Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-04-01225/USCOURTS-ca8-04-01225-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 

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1

The Honorable G. Thomas Eisele, United States District Judge for the Eastern

District of Arkansas.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 04-1225

___________

Lisa Watson; Loretta Lawson, *

Individually and On Behalf of All *

Others Similarly Situated, *

*

Plaintiffs - Appellants, *

* Appeal from the United States

v. * District Court for the

* Eastern District of Arkansas.

Philip Morris Companies, Inc., a *

Corporation; Philip Morris, *

Incorporated, a Corporation, *

*

Defendants - Appellees. *

___________

Submitted: November 15, 2004

Filed: August 25, 2005

___________

Before RILEY, JOHN R. GIBSON, and GRUENDER, Circuit Judges.

___________

JOHN R. GIBSON, Circuit Judge.

Lisa Watson and Loretta Lawson filed this interlocutory appeal, on their own

behalf and as representatives of a class, from the district court's1

 denial of their

motion to remand to state court. Watson and Lawson filed their class action in

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2

See Federal Trade Comm'n v. Brown & Williamson Tobacco Corp., 778 F.2d

35, 37-38 (D.C. Cir. 1985), for a comprehensive history of the FTC's involvement in

regulating unfair and deceptive advertising in the tobacco industry. 

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Arkansas state court, alleging that Philip Morris violated the Arkansas Deceptive

Trade Practices Act. See Ark. Code Ann. § 4-88-107 et seq. We hold that the case

was properly removed to federal court. 

Watson and Lawson claim that Philip Morris engaged in "unfair business

practices and/or deceptive and unlawful conduct in connection with the manufacture,

distribution, promotion, marketing, and sale of Cambridge Lights and Marlboro

Lights." They basically allege that Philip Morris designed its cigarettes to deliver

more tar and nicotine to smokers than its use of the labels "lights" and "lowered tar

and nicotine" in its advertising would suggest. The propriety of remand is the only

issue before us, as it was in the district court, and we express no views on the merits.

Philip Morris removed the action pursuant to 28 U.S.C. § 1442(a)(1) (2000),

which permits removal where a person is sued for actions taken under the direction

of a federal officer. Philip Morris claims it satisfies the requirements of the federal

officer statute because it was acting under the direct control of the Federal Trade

Commission (FTC) when it engaged in the allegedly unlawful conduct. The district

court denied Watson's and Lawson's motion to remand and certified the following

question for interlocutory appeal under 28 U.S.C. § 1292(b): "May Philip Morris

remove this lawsuit to federal court under 28 U.S.C. § 1442(a)?" Slip op. at 36. We

affirm the district court's answer of "yes" to that question. 

The applicability of this removal statute depends in large part on the role the

FTC plays in regulating the tobacco industry.2

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The Federal Trade Commission Act authorizes the FTC to regulate "unfair

methods of competition" and "unfair or deceptive acts or practices in or affecting

commerce," 15 U.S.C. § 45(a)(2) (2000), which includes regulation of unfair and

deceptive tobacco advertisements, Cipollone v. Liggett Group, Inc., 505 U.S. 504,

513 (1992) (FTC has "long regulated unfair and deceptive advertising practices in the

cigarette industry"). 

In the 1950s, the FTC's policy changed from permitting some claims of "low"

or "lower" tar and nicotine levels to prohibiting all such representations in

advertising. The FTC wanted a uniform rating system so that consumers could

compare tar and nicotine levels among brands. The FTC developed the Cambridge

Filter Method, which uses a smoking machine that takes a two-second puff on a

cigarette every sixty seconds until the cigarette is smoked to a specified length.

Brown & Williamson, 778 F.2d at 37. The machine collects tar and nicotine on filter

pads to be measured. Since its first formal testing in 1967, the FTC has been

reporting the Cambridge Filter Method results in the Federal Register. From its initial

development, the FTC was aware that the testing method did not measure the amount

of tar or nicotine that an individual smoker may receive. The purpose of the test was

not to replicate human smoking but to provide a basis for comparison. 

When the FTC proposed a trade regulation rule in 1970 that would require

advertisements to disclose tar and nicotine ratings, as determined by the Cambridge

Filter Method, several leading tobacco companies responded by entering into an

agreement to disclose the Cambridge Filter Method results in all cigarette advertising.

The FTC accepted the agreement, which was conditioned on suspension of the formal

rulemaking proceedings. Letter from Eight Tobacco Companies to FTC (Dec. 17,

1970) ("Letter Agreement"). 

After twenty years of testing, the FTC decided to terminate its cigarette testing

lab, and instead require the cigarette industry to self-test, using the Cambridge Filter

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Method, and to submit results that would continue to be published in the Federal

Register. The FTC retained the right to conduct unannounced inspections of the

industry testing facilities and the right to confirm the test results through a

government lab. 

Based upon the FTC's involvement in the tobacco industry, the district court

denied Watson's and Lawson's motion to remand to state court. Our review of that

denial is de novo. See Nichols v. Harbor Venture, Inc., 284 F.3d 857, 860 (8th Cir.

2002).

Section 1442(a)(1) permits removal by the following:

(1) The United States or any agency thereof or any officer (or any

person acting under that officer) of the United States or of any agency

thereof, sued in an official or individual capacity for any act under color

of such office or on account of any right, title or authority claimed under

any Act of Congress for the apprehension or punishment of criminals or

the collection of the revenue. 

(emphasis added). Section 1442(a) requires that a defendant: (1) act under the

direction of a federal officer; (2) show a nexus or "causal connection" between the

alleged conduct and the official authority; (3) have a colorable federal defense; and

(4) be a "person" within the meaning of the statute. See, e.g., Jefferson County v.

Acker, 527 U.S. 423, 431 (1999) (requiring 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

(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)

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(incorporating all four requirements). Watson and Lawson dispute only the first and

second requirements.

In Willingham v. Morgan, 395 U.S. 402, 406-07 (1969), the Supreme Court

explained why the federal officer removal statute was not meant to be given a

"narrow" or "limited" interpretation:

One of the primary purposes of the removal statute–as its history clearly

demonstrates–was to have such defenses litigated in the federal courts.

. . . In cases like this one, Congress has decided that federal offices, and

indeed the Federal Government itself, require the protection of a federal

forum. This policy should not be frustrated by a narrow, grudging

interpretation of § 1442(a)(1).

The primary purpose of giving the protection of a federal forum under this

statute has a lengthy history. The broad scope of federal officer removal is explained

in the early case of Tennessee v. Davis, 100 U.S. 257, 263 (1880), 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 unfriendly.

It may affix penalties to acts done under the immediate direction of the

national government, and in obedience to its laws. It may deny the

authority conferred by those laws. The State court may administer not

only the laws of the State, but equally Federal law, in such a manner as

to paralyze the operations of the government. And even if, after trial

and final judgment in the State court, the case can be brought into the

United States court for review, the officer is withdrawn from the

discharge of his duty during the pendency of the prosecution, and the

exercise of acknowledged Federal power arrested. 

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See also Arizona v. Manypenny, 451 U.S. 232, 243 (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 immunity defense."); Winters v. Diamond Shamrock Chem. Co., 149 F.3d 387,

397-98 (5th Cir. 1998). The Supreme Court interpreted the original version of the

statute to exclude agencies' removal ability under the statute. Primate Protection

League v. Admin'rs. of Tulane Educ. Fund, 500 U.S. 72, 87 (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 statute to reverse

Primate and permit agency removal provides further support for a broad interpretation

of the federal officer removal statute.

I.

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. 

"[R]emoval by a 'person acting under' a federal officer must be predicated upon

a showing that the acts . . . were performed pursuant to an officer's direct orders or

to comprehensive and detailed regulations." Virden v. Altria Group, Inc., 304 F.

Supp. 2d 832, 844 (N.D. W.Va. 2004) (quoting Ryan v. Dow Chem. Co., 781 F.

Supp. 2d 934, 947 (E.D.N.Y. 1992)). Mere participation in a regulated industry is

insufficient to support removal unless the challenged conduct is "closely linked to

detailed and specific regulations." Virden, 304 F. Supp. 2d at 844 (quoting In re

Wireless Tel. Radio Frequency Emissions Prods. Liab. Litig., 216 F. Supp. 2d 474,

500 (D. Md. 2002), rev'd 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 tobacco companies alleging they were acting

under a federal officer has remanded the case to state court. See Virden, 304 F. Supp.

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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, companies contracting with the government have had more

success. Courts have found private actors, working under government contracts, to

be acting under the direction of a federal officer where the government maintained

control over the manner in which the contractor performed the contracted work or

monitored the 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.

Winters 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. Id. 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. Id.

at 398. The government specified the formula for Agent Orange, as well as the

packaging, labeling and shipping requirements. Id. at 399. The government also

inspected the labeling 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 provide the product to the government's specifications,

and the on-going supervision the government exercised over the

formulation, packaging, and delivery of Agent Orange is all quite

sufficient to demonstrate that the defendants acted pursuant to federal

direction and that a direct causal nexus exists between the defendant's

actions taken under color of federal office and Winters's claims. 

Id. at 399-400.

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The extent of federal direction reached a similar level in Fung v. Abex Corp.,

816 F. Supp. 569 (N.D. Cal. 1992). Fung involved exposure to asbestos during

Abex's construction of submarines pursuant to federal contract. Id. at 570-71. The

district court found that the government monitored Abex's performance "at all times"

and required it to "construct and repair the vessels" according to the contract

specifications. Id. at 572-73. In addition, the government retained the right to

inspect, test, and approve 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 control and direction satisfied the "acting under" requirement

of section 1442(a). Id.

Here, the FTC exercises the same type of comprehensive, detailed regulation

and does the same kind of ongoing monitoring as in Winters and Fung. In addition

to specifying a testing method that was discussed in detail in two separate

submissions to chemists' journals, the FTC modified the testing method to include the

following requirements: 

1. Smoke cigarettes to a 23 mm. butt length, or to the length of the filter

and overwrap plus 3 mm. if in excess of 23 mm.,

2. Base results on a test of 100 cigarettes per brand, or type,

3. Cigarettes to be tested will be selected on a random basis, as opposed

to "weight selection,"

4. Determine particulate matter on a "dry" basis . . . to determine the

moisture content,

5. Determine and report the "tar" content after subtracting moisture and

alkaloids [(]as nicotine) from particulate matter,

6. Report tar content to the nearest whole milligram and nicotine content

to the nearest 1/10 milligram.

Federal Trade Commission: Testing for Tar and Nicotine Content, 32 Fed. Reg.

11,178 (Aug. 1, 1967). The FTC's specificity in testing procedures is comparable to

the specificity of the government's formula for Agent Orange. 

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Another example of the detail involved in the government's directives to the

tobacco industry is the specific manner in which the industry agreed to disclose the

tar and nicotine ratings in advertising:

The disclosure will be in the following language:

____mg. "tar", ___mg. nicotine

av. per cigarette, FTC report (date)

Letter Agreement at 2. In Fung, the parties' agreement included the design for

submarines, and in this case the parties' agreement included the design for testing

cigarettes and disclosure of ratings. In Winters, the government controlled the

delivery and labeling of Agent Orange. Here, the FTC controls the delivery of tar and

nicotine information to consumers. The FTC's ongoing monitoring of the cigarette

industry far exceeds the monitoring in Winters. The government in Winters

monitored one small aspect of the Agent Orange creation and distribution process--

the labeling of the containers. Here, the FTC itself conducted the entire testing

process for twenty years and now requires the cigarette manufacturers to conduct the

testing to its specifications. The FTC continues to inspect the industry labs,

independently verify the results, and publish the ratings. In addition, part of the

FTC's ongoing monitoring includes monitoring cigarette ads and occasionally

bringing claims against companies for deceptive advertising. 

We are satisfied that the level of specificity of the direction is more extensive

than that in Winters, but the question remains whether the government compels

compliance with its directions. In Winters, Diamond Shamrock was compelled to

supply the Agent Orange to the government. In Fung, the defendant acted pursuant

to a binding contract that 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 confronted with federal officer removal and the tobacco industry have

found it significant that the agreement to test and disclose ratings was a "voluntary"

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agreement, not a formal rule. See, e.g., Paldrmic, 327 F. Supp. 2d at 966; Virden, 304

F. Supp. 2d at 841-42. 

We are convinced that the record in this case shows a level of compulsion that

establishes that Philip Morris was indeed "acting under" the direction of a federal

officer. The FTC effectively used its coercive power to cause the tobacco companies

to enter the 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 proposed

the agreement if the FTC had not threatened to make a formal rule. Though the FTC

did not act formally, the effect of its actions still compelled the tobacco companies

to adhere to a testing and advertising standard that was prompted by the FTC. The

FTC agreed with the industry that a voluntary agreement was preferable to the

formalities of rulemaking. 

FTC Chairperson Miles W. Kirkpatrick explained how an agreement would

best serve the goals of the FTC:

The Commission's objective is to insure that all cigarette advertising

make these tar and nicotine disclosures as soon as possible. If the

industry can devise a voluntary plan that is feasible and appropriate, the

Commission is willing to consider it. A trade regulation rule, if

contested in the courts, might take a long time to become effective; a

workable, voluntary plan by the industry could be put into effect

immediately.

Press Release, FTC (Oct. 1, 1970). 

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"[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 & Williamson Tobacco Corp., 778 F.2d 35, 44-45

(D.C. Cir. 1985). 

-11-

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

rulemaking, which had proved to be inefficient, "little used and not terribly

successful." Bringing a single case against one cigarette company would have the

effect of bringing the whole industry into compliance and would do so much more

quickly than would a formal rulemaking process. As a result, voluntary agreements

have become part of a general trend in administrative law, and the tobacco industry

has responded to that trend with cooperation. 

 

Even if the companies had not been compelled to enter the agreement

originally, after the companies entered the agreement, the FTC has enforced

compliance with the agreement. The FTC's comments suggest it would bring an

action for deceptive advertising or reinstitute formal rulemaking proceedings if a

company did not disclose the tar and nicotine ratings. Though one could call the

agreement voluntary, the reality is that the cigarette companies have included the

Cambridge Filter Method results in their cigarette advertising for over thirty years.

The main difference between a formal rule and an agreement is that the FTC enforces

the disclosure of the Cambridge Filter Method's results by bringing an action against

the company for deceptive advertising rather than directly enforcing a regulation.3

Regardless of the enforcement method, the FTC has compelled the tobacco industry

to advertise the tar and nicotine ratings as determined 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

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4

The FTC additionally stated that "the public interest requires that all test

results presented to the public be based on a uniform method used by all laboratories"

because "[u]se of more than one testing method . . . would only serve to confuse or

mislead the public." News Release, FTC (Aug. 1, 1967). It added that "statements

or representations based on non-standardized tests having no official or governmental

sanction would tend to confuse and mislead the public." Letter from FTC secretary

Joseph W. Shea to Howard Bell (Oct. 25, 1967). 

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Filter Method. In an advisory opinion rejecting one company's offer to advertise a

tar level higher than the most recent Cambridge Filter method results, the FTC

explained that consumers could be confused if a company were to advertise tar levels

that differed from the published Cambridge Filter Method results. In re Lorillard, 92

F.T.C. 1035 (1978). That statement, along with others,4

 sent a clear signal to the

tobacco companies that they would risk a deceptive advertising claim if they failed

to advertise tar and nicotine levels in accordance with the Cambridge Filter Method.

In comparison, the government contract in Fung was not compelled and could

be considered a "voluntary agreement" and yet was certainly enforceable once

entered. Similarly, in the Agent Orange case, Diamond Shamrock chose to participate

in the herbicide industry and was already manufacturing herbicide with some of the

components of Agent 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 volunteer program and other participants were acting under

a federal officer when they entered a farm to help a migrant worker obtain health care.

Removal was appropriate because the volunteers were assigned pursuant to federal

statute "to work in meeting the health . . . needs of . . . migratory workers and their

families." Id. at 38. They chose to participate in the program and acted in accordance

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. 

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We have been instructed by the Supreme Court to interpret this removal statute

broadly, to give effect to its purpose. See Colorado v. Symes, 286 U.S. 510, 517

(1932); Willingham v. Morgan, 395 U.S. 402, 406-07 (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 required to do, the fact that the FTC approved an agreement

instead of proposing a rule should not defeat removal 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 policy as well as

communications between the FTC and the cigarette industry, which show

comprehensive and detailed control. The record establishes that Philip Morris acted

under the direction of a federal officer. 

II.

For federal officer removal there must be a "causal connection" that links the

federal officer's direction and control to the acts challenged in the 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

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comprehensive and detailed regulations." Virden v. Altria Group, 304 F. Supp. 2d

832, 844 (N.D. W. Va. 2004) (quoting Ryan v. Dow Chem. Co., 781 F. Supp. 2d 934,

947 (E.D.N.Y. 1992)). Here, the acts 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 Tremblay 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

"enforcement or wisdom of any FTC policy, procedure or regulation." Id. at 419.

Instead, the complaint alleged that Philip Morris manipulated the FTC's policies and

exploited the Cambridge Filter Method. Id. at 419.

The allegations of the complaint in Paldrmic also focused 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 challenged

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. Id.

In this case, Watson and Lawson challenge more than just the cigarette design.

They also challenge Philip Morris's "marketing and promoting" of low tar and

nicotine cigarettes, its "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. 

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5

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.

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Here, Watson and Lawson claim that Philip Morris's use of low tar descriptors

such as "lights" or "lowered tar" are deceptive or misleading because the actual tar

and nicotine delivered to the smoker is much higher than the FTC results

communicate to smokers. The FTC defines "low tar" as 15.0 mg. or less tar.5 FTC

Report to Congress, Pursuant to the Federal Cigarette Labeling and Advertising Act

(1979). 

In 1971, the FTC and American Brands, Inc. entered into a consent order based

upon a complaint the FTC issued. There, the FTC explained its view of how the use

of certain descriptors could constitute deceptive advertising--it would be deceptive

to use descriptors like "low," "lower," "reduced," or other qualifying terms unless the

tar and nicotine levels were also stated. The tar and nicotine levels were to be

measured by "the testing method employed by the Federal Trade Commission," which

is the Cambridge Filter Method. Watson and Lawson claim it is deceptive for Philip

Morris to use a low tar descriptor in conjunction with its cigarettes' FTC rating. The

very combination Watson and Lawson challenge as deceptive is the same

combination the FTC requires to not be deceptive. Whether Philip Morris's labeling

of cigarettes as "lights" is deceptive directly implicates the enforcement and wisdom

of the FTC's tobacco policies.

It is not as if Watson and Lawson discovered new designs by Philip Morris that

the FTC did not contemplate when it required the disclosure of test results. The FTC

was well-aware of the limitations of the Cambridge Filter Method. In 1977, the FTC

solicited public comment on a problem similar, if not identical to, some of Watson's

and Lawson's claims in this case. The FTC studied how the placement of ventilation

holes in cigarettes affected their tar and nicotine ratings. If vent holes were covered

by the smoking machine's cigarette holder, but open when smoked by a person, then

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less tar and nicotine would pass through the cigarette to the smoker than the ratings

reflected. Conversely, if the smoker covered vents that the machine's cigarette holder

left open, more tar and nicotine would pass through the cigarette to the smoker than

the ratings reflected. 

The FTC was fully aware that the placement of ventilation holes near the tip

of the cigarette complicated the comparability of the tar and nicotine ratings among

different brands. The same problem reemerged in the early 1980's when Brown and

Williamson developed the Barclay brand, which had ventilation channels instead of

ventilation holes. Although the FTC recognized these problems and solicited

comment on them, the FTC ultimately chose to continue using the Cambridge Filter

Method. 

Watson and Lawson challenge the FTC's policy judgment that despite the

failure of the Cambridge Filter Method to take into account ventilation holes or

channels, the test results should still be included in advertising, even if alongside

"light" descriptors, to prevent deception. In contrast, Watson and Lawson claim that

this grouping of test results and descriptors renders advertising deceptive. Their

claims are sufficiently related to the FTC's direct and comprehensive control to

establish a causal connection. 

III.

The final two requirements for removal under 28 U.S.C. § 1442(a) are that

Philip Morris must present a "colorable federal defense" and that it must be a

"person" within the meaning of the statute. To satisfy the requirement of a colorable

federal defense, Philip Morris pleaded that Watson's and Lawson's state law claims

were preempted by Section Five of the Federal Cigarette Labeling and Advertising

Act. Philip Morris's Notice of Removal cites Geier v. American Honda Motor Co.,

529 U.S. 861 (2000) in support of its preemption defense. The district court order

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stated that Watson and Lawson “do not dispute that the federal preemption defense

raised by the Defendants is a 'colorable' claim to a federal defense.” Slip op. at 14.

The court cited United States v. Todd, 245 F.3d 691, 693 (8th Cir. 2001), that for a

defense to be colorable it need only be plausible and further stated that it did not

believe the district court opinion 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 testing 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 preemption

defense it had raised sufficed as a ‘colorable’ federal defense.” Watson and Lawson

argue only that Philip Morris failed at a minimum to demonstrate that it acted under

the direction of a federal officer, or to show a causal nexus between plaintiffs' claims

and the acts of Philip Morris, allegedly performed under the 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 (1969). The defendant need only raise a “colorable” federal

defense. Id.; Jefferson County v. Acker, 527 U.S. 423, 431 (1999). We have no

hesitation in concluding that Philip Morris, in its Notice of Removal, has set forth a

colorable federal defense 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

corporation can be a "person" within the requirements of federal officer removal. See

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Ryan v. Dow Chem. Co., 781 F. Supp. 934, 946-47 (E.D.N.Y. 1992); Fung v. Abex

Corp., 816 F. Supp. 569, 572 (N.D. Cal. 1992). We find the analysis in Ryan to be

persuasive. 

We affirm the district court's order denying remand and finding removal proper

under section 1442(a).

GRUENDER, Circuit Judge, concurring.

I fully concur in the court’s opinion and judgment. I write separately to

emphasize that our decision today should not be construed as an invitation to every

participant in a heavily regulated industry to claim that it, like Philip Morris, acts at

the direction of a federal officer merely because it tests or markets its products in

accord with federal regulations. I believe that in most instances, a contract, principalagent 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 Virden, 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 government 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 disclosure of the results throughout. Because the FTC

passed the function of performing the testing to the cigarette companies while

allowing them no independent control of the process whatsoever, this is a rare case

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in which federal officer jurisdiction is appropriate even in the absence of a contract,

principal-agent relationship, or near-employee relationship with the government.

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

______________________________

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