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Price v. Philip Morris12/15/2005
was not based on a formal rule, the two consent orders in this case are not based on any formal rule. If the letter in Wabash Valley Power cannot be considered as "law" as a matter of federal law, then there is no basis for concluding that the consent orders constitute "laws" administered for the purposes of section 10b(1).
As a final matter, the court, in its opinion, "note with great interest" (slip op at 65) a decision by the United States District Court for the Eastern District of Arkansas. Watson v. Philip Morris Cos., Inc., No. 4:03-CV-519 GTE (E.D. Ark., December 12, 2003), aff'd, 420 F.3d 852 (8th Cir. 2005), involved an Arkansas consumer fraud class action, which charged Philip Morris with the same fraudulent misconduct as in this case. Philip Morris removed the cause from Arkansas state court to federal court pursuant to 28 U.S.C. §1442(a)(1) (2000), which provides for removal where a person is sued for actions taken under the direction of a federal officer. Philip Morris claimed that it satisfied the requirements of the federal officer statute "because it was acting under the direct control of the when it engaged in the allegedly unlawful conduct." Watson, 420 F.3d at 854.
A key requirement for federal removal jurisdiction is that the defendant act under the direction of a federal officer.
" ` emoval by a "person acting under" a federal officer must be predicated upon a showing that the acts ... were performed pursuant to an officer's direct orders or to comprehensive and detailed regulations.' Virden v. Altria Group, Inc., 304 F. Supp. 2d 832, 844 (N.D. W. Va. 2004) (quoting Ryan v. Dow Chem. Co., 781 F. Supp. 934, 947 (E. D. N.Y. 1992)). Mere participation in a regulated industry is insufficient to support removal unless the challenged conduct is `closely linked to detailed and specific regulations.' Virden, 304 F. Supp. 2d at 844." Watson, 420 F.3d at 857.
The model cases in which private actors have successfully removed cases to federal court under the statute have involved: government contractors with limited discretion; Medicare program contractors because they serve as agents of the federal government; and private actors whose functions are so intertwined with the federal government that they are considered effectively to be federal employees. Virden v. Altria Group, Inc., 304 F. Supp. 2d 832, 845 (N.D. W. Va. 2004) (and cases cited therein). "Removal under §1442(a)(1) will not be permitted if the defendant cannot establish direct and detailed control but only that the relevant acts occurred under the general auspices of a federal officer, as would be the case, for example, if the defendant were simply a participant in a regulated industry." Paldrmic v. Altria Corporate Services, Inc., 327 F. Supp. 2d 959, 966 (E.D. Wis. 2004).
The district court in Watson reasoned that the FTC often regulates industries within its purview by compelling voluntary agreements and consent orders rather than by promulgating formal regulations. See slip op. at 66. Further, the district court stated that "the FTC coerced Philip Morris and other cigarette manufacturers into `voluntary' cooperation with its cigarette labeling and advertising policies `in such a way that a formal rule' was not required to create federal jurisdiction." See slip op. at 66-67. The court of appeals agreed with the district court's view of the record: "We are convinced that the record in this case shows a level of compulsion that establishes that Philip Morris was indeed `acting under' the direction of a federal officer." Watson, 420 F.3d at 859. Regarding the 1970 voluntary agreement: "The FTC effectively used its coercive power to cause the tobacco companies to enter the agreement.
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