More on Today’s Opinion in Watson v. Philip Morris

By Amy Howe
on Jun 11, 2007 at 6:26 pm

[Note: The following opinion recap is by Jordan Connors, an Akin Gump summer associate and a student at Columbia Law School.]

The Supreme Court held unanimously today that compliance with federal regulation is insufficient to provide a regulated entity with federal court removal power under the “federal officer removal statute.” In so doing, it explained that the tobacco industry is not different in kind from other regulated industries merely because of a difference in the degree of regulation.

Petitioners Lisa Watson and Loretta Lawson, on behalf of a class of similarly situated plaintiffs, brought this suit in Arkansas state court against Philip Morris for violating Arkansas unfair trade laws. After Philip Morris – relying on the federal officer removal statute – removed the case to federal court, the district court denied petitioners’ motion to remand the matter back to state court and certified the question whether the case was validly removed to federal court for interlocutory review by the Eighth Circuit.

The Eighth Circuit held that Philip Morris was entitled to removal under the federal officer removal statute. According to the unanimous circuit court, Philip Morris was a “person acting under” a federal officer or agency, under the statute, because the Federal Trade Commission extensively regulated Philip Morris’s testing procedure. The opinion analogized to lower court cases authorizing removal under the same statute for heavily supervised government contractors.

The Supreme Court reversed. Justice Breyer, writing for a unanimous Court, made two important distinctions relevant to the case. The first was the difference between assisting law enforcement on the one hand and complying with law enforcement on the other. The Court held that mere compliance with regulation does not bring the regulated entity within the scope of the statute. According to the Court, the statutory language, context, and purpose, as well as Supreme Court precedent, all confirmed this view. Relying on dictionaries, the Court concluded that “acting under” meant “help” or “assist” rather than “acquiesce[] to an order.” Moreover, the removal statute was enacted to defeat local prejudice against federal law enforcement and to provide a federal forum for immunity defenses. The Court reasoned that both purposes were more likely implicated by entities assisting federal law enforcement than by entities complying with federal laws. Furthermore, while nineteenth- and twentieth-century statutes expanded the statute’s coverage to include all federal officers, they did not change the “acting under” language describing “the triggering relationship between a private entity and the federal officer.” Thus, even if there was extensive regulation and monitoring, the Court concluded, compliance alone could not bestow the regulated entity with removal power. A contrary ruling, in the Court’s view, “would expand the scope of the statute considerably.”

On the basis of this first distinction, the Court explained, lower court opinions holding that closely supervised government contractors fall within the terms of the removal statute are inapposite. Private contractors assist federal officers, the Court explained, in a manner “that goes beyond simple compliance with the law.” The Court did not, however, express an opinion on whether private contractors may invoke the statute.

The second distinction the Court made was between regulation and delegation. Although the Court suggested that removal might be possible in cases of “formal delegation” of authority to private parties, it emphasized that no such delegation at issue here because there was no “evidence of any contract, any payment, any employer/employee relationship, or any principal/agent arrangement.” According to the Court, “differences in the degree of regulatory detail or supervision cannot by themselves transform Philip Morris’ regulatory compliance into the kind of assistance that might bring the FTC within the scope of the statutory phrase ‘acting under’ a federal ‘officer.’”

There are several implications of the Court’s ruling today. Watson clearly signals that private actors in heavily regulated industries such as drug companies, medical equipment makers and nuclear power plants cannot rely solely on their status as regulated entities to assert a right to removal. However, regulated actors should still have access to federal courts, as the Class Action Fairness Act of 2005 generally supplanted individual removal procedures in cases such as this one.