Opinion
Case No. 03-cv-0403-MJR.
March 2, 2004
MEMORANDUM ORDER
Plaintiffs Linda Arnold, Sherry Oliver, Barbara Whitehead, Allison Papa and Terri Edrington brought this class action complaint in the Circuit Court of Madison County, Illinois, against the Defendant, Philip Morris USA, Inc. (Philip Morris) (Doc. 2). Plaintiffs allege that Philip Morris manufactures, distributes, promotes, markets and sells light brand cigarettes in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1, et seq.
The complaint alleges that Philip Morris intentionally designs its light cigarettes and manipulates their contents to produce misleading tar and nicotine ratings when measured by the Cambridge Filter Method (CFM), a method for measuring tar and nicotine levels in cigarettes that has been endorsed by the Federal Trade Commission (FTC). Plaintiffs contend that Philip Morris' light cigarettes exposes users to smoke with far higher tar and nicotine levels than detected by the CFM. Hence, Plaintiffs allege Philip Morris committed consumer fraud when it designed its light cigarettes to intentionally exploit CFM's limitations so that it could falsely claim in its advertising and marketing materials that its light cigarettes are low in tar and nicotine. See Doc. 2, p. 3-4.
Philip Morris then removed this action to this Court asserting removal is authorized under the federal officer removal statute, 28 U.S.C. § 1442(a)(1) (Doc. 1). Philip Morris argues removal is proper because Philip Morris is a person "acting under" an officer of the United States as the conduct giving rise to Plaintiffs' complaint resulted from Philip Morris' compliance with FTC regulations and policies. See Doc. 1, p. 2. Now before the Court is Plaintiffs' motion to remand this matter to the Circuit Court of Madison County, Illinois (Doc. 5).
Standard of Review on Remand Motions
As the party seeking to remove a state court action has the burden of demonstrating the propriety of removal, Philip Morris bears the burden of demonstrating that this Court has subject matter jurisdiction over this matter. Collins v. Ralston Purina Co., 147 F.3d 592, 602 n. 1 (7th Cir. 1998) ("The party seeking removal has the burden of establishing the jurisdiction of the district court."); In re Brand Name Prescription Drugs Antitrust Litigation, 123 F.3d 599, 607 (7th Cir. 1997), cert. denied, 522 U.S. 1153 (1998); County Collector v. O'Brien, 96 F.3d 890, 895 (7th Cir. 1996); Wellness Community-National v. Wellness House, 70 F.3d 46, 49 (7th Cir. 1995). If the Court has any doubt regarding removal, jurisdiction should be resolved in favor of the state court. Doe v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993). Hence, this is the standard the Court must keep in mind in reviewing the extensive record submitted on the question of subject matter jurisdiction.
Analysis
Philip Morris maintains that the Court may exercise subject matter jurisdiction under the "federal officer" statute, 28 U.S.C. § 1442(a)(1). Section 1442(a) provides:
A civil action . . . commenced in State court against any of the following may be removed . . . to the district court of the United States for the district and division embracing the place wherein it is pending:
(1)The United States or any agency thereof or any officer (or any person acting under that officer) . . . 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.
This provision protects federal officers, federal agencies, and those acting under their direction "against interference in the course of their duties by hostile state court." Willingham v. Morgan, 395 U.S. 402, 405 (1969). The provision carries out its purpose "by allowing those whose federal activity may be inhibited by state court actions to remove to the presumably less biased forum of federal court." Ryan v. Dow Chemical, 781 F. Supp. 934, 939 (E.D.N.Y. 1992).
When removal is sought based on the existence of federal question jurisdiction, ordinarily, the "well pleaded complaint" rule requires the court to determine whether removal is warranted by looking only to the face of the plaintiff's well pleaded complaint rather than to the potential existence of a defense based on federal law. See Jefferson County v. Acker, 527 U.S. 423, 431-32 (1999). Section 1442(a)(1) is an exception to the well pleaded complaint rule. Id. It permits federal law under which the action is deemed to "arise" for purposes of the court's Article III jurisdiction to be supplied by pleading a federal defense in the notice of removal and satisfying the provision's other requirements. See id.; see also Mesa v. California, 489 U.S. 121, 136 (1989).
While the primary beneficiaries of Section 1442(a)(1) are federal officers and agencies, a private party defendant may also invoke Section 1442(a)(1) but to do so must: (1) assert a colorable defense based on federal law in the notice of removal; (2) establish that it was acting under the direction of a federal officer when it engaged in the actions on which the plaintiff's claims are based; and (3) demonstrate that a causal nexus exists between its actions and the federal officer's use of his governmental office. See Jefferson County, 527 U.S. at 431. Additionally, a defendant seeking removal must also be a `person' within the meaning of Section 1442(a)(1). Therefore, for Philip Morris to invoke Section 1442(a)(1), it must be a `person' under the section and demonstrate all three elements; if the Court finds that it has not proven any one of the elements nor is a person within the meaning of the statute, then removal is improper
Plaintiffs do not dispute that Philip Morris, a corporation, is a `person' within the meaning of Section 1442(a)(1). See Ryan v. Dow Chem. Co., 781 F.Supp. 934 (E.D.N.Y. 1992) (holding a corporation to be a person). Plaintiffs argue removal is improper because (1) Philip Morris was not acting under the direction of a federal officer or agency, (2) there is no causal nexus between Plaintiffs' claims and any acts Philip Morris performed under color of federal office, and (3) Philip Morris does not have a colorable federal defense to Plaintiffs' claims. See Doc. 5, p. 2.
Whether or not a party can remove a claim under the federal officer removal statute often turns on Section 1442(a)(1)'s second and third requirements, as is true in this matter. The Court notes that the "person acting under" element and the causal nexus element usually converge into one issue: whether the actions that form the basis of the state complaint were performed pursuant to comprehensive and detailed federal regulation. See Ryan, 781 F.Supp. at 945-46. Hence, Defendants must prove the existence of a "federal nexus" between the actions for which they are being sued and the directives of federal officers. Id.
Philip Morris argues that it was simply complying with the FTC's mandated tar and nicotine program when it engaged in the conduct for which Plaintiffs are suing over, and as Philip Morris had to comply with the FTC's policies, it argues that it has satisfied Section 1442(a)(1)'s second and third requirements. Philip Morris has provided the Court with a lengthy and detailed record of the FTC's involvement in the cigarette industry in support of its position, which the Court has carefully reviewed. The Court will briefly discuss the FTC's activities in the light cigarette industry as it relates to this matter.
In 1955, in response to complaints from tobacco companies that rivals were misrepresenting tar and nicotine levels in advertisements, the FTC began regulating the marketing of light cigarettes. See National Institute of Health, U.S. Dep't of Health and Human Servs., Pub. No. 02-5074, Risks Associated with Smoking Cigarettes with Law Machine-Measured Yields of Tar and Nicotine 202 (2001); Cigarette Testing, Request for Public Comment, 62 Fed.Reg. 48,158 (Sept. 12, 1997). The FTC issued cigarette advertising guides that prohibited tobacco companies from stating that "any brand of cigarette or the smoke therefrom is low in nicotine or tars, or contains less nicotine [or] tars . . . than any other brand or brands of cigarettes when it has not been established by competent scientific proof . . . that the claim is true." See Doc. 1, p. 4, citing 1955 Cigarette Advertising Guides, 6 Trade Reg. Rptr. (CCH) 39,012 (1995). However, the FTC's advertising guides were not successful in eliminating the misrepresentations in advertisements amongst the tobacco industry, and in 1960 the industry "through the aegis of the [FTC]" agreed to eliminate tar and nicotine claims in cigarette advertisements. Tobacco Products and Accessories, 5 Trade Reg. Rptr. (CCH) 11, 730 (1988).
In 1966, the FTC proposed adopting the CFM as the standard for measuring tar and nicotine levels, and sought public comment on this proposal. Cigarette Testing Request for Public Comment, 62 Fed.Reg. at 48,158. The FTC's purpose in adopting the CFM was "to provide a uniform basis for advertising claims" as to the amount of tar and nicotine levels in cigarettes. Id.
The FTC then adopted the CFM in 1967, thus beginning a program to test the tar and nicotine levels in every brand of cigarette on the market. See Cigarettes, Testing for Tar and Nicotine Content, 32 Fed.Reg. 11,107, 11,178 (Aug. 1, 1967); see also Cigarettes and Related Matters, 45 Fed.Reg. 46, 483 (July 10, 1980). The CFM was specified as the method "to be used to support any factual statements of tar and nicotine content of the mainstream smoke of cigarettes." Cigarettes and Related Matters, 31 Fed.Reg. 14,105, 14,278 (Nov. 4, 1966); see also 32 Fed.Reg. at 11,178. The purpose behind having the CFM was to "provide smokers seeking to switch to lower tar cigarettes with a single, standardized measurement with which to choose among the existing brands." Cigarette Testing Request for Public Comment, 62 Fed.Reg. at 48,158; see also Announcement of Commission Determination, 48 Fed.Reg. 15,953, 15,954 (April 13, 1983) (testing data for comparative purposes only).
Thereafter, the FTC initiated formal rulemaking procedures and proposed a trade rule mandating the disclosure of tar and nicotine levels in cigarette advertisements. See Federal Trade Commission, Report to Congress (Dec. 21, 1970). Philip Morris and other tobacco companies, in response, voluntarily agreed to disclose tar and nicotine levels under the CFM. Since Philip Morris and the other tobacco companies voluntarily agreed to make the tar and nicotine levels disclosures, the FTC indefinitely suspended its rulemaking proceeding. See id. at App. C.
The discussion of the FTC's treatment of light cigarettes demonstrates that the FTC's purpose in endorsing the CFM was to "provide smokers seeking to switch to lower tar cigarettes with a single, standardized measurement with which to choose among the existing brands," not to direct and control the design or production of low tar cigarettes. See Tremblay v. Philip Morris, Inc., 231 F.Supp.2d 411, 418 (D.N.H. 2002). The concern of the FTC appears to be that of informing the consumers of what it is they are buying and using, not to control the actual design and production of what the consumers are buying and using.
Philip Morris' arguments in favor of removal ignore the fact that Plaintiffs' allegations focus on the techniques Philip Morris used in the design and production of its light cigarettes so that it could allegedly mislead consumers in its marketing. As the United States District Court for the District of New Hampshire stated when remanding an almost identical consumer law violation case in which Philip Morris was the defendant seeking removal under the federal officer removal statute, "the complaint does not allege that Philip Morris is liable for simply complying with the CFM and FTC advertising policies. Rather, it clearly and concisely alleges that Philip Morris engages in a course of conduct aimed at manipulating the FTC's policies by exploiting loopholes in the CFM." Tremblay, 231 F.Supp.2d at 419. And the same is true in this matter. Plaintiffs' complaint focuses on Philip Morris' allegedly intentional design of its light cigarettes so as to "reduce the machine-measured levels of tar and nicotine . . . while actually increasing the harmful biological effects." See Doc. 2, p. 4. This in turn allegedly allowed Philip Morris to mislead consumers in its marketing and advertising of its supposed light cigarettes.
Additionally, the fact that Philip Morris is a participant in a regulated industry is not enough to demonstrate that it was acting under the direction of a federal officer when it designed its light cigarettes and marketed them as low in tar and nicotine. See Bakalis v. Crossland Sav. Bank, 781 F.Supp. 140, 145 (E.D.N.Y. 1991) (stating "the rule that appears to emerge from the case law is one of `regulation plus'."). As the Third Circuit Court of Appeals stated in Brown v. Philip Morris Inc., [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." Brown v. Philip Morris Inc., 250 F.3d 789, 801 (3rd Cir. 2001).
Therefore, Philip Morris has failed to establish that it was acting under the direction of a federal officer when it engaged in the actions on which the plaintiff's claims are based. Cf. Ryan, 838 F. Supp. at 950 ( remanding a matter involving Agent Orange that was removed under Section 1442(a)(1), as the manufacturer defendants did not act under the direction of the Department of Defense as the Department did not control the design, formulation and development of Agent Orange, but instead, only directed the production and sale of the product.); see also Pack v. AC and S, Inc., 838 F. Supp. 1099, 1103 (D. Md. 1993) (holding government construction, design and testing of turbines under government specifications amounted to direct and detail control, constituting more government direction than the purchase at issue in Ryan. ). As the Court has found that one of the requirements for removal under Section 1442(a)(1) has not been met, it need not address whether Philip Morris has met the other requirements.
Conclusion
Because it lacks subject matter jurisdiction, the Court GRANTS Plaintiffs' motion to remand (Doc. 5) and REMANDS this case to the Circuit Court of Madison County, Illinois.
Furthermore, the Court ORDERS Philip Morris to pay the "costs and actual expenses, including attorney fees, incurred as a result of the removal," under 28 U.S.C. § 1447(c). This award is not and should not be interpreted as a sanction. Rather, Section 1447(c) is a feeshifting statute "entitling the district court to make whole the victorious party." Garbie v. DaimlerChrysler Corp., 211 F.3d 407, 410 (7th Cir. 2000). The United States Court of Appeals for the Seventh Circuit has recognized that District Courts remanding cases should award costs and expenses under Section 1447(c) as "normal incidents of remand for lack of jurisdiction." Citizens for a Better Environment v. Steel Co., 230 F.3d 923, 927 (7th Cir. 2000).
Stated simply, plaintiffs "are presumptively entitled to recover attorneys' fees incurred in obtaining remand," Garbie, 211 F.3d at 407, and as such, the Court finds that costs and expenses should be recovered by Plaintiffs here.
Plaintiffs' counsel should furnish Philip Morris' counsel a statement reflecting these costs and expenses on or before March 16, 2004. Philip Morris has until April 23, 2004 to pay those costs and expenses.
Although the Court lacks subject matter jurisdiction and is remanding this matter to state court, it has the inherent power to enforce its Order awarding these costs and expenses and will do so, if necessary. The undersigned Judge defers the resolution of all issues regarding the enforcement of this Order to United States Magistrate Judge Clifford J. Proud.