiction.” Id. at 726 n.4. This dictum
pertains to concurrent judicial jurisdiction––not concurrent
legislative political jurisdiction at issue here. See Gulf
Offshore Co., 453 U.S. at 482.

Likewise, Macomber dealt with an area of “[s]ole and
exclusive jurisdiction” where all state laws were assimilated
in federal law. 401 F.2d at 546 & n.2.
16 LAKE V. OHANA MILITARY COMMUNITIES

The district court’s theory is unsupported by Durham,
Willis, and Macomber, as explained above. Hawaii
exercises broad concurrent legislative jurisdiction over
MCBH. Thus, neither the locus theory nor the district
court’s theory applies to provide federal subject matter
jurisdiction here.

B

Federal officer or agency jurisdiction under 28 U.S.C.
§ 1442 does not exist either. We discuss it since § 1442 was
raised by the parties but not reached by the district court. See
Gonzalez v. Thaler, 565 U.S. 134, 141 (2012); see also Lake,
2017 WL 11515424, at *13.

1

A civil action may be removed under § 1442 when the
defendant shows: “(a) it is a ‘person’ within the meaning of
the statute; (b) there is a causal nexus between its actions,
taken pursuant to a federal officer’s directions, and
plaintiff’s claims; and (c) it can assert a ‘colorable federal
defense.’” Durham, 445 F.3d at 1251 (citation omitted).
Neither party disputes the first prong. Defendants focus their
argument on “the causal nexus requirement” for removal.
We conclude that there is no causal nexus here, and thus
Ohana is not a federal officer for purposes of federal
jurisdiction.

Defendants assert that the Navy exercised significant
control over Ohana’s housing by: (1) restricting the type of
people able to access MCBH and occupy its housing;
(2) providing BAH to servicemembers; and (3) retaining the
right to consent to financial restructuring and replacement of
the Property Manager and Asset Manager. Defendants also
note the Navy commented on the Plan.
 LAKE V. OHANA MILITARY COMMUNITIES 17

Our causal nexus analysis “focuses on whether [the
defendant] was involved in an effort to assist, or to help carry
out, the duties or tasks of [a] federal superior.” Stirling v.
Minasian, 955 F.3d 795, 800 (9th Cir. 2020) (internal
quotation marks and citation omitted). Thus, “[t]he
relationship between someone acting under a federal officer
and the federal officer typically involves subjection,
guidance, or control.” Id. (internal quotation marks and
citation omitted). This relationship “must go beyond simply
complying with the law.” Goncalves By & Through
Goncalves v. Rady Child.’s Hosp. San Diego, 865 F.3d 1237,
1245 (9th Cir. 2017). It is not enough that “the regulation is
highly detailed and . . . the private firm’s activities are highly
supervised and monitored.” Watson v. Philip Morris Cos.,
551 U.S. 142, 153 (2007). In sum, Ҥ 1442(a)(1) d[oes] not
allow removal simply because a federal agency ‘directs,
supervises, and monitors a company’s activities in
considerable detail.’” Fidelitad, Inc. v. Insitu, Inc., 904 F.3d
1095, 1100 (9th Cir. 2018) (quoting Watson, 551 U.S.
at 145).

No causal nexus exists. Defendants do not argue that the
Navy had control over Ohana’s decision whether to disclose
the pesticide contamination. Indeed, HMC (not the Navy)
has “sole and exclusive management and control” of Ohana.
Thus, the “central issue” in the causal nexus analysis––
whether a federal officer directed the defendant to take the
action challenged––is unmet. See Riggs v. Airbus
Helicopters, Inc., 939 F.3d 981, 987 (9th Cir. 2019) (citing
Fidelitad, 904 F.3d at 1099). The Navy’s consent power
over aspects of the housing arrangement does not change the
result. Requiring federal agency consent on collateral points
“fall[s] within the simple compliance with the law
18 LAKE V. OHANA MILITARY COMMUNITIES

circumstance that does not meet the acting under standard.”
Id. at 989 (internal quotation marks and citations omitted). 4

Defendants’ alleged facts do not support federal officer
removal. See Watson, 551 U.S. at 153; Fidelitad, 904 F.3d
at 1100. Even though we “interpret section 1442 broadly in
favor of removal,” Defendants fail to meet at least one of the
requirements for federal officer removal. See Durham,
445 F.3d at 1252.

2

Defendants additionally argue Ohana is a federal agency
based on the Navy’s partial ownership of Ohana. They
assert removal was warranted under § 1442 authorizing
“[t]he United States or any agency thereof” to remove
actions to federal court.

We use a six-factor test for determining whether an
entity falls within 28 U.S.C. § 451’s definition of agency 5:

(1) the extent to which the alleged agency
performs a governmental function; (2) the
scope of government involvement in the
organization’s management; (3) whether its
operations are financed by the government;

4
Because no federal officer directed Ohana to take the challenged
actions, we need not address Defendants’ arguments that Ohana, by
acting as a landlord, was performing acts delegated to it by the Navy.

5
28 U.S.C. § 451 defines “agency” as “any department, independent
establishment, commission, administration, authority, board or bureau of
the United States or any corporation in which the United States has a
proprietary interest, unless the context shows that such term was
intended to be used in a more limited sense.”
 LAKE V. OHANA MILITARY COMMUNITIES 19

(4) whether persons other than the
government have a proprietary interest in the
alleged agency and whether the
government’s interest is merely custodial or
incidental; (5) whether the organization is
referred to as an agency in other statutes; and
(6) whether the organization is treated as an
arm of the government for other purposes,
such as amenability to suit under the Federal
Tort Claims Act.

In re Hoag Ranches, 846 F.2d at 1227–28. None of the six
In re Hoag Ranches factors support finding Ohana an
“agency.”

First, Ohana likely does not “perform[] a governmental
function.” Id. at 1227. Merely leasing housing to a
servicemember cannot itself be a governmental function,
since BAH can be used on or off a military base. Otherwise,
every private housing (or other service) provider that leases
to a servicemember would perform a governmental function.

Nor is leasing housing on a military installation under the
MHPI necessarily a historically and exclusively
governmental function. Congress enacted the MHPI to
privatize military housing, allowing private companies to
own and manage housing on military installations. See
National Defense Authorization Act for Fiscal Year 1996,
110 Stat. at 544–52. And the Navy regards PPV housing as
“owned by a private entity and governed by a business
agreement in which the Navy has limited rights and
responsibilities,” where “[t]he private entity is entirely
responsible for Construction[,] Renovation[, and]
Maintenance.” See Privatized (PPV) Housing Program:
Military Housing Privatization Initiative (MHPI),
20 LAKE V. OHANA MILITARY COMMUNITIES

Commander, Navy Installations Command,
https://bit.ly/2UKtAQz (“PPV Website”). 6 Certainly, there
may be situations where leasing housing on a military
installation might perform a governmental function. But
Defendants have not shown that Ohana performs a
governmental function in this specific factual context. Even
if military housing on MCBH once was considered an
exclusively federal governmental function, it is no longer.
See In re Hoag Ranches, 846 F.2d at 1228.

Second, the federal government’s “involvement in the
organization’s management” is limited. See id. at 1227.
HMC has “sole and exclusive management and control” of
Ohana as the “Managing Member.” The Navy, as the
“Government Member,” generally has no management or
control. The Navy also states it “has limited rights and
responsibilities” over PPVs. See PPV Website. The Navy
has only limited control here––such as choosing to identify
Preferred Referrals, replacing a defaulting or failing
Property Manager, or consenting to certain items such as
annual budgets, or additional debt. We have found no
control where the government withdrew its supervisory
authority and “was removed from participation in day-to-day
management,” even though the corporation remained subject
to federal regulation. See In re Hoag Ranches, 846 F.2d
at 1228. Here, the government only ever had limited control.
At most, this factor does not weigh heavily in either
direction.

Third, Defendants do not provide evidence that Ohana’s
“operations are financed by the government,” even if the

6
We take judicial notice that the Navy has made these
representations. See Fed. R. Evid. 201(b); Daniels-Hall v. Nat’l Educ.
Ass’n, 629 F.3d 992, 998–99 (9th Cir. 2010).
 LAKE V. OHANA MILITARY COMMUNITIES 21

Navy at one point financially contributed to Ohana’s
creation. See id. at 1227. An initial financial contribution
does not show ongoing operational financing.

Fourth, Ohana does not directly address whether
“persons other than the government have a proprietary
interest in the alleged agency, and whether the government’s
interest is merely custodial or incidental.” See In re Hoag
Ranches, 846 F.2d at 1227–28. To the extent it disputes the
fourth In re Hoag Ranches factor, Ohana’s arguments are
unconvincing. It fails to note that HMC, a non-federal
person that is the Managing Member, has a “proprietary
interest in the alleged agency.” See id. at 1227. It does not
explain how the government’s interest is not “merely
custodial or incidental” in light of HMC’s managing interest
in the residential units and future improvements over
50 years. See id. at 1227–28.

Defendants do not address the fifth and sixth factors, and
arguments on these factors are waived. See Miller v.
Fairchild Indus., Inc., 797 F.2d 727, 738 (9th Cir. 1986). 7
“In conclusion, . . . the balance tips toward treating” Ohana
as a private entity, not as a federal agency. See In re Hoag
Ranches, 846 F.2d at 1228–29 (finding a corporation was not

7
Regardless, neither of these factors suggest Ohana is an agency.
Ohana is not “referred to as an agency in other statutes.” See id. at 1228.
And Ohana is not “treated as an arm of the government for other
purposes, such as amenability to suit under the Federal Tort Claims Act.”
See id. Indeed, Ohana’s residential leases’ Choice of Law provision
requires that “the contractual relationship . . . shall be constructed
exclusively in accordance with, and shall be exclusively governed by the
substantive laws of the State of Hawaii.” Ohana’s Operating Agreement
similarly states that Ohana would be incorporated and registered “under
the laws of the State of Hawaii.”
22 LAKE V. OHANA MILITARY COMMUNITIES

a government agency even though “some factors weigh[ed]
in favor of finding agency status”).

C

Finally, a “special and small category” of state law cases
may be brought in federal court. Gunn, 568 U.S. at 257–58
(citation omitted). This “less frequently encountered”
category of federal question cases includes state law claims
meeting certain requirements. See Grable & Sons Metal
Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 312
(2005); see also Merrell Dow Pharms. Inc. v.
Thompson, 478 U.S. 804, 808 (1986). Gunn clarifies that
“federal 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.” 568 U.S. at 258.

Defendants first argue that the Gunn test does not apply
because federal jurisdiction requires only a substantial
federal interest. But we have rejected this interpretation. See
California Shock Trauma Air Rescue v. State Comp. Ins.
Fund, 636 F.3d 538, 542 (9th Cir. 2011) (“[C]ontrary to [the
party’s] suggestion, Grable did not implicitly overturn the
well-pleaded complaint rule . . . in favor of a new
‘implicate[s] significant federal issues’ test.” (internal
citations omitted)).

Defendants then argue that a federal issue is necessarily
raised because Plaintiffs’ causes of action turn on the safety
of military housing. But we have held a federal issue is not
necessarily raised where the “actions are based entirely on
[state] causes of action . . . , each of which does not, on its
face, turn on a federal issue.” Id. at 543. For jurisdiction to
exist under the Gunn test, a “‘right or immunity created by
 LAKE V. OHANA MILITARY COMMUNITIES 23

the Constitution or laws of the United States must be an
element, and an essential one, of the plaintiff’s cause of
action.’” Id. at 541 (quoting Gully v. First Nat’l Bank,
299 U.S. 109, 112 (1936)); see also Atl. Richfield Co. v.
Christian, 140 S. Ct. 1335, 1350 n.4 (2020) (“No element of
the landowners’ state common law claims necessarily raises
a federal issue.”). Defendants have failed to make that
showing here. Instead, Defendants allege only that a policy
interest––the safety of military housing––is implicated, and
they point to no question of federal law. Because
Defendants fail to satisfy the first Gunn prong, we need not
address the other three.

IV

We reverse the district court’s order denying the motion
to remand, vacate all subsequent district court decisions for
lack of jurisdiction, and remand with instructions to remand
to state court.

REVERSED, VACATED, AND REMANDED.