Argument Preview: Watson v. Philip Morris on 4/25

The following argument preview is by Luke Itano, a student in the Stanford Supreme Court Litigation Clinic.

This morning, the Court will hear oral argument in Watson v. Philip Morris (No. 05-1284), which presents the question whether a private company “doing no more than complying with federal regulation is a ‘person acting under a federal officer’ for the purpose of 28 U.S.C. § 1442(a)(1), entitling the actor to remove to federal court a civil action brought in state court under state law.” This novel use of the “federal officer removal” provision in response to several class action “light” cigarette suits in state courts under state law puts at issue important federalism principles concerning supremacy, comity, and the presumption against federal preemption.

Arguing for the petitioners will be David C. Frederick of D.C.’s Kellogg, Huber. Former Solicitor General Ted Olson of Gibson Dunn & Crutcher LLP will argue on behalf of Philip Morris. Assistant to the Solicitor General Irving Gornstein will argue on behalf of the United States as an amicus in support of petitioners. The parties’ briefs are available here; the brief of the United States is available here.

The Federal Trade Commission’s jurisdiction over the advertising and testing of tar and nicotine levels in cigarettes derives from Section 45(a) of the Federal Trade Commission Act, which prohibits “unfair methods of competition…and unfair and deceptive acts or practices in or affecting commerce” and grants the FTC broad regulatory authority to prevent such practices. Concerned with the claims made regarding tar and nicotine content in cigarette advertising, the FTC had not only embarked on a detailed hands-on regulatory program that required standardized collection and reporting rules for all manufacturers claiming to offer “light” cigarettes, but it had in fact even conducted its own testing itself for twenty years. In response to the FTC’s threat to promulgate formal rules that would require manufacturers to make disclosures regarding tar and nicotine content based on the FTC’s testing method, the manufacturers “voluntarily” agreed to make the same basic disclosures that the rules would have required. The FTC then enforced the manufacturers’ compliance with the agreement through regulatory litigation and other means.

At issue in the case is the degree of regulation needed to give a defendant that can advance a colorable federal defense its choice between the sovereigns. The petitioners are Arkansas residents who have smoked at least one pack of Marlboro Light cigarettes per day for the last six years. They filed a complaint filed in Arkansas state court in which they alleged that respondent Philip Morris violated the Arkansas Deceptive Trade Practices Act by designing Marlboro Lights to deliver higher levels of tar and nicotine than the labels “light” and “lowered tar and nicotine” would suggest, and that the cigarettes were specifically designed to defeat the FTC’s prescribed testing methods. Petitioners do not allege a violation of federal law and thus would ordinarily be entitled to remain in the state forum in accord with the well-pleaded complaint rule of Louisville & Nashville R.R. v. Motley.

Philip Morris removed the case to the U.S. District Court for the Eastern District of Arkansas. Applying the three-part test set out by the Supreme Court in Mesa v. California, the district court denied petitioners’ motion to remand the matter back to state court for resolution of the purely state law questions: it held that Philip Morris “acted under” the direction of an officer of the United States – here, the FTC – in the testing and advertising of tar and nicotine levels in its “light” cigarettes, and that Philip Morris was entitled to a federal forum because the FTC regulation of its testing and advertising activities was causally connected to the challenged conduct.

Acknowledging its novel application of the federal officer removal statute, the district court certified the question for interlocutory appeal. The Eighth Circuit unanimously affirmed the district court’s order, reasoning that the “comprehensive and detailed federal government regulation” amounted to “direct control,” and petitioners’ petition for rehearing and rehearing en banc was denied. Petitioners then sought certiorari. The Supreme Court initially invited the Solicitor General to file a brief expressing the views of the United States on the issue; after receiving that brief – in which the Solicitor General took the position that the Eighth Circuit’s decision was erroneous but should nonetheless remain intact – the Court granted cert.

Petitioners’ merits brief distinguishes the allegedly improper application of the federal officer removal statute in this case from legitimate historical applications of the provision based upon the “under color of official office” clause, and claims that the statute was never intended to shield a private regulated commercial actor. Petitioners claim that the statute cannot meaningfully be invoked when the defendant is the object of federal regulation, rather than assisting in the enforcement of federal law, and that permitting this use of the removal statute would greatly expand federal court jurisdiction. An amicus brief filed on behalf of Public Citizen and others in support of the petitioners focuses its argument on the claim that Philip Morris is not a “person” within the meaning of the statute, and disputes the claim that regulation of the tobacco industry has been unusually or uniquely extensive.

In the brief of the United States as amicus supporting petitioners, the Solicitor General argues that removal under the statute is limited to cases in which private actors assist federal officers in carrying out their official duties, writing that a “private party that acts for its own purposes is not acting under a federal officer merely because it acts in compliance with federal regulation,” and that the right “does not extend to those subject to a federal regulatory regime, even a pervasive one.”

In its brief on the merits, respondent Philip Morris details the lengthy history of the regulation of the tobacco industry and argues that the requirements of the statute are satisfied not only under the “direction and control” standard endorsed by the court of appeals, but also under the “assisting in the enforcement of federal law” standard endorsed by petitioners.

Watson follows the massive tobacco litigation of the late nineties, in which state attorneys general sought to recover from tobacco companies for Medicare and other smoking-related costs, and it comes before the Court against the backdrop of several other notable tobacco cases currently working their way through the lower courts. One such case is United States v. Philip Morris, in which Judge Gladys Kessler of the United States District Court for the District of Columbia last year ruled that Philip Morris was liable under RICO for the very same conduct upon which it now relies in arguing that it is a “federal officer” entitled to the protection of a federal forum. This is one plausible explanation for the Solicitor General’s somewhat curious position in this case, and Philip Morris draws attention – at both the cert. and merits stages – to the fact that “the Department of Justice is hardly a disinterested party in this matter.”

Watson provides the Court with another opportunity to adjust the tension between, on the one hand, the general right of the states to exercise their police power and to provide for the health and welfare of their citizens and, on the other, the federal prerogative to administer a consistent national tobacco policy unencumbered by frequent state interference. Interestingly, were the Court to affirm the Eighth Circuit decision, it would suggest the embrace of a distinctively federal conception of the subject matter jurisdiction of the federal courts. By contrast, as a result of the enactment of the Class Action Fairness Act of 2005, which generally supplanted individual removal procedures in cases such as this one and which serves as an even clearer statement of Congress’s intent to preempt the states by creating an independent alternative means for access to federal court, an opinion reversing the decision below would not limit access to federal courts in future cases involving federal regulatory control.