Amicus Curiae Brief — Watson v. Philip Morris Companies, Inc.

No. 05-1284

OFFICE OF ft

In the Supreme Court of the United 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

MorkRISs, INC., A CORPORATION, RESPONDENTS.

On Writ of Certiorari to the United States

Court of Appeals for the Eighth Circuit

BRIEF FOR THE STATES OF ILLINOIS, ALASKA,

ARIZONA, ARKANSAS, CALIFORNIA, COLORADO,

CONNECTICUT, DELAWARE, FLORIDA, GEORGIA,

HAWAII, IDAHO, INDIANA, IOWA, KANSAS, KENTUCKY,

LOUISIANA, MAINE, MARYLAND, MASSACHUSETTS,

MICHIGAN, MINNESOTA, MISSISSIPPI, MISSOURI,

MONTANA, NEVADA, NEW HAMPSHIRE, NEW JERSEY,

NEW MEXICO, NEW YORK, NORTH CAROLINA, NORTH

DAKOTA, OHIO, OKLAHOMA, OREGON,

PENNSYLVANIA, RHODE ISLAND, SOUTH CAROLINA,

SOUTH DAKOTA, TENNESSEE, UTAH, VERMONT,

VIRGINIA, WASHINGTON, WEST VIRGINIA, WISCONSIN

AND WYOMING, AND THE DISTRICT OF COLUMBIA, AS

AMICI CURIAE IN SUPPORT OF PETITIONER

GARY FEINERMAN* LISA MADIGAN

Solicitor General Attorney General of Illinois

100 West Randolph Street

MICHAEL SCODRO Chicago, Illinois 60601

Deputy Solicitor General (312) 814-3698

*Counsel of Record

[additional counsel listed on signature page]

SSS eee eee

2 ie ET oe

- 1} FER 8 2007

| |

- rit: LRA

= mS.

i

QUESTION PRESENTED

Whether a private actor doing no more than complying with

federal regulations 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.

ll

TABLE OF CONTENTS

Page

STEED 66s ccccecscvcsccevenss«s i

TAGE SFUMEEEEED 6 cccsvecccccsvcnseseves ili

INTEREST OF THE AMICI CURIAE ........6.00 00005 I

DEARMINE cccscesecess i. cenbseeeecaceuanneens l

SUMMARY OF ARGUMENT ...............000000: 5

NEE $40. 6-4.4 Gu Kak eaedxawnendadbeessennnds 6

I. The Eighth Circuit’s Interpretation Of Section

1442(a)(1) Upends Settled Principles Of Comity And

PE ccncueadvcecuvesvancestenekaasasses 6

Il. The Eighth Circuit’s Interpretation Of Section

1442(a)(1) Threatens To Undermine The Enforcement

Of State Consumer Protection And Other Laws ...... 9

A. Removal Slows The Development Of State Law

And Allows For Inconsistent Rulings ......... 10

B. Federal Courts Are Less Willing To Develop The

STEED cd ccecndddeceescances 13

C. At Best, The Eighth Circuit’s Rule Permits

Defendants To Force Plaintiffs Into Wasteful,

PEED Sic cccccveseesecceosee so

PPP OCTeT TTT TCT TTT TUTTE CTT TTT Te 19

ili

TABLE OF AUTHORITIES

Cases: Page

Alsup v. 3-Day Blinds, Inc.,

435 F. Supp. 2d 838 (S.D. Ill. 2006) .............. 17

Arizona v. Manypenny, 451 U.S. 232 (1981) ............ 8

Burford v. Sun Oil Co., 319 U.S. 315 (1943) ........... 12

Burton vy. R.J. Reynolds Tobacco Co.,

ee i re 13

Burton v. R.J. Reynolds Tobacco Co.,

884 F. Supp. 1515 (D. Kan. 1995)................ 16

Caterpillar Inc. v. Williams, 482 U.S. 386 (1987) ........ 7

Chick Kam Choo v. Exxon Corp., 486 U.S. 140 (1988) ... 7

City of Indianapolis v. Chase Nat'l Bank,

I 6db 6 dN ckeWeensbesensencekes 7

Colorado v. Symes, 286 U.S. 510 (1932) ...........005. 9

Falise v. American Tobacco Co.,

94 F. Supp. 2d 316 (E.D.N.Y. 2000) .............. ~43

Franchise Tax Bd. v. Construction Laborers

Vacation Trust, 463 U.S. 1 (1983) ............... 7,8

In re Guidant Corp. Implantable Defibrillators Prods.

Liability Litig., 428 F. Supp. 2d 1014

Sp cess Kbaee baw e es Kh ceaeee keeces 17

iv

TABLE OF AUTHORITIES-Continued

Page

Gulf Offshore Co. v. Mobil Oil Corp.,

es PI n.ks 6660s dccssesiventencceee’s 7

Home Valu, Inc. v. Pep Boys,

Zid FFG SEO CIC, BOOP oc ccccvccscccccccecese 14

Insolia v. Philip Morris Inc.,

BEG FIG FO CHG, BOSD i oc ccccscvevevecsess 14

Kaiser Steel Corp. v. W.S. Ranch Co.,

PT eT ETT TTT er 12

King v. Provident Bank,

428 F. Supp. 2d 1226 (M.D. Ala. 2006) ........... 17

Lontz v. Tharp, 413 F.3d 435 (4th Cir. 2005) ........... 8

Moore v. Sims, 442 U.S. 415 (1979) 0.22... -0cceeeeeee 7

Naylor v. Case & McGrath, Inc.,

- Pe Footy io Brrr rrr re 12

Oppenheimer v. York Int'l,

2002 WL 31409949 (Pa. Com. PI. Oct. 25, 2002).... 15

Parks v. Guidant Corp.,

402 F. Supp. 2d 964 (N.D. Ind. 2005) .......... 17, 18

Railroad Comm'n v. Pullman Co., 312 U.S. 496 (1941)... 10

Vv

TABLE OF AUTHORITIES-Continued

Schnall v, Hertz Corp., 78 Cal. App. 4th 1144,

93 Cal. Rptr. 2d 439 (2000) ..............008.

Seward v. Certo,

2006 WL 266150 (E.D. Pa. Feb. 2, 2006) .......

Shamrock Oil & Gas Corp. v. Sheets,

FOP Oak CREO os accxseseyscesen neues

Solomon v. Walgreen Co.,

TS Fae USED CSR Ce, 19GE) once cccccevesss

Tennessee v. Davis, 100 U.S. 257 (1879) ..........

Tritle vy. Crown Airways, Inc.,

Fae FeO) CAEN CO, FOOED occ cccccevesesese

Tyler v. Rapid Cash, LLC,

930 So.2d 1135 (La. App. 2006) ...........05.

United Mine Workers v. Gibbs, 383 U.S. 715 (1966) ....-

Werwinski v. Ford Motor Co.,

286 F.3d 661 (3d Cir. 2002) .............005.

Zwiercan vy. General Motors Corp.,

2002 WL 31053838 (Pa. Com. Pl. Sep. 11, 2002) ...

vi

TABLE OF AUTHORITIES-Continued

Page

Statutes and Rule:

Be Ue BOOUIEED cccccccccccccccccccccses passim

AED co ccccccescédcccccceccosescece 18

Federal Rule of Civil Procedure 9(b) ...........5-045- 16

Miscellaneous:

Jack E. Karns, State Regulation of Deceptive Trade

Practices Under “Little FTC Acts”: Should

Federal Standards Control?, 94 Dick. L. Rev.

DE kc pabaeencesbevccscdcssoccceees 10

John R. Knight, State Law Deceptive & Unfair Trade

Practice Claims in Federal Court, 43 DEC Fed.

PE cc ceaecoscccccessvescvceeves 16

National Consumer Law Center, Unfair & Deceptive

Acts & Practices (2001) .............55. 9,11, 12

Victor E. Schwartz & Cary Silverman, Common-Sense

Construction of Consumer Protection Acts, 54

Se BEE ccccccccccascctons 9,11

19 Charles Allan-Wright, Arthur R. Miller & Edward

H. Cooper, Federal Practice & Procedure

TT ere rey TT ery Te TT TTT ino Oe

INTEREST OF THE AMICI CURIAE

This case asks whether a private entity subject to “detailed”

and “comprehensive” federal regulation may, on that ground

alone and pursuant to 28 U.S.C. §1442(a)(1), remove to federal

court a lawsuit against it raising exclusively state law claims.

Amici States have a critical interest in this matter. State

courts exercise general jurisdiction and are entrusted to resolve

federal defenses like the preemption defense asserted by

respondents here. By permitting private entities sued in state

court to remove their suits to federal court solely because they

are federally regulated and claim federal preemption, the Eighth

Circuit upset the division of labor between state and federal

courts. The Eighth Circuit’s decision cannot be reconciled with

the text of §1442(a)(1) and prior decisions of this Court, and

offends settled principles of comity and federalism.

The Eighth Circuit’s dramatic expansion of federal removal

jurisdiction, moreover, threatens the States’ fundamental

interest in the enforcement of consumer protection acts and

other state laws. Consumer fraud statutes, like the Arkansas

law at issue here, depend upon judicial interpretation for their

development. But federal court construction of state law is not

binding on state courts, and state law claims removed to federal

court deprive state courts of the chance to develop state law and

clarify its requirements. In addition, federal courts are openly

hesitant to develop the contours of state law without clear

guidance from state courts. Finally, even if plaintiffs succeed

in remanding some cases to state court, removals encouraged by

the Eighth Circuit’s rule will add needlessly to the time and

expense of litigating important, public law claims.

STATEMENT

1. Petitioners Lisa Watson and Loretta Lawson, on behalf

of a putative class of Arkansas cigarette smokers, filed suit

2

against respondents in Arkansas state court. Pet. App. 20a, 23a.

The suit alleged that respondents violated the Arkansas

Deceptive Trade Practices Act by misleadingly marketing

certain brands as “light” cigarettes with less tar and nicotine.

Id. at 63a-66a, 68a-72a. Petitioners further claimed that

respondents engineered these brands so that the machines used

to test their tar and nicotine content would register lower levels

than smokers actually received. Jd. at 63a-65a, 69a-70a.

2. Respondents removed the lawsuit to federal district

court, invoking 28 U.S.C. §1442(a)(1), which authorizes

removal by a federal officer or “any person acting under” an

officer who is “sued in an official or individual capacity for any

act under color of such office.” Pet. App. 74a. Respondents

claimed that they were “acting under” a federal officer within

the meaning of §1442(a)(1) because the Federal Trade

Commission (“FTC”) “has extensive authority to monitor and

regulate virtually all aspects of cigarette advertising” and

requires respondents to employ the mechanical testing method

whose results petitioners challenge as misleading. Pet. App.

76a, 78a.

The district court denied petitioners’ motion to remand the

suit to state court. Pet. App. 20a. The court identified four

requirements for removal under §1442(a)(1): (1) respondents

“must have acted under the direction of a federal officer’; (2)

they must “raise a ‘colorable’ federal defense to [petitioners’]

claims”; (3) they must show “a causal nexus between [these]

claims and the acts [respondents] performed under color of

federal office”; and (4) they must be “persons” for purposes of

the statute. Pet. App. 35a. The district court disagreed with

petitioners’ contention that respondents failed to satisfy two of

these elements—the need to “‘act[] at the direction of a federal

officer,” and the need for “a causal nexis” between petitioners’

claims and actions respondents took under federal direction. /d.

at 35a-36a.

3

As to the first, the district court held that respondents “acted

under” the FTC because the agency has regulated “cigarette

testing and advertising” for “over forty years” with “detailed

and specific” requirements. Pet. App. 41a. The court cited a

1970 letter agreement, entered into in lieu of formal FTC

regulation, in which cigarette manufacturers agreed to disclose

tar and nicotine levels in all of their advertising. Jd. at 25a-26a,

4la. The court also relied on the fact that the FTC itself

performed the tar and nicotine tests for many years, and that it

retains the power to oversee and monitor private testing, which

continues to follow the FTC’s prescribed methodology, the

Cambridge Filter Method. /d. at 27a, 41a-42a. Finally, the

court relied on a collection of FTC actions against individual

companies and a 1978 advisory opinion as evidence that, in the

FTC’s view, conduct “contrary to the 1970 [letter] agreement

and advertising inconsistent with” the FTC’s prescribed testing

methods was “deceptive advertising in violation” of federal

law. Id. at 42a.

Turning to causation, the district court found a sufficient

nexus between petitioners’ claim that respondents had

manipulated their product to fool the FTC’s testing method and

the agency’s demand that companies use the results of that

method in their advertising. Pet. App. 42a-43a. The court

deemed it material that the FTC is aware that the Cambridge

Filter Method permits “the very inaccuracies” that petitioners

allege in their complaint, yet continues to require testing under

that method. /d. at 43a.

3. The district court certified its order for interlocutory

appeal, Pet. App. 59a-60a, and the Eighth Circuit affirmed. The

court determined that respondents operated under sufficiently

“comprehensive, detailed [FTC] regulation” to be “acting

under” federatauthonity for purposes of §1442(a){1). Pet. App.

8a. Like the district court, the court of appeals cited the FTC’s

requirement that companies test tar and nicotine content using

4

the Cambridge Filter Method, and that the FTC formerly

performed this test and that today’s private testing remains

subject to FTC inspection and verification. /d. at 3a, 8a-9a.

And while recognizing that the 1970 letter agreement was

voluntary on the part of participating manufacturers, id. at 9a,

the court found the agreement sufficiently “coercive” because

companies entered into it on the threat of more formal

regulation, and also because companies that violate the

agreement’s terms risk FTC action for deceptive advertising.

Id. at 10a-1 1a.

The Eighth Circuit further found the required “causal

connection” between “the federal officer’s direction and

control” and “the acts challenged in the plaintiff's complaint.”

Pet. App. 14a. According to the court, because petitioners

challenged respondents’ advertising, “[{i}t cannot seriously be

argued that the FTC does not direct and control the advertising

of cigarettes.” Jbid. The court cited a 1971 consent order

between the FTC and another cigarette manufacturer, American

Brands, Inc., in which the agency indicated that it was

misleading to advertise using terms like “low” or “reduced”

without disclosing tar and nicotine levels as determined by the

Cambridge Filter Method. /d. at 15a. The court found a

sufficient nexus between these FTC requirements and

petitioners’ “claim that this grouping of test results and

descriptors renders advertising deceptive.” Jd. at 16a.

Judge Gruender concurred and wrote separately “to

emphasize that [the court’s] decision * * * should not be

construed as an invitation to every participant in a heavily

regulated industry to” remove suits to federal court. Pet. App.

18a. In most cases, Judge Gruender wrote, “a contract,

principal-agent relationship, or near-employee relationship with

the government will be necessary.” /bid. The concurrence

stressed that it is the “extraordinary” level of FTC control that

makes this case different. /bid.

5

SUMMARY OF ARGUMENT

In the decision below, the Eighth Circuit dramatically

expanded removal jurisdiction under 28 U.S.C. §1442(a)(1).

That provision permits private parties to remove suits to federal

court only when they act on behalf of federal officers. The

Eighth Circuit’s rule, by contrast, authorizes removal by any

private party subject to sufficiently “detailed” and

“comprehensive” federal regulation.

For the reasons set forth by petitioner and the United States,

the Eighth Circuit’s interpretation of §1442(a)(1) cannot be

reconciled with the text, structure, purposes, or history of the

statute. And for the reasons set forth below, the Eighth

Circuit’s interpretation offends principles of comity and

federalism. Federal courts “scrupulously confine their own

jurisdiction” within statutory limits. Shamrock Oil & Gas

Corp. v. Sheets, 313 U.S. 100, 109 (1941) (internal quotations

omitted). The Eighth Circuit’s decision ignores this limitation

on federal judicial power and erroncously authorizes defendants

to remove a host of cases raising exclusively state law claims.

In addition, if allowed to stand, the Eighth Circuit’s

interpretation of §1442(a)(1) will undercut protections

guaranteed by state law. The Eighth Circuit’s rule channels a

new class of lawsuits into federal court under a removal

standard that is not only “somewhat amorphous” (in the district

court’s words, Pet. App. 41a), but also extremely permissive,

considering the broad spectrum of activity governed by federal

rules that are at least as “detailed” and “comprehensive” as the

informal FTC directives that respondents invoked to justify

removal. Because federal court interpretations of state law are

not binding in state court, resolving state law disputes in the

federal system—particularly disputes that hinge on novel or

unresolved questions of state law-—slows the development of

state legal doctrine and could foster inconsistency. In addition,

6

federal courts are loathe to develop state law beyond the bounds

effected by existing state court precedent. Suits removed to

federal court are therefore less likely to afford citizens as much

protection as would be available in state court.

Defendants in other industries subject to federal regulation

have already invoked the Eighth Circuit’s decision to remove

state law claims to federal court. And even if such cases are

ultimately remanded to state court, removal adds significantly

to the time and expense of litigating state law claims. This

wasteful collateral litigation is harmful in its own right, and by

diminishing the prospective value of state law claims, it

discourages would-be private plaintiffs, who play an important

role in vindicating state law rights and deterring their violation.

Amici States respectfully urge this Court to reverse the

Eight Circuit’s judgment and hold that federal officer removal

under §1442(a)(1) does not apply merely because a defendant

operates pursuant to federal regulation, even the alleged

“detailed, comprehensive” regulation of the ie type found by the

Eighth Circuit here.

ARGUMENT

I. The Eighth Circuit’s Interpretation Of Section

1442(a)(1) Upénds Settled Principles Of Comity And

Federalism.

States retain the power “to provide for the determination of

controversies in their courts,” and that power “may be restricted

only by the action of Congress in conformity with the Judiciary

Articles of the Constitution.” Shamrock Oil & Gas Corp. v.

Sheets, 313 U.S. 100, 109 (1941). Both Congress and this

Court have appropriately cabined federal jurisdiction in line

with this principle. The “dominant note” in successive

congressional enactments regarding the scope of diversity

jurisdiction has been “one of jealous restriction, of avoiding

7

offense to state sensitiveness, and of relieving the federal courts

of the overwhelming burden of business that intrinsically

belongs to the state courts.” City of Indianapolis v. Chase Nat'l

Bank, 314 U.S. 63, 76 (1941) (internal quotations omitted); see

also Shamrock Oil & Gas Corp., 313 U.S. at 108 (“[ T]he policy

of the successive acts of Congress regulating the jurisdiction of

federal courts is one calling for the strict construction of

[removal] legislation.”). Likewise, this Court has admonished

lower federal courts to “scrupulously confine [their] own

jurisdiction to the precise limits which [the jurisdictional]

statute has defined,” with “[djue regard for the nghtful

independence of state governments.” Shamrock Oil & Gas

Corp., 313 U.S. at 109 (internal quotations omitted).

Consistent with this restrictive notion of federal

jurisdiction, the “well-pleaded complaint rule” limits federal

question jurisdiction to cases where the federal question appears

“on the face of the plaintiff's properly pleaded complaint.”

Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). Federal

defenses, including preemption, do not give rise to federal

jurisdiction “even if the [preemption] defense is anticipated in

the plaintiff’ s complaint, and even if both parties admit that the

defense is the only question truly at issue in the case.”

Franchise Tax Bd. v. Construction Laborers Vacation Trust,

463 U.S. 1, 14 (1983); see also Caterpillar Inc., 482 U.S. at

393. The well-pleaded complaint rule entrusts these potentially

dispositive federal law disputes to state courts, consistent with

the longstanding presumption that state courts are “competent

to resolve federal issues.” Chick Kam Choo v. Exxon Corp.,

486 U.S. 140, 150 (1988); see also Moore v. Sims, 442 U.S.

415, 430 (1979) (noting that this Court has “repeatedly and

emphatically rejected” the notion that “state courts [are] not

competent to adjudicate federal constitutional claims”); Gulf

Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 478 n.4 (1981)

8

(“Permitting state courts to entertain federal causes of action

facilitates the enforcement of federal rights.”’).

Federal officer removal under 28 U.S.C. §1442(a)(1) is an

exception to the well-pleaded complaint rule, for it applies even

where the complaint does not raise any issue of federal law.

But the Eighth Circuit’s unduly broad interpretation of

§1442(a)(1) allows the exception to swallow the rule. The

well-pleaded complaint rule prevents “potentially serious

federal-state conflicts,” Franchise Tax Bd., 463 U.S. at 10, by

placing upon state courts the responsibility to adjudicate federal -

defenses to state law claims. Remarkably, the Eighth Circuit

used the basis for respondents’ preemption

defense—compliance with federal regulation, Pet. App.

17a—as grounds for federal jurisdiction, precisely what the

well-pleaded complaint rule prohibits. If being subject to

federal regulation and being able to assert a federal preemption _

defense is sufficient to trigger federal officer removal

jurisdiction, then the well-pleaded complaint rule will be

substantially undermined.

It is for this reason that the Eighth Circuit’s decision upsets

the established division of labor between state and federal

courts. Rather than limiting federal officer removal to private

parties who act on behalf of the national government, as

petitioners urge, the Eighth Circuit interpreted §1442(a)(1) to

undo much of what settled law has done to preserve state court

jurisdiction. Like every other grant of authority to the federal

courts, removal jurisdiction implicates “the relation of the

general government to the government of the States,” Tennessee

v. Davis, 100 U.S. 257, 260 (1879), and “carries significance

for federal-state relations.” Arizona v. Manypenny, 451 U.S.

232, 239 (1981); see also, e.g., Lontz v. Tharp, 413 F.3d 435,

440 (4th Cir. 2005) (Wilkinson, J.) (observing the “significant

federalism concerns implicated by” “removal jurisdiction’’)

(internal quotations omitted). Section 1442(a)(1) thus must be

9

construed “with the highest regard for” the “equality” between

federal authority and the States’ power “to make and enforce

their own laws.” Colorado v. Symes, 286 U.S. 510, 518 (1932).

The Eighth Circuit’s drastic expansion of federal officer

removal jurisdiction, which views federal regulation alone as

grounds for removal, cannot be reconciled with these principles.

Il. The Eighth Circuit’s Interpretation Of Section

1442(a)(1) Threatens To Undermine The Enforcement

Of State Consumer Protection And Other Laws.

The Eighth Circuit’s expansion of federal officer removal

jurisdiction, if upheld, will have the adverse practical

consequence of making it more difficult to enforce the full

range of protections granted by state law. Deceptive trade laws,

like the Arkansas law at issue here, are a case in point.

“All fifty states, the District of Columbia, Puerto Rico,

Guam, and the Virgin Islands have enacted at least one statute

with broad applicability to most consumer transactions, aimed

at preventing consumer deception and abuse in the

marketplace.” National Consumer Law Center, Unfair &

Deceptive Acts & Practices § 1.1, at 1 (2001). These laws are

an intended and necessary adjunct to regulatory action under

federal law by the FTC. “The federal and state laws were meant

to complement each other,” and “the FTC urged states to adopt

their own little FTC Acts as a way of combining resources to

target unfair and deceptive practices at both the local and

national levels.” Victor E. Schwartz & Cary Silverman,

Common-Sense Construction of Consumer Protection Acts, 54

U. Kan. L. Rev. 1, 16 (2005).

State attorneys general and other state agencies can bring

suit to enforce these statutes, National Consumer Law Center,

supra, § 10.3.4, at 785, and nearly every jurisdiction authorizes

private suits as well. /d. § 7.2.1, at 537-538. Each year, state

attorneys general collectively file thousands of such suits, Pet.

10

Supp. App. la, which together with private actions play a

critical role in combating consumer fraud nationwide. See Jack

E. Karns, State Regulation of Deceptive Trade Practices Under

“Little FTC Acts”: Should Federal Standarus Control?, 94

Dick. L. Rev. 373, 374 (1990) (state acts are “important

litigation weapons in commercial and consumer disputes”).

The Eighth Circuit’s interpretation of §1442(a)(1), by

permitting removal of state law actions simply because the

defendants are subject to extensive federal regulation, threatens

the enforcement of state consumer protection and other laws in

at least three ways. First, a federal court’s construction of state

law is not binding on state courts, and removal of state law

claims to federal court fosters inconsistent rulings and deprives

state courts of the chance to develop state law. Second, federal

courts are openly reluctant to develop the contours of state law

broadly or to entertain untested legal theories, undercutting

consumer and other protections offered by state law. Finally,

the Eighth Circuit’s decision has already inspired defendants in

federally regulated industries to remove to federal court

lawsuits raising only state law claims. Even if such cases are

later remanded, defendants will have succeeded in bogging

down state law litigation in costly and time-consuming

collateral matters.

A. Removal Slows The Development Of State Law And

Allows For Inconsistent Rulings.

“(N]o matter how reasoned the judgment of [a federal]

district court may be” on a question of state law, “it cannot

escape being a forecast rather than a determination.” Railroad

Comm'n v. Pullman Co., 312 U.S. 496, 499 (1941). Because a

federal court’s construction of state law does not bind state

courts, federal decisions do not make that body of law any more

certain or predictable. The Eighth Circuit’s expansive take on

1]

federal officer removal jurisdiction exacerbates this problem by

rerouting many more cases from state to federal court.

The need for case-by-case development of state law is

particularly acute when it comes ta state deceptive trade laws.

Like the Federal Trade Commission Act itself, those laws are

typically drafted in general terms—“prohibiting all conduct that

is ‘unfair’ or ‘deceptive’”’—and thereby afford courts “the

power to make reasoned choices” on a case-by-case basis.

Schwartz & Silverman, 54 U. Kan. L. Rev. at 3; see also id. at

15 (“Although these laws take various forms, each broadly

prohibits unfair or deceptive acts, as does the FTC Act.”).

These laws are general by design. As Congress recognized

in passing the FTC Act, because ““‘it would undertake an

endless task’ by attempting to provide an exhaustive list of

prohibited practices,” it was necessary to draft the statutory text

in broad terms. /d. at 9; see also Schnall v. Hertz Corp., 78 Cal.

App. 4th 1144, 1153-1154, 93 Cal. Rptr. 2d 439, 446 (2000)

(noting that legislature used “sweeping language” in state unfair

competition law “to permit tribunals to enjoin on-going

wrongful business conduct in whatever context such activity

might occur,” and that the law was “intentionally framed in

* * * broad, sweeping language * * * to enable judicial

tribunals to deal with the innumerable new schemes which the

fertility of man’s invention would contrive”) (internal

quotations omitted). Practical realities make it “impossible to

draft in advance detailed plans and specifications of all acts and

conduct to be prohibited,” for “unfair or fraudulent business

practices may run the gamut of human ingenuity and

chicanery.” /d. at 1154, 93 Cal. Rptr. 2d at 447 (internal

quotations omitted); National Consumer Law Center, supra,

§ 1.1, at 1 (“Legislatures and courts have been careful to

guarantee that [unfair or deceptive acts or practices] statutes are

broad and flexible, so that they can apply to creative, new forms

of abusive business schemes in almost all types of consumer

12

transactions.”). Indeed, “(t]he broad, expansive, developing

nature of [these] statues is their unique strength.” National

Consumer Law Center, supra, § 1.1, at 2.

Because “[w]hat constitutes an unfair trade practice is

determined on a case-by-case basis,” Tyler v. Rapid Cash, LLC,

930 So.2d 1135, 1140 (La. App. 2006), the development of

consumer fraud law depends critically on the resolution of

individual disputes. By expanding the range of cases subject to

removal under §1442(a)(1), the Eighth Circuit’s rule promises

to deprive state courts of numerous opportunities to add depth

and clarity to state law. Cf. Naylor v. Case & McGrath, Inc.,

585 F.2d 557, 564-565 (2d Cir. 1978) (abstaining to allow

Connecticut courts to resolve unsettled issues under state Unfair

Trade Practices Act).

Moreover, because federal court interpretations of state law

do not bind state courts, expanding removal jurisdiction

increases the likelihood that courts will treat similarly situated

parties differently. See infra pp. 13-17; cf. Kaiser Steel Corp.

v. W.S. Ranch Co., 391 U.S. 593, 594 (1968) (per curiam)

(holding that federal court should abstain in favor of state court

resolution because “[s]ound judicial administration requires that

the parties in this case be given the benefit of the same rule of

law which will apply to all other businesses and landowners

concerned with the use of this vital state resource’’); Burford v.

Sun Oil Co., 319 U.S. 315, 327 (1943) (recognizing that

allowing federal courts to adjudicate certain state law claims

would cause “[dJjelay, misunderstanding of local law, and

needless federal conflict with the State policy,” and citing

instances “where [a] federal court has flatly disagreed with the

position later taken by a State court as to State law”).

“Needless decisions of state law should be avoided [by federal

courts} both as a matter of comity and to promote justice

between the parties, by procuring for them a surer-footed

reading of applicable law.” United Mine Workers v. Gibbs, 383

13

U.S. 715, 726 (1966) (footnote omitted). Far from assuring

parties “a surer-footed reading of’ state law, the Eighth

Circuit’s rule would remove a host of state law claims to federal

courts, which do not have the power to render controlling

pronouncements of state law.

In short, by permitting defendants to remove cases under

§1442(a)(1) when they operate in any of the many spheres

covered by “comprehensive” or “detailed” federal regulation,

the Eighth Circuit’s rule will deprive state courts of the

opportunity to develop and clarify state law and will open the

door to inconsistent decisionmaking.

B. Federal Courts Are Less Willing To Develop The

Contours Of State Law.

The Eighth Circuit’s rule also undermines the enforcement

of state law because federal courts are less likely to develop the

contours of state law to the same extent state courts would do

absent removal. “A federal court of appeals is necessarily

limited in its ability to speak to questions of state law with any

certitude” and “generally must be more conservative in

resolving novel issues of state law than the highest state court,

since [federal courts] are limited to predicting the proper

disposition based on earlier precedents developed under

substantially different social and economic conditions.” Falise

v. American Tobacco Co., 94 F. Supp. 2d 316, 356 (E.D.N.Y.

2000). Federal courts view themselves as “Erie-bound to apply

state law as it currently exists,” not to “change that law or-adopt

innovative theories ofrecovery,” Solomon v. Walgreen Co.,975

F.2d 1086, 1089 (5th Cir. 1992), for it is not “the function of

the federal court to expand the existing scope of state law.” 19

Charles Allan Wright, Arthur R. Miller & Edward H. Cooper,

Federal Practice & Procedure § 4507, at 207 (1996).

Accordingly, “[f]ederal court is not the place to press innovative

theories of state law.” Burton v. R.J. Reynolds Tobacco Co.,

14

397 F.3d 906, 913 (10th Cir. 2005) (internal quotations

omitted).

This dynamic is illustrated by /nsolia v. Philip Morris Inc.,

216 F.3d 596 (7th Cir. 2000), where the piaintiffs contended

that the cautious approach taken by federal courts when

interpreting state law is unfair where a suit is removed to

federal court over the plaintiffs’ objection: “The plaintiffs say

they tried to litigate this in state court, but the tobacco

companies—as they generally do in cases like this—removed

the case to federal court.” Jd. at 607. The Seventh Circuit

recognized that “plaintiffs are in a predicament because state

law in this area is stunted by the ability of tobacco companies

to remove cases under diversity jurisdiction.” /bid. But noting

that “[w]hen confronted with a state law question that could go

either way, the federal courts usually choose the narrower

interpretation that restricts liability,” the court concluded that

the plaintiffs’ “bind” did not “justify the federal courts”

recognizing a “new tort claim” under state law. /bid.

Likewise, in Tritle v. Crown Airways, Inc., 928 F.2d 81 (4th

Cir. 1990), although the plaintiffs objected that removal of their

suit would “preclude the [state] courts from ever reaching

[their] question” of state law, the Fourth Circuit adhered to the

rule that federal courts must not “surmise or suggest” an

expansion of state law that “has not been recognized by that

jurisdiction’s own courts.” /d. at 84 (internal quotations

omitted); see also Home Valu, Inc. v. Pep Boys, 213 F.3d 960,

965 (7th Cir. 2000) (observing, in case removed to federal

court, that “[wjhere, as in this case, we are faced with two

equally plausible interpretations of state law, we generally

choose the narrower interpretation which restricts liability,

rather than the more expansive interpretation which creates

substantially more liability’) (internal quotations omitted).

15

The Third Circuit’s decision in Werwinski v. Ford Motor

Co., 286 F.3d 661 (2002), provides an illustration in the context

of a consumer fraud action. The plaintiffs in Werwinski sued

Ford under. Pennsylvania’s Unfair Trade Practices and

Consumer Protection Law on behalf of a puta*ive class for

allegedly defective transmission components. /7. at 663-664.

Defendants removed the suit to federal court on diversity

grounds. /d. at 664. The district court granted Ford’s motion

for judgment on the pleadings, and the Third Circuit affirmed.

The court of appeals recognized that the state courts had not

yet decided whether the economic loss doctrine—which

“prohibits plaintiffs from recovering in tort economic losses to

which their entitlement flows only from a contract”—applied in

cases of intentional fraud under the Pennsylvania statute. /d. at

671, 675 (internal quotations omitted). In deciding to apply the

doctrine and deny plaintiffs’ claim, the Third Circuit invoked

the principle that federal courts should err on the side of caution

when interpreting state law: “[I]f we were torn between two

competing yet sensible interpretations of Pennsylvania law

* * * we should opt for the interpretation that restricts liability,

rather than expands it, until the Supreme Court of Pennsylvania

decides differently.” Jd. at 680.

Within months, however, Pennsylvania courts rejected the

Third Circuit’s holding and permitted claims for economic

injuries arising from intentional violations of the same statute.

See Zwiercan v. General Motors Corp., 2002 WL 31053838, at

*7 (Pa. Com. PI. Sep. 11,2002) (rejecting Werwinski’s “blanket

application of the economic loss doctrine,” and recognizing that

the statute must “be liberally construed to prevent unfair or

deceptive practices”); Oppenheimer v. York Int'l, 2002 WL

31409949, at *5 (Pa. Com. Pl. Oct. 25, 2002) (adopting

“holding contrary to that of the Third Circuit on the role of the

economic loss doctrine with respect to” claims under the

statute); see also Seward v. Certo, 2006 WL 266150, at *2

16

(E.D. Pa. Feb. 2, 2006) (recognizing that “Pennsylvania courts

* * * have expressly disagreed with Werwinski’s holding”).

The Werwinski plaintiffs, forced into federal court against their

wishes, thus lost on claims that have since prevailed in the state

courts.”

By affording removal jurisdiction to entire industries, so

long as they are subject to sufficiently thorough federal

regulation, the Eighth Circuit’s rule threatens to channel whole

classes of state law claims to federal court. Unless this Court

disapproves that rule, not only would controlling law fail to

develop in these areas, but federal courts, without the benefit of

state court rulings on novel claims, would tend to reject state

law claims that the state courts themselves would recognize if

given the chance.

* In addition, plaintiffs often are required to satisfy the

heightened standard for pleading fraud with particularity under

Federal Rule of Civil Procedure 9(b) when pressing claims under

state deceptive trade laws in federal court. See, e.g., John R. Knight,

State Law Deceptive & Unfair Trade Practice Claims in Federal

Court, 43 DEC Fed. Law. 10, 11 (1996) (“[I]n the vast majority of

reported cases on the subject, fraud-based claims brought in federal

court under state deceptive or unfair trade practice statutes have been

held subject to the pleading requirements of Rule 9(b).”); Burton v.

R.J. Reynolds Tobacco Co., 884 F. Supp. 1515, 1524 & n.8 (D. Kan.

1995) (holding that “allegations of deceptive trade practices under

the [Kansas Consumer Protection Act] are subject to Rule 9(b)’s

requirement of particularity,” consistent “with other jurisdictions that

have held that Rule 9(b) applies to actions under consumer protection

acts similar to the KCPA”) (citing cases).

17

C. At Best, The Eighth Circuit’s Rule Permits

Defendants To Force Plaintiffs Into Wasteful,

Collateral Litigation.

Finally, the Eighth Circuit’s expansive notion of federal

officer removal has prompted defendants in several federally

regulated spheres to remove state Jaw suits to federal court.

Even when removal is ultimately unsuccessful, it will make

litigation substantially more time-consuming and expensive,

and will deter plaintiffs from filing suit to vindicate state law

rights.

The Eighth Circuit’s decision has already caught on, not

only among members of the tobacco industry, but in other

federally regulated industries as well. See, e.g., Alsup v. 3-Day

Blinds, Inc., 435 F. Supp. 2d 838, 850 (S.D. Ill. 2006) (window

blinds); Jn re Guidant Corp. Implantable Defibrillators Prods.

Liability Litig., 428 F. Supp. 2d 1014, 1017 (D. Minn. 2006)

(medical devices); Parks v. Guidant Corp., 402 F. Supp. 2d

964, 969 (N.D. Ind. 2005) (same); see also King v. Provident

Bank, 428 F. Supp. 2d 1226 (M.D. Ala. 2006) (citing Eighth

Circuit’s decision for proposition that removal is available

under §1442(a)(1) if defendant acts “pursuant to a

comprehensive and detailed regulatory scheme,” but holding

. that regulation of mortgage company and related defendants did

not satisfy that standard).

The removal effort may fail, and the federal court ultimately

may remand the suit to the state forum. See, e.g., Alsup, 435 F.

Supp. 2d at 853; Jn re Guidant, 428 F. Supp. 2d at 1018; Parks,

402 F. Supp. 2d at 971. But an eventual remand comes only

after costly, time-consuming litigation in federal court over the

propriety of the initial removal. The Eighth Circuit’s approval

of §1442(a)(1) removal based upon the FTC’s purportedly

“comprehensive” and “detailed” regulation of cigarette testing

and advertising states a broad standard. Notwithstanding Judge

18

Gruender’s attempts to narrow that standard in his concurrence,

Pet. App. 1 8a-19a, defendants in numerous industries can claim

to be subject to federal regulation that is at least as

“comprehensive” and “detailed” as the FTC’s informal

regulation in this case.

With the Eighth Circuit’s rule, therefore, federally regulated

defendants can credibly threaten, at a minimum, to bog down

state lawsuits in collateral federal proceedings. And defendants

can do so with little risk to themselves. Although district courts

have discretion to assess fees against the defendant who

removes unsuccessfully, see 28 U.S.C. §1447(c), the Eighth

Circuit’s permissive standard gives many federally regulated

defendants a good faith basis for attempting to remove. One

district court has already relied on the Eighth Circuit’s decision

as grounds for refusing to award attorneys fees to plaintiffs who

successfully fought removal, holding that “(t]he Watson case,

on which Defendants relied most, gave Defendants a colorable

(although ultimately unsuccessful) basis for removal.” Parks,

402 F. Supp. 2d at 971.

At best, the threat of removal reduces a case’s potential

value to the plaintiff. At worst, it discourages the plaintiff from

filing suit in the first place. Private plaintiffs play an important

role in enforcing state consumer protection and other laws, and

the threat of private suits is essential to the deterrent effect of

these laws. By discouraging such suits, the Eighth Circuit’s

unduly broad and amorphous removal standard undercuts this

deterrent effect.

* baad *

The Eighth Circuit’s expansive construction of §1442(a)(1)

poses significant problems for the enforcement of a range of

state laws, including deceptive trade acts like the one at issue

here. Allowing removal of lawsuits solely because the

defendants are members of industries subject to federal

19

regulation would deprive state courts of valuable opportunities

to develop state law, and federal courts deciding state law

claims invariably would reject claims untested in state court.

And even if plaintiffs succeed in remanding a suit to state court,

they will have spent time and money litigating over removal.

The result will be to undermine the development and rigorous

enforcement of state law.

CONCLUSION

The judgment of the court of appeals should be reversed.

Respectfully submitted.

LisA MADIGAN

Attorney General of Illinois

GARY FEINERMAN*

Solicitor General

MICHAEL SCODRO

Deputy Solicitor General

100 West Randolph Street

Chicago, Illinois 60601

*Counsel of Record (312) 814-3698

FEBRUARY 2007

20

TALIS J. COLBERG LINDA SINGER

Attorney General of Alaska Acting Attorney General of the

P.O. Box 110300 District of Columbia

Juneau, AK 99811 441 4th Street, N.W.

Suite 600 South

TERRY GODDARD Washington, DC 20001

Attorney General of Arizona

1275 West Washington BILL MCCOLLUM

Phoenix, AZ 85007 Attorney General of Florida

The Capitol PL-01

MIKE BEEBE Tallahassee, FL 32399-1050

Attorney General of Arkansas

323 Center Street, Suite 1100 = THURBERTE. BAKER

Little Rock, AR 72201 Attorney General of Georgia

40 Capitol Square, SW

EDMUND G. BROWN Jr. Atlanta, GA 30334-1300

Attorney General of California

1300 I Street, Suite 125 MARK J. BENNETT

P.O. Box 944255 Attorney General of Hawaii

Sacramento, CA 94244-2550 425 Queen Street

Honolulu, HI 96813

JOHN W. SUTHERS

Attorney General of Colorado LAWRENCE G. WASDEN

1525 Sherman Street, 5th Floor Attorney General of Idaho

Denver, CO 80203 P.O. Box 83720

Boise, [D 83720-0010

RICHARD BLUMENTHAL

Attorney General of Connecticut STEVE CARTER

55 Elm Street Attorney General 9f Indiana

Hartford, CT 06106 302 West Washington Street

. IGCS, Sth Floor

JOSEPH R. BIDEN III Indianapolis, IN 46204

Attorney General of Delaware

Department of Justice

820 North French Street

Wilmington, DE 19801

TOM MILLER

Attorney General of Iowa

Hoover Building, 2d Floor

Des Moines, LA 50319

PAUL J. MORRISON

Attorney General of Kansas

120 SW 10th Avenue, 2d Floor

Topeka, KS 66612-1597

GREGORY D. STUMBO

Attorney General of Kentucky

State Capitol, Room 116

Frankfort, KY 40601

CHARLES FOTI

Attorney General of Louisiana

P.O. Box 94095

Baton Rouge, LA 70804-4095

G. STEVEN ROWE

Attorney General of Maine

6 State House Station

Augusta, ME 04333

DOUGLAS F. GANSLER

Attorney General of Maryland

200 Saint Paul Place

Baltimore, MD 21202

MARTHA COAKLEY ©

Attorney General of

Massachusetts

_ One Ashburton Place

Boston, MA 02108

21

MICHAEL A. Cox

Attorney General of Michigan

P.O. Box 30212

Lansing, MI 48909

LORI SWANSON

Attorney General of Minnesota

102 State Capitol

75 Rev. Dr. Martin Luther King,

Jr. Blvd.

St. Paul, MN 55155-1609

Jim Hoop

Attorney General of Mississippi

Department of Justice

P.O. Box 220

Jackson, MS 39205

JEREMIAH W. (JAY) NIXON

Attorney General of Missouri

Supreme Court Building

207 West High Street

Jefferson City, MO 65101

MIKE MCGRATH

Attorney General of Montana

P.O. Box 201401

Helena, MT 59620-1401

CATHERINE CORTEZ MASTO

Attorney General of Nevada

100 North Carson Street

Carson City, NV 89701

_

KELLY A. AYOTTE

Attorney General of New

Hampshire

33 Capitol Street

Concord, NH 03301

STUART RABNER

Attorney General of New Jersey

P.O. Box 080

Trenton, NJ 08625-0080

GARY K. KING

Attorney General of

New Mexico

P.O. Drawer 1508

Santa Fe, NM 87504-1508

ANDREW M. CUOMO

Attorney General of New York

The Capitol

Albany, NY 12224-0341

Roy COOPER

Attorney General of North

Carolina

9001 Mail Service Center

Raleigh, NC 27699-9001

WAYNE STENEHJEM

Attorney General of North

Dakota

600 E. Boulevard Avenue

Bismark, ND 58505-0040

22

MARC DANN

Attorney General of Ohio

30 East Broad Street, 17th Floor

Columbus, OH 43215

W.A. DREW EDMONDSON

Attorney General of Oklahoma

313 N.E. 21st Street

Oklahoma City, OK 73105-4894

HARDY MYERS

Attorney General of Oregon

1162 Court Street N.E.

Salem, OR 97301

THOMAS W. CORBETT, JR.

Attorney General of

Pennsylvania

16th Floor, Strawberry Square

Harrisburg, PA 17120

PATRICK LYNCH

Attorney General of Rhode

Island

150 South Main Street

Providence, RI 02903

HENRY MCMASTER

Attorney General of South

Carolina

P.O. Box 11549

Columbia, SC 29211

23

LAWRENCE E. LONG DARRELL V. MCGRAW, JR.

Attorney General of South Attorney General of

Dakota West Virginia

1302 E. Highway 14; Suite 1 Office of the Attorney General

Pierre, SD 57501 State Capitol, Room 26-E

4 —~—.. Charleston, WV 25305

ROBERT E. COOPER, JR.

Attorney General and Reporter J.B. VAN HOLLEN

of Tennessee Attorney General of Wisconsin

P.O. Box 20207 114 East Capitol

Nashville, TN 37202-0207 Madison, WI 53702

MARK L. SHURTLEFF PATRICK J. CRANK

Attorney General of Utah Attorney General of Wyoming

Utah State Capitol Complex 123 State Capitol

East Office Bldg., Suite 320 Cheyenne, WY 82002

Salt Lake City, UT 84114-2320

WILLIAM H. SORRELL

Attorney General of Vermont

109 State Street

Montpelier, VT 05609-1001

ROBERT F. MCDONNELL

Attorney General of Virginia

900 East Main Street

Richmond, VA 23219

ROBERT M. MCKENNA

Attorney General of Washington

1125 Washington Street

P.O. Box 40100

Olympia, WA 98504-0100

>

7 a :

Sawer

=