Opinion ID: 2724
Heading Depth: 4
Heading Rank: 1

Heading: Federal Officer Removal

Text: 6 The federal officer removal statute, in relevant part, permits the removal of cases commenced in state court against 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 . . . . 28 U.S.C. § 1442(a)(1). A defendant who is not a federal officer or agency must satisfy three elements to have a suit against it removed under this statute. First, it must show that it is a person within the meaning of the statute. Second, it must establish that it was acting under a federal officer, which subsumes the existence of a `causal connection' between the charged conduct and asserted official authority. Willingham, 395 U.S. at 409, 89 S.Ct. 1813. Finally, the defendant must raise a colorable federal defense. Mesa, 489 U.S. at 129, 109 S.Ct. 959. 7 Because it is clear that corporations are persons within the meaning of the statute, see 1 U.S.C. § 1; Ryan v. Dow Chem. Co., 781 F.Supp. 934, 946 (E.D.N.Y. 1992), we turn to the requirement that the defendants have been acting under a federal officer. Although the district court considered this question to be separate from that of the existence of a causal connection between the conduct in question and the federal direction, MTBE III, 342 F.Supp.2d at 154, they tend to collapse into a single requirement: 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. Ryan, 781 F.Supp. at 947. Critical under the statute is to what extent defendants acted under federal direction at the time they were engaged in the conduct now being sued upon. Id. at 946 (citation and internal quotation marks omitted). Removal will not be proper where a private party establishes only that the acts complained of were performed under the general auspices of a federal officer. Id. at 947. Likewise, the mere fact that a corporation participates in a regulated industry is insufficient to support removal absent a showing that the particular conduct being sued upon is closely linked to detailed and specific regulations. Id.; see also Bakalis v. Crossland Sav. Bank, 781 F.Supp. 140, 145 (E.D.N.Y.1991) (describing the need for some government intervention or control, other than that contemplated by a generally applicable regulatory scheme, as regulation plus). 8 The line between the absence and the presence of direct control by a federal officer over a private party is a fine one, depending heavily on the facts of each case and the particular conduct giving rise to the plaintiff's cause of action. For example, in Ryan, Judge Weinstein considered whether seven companies that had manufactured the cancer-causing defoliant Agent Orange for the United States Armed Forces could remove the actions from state to federal court. He first noted that government officers exercised a high degree of control over the defendants' production and delivery processes. 781 F.Supp. at 938. Judge Weinstein then observed, however, that the defendants were being sued on the theory that Agent Orange was improperly designed and produced, and relied on the assumption that Agent Orange was a mix of pre-existing chemical formulae that had long been put to domestic commercial use. Id. at 950. On this basis, he concluded that the defendants had not met the requirements for removal under section 1442: 9 They are being sued for formulating and producing a product all of whose components were developed without direct government control and all of whose methods of manufacture were determined by the defendants. Although the defendants later produced and delivered Agent Orange under the control of federal officers, these subsequent acts are distinct from the earlier acts of product and manufacturing design being sued upon. The government sought only to buy ready-to-order herbicides, not to cause, control, or prevent the production of the unwanted byproduct, dioxin, which is the alleged cause of plaintiffs' injuries. The necessary direct and detailed official control over the acts for which the defendants are now being sued is therefore lacking. 10 Id. 11 In a subsequent Agent Orange case, a different court found that removal was proper in light of a more developed record that undermined the factual basis for Judge Weinstein's decision and evidenced the more direct control of federal officers. In Winters v. Diamond Shamrock Chemical Co., 901 F.Supp. 1195 (E.D.Tex.1995), aff'd, 149 F.3d 387 (5th Cir.1998), the district court found that the Defense Department expressly directed chemical companies to provide a detailed mixture of chemicals known as Agent Orange and that the defendants were compelled under threat of criminal sanctions to deliver it. Id. at 1199. The Fifth Circuit cited those facts in affirming the action's removal. 149 F.3d at 398; see also Miller v. Diamond Shamrock Co., 275 F.3d 414 (5th Cir.2001). On its own review of the record, the Fifth Circuit also observed that, while the defendant manufacturers had always diluted the active ingredients in Agent Orange with inert chemicals before commercial use, it was the Defense Department that required the defendants to produce Agent Orange comprising only the undiluted active ingredients for use in Vietnam. 149 F.3d at 399. This combination of factors—the government's detailed specifications, the defendants' compulsion to provide the product to those specifications, and the government's oversight over the manufacturing process—caused the court to determine that removal was appropriate. Id. at 399-400. Indeed, relying on these facts, Judge Weinstein would later conclude that his earlier decision in Ryan was wrong and that removal was proper. See In re Agent Orange Prod. Liab. Litig., 304 F.Supp.2d 442, 449-50 (E.D.N.Y.2004). 12 Adopting these standards for determining when a private party is acting under a federal officer for the purpose of removal jurisdiction, we now turn to the reasons stated by the district court in sustaining the removal of the complaints here. The district judge began her analysis with three observations. First, the defendants alleged in their Notices of Removal that the Clean Air Act, and regulations promulgated thereunder, require them to blend oxygenates into gasoline. MTBE III, 342 F.Supp.2d at 156. Second, defendants allege that at the time the Clean Air Act was amended and the seven oxygenates were approved for use, both Congress and the EPA were aware that defendants would have to use MTBE in order to comply with the Act's requirements. Id. Third, [a]lthough the EPA has identified seven additives that may be used to meet these requirements, MTBE is the only approved oxygenate that is available in quantities sufficient to comply with the Act and regulations. Id. On this basis, the district judge concluded, defendants have sufficiently alleged that they added MTBE to gasoline at the direction of the EPA, a federal agency. Id. We cannot agree. 13 The conclusion of the district judge is not based on an explicit directive in either the Clean Air Act or its implementing regulations. Significantly, after oral argument in this appeal, the district judge held that federal law did not require the use of MTBE. In re Methyl Tertiary Butyl Ether (MTBE) Prods. Liab. Litig., 457 F.Supp.2d 324, 335 (S.D.N.Y.2006) (denying summary judgment to defendants on issue of preemption). Indeed, the district judge and the defendants acknowledged that the EPA identified six other additives, besides MTBE, that could be blended into reformulated gasoline to meet the requirements imposed by the CAA and the regulations promulgated thereunder. MTBE III, 342 F.Supp.2d at 156. Thus, although the district judge was correct in her first observation—that the defendants alleged they were required to blend oxygenates into gasoline—because this allegation lacks a foundation in law, it is unavailing in supporting removal. Moreover, the complaints here are not predicated simply on the fact that the defendants blended oxygenates into gasoline. Instead, they focus on the use of one particular oxygenate, MTBE, and the harm caused by the release of gasoline containing MTBE into the states' water supplies. 14 Under these circumstances, we understand the district court to have found removal proper on the premise that, if the defendants were compelled to use a particular additive—in this case MTBE—because there was no sufficiently available alternative to meet CAA requirements, it would demonstrate that the defendants were acting pursuant to the direct orders of a federal agency, at least where, at the time the regulation was promulgated, the agency was aware of these market forces. We assume for present purposes that such market compulsion would satisfy the federal officer removal statute. Nevertheless, the district judge somewhat overstated the language in the Notices of Removal when she observed that the defendants alleged that Congress and the EPA were aware that defendants would have to use MTBE in order to comply with the Act's requirements. MTBE III, 342 F.Supp.2d at 156. The Notices of Removal do not so allege. Nor do they allege that MTBE is the only approved oxygenate that is available in quantities sufficient to comply with the Act and regulations. Id. On their faces, the Notices of Removal, which are virtually identical for the present purposes, come closest when they allege that Congress also knew, when it enacted these oxygenate mandates, that the industry would have to blend MTBE into at least some of the gasoline sold in OFP and RFG areas in order to comply with the program requirements. N.H. Notice of Removal ¶ 19; Cal. Notice of Removal ¶ 19. The Notices of Removal also allege—without citation to any supporting document—that, at some point in time, the EPA knew there was not a sufficient capacity of ethanol, on a nationwide basis, nor sufficient infrastructure for ethanol, to comply with the regulation. N.H. Notice of Removal ¶ 33; Cal. Notice of Removal ¶ 34. 15 The allegation as to what Congress knew is based entirely on the floor statements by a handful of individual legislators rather than explicit findings of fact in the legislation itself. Because such [f]loor debates reflect at best the understanding of individual Congressmen, Zuber v. Allen, 396 U.S. 168, 186, 90 S.Ct. 314, 24 L.Ed.2d 345 (1969), they are of little value even in construing ambiguous statutes. The issue here, however, does not turn on the construction of statutory language. Instead, the statements in the floor debates are offered to prove what Congress as a whole understood would be the practical consequences of the statute it was discussing. On this score, they do not constitute competent evidence. 16 Nevertheless, while we decide this appeal without reliance on the floor debate, the statements made during its course are useful in evaluating the defendants' arguments that they were victims of a course of action that they were forced by Congress to undertake. Some background is necessary. While the RFG Program required only 2 percent oxygen content for gasoline in areas with too much summertime smog, the Oxyfuel Program imposed a higher standard during the winter months in areas with too much carbon monoxide. The bill introduced in the Senate, passed out of committee and endorsed by the White House, originally provided that gasoline subject to the Oxyfuel Program contain 3.1 percent oxygen, not 2.7 percent oxygen. While ethanol could be used to reach that 3.1 percent threshold, MTBE alone could not. In order to overcome this impediment to the use of MTBE as an oxygenate, and ostensibly to give flexibility to state and local officials, Senator Lautenberg introduced an amendment on the floor reducing the oxygen-content requirement from 3.1 percent to 2.7 percent. 17 The floor debate on which the defendants rely is derived principally from the colloquy that ensued after Senator Lautenberg introduced his amendment. Indeed, their evidence of congressional intent is composed largely of statements made by several farm-belt Senators defending the 3.1 percent standard. While Senator Daschle, for example, is quoted by the defendants as saying that he wanted MTBE, along with other oxygenates, to play a role in achieving a variety of national objectives, he did so in the context of opposing an amendment that would have encouraged significantly greater use of that additive at the expense of ethanol. See 136 Cong. Rec. S 2280, 2289 (Mar. 7, 1990). Indeed, any reasonable reading of the floor debate establishes, if anything, that many of the Senators engaged in the debate believed that ethanol production would expand to meet increased demand and that the 3.1 percent standard would operate to the severe detriment of those who manufactured or wished to use MTBE. Otherwise, the Lautenberg Amendment and the debate it engendered were pointless. 18 More than this, the statements made during the floor debate, if credited, support the premise that many of the defendants actually lobbied Congress for a lower oxygen-content requirement that would make it possible for them to use more MTBE—a chemical created from natural gas and byproducts of the gasoline-refining process—and less ethanol. As Senator Grassley, one of the farm-state legislators, observed: 19 [B]y dropping the standard down to 2.7 percent, we will actually be cutting ethanol and American farmers out of a major market. 20 So who will really gain by changing from 3.1 to 2.7 percent? The answer is obvious! Big oil!! Big oil will gain because those companies control the methanol and MTBE. The [b]ig oil companies make up much of the membership of the so-called [C]onsumers for [C]ompetitive [F]uels which supports this amendment. Big consumers like Shell, Mobil, Exxon, Phillips, Amoco, Chevron, just to name a few. 21 The debate over this amendment, therefore, really boils down to this: If you want to help big oil maintain its lock on our fuel supply and if you want to weaken the Clean Air Act, then vote to reduce the 3.1-percent requirement down to 2.7 percent. 22 On the other hand, if you want to improve our air, and provide the Federal Government with some net savings, then vote to retain the 3.1-percent requirement. Because with 3.1, you are going to encourage the use of ethanol—a proven pollution fighter produced by American farmers, not big oil. 23 136 Cong. Rec. S 2290, 2295-96 (Mar. 7, 1990) (emphasis added). Likewise, Senator Dole added: 24 The amendment is an antienvironmental, big oil bailout, and I am surprised anyone would think it should be given serious consideration to a bill which is supposed to help our environment. . . . 25 . . . . 26 Make no mistake, this is a big oil amendment. The major international oil companies control foreign natural gas reservoirs, and they are looking for a market—your gas tank and the gas tanks of your constituents. By voting for the Lautenberg amendment, you will be closing an opportunity for a clean-burning, domestically produced product from our motor fuels market, leaving nothing to compete against oil company-owned feedstocks. If you vote for this amendment, do not complain about high gasoline prices, because you voted against competition. 27 Id. at 2297. Perhaps the most candid comments on this issue came from Senator Simpson, who explained his vote by stating: 28 Mr. President, I find myself in disagreement with my fine leader [Senator Dole] and some of my farm State colleagues on this one. I would like to see all types of oxygenates used to reduce carbon monoxide and other pollutants— for I believe they are useful fuel additives and are very necessary in nonattainment areas. 29 We often react to issues based on parochial concerns. Here is such a case. I find that I must support the amendment offered by my able colleague, the Senator from New Jersey. There are many small refiners in my State that produce MTBE or methyl tertiary butyl ether and a major corporation has just announced they are planning to build a new MTBE plant in my State and that they will be making MTBE from natural gas. Then we also have the potential to make methanol from coal and natural gas and we have great reserves of those products in my State. I also have farmers to represent and they would like to produce ethanol as well, but not on the same scale as the MTBE producers. 30 So, I do support the amendment to change the oxygenate number to 2.7. This is assuredly a tough issue, but I must support my State on this one. 31 Id. at 2299. While the legislation that emerged from the House-Senate Conference suggests that the large oil companies ultimately obtained the result they allegedly sought, namely, the reduction of the oxygenation requirement to 2.7 percent, this proves little more than that they achieved the goal of ensuring that MTBE would be used widely as an oxygenate. It does not establish, however, that the defendants were required to use MTBE or that, if MTBE were not used, ethanol producers would have been unable to meet the expected demand in the few years before the fuel-oxygenation requirements took effect. 32 Nor are the defendants aided by the allegation that, at some unspecified time, the EPA knew there was not a sufficient capacity of ethanol, on a nationwide basis, nor sufficient infrastructure for ethanol, to comply with the regulation. N.H. Notice of Removal ¶ 33; Cal. Notice of Removal ¶ 34. First, apart from what the EPA may have understood about the supply of ethanol at the time the regulations were promulgated, the Notices of Removal do not allege that there was, in fact, an insufficient supply of alternative oxygenates, or that the EPA entertained such an understanding. Second, and more importantly, this allegation does not support the conclusion that had the defendants decided to use ethanol (or some other oxygenate) instead of MTBE, it would have been impossible for the supply of ethanol to have grown to meet that demand before the EPA regulations implementing the CAA amendments took effect. While the defendants allege that the notices' allegations of impossibility cover this easily, Defs.' Br. at 53 n. 13, we do not find this specific allegation in the Notices of Removal, and the defendants do not cite any particular paragraph where it appears. Nor do they cite any later-filed affidavits which could provide the basis for us to treat the removal petitions as amended to include those allegations. See Willingham, 395 U.S. at 407 n.3, 89 S.Ct. 1813 (treating removal petition as if it had been amended to include information contained in later-filed affidavits). Indeed, although we rely only on the language of the Notices of Removal, the plaintiffs argue persuasively, and without contradiction, that the defendants' argument that ethanol capacity was insufficient is a classic example of confusing the cart with the horse: ethanol supplies were low because the oil industry chose not to use it, not the other way around. N.H. Br. at 28. 33 Against this backdrop, the other allegations in the Notices of Removal are similarly unavailing. Even if the Notices of Removal were sufficient to establish that Congress and the EPA may have expected that the defendants would use MTBE, they leave unstated the reason for that expectation. Of course, constraints on the supply of other oxygenates constitute one plausible explanation, but it is also possible that Congress and the EPA based their expectation on price differences among the oxygenates or the fact that the major oil companies also controlled the natural gas from which MTBE is derived. That it may have been more convenient or less expensive for the defendants to use MTBE does not mean it would have been impossible for them to use other, less-polluting additives. Moreover, most of the facts alleged by the defendants in their Notices of Removal only indicate that MTBE would be one of several oxygenates used, and many of the floor statements cited by the defendants put ethanol and ethyl tertiary butyl ether, another oxygentate, on equal footing with MTBE with respect to the means by which gasoline refiners would comply with the terms of the CAA. In sum, the defendants have not met their burden of providing candid, specific and positive allegations, Willingham, 395 U.S. at 408, 89 S.Ct. 1813 (internal quotation marks omitted), that they were acting under federal officers when they added MTBE, and not some approved alternative, to their reformulated gasoline. 34 Moreover, the defendants' reliance on Watson v. Philip Morris Cos., 420 F.3d 852 (8th Cir.2005), cert. granted, ___ U.S. ___, 127 S.Ct. 1055, 166 L.Ed.2d 797 (2007) (No. 05-1284), is misplaced. In that case, users of so-called light cigarettes sued a cigarette manufacturer in state court under a state law barring deceptive trade practices, alleging that it had designed its cigarettes to deliver more tar and nicotine to smokers than its use of the terms light and lowered tar and nicotine would suggest. Specifically, pursuant to a voluntary agreement with the Federal Trade Commission (FTC) entered into in 1970, Philip Morris and other cigarette manufacturers had used a standard testing mechanism designed by the FTC to measure the amount of tar and nicotine in its products and had displayed the results in all of its advertisements. This filter test was known to be imperfect, as it did not accurately measure the tar and nicotine inhaled by a person under real-world conditions. Rather, it was intended to provide a standard methodology for comparing the relative amounts of these substances present in different varieties of cigarettes. In addition, the FTC permitted manufacturers to advertise a cigarette as light or low tar if the tar collected using the FTC's testing apparatus fell below a certain level. The plaintiffs contended that Philip Morris manipulated the design and content of its light cigarettes so that they would score well on the FTC test, even though they were as or more harmful than regular cigarettes. 35 Philip Morris removed the case from state to federal court on the ground that it was acting under a federal officer for the purposes of cigarette testing and advertising. The district court denied the plaintiffs' motion to remand, and the Eighth Circuit affirmed, holding that Philip Morris was acting at the direction of the FTC. Specifically, it noted that the FTC specified the testing procedures to be used with the same particularity that the Defense Department specified the formula for Agent Orange, determined the language to be used to disclose the tar and nicotine content of each type of cigarette, monitored the industry's testing labs, independently verified the manufacturers' results, monitored the content of cigarette advertisements, and threatened enforcement actions against manufacturers that did not comply with the terms of the voluntary agreement in any way. Watson, 420 F.3d at 858-60. The Eighth Circuit further observed that [t]he FTC involved itself in the tobacco industry to an unprecedented extent and that it engaged in an unusually high level of governmental participation and control. Id. at 860. 36 There are several reasons why we are not persuaded that the decision in Watson is useful to our resolution of this appeal. First, even if we assume Watson was correctly decided, its conclusion was by no means inevitable. The plaintiffs did not challenge any conduct undertaken by or at the direction of the FTC, including the testing of the cigarettes using the government-specified methodology or the public disclosure of the test results. Instead, they alleged that Philip Morris manipulated its cigarettes to achieve particular test results, even though the light cigarettes were as or more harmful than regular cigarettes, and as a result, the marketing of Philip Morris's cigarettes as light was misleading. While the FTC permitted Philip Morris to use the word light in its advertisements on the basis of the test results, it did not require the company to do so. Moreover, at least three federal courts facing similarly stated allegations regarding light cigarettes did not find the federal officer removal statute satisfied and remanded those cases back to state court. See Paldrmic v. Altria Corp. Servs., Inc., 327 F.Supp.2d 959 (E.D.Wis. 2004); Virden v. Altria Group, Inc., 304 F.Supp.2d 832 (N.D.W.Va.2004); Tremblay v. Philip Morris, Inc., 231 F.Supp.2d 411 (D.N.H.2002); cf. Brown v. Philip Morris Inc., 250 F.3d 789, 801 (3d Cir. 2001) (in Bivens action, [t]he mere fact that a tobacco company has complied with the requirements of a federal law cannot suffice to transform it into a federal actor any more than the compliance of a myriad of private enterprises with federal law and administrative regulations could of itself work such a transformation). 37 More significantly, the grounds for removal in Watson were more compelling than those in the present cases. For one thing, the FTC's level of control and monitoring over the cigarette industry, which the court described as unprecedented, 420 F.3d at 860, was stronger than that of the EPA over the gasoline industry. The FTC required the regulated companies to test its products using an apparatus and a methodology created and specified by the federal government; it required manufacturers to disclose the results of those tests in their advertisements; and it held a sword over the manufacturers' heads by threatening to take action against any company that deviated from the requirements set forth in the voluntary agreement. Id. at 858-61. By contrast, while federal regulations at issue here have much to say about gasoline content, they allow refiners to use any of several additives to meet federal oxygenation requirements and say nothing regarding the marketing of gasoline containing MTBE, a highly dangerous compound that, like tar and nicotine, poses a threat to human health if ingested. 38 Lastly, we are mindful of Judge Gruender's concurring opinion in Watson, which cautioned 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. Id. at 863. Judge Gruender observed, and we agree, 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). Id. Judge Gruender concurred with the court's opinion because he found that the FTC's direction and control of the testing and marketing practices at issue is extraordinary, id. at 863-64, but there is no similar direction and control in the present cases. 39 The federal officer removal statute is not to be construed grudgingly, Arizona v. Manypenny, 451 U.S. 232, 242, 101 S.Ct. 1657, 68 L.Ed.2d 58 (1981), but we do not believe it was intended to be construed so broadly that it would federalize a broad spectrum of state-law tort claims against entities regulated by—though not acting under—officers or agencies of the United States. As we have found that removal was inappropriate under the federal officer removal statute because the defendants did not act under an officer of the United States, we need not address the last requirement for removal under the federal officer removal statute, i.e., whether defendants have offered a colorable federal defense.