Philip Morris's Argument to the Supreme Court in Watson v. Philip Morris, About Where a Case about Cigarettes Sold As "Lights" Should Be Tried:
By ANTHONY J. SEBOK
|Tuesday, May. 08, 2007
When it comes to tobacco litigation, I am an equal-opportunity skeptic. Many of the suits against the tobacco industry are based on flimsy legal grounds. Thus, even if, as a matter of policy, I might sympathize with the public health goals that the plaintiffs' bar claims it wants to achieve through massive tort judgments and settlements, I still question the dubious legal strategies that are being employed in the attempt to reach these goals -- and wonder if they might be better sought in legislatures, than in courts.
Of course, when the tobacco industry tries to defend itself by using flimsy legal arguments, that is grist for my mill too. And a prime example occurred two weeks ago, when the tobacco industry was in front of the Supreme Court making an argument which can be summarized in one word: chutzpah.
The issue before the Court in Watson v. Philip Morris, Inc. et. al. arose out of one of the many "lights" cases -- that is, cases in which plaintiffs claim they were defrauded by inaccurate claims on cigarettes' "lights" labels -- that have been filed around the country. I have written in a prior column for this site about the "lights" cases. In this column, I'll focus on Watson, the case before the Court -- which raised a separate but related issue, regarding whether a "lights" case will be litigated in state or federal court.
The Problem with "Lights" Cases in General
"Lights" cases have many problems, especially when framed as class actions. That is because the cases are not technically about the physical illnesses caused by smoking, but rather about the difference in value between what smokers paid for lights cigarettes, and what they actually received.
When the issue is phrased this way, one can easily see that the lights cases are another example of the clever use of pretext: The cases are really about the health effects of cigarettes, but they are framed as "simple" fraud claims, so that some of the messy causation issues that complicated earlier tobacco cases can be left to one side. There is an attempt to shift the relevant time-frame too, asking whether smokers got what they paid for at the moment of sale, not whether their purchase and use of the product caused their later illnesses.
The Issue Raised by Watson in Particular: To Litigate in State, or Federal, Court?
Watson, however, is not a typical lights case. The reason it is currently before the Supreme Court is that the tobacco defendants succeeded in convincing a federal trial judge to remove the case from Arkansas state court, where is had been filed as a class action, to the federal district court in Arkansas. The only issue before the Supreme Court on April 25, then, was whether this removal was correct under federal law.
At first glance, it might seem that very little is at stake in Watson. In theory, why should it matter whether a class action is tried in state court or federal court?
In reality, however, it matters very much. That is why, for instance, there was so much controversy over the Class Action Fairness Act (CAFA), which made it easier for defendants to remove class actions from state court to federal court. The plaintiffs' bar and Democrats in Congress opposed CAFA, but it was passed over their objections before the 2006 elections.
Defendants in most class actions prefer the federal courts over the state courts -- even if, in theory, the substantive law applied will be the same. Federal courts have a reputation of being, at the moment, more conservative than certain state courts -- which have, whether deserved or not, distinctly pro-plaintiff reputations.
Furthermore, the certification of a class action--which is a highly discretionary act by a trial judge--is seen as being more difficult in the federal courts, than in a number of state courts. And in some cases, winning the class certification motion is as good as winning the case, from plaintiffs' perspective -- for it may prompt a high settlement by vastly increasing the size of the verdict the defendant risks, if it insists on going to trial.
Interpreting the Removal Statute: Tobacco Companies as "Federal Officers"?
How did the tobacco companies get the case against them transferred from state court to federal court, in the Watson case itself?
They invoked the "federal officer removal" statute. This law authorizes removal of a case from state to federal court by the "United States or any agency thereof or any officer (or any person acting under that officer) of the United States or any agency thereof, sued in an official or individual capacity for any act under color of such office."
The tobacco industry companies who are parties in Watson argue that when they performed the tests rating the tar and nicotine in light cigarettes that are the heart of the plaintiffs' suit, they themselves were acting as "federal officers" because the tests were required by the Federal Trade Commission.
This argument was accepted by the federal district court and the U.S. Court of Appeals for the Eighth Circuit. Yet it is so implausible, it is hard to know where to begin to criticize it.
To begin, it is important to realize that the tobacco industry made this argument at the same time that a federal district court in Washington D.C. was coming to the conclusion that the efforts by the tobacco industry to market "lights" cigarettes constituted conspiracy to commit fraud and therefore violated the federal racketeering laws. In her 1683-page opinion in United States v. Philip Morris USA, Inc., which I discussed in a column for this site last year, Judge Gladys Kessler made it very clear that she believed that the plaintiffs had proven that the tobacco industry had attempted to use the FTC's testing method (called the "Cambridge test") to deceive the consumer -- and, one assumes, the FTC as well. If one credits Judge Kessler's view, here, then it is the height of arrogance to claim that the same companies that were, in her opinion, deceiving the FTC, were also at the same time acting as its agents!
But, of course, the tobacco industry does not share Judge Kessler's view, and seeks to defend itself against such claims. Still, it's hard to see what basis it could have for trying to do so in federal court, under the aegis of the federal officer statute.
Removal under the federal officer statute is supposed to protect persons who are being charged or sued in state courts because of something they did in order to implement the ends of the federal government. The classic example, of course, would be an FBI agent charged with murder or sued for damages after a shootout. Of course, that agent is a federal officer, and she should be able to remove her case from a potentially hostile or biased local courtroom.
There are also instances where civilians who were helping federal officers were able to remove their cases, because they were helping federal officers pursue aims of the federal government. The best example of this is discussed in the Supreme Court's 1926 decision in Maryland v. Soper. In that Prohibition-era case, a chauffeur drove four federal revenue officers who killed someone during a raid. When the four agents and the chauffeur were sued, all five, including the chauffeur, were able to remove their case to federal court, even though the chauffeur was not formally a federal officer in the sense the federal revenue officers were.
The Tobacco Companies' Argument for "Federal Officer" Status: Clever, But Not Persuasive
Of course, the tobacco companies are not remotely like FBI agents, or like the chauffeur who served the four federal revenue officers. So what is their basis for claiming to be "federal officers"?
The tobacco companies argue that, because the FTC had once performed the Cambridge Test itself, and then stopped in 1987, the companies became "federal officers" after 1987, when they began to do the Cambridge test themselves. Their argument turns on the fact that they had to perform the test, or they could not legally advertise the cigarettes as "lights." Their logic implies that not only they, but anyone who performed the Cambridge test was acting on behalf of the federal government--and was, therefore, a federal "officer."
There are two serious problems with this argument, although I have to admit that it is clever:
First, it ignores the purpose behind the federal officer removal statute. As a number of courts have noted, the reason why a federal officer and agents of the federal government need to get out of state court, is that there is an important issue of federal law that must be decided before any case against a federal officer or agent can be heard: the question of immunity.
Sovereign immunity, which I discussed in a recent column, is one of the most important tools any government has to limit its liability. In part for this reason, it is understandable that the federal government would not trust the state courts to make the immunity determination under federal law -- and would use the federal removal statute to take that determination out of state courts' hands.
In fact, it was precisely this sort of reasoning that led the U.S. Court of Appeals for the Eighth Circuit to extend federal officer removal to the tobacco companies. It compared the position of the tobacco companies, who were "required" to perform the Cambridge test by the FTC, to that of a private company that is "required" to make a product according to government specifications which turns out to be defective.
The Eighth Circuit thus based its Watson opinion on the 1998 opinion of the U.S. Court of Appeals for the Fifth Circuit in Winters v. Diamond Shamrock Chem. Co. The Winters case involved a manufacturer of Agent Orange which sought removal from state court to federal court in order to adjudicate whether it was immune from suit -- arguing that, since the federal government had told it exactly and precisely how to manufacture Agent Orange, which was being used for U.S. military purposes, it should be treated as a "federal officer" under the removal statute. The key decisions that could lead to liability, the manufacturer said, were made by the U.S. military, not the manufacturer itself.
But, of course, that is not this case -- far from it. The tobacco companies were not performing a contract for the federal government with respect to the "lights." The federal government was not buying the cigarettes the companies made, or telling them exactly what to put into them. Indeed, the federal government had no interest in the cigarettes' being manufactured at all -- in sharp contrast to the situation with Agent Orange. The federal government didn't want the companies to sell cigarettes; it simply wanted (and required) them to test the cigarettes, using the Cambridge test, before they did so.
The second -- and closely-related -- problem with the tobacco companies' argument is that if the Supreme Court accepts it, it is hard to know how the federal courts could possibly limit the consequences. If the tobacco companies are truly acting on behalf of the federal government when they comply with a FTC regulation, then so is every regulated industry that performs tests in compliance with any federal government regulation. All would be federal officers for purposes of the removal statute.
I don't usually like to resort to arguments based on slippery slopes or "parades of horribles," but here, such arguments are actually realistic: If the tobacco companies' arguments are accepted, cases involving every aspect of product design could be removed from state court to federal court.
This would be a massive reversal of the way the federal judicial system works, and we should be wary about reading a statute in a way that would bring about such an absurd result.
This last point provides the strongest reason why I predict the Supreme Court will reverse Watson. The Roberts Court may not be interested in consumer rights, but it is surely interested in federalism and it does not want to see the federal courts flooded with state tort suits.
Indeed, I predict that the Eighth Circuit's decision will be reversed by a large majority--if not a unanimous vote--of the Court. There are lots of things wrong with the plaintiffs' "lights" cases, but they won't be solved by preserving the ridiculous fiction that the cigarettes companies were somehow acting on the government's behalf when they took their product to market.