UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
STATE OF CONNECTICUT
V.
PHILIP MORRIS INC., ET AL.
Ruling on Plaintiff's Motion to Remand [Doc. #18] Arterton, J.
Plaintiff State of Connecticut filed the present action against defendant tobacco companies in
state court. Plaintiff's seven-count complaint alleges violations of the Connecticut Unfair Trade
Practices Act, the Connecticut Antitrust Act, and Connecticut common law. Defendants filed a
joint Notice of Removal under 28 U.S.C. §1441, contending that this Court has original
jurisdiction over the action under 28 U.S.C. §1331 (federal-question jurisdiction). Plaintiff
disputes jurisdiction and moves to remand to state court.
Analysis
Congress has provided for original federal jurisdiction over "all civil actions arising under the
Constitution, laws, or treaties of the United States." 28 U.S.C. 1331. The standards for
assessing whether an action "arises under" federal law are well established:
•
To bring a case within the [jurisdiction] statute, a right or immunity created by the
Constitution or laws of the United States must be an element, and an essential one, of
the plaintiff's cause of action. The right or immunity must be such that it will be
supported if the Constitution or lass of the United States are given one construction or
effect, and defeated if they receive another. A genuine and present controversy, not
merely a possible or conjectural one, must exist with reference thereto, and the
controversy must be disclosed upon the face of the complaint, unaided by the answer or
the petition for removal.
Gully v. First Nat'l Bank, 299 U S. 109, 112-13 (1936) (citations omitted); see also InterAmerican University of Puerto Rico, Inc. v. Conception, 716 F.2d 933, 934 (1st Cir. 1983) In
determining whether federal-question jurisdiction exists over a given action, the plaintiff is
"master of the claim." Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987) (footnote
omitted) "The presence or absence of federal-question jurisdiction is governed by the 'wellpleaded complaint rule,' which provides that federal jurisdiction exists only when a federal
question is presented on the face of the plaintiff's properly pleaded complaint." Id. In the present
case, plaintiff has ostensibly presented only state-law claims; under the well-pleaded complaint
rule, plaintiff would thus be entitled to litigate the matter in state court. However, defendants rely
on an exception to the well pleaded complaint rule, claiming that plaintiff's complaint is subject
to the "artful pleading" doctrine The nature of this doctrine has been characterized as follows:
[O]ccasionally the removal court will seek to determine whether the real nature of the
claim is federal, regardless of plaintiff's characterization For instance, in many contexts
plaintiff's claim may be one that is exclusively governed by federal law, so that the
plaintiff necessarily is stating a federal cause of action, whether he chooses to articulate
it that way or not. If the only remedy available to plaintiff is federal, because of
preemption or otherwise, and the state courts necessarily must look to federal law in
passing on the claim, the case is removable regardless of what is in the pleading.
Travelers Indem. Co. v. Sarkisian, 794 F 2d 754, 758 (2d Cir. 1986) (quoting 14A C. Wright
et al., Federal Practice and Procedure 3722 (2d ed 1985)). "The classic application of the artful
pleading doctrine occurs in the context of federal preemption of state law." Id. However,
"[b]ecause state and federal lass have many overlapping or even identical remedies and because
generally we respect a plaintiff's choice between state and federal forums," the artful pleading
"exception to well pleaded complaint rule is necessarily a narrow one," In re Agent Orange
Product Liability Litigation, 996 F.2d 1425, 1430-31 (2d Cir. 1993). Defendants point to two
distinct aspects of the complaint whose "real nature" they find to be federal: 1) plaintiff's request
for reinbursement of tobacco-related Medicaid expenses, and 2) plaintiff's allegations of
antitrust violations. These claims are discussed separately below.
A. Medicaid Reimbursement
Defendants' argument that a claim for reimbursement of Medicaid expenses necessarily "arises
under" federal law has been squarely rejected by all four federal courts to have considered it.
See Maryland v. Philip Morris, Inc., CV No. CCB-96-1691 (D. Md. July 31, 1996); Ieyoub
v. American Tobacco Co., (W.D. La. July 16, 1996); Massachusetts v. Philip Morris, Inc.,
(1996 U.S. Dist. LEXIS 6895 (D. Mass. May 20, 1996); Moore v. American Tobacco Co.,
(94cv293GR (S.D. Miss. August 16, 1994). The argument merits little additional attention by
this Court, and, in fact, borders on the frivolous.
Briefly, defendants assert that plaintiff's claim "arises under" 42 U.S.C. §1396a(a)(25)(B),
which requires state Medicaid plans to provide
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that in any case where such legal liability is found to exist after medical assistance has
been made available on behalf of the individual and where the amount of reinbursement
the state can reasonably expect to recover exceeds the costs of such recovery, the
State or local agency will seek reimbursement for such assistance to the extent of such
legal liability.
The Court finds no hint in this provision of an intent to establish any "rights or immunities";
indeed, the provision seems to presuppose other bases of liability. Therefore, the Court cannot
discern how a suit brought to recover Medicaid payments can be characterized such that an
"essential" element of the suit is a "right or immunity created" by §1396a(a)(25)(B) See Gully,
299 U.S. at 112 Much less can the Court perceive how this provision indicates that "the only
remedy available to plaintiff is federal . . [and] courts necessarily must look to federal law in
passing on [a Medicaid reimbursement] claim." See Travelers Indem. Co., 794 F 2d at 758
Indeed, defendants have raised no serious argument that 1396a(a)(25)(B) preempts state-law
remedies; rather, defendants argue that preemption is not an absolute prerequisite to application
of the artful pleading doctrine. While this may be so, defendants must nonetheless offer some
other basis for concluding that "the only remedy available to plaintiff is federal" or that the artful
pleading doctrine is somehow otherwise applicable. Defendants have simply failed to do so. If
anything, the provision defendants rely on suggests that preexisting state-law causes of action
must provide the essential elements of a Medicaid reimbursement claim. Nor is the Court
persuaded otherwise by the ambiguous dicta concerning §1396a(a)(25)(B) found in James
Square Nursing Home, Inc. v. Wing, 897 F.Supp. 682, 687 (N.D.N.Y. 1995) (citing
1396a(a)(25) for proposition that states "are empowered to seek reimbursement from third
parties who are liable for care and services paid for by Medicaid").
Defendants' reliance on Hollander v. Brezenoff; 787 F.2d 834 (2d Cir. 1986), is similarly
misplaced. Hollander concerns an entirely different provision of the Medicaid statute,
§1396a(a)(37), which sets forth requirements for the payment of Medicaid providers by state
Medicaid agencies. Hollander held that a provider's claim for full payment arose under
§1396a(a)(37), rather than state contract law; however, §1396a(a)(31) plainly does what
§1396a(a)(25) does not create substantive rights on behalf of specified parties. While a suit by
a provider to vindicate those rights may arise under federal law, no such conclusion follows with
respect to claims by a state to recover expenditures already made. The Medicaid statute merely
sets forth vague procedural requirements pertaining to such actions, in contrast to the
substantive requirements set forth with respect to Hollander-type actions; therefore, Hollander is
easily distinguishable from the present case. The cases from other circuits on which defendants
rely are similarly distinguishable. In sum, the Court cannot conclude that the present action
"arises under" the Medicaid statute within the meaning of 28 U.S,C. §1331.
B. Antitrust Violations
Defendants argue that the national scope of the alleged antitrust violations, including many
allegations of various acts committed outside the state of Connecticut, compels a conclusion that
the state antitrust claims are truly federal antitrust claims Like their Medicaid argument, this
argument has been unsuccessfully advanced by the same defendants in similar litigation
elsewhere. Maryland v. Philip Morris, Civ. No. CCB-96-1691 (D. Md. July 31, 1996), Again,
this Court need add little to the persuasive opinion of the previous court.
Federal antitrust law plainly does not preempt state antitrust law; "Congress intended the federal
antitrust lass to supplement, not displace, state antitrust remedies." California v. ARC America
Corp. 490 U.S. 93, 102 (1988) (citations omitted). Moreover, the Connecticut Antitrust Act,
by its own terms, "applies to every contract, combination, or conspiracy in restraint of any part
of trade or commerce... when any part thereof was entered into or effectuated in whole or in
part in this state " Conn. Gen. Stat. 35-30. Thus, the Court cannot see how the plaintiff's
antitrust claims fall within the ambit of the artful pleading doctrine See Travelers Indem. Co.,
794 F.2d at 758 ("If the only remedy available to plaintiff is federal, because of preemption or
otherwise, and the state courts necessarily must look to federal law in passing on the claim, the
case is removable, regardless of what is in the pleadings.").
Defendants rely primarily on In re NASDAQ Market Makers Antitrust Litigation, 929 F.Supp.
174 (S.D.S.Y. 1996), and In re Wiring Device Antitrust Litigation, 498 F.Supp. 79 (E.D.N.Y.
1980), In both cases, the artful pleading doctrine was found to support the removal to federal
court of state antitrust claims involving interstate conduct. However, in both cases, nearly
identical factual allegations had been presented in federal suits filed prior to the state suits
Moreover, in both cases, the federal suits had been consolidated pursuant to multidistrict
litigation procedures; thus, "the court to which the case had been removed was overseeing a
multi-district litigation involving very nearly the same set of facts, the same allegedly illegal
actions, nearly identical federal and state law claims, and a proposed federal class that included
the plaintiffs in the state law action." 929 F.Supp. at 180. In finding these facts to warrant
application of the artful pleading doctrine, the NASDAO court cited Travelers Indemnity Co., in
which the Second Circuit established that the artful pleading doctrine encompassed situations in
which a plaintiff initially raised a federal claim in federal court; "[h]aving done so and foregone
the opportunity to plead a pendent state law claim, he was not free to abuse the dual court
system by filing in state court a second law suit and resubmitting his claim as one based solely on
state law." Travelers Indem. Co., 794 F.2d at 760-61. In light of Travelers Indemnity, and the
reliance of NASDAO on Travelers Indemnity, the Court finds that the better reading of
NASDAO and Wiring Device is not that all antitrust claims involving interstate elements
necessarily "arise under" federal law, as defendants urge, but rather that the artful pleading
doctrine extends beyond the preemption context to encompass state-court suits that attempt to
"abuse the dual court system" by allowing the plaintiff to avoid consolidation with a pending
federal suit. See also Maryland v. Phillip Morris, slip op. at 6 (distinguishing Wiring Device
case).
The Court notes that NASDAO and Wiring Device are further distinguishable in that the state
antitrust laws at issue in both cases only regulated intrastate commerce Wiring Device, 929
F.Supp at 179 The difference between these laws and the Connecticut law, which apparently
may encompass conduct that is not wholly intrastate, seems germane to the artful pleading
analysis: simply put, the NASDAO and Wiring Device courts could much more easily find that
"the only remedy available to plaintiff is federal" than can the present Court.
Like the Connecticut antitrust law, the California antitrust law applies to transactions in interstate
commerce. In a case similar to the present one, the Ninth Circuit remanded to state court a suit
alleging only violations of California's antitrust law, notwithstanding the fact that the defendants
were primarily engaged in interstate commerce. Redwood Theatres v. Festival Enterprises, 908
F.2d 477, 480 (9th Cir. 1990). Defendants seek to distinguish Redwood Theatres on the basis
of plaintiff's request for "unprecedented nationwide relief" and attempt to impose liability based
on out-of-state conduct. However, the relief sought for plaintiff's antitrust claim does not appear
particularly national in character, indeed, of the elements of "national relief" defendants
enumerate, only one, disclosure of tobacco research, is actually requested in plaintiff's antitrust
count. (See Defs.'s Mem Opp Remand, at 31.) As to defendants' argument that plaintiff seeks
to impose liability based in part on out-of-state conduct, this assertion is little different than
observing that liability is premised on interstate transactions. Yet, Redwood Theatres indicates
that the interstate nature of a transaction alone does not require application of the artful pleading
doctrine to a state antitrust claim. 908 F.2d at 480 Thus, the Court is not persuaded by
defendants' efforts to distinguish Redwood Theatres, and cannot conclude that the real nature of
plaintiff's claim is federal such that the suit is not subject to the well-pleaded complaint rule.
Conclusion
For the foregoing reasons, plaintiff's Motion to Remand (Doc.#18) is GRANTED. The action is
remanded to the Connecticut Superior Court, Judicial District of Stamford/Norwalk.
IT IS SO ORDERED.
____________________
Janet Bond Arterton
United States District Judge
Dated at New Haven, Connecticut: October 9, 1996