Tuesday, January 16, 2007

Supreme Court to Review Removal of State Deceptive Advertising Case

The U.S. Supreme Court on January 12 agreed to review the removal to federal court of an Arkansas Deceptive Trade Practices Act claim brought by tobacco consumers against Philip Morris Companies, Inc. in Arkansas state court.

A class of tobacco consumers alleged that Philip Morris engaged in unfair and deceptive practices in advertising and marketing its cigarettes as “light” and having “lowered tar and nicotine,” while actually designing those cigarettes to deliver more tar and nicotine than the advertising and marketing would suggest. The class further claimed that the cigarettes delivered much more tar and nicotine to the smoker than FTC test results indicated.

Philip Morris removed this action to federal court under 28 U.S.C. §1442(a) (1), which permits removal when a person is sued for actions taken under the direction of a federal officer. The tobacco giant claimed it was acting under the direct control of the FTC when it engaged in the allegedly unlawful conduct. The class contested the removal, and the federal district court certified the question for interlocutory appeal to the U.S. Court of Appeals, Eighth Circuit.

The appeals court upheld the removal, agreeing that Philip Morris was acting under the direction of the FTC, which controlled the delivery of tar and nicotine information to consumers and monitored cigarette ads (2005-2 Trade Cases ¶74,901; CCH State Unfair Trade Practices Act ¶31,061; CCH Advertising Law Guide ¶61,808).

The direction was very specific, and the government compelled compliance with its directions through a voluntary agreement with the tobacco industry, the Eighth Circuit held. Moreover, the consumers’ claims were sufficiently related to the FTC’s direct and comprehensive control to establish a “causal connection” that linked the federal officer’s direction and control to the acts challenged in the complaint.

The class filed a petition for review by the Supreme Court on April 7, 2006, asking whether a private actor, doing no more than complying with federal regulation was a “person acting under a federal officer” for the purpose of 28 U.S.C. §1442(a)(1), entitling the actor to remove to federal court a civil action brought in state court under state law.

The petition is Watson v. Philip Morris Companies, Inc., Docket No. 05-1284, cert granted January 12, 2007.

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