Preemption and removal: Watson shuts the federal officer backdoor to the federal courthouse, conceals familiar motive.

• Author: Klenov, Michael E.

1. INTRODUCTION

   A group of plaintiffs sues a large national corporation in state court for violating state law. The corporate defendant responds that even if it did violate state law, it is not liable because federal law or a relevant federal regulatory agency authorized or directed the allegedly illegal conduct. But before arguing that the supremacy of federal law and regulation preempts the state claim, the corporate defendant invariably removes the case to federal court. (1) If the corporate defendant cannot establish diversity jurisdiction, however, the Supreme Court's narrow interpretation of the federal question jurisdiction statute and its strict application of the well-pleaded complaint rule make the task of keeping the case in federal court nearly impossible. Following remand, a state judge ultimately decides whether federal law or regulation preempts the state claim against the corporate defendant.

   Given this jurisdictional milieu, corporate defendants eager to escape the state courts vigilantly try to sneak into the federal courthouse through a backdoor after finding the front door closed. Recently, cigarette maker Philip Morris found one such backdoor in the federal officer removal statute, 28 U.S.C. [section] 1442(a)(1). (2) Indeed, Philip Morris succeeded not only at the district court level, (3) but also convinced a panel of the Eighth Circuit to unanimously affirm the district court's denial of plaintiffs' remand motion. (4)

   On its face, the federal officer removal statute permits removal of state claims against officers or agencies of the United States as well as persons "acting under" those officers or agencies. Historically, individuals and corporations unaffiliated with the government scarcely used this narrow jurisdictional statute. When they did, the defendants were federal contractors facing suits for activities performed under the direction of the United States pursuant to a contract. (5) Philip Morris was the first corporate defendant to successfully argue that because the Federal Trade Commission (FTC) regulated and authorized its actions that allegedly violated state law, Philip Morris was a person "acting under" an agency of the United States entitled to federal jurisdiction under [section] 1442(a)(1). This backdoor did not stay open for long, however, as a unanimous Supreme Court reversed the Eighth Circuit and held that a corporation simply complying with federal regulation, no matter how detailed or specific, could not defend state law claims in federal court under the federal officer removal statute. (6)

   This Note has two primary goals. The first goal is to highlight the underlying jurisdictional issues that were not apparent on the face of any of the three Watson v. Philip Morris Cos. (7) opinions. Specifically, the lower courts' acceptance of Philip Morris's argument for federal officer jurisdiction created a rule that could potentially result in removal under [section] 1442(a)(1) of any case where a defendant asserted a conflict preemption defense based on extensive federal regulation. This decision circumvented established Supreme Court doctrine and carved a new exception into the well-pleaded complaint rule. In addition, if left untouched, the decision had the potential to seriously alter the balance toward federal regulatory preemption of private enforcement of state law.

   The second goal is to analyze the Supreme Court's reasons for reversing the lower courts. This Note explains why the three principal rationales the Court used to support reversal-hi story, plain language, and statutory purpose undermine rather than bolster the Court's decision. Ultimately, the Note concludes that just as with the Court's development of the well-pleaded complaint rule in the context of interpreting the federal question jurisdiction statute, practical concern over the expansion of the federal docket drove the Court's narrow reading of the federal officer removal statute.

2. THE FRONT DOOR TO THE FEDERAL COURTHOUSE: STATUTORY FEDERAL QUESTION JURISDICTION AND REMOVAL

   1. Divergence Between the Constitutional and Statutory Interpretations of Federal Question Jurisdiction

      Before delving into the history and judicial treatment of the federal officer removal statute prior to and during Watson's ascent to the Supreme Court, it is important to briefly address some fundamental principles of federal jurisdiction. That federal courts are courts of limited jurisdiction is an oft-heard truism for both students and practitioners of the law. (8) Article III of the United States Constitution created the Supreme Court, authorized Congress to create inferior federal courts, and defined the extent of judicial power that those courts could exercise. (9) Among the bases of subject matter jurisdictions (10) enumerated in Article III, the most prominent in contemporary civil litigation are the ubiquitous diversity jurisdiction (11) and federal question jurisdiction. (12) The development and application of diversity jurisdiction is comparatively straightforward (and also less relevant for the upcoming analysis in light of the introductory hypothetical), (13) so the focus of the rest of this section and this Note will be federal question jurisdiction. (14)

      Article III, Section 2 is the source of federal question jurisdiction and provides that the federal judicial power "shall extend to all Cases ... arising under ... the Laws of the United States." (15) While Congress exercised its Article III, Section 1 power and created inferior federal courts by enacting the Judiciary Act of 1789, it did not confer statutory federal question jurisdiction upon those inferior courts until 1875. (16) By that time, the Supreme Court already had occasion to interpret the "arising under ... the Laws of the United States" language in the Constitution. (17) In Osborn v. Bank of the United States, (18) the Court adopted an extremely broad reading of the "arising under" language when it held that the mere possibility that a question of federal law would be an important ingredient in litigation satisfied Article III requirements. (19)

      While the language of the modern federal question jurisdiction statute, 28 U.S.C. [section] 1331, (20) is nearly identical to the constitutional "arising under" language, the Court interprets the statutory grant of jurisdiction much more narrowly. In fact, a question "arises under" federal law for purposes of [section] 1331 only when: (1) federal law creates the plaintiffs cause of action; (21) or (2) state law creates the plaintiffs cause of action but federal law is an essential component of the case, and the outcome depends on the construction or application of that federal law. 22 Together, these limitations define the boundaries of what has become widely known as the well-pleaded complaint rule the requirement that the federal question must appear on the face of a well-pleaded complaint to trigger [section] 1331 jurisdiction. (23)

      A corollary of the well-pleaded complaint rule is that a federal defense cannot give rise to [section] 1331 jurisdiction, regardless of whether a defendant first raises the defense, or the plaintiff anticipates the defense and addresses it in the complaint. (24) An increasingly common federal defense (25)--the one raised in the introductory hypothetical--is federal preemption of state law. (26) Broadly described, preemption is a doctrine grounded on the Supremacy Clause of the Constitution. (27) Article VI proclaims that federal law shall be the supreme law of the land, and that state judges shall be bound by federal law, anything to the contrary in state law notwithstanding. (28) An extension of this constitutional principle is that when Congress enacts a law with the explicit intent to change or supplant state law, a state judge must abide by that federal law even if doing so forecloses a plaintiff's relief for a defendant's violation of state law. (29) In addition to congressional ability to expressly preempt state law through statutory language, both federal law and federal regulation can preempt inconsistent or contrary state law by implication. (30) While it is the stated doctrine of both the state and federal judiciary to avoid finding conflict between federal and state law whenever possible, (31) when courts do find state law in favor of federal law. (32)

   2. Practical Implications of the Divergent Interpretations for Litigants, and State and Federal Governments

      At the intersection of the well-pleaded complaint rule and the implied conflict preemption doctrine lies the question of true practical significance for our hypothetical corporate defendant-can the defendant remove the state law claim so that a federal court will rule on the validity of its federal preemption defense? The front door to the federal courthouse for our corporate defendant is the general removal statute, 28 U.S.C. [section] 1441. (33) Yet the general removal statute permits removal of a state case to federal court only if a district court could have exercised original jurisdiction over the case in the first place. (34) So, absent diversity jurisdiction, the corporate defendant cannot establish the requisite federal question jurisdiction based solely on its conflict preemption defense, and thus cannot remove under [section] 1441. (35) The result is that a district court will grant the plaintiff's motion for remand and a state judge, rather than the defendant's preferred federal judge, will ultimately determine whether a conflict exists between federal and state law, and whether that conflict will foreclose the plaintiff's remedy for the defendant's violation of state law. (36)

      Two inescapable questions follow. Does it matter? And if so, to whom? The simple answer belies its complex underpinnings. Yes, it matters a lot. And it matters not only to the individual litigants, but also to state and federal governments. For the litigants, the difference between a state and federal forum has...