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The AEI Federalism Project conducts and sponsors original research on American federalism, with particular emphasis on federal and state business regulation, legal developments and the role of the courts, and the prospects for rehabilitating a constitutional federalism that puts states in competition for productive citizens and businesses. Through its AG Watch, the Federalism Project monitors and comments on the increasingly active role of state attorneys general.

The AEI Federalism Project disseminates its research results and opinions through frequent conferences and other public events; through the Federalism Outlook, a newsletter written by the Project’s Director, Michael S Greve; through its website; and through books and publications in scholarly journals.

Supreme Court Update

April 25, 2007

Blowing Smoke

posted by Michael Greve @ 10:48 am

Cigarette maker Philip Morris is a party in two Supreme Court cases this Term, both with interesting federalism implications. The company prevailed, sort of, in Philip Morris USA v. Williams, where the Court, per Justice Breyer, held that state juries may not punish defendants, by means of punitive damages, for conduct that took place in other states. They may, however, take that conduct into account in assessing punitive damages. This subtle distinction is said to flow from the due process clause and is to be enforced by means of jury instructions. Justices Stevens, Ginsburg, Thomas, and Scalia dissented.

Watson v. Philip Morris Co., the last case to be argued this Term (on April 25) , addresses the question of whether the company is a federal officer. Whence this far-fetched notion? The company’s products and advertising practices are heavily and, one would think, preemptively regulated by the federal government. Philip Morris has found, though, that preemption defenses aren’t worth a whole lot in state court cases, where creative plaintiffs’ lawyers argue that cigarette makers federally mandated warning labels and product claims nonetheless violate state consumer protection laws. So the first order of business is to remove those cases to federal courts—but how? Enter the “federal officer removal statute,” 28 USC 1442(a)(1), enacted eons ago to protect federal customs and revenue offers from vexatious state litigation. In recent decades, some federal circuits have allowed not only federal officials but also federal contractors to invoke the removal provision. In Watson, Philip Morris persuaded the Eight Circuit that the protection should be further extended to heavily regulated industries, especially tobacco.

Good try, but not even close. There ought to be a way of protecting corporations from ruinous state litigation, but turning them into instruments of the federal government isn’t it.

For what it’s worth: this very same company, in the notorious 1998 tobacco settlement with attorneys general, effectively turned itself into an excise tax collector for the states, in exchange for antitrust immunity, a monopoly status, and attendant profits. Having made its bed as a state-protected public utility, it should lie in it.