Lead Opinion
Lisа Watson and Loretta Lawson filed this interlocutory appeal, on their own behalf and as representatives of a class, from the district court’s
Watson and Lawson claim that Philip Morris engaged in “unfair business practices and/or deceptive and unlawful conduct in connection with the manufacture, distribution, promotion, marketing, and sale of Cambridge Lights and Marlbоro Lights.” They basically allege that Philip Morris designed its cigarettes to deliver more tar and nicotine to smokers than its use of the labels “lights” and “lowered tar and nicotine” in its advertising would suggest. The propriety of remand is the only issue before us, as it was in the district court, and we express no views on the merits.
Philip Morris removed the action pursuant to 28 U.S.C. § 1442(a)(1) (2000), which permits removal where a person is sued for actions taken under the direction of a federal officer. Philip Morris claims it satisfies the requirements of the federal officer statute because it was acting under the direct control of the Federal Trade Commission (FTC) when it engaged in the allegedly unlawful conduct. The district court denied Watson’s and Lawson’s motion to remand and certified the following question for interlocutory appeal under 28 U.S.C. § 1292(b): “May Philip Morris remove this lawsuit to federal court under 28 U.S.C. § 1442(a)?” Slip op. at 36. We affirm the district court’s answer of “yes” to that question.
The applicability of this removal statute depends in large part on the role the FTC plays in regulating the tobacco industry.
In the 1950s, the FTC’s policy changed from permitting some claims of “low” or “lower” tar and nicotine levels to prohibiting all such representations in advertising. The FTC wanted a uniform rating system so that consumers could compare tar and nicotine levels among brands. The FTC developed the Cambridge Filter Method, which uses a smoking machine that takes a two-second puff on a cigarette every sixty seconds until the cigarette is smoked to a specified length. Brawn & Williamson,
When the FTC proposed a trade regulation rule in 1970 that would require advertisements to disclose tar and nicotine ratings, as determined by the Cambridge Filter Method, several leading tobacco companies responded by entering into an agreement to disclose the Cambridgе Filter Method results in all cigarette advertising. The FTC accepted the agreement, which was conditioned on suspension of the formal rulemaking proceedings. Letter from Eight Tobacco Companies to FTC (Dec. 17, 1970) (“Letter Agreement”).
After twenty years of testing, the FTC decided to terminate its cigarette testing lab, and instead require the cigarette industry to self-test, using the Cambridge Filter Method, and to submit results that would continue to be published in the Federal Register. The FTC retained the right to conduct unannounced inspections of the industry testing facilities and the right to confirm the test results through a government lab.
Based upon the FTC’s involvement in the tobacco industry, the distriсt court denied Watson’s and Lawson’s motion to remand to state court. Our review of that denial is de novo. See Nichols v. Harbor Venture, Inc.,
Section 1442(a)(1) permits removal by the following:
(1) 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, sued in an official or individual capacity for any act under color of such office 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 revenue,
(emphasis added). Section 1442(a) requires that a defendant: (1) act under the direction of a federal officer; (2) show a nexus or “causal connection” between the alleged conduct and the official authority; (3) have a colorable federal defense; and (4) be a “person” within the meaning of the statute. See, e.g., Jefferson County v. Acker,
In Willingham v. Morgan,
One of the primary purposes of the removal statute-as its history clearly demonstrates-was to have such defenses litigated in the federal courts.... In cases like this one, Congress has decided that federal offices, and indeed the Federal Government itself, require the protection of a federal forum. This policy should not be frustrated by a narrow, grudging interpretation of § 1442(a)(1).
The primary purpose of giving the protection of a federal forum under this statute has a lengthy history. The broad scope of federal officer removal is explained in the early case of Tennessee v. Davis,
[I]f their protection must be left to the action of the State court,-the operations of the general government may at any time be arrested at the will of one of its members. The legislation of a State may be unfriendly. It may affix penalties to acts done under the immediate direction of the national government, and in obedience to its laws. It may deny the authority сonferred by those laws. The State court may administer not only the laws of the State, but equally Federal law, in such a manner as to paralyze the operations of the government. And even if, after trial and final judgment in the State court, the case can be brought into the United States court for review, the officer is withdrawn from the discharge of his duty during the pendency of the prosecution, and the exercise of acknowledged Federal power arrested.
See also Arizona v. Manypenny,
I.
Whether a defendant is “acting under” the direction of a federal officer depends on the detail and specificity of the
“[RJemoval by a ‘person acting under’ a federal officer must be predicated upon-a showing that the acts ... were performed pursuant to an officer’s direct orders or to comprehensive and detailed regulations.” Virden v. Altria Group, Inc.,
Although tobacco companies’ efforts at federal officer removal have not been successful in other courts, companies contracting with the government have had more success. Courts have found private actors, working under government contracts, to be acting under the direction of a federal officer where the government maintained control over the manner in which the contractor performed the contracted work or monitored the performancе of the work. Virden,
In a Fifth Circuit government contract case, Diamond Shamrock Chemical Company manufactured herbicide, now known as Agent Orange, for the government. Winters v. Diamond Shamrock Chem. Co.,
We are convinced that the government’s detailed specifications concerning the make-up, packaging, and delivery of Agent Orange, the compulsion to provide the product to the government’s specifications, and the on-going supervision the government exercised over the formulation, packaging, and delivery of Agent Orange is all quite sufficient to demonstrate that the defendants acted pursuant to federal direction and that a direct causal nexus exists between the defendant’s actions taken under color of federal office and Winters’s claims.
Id. at 399-400.
The extent of federal direction reached a similar level in Fung v. Abex Corp.,
Here, the FTC exercises the same type of comprehensive, detailed regulation and does the same kind of ongoing monitoring as in Winters and Fung. In addition to specifying a testing method that was discussed in detail in two separate submissions to chemists’ journals, the FTC modified the testing method to include the following requirements:
1. Smoke cigarettes to a 23 mm. butt length, or to the length of the filter and overwrap plus 3 mm. if in excess of 23 mm.,
2. Base results on a test of 100 cigarettes per brand, or type,
3. Cigarettes to be tested will be selected on a random basis, as opposed to “weight selection,”
4. Determine particulate matter on a “dry” basis ... to determine the moisture content,
5. Determine and report the “tar” content after subtracting moisture and alkaloids [ Qas nicotine) from particulate matter,
6. Report tar content to the nearest whole milligram and nicotine content to the nearest 1/10 milligram.
Federal Trade Commission: Testing for Tar and Nicotine Content, 32 Fed.Reg. 11,178 (Aug. 1,1967). The FTC’s specificity in testing procedures is comparable to the specificity of the government’s formula for Agent Orange.
Another example of the detail involved in the government’s directives to the tobacco industry is the specific manner in which the industry agreed to disclose the tar and nicotine ratings in advertising:
The disclosure will be in the following language:
_mg. “tar”,_mg. nicotine
av. per cigarette, FTC report (date)
Letter Agreement at 2. In Fung, the parties’ agreement included the design for submarines, and in this case the parties’ agreement included the design for testing cigarettes and disclosure of ratings. In Winters, the government controlled the delivery and labeling of Agent Orange. Here, the FTC controls the delivery of tar and nicotine information to consumers. The FTC’s ongoing monitoring of the cigarette industry far exceeds the monitoring in Winters. The government in Winters monitored one small aspect of the Agent Orange creation and distribution process— the labeling of the containers. Here, the FTC itself conducted the entire testing process for twenty years and now requires the cigarette manufacturers to conduct the testing to its specifications. The FTC continues to inspect the industry labs, independently verify the results, and publish the ratings. In addition, part of the FTC’s ongoing monitoring includes monitoring cigarette ads and occasionally bringing claims against companies for deceptive advertising.
We are satisfied that the level of specificity of the direction is more extensive than that in Winters, but the question remains whether the government compels compliance with its directions. In Winters, Diamond Shamrock was compelled to supply the Agent Orange to the government. In Fung, the defendant acted pursuant to a binding contract that gavе the government legal rights to enforce its directions. In this case, Philip Morris acted pursuant to a voluntary industry agreement. Two of the courts confronted with
We are convinced that the record in this case shows a level of compulsion that establishes that Philip Morris was indeed “acting under” the direction of a federal officer. The FTC effectively used its coercive power to cause the tobacco companies to enter the agreemеnt. The FTC made the policy decision to pursue a voluntary agreement instead of proceeding by formal rulemaking. The tobacco industry first proposed an agreement on October 23, 1970, which was just over two months after the FTC announced an intention to make a formal rule requiring disclosure of the Cambridge Filter Method tar and nicotine ratings. This “voluntary agreement” was a substitute for a formal rule. The industry almost certainly would not have proposed the agreement if the FTC had not threatened to make a formal rule. Though the FTC did not act formally, the effect of its actions still compelled the tobacco companies to adhere to a testing and advertising standard that was prompted by the FTC. The FTC agreed with the industry that a voluntary agreement was preferable to the formalities of rulemaking.
FTC Chairperson Miles W. Kirkpatrick explained how an agreement would best serve the goals of the FTC:
The Commission’s objective is to insure that all cigarette advertising make these tar and nicotine disclosures as soon as possible. If the industry can devise a voluntary plan that is feasible and appropriate, the Commission is willing to consider it. A trade regulation rule, if contested in the courts, might take a long time to become effective; a workable, voluntary plan by the industry could be put into effect immediately.
Press Release, FTC (Oct. 1,1970).
Daniel Oliver, Chairman of the FTC in 1987, explained that the FTC’s practice in advertising regulation was moving more toward agreements and away from rule-making, which had proved to be inefficient, “little used and not terribly successful.” Bringing a single case against one cigarette company would have the effect of bringing the whole industry into compliance and would do so much more quickly than would a formal rulemaking process. As a result, voluntary agreements have become part of a general trend in administrative law, and the tobacco industry has responded to that trend with cooperation.
Even if the companies had not been compelled to enter the agreement originally, after the companies entered the agreement, the FTC has enforced compliance with the agreement. The FTC’s comments suggest it would bring an action for deceptive advertising or reinstitute formal rulemaking proceedings if a company did not disclose the tar and nicotine ratings. Though one could call the agreement voluntary, the reality is that the cigarette companies have included the Cambridge Filter Method results in their cigarette advertising for over thirty years. The main difference between a formal rule and an agreement is that the FTC enforces the disclosure of the Cambridge Filter Method’s results by bringing an action against the company for deceptive advertising rather than directly enforcing a regulation.
The FTC has made it clear it has not found any.other testing method adequate and will consider advertising to be “deceptive” if it deviates from the Cambridge Filter Method. In an advisory opinion rejecting one company’s offer to advertise a tar level higher than the most recent Cambridge Filter method results, the FTC explained that consumers could be confused if a company were to advertise tar levels that differed from the published Cambridge Filter Method results. In re Lorillard,
In comparison, the government contract in Fung was not compelled and could be considered a “voluntary agreement” and yet was certainly enforceable once entered. Similarly, in the Agent Orange case, Diamond Shamrock chose to participate in the herbicide industry and was already manufacturing herbicide with some of the components of Agent Orangе before it was compelled to turn over its Agent Orange to the government. See Winters,
We have been instructed by the Supreme Court to interpret this removal statute broadly, to give effect to its purpose. See Colorado v. Symes,
The FTC involved itself in the tobacco industry to an unprecedented extent. Throughout the record, there were several indications that both developing a testing method and carrying out the testing evidenced an unusually high level of governmental participation and control. Deputy Director of the Bureau of Consumer Protection of the FTC, C. Lee Peeler, could not recall any other instance where the
The record is filled with FTC announcements of its policy as well as communications between the FTC and the cigarette industry, which show comprehensive and detailed control. The record establishes that Philip Morris acted under the direction of a federal officer.
II.
For federal officer removal there must be a “causal connection” that links the federal officer’s direction and control to the acts challenged in the plaintiffs complaint. It must be shown that “the acts that form the basis for the state civil or criminal suit were performed pursuant to an officer’s direct orders or to comprehensive and detailed regulations.” Virden v. Altria Group,
The complaint in Tremblay v. Philip Morris,
The allegations of the complaint in Paldrmic also focused narrowly on the manufacture and design of the cigаrettes. “Although the Cambridge System is deeply intertwined with plaintiffs allegations, the gravamen of his lawsuit is that defendant, fully aware that it had agreed to communicate tar and nicotine test results within certain parameters, designed and manufactured its product so as to use the test to mask the truth about its product.”
In this case, Watson and Lawson challenge more than just the cigarette design. They also challenge Philip Morris’s “marketing and promoting” of low tar and nicotine cigarettes, its “reрresentations,” and its alleged deception of consumers. Thus, in part, their complaint challenges Philip Morris’s advertising. It cannot seriously be argued that the FTC does not direct and control the advertising of cigarettes. This Court must look at the FTC’s regulation of cigarette advertising because the conduct Watson and Lawson challenge includes cigarette advertising.
Here, Watson and Lawson claim that Philip Morris’s use of low tar descriptors such as “lights” or “lowered tar” are deceptive or misleading because the actual tar and nicotine delivered to the smoker is much higher than the FTC results communicate to smokers. The FTC defines “low tar” as 15.0 mg. or less tar.
In 1971, the FTC and American Brands, Inc. entered into a consent order based upon a complaint the FTC issued. There, the FTC explained its view of how the use of certain descriptors could constitute deceptive advertising — it would be deceptive to use descriptors like “low,” “lower,” “reduced,” or other qualifying terms unless the tar and nicotine levels were also stated. The tar and nicotine levels were to be measured by “the testing method employed by the Federal Trade Commission,” which is the Cambridge Filter Method. Watson and Lawson claim it is deceptive for Philip Morris to use a low tar descriptor in conjunction with its cigarettes’ FTC rating. The very combination Watson and Lawson challenge as deceptive is the same combination the FTC requires to not be deceptive. Whether Philip Morris’s labeling of cigarettes as “lights” is deceptive directly implicates the enforcement and wisdom of the FTC’s tobacco policies.
It is not as if Watson and Lawson discovered new designs by Philip Morris that the FTC did not contemplate when it required the disclosure of test results. The FTC was well-aware of the limitations of the Cambridge Filter Method. In 1977, the FTC solicited public comment on a problem similar, if not identical to, some of Watson’s and Lawson’s claims in this case. The FTC studied how the placement of ventilation holes in cigarettes affected their tar and nicotine ratings. If vent holes were covered by the smoking machine’s cigarette holder, but open when smoked by a person, then less tar and nicotine would pass through the cigarette to the smoker than the ratings reflected. Conversely, if the smoker covered vents that the machine’s cigarette holder left open, more tar and nicotine would pass through the cigarette to the smoker than the ratings reflected.
The FTC was fully aware that the placement of ventilation holes near the tip of the cigarette complicated the comparability of the tar and nicotine ratings among different brands. The same problem reemerged in the early 1980’s when Brown and Williamson developed the Barclay brand, which had ventilation channels instead of ventilation holes. Although the FTC recognized these problems and solicited comment on them, the FTC ultimately chose to continue using the Cambridge Filter Method.
Watson and Lawson challenge the FTC’s policy judgment that despite the failure of the Cambridge Filter Method to take into account ventilation holes or channels, the test results should still be included in advertising, even if alongside “light” descriptors, to prevent deception. In contrast, Watson and Lawson claim that this grоuping of test results and descriptors renders advertising deceptive. Their claims are sufficiently related to the FTC’s direct and comprehensive control to establish a causal connection.
III.
The final two requirements for removal under 28 U.S.C. § 1442(a) are that Philip Morris must present a “colorable federal defense” and that it must be a “person” within the meaning of the statute. To satisfy the requirement of a colorable federal defense, Philip Morris pleaded that Watson’s and Lawson’s state law claims were preempted by Section Five of the Federal Cigarette Labeling and Advertising Act. Philip Morris’s Notice of Removal cites Geier v. American Honda Motor Co.,
In their brief before this Court Watson and Lawson state, “For the purposes of the Remand Motion only, Plaintiffs do not contest ... whether the federal preemption defense it had raised sufficed as a ‘colorable’ federal defense.” Watson and Lawson argue only that Philip Morris failed at a minimum to demonstrate that it acted under the direction of a federal officer, or to show a causal nexus between plaintiffs’ claims and the acts of Philip Morris, allegedly performed under the col- or of a federal office.
Although we are required to review the requirement of a colorable federal defense for jurisdictional purposes, the threshold is quite low. We do not require the defendant to “win his case before he can have it removed.” Willingham v. Morgan,
The fourth requirement for federal officer removal is that the party must be a “person” within the meaning of the statute. Several courts hаve concluded that a corporation can be a “person” within the requirements of federal officer removal. See Ryan v. Dow Chem. Co.,
We affirm the district court’s order denying remand and finding removal proper under section 1442(a).
Notes
. The Honorable G. Thomas Eisele, United States District Judge for the Eastern District of Arkansas.
. See Federal Trade Comm’n v. Brown & Williamson Tobacco Corp.,
. "[W]e cannot force a company to use nor can we approve in advance the kind of testing a company uses. We can make sure that the testing a company uses is an accurate test, especially as that accuracy relates to the FTC method.” MacLeod testimony. See FTC v.
. The FTC additionally stated that “the public interest requires that all test results presented to the public be based on a uniform method used by all laboratories” because ”[u]se of more than one testing method ... would only serve to confuse or mislead the public.” News Release, FTC (Aug. 1, 1967). It added that “statements or representations based on non-standardized tests having no official or governmental sanction would tend to confuse and mislead the public.” Letter from FTC secretary Joseph W. Shea to Howard Bell (Oct. 25, 1967).
. The FTC recognized that cigarette manufacturers have also used the term "ultra low tar” for cigarettes containing 1.0 — 5.0 mg. tar, but the FTC has not formally defined that term.
Concurrence Opinion
concurring.
I fully concur in the court’s opinion and judgment. I write separately to emphasize that our decision today should not be construed as an invitation to every participant in a heavily regulated industry to claim that it, like Philip Morris, acts at the direction of a federal officer merely because it tests or markets its products in accord with federal regulations. I believe that in most instances, a contract, principal-agent relationship, or near-employee relationship with the government will be necessary to show the degree оf direction by a federal officer necessary to invoke removal under 28 U.S.C. § 1442(a)(1). See Virden,
In this case, as the court’s opinion makes clear, the FTC’s direction and con
With these observations, I join the court’s opinion and judgment.