Opinion
CASE NO. 4:03-CV-519 GTE
December 12, 2003
MEMORANDUM OPINION AND ORDER
Before the Court is the Plaintiffs' Motion to Remand, to which the Defendants have responded. For the reasons provided herein, the Plaintiffs' Motion will be denied.
I. Procedural Background
Plaintiffs filed this action on April 18, 2003 in the Circuit Court of Pulaski County, Arkansas, Sixth Division. On May 29, 2003, Plaintiffs filed an Amended Complaint. On June 3, 2003, Defendants were served. Defendants removed the action to this Court on July 2, 2003. Plaintiffs filed the instant Motion for Remand on August 1, 2003. The Court has also received and reviewed the Defendants' Memorandum in Opposition, filed on August 20, 2003; the Plaintiffs' Reply Memorandum, filed on September 12, 2003; the Defendants' Supplemental Memorandum, filed on November 18, 2003; and the Defendants' letter of November 19, 2003 submitting additional exhibits (66-71). Oral argument was conducted on November 20, 2003.
Plaintiffs are smokers who have consumed approximately one pack of Marlboro Lights or more over at least the past six years. They allege that Philip Morris violated the Arkansas Deceptive Trade Practices Act, Ark. Code Ann. § 4-88-107 et seq., by deceptively marketing cigarettes as "lighter," or lower in tar. The essence of Plaintiffs' complaint is that Philip Morris advertised their cigarettes as light despite the fact that the cigarettes conveyed more tar and nicotine to smokers than shown by the Federal Trade Commission ("FTC") testing method, known as the Cambridge Filter Method. The Plaintiffs' First Amended Complaint, filed in Pulaski County Circuit Court, states in pertinent part:
Throughout this opinion, the Court's reference to "Philip Morris" refers to Defendants Philip Morris Companies, Inc. and Philip Morris Incorporated jointly. The Court notes that Defendants' Supplemental Memorandum styles the case as "Watson, et al. v. Altria Group, Inc., et. al." However, neither party has filed any amendment inserting Altria Group, Inc. as a Defendant.
The "Cambridge Filter Method" is often referred to as the "FTC Method." The terms are used interchangeably in this Order.
9. While marketing and promoting decreased tar and nicotine deliveries, Defendants designed Cambridge Lights and Marlboro Lights to register lower levels of tar and nicotine on the "Cambridge" or "Ogg" testing apparatus — the testing machine used by the tobacco industry to "measure" tar and nicotine levels in cigarettes — than would be delivered to the consumers of the product. Defendants controlled the tar and nicotine delivery of Cambridge Lights and Marlboro Lights cigarettes under machine testing conditions apparently to achieve support for their representations that their Cambridge Lights and Marlboro Lights cigarettes are "light" and contain decreased tar and nicotine and that their Marlboro Lights cigarettes contain "lowered tar and nicotine."
10. Defendants representations that Cambridge Lights and Marlboro Lights cigarettes are "lighter" (ie: lower tar and nicotine) than regular cigarettes are deceptive and misleading and constitute unfair business practices.
11. Not only do consumers receive higher levels of tar and nicotine than the testing apparatus registers, but the smoke produced by Cambridge Lights and Marlboro Lights is more mutagenic (causing genetic and chromosomal damage) per milligram of tar than `regular' cigarettes.
12. Defendants engaged in a common course of unfair business practices and/or deceptive and unlawful conduct in connection with the manufacture, distribution, promotion, marketing, and sale of Cambridge Lights and Marlboro Lights cigarettes by:
a. Falsely and/or misleadingly representing that their product is "light" and/or delivers lowered tar and nicotine in comparison to regular cigarettes;
b. Describing the product as light when the so-called lowered tar and nicotine deliveries depended on deceptive changes in cigarette design and composition that dilute the tar and nicotine content of smoke per puff as measured by the industry standard testing apparatus, but not when used by the consumer;
c. Intentionally manipulating the design and content of Cambridge Lights and Marlboro Lights cigarettes in order to maximize nicotine delivery while falsely and/or deceptively claiming lowered tar and nicotine. These manipulations include, but are not limited to, the modification of tobacco blend, weight, rod length, and circumference; the use of reconstituted tobacco blend, weight, rod length, and circumference; the use of reconstituted tobacco sheets and/or expanded tobacco; and the increase of smoke pH levels by chemical processing and additives, such as ammonia, which resulted in the delivery of greater amounts of tar and nicotine when smoked under actual conditions than Defendants represent by use of the "light" description;
d. Employing techniques that purportedly reduce machine-measured levels of tar and nicotine in Cambridge Lights and Marlboro Lights cigarettes, while actually increasing the harmful biological effects, including mutagenicity (genetic and chromosomal damage) caused by the tar ingested by the consumer per milligram of nicotine.
13. Through longstanding fraudulent and unfair conduct, Defendants willfully deceived consumers, including the Plaintiffs named herein, regarding the nature and effect of their "light" cigarettes.
Plaintiffs further indicate in their First Amended complaint that they seek class action status, with the class to include all persons who purchased Cambridge Lights and Marlboro Lights cigarettes in Arkansas for personal consumption since those cigarettes were first sold in the state.
Defendants contend that this court has jurisdiction under 28 U.S.C. § 1442 (a) because Philip Morris is "a person acting under" the direction of an officer of the United Stales for purposes of cigarette testing and advertising. Defendants also argue that federal question jurisdiction under 28 U.S.C. § 1331 is appropriate because Plaintiffs' complaint, though premised on the Arkansas Deceptive Trade Practices Act, necessarily implicates the FTC's cigarette testing and advertising requirements, including the accuracy of the Cambridge Filter Method. Plaintiffs argue that federal jurisdiction is not appropriate under either § 1442 or § 1331 because their allegations center on Philip Moms' deceptive advertising, not the faults of the Cambridge Filter Method. The Court concludes, for the reasons stated below, that it has jurisdiction under 28 U.S.C. § 1442 (a)(1). Therefore, the Court will not address removal pursuant to 28 U.S.C. § 1331.
II. Factual, Statutory, and Regulatory Background
The FTC's jurisdiction over advertising and testing of tar and nicotine content of cigarettes is premised on the Federal Trade Commission Act. Title 15 U.S.C. § 45 (a) of the Act declares unlawful "unfair methods of competition in or affecting commerce and unfair and deceptive acts or practices in or affecting commerce." Section 45(a) also grants the FTC broad authority to prevent such unfair and deceptive acts, including unfair and deceptive advertisements for products such as tobacco. See Federal Trade Commission v. Brown Williamson Tobacco Corp., 778 F.2d 35, 40 n. 2 (D.C. Cir. 1985).
Judge Bork discussed the FTC's regulation of the advertising of tar and nicotine content claims in the following excerpt from Brown Williamson:
Since at least the mid-1950's the FTC has been concerned about the validity of tar and nicotine content claims in cigarette advertising. In 1955 the Commission published cigarette advertising guides advising manufacturers to make no representations about the tar and nicotine content of a cigarette that could not be supported with reliable scientific evidence. By the mid-1960's the FTC became concerned about the absence of a standard method for testing cigarette delivery of tar and nicotine. Accordingly, in 1967 the Commission adopted a testing method and began a program to analyze the tar and nicotine levels of each brand of cigarettes sold in the United States.
The test adopted by the FTC is known as the Cambridge Filter Method and is used with minor variations throughout the world. The test utilizes a smoking machine that takes a 35 milliliter puff of two seconds' duration on a cigarette every 60 seconds until the cigarette is smoked to a specified butt length. The tar and nicotine collected by the machine is then weighed and measured. This provides an objective basis for assessing the relative amounts of tar and nicotine different cigarettes will deliver when they are smoked in the same way. The test does not measure the amount of tar or nicotine that any individual smoker may receive since that quantity will depend on individual smoking behavior.
In 1970, the FTC proposed a formal rulemaking in order to promulgate a Trade Regulation Rule requiring disclosure of FTC tar and nicotine ratings in cigarette advertising. Immediately following this proposal, five leading cigarette companies, including B W, agreed among themselves to a voluntary disclosure plan (the "1970 agreement"). This plan provided that the cigarette manufacturers would disclose the tar and nicotine figures in all advertising for their cigarettes according to the most recently published Commission test results. Upon accepting the 1970 agreement, the FTC indefinitely suspended its rulemaking proceeding.Brown Williamson, 778 F.2d at 36-37. The FTC's proposed rule was published in the Federal Register. See Proposed Rule Making by the Federal Trade Commission Regarding Advertising of Cigarettes, 35 Fed. Reg. 12671 (August 8, 1970). The voluntary agreement itself was reflected in a letter to the FTC signed by eight cigarette manufacturers, including Philip Morris. That letter states:
In accordance with the Commission Press Release of October 1, 1970, each of the undersigned companies which manufactures, or is a primary distributor of, varieties of cigarettes which are presently advertised, and any of its subsidiaries similarly engaged, is writing to set forth a voluntary program for the disclosure of "tar" and nicotine in its paid consumer-directed cigarette advertising in the United States placed by each of the undersigned companies.
Under this program, each company will disclose clearly and prominently for the variety of cigarettes advertised the values for "tar" in milligrams and for nicotine in tenths of a milligram contained in the Federal Trade Commission published test results, under its present methodology, in all advertising newspapers, magazines, and other periodicals published and distributed in the United States. . . . Each of these advertisements will include the "tar" and nicotine data, as rounded off by the Federal Trade Commission, from the Commission test results most recently published in the Federal Register. . . . Necessarily, the carrying out of this voluntary program is predicated upon the Commission continuing to test the advertised varieties of cigarettes and to publish its results in the Federal Register at regular and periodic intervals of not more than six months. . . . Each of these companies is confident that the program presented, which they intend to begin thirty working days after the Commission has considered it in lieu of any formal Trade Regulation Rule proceeding and hearing, constitutes a plan that is feasible.See Defendants' exhibit 66, Letter from Ross R. Millhiser, President, Philip Morris, U.S.A., et. al. to Federal Trade Commission (December 17, 1970).
As the FTC recently stated, the voluntary agreement "remains in effect today, and it forms the basis for current disclosure of tar and nicotine yield." See Cigarette Testing; Request for Public Comment, Federal Trade Commission, 62 Fed. Reg. 48158, 1997 WL 563104 (February 12, 1997). The FTC itself tested cigarettes in its own lab using the Cambridge Filter Method until 1987. Id. Lee Peeler, an employee of the FTC since 1973, testified in a Rule 30(b)(6) deposition in the case of United States v. Philip Morris, Inc., then pending in the District of Columbia Federal District Court, regarding the approximately twenty year period in which the FTC tested cigarettes in its own lab:
A. The point I was trying to make is that the . . . operation of the cigarette lab was really something that was unique and . . . was designed to prevent a certain type of deception, but . . . as we said when we closed the lab it was unusual for a program like that to be maintained by the Commission.
Q. Right. We're going to talk about that specifically. There are other industries that run testing and it was unusual for the Commission itself to be running the testing for the cigarette industry, right?
A. It is both unusual for the Commission to be running the testing and to be the agency that specified the testing methodology because . . . I can't recall any other instances where the FTC itself specifies the testing methodology. . . . .
Q. Okay, Now I think you testified earlier that having the FTC run the testing lab is unusual.
A. Among government programs it seems very unusual to have an agency actually doing the testing for an industry.See Defendants' Exhibit 70, Deposition of C. Lee Peeler, Deputy Director of the Bureau of Consumer Protection of the FTC, pp. 96-97, taken in connection with United States v. Philip Morris, Case No. 99-CV-02496 (D. D.C. July 30, 2002).
In 1987, the FTC closed its testing lab, but required manufacturers, including Philip Morris, to continue testing cigarettes using the Cambridge Filter Method. See Cigarette Testing; Request for Public Comment, Federal Trade Commission, 62 Fed. Reg. 48158, 1997 WL 563104. Responsibility for conducting the testing was transferred to the Tobacco Institute Testing Lab ("TITL"), and the voluntary agreement was modified to reflect the change. See Defendants' Exhibit 67, Letter from John P. Rupp, counsel to TITL, to Judith P. Wilkenfield, Program Adviser, Cigarette Advertising and Testing, Federal Trade Commission dated June 30, 1987; see also Cigarette Testing, 62 Fed. Reg. 48158. Although TITL is an industry funded lab, the FTC retains the authority to inspect the lab. Id; see also Defendants' exhibit 70, Peeler Deposition at 201. An FTC contractor and former director of the FTC laboratory has unrestricted access to the TITL laboratory to monitor and review the testing process. See Defendants' Exhibit 20, Federal Trade Commission, Tar, Nicotine, and Carbon Monoxide of the Smoke of 1206 Varieties of Domestic Cigarettes for the Year 1994 (1997). Additionally, the FTC requires cigarette manufacturers, by "compulsory process" to provide results of TITL testing for all cigarettes to the FTC. See Cigarette Testing, 62 Fed. Reg. 48158; see also Peeler Deposition at 202. The results obtained by the FTC are published annually in the Federal Register.
TITL had been testing cigarettes under the Cambridge Filter Method prior to the transfer of authority in 1987. See Peeler Deposition at 198. The TITL lab and the FTC lab had collaborated to ensure accuracy of test results. Id. The FTC considered the uniformity between TITL's testing results and the FTC lab's testing results in abolishing the FTC lab and transferring sole testing authority to TITL. Id.
The FTC recently described the FTC Method in a request for public comment published in the Federal Register:
Thus, although some changes have been made, the modified Cambridge Filter Method adopted by the Commission in 1967 remains essentially in place today. The Commission's test method was not designed `to determine the amount of `tar' and nicotine inhaled by any human smoker, but rather to determine the amount of tar and nicotine generated when a cigarette is smoked by a machine in accordance with the prescribed method.' The purpose of the program was to provide smokers seeking to switch to lower tar cigarettes with a single, standardized measurement with which to choose among the existing brands. This goal was consistent with the then-consensus of the scientific community that lower tar and nicotine cigarettes should be less harmful than higher tar and nicotine brands.See Cigarette Testing; Request for Public Comment, Federal Trade Commission, 62 Fed. Reg. 48158. (February 12, 1997).
In addition to mandating the disclosure of tar and nicotine values under the FTC Method in all cigarette advertising, the FTC permits a manufacturer to advertise a cigarette as "low tar" or "light" if a cigarette's tar value under the FTC Method is 15.0 mg or less. As with disclosure of tar and nicotine values under the FTC Method, no formal rule permitting descriptors such as "light" or "low tar" was ever promulgated. However, the FTC has, in a variety of advisory opinions and proceedings, expressed its view that cigarette companies engage in deceptive advertising in violation of the Federal Trade Commission Act when they advertise cigarettes as "light" or "low tar" without publishing Cambridge Filter Method test results that reflect that the cigarettes are, in fact, "low tar."
The FTC stated in Reports to Congress for 1979 and 1980 that it defined "low tar" as 15.0mg or less of tar under the Cambridge Filter Method. See Defendants' Exhibits 55 and 56, Federal Trade Commission, Report to Congress, Pursuant to the Federal Cigarette Labeling and Advertising Act, For the Years 1979 and 1980, n. 8, n. 11; but see Cigarette Testing, Request for Public Comment, Federal Trade Commission, 62 Fed. Reg. 48158 (February 12, 1997) (stating that the FTC had never defined "low tar"). The FTC has not formally defined other descriptors, such as "ultra low tar," but that term is generally understood to mean 6 mg or less of tar and nicotine. Id.
In 1971, the FTC issued a complaint against American Brands, Inc. for advertising cigarettes as "lower in tar" without disclosing Cambridge Filter Method tar ratings. In the Matter of Am. Brands, 79 F.T.C. 255, 258-259 (1971). As a result of that complaint, the FTC and American Brands, Inc. entered into a consent order requiring American Brands to cease advertising its cigarettes as low tar without clearly disclosing FTC Method tar ratings. Id. In 1978, the FTC issued an advisory opinion to Lorillard, another cigarette manufacturer. See In re Lorillard, 92 F.T.C. 1035 (1978); see also Defendants' Exhibit 70, Peeler Deposition at 470. That opinion stated the Commission's view that it would be deceptive to advertise a cigarette tar figure that differed from that obtained using the FTC method. Id.
In 1981, the FTC began an investigation of Brown and Williamson, manufacturer of Barclay cigarettes, for advertising cigarettes as " 1 mg tar, .2 mg nicotine by the FTC method." See FTC v. Brown Williamson, 778 F.2d 35, 37 (D.C. Cir. 1985). The FTC first concluded that the method did not accurately measure the tar content of Barclay cigarettes, and attempted to require Barclay advertisements to state an estimated tar content of 3 to 7 mg. of tar. Id. at 38. Barclay refused, but revised its advertisements to state that the 1 mg tar content was produced using a method recognized by independent laboratories, not the FTC. Id. The FTC filed suit in Federal District Court seeking an injunction to prevent Brown and Williamson from continuing to advertise Barclay cigarettes in a false and deceptive manner in violation of § 45(a) of the Federal Trade Commission Act. Id. The District Court granted injunctive relief, which the District of Columbia Court of Appeals eventually curtailed on First Amendment grounds. Id. See further discussion infra.
The FTC again challenged a cigarette manufacturer's "low tar" advertising in 1994 when it contested American Tobacco's claim that consumers would get less tar by smoking 10 packs of Carlton cigarettes than by smoking a single pack of the other brands. The FTC found these advertisements deceptive, and entered into a consent agreement with American Tobacco prohibiting the ads.
Despite the FTC's pursuit of companies that did not disclose FTC Method test results with their "light" advertisements, the FTC acknowledged flaws in the FTC Method on several occasions. In 1977, the FTC evaluated the FTC Method's ability to measure tar delivery to human smokers when cigarettes are designed with ventilation holes. Ventilation holes, like the various cigarette design components that Plaintiffs allege Philip Morris uses, cause smokers that smoke in certain ways to receive a higher amount of tar and nicotine than is reflected in the FTC Method's ratings. After investigating, the FTC directed that the FTC Method would not be changed. In 1981, the FTC evaluated the Cambridge Filter Method's inability to measure the tar and nicotine content of Barclay Cigarettes. See Brown Williamson, 778 F.2d at 37. Other cigarette manufacturers, including Philip Morris, complained to the FTC that the ventilation system in Barclay cigarettes produced a lower tar rating under the FTC Method, but produced much higher tar when smoked by actual humans. Id. at 37. Although the FTC concluded in 1982 that the FTC Method did not accurately measure Barclay cigarettes, the FTC continued to mandate that all cigarettes other than the Barclay be tested according to the method. Id. at 38. The FTC also continued to evaluate the FTC Method after the Brown Williamson decision. An FTC official acknowledged this evaluation, when she stated:
Since the Brown Williamson decision, the Commission has conducted an ongoing review of the cigarette testing methodology that, among other things, has examined possible ways to measure the effects of compensatory smoking, but to date no cigarette company, scientific agency or health group has offered a viable alternative to the present testing system.See Defendants' Exhibit 33, Letter from E. Rock to Hon. T.A. Luken (June 17, 1988). The Cambridge Filter Method remained mandatory for all cigarettes but Barclay. See Brown Williamson, 778 F.2d at 37.
In 1997, the FTC solicited public comment on proposed ways to alter the FTC Method and to change cigarette advertising to better reflect the method's inability to measure the tar and nicotine actually conveyed to smokers. See Cigarette Testing; Request for Public Comment, Federal Trade Commission, 62 Fed. Reg. 48158 (February 12, 1997). The request for public comment summarized the history of the Method and its regulation by the FTC. Id. The FTC first acknowledged that the voluntary agreement that bound cigarette manufacturers to disclose FTC Method results formed the basis for the FTC's annual, compulsory demand for cigarette tar and nicotine ratings. Id. The request went on to summarize current concerns about the FTC Method:
Changes in cigarette design and increased knowledge about human smoking behavior have highlighted the limitations of the existing test method. In particular, research indicates that smokers switching to cigarettes at the lower end of the range of machine measured nicotine yields tend to take larger and more frequent puffs to satisfy their need for nicotine. This compensatory smoking behavior substantially reduces the informative value of the current ratings. As a result, public and private health groups and others have questioned the usefulness of the FTC ratings over the past few years, suggesting that they may mislead consumers with respect to the relative risks of smoking cigarettes with various levels of tar and nicotine ratings.
The Commission has been especially concerned that some consumers may believe that the existing machine measured yields are literal indicators of how much tar and nicotine they will get from particular brands of cigarettes. To the extent that smokers interpret current tar and nicotine disclosures in this manner, they may fail to understand that the amount of tar and nicotine they get from a cigarette depends in part on how that cigarette is smoked. In addition, smokers-especially those who engage in compensatory smoking — may underestimate the risk associated with lower rated brands by assuming that a very low tar yield necessarily translates into a correspondingly low health risk. In fact, even the lowest rated cigarette represents an important adverse health risk. . . .
The FTC protocol was based on cursory observations of human smoking behavior. Actual human smoking behavior is characterized by wide variations in smoking patterns which result in wide variations in tar and nicotine exposure. Smokers who switch to lower tar and nicotine cigarettes frequently change their smoking behavior which may negate potential health benefits.
Cigarette Testing, 62 Fed. Reg. 48158. The request for comment also cites several changes to the FTC Method proposed at a conference held by the National Cancer Institute at the request of the FTC, and requests comments on ways to improve communication of the FTC Method ratings through advertising. Id. In addressing the weaknesses of the current advertising requirements, the Commission commented:
Finally, the Commission considered keeping the current unitary rating system and adding disclosures warning smokers that the amount of tar and nicotine they get will vary depending on how a cigarette is smoked. This plan has the advantage of avoiding the costs and complexities involved in moving to a two-tier system. It would emphasize the artificial nature of the smoking machine measurements and the fact that ratings produced by machines do not indicate what smokers actually get from their cigarettes. The advertising disclosure, along with appropriate education efforts, could potentially inform smokers about compensation and ways to avoid it. The Commission believes, however, that unitary ratings will be less effective than a range of ratings in communicating to smokers the variability in potential smoke ingestion.
The Commission is seeking comment on the desirability and feasibility of these alternative approaches to revising the test method.Id.
In 1998, the FTC informed Senator Frank Lautenberg, in response to his letter inquiring as to the status of the proposed changes, that the FTC was still evaluating problems with the Cambridge Filter Method. See Defendants' Exhibit 63, FTC News (Nov. 24, 1998). Finally, Defendant's counsel reported to this Court at oral argument that the FTC continues to evaluate the Cambridge Filter Method at the present time, but has not yet adopted any other testing procedure or any substantial changes to the Method. Additionally, Peeler testified in his deposition that the FTC had not come to a final determination as to whether to keep, abandon, or revise the Method. See Defendants' Exhibit 70, Peeler Deposition at 367, 587.
As the Peeler deposition and the FTC's 1997 request for public comment make clear, the voluntary agreement of 1970 remains in place and the FTC continues to ensure compliance with that agreement by inspecting the TITL testing facility, compelling cigarette manufacturers to disclose tar and nicotine ratings for all cigarettes both to the FTC and in all advertisements, and publishing tar and nicotine figures in the Federal Register.
III. Discussion
Ordinarily, the Court may only accept a case upon its removal from a state court if the lawsuit is one that could have been originally brought in federal court. See 28 U.S.C. § 1441. For example, removal is appropriate in federal question cases, that is, cases arising under the Constitution, laws or treaties of the United States, because Federal Courts have original jurisdiction over those cases under 28 U.S.C. § 1331. In the typical § 1331 situation, the well-pleaded complaint rule provides that a civil action arises under federal law only when the plaintiff's well-pleaded complaint raises issues of federal law. See Crews v. General American Life Ins. Co., 274 F.3d 502, 504-05 (8th Cir. 2001). As a general rule, a federal defense will not give rise to federal question jurisdiction. See Caterpillar, Inc. v. Williams, 482 U.S. 386, 392(1987).
The federal officer removal statute, 28 U.S.C. § 1442, provides an exception to the general rule. This statute "serves to overcome the `well-pleaded complaint rule' which would otherwise preclude removal even if a federal defense were alleged." See Mesa v. California, 489 U.S. 121, 136 (1989). "The right to removal [under § 1442] `is made absolute whenever a suit in a state court is for any act under color of federal office, regardless of whether the suit could originally have been brought in federal court.'" See United States v. Todd, 245 F.3d 691, 693 (8th Cir. 2001) (quoting Willingham v. Morgan, 395 U.S. 402, 406 (1969)).
A. Standard for Removal based on Federal Officer Jurisdiction
28 U.S.C. § 1442 (a)(1) provides:
(a) A civil action or criminal prosecution commenced in a State court against any of the following may be removed by them to the district court of the United States for the district and division embracing the place where it is pending:
(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 . . .Id. In Mesa, the United States Supreme Court set forth a three-part test for determining whether § 1442(a)(1) is applicable. To remove under § 1442(a)(1), a defendant must: (1) have acted under the direction of a federal officer; (2) raise a "colorable" federal defense to the plaintiffs' claims and (3) demonstrate a causal nexus between plaintiffs' claims and the acts Defendant performed under color of federal office. Mesa, 489 U.S. at 124-25. A defendant must also be a "person" within the meaning of § 1442(a)(1).
The Plaintiffs do not dispute that both of the Defendant corporations are "persons" within the meaning of § 1442(a)(1). See Ryan v. Dow Chem. Co., 781 F. Supp. 934 (E.D.N.Y. 1992) (Holding a corporation to be a person within the statute and noting that "a corporation could be engaged in activities that amount to the implementation of federal policy under the direction of a government officer.") They also do not dispute that the federal preemption defense raised by the Defendants is a "colorable" claim to a federal defense. See United States v. Todd, 245 F.3d 691, 693 (8th Cir. 2001) ("For a defense to be considered colorable, it need only be plausible; § 1442(a)(1) does not require a court to hold that a defense will be successful before removal is appropriate"). Plaintiffs, however, do contest whether Philip Morris was acting at the direction of a federal officer and whether a causal nexis exists between Philip Morris and the FTC regarding the testing and marketing of "light" cigarettes.
The Court notes the case of U.S. v. Philip Morris, in which the District Court for the District of Columbia held that FTC jurisdiction over cigarette advertising, marketing, promotion and warning claims did not prevent the government from bringing civil Racketeer Influenced and Corrupt Organizations Act (RICO) claims against several cigarette manufacturers for a wide range of actions involving deceptive advertising. See U.S. v. Philip Morris, 263 F. Supp.2d 72 (D. D.C. 2003). The Court would consider this case in ruling on the merits of Defendants' preemption defense, but does not believe that U.S. v. Philip Morris prevents Defendants' preemption defense from being "colorable."
The "person acting under" element and the causal nexis element tend to converge into a single issue: whether the actions that form the basis of the state suit were performed pursuant to comprehensive and detailed federal government regulation. See Ryan v. Dow Chem. Co., 781 F. Supp. at 947. Participation in an industry regulated by the federal government is insufficient alone to support removal. There must also be detailed and specific involvement by the federal government. Id. If direct and detailed regulation does exist, the Defendant must have been following that federal direction in performing the actions that form the basis of the lawsuit. Id. To determine whether Philip Morris acted under the direction of a federal officer, the Court must decide whether the FTC's regulation of cigarette testing and advertising constitutes the direct and detailed control required to invoke § 1442(a)(1) jurisdiction and whether the manner in which Philip Morris tested and advertised Malboro Lights and Cambridge Lights was directed by the FTC.
Several courts have addressed the level of regulation necessary for a private person or corporation to act under the direction of a federal officer. In many of these cases, courts have evaluated whether government contractors had sufficiently detailed contact with the contracting agency to allow federal officer removal. In Crackau v. Lucent, 2003 WL 21665135 (D. N.J. June 25, 2003), radar technicians and operators sued the manufacturer of certain radar devices for injuries sustained due to exposure to ionizing radiation allegedly emitted by the radar devices. Id. at 1. Jurisdiction under § 1442(a)(1) centered on the U.S. Army's involvement in the development of the radar system. At a hearing on a motion to remand, Lucent presented evidence that the Army controlled training given to technicians, wording in manuals accompanying radar devices, and specifications of the radar system at issue in the suit. Id. at 3. Lucent would have had to obtain prior approval from the Army before modifying the equipment used in manufacturing the radar system. Id. at 3. Since "government guidelines and specifications controlled Lucent's activities," the Court concluded that federal officer jurisdiction existed. See Crackau, 2003 WL 21665135 at 5.
Similarly, in Fung v. Abex Corporation, 816 F. Supp. 569 (N.D. Cal. 1992), employees of a contractor sued the contractor for damages arising from injuries allegedly caused by exposure to asbestos during manufacture of submarines for the Department of Defense. The Department of Defense monitored the manufacture of the submarines, required construction and repair in accordance with contract specifications, and subjected all supplies used in the manufacturing process to inspection, test, and approval. Id. at 572-573. The Court found that this level of governmental oversight was "direct and detailed," rendering federal officer removal appropriate. Id.
Another case involving a Department of Defense contractor reached a different conclusion. In Ryan v. Dow Chemical, civilians present in Vietnam sued the manufacturers of "Agent Orange" in state court for injuries caused by exposure to the herbicide. See Ryan, 781 F. Supp. at 937. The manufacturers attempted to remove under § 1442(a)(1), arguing that contracting to sell, manufacture, and deliver Agent Orange to the Department of Defense satisfied the "acting under" requirement. Id. The Court acknowledged that the interaction between the manufacturers and the Defense Department presented a close call, but ultimately decided that federal officer removal was not appropriate. Id. at 947, 953. The Court distinguished the design and formulation of Agent Orange from the production and delivery of the herbicide. Id. at 950. The Court noted that the Department of Defense did not control the herbicide's development, but only directed the production and sale of the product. Ryan, 781 F. Supp. at 950. Therefore, the Court concluded that the manufacturers did not act under the direction of a federal officer when they created Agent Orange. Id; see also Pack v. AC and S, Inc., 838 F. Supp. 1099, 1103 (D.Md. 1993) (Holding government construction, design, and testing of turbines under government specifications amounted to direct and detailed control, constituting more government direction than the purchase at issue in Ryan).
Two cases involving personnel associated with the Office of Economic Opportunity (OEO) are also instructive. In Oregon v. Cameron, 290 F. Supp. 36 (D. Oregon 1968), the state of Oregon sued workers in the Volunteers in Service to America ("VISTA") program for trespass stemming from an incident in which the volunteers went onto a farm to pick up a child of migrant workers for a visit to a doctor. 42 U.S.C. § 2992 authorizes the director of the OEO "to work in meeting the health, education, welfare, or related needs of . . . migratory workers and their families." Based on this statute and the OEO's general directions that VISTA volunteers were to work with migrant farm workers, the Court concluded that the volunteers acted under the direction of a federal officer in entering the farm to pick up the child. Id. at 38. The Court reached this conclusion even though 42 U.S.C. § 2992 emphasizes the limited employee status of VISTA personnel.
The second OEO case involved attorneys with a legal services corporation. See Gurda Farms v. Monroe County Legal Assistance Corp., 358 F. Supp. 841 (S.D. N.Y. 1973). Employers of migrant farm workers brought suit against a legal assistance corporation and lawyers associated with the corporation for conspiracy to induce workers to breach their employment agreements and for civil assault. Id. at 842. The Monroe County Legal Assistance Corp. received a grant from the OEO to serve the needs of migrant farm workers. Id. at 845. In order to receive the grant, the Corporation was required to comply with several O.E.O. regulations, including submitting reports and allowing audits to be performed. Id. The O.E.O.'s conditions for receipt of the grant amounted to sufficient governmental involvement for the Court to conclude that the attorneys were acting at the direction of a federal officer when they interacted with migrant farm workers. Id. at 847.
Courts have also applied § 1442(a)(1) to Medicare intermediaries. The consistent holding from these cases is that private companies acting as intermediaries in the Medicare program are persons acting under the direction of the Secretary of Health and Human Services and therefore eligible to remove actions under § 1442(a)(1). See Peterson v. Blue Cross/Blue Shield, 508 F.2d 55 (5th Cir.), cert. denied, 422 U.S. 1043, 95 S.Ct. 2657, 45 L.Ed.2d 694 (1975); Neurological Assocs. v. Blue Cross/Blue Shield, 632 F. Supp. 1078 (S.D.Fla. 1986); Group Health Inc. v. Blue Cross Ass'n, 587 F. Supp. 887 (S.DN.Y. 1984); see also Kuenstler v. Occidental Life Ins. Co., 292 F. Supp. 532 (C.D.Cal. 1968); Allen v. Allen, 291 F. Supp. 312 (S.D.Iowa 1968); see also Ryan, 781 F. Supp. at 949. Medicare intermediaries are charged with administering the Medicare program. See Ryan, 781 F. Supp. at 949. They are subject to "extensive and specific" federal regulations and must satisfy "performance criteria" to remain in service as intermediaries. Id. at 949. After evaluating the medicare intermediary removal caselaw, the Ryan court concluded that these cases do not stand for the proposition that removal solely on the basis of a contract with the government is allowed under § 1442(a)(1). Id. at 949. Instead, some additional level of involvement between private entities and the government is required for the private entity to qualify for federal officer removal. Id.
The Eighth Circuit Court of Appeals has seldom considered the application of § 1442(a)(1) to private corporations associated with a governmental agency. First National Bank of Aberdeen v. Aberdeen National Bank, 627 F.2d 843 (8th Cir. 1980) discusses the federal officer removal statute's application to a private company more extensively than any other Eighth Circuit case. First National Bank of Aberdeen involved an allegation by one bank that another bank had adopted a deceptively similar name. Id. at 846. The removing bank argued that federal officer jurisdiction existed because the Comptroller General of the United States had approved the name change. Id. The Eighth Circuit found this connection to a federal officer too remote to warrant removal based on § 1442(a)(1). Id. at 849, n. 13; but see First National Bank of Bellevue v. Bank of Bellevue, 341 F. Supp. 960 (8th Cir. 1972) (Holding removal under § 1442(a)(1) appropriate where the Secretary of the Treasury and the Department of the Air Force approved the establishment of a bank branch office on a U.S. Air Force Base).
After surveying the cases applying § 1442(a)(1), this Court concludes that, in order to obtain federal jurisdiction as a corporation "acting under the direction of a federal officer," the corporation and the federal government must interact in a way that evinces more federal control than the typical regulatory situation. As one court put it, "the rule that appears to emerge from the case law is one of regulation plus." See Bakalis v. Crossland Bank, 781 F. Supp. 140, 144-145 (E.D.N.Y. 1991). Not only must the appropriate level of regulation be present, but the regulation must go to the heart of the cause of action asserted against the private corporation. Unfortunately, as the court in Gurda Farms acknowledged, "the number and complexity of federal institutions and programs render impossible the formulation" of a "precise standard for the extent of control necessary to bring an individual [or corporation] within the `acting under' clause." See Gurda Farms, 358 F. Supp. at 844. The Court now turns to applying the somewhat amorphous standard of § 1442(a)(1) to the FTC's regulation of and interaction with Philip Morris.
B. Application of Federal Officer Statute to this case
This Court concludes that Philip Morris acted under the direction of a federal officer within the meaning of § 1442(a)(1) when it cited the tar and nicotine values derived from the FTC Method in its Malboro Light and Cambridge Light advertisements. The FTC's regulation of cigarette testing and advertising spans over forty years and is detailed and specific. The cigarette manufacturers entered into the "voluntary" agreement of 1970 under the threat of a proposed rule and at the behest of the FTC. In fact, FTC consent was an express condition to the agreement. The letter that set forth the voluntary agreement stated that the cigarette manufacturers "intend to begin thirty working days after the Commission has considered [the agreement] in lieu of any formal Trade Regulation Rule proceeding and hearing . . ." See Defendants' Exhibit 66, Letter from Millhiser. But for the FTC's actions, the manufacturers would not have entered into the agreement. Nor would the manufacturers have been obliged to test cigarettes under the FTC Method. Further, the fact that the agreement was subject to FTC approval and premised on FTC waiver of a formal rule indicates that the agreement imposed an FTC backed obligation on the cigarette manufacturers to conduct testing in accordance with the method and to disclose the testing results in all advertising.
After the manufacturers entered into the agreement, the FTC remained involved with cigarette testing and advertising in a detailed and specific manner. The FTC took the unusual and unprecedented step of conducting cigarette testing itself for approximately twenty years. Lee Peeler, who was authorized to speak for the FTC in his July, 2002 deposition, testified that this approach was extremely unique and that he could not recall any other industry in which the FTC set forth testing methodology and actually tested products itself. See Defendants' Exhibit 70, Peeler Deposition at 96-97. When the FTC transferred testing responsibility to TITL, it retained and used the authority to monitor TITL's lab through unannounced inspections. From 1987 to the present, the FTC has compelled TITL to produce sworn statements of Method ratings for all cigarettes which ratings were, and are, published annually by the FTC in the Federal Register.
The FTC enforced the agreement's obligation to adhere to the Method's results in cigarette advertising through the FTC's statutory authority to prevent unfair and deceptive practices in commerce. See 15 U.S.C. § 45 (a). The FTC's 1971 complaint and consent order with American Brands, the 1978 advisory opinion to Lorillard, the 1981 investigation and succeeding lawsuit against Brown Williamson, and the 1994 complaint and consent order against Carlton all demonstrate that the FTC believes actions contrary to the 1970 agreement and advertising inconsistent with the FTC Method to be deceptive advertising in violation of 15 U.S.C. § 45(a). The FTC clearly views testing and advertising in accordance with the FTC Method as mandatory under 15 U.S.C. § 45(a) and goes to extraordinary lengths to further that mandate. Given the FTC's efforts to direct and enforce use of cigarette ratings derived from the FTC Method in cigarette advertising, it appears clear to the Court that Philip Morris is a "person acting under" the FTC.
With regard to the causation element of § 1442(a)(1), the Court also concludes that the FTC's regulation of Philip Morris's cigarette testing and advertising forms cuts to the heart of the Plaintiffs' lawsuit. Plaintiffs contend that their allegations that Philip Morris deceptively designs their cigarettes to manipulate the FTC Method are wholly independent from testing procedures mandated by the FTC. The Court disagrees. Although Philip Morris is responsible for designing its cigarettes, the FTC mandates the method by which the tar and nicotine content of those cigarettes will be measured for advertising purposes. No matter what cigarette design Philip Morris uses, advertising for that cigarette must disclose the tar and nicotine rating calculated using the FTC Method. The FTC has expressed its opinion that other cigarette manufacturers who advertise tar and nicotine ratings derived from other testing methods violate the unfair and deceptive advertising provisions of 15 U.S.C. § 45(a). See In re Lorillard, 92 F.T.C. 1035 (1978).
PIaintiffs state in their Reply Memorandum of Law in Support of Plaintiffs' Motion to Remand: "As made clear in their Motion for Remand, Plaintiffs do not take issue with the testing procedures Philip Morris purports to utilize or with any federal policies that define appropriate mechanisms and procedures for assaying tar and nicotine levels in cigarettes. The conduct about which Plaintiffs complain is Philip Morris' deceptive design of its products, which makes the tar and nicotine levels measured by the Cambridge Method testing meaningless, and the Company's fraudulent marketing of its products on the basis of these `measurements,' in claiming that their products are `light' and deliver `lowered tar and nicotine,' when in fact there is nothing light about them."
The FTC's consideration of the precise Cambridge method weaknesses that produce the allegedly misleading tar and nicotine ratings further supports the existence of the requisite causal nexis between FTC regulation of Philip Morris and the Plaintiffs' claims. On multiple occasions, the FTC has acknowledged that the FTC Method does not accurately measure the tar and nicotine conveyed to smokers. The FTC has repeatedly examined the very inaccuracies in the FTC Method that form the basis for the Plaintiffs' claims of deceptive advertising. However, the FTC continues to this day to mandate use of the FTC Method for testing and advertising. Assume for the moment that, as Plaintiff alleges, Philip Morris intentionally designs its cigarettes to manipulate the method to produce tar and nicotine ratings below 15mg so that Philip Morris can advertise those cigarettes as "Lights." Such intentional action cannot be separated from the fact that the FTC continues to require testing to be done under the Cambridge Filter Method, mandates that advertisements disclose Method results, and does not permit use of other testing methods in cigarette advertising. The FTC requires adherence to the FTC Method despite its awareness that the FTC Method does not measure actual tar and nicotine conveyed to consumers, especially when cigarettes are designed in certain ways (eg: with ventilation holes). Since the FTC, through its enforcement of the "voluntary" agreement, requires Philip Morris to disclose tar and nicotine ratings derived by using the Cambridge Filter Method in cigarette advertising — and considers the use of any other method in advertising illegal — Plaintiffs' claims that Philip Morris' advertisements are deceptive necessarily calls into question the FTC's regulation of those advertisements.
Philip Morris itself complained of inaccuracies in the FTC Method's testing results when it complained to the FTC in 1980 that the Method inaccurately measured Brown Williamson's Barclay cigarettes. See Brown Williamson, 778 F.2d at 37-38. As a result of these complaints, the FTC reevaluated the FTC Method, but ultimately decided to continue to mandate the Method (despite its shortcomings) for all cigarettes but the Barclay. Id. at 38. See Defendants' Exhibit 33, Letter from E. Rock to Hon. T.A. Luken (June 17, 1988).
The Court recognizes that Philip Morris is not required to advertise its cigarettes as "light" or "low tar." However, it is permitted by the FTC to so advertise its cigarettes if they meet FTC's standard. Philip Morris is required to adhere to the FTC's regulation of "lights" advertising. The FTC requires disclosure of Cambridge Filter Method tar and nicotine ratings in cigarette advertisements, and has stated that a cigarette may be advertised as light if its rating using the FTC Method is less than 15mg of tar. Plaintiffs admit that Marlboro Lights and Cambridge Lights are both rated less than 15mg using the FTC Method. Therefore, any contention that Philip Morris' advertising of these two cigarette brands as "Lights" is misleading squarely confronts the FTC's mandate that cigarette companies disclose FTC Method results in advertising and use the Method to determine whether a particular cigarette may be classified as "Light."
Philip Morris' position is unique, but consistent with the holdings of cases involving government contractors. Although this case does not involve a government procurement contract, the FTC's pervasive involvement in cigarette advertising and testing is analogous to the level of governmental control demanded by the courts in Crackau, Fung, and Ryan. The FTC dictates the manner and method by which Philip Morris will test and advertise its cigarettes just as the Department of Defense dictated the materials and specifications to be used in the manufacturing process of radar systems and submarines. The Ryan court's distinction between manufacturing of Agent Orange and the Department of Defense's purchase of Agent Orange is not applicable here. In the instant case, the FTC was clearly aware of the shortcomings of its advertising and testing requirements, yet chose to require use of the FTC Method in spite of those downfalls.
Philip Morris' testing and advertising of cigarettes in accordance with the FTC's mandates amounts to more than mere participation in a regulated industry. Philip Morris' testing and advertising obligations are much more specific than the general guidance given to VISTA volunteers in Cameron and legal services attorneys in Gurda Farms. See Cameron, 290 F. Supp. at 38; Gurda Farms, 358 F. Supp. at 841. Additionally, the FTC's lengthy and active interaction with cigarette testing and advertising constitutes significantly more hands-on contact than the simple approval of a bank name change. See First National Bank of Aberdeen v. Aberdeen National Bank, 627 F.2d 843, 846. Similar to the "integrated system of officials and private intermediaries" in the Medicare intermediary cases, Philip Morris and other cigarette manufacturers collaborate through TITL with the FTC to test cigarettes. See Ryan, 781 F. Supp. at 949. Further, the FTC itself took the extraordinary step of conducting that testing for much of the Plaintiffs' proposed class period. Since the FTC mandates advertising in accordance with the Method and does not permit use of any other method, Philip Morris' "Lights" advertising is closely integrated with the FTC's regulatory regime.
The FTC and cigarette manufacturers, including Philip Morris, have a forty year history of specific, detailed, and unusual regulation of cigarette testing and advertising. Further, the FTC's mandates directly relate to the core of this lawsuit — whether advertising cigarettes as "Lights," when those cigarettes fall below 15mg under the FTC Method, is deceptive. Therefore, the Court concludes that Philip Morris acted under the direction of the FTC in testing and advertising Marlboro Lights and Cambridge Lights in accordance with the Cambridge Filter Method. In arriving at this decision, the Court emphasizes that it reaches no conclusion on the merits of Philip Morris' preemption defense, but is ruling that the FTC's regulation of Philip Morris' cigarette testing and advertising rises to a level sufficient to invoke federal jurisdiction under the federal officer removal statute. Accordingly, Philip Morris properly removed this case to federal court pursuant to § 1442(a).
As the Court stated above, Plaintiffs have admitted that Defendants asserted federal defense of preemption satisfies the "colorable federal defense" requirement of § 1442. The Court notes that its denial of Plaintiffs' motion to remand is solely jurisdictional. The Court expresses no opinion at this time as to the merits Defendants' preemption defense other than to say that it is colorable as required by § 1442.
C. FTC Regulation Without Formal Rule
The Plaintiffs argue that the lack of formal trade regulation rules requiring use of the FTC Method to determine tar and nicotine values, requiring use of those values in advertisements, and formalizing the 15mg requirement for "Light" advertising forces the conclusion that Defendants, as a matter of law, are not "acting under the direction of a federal officer." The Court disagrees. A formal rule is not required in order for a federal agency to direct the actions of a private company. Formal rules were not present in the government contractor cases cited above. See Crackau, 2003 WL 21665135; Fung, 816 F. Supp. 569; Ryan v. Dow Chemical, 781 F. Supp. 934. Although the OEO possessed statutory authority to assign volunteers to aid migrant workers and to provide financial assistance to meet the legal needs of migrant workers, the courts in Gurda Farms and Cameron held that § 1442 jurisdiction was appropriate without formal rules addressing interaction with migrant workers. Oregon, 290 F. Supp. 36; Gurda Farms, 358 F. Supp. 841. Like the OEO, the FTC possess general statutory authority to regulate cigarette testing and advertising under 15 U.S.C. § 45(a).
The FTC often regulates the industries it governs by compelling voluntary agreements and consent orders rather than promulgating formal rules. In 1987, Daniel Oliver, then Chairman of the FTC testified before a subcommittee of the House of Representatives Energy and Commerce Committee and addressed the manner in which the FTC prefers to regulate. Chairman Oliver stated:
the FTC has discovered that rulemaking takes a very long time, and I think, therefore it is more efficient to bring a single case against the first offender in order to stop [a certain] practice before we go to rulemaking . . . it is faster — everything the Commission has done has shown that it is faster to bring a single case than to go through rulemaking . . . I'm interested not in rulemaking; I'm interested in having an effect for the benefit of consumers. If I can have a faster and better effect by bringing a case instead of making a rule, I think it serves the consumers' interest better . . . In the case of the cigarette industry, which is what we're talking about, it is entirely reasonable to suppose that one action against cigarette company would have an effect on all of them, and that you would not have to make a rule. You would do the same thing much faster bringing a single case; that would benefit the consumers. So my job is deploying resources, and I would much prefer to bring a case, which can be done in a tenth of the time that making a rule can be done. I think that's a more effective way to deploy law enforcement resources for the benefit of the consumer.
See Defendants' Exhibit 24, Hearing before the Subcomm. on Transportation, Tourism, and Hazardous Materials of the House Comm. on Energy and Commerce, 100th Cong. 17-19 (1987) (statements of Daniel Oliver, Chairman of the Federal Trade Commission). Lee Peeler also commented on the FTC's approach to voluntary agreements and consent orders:
Q. Is there anything nefarious about the FTC obtaining an industry-wide agreement in lieu of a formal rule?
A. The idea of proceeding on a voluntary basis is something the Commission has done in a variety of circumstances with a variety of industries and the Commission looks at these programs to try to make sure that they are done . . . correctly and in the public interest. . . .
Q. Why does the FTC publish consent orders?
A. We publish consent orders and other final agency actions for a whole variety of reasons . . . one of the purposes of bringing cases is to give guidance to other industry members about what type of conduct we would challenge. The one thing that is confusing sometimes to people is that an order contains . . . provisions that are designed to fence-in conduct . . . the complaint states the violation of laws and the order is a remedial provision.
Q. I want to focus on the phrase you used "to give the industry guidance." Is there any question in your mind that the publication of the decision and order in the matter of American Brands was intended to guide the industry regarding . . . any industry actor's use of the words "low, lower, reduced or like qualifying terms" in cigarette advertising?
A. It would be designed to do that, it would be designed to do that in the context of the ads that are challenged.See Defendants' Exhibit 70, Deposition of C. Lee Peeler at 96-97.
The United States Court of Appeals for the District of Columbia Circuit has also commented on the FTC's tendency to regulate by obtaining voluntary compliance rather than by pursuing formal proceedings. See Holloway v. Bristol-Myers Corp., 485 F.2d 986, 995 (D.C. Cir. 1973). In the context of deciding whether 15 U.S.C. § 45 provided for a private right of action in a class action by consumers against a manufacturer of nonprescription analgesic compound for deceptive advertising, the Court stated:
Indicative of [Congress'] fundamental policy judgment [in amending the Federal Trade Commission Act] are frequent references in the legislative history to the Trade Commission's expertise in dealing with commercial practices, its ability to act as a buffer in securing voluntary compliance through informal proceedings, and its sound discretion in determining when formal enforcement measures are necessary. Congress voiced approval of the Commission's record in shaping the fluid contours of generalized statutory policy pronouncements into meaningful and coherent rules of business conduct, and it felt that the agency's experience in making concrete the proscriptions of the 1914 Act against `unfair methods of competition rendered the FTC particularly well suited to the responsibility of giving life to the broad standard of `deceptiveness' as applied to advertising.See Holloway, 485 F.2d at 995.
The FTC coerced "voluntary" action in cigarette testing and advertising in such a way that a formal rule is not required for § 1442(a) jurisdiction. The FTC made cigarette manufacturers aware that it intended to promulgate a federal rule to establish a single test to measure tar and nicotine content in cigarettes. The FTC informed the companies that the FTC would not promulgate such a rule if the companies voluntarily entered into an agreement to do such testing. The companies elected to enter into that agreement, at the FTC's behest. The FTC subsequently monitored the manufacturers' compliance with that agreement. Although the FTC had no formal rule to enforce, they used their general statutory authority to prevent unfair or deceptive acts or practices, including advertising, that affect commerce to ensure compliance with the agreement. When companies did not disclose tar and nicotine values derived from the FTC Method, the FTC brought enforcement actions against them.
Philip Morris, as required, followed the FTC's directives. Absent FTC regulation in this area, Philip Morris — and other cigarette manufacturers — could advertise "light" cigarettes in any manner and method that they chose. They would be free to use any test to validate their "light" claim. Instead of allowing such freedom in cigarette testing and advertising, the FTC required the FTC Method to be used and the results disclosed in advertisements. Therefore, Philip Morris has been required to use the FTC Method and to adhere to the FTC's advertising directives since the "voluntary" agreement was entered into.
Plaintiffs claim that FTC v. Brown Williamson Tobacco Corp. held that the FTC cannot make the Cambridge Filter Method compulsory upon tobacco companies. The Court does not read Brown Williamson so broadly. In Brown Williamson, the D.C. Circuit considered a district court's permanent injunction requiring Brown Williamson to obtain prior approval for using test results obtained from a testing system other than the FTC Method in cigarette advertisements. See Brown Williamson, 778 F.2d at 37. The Court first adopted the district court's finding that the FTC Method did not accurately measure Barclay cigarettes, but concluded that the use of a non-FTC sanctioned method, even with a disclaimer, would be deceptive and misleading. See Brown Williamson, 778 F.2d at 41-43, 45 n. 7. In the portion of the opinion relied upon by Plaintiffs, the district court discusses whether prior FTC approval of non-FTC-Method advertisements amounts to a prior restraint in violation of the First Amendment. The court states:
The litigation giving rise to this injunction was an outgrowth of the FTC's efforts, at the request of competing cigarette manufacturers, to obtain accurate tar and nicotine ratings of Brown Williamson's Barclay cigarettes. See infra at 8-9.
There is a problem, however, in the fact that, these safeguards notwithstanding, the injunction places the burden on B W to justify the advertisement of results from a different system of testing which it considers superior to the FTC system, even if B W includes a prominent disclaimer explaining that the rating comes from a new system not comparable to that used by the FTC and other manufacturers. Because the FTC has not adopted its system of testing pursuant to a Trade Regulation Rule under section 18 of the FTC Act, 15 U.S.C. § 57a (1982), one cannot say that the FTC system constitutes the only acceptable one available for measuring milligrams of tar per cigarette.
If B W sought to advertise the results of a different system solely with respect to Barclay, this objection would be groundless. If the different system produces results not comparable to the FTC ratings used by other manufacturers, an advertisement displaying only that system's results for Barclay would have an inherent tendency to deceive, even with an explanatory disclaimer. The sole utility of any particular milligram rating is in comparison with the analogous ratings of other cigarettes. Thus, standing alone, the Barclay rating from a new system would tend to encourage comparison with the inapposite FTC ratings advertised by other manufacturers. This would tend to deceive consumers.
The injunction as written, however, would even prohibit B W from devising a new testing system and, in advertising its results for Barclay, providing information about competing brands prominently enough and in sufficient quantity to allow consumers to make informed decisions without confusing figures from disparate testing systems. Since this would eliminate consumer confusion, we believe that the FTC must bear the affirmative burden of demonstrating any inadequacy, and thus deceptiveness, of the results obtained under such a system and advertised in the manner described. We do not wish to leave intact the injunction's requirement of prior FTC approval of such advertising because that would enshrine the current FTC system as the sole legitimate testing method, even though it was not passed pursuant to section 18 of the FTC Act, 15 U.S.C. § 57a (1982), and subjected to the possibility of judicial review. Thus we remand this case to the district court with instructions to modify the injunction to allow for the presentation of the results of a different testing system, so long as any advertisement of such results provides sufficient data to avoid deceptiveness due to confusion with the FTC testing system. It hardly requires saying that the FTC would remain free to prove deceptiveness due to the inadequacy of the new testing system or the form of the advertisements under section 5 of the FTC Act. The Commission may, of course, address the problem by promulgating a Trade Regulation Rule under section 18 of the Act.Brown Williamson, 778 F.2d at 44-45.
The D.C. Circuit's holding was based on its belief that requiring prior FTC approval of cigarette advertisements referencing a different testing system but providing information about competing brands for consumer comparison of tar and nicotine values would constitute an unlawful prior restraint on speech. This holding does not mean that a cigarette company is not "acting under the direction of a federal officer" when it advertises cigarettes in accordance with the FTC prescribed method. Rather, the D.C. Circuit's opinion merely freed Brown Williamson from having to obtain prior approval if it chose to deviate from the FTC's advertising standards. Brown Williamson did not disturb the FTC provided safe harbor for cigarette manufacturers disclosing tar and nicotine values on the FTC Method in advertisements. The FTC made clear to such manufacturers that their actions would not be construed as deceptive under 15 U.S.C. § 45 (a). Although a Trade Regulation Rule would fortify the FTC Method disclosure requirement, lack of a formal rule does not deprive cigarette manufacturers utilizing the FTC method to measure tar and nicotine and to advertise their products from the protection of the federal officer removal statute.
By the terms of Brown Williamson, a formal Trade Regulation Rule would also allow the FTC to place a constitutional prior restraint on advertisements that did not use the method. See Brown Williamson, 778 F.2d at 45. Absent such a rule, the FTC is still free to regulate such advertisements, but must do so by enforcing the deceptive practices provision of 15 U.S.C. § 45(a) through compliance actions and compelled consent orders. This, of course, is the FTC's preferred way of regulating.
This Court believes it would be reading § 1442 far too technically if it concluded that a company may only act under the direction of a federal officer where a formal rule is issued. Formal rulemaking may be one of the principal ways federal agencies regulate, but it is clearly not the only way. In the FTC's case, it is not even the preferred way to regulate the cigarette industry. Given the number and complexity of federal programs and the variety of ways in which federal agencies bring about actions in private industries, this Court cannot say that a formal rule is the only way in which the FTC's interaction with Philip Morris would trigger application of § 1442. The manner in which the FTC has overseen cigarette testing and advertising for the past four decades and has compelled adherence to the FTC Method is sufficient to invoke federal court jurisdiction pursuant to the federal officer removal statute.
D. Contrary Authority
This Court reaches its conclusion fully aware that two other federal district courts have considered this precise issue and have reached the opposite conclusion, holding that Philip Morris could not remove "lights" class action suits under § 1442(a)(1). See Tremblay v. Philip Morris, 231 F. Supp.2d 411 (D.N.H. 2002); Pearson v. Philip Morris, Case No. 03-CV-178-HA (D. Oreg. August 8, 2003). Plaintiffs' allegations here appear to be virtually identical to those raised by the Plaintiffs in Tremblay and Pearson. Tremblay, 231 F. Supp.2d at 413; Pearson at 2. After carefully considering the issue, this Court simply finds itself in disagreement with the holdings of Tremblay and Pearson.
The Tremblay Court concluded:
Nowhere in the complaint do the plaintiffs challenge the enforcement or wisdom of any FTC policy, procedure or regulation. Further, the complaint does not allege that Philip Morris is liable simply for complying with the Cambridge Filter Method and FTC advertising policies. Rather, it clearly and concisely alleges that Philip Morris engages in a course of conduct aimed at manipulating the FTC's policies by exploiting loopholes in the Cambridge Filter Method. Because the plaintiffs are the masters of their complaint, [citation omitted], Philip Morris's attempted recasting of their claims is irrelevant.
In short, this is not a case where plaintiffs seek to challenge federal policy or official action in a state court forum. Rather, the plaintiffs challenge the conduct of a private corporation, acting without direction from a federal officer or agency. Allowing this action to be litigated in state court will not interfere with the course of the FTC's duties nor its policies regarding the regulation of the cigarette industry.Tremblay, 231 F. Supp.2d at 419. The Pearson court essentially adopted the reasoning of Tremblay. However, in reaching its decision, the Pearson court relied more heavily on the lack of a formal rule requiring use of the FTC Method.
This Court has concluded otherwise. Philip Morris' adherence to the FTC mandated method cannot be divorced from the tar and nicotine values assigned to its cigarettes and used, as the FTC requires, in advertisements for those cigarettes. The FTC's lengthy and detailed involvement in the way cigarettes are tested and advertised — all pursuant to its legislative mandate — amounts to more than "underlying facts used by plaintiffs to support their allegations." See Pearson at 10. Though no formal rule was ever promulgated, the FTC's actions are so pervasive that they rise to the level comprehended by § 1442(a). As this Court has already stated, the fact that Philip Morris is free to design its cigarettes as it wishes does not diminish the federal direction under which Philip Morris tests and advertises those cigarettes. Given that the FTC has directed use of the Cambridge Filter Method for four decades, the inadequacies of the tar and nicotine values derived from application of the Method cannot be the sole result of Philip Morris' actions. Plaintiffs' allegations, though articulated in terms of Philip Morris' manipulative intent, squarely confront the FTC's policy that cigarette testing and advertising using the FTC Method does not violate 15 U.S.C. § 45 (a), but that all other testing is suspect. Although Plaintiffs are masters of their Complaint, § 1442 contemplates federal jurisdiction when a plaintiff's claims challenge private action taken at the direction of the federal government. Such is the case here. Since inadequacies in FTC policies are at the heart of Plaintiffs' complaint, this is the type of action for which § 1442 provides federal jurisdiction.
E. Judicial Estoppel
The Court rejects Plaintiffs' argument that judicial estoppel prevents Philip Morris from arguing that federal officer removal is appropriate. Judicial estoppel bars a party from taking "clearly inconsistent" positions in litigation. See New Hampshire v. Maine, 532 U.S. 742, 750-1 (2001); Hossaini v. W. Mo. Med. Ctr., 140 F.3d 1140, 1142-1143 (8th Cir. 1998). The Eighth Circuit has commented that judicial estoppel is limited to situations "tantamount to a knowing misrepresentation to or even fraud on the court." See Total Petroleum, Inc. v. Davis, 822 F.2d 734, 738 n. 6 (8th Cir. 1987). Plaintiffs contend that judicial estoppel applies because Philip Morris' position in Brown v. Philip Morris, Inc., 250 F.3d 789 (3d Cir. 2001) directly contradicts the position that Philip Morris has taken in this litigation.
The Brown plaintiffs claimed that Philip Morris violated their rights under color of federal law by targeting advertising of mentholated tobacco products to African Americans. Philip Morris successfully argued that it could not be sued under Bivens because it was not a state actor. Determining whether a party is a state actor for purposes of applying constitutional protection is completely different than determining whether a party is "acting under the direction" of a federal officer sufficient to invoke federal jurisdiction under 28 U.S.C. § 1442. The Court agrees with the Defendant that "judicial estoppel simply does not apply where a change in a party's position arises from differences in the legal standards relevant to the underlying actions," See Defendant's Memorandum in Opposition to Plaintiff's Motion to Remand at 5; see also Sumner v. Michelin N. Am., Inc., 966 F. Supp. 1567, 1573-76 (M.D. Ala 1997); Holder v. Holder, 305 F.3d 854, 872 (9th Cir. 2002); Johnson v. Or. Dep't of Human Res., 141 F.3d 1361, 1367 (9th Cir. 1998). Philip Morris is certainly not committing a "fraud on the court" by arguing that it is not a state actor in a Bivens action, but arguing that it is acting under the direction of the FTC in the instant case. See Total Petroleum, Inc., 822 F.2d at 738 n. 6.
This action was premised on Bivens v. Six Unknown Named Agents of Fed Bureau of Narcotics, 403 U.S. 388 (1971). Bivens held that violation of the Fourth Amendment by a federal agent acting under color of his authority gives rise to a cause of action for damages consequent upon his unconstitutional conduct.
IV. Conclusion
This Court concludes that Philip Morris acted under the direction of the FTC in relying on Cambridge Filter Method tar and nicotine ratings to advertise its Marlboro Lights and Cambridge Lights cigarettes and in disclosing those ratings in such advertisements. Therefore, this Court has jurisdiction of this matter under 28 U.S.C. § 1442 (a). For these reasons, described more fully above, the Court denies Plaintiffs' motion to remand to state court. Having so held, the Court also denies Plaintiffs' request for attorney fees and costs.
V. Interlocutory Appeal Certification
The Court has discretion to allow Plaintiffs to seek an interlocutory appeal of this order. To do so, the court must consider the requirements of 28 U.S.C. § 1292 (b), which states:
When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order. The Court of Appeals which would have jurisdiction of an appeal of such action may thereupon, in its discretion, permit an appeal to be taken from such order, if application is made to it within ten days after the entry of the order: Provided, however, That application for an appeal hereunder shall not stay proceedings in the district court unless the district judge or the Court of Appeals or a judge thereof shall so order.28 U.S.C. § 1292 (b).
Certification is appropriate only when the district court is "of the opinion that": (1) the order "involves a controlling question of law"; (2) "there is a substantial ground for difference of opinion"; and (3) certification will "materially advance the ultimate termination of the litigation." See White v. Nix, 43 F.3d 374, 377 (8th Cir. 1994).
An order denying a motion to remand a case to the state court from which the case was removed may be certified for interlocutory appeal. See 9 James W. Moore, Moore's Federal Practice ¶ 110.22[2], at 271-72 (2d ed. 1996). Several circuits have considered interlocutory appeals of such orders. See Sonoco Products Co. v. Physicians Health Plan, Inc., 338 F.3d 366, 368 (4th Cir. 2003); Grant v. Chevron Phillips Chemical Co., 309 F.3d 864, 866 (5th Cir. 2002); Lee v. American Nat. Ins. Co., 260 F.3d 997, 999 (9th Cir 2001); S.G. v. American National Red Cross, 938 F.2d 1494, 1495-96 (1st Cir. 1991), reversed on other grounds by American National Red Cross v. S. G., 505 U.S. 247, 249 (1992); Elston Inv. Ltd. v. David Altman Leasing Corp., 731 F.2d 436 (7th Cir. 1984). The U.S. Supreme Court has considered U.S. Court of Appeals decisions reversing, on § 1292(b) appeals, Federal District Court orders refusing to remand removed actions. See Murphy Bros. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 346 (1999); American National Red Cross v. S. G., 505 U.S. 247, 249 (1992). Although this Court could not locate an Eighth Circuit case reviewing a district court's denial of a motion to remand, it located one case implying that such a procedure provides a basis for interlocutory appeal. See Humphrey v. Sequentia, Inc., 58 F.3d 1238, 1240 (8th Cir. 1995) (noting appellate court could not consider district court denial of motion to remand where district court refused Plaintiff's request to certify order for interlocutory appeal).
This Court finds that all three elements required by § 1292(b) are present in this case. The central question considered in whether Philip Morris may remove this lawsuit to federal court under 28 U.S.C. § 1442 (a)? The presence of a controlling question of law in this particular order is especially clear. The dispositive question for jurisdictional purposes is whether, given the FTC's regulation of cigarette testing and advertising (which is not in dispute), Philip Morris was acting under the direction of a federal officer as that phrase is used in 28 U.S.C. § 1442 (a). The facts surrounding the FTC's involvement with cigarette testing and advertising are not in dispute. This question is purely a legal one.
Additionally, substantial grounds for disagreement with the Court's ruling exist. The Court's decision is directly contrary to the only other federal district court cases that have considered the very same issue. The decisions in Tremblay and Pearson could not be considered on appeal because 28 U.S.C. § 1447 (d) prevents U.S. Courts of Appeal from considering a district court's order remanding a case to state court on jurisdictional grounds. See Feidt v. Owens Corning Fiberglas Corp., 153 F.3d 124, 126-127. This is so even where a remand order is certified for interlocutory appeal under § 1292(b). Id. at 129-130. Further, several other motions to remand removed proposed "Lights" class actions relying on § 1442(a) are pending in federal courts across the country. See Arnold v. Philip Morris USA, Case No. 03-403-MJR (S.D. Ill.); Paldrmic v. Altria Corp. Services, Case No. 03-C-649 (E.D. Wise.); Piscetta v. Philip Morris, Inc., Case No. 03-CV-1337-RLV (N.D. Ga.); Stern v. Philip Morris USA, Case No. O3cv2556; Virden v. Altria Group, Inc., Case No. 5:03-CV-61 (N.D. Va.).
Finally, certification will "materially advance the termination of this litigation." A strong consideration in considering a § 1292(b) petition is the policy of "minimizing the total burdens of litigation on parties and the judicial system by accelerating or at least simplifying trial court proceedings." See 16 CHARLES ALAN WRIGHT ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 3930, p. 439 (2d. ed. 1995). That goal would be advanced here.
This Court concludes that certification of the question posed in the Plaintiffs' motion to remand for interlocutory appeal is appropriate. The Court therefore certifies the controlling question of this order — May Philip Morris remove this lawsuit to federal court under 28 U.S.C. § 1442 (a)? — for interlocutory appeal. The Court is mindful that § 1292(b) should only be used in "exceptional cases," but believes that this is one of those cases in which interlocutory appeal could avoid "protracted and expensive litigation." See White, 43 F.3d 374 at 376. Therefore, if Plaintiffs so choose, they shall have the statutorily enumerated ten days in which to file an application for interlocutory review with the Eighth Circuit Court of Appeals. In this event, Plaintiffs shall also notify this court. To avoid expensive and burdensome proceedings in the district court, the Court orders that the filing of an application for interlocutory appeal with the Eighth Circuit Court of Appeals and notice thereof to this court shall stay the proceedings in this court until the question posed on this interlocutory appeal is adjudicated or the application is rejected.
Failure to file such application within the ten day period would result in loss of the right to petition for interlocutory appellate consideration. See Jones v. Goodyear Tire Rubber Co., 967 F.2d 514, 516 (11th Cir. 1992).
IT IS THEREFORE ORDERED that the Plaintiffs' Motion to Remand (Doc. #2) be, and it is hereby, DENIED.
IT IS FURTHER ORDERED that the Plaintiffs' request for costs and fees (Contained in Doc #2) be, and it is hereby, DENIED.
IT IS FURTHER ORDERED that the controlling question of this case, as stated above, be and it is hereby, DESIGNATED FOR INTERLOCUTORY APPEAL under § 1292(b). The Plaintiffs shall have ten days to file an application for interlocutory review with the Court of Appeals for the Eighth Circuit. Upon filing of such an application, proceedings in this Court will be stayed pending either the outcome of the Eighth Circuit review of the question posed or rejection of the application.
IT IS FURTHER ORDERED that the date on which Defendants' response to Plaintiffs' Motion for Class Certification is due shall be extended. If the stay contemplated above comes into effect, Defendants' response to Plaintiffs' Motion for Class Certification need not be filed until 14 days after Eighth Circuit final action upon Plaintiff's application for interlocutory appeal. If Plaintiffs do not seek interlocutory appeal, Defendants' response is due no later than 14 days after the expiration of the ten day period in which Plaintiffs have to file an application for interlocutory review.