by Scott Nelson
Every now and then you read an opinion of a federal court of appeals and realize immediately that if the Supreme Court ever gets its hands on it, it will be reversed. The only question is whether the Court will take the case.
Usually these days that happens when the opinion is from the Court of Appeals for the Ninth Circuit, which has some judges who are, shall we say, sometimes a bit out of step with the Supreme Court's prevailing judicial philosophy. But sometimes the lower court's error is not that it veered left in a case where the Supreme Court would steer right. Sometimes a court just issues an opinion that is so appallingly wrong that no Justice, left, right or center, would ever agree with it.
Such a decision was the Eighth Circuit's ruling in Watson v. Philip Morris.
The lower court in Watson gave cigarette companies the same right that federal officers, employees, and agencies have to "remove" cases brought against them in state courts to federal courts. The court of appeals' reasoning, if sustained, would have given many other regulated industries the same ability to take consumer lawsuits filed against them out of the state courts and place them in federal courts.
Fortunately, sanity prevailed in the Supreme Court. In a unanimous decision by Justice Breyer, the Court this Monday reversed the Eighth Circuit's decision and held that neither Philip Morris, nor any other cigarette company, nor, for that matter, any business, is entitled to remove cases as if it were a federal officer merely because it is subject to federal regulation. The Court's decision will help preserve what remaining ability plaintiffs still have to choose to bring lawsuits in the forum of their choice, which for many remains the state courts.
What the Watson Case Was About
Watson started out as a case brought in an Arkansas state court seeking damages for consumers who bought "light" cigarettes made by Philip Morris -- specifically, Marlboro and Cambridge "Lights." The theory of the case was that Philip Morris violated state laws against unfair and deceptive business practices by misleadingly marketing its "low-tar" cigarettes as "lights" even though it knew that they were as bad for smokers as regular cigarettes. Among other things, the suit accused Philip Morris of manipulating the design of the cigarettes so that they would show low tar and nicotine levels when tested in accordance with the "Cambridge method" originally developed by the Federal Trade Commission, even though when actually smoked by human beings they would deliver levels of tar and nicotine comparable to regular cigarettes.
Philip Morris, like many defendants in consumer class actions, preferred to litigate in a federal rather than state court. If the suit had been filed after the effective date of the "Class Action Fairness Act" (CAFA), that would have been no problem: Philip Morris could have removed the case to federal court under CAFA because of the diversity of citizenship between class members and the company. Because that option wasn't available, Philip Morris had to get creative. What it came up with was the argument that it was entitled to remove the case to federal court under a relatively little-known law that allows federal agencies, federal officers, and persons who "act under" federal officers in carrying out official actions to remove cases brought against them in state courts to federal courts.
The Federal Officer Removal Statute
The law invoked by Philip Morris, 28 U.S.C. 1442(a)(1), had its origins during the War of 1812, when northern states that opposed the war opened their courts to lawsuits against federal customs inspectors who were enforcing the ban on trading with the enemy, Great Britain. To prevent state-court interference with the actions of federal customs officers, Congress passed a law permitting customs officers and those who assisted them in carrying out their duties to remove to federal courts cases brought against them in state courts arising out of their official actions. The law was expanded over the years to include all revenue officers, and eventually all officers and agencies of the federal government.
Historically, the classic cases invoking the law were murder prosecutions brought by the states against federal revenue officers who killed moonshiners while raiding their stills. Such cases illustrated the major justification for the law: The unpopularity of federal law enforcement operations that killed local residents made it questionable whether the officers could receive fair trials, and fair consideration of their federal immunity defenses, in state courts. A recent example of the law's application for its intended purpose occurred when the state of Idaho prosecuted FBI agent Lon Horiuchi for manslaughter as a result of the shooting of Vicki Weaver in the standoff at Ruby Ridge. Horiuchi removed the case to a federal court, where the case proceeded until the state ultimately dismissed it.
Although the law applies to civil lawsuits as well as criminal cases, a lawsuit against a cigarette company for allegedly deceptive marketing practices is obviously a far cry from a prosecution of a federal agent for actions done in the line of duty. How could the law possibly protect Philip Morris against a state-court lawsuit by smokers it deceived about the health risks of its products?
Philip Morris's Theory and the Lower Court Decisions
According to Philip Morris, what gave it the same right as, for example, FBI agent Horiuchi to move state-court cases filed against it to the federal courts was that it was acting under the direction of a federal officer in testing the tar and nicotine levels of its cigarettes -- because, according to Philip Morris, the cigarette testing procedures were developed and imposed on Philip Morris by the FTC. The FTC's supposed exercise of extensive regulatory authority over Philip Morris and other cigarette companies meant, in Philip Morris's argument, that Philip Morris was being sued for actions undertaken at the direction of the federal government.
Never mind that the FTC had never issued any regulations requiring Philip Morris to do any testing, but had merely elicited a voluntary agreement from the cigarette companies to test their products and report the results in their ads by threatening enforcement action. And never mind that Philip Morris wasn't being sued for the testing anyway, but for manipulating the design of its cigarettes and misleadingly marketing its cigarettes as "lights," which the FTC had never come close to directing Philip Morris to do. And never even mind that the federal government itself had successfully sued Philip Morris for a massive conspiracy involving the exact actions Philip Morris claimed it was directed by the government to perform.
Astonishingly, both the Arkansas federal district court and the Eighth Circuit Court of Appeals swallowed Philip Morris's argument hook, line and sinker. The Eighth Circuit not only accepted Philip Morris's one-sided and flatly incorrect historical claim that it had been the subject of an extraordinary degree of regulation by the FTC that required it to take the actions for which it was being sued, but, even more disturbingly, it became the first appellate court in the country ever to buy into the notion that an industry's mere compliance with federal regulations, no matter how extensive, put it in the same shoes as a federal officer carrying out the duties of his office.
The Supreme Court's Ruling
The plaintiffs in Watson sought review of the case by the Supreme Court, pointing out that the Eighth Circuit's unprecedented extension of the federal officer removal statute to companies that were, at most, complying with federal regulation conflicted in principle with Supreme Court and other lower court decisions interpreting the statute, as well as with the law's basic purpose. Brian Wolfman and I filed a brief on behalf of Public Citizen supporting the plaintiffs' request and pointing out that if complying with regulation were enough to allow a defendant to remove a case under the law, a host of industries that are in fact subject to much heavier regulation than cigarette makers would have free rein to remove cases filed against them in state courts to federal courts. As we pointed out, other industries, including the banking and drug industries, had already begun seeking to remove cases against them, invoking Watson.
The Supreme Court asked the federal government whether it should hear the case, and the Solicitor General responded that although the Eighth Circuit's opinion was, in the government's view, dead wrong, the issue didn't require the Court's attention. Fortunately, the Court paid more attention to the first point than the second and agreed to hear the case. Once it did so, the result was foreordained.
At the merits stage, we again filed a brief supporting the plaintiffs, joined by other consumer groups including AARP, NACA, U.S. PIRG, the Consumer Federation of California, the Congress of California Seniors, and the Public Health Advocacy Institute. The United States also supported the plaintiffs, as did Public Justice, the American Association for Justice, and the Consumer Attorneys of California, among others.
The Supreme Court's unanimous opinion roundly rejected Philip Morris's arguments and dealt a death blow to the claim that compliance with regulation could ever suffice to allow a company to invoke the federal officer removal law. As the Court explained, to "act under" a federal officer for purposes of the removal statute, a person must not only be one of the officer's subordinates, but must also be attempting "to assist, or to help carry out, the duties or tasks of the federal superior." As the Court pointed out, those who merely comply with regulations are not, in normal parlance, assisting the regulators in carrying out their duties. Thus, "the help or assistance necessary to bring a private person within the scope of the statute does not include simply complying with the law."
Interestingly, the Court was willing to accept (for purposes of argument) Philip Morris's phony assertion that it had in fact been subject to an extraordinary degree of federal regulation. In doing so, the Court actually strengthened the force of its opinion, which as a result stands for the proposition that regulation does not permit removal "even if the regulation is highly detailed and even if the private firm's activities are highly supervised and monitored." The Court stated expressly that it could not distinguish the type of regulation to which Philip Morris claimed to have been subjected from the regulation of other industries (including the drug and pesticide industries), and it rejected Philip Morris's argument partly because of its concern that accepting it would open the door to removal by "many highly regulated industries," a result the Court saw as contrary to the statute's language, intent, and history.
The Court's opinion thus nips in the bud a trend, which had already started to emerge in the short time since the lower court's decision in Watson, of regulated industries seeking to use the federal officer statute to remove tort and consumer claims against them (to the extent that removal was not already permitted by CAFA or other statutes). Just last month, for example, the Second Circuit had to address a claim that federal regulation of gasoline additives entitled oil companies to invoke the federal officer removal statute in cases brought against them for environmental contamination caused by Methyl Tertiary Butyl Ether (MTBE). Although the court rejected the claim because the companies weren't actually required to use MTBE, it felt it had to engage in a detailed analysis of the degree of federal compulsion in order to do so. After Watson, the MTBE case would be an easy one because no degree of federal regulation requiring the companies to use MTBE would entitle them to invoke the statute.
The Watson opinion leaves open one major issue under the statute: Whether or under what circumstances a federal contractor may claim the benefit of the removal statute. The Court distinguished contractors from merely regulated businesses and thus said that it didn't have to address whether contractors could remove cases under the statute. The issue is of great significance in tort claims involving Agent Orange and other injurious products sold to the military under federal contracts, and the Second Circuit will hear argument in an appeal from Judge Weinstein's decision upholding Dow's right to remove under the statute in an Agent Orange case next week. (We've also filed a brief in those cases supporting the plaintiffs.)
Consumer claims, however, generally won't involve the government contractor issue to the extent that they involve defendants who did business with the general public rather than supplying goods or services to the government. In such cases, Watson lays to rest any claim that removal is in order merely because the defendant claims that it acted under the compulsion or influence of federal regulation, and plaintiffs' choices of state courts as the fora for such cases (if they can avoid the effects of CAFA) should remain secure.