# Petition for Writ of Certiorari — Watson v. Philip Morris Companies, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2007
- **Citation:** 551 U.S. 142

## Text

Suprame Court 118
A!

1) FILE

No. Res O5 128 4A? 4 - 2006

INTHE OFFICE OF THE CLERK
Supreme Court of the Gnited States

- [LISA WATSON AND LORETTA LAWSON, INDIVIDUALLY
AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED.
Petitioners.

Vv

PHILIP MORRIS COMPANIES, INC... A CORPORATION:
AND PHILIP MORRIS, INCORPORATED, A CORPORATION.
Respondents.

On Petition for a Writ of Certiorari
to the United States Court of Appeals
for the Eighth Circuit

PETITION FOR A WRIT OF CERTIORARI

STEVEN EUGENE CAULEY DAVID C. FREDERICK
MARCUS N. BOZEMAN Counsel of Record
CAULEY, BOWMAN, CARNEY KELLY P. DUNBAR

& WILLIAMS, PLLC KELLOGG, HUBER, HANSEN,
11311 Areade Drive TODD, EVANS & FIGEL,
Suite 200 P.Lka€.
Little Rock, Arkansas 72212 1615 M Street, N.W.
(501) 312-8500 Suite 400

Washington, D.C. 20036
(202) 326-7900

Counsel for Petitioners

April 7, 2006

QUESTION PRESENTED

Whether a private actor doing no more than complyihg
with federal regulation is a “person acting under a federal
officer” for the purpose of 28 U.S.C. § 1442(a)(1), entitling
the actor to remove to federal court a civil action brought
in state court under state law.

)

ill

TABLE OF CONTENTS

Page

PPS REGS © RUINS BUND ccceccecicccccessonsosstccesscssesccscessaeseoess i
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TET sisiteincidnscdauineitninnnmsumenetassinegepieiyenmauiibintel 1
ITE ciicrsitrnnspuiiishesutinniduniponsetisianiveniennitinenaniiimeatia 2
TT csiiiiisdbiiinsieiclenunicicinnniiceinninictninniniavecesienvnadeinncieiiaees 2
STATUTORY PROVISIONS INVOLVED.......00.000......0000.8 3
STATEMENT OF THE CASB.....................cscecsssccsenssssesssereed
A. The Federal Officer Removal Statute .....................3

B. FTC “Regulation” of Light Cigarettes Sacinniuhaatididesaiaiiinds 4

C. Proceedings in State and District Court .................5

D. The Court of Appeals’ Decision.........................000008 7
REASONS FOR GRANTING THE PETITION..... ’ saeiipeiaaal 8

THE EIGHTH CIRCUIT'S DECISION DIVIDES
THE FEDERAL COURTS ON SIGNIFICANT
ISSUES PERTAINING TO THE PROPER
APPLICATION OF THE FEDERAL OFFICER
ee STITT cesctctniasinsisincinictestaniessitaiiniibinsibandincisiininnnien 9

A. Federal Courts Are Divided Or Otherwise In
Disarray With Respect To When A Private
Party Is “Acting Under” A Federal Officer

Within The Meaning Of § 1442(a)(1)..........0..0.000004. y
1. The First, Seventh, and Eleventh Circuits
have adopted an official function test ............. 10

2. The approach of the Eighth and Fifth Cir-
cuits rests on the comprehensiveness and
I Ae Se GIG hice nccicccicccdcnceccincsettieninn 13

3. The Ninth and Tenth Circuits construe
the “acting under” clause to permit re-
moval! if the federal officer had general
supervision over a private actor ...................... 16

Vv

B. In Holding That Philip Morris May Avail It-
self Of The Federal Officer Removal Statute,
- The Eighth Circuit Misinterpreted This
Court’s Precedents, Reaching An Outcome
Inconsistent With Statutory Text And Pur-

1. The Eighth Circuit embraced an interpre-
ation of “acting under” that does not ac-
cord with the statutory text viewed in
light of this Court’s precedents.....................04. 18

2. The Eighth Circuit’s control test is incon-
sistent with the purpose of § 1442(a)(1).......... 21

3. The federal government's suit against
Philip Morris for acts similar to those at
issue here underscores the consequence of
the distinction between private actors and
SPT dactiicichadeiibintidenddlintnandiiabigtibiabbdainveniadae 23

4. The Eighth Circuit’s approach conflates
ordinary preemption analysis with the
justification for federal officer removal ........... 24

C. This Case Presents An Excellent Vehicle To
Resolve The Issues Presented........................c0c0000- 25

D. The Eighth Circuit’s Decision Raises Juris-
dictional Issues Of Exceptional Importanée ......... 26

TE indniehininnncnscdenieinibiderdeniasuiindsstasisidsninnieieinenienin 30
APPENDIX

v

TABLE OF AUTHORITIES
Page
CASES
Abdullah v. American Airlines, Inc., 181 F.3d 363

Ge GR i tensesdncbasctavesunistcusecnniudineniinenaonete 29
‘Agent Orange’ Prod. Liab. Litig., In re, 304 F. Supp.

BD GE Ges Sc OD crccccsnnstnserintnniasinntictdediedaitaiai 14
Akin v. Big Three Indus., Inc., 851 F. Supp. 819

GR SUE: Bee cacenciscicepcsuciiocdacedtehessiatescamidiaiiaeencnnael 18
Angelides v. Baylor College of Medicine, 117 F.3d

BE Ge GO: ED cccncnsatiinntccitnasceticeniavenebtasitibunimanmaaen i]
Arizona v. Manvpenny, 451 U.S. 232 (1981)......... 21, 22, 27
Bakalis v. Crossland Sav. Bank, 781 F. Supp. 140

Gees Ho PIED cccssansctessncensesenntniatedinbinminaiddiamamiamiaanes 13
Bates v. Dow AgroSciences LLC, 125 S. Ct. 1788

(2005) ......... védemonenagpeennoesnnspatedbedapiionbbineemientaaenamaa 29
Brown & Williamson Tobacco Corp. v. Wigand,

913 F. Supp. 530 (W.D. Ky. 1996) ...............0......- 12, 13
California v. H&H Ship Serv. Co., No. 94-10182,

1995 WL 6192938 (9th Cir. Oct. 17, 1995)... 16
Camacho v. Autoridad de Telefonos de Puerto Rico,

BEB F.Bad 46Z (lat Cir. 1BBBD .occecccccscccscccscosscesccsscess 10, 11
Caterpillar Inc. v. Williams, 482 U.S. 386 (1987) ............ 25
Chapman v. Lab One, 390 F.3d 620 (8th Cir. 2004)......... 29
Chick Kam Choo v. Exxon Corp., 486 U.S. 140 (1988).....25

Cipollone v. Liggett Group, Inc., 505 U.S. 504
SOE eenscnsss

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 of-
ficial or individual capacity for any act under color of
such office or on account of any right, title or author-
ity claimed under any Act of Congress for the appre-
hension or punishment of criminals or the collection
of the revenue.

(emphasis added). Section 1442(a) requires that a defen-
dant: (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, 527
U.S. 423, 431, 119 S.Ct. 2069, 144 L.Ed.2d 408 (1999) (re-
quiring a “colorable federal defense” to a suit for “a[n] act
under color of office” and “a ‘causal connection’ between
the charged conduct and asserted official authority”);
Mesa v. California, 489 U.S. 121, 125, 109 S.Ct. 959, 103
L.Ed.2d 99 (1989) (recognizing the 1442(a) requirement of
“‘person|s}] acting under’ an officer of the United States or
any agency thereof” sued “for act|s] under color of such
office”); United States v. Todd, 245 F.3d 691, 693 (8th
Cir.2001) (requiring “a ‘colorable defense arising out of
[the defendant's] duty to enforce federal law’”); Paldrmic
v.. Altria Corp. Servs., Inc., 327 F.Supp.2d 959, 964
(E.D.Wis.2004) (incorporating all four requirements).
Watson and Lawson dispute only the first and second re-
quirements.

In Willingham v. Morgan, 395 U.S. 402, 406-07, 89
S.Ct. 1813, 23 L.Ed.2d 396 (1969), the Supreme Court ex-
plained why the federal officer removal statute was not
meant to be given a “narrow” or “limited” interpretation:

Da

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 of-
fices, and indeed the Federal Government itself, re-
quire the protection of a federal forum. This policy
should not be frustrated by a narrow, grudging inter-
pretation of § 1442(a)(1).

The primary purpose of giving the protection of a fed-
eral 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, 100 U.S. 257, 263, 25
L.Ed. 648 (1879), where the Court applied the original
version of the statute to revenue officers:

{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 un-
friendly. 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
conferred by those laws. The State court may admin-
ister not only the laws of the State, but equally Fed-
eral law, in such a manner as to paralyze the opera-
tions 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 exer-
cise of acknowledged Federal power arrested.
See also Arizona v. Manypenny, 451 U.S. 232, 243, 101
S.Ct. 1657, 68 L.Ed.2d 58 (1981) (“Respondent here, by
obtaining a federal forum, has fully vindicated the federal
policies supporting removal. The plainest evidence of this
vindication is the District Court's application of the im-
munity defense.”); Winters v. Diamond Shamrock Chem.
Co., 149 F.3d 387, 397-98 (Sth Cir.1998). The Supreme
Court interpreted the original version of the statute to ex-

6a

clude agencies’ removal ability under the statute. Pri-
mate Protection League v. Admin's. of Tulane Educ.
Fund, 500 U.S. 72, 87, 111 S.Ct. 1700, 114 L.Ed.2d 134
(1991). Congress responded by amending the statute to
explicitly permit agency removal. See Pub.L. 104-317,
§ 206(a)(1) (1996). Congress's decision to amend the stat-
ute to reverse Primate and permit agency removal pro-
vides further support for a broad interpretation of the fed-
eral officer removal statute.

Whether a defendant is “acting under” the direction of a
federal officer depends on the detail and specificity of the
federal direction of the defendant's activities and whether
the government exercises control over the defendant.

“{Rlemoval 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 com-
prehensive and detailed regulations.” Virden v. Altria
Group, Inc., 304 F.Supp.2d 832, 844 (N.D.W.Va.2004)
(quoting Ryan v. Dow Chem. Co., 781 F.Supp. 934, 947
(E.D.N.Y.1992)). Mere participation in a regulated indus-
try is insufficient to support removal unless the chal-
lenged conduct is “closely linked to detailed and specific
regulations.” Virden, 304 F.Supp.2d at 844 (quoting /n re
Wireless Tel. Radio Frequency Emissions Prods. Liab.
Litig., 216 F.Supp.2d 474, 500 (D.Md.2002), revd sub
nom. on other grounds, Pinney v. Nokia, Inc., 402 F.3d 430
(4th Cir.2005)). In contrast to the district court's decision
in this case, every other district court confronted with to-
bacco companies alleging they were acting under a federal
officer has remanded the case to state court. See Virden.
304 F.Supp.2d 832; Paldrmic v. Altria Corp. Servs., 327
F.Supp.2d 959 (E.D.Wis.2004); Tremblay v. Philip Morris,
231 F.Supp.2d 411 (D.N.H.2002).

Although tobacco companies’ efforts at federal officer
removal have not been successful in other courts, compa-
nies contracting with the government have had more suc-
cess. Courts have found private actors, working under

7a

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 performance of the
work. Virden, 304 F.Supp.2d at 845-46.

In a Fifth Circuit government contract case, Diamond
Shamrock Chemical Company manufactured herbicide,
now known as Agent Orange, for the government. Win-
ters v. Diamond Shamrock Chem. Co., 149 F.3d 387, 390
(5th Cir.1998). A nurse in Vietnam claimed that exposure
to Agent Orange caused her to develop lymphoma. /d.
Diamond removed the case to federal court and argued
that when it manufactured Agent Orange it was acting
under the direction of a federal officer. /d. at 398. The
government specified the formula for Agent Orange, as
well as the packaging, labeling and shipping require-
ments. /d. at 399. The government also inspected the la-
beling of the containers, id.; and compelled Diamond to
deliver the Agent Orange to it under threat of criminal
sanctions, id. at 398. In finding Diamond acted under the
direction of a federal officer, the court stated:

We are convinced that the government's detailed
specifications concerning the make-up, packaging,
and delivery of Agent Orange, the compulsion to pro-
vide the product to the government's specifications,
and the on-going supervision the government exer-
cised over the formulation, packaging, and delivery of
Agent Orange is all quite sufficient to demonstrate
that the defendants acted pursuant to federal direc-
tion 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 siinilar level in
Fung v. Abex Corp., 816 F.Supp. 559 (N.D.Jal. 1992).
Fung involved exposure to asbestos during Abex’s con-
struction of submarines pursuant to federal contract. /d.
at 570-71. The district court found that the government

8a

monitored Abex’s performance “at all times” and required
it to “construct and repair the vessels” according to the
contract specifications. Jd. at 572-73. In addition, the
government retained the right to inspect, test, and ap-
prove all contract supplies, and performed its own tests on
the submarines to ensure compliance with the contract.
Id. at 573. The district court found that this level of con-
trol and direction satisfied the “acting under” requirement
of section 1442(a). Id.

Here, the FTC exercises the same type of comprehen-
sive, detailed regulation and does the same kind of ongo-
ing 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
mod “ied the testing method to include the following re-
quirc nents:

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 [(jas_ nicotine)
from particulate matter,

6. Report tar content to the nearest whole milli-
gram and nicotine content to the nearest 1/10 milli-
gram.
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 govern-
ment’s directives to the tobacco industry is the specific

Ya

manner in which the industry agreed to disclose the tar
and nicotine ratings in advertising:
The disclosure will be in the following language:
____smg. “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 ciga-
rettes and disclosure of ratings. In Winters, the govern-
ment controlled the delivery and labeling of Agent Or-
ange. Here, the FTC controls the delivery of tar and nico-
tine information to consumers. The FTC’s ongoing moni-
toring of the cigarette industry far exceeds the monitoring
in Winters. The government in Winters monitored one
small aspect of the Agent Orange creation and distribu-
tion 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 contin-
ues 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 direc-
tion is more extensive than that in Winters, but the ques-
tion 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 con-
tract that gave the government legal rights to enforce its
directions. In this case, Philip Morris acted pursuant to a
voluntary industry agreement. Two of the courts con-
fronted with federal officer removal and the tobacco in-
dustry have found it significant that the agreement to test
and disclose ratings was a “voluntary” agreement, not a
formal rule. See, e.g.. Paldrmic, 327 F.Supp.2d at 966;
Virden, 304 F.Supp.2d at 841-42.

10a

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 offi-
cer. The FTC effectively used its coercive power to cause
the tobacco companies to enter the agreement. 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 pro-
posed 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 compa-
nies to adhere to a testing and advertising standard that
was prompted by the FTC. The FTC agreed with the in-
dustry 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 ciga-
rette advertising make these tar and nicotine disclo-
sures 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 regula-
tion 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 rulemak-
ing, 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

lla

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 in-
dustry 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 agree-
ment is that the FTC enforces the disclosure of the Cam-
bridge Filter Method’s results by bringing an action
against the company for deceptive advertising rather than
directly enforcing a regulation.’ Regardless of the en-
forcement method, the FTC has compelled the tobacco in-
dustry to advertise the tar and nicotine ratings as deter-
mined by the Cambridge Filter Method.

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 coinpany were to adver-
tise tar levels tnat differed from the published Cambridge
Filter Method results. Jn re Lorillard, 92 F.T.C. 1035.

‘“[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. Brown & Wil-
liamson Tobacco Corp., 778 F.2d 35, 44-45 (D.C.Cir. 1985).

_ l2a ,
(1978). That statement, along with others,’ sent a clear
signal to the tobacco companies that they would risk a de-
ceptive advertising claim if they failed to advertise tar

and nicotine levels in accordance with the Cambridge Fil-
ter Method.

In comparison, the government contract in Fung was
not compelled and could be considered a “voluntary
agreement” and yet was certainly enforceable once en-
tered. 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 Orange before it was compelled
to turn over its Agent Orange to the government. See
Winters, 149 F.3d at 399. Even a volunteer can be “acting
under” a federal officer. In Oregon v. Cameron, 290
F.Supp. 36, 37 (D.Or.1968), an unpaid supervisor of a vol-
unteer program and other participants were acting under
a federal officer when they entered a farm to help a mi-
grant worker obtain health care. Removal was appropri-
ate because the volunteers were assigned pursuant to fed-
eral statute “to work in meeting the health .. . needs of

migratory workers and their families.” /d. at 38.
They chose to participate in the program and acted in ac-
cordance with the duties they had been assigned, just as
Philip Morris has chosen to participate in the cigarette
industry and has agreed to follow the FTC’s policies.

We have been instructed by the Supreme Court to in-
terpret this removal statute broadly, to give effect to its
purpose. See Colorado v. Svmes, 286 U.S. 510, 517, 52
S.Ct. 635, 76 L.Ed. 1253 (1932); Willingham v. Morgan,

‘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 representa-
tions based on non-standardized tests having no official or governmen-
tal sanction would tend to confuse and mislead the public.” Letter
from FTC secretary Joseph W. Shea to Howard Bell (Oct. 25, 1967).

loa

395 U.S. 402, 406-07, 8S S.Ct. 1813, 23 L.Ed.2d 396
(1969); see also Winters, 149 F.3d at 398. In essence, the
requirement that the companies enter the agreement was
a rule in substance though not in form. If we give the
statute a broad and liberal interpretation as we are re-
quired to do, the fact that the FTC approved an agree-
ment instead of proposing a rule should not defeat re-
moval under section 1442(a).

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 FTC had gone so far as to specify the testing
methodology. To actually conduct the testing itself for
over twenty years, instead of delegating that task to the
industry, was outside the government's normal course of
conduct. The operation of a cigarette lab by the FTC was
“really something that was unique” and “unusual for .. .
the Commission.”

The record is filled with FTC announcements of its pol-
icv as well as communications between the FTC and the
cigarette industry, which show comprehensive and de-
tailed control. The record establishes that Philip Morris
acted under the direction of a federal officer.

Il.

For federal officer removal there must be a “causal con-
nection” that links the federal officer's direction and con-
trol to the acts challenged in the plaintiff’s 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, 304 F.Supp.2d 832,
844 (N.D.W.Va.2004) (quoting Rvan v. Dow Chem. Co..
781 F.Supp. 934, 947 (E.D.N.Y.1992)). Here, the acts

l4a
regulated by the FTC form the basis for Watson’s and
Lawson's class action.

The complaint in Tremblay v. Philip Morris, 231
F.Supp.2d 411, 418-19 (D.N.H.2002) was drawn more
narrowly. than Watson's and Lawson’s complaint. The
court in 7remblay held that Philip Morris's actions were
not conducted under the direction of a federal officer or
agency because the complaint did not challenge the “en-
forcement or wisdom of any FTC policy, procedure or
regulation.” /d. at 419. Instead, the complaint alleged
that Philip Morris manipulated the FTC's policies and ex-
ploited the Cambridge Filter Method. Jd. at 419.

The allegations of the complaint in Paldrmic also fo-
cused narrowly on the manufacture and design of the
cigarettes. “Although the Cambridge System is deeply
intertwined with plaintiff's 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.” 327 F.Supp.2d at 967. The conduct chal-
lenged in the complaint was the design or manufacture of
cigarettes, and the FTC did not direct Philip Morris how
to design and manufacture its product. /d.

In this case, Watson and Lawson challenge more than
just the cigarette design. They also challenge Philip Mor-
ris's “marketing and promoting” of low tar and nicotine
cigarettes, its “representations,” 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

ld5a

FTC results communicate to smokers. The FTC defines
“low tar” as 15.0 mg. or less tar.’ FTC Report to Congress,

Pursuant to the Federal Cigarette Labeling and Advertis-
ing Act (1979).

In 1971, the FTC and American Brands, Inc. entered
into a consent order based upon a complaint the FTC is-
sued. There, the FTC explained its view of how the use of
certain descriptors could constitute deceptive advertising
— it would be deceptive to use descriptors lke “low,”
“lower,” “reduced,” or other qualifying terms unless the
tar and nicotine levels were also stated. The tar and nico-
tine levels were to be measured by “the testing method
employed by the Federal Trade Commission,” which is the
Cambridge Filter Method. Watson and Lawson ciaim it is
deceptive for Philip Morris to use a low tar descriptor in
conjunction with its cigarette: FTC rating. The verv
combination Watson and Lawson challenge as deceptive is
the same combination the FTC requires to not be decep-
tive. 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 de-
signs 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 re-
flected. Conversely, if the smoker covered vents that the

’ 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.

l6a

machine’s cigarette holder left open, more tar and nicotine
would pass through the cigarette to the smoker than the
ratings reflected.

The FC was fully aware that the placement of ventila-
tion holes near the tip of the cigarette complicated the
comparability of the tar and nicotine ratings among dif-
ferent brands. The same problem reemerged in the early
1980's when Brown and Williamson developed the Bar-
clay brand, which had ventilation channels instead of ven-
tilation holes. Although the FTC recognized these prob-
lems and solicited comment on them, the FTC ultimately
chose to continue using the Cambridge Filter Method.

Watson and Lawson challenge the FTC's policy judg-
ment 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 grouping
of test results and descriptors renders advertising decep-
tive. Their claims are sufficiently related to the FTC’s di-
rect and comprehensive control to establish a causal con-
nection.

Il.

The final two requirements for removal under 28 U.S.C.
§ 1442(a) are thet 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 Wat-
son’s and Lawson's state law claims were preempted by
Section Five of the Federal Cigarette Labeling and Adver-
tising Act. Philip Morris's Notice of Removal cites Geier v.
American Honda Motor Co., 529 U.S. 861, 120 S.Ct. 1913,
146 L.Ed.2d 914 (2000) in support of its preemption de-
fense. The district court order stated that Watson and
Lawson “do not dispute that the federal preemption de-
fense raised by the Defendants is a ‘colorable’ claim to a
federal defense.” Ship op. at 14. The court cited United
States v. Todd, 245 F.3d 691, 693 (8th Cir.2001), that for a

l7a

defense to be colorable it need only be plausible and fur-
ther stated that it did not believe the district court opin-
ion in United States v. Philip Morris, Inc., 263 F.Supp.2d
72 (D.D.C.2003), prevents the preemption defense from
being “colorable.” Slip op. at 14 & fn. 5. The district court
emphasized that its decision “reaches no conclusion on the
merits of Philip Morris’ preemption defense but is ruling
that the FTC’s regulation of Philip Morris’ cigarette test-
ing and advertising rises to a level sufficient to invoke
federal jurisdiction under the federal removal statute.”
Slip op. at 24.

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 preemp-
tion 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 color 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, 395 U.S. 402, 407, 89 S.Ct. 1813, 23 L.Ed.2d
396 (1969). The defendant need only raise a “colorable”
federal defense. Id.; Jefferson County v. Acker, 527 U.S.
423, 431, 119 S.Ct. 2069, 144 L.Ed.2d 408 (1999). We
have no hesitation in concluding that Philip Morris, in its
Notice of Removal, has set forth a colorable federal de-
fense which Watson and Lawson have not contested.

The fourth requirement for federal officer removal is
that the party must be a “person” within the meaning of
the statute. Several courts have concluded that a corpo-
ration can be a “person” within the requirements of fed-
eral officer removal. See Rvan v. Dow Chem. Co., 781
F.Supp. 934, 946- 47 (E.D.N.Y.1992); Fung v. Abex Corp..

18a

816 F.Supp. 569, 572 (N.D.Cal.1992). We find the analy-
sis in Rvan to be persuasive.

We affirm the district court’s order denying remand and
finding removal proper under section 1442(a).

GRUENDER, Circuit Judge, concurring.

1 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 partici-
pant 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 of direction by a federal officer necessary
to invoke removal under 28 U.S.C. § 1442(a)(1). See Vir-
den, 304 F.Supp.2d at 845-46 (collecting cases embodying
the “regulation plus” concept, where limited discretion
under a government contract, action as an agent for the
federal government, or action in the nature of a govern-
ment employee, in addition to government regulation,
supported a defendant's invocation of the federal officer
removal statute).

In this case, as the court’s opinion makes clear, the
FTC's direction and control of the testing and marketing
practices at issue is extraordinary. The FTC developed
the Cambridge Filter Method, conducted the testing itself
for twenty years before farming it out to the cigarette
companies, threatened a deceptive advertising action if
the method of testing deviated in the smallest way from
the government-mandated method and controlled the dis-
closure of the results throughout. Because the FTC
passed the function of performing the testing to the ciga-
rette companies while allowing them no independent con-
trol of the process whatsoever, this is a rare case in which
federal officer jurisdiction is appropriate even in the ab-

19a

sence of a contract, principal-agent relationship, or near-
employee relationship with the government.

With these observations, I join the court’s opinion and
judgment.

20a

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF ARKANSAS
LITTLE ROCK DIVISION

Case No. 4:03-CV-519 GTE

LISA WATSON AND LORETTA LAWSON, INDIVIDUALLY
AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
Plaintiffs,

Vv.

PHILIP MORRIS COMPANIES, INC., AND
PHILIP MORRIS, INCORPORATED,
Defendants.

[Filed Dec. 12, 2003]

MEMORANDUM OPINION AND ORDER
Eisele, J.
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 Cir-
cuit 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. Plain-
tiffs frled the instant Motion for Remand on August 1.
2003. The Court has also received and reviewed the De-
fendants’ Memorandum in Opposition, filed on August 20,
2003; the Plaintiffs’ Reply Memorandum, filed on Septem-
ber 12, 2003; the Defendants’ Supplemental Memoran-
dum, filed on November 18, 2003; and the Defendants’ let-
ter of November 19, 2003 submitting additional exhibits

Zia

(66-71). Oral argument was conducted on November 20,
2003.

Plaintiffs are smokers who have consumed approxi-
mately 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 seg., by deceptively marketing ciga-
rettes as “lighter,” or lower in tar. The essence of Plain-
tiffs’ complaint is that Philip Morris advertised their ciga-
rettes as light despite the fact that the cigarettes conveyed
more tar and nicotine to smokers than shown by the Fed-
eral 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:

9. While marketing and promoting decreased tar
and nicotine deliveries, Defendants designed Cam-
bridge 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 to-
bacco 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 representa-
tions that their Cambridge Lights and Marlboro
Lights cigarettes are “light” and contain decreased tar
and nicotine and that their Marlboro Lights ciga-
rettes contain “lowered tar and nicotine.”

' Throughout this opinion, the Court's reference to “Philip Morris”
refers to Defendants Philip Morris Compamies. 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.

~

22a
—

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 busi-
ness 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 un-
fair business practices and/or deceptive and unlawful
conduct in connection with the manufacture, distribu-
tion, 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 com-
position that dilute the tar and nicotine content of
smoke per puff as measured by the industry stan-
dard testing apparatus, but not when used by the.
consumer;

ec. Intentionally manipulating the design and con-
tent of Cambridge Lights and Marlboro Lights ciga-
rettes 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 addi-
tives, such as ammonia, which resulted in the de-

23a

livery of greater amounts of tar and nicotine when
smoked under actual conditions than Defendants
represent bv 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 ef-
fects. including mutagenicity (genetic and chromo-
somal damage) caused by the tar ingested by the
consumer per milligram of nicotine.

13. Through longstanding fraudulent and unfair
conduct, Defendants willfully deceived consumers, in-
cluding the Plaintiffs named herein, regarding the
nature and effect of their “light” cigarettes.

Plaintiffs further indicate in their First Amended com-
plaint that thev seek class action status, with the class to
include all persons who purchased Cambridge Lights and
Marlboro Lights cigarettes in Arkansas for personal con-
sumption since those cigarettes were first sold in the state.

Defendants contend that this court has jurisdiction un-
der 28 U.S.C. § 1442(a) because Philip Morris is “a person
acting under’ the direction of an officer of the United
States 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 ciga-
rette 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
Morris deceptive advertising, not the faults of the Cam-
bridge Filter Method. The Court concludes, forthe rea-
sons stated below, that it has jurisdiction under 28 U.S.C.
§ 1442(a)(1). Therefore, the Court will not address re-
moval pursuant to 28 U.S.C. § 1331.

24a

Il. 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., Section
45(a) of the Act declares unlawful “unfair methods of com-
petition 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 un-
fair and deceptive acts, including unfair and deceptive ad-
vertisements 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 adver-
tising of tar and nicotine content claims in the following
excerpt from Brown & Williamson:

Since at least the mid-1950’s the FTC has been con-
cerned about the validity of tar and nicotine content
claims in cigarette advertising. In 1955 the Commis-
sion 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 ab-
sence of a standard method for testing cigarette deliv-
ery 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 Cam-
bridge Filter Method and is used with minor varia-
tions throughout the world. The test utilizes a smok-
ing machine that takes a 35 milliliter puff of two sec-
onds’ 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

25a

are smoked in the same way. The test does not
measure the amount of tar or nicotine that any indi-
vidual 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 requir-
ing disclosure of FTC tar and nicotine ratings in ciga-
rette advertising. Immediately following this pro-
posal, five leading cigarette companies, including
B & W, agreed among themselves to a voluntary dis-
closure plan (the “1970 agreement”). This plan pro-
vided 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 rule-
making proceeding.

Brown & Williamson, 778 F.2d at 36-37. The FTC's pro-
posed 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 re-
flected 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 writ-
ing 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

26a

Federal Trade Commission published test results,
under its present methodology, in all advertising
newspapers, magazines, and other periodicals pub-
lished 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.... Nec-
essarily, 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 pe-
riodic intervals of not more than six months....
Each of these companies is confident that the pro-
gram presented, which they intend to begin thirty
working days after the Commission has considered it
in lieu of any formal Trade Regulation Rule proceed-
ing 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 Test-
ing:-Request for Public Comment, Federal Trade Commis-
sion, 62 Fed.Reg. 48158, 1997 WL 563104 (February 12,
1997). The FTC itself tested cigarettes in its own lab us-
ing the Cambridge Filter Method until 1987. Jd. 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 Colum-
bia Federal District Court, regarding the approximately
twenty vear period in which the FTC tested cigarettes in
its own lab:

A. The point I was trying to make is that the . . . op-
eration 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 pro-

27a

gram like that to be maintained by the Commis-
sion.

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 run-
ning the testing for the cigarette industry, right?

A. It is both unusual for the Commission to be run-
ning the testing and to be the agency that speci-
fied 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 hav-
ing the FTC run the testing lab is unusual.

A. Among government programs it seems very un-
usual to have an agency actually doing the test-
ing 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 test-
ing 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 Ad-
viser, Cigarette Advertising and Testing, Federal Trade

“ TITL had been testing cigarettes under the Cambridge Filter
Methed prior to the transfer of authority in 1987. See Peeler Deposi-
tion at 198. The TITL lab and the FTC lab had collaborated to ensure
accuracy of test results. Jd The FTC considered the uniformity be-
tween TITL’'s testing results and the FTC lab’s testing results im abol-
ishing the FTC lab and transferring sole testing authority to TITL. /d.

28a

Commission dated June 30, 1987: see also Cigarette Test-
ing, 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 Do-
mestic 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.

The FTC recently described the FTC Method in a re-
quest for public comment published in the Federal Regis-
ter:

Thus, although some changes have been made, the
modified Cambridge Filter Method adopted by the
Commission in 1967 remains essentially in place to-
day. 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 ciga-
rette 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 ciga-
rettes should be less harmful than higher tar and
nicotine brands.

See Cigarette Testing: Request for Public Comment, Fed-
eral Trade Commission, 62 Fed.Reg. 48158. (February 12,
1997).

29a

In addition to mandating the disclosure of tar and nico-
tine values under the FTC Method in all cigarette adver-
tising, 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 disclo-
sure 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 adver-
tising in violation of the Federal Trade Commission Act
when they advertise cigarettes as “light” or “low tar” with-
out publishing Cambridge Filter Method test results that
reflect that the cigarettes are, in fact, “low tar.”

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 Ameri-
can 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. Jd.
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. /d.

‘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 456, Federal Trade Commis-
sion, 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 Com-
mission, 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 under-
stood to mean 6 mg or less of tar and nicotine. /d.

30a

In 1981, the FTC began an investigation of Brown and
Williamson, manufacturer of Barclay cigarettes, for adver-
tising 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 Bar-
clay cigarettes, and attempted to require Barclay adver-
tisements to state an estimated tar content of 3 to 7 mg. of
tar. Jd. at 38. Barclay refused, but revised its advertise-
ments to state that the 1 mg tar content was produced us-
ing 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. Jd. The District Court granted
injunctive relief, which the District of Columbia Court of
Appeals eventually curtailed on First Amendment
grounds. /d. 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 ad-
vertisements deceptive, and entered into a consent agree-
ment with American Tobacco prohibiting the ads.

Despite the FTC's pursuit of companies that did not dis-
close FTC Method test results with their “light” adver-
tisements, 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 hu-
man smokers when cigarettes are designed with ventila-
tion holes. Ventilation holes. like the various cigarette de-
sign 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 di-
rected that the FTC Method would not be changed. In
1981, the FTC evaluated the Cambridge Filter Method’s

sla

inability to measure the tar and nicotine content of Bar-
clay Cigarettes. See Brown & Williamson, 778 F.2d at 37.
Other cigarette manufacturers, including Philip Morris,
complained to the FTC that the ventilation system in Bar-
clay cigarettes produced a lower tar rating under the FTC
Method, but produced much higher tar when smoked by
actual humans. /d. 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. Jd. 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 Commis-
sion has conducted an ongoing review of the cigarette
testing methodology that, amoug other things, has
examined possible ways to measure the effects of
compensatory smoking, but to date no cigarette com-
pany, 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 ad-
vertising to better reflect the method's inability to meas-
ure 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. 7d.
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:

32a

Changes in cigarette design and increased knowl-
edge about human smoking behavior have high-
lighted 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 re-
sult, 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 ma-
chine measured yields are literal indicators of how
much tar and nicotine they will get from particular
brands of cigarettes. To the extent that smokers in-
terpret 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 compensa-
torv smoking--may underestimate the risk associated
with lower rated brands by assuming that a very low
tar vield necessarily translates into a correspondingly
low health risk. In fact, even the lowest rated ciga-
rette represents an important adverse health risk. . . .

The FTC protocol was based on cursory observa-
tions 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.

joa

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 In-
stitute at the request of the FTC, and requests comments
on ways to improve communication of the FTC Method rat-
ings through advertising. /d. In addressing the weak-
nesses of the current advertising requirements, the Com-
mission 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 educa-
tion efforts, could potentially inform smokers about
compensation and ways to avoid it. The Commission
believes, however, that unitary ratings will be less ef-
fective than a range of ratings in communicating to
smokers the variability in potential smoke ingestion.

The Commission is seeking comment on the desir-
ability 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 prob-
lems with the Cambridge Filter Method. See Defendants
Exhibit 63, FTC News (Nov. 24, 1998). Finally, Defen-
dant’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

34a

that the FTC had not come to a final determination as to
whether to keep, abandon, or revise the Method. See De-
fendants’ 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 dis-
close 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.

Ill. 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 Caterpil-
lar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96
L.Ed.2d 318 (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, 109 S.Ct. 959, 103 L.Ed.2d 99 (1989). “The right
to removal funder § 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,

35a

245 F.3d 691, 693 (8th Cir. 2001) (quoting Willingham v.
Morgan, 395 U.S. 402, 406, 89 S.Ct. 1813, 23 L.Ed.2d 396
(1969)).

A. Standard for Removal based on Federal Offi-
cer 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 of-
ficial 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 ap-
plicable. 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 Defen-
dant corporations are “persons” within the meaning of
§ 1442(a)(1). See Rvan 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 governmeni officer.”)
They also do not dispute that the federal preemption de-
fense raised by the Defendants is a “colorable” claim to a

federal defense.’ See United States v. Todd, 245 F.3d 691.

* The Court notes the case of ULS. v. Philip Morris. in which the Dis-
trict Court for the District of Columbia held that FTC jurisdiction over

36a

693 (8th Cir. 2001) (“For a defense to be considered color-
able, it need only be plausible; § 1442(a)(1) does not re-
quire a court to hold that a defense will be successful be-
fore removal is appropriate”). Plaintiffs, however, do con-
test 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 mar-
keting of “light” cigarettes.

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 per-
formed 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 re-
moval. There must also be detailed and specific involve-
ment by the federal government. /d. If direct and detailed
regulation does exist, the Defendant must have been fol-
lowing that federal direction in performing the actions
that form the basis of the lawsuit. Jd. To determine
whether Philip Morris acted under the direction of a fed-
eral officer, the Court must decide whether the FTC's
regulation of cigarette testing and advertising consti-
tutes 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

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 advertis-
ing. See U.S. v. Philip Morris. 265 F.Supp.2d 72 (D.D.C.2006.%. The
Court would consider this case in ruling on the merits of Defendants
preemption defense, but does not believe that lS. v. Philip Morris
prevents Defendants preemption defense from being “colorable~

37a

had sufficiently detailed contact with the contracting
agency to allow federal officer removal. In Crackau v. Lu-
cent, 2003 WL 21665135 (D.N.J. June 25, 2003), radar
technicians and operators sued the manufacturer of cer-
tain 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 pre-
sented evidence that the Army controlled training given to
technicians, wording in manuals accompanying radar de-
vices, and specifications of the radar system at issue in the
suit. Id. at 3. Lucent would have had to obtain prior ap-
proval from the Army before modifying the equipment
used in manufacturing the radar system. /d. at 3. Since
“government guidelines and specifications controlled Lu-
cent’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 con-
tractor for damages arising from injuries allegedly caused
by exposure to asbestos during manufacture of submarines
for the Department of Defense. The Department of De
fense monitored the manufacture of the submarines, re-
quired 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 govern-
mental oversight was “direct and detailed,” rendering fed-
eral officer removal appropriate. /d.

Another case involving a Department of Defense con-
tractor reached a different conclusion. In Ryan v. Dow
Chemical, civilians present in Vietnam sued the manufac-
turers of “Agent Orange” in state court for injuries caused
by exposure to the herbicide. See Rvan, 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. /d. The Court

38a

acknowledged that the interaction between the manufac-
turers and the Defense Department presented a close call,
but ultimately decided that federal officer removal was not
appropriate. Jd. at 947, 953. The Court distinguished the
design and formulation of Agent Orange from the produc-
tion and delivery of the herbicide. /d. 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. There-
fore, the Court concluded that the manufacturers did not
act under the direction of a federal officer when they cre-
ated Agent Orange. /d; 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 gov-
ernment 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 re‘ated
needs of ... migratory workers and their families.” Based
on this statute and the OKEO’s general directions that
VISTA volunteers were to work with migrant farm work-
ers, the Court concluded that the volunteers acted under
the direction of a federal officer in entering the farm to
pick up the child. Jd. at 38. The Court reached this con-
clusion even though 42 U.S.C. § 2992 emphasizes the lim-
ited 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

39a

the corporation for conspiracy to induce workers to breach
their employment agreements and for civil assault. /d. at
842. The Monrve County Legal Assistance Corp. received
a grant from the OKO to serve the needs of migrant farm
workers. Jd. 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. /d. 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. /d. at 847.

Courts have also applied § 1442(a)(1) to Medicare inter-
mediaries. The consistent holding from these cases is that
private companies acting as intermediaries in the Medi-
care 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. de-
nied, 422 U.S. 1048, 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.D.N.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.lowa
1968); see also Ryan, 781 F.Supp. at 949. Medicare inter-
mediaries 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 in-
termediaries. /d. at 949. After evaluating the medicare
intermediary removal caselaw, the Ryan court concluded
that these cases do not stand for the proposition that re-
moval solely on the basis of a contract with the govern-
ment is allowed under § 1442(a)(1). /d. at 949. Instead,
some additiona! level of involvement between private enti-
ties and the government is required for the private entity
to quahfy for federal officer removal. /d.

40a

The Eighth Circuit Court of Appeals has seldom consid-
ered 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 exten-
sively 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. /d.
at 846. The removing bank argued that federal officer ju-
risdiction existed because the Comptroller General of the
United States had approved the name change. /d. The
Eighth Circuit found this connection to a federal officer too
remote to warrant removal based on § 1442(a)(1). Jd. at
849, n. 13; but see First National Bank of Bellevue v. Bank
of Bellevue, 341 F.Supp. 960 (8th Cir. 1972) (Holding re-
moval under § 1442(a)(1) appropriate where the Secretary
of the Treasury and the Department of the Air Force ap-
proved 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 contro] 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 regula-
tion 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 cor-
poration] within the ‘acting under’ clause.” See Gurda
Farms, 358 F.Supp. at 844. The Court now turns to apply-

dla

ing 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 de-
rived from the FTC Method in its Malboro Light and Cam-
bridge 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 agree-
ment. 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 agreec-
ment. 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 ciga-
rette manufacturers to conduct testing in accordance with
the method and to disclose the testing results in all adver-
tising.

After the manufacturers entered into the agreement, the
FTC remained involved with cigarette testing and adver-
tising 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

42a

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 ciga-
rettes 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 decep-
tive 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 ac-
tions contrary to the 1970 agreement and advertising in-
consistent with the FTC Method to be deceptive advertis-
ing 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
‘ourt 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 re-

" Plaintiffs state in their Reply Memorandum of Law in Support of
Plaintiffs’ Motion to Remand: “As made clear in their Motion for Re-
mand, Plaintiffs do not take issue with the testing procedures Philip
Morris purports to utilize or with any federal policies that define ap-
propriate mechanisms and procedures for assaying tar and nicotine

43a

sponsible 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, advertis-
ing 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 advertis-
ing provisions of 15 U.S.C. 45(a). See In re Lorillard, 92
F.T.C. 1035 (1978).

The FTC’s consideration of the precise Cambridge
method weaknesses that produce the allegedly misleading
tar and nicotine »atings further supports the existence of
the requisite causal nexis between FTC regulation of
Philip Morris and the Plaintiffs’ claims. On multiple occa-
sions, 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
tTC continues to this day to mandate use of the FTC
Method for testing and advertising.’ Assume for the mo-
ment that, as Plaintiff alleges, Philip Morris intentionally
designs its cigarettes to manipulate the method to produce

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 mean-
ingless, 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 noth-
ing light about them.”

Philip Morris itself complained of inaccuracies in the FTC
Method’s testing results when it complaimed to the FTC in 1980 that
the Method inaccurately measured Brown & Williamson's Barclay
eyarettes. See Brown & Williamson, 778 F.2d at 37-38. As a result of
these complaints, the FTC reevaluated the FTC Method, but ulti-
mately decided to vontinue to mandate the Method (despite its short-
comings) for all cigarettes but the Barclay. /d. at 38. See Defendants’
Exhibit 33, Letter from E. Rock to Hon. T.A. Luken (June 17, 1988).

44a

tar and nicotine ratings below 15mg so that Philip Morris
can advertise those cigarettes as “Lights.” Such inten-
tional 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 re-
quires 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 nico-
tine 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.

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 F’FC’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 rat-
ing using the FTC Method is less than 15mg of tar. Plain-
tiffs admit that Marlboro Lights and Cambridge Lights are
both rated less than 15mg using the FTC Method. There-
fore, any contention that Philip Morris’ advertising of
these two cigarette brands as “Lights” is misleading
squarely confronts the FTC's mandate that cigarette com-
panies 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. Al-
though this case does not involve a government procure-
ment contract, the FTC's pervasive involvement in ciga-

45a

rette 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 manufactur-
ing process of radar systems and submarines. The Ryan
court's distinction between manufacturing of Agent Or-
ange 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 advertis-
ing 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 ac-
cordance 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 consti-
tutes 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 ex-
traordinary 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.

46a

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 test-
ing 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 pre-
emption 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 fed-
eral officer removal statute.” Accordingly, Philip Morris
properly removed this case to federal court pursuant to
§ 1442(a).

C. FTC Regulation Without Formal Rule

The Plaintiffs argue that the lack of formal trade regula- ~
tion 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 appropri-
ate without formal rules addressing interaction with mi-

“ As the Court stated above. Plaintiffs have admitted that Defen.
dants asserted federal defense of preemption satisties the “colorable
federal defense” requirement of § 1442. The Court notes that its denial
of Plaintiffs’ motion to remand is solely jurisdictional. The Court ex-
presses no opinion at this time as to the merits Defendants preemption
defense other than to say that it is colorable as required by § 1442.

47a

grant 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 ad-
vertising 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 sub-
committee 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 | think, therefore it is more effi-
cient 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 Commis-
sion has done has shown that it is faster to bring a
single case than to go through rulemaking... I'm in-
terested 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’ inter-
est better ... In the case of the cigarette industry,
which is what we're talking about, it is entirely rea-
sonable 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 | would much prefer to bring a case,
which can be done in a tenth of the time that making
a rule can be done. | 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

48a

on the FTC's approach to voluntary agreements and con-
sent orders:

Q. Is there anything nefarious about the FTC ob-
taining 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. | 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, re-
duced or like qualifying terms” in cigarette adver-
tising?

A. It would be designed to do that, it would be de-
signed 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 ten-
dency to regulate by obtaining voluntary compliance
rather than by pursuing formal proceedings. See Holloway

49a

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 com-

pound for deceptive advertising, the Court stated:
Indicative of |Congress’] fundamental policy judgment
jin amending the Federal Trade Commission Act] are
frequent references in the legislative history to the
Trade Commission's expertise in dealing with com-
mercial practices, its ability to act as a buffer in se-
curing voluntary compliance through informal pro-
ceedings, 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 ren-
dered the FTC particularly well suited to the respon-
sibility of giving life to the broad standard of ‘decep-
tiveness as applied to advertising.

See Holloway, 435 F.2d at 995.

The FTC coerced “voluntary” action in cigarette testing
and advertising in such a way that a formal rule is not re-
quired for § 1442(a) jurisdiction. The FTC made cigarette
manufacturers aware that it intended to promulgate a fed-
eral rule to establish a single test to measure tar and nico-
tine content in cigarettes. The FTC informed the compa-
nies 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 en-
force. they used their general statutory authority to pre-
vent unfair or deceptive acts or practices, including adver-
tising, that affect commerce to ensure compliance with the
agreement. When companies did not disclose tar and nico-

50a

tine 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 “lhght”
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 test-
ing 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 To-
bacco 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 & William-
son to obtain prior approval for using test results obtained
from a testing system other than the FTC Method in ciga-
rette 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 sanc-
tioned 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:

There is a problem, however, in the fact that, these
safeguards notwithstanding, the injunction places the

” 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 Bar-
clay cigarettes. See infra at 8-9.

Hla

burden on B & W to justify the advertisement of re-
sults from a different system of testing which it con-
siders superior to the FTC system, even if B & W in-
cludes a prominent disclaimer explaining that the
rating comes from a new system not comparable to ©
that used by the FTC and other manufacturers. Be-
cause 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 differ-
ent system solely with respect to Barclay, this objec-
tion would be groundless. If the different system pro-
duces results not comparable to the FTC ratings used
by other manufacturers, an advertisement displaving
only that system’s results for Barclay would have an
inherent tendency to deceive, even with an explana-
tory disclaimer. The sole utility of any particular mil-
ligram rating is in comparison with the analogous
ratings of other cigarettes. Thus, standing alone, the
Barclay rating from a new system would tend to en-
courage comparison with the inapposite FTC ratings
advertised by other manufacturers. This would tend
to deceive consumers.

The injunction as written, however, would even pro-
hibit B & W from devising a new testing svstem and,
in advertising its results for Barclay, providing in-
formation 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 demonstrat-
ing 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 in-
tact the injunctions requirement of prior FTC ap-

52a

proval of such advertising because that would en-
shrine the current FTC system as the sole legitimate
testing method, even though it was not passed pursu-
ant to section 18 of the FTC Act, 15 U S.C. § 67a
(1982), and subjected to the possibility of judicial re-
view. 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 re-
quires 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 un-
der 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 infor-
mation 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. Cir-
cuit’s opinion merely freed Brown & Williamson from hav-
ing 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 manu-
facturers 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

53a

requirement,’ lack of a formal rule does not deprive ciga-
rette manufacturers utilizing the FTC method te measure
tar and nicotine and to advertise their products from the
protection of the federal officer removal statute.

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 pri-
vate 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 adver-
tising for the past four decades and has compelled adher-
ence 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). Plain-
tiffs’ allegations here appear to be virtually identical to
those raised by the Plaintiffs in Tremblay and Pearson.

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 & William-
son, 778 F.2d at 45. Absent such a rule, the FTC is still tree to regu-
late such advertisements, but must do so by enforcing the deceptive
practices provision of 15 U.S.C. § 45(a) through comphance actions and
compelled consent orders. This, of course, is the FTC's preferred way
of regulating.

54a

Tremblay, 231 F.Supp.2d at 413; Pearson at 2. After care-
fully considering the issue, this Court simply finds itself in
disagreement with the holdings of Tremblay and Pearson.

The 7remblay Court concluded:

Nowhere in the complaint do the plaintiffs chal-
lenge the enforcement or wisdom of any FTC policy,
procedure or regulation. Further, the complaint does
not allege that Philip Morris is liable simply for com-
plying with the Cambridge Filter Method and FTC
advertising policies. Rather, it clearly and concisely
alleges that Philip Morris engages in a course of con-
duct aimed at manipulating the FTC's policies by ex-
ploiting loopholes in the Cambridge Filter Method.
Because the plaintiffs are the masters of their com-
plaint, [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 con-
duct 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 regard-
ing the regulation of the cigarette industry.

Tremblay, 231 F.Supp.2d at 419. The Pearson court essen-
tially adopted the reasoning of Tremblay. However, in
reaching its decision, the Pearson court relied more heav-

ily on the lack of a formal rule requiring use of the FTC
Method.

This Court has concluded otherwise. Philip Morris’ ad-
herence 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 pursu-
ant to its legislative mandate — amounts to more than
“underlving facts used by plaintiffs to support their allega-
tions.” See Pearson at 10. Though no formal rule was ever

dda

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 ad-
vertises 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 ar-
ticulated 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. A\l-
though Plaintiffs are masters of their Complaint, § 1442
contemplates federal jurisdiction when a plaintiff's claims
challenge private action taken at the direction of the fed-
eral government. Such is the case here. Since inadequa-
cies in FTC policies are at the heart of Plaintiffs’ com-
plaint, this is the type of action for which § 1442 provides
federal jurisdiction.

E. Judicial Estoppel

The Court rejects Plaintiffs’ argument that judicial es-
toppel prevents Philip Morris from arguing that federal
officer removal is appropriate. dJudicial estoppel bars a
party from taking “clearly inconsistent” positions in litiga-
tion. See New Hampshire v. Maine, 522 U.S. 742, 750-1,
121 S.Ct. 1808, 149 L.Ed.2d 968 (2001): Hossaini v. W. Mo.
Med. Ctr., 140 F.3d 1140, 1142-11438 (8th Cur. 1998). The
Eighth Circuit has commented that judicial estoppel is
limited to situations “tantamount to a knowing misrepre-
sentation to or even fraud on the court.” See Total Petro-
leum, 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 adver-

——_ ——

56a

tising of mentholated tobacco products to African Ameri-

cans.'' Philip Morris successfully argued that it could not

be sued under Bivens because it was not a state actor. De-
termining 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 di-
rection” of a federal officer sufficient to invoke federal ju-
risdiction under 28 U.S.C. § 1442. The Court agrees with
the Defendant that “judicial estoppel simply does not ap-
ply where a change in a party's position arises from differ-
ences in the legal standards relevant to the underlying ac-
tions.” See Defendant’s Memorandum in Opposition to
Plaintiff's Motion to Remand at 5; s.° 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 act-
ing under the direction of the FTC in the instant case. See
Total Petroleum, Inc., 822 F.2d at 738 n. 6.

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’ re-
quest for attorney fees and costs.

'' This action was premised on Bivens v. Six Unknown Named

L.Ed.2d 619 (1971). Bivens held that violation of the Fourth Amend-
ment by a federal agent acting under color of his authority gives rise to
a cause of action for damages consequent upon his unconstitutional
conduct.

57a

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 con-
trolling question of law as to which there is substan-

tial ground for difference of opinion and that an im-

mediate appeal from the order may materially ad-

vance 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 or-

der: 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 dif-
ference 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). Sev-
eral 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, 93%

58a

F.2d 1494, 1495-96 (Ist Cir. 1991), reversed on other
grounds by American National Red Cross v. S.G., 505 U.S.
247, 249, 112 S.Ct. 2465, 120 L.Ed.2d 201 (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, 119 S.Ct. 13822, 143 L.Ed.2d 448 (1999);
American National Red Cross v. S.G., 505 U.S. 247, 249,
112 S.Ct. 2465, 120 L.Ed.2d 201 (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 re-
mand 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 law-
suit to federal court under 28 U.S.C. § 1442(a)? The pres-
ence of a controlling question of law in this particular or-
der is especially clear. The dispositive question for juris-
dictional purposes is whether, given the FTC's regula-
tion 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 Ap-
peal from considering a district court's order remanding a

59a

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 inter- —
locutory appeal under § 1292(b). Jd. 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.IIL); Paldrmic v.
Altria Corp. Services, Case No. 03-C-649 (E.D.Wisc.);
Piscetta v. Philip Morris, Inc., Case No. 03-CV-1337-RLV
(N.D.Ga.); Stern v. Philip Morris USA, Case No. 03¢ev2556;
Virden v. Altria Group, Inc., Case No. 5:03-CV-61
(N.D.Va.).

Finally, certification will “materially advance the termi-
nation of this litigation.” A strong consideration in consid-
ering a § 1292(b) petition is the policy of “minimizing the
total burdens of litigation on parties and the judicial sys-
tem by accelerating or at least simplifying trial court pro-
ceedings.” 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 re-
move 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 inter-
locutory appeal could avoid “protracted and expensive liti-
gation.” See White, 43 F.3d 374 at 376. Therefore, if
Plaintiffs so choose, they shall have the statutorily enu-
merated ten days in which to file an application for inter-

locutory review with the Eighth Circuit Court of Appeals. '*

Failure to file such application within the ten day period would
result in loss of the right to petition for interlocutory appellate consid-
eration. See Jones v. Goodyear Tire & Rubber Co., 967 F.2d 514, 516
(Lith Cir. 1992).

60a

In this event, Plaintiffs shall also notify this court. To
avoid expensive and burdensome proceedings in the dis-
trict court, the Court orders that the filing of an applica-
tion 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.

IT IS THEREFORE ORDERED that the Plaintiffs’ Mo-
tion 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 ques-
tion of this case, as stated above, be and it is hereby, DES-
IGNATED FOR INTERLOCUTORY APPEAL under
§ 1292(b). The Plaintiffs shall have ten days to file an ap-
plication for interlocutory review with the Court of Ap-
peals for the Eighth Circuit. Upon filing of such an appli-
cation, 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 De-
fendants’ response to Plaintiffs’ Motion for Class Certifica-
tion 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 ap-
plication 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 interlocu-
tory review.

Dated this 12th day of December, 2003.

/s/_ Garnett Thomas Eisele
UNITED STATES DISTRICT JUDGE

6la

UNITED STATES COURT OF APPEALS
FOR.THE EIGHTH CIRCUIT

No. 04-1225

LISA WATSON, ET AL.,

Appellants,
v.

[Text truncated at 120,000 characters. The full text is on the page linked above.]

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0251%3A02. Public record. Not legal advice.