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Price v. Philip Morris12/15/2005
aking of statements that "fall within the boundaries established by federal law" (Bober, 246 F.3d at 943) in a highly regulated industry, even if those statements may tend to be confusing or misleading and even if there is no express authorization for the making of such statements in the applicable federal regulations. This is entirely consistent with our previous decisions, our reading of the statutory language, and our understanding of the legislative policy underlying section 10b(1).
The United States Court of Appeals for the District of Columbia Circuit long ago noted the FTC's tendency to regulate by obtaining voluntary compliance with its policies, rather than engaging in formal rulemaking. See Holloway v. Bristol-Myers Corp., 485 F.2d 986, 995 (D.C. Cir. 1973) (noting that, due to its "expertise in dealing with commercial practices," the FTC is able to secure "voluntary compliance through informal proceedings," and, in its sound discretion, determines when "formal enforcement measures" are necessary; and, further, that Congress has "voiced approval" of the FTC's "record in shaping the fluid contours of generalized statutory policy pronouncements into meaningful and coherent rules of business conduct"). In reaching its holding that the FTC Act did not create a private cause of action under which that the Holloway plaintiffs could bring their claim, the court of appeals provided a detailed history of the FTC Act and its amendments and of the FTC itself. The court noted that when considering the 1939 amendments to the FTC Act, Congress made a fundamental policy judgment regarding the FTC's "expertise in dealing with commercial practices, its ability to act as a buffer in securing voluntary compliance through informal proceedings, and its sound discretion in determining when formal enforcement measures were necessary." Holloway, 485 F.2d at 995. Holloway also offers support for the conclusion that the consent orders obtained by the FTC with respect to one industry member provided specific authorization for other industry members to act in conformity with those orders.
Finally, although lacking in significant precedential weight, we note with great interest the memorandum opinion and order of the federal district court for the Eastern District of Arkansas in Watson v. Philip Morris Cos., No. 4:03-CV-519 GTE (E.D. Ark., December 12, 2003), aff'd, No. 04-1225 (8th Cir. August 25, 2005). The Watson class of plaintiffs was comprised of smokers who had consumed at least one pack of Marlboro Lights during the six years prior to the filing of their action pursuant to the Arkansas Deceptive Trade Practices Act (Ark. Code Ann. §4-88-107). The substance of their complaint was that Philip Morris advertised Marlboro Lights as being lighter or lower in tar, despite the fact that the cigarettes actually delivered more tar and nicotine than shown by the FTC testing method. Philip Morris removed the action to federal court pursuant to 28 U.S.C. §1442(a)(1) (2000), on the basis that it had raised a colorable federal defense to the plaintiffs' claims. Specifically, Philip Morris argued that its actions were at the direction of a federal agency-the FTC-and that there was a causal nexus between the FTC's actions and Philip Morris' marketing practices with regard to light cigarettes. The district court denied the plaintiffs' motion to remand the matter back to state court.
For our purposes, the relevant portion of the Watson decision is the district court's discussion of the FTC's regulation of advertising of light and low tar cigarettes and the FTC's use of mechanisms other than formal rules to direct the actions of regulated entities.
After an exhaustive recounting of the history of regul
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