Hunter v. Philip Morris Usa

Decision Date28 September 2009
Docket NumberNo. 07-35916.,07-35916.
Citation582 F.3d 1039
PartiesDolores HUNTER; Estate of Benjamin G. Francis, Plaintiffs-Appellants, v. PHILIP MORRIS USA; Altria Group, Inc.; The Alaska Commercial Company, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Don C. Bauermeister, Burke & Bauermeister, PLLC, Anchorage, AK, for the plaintiff-appellant.

John W. Phillips, Phillips Law Group, PLLC, Seattle, WA, for the defendants-appellees.

Appeal from the United States District Court for the District of Alaska, Ralph R. Beistline, District Judge, Presiding. DC No. CV 07-0010 RRB.

Before DOROTHY W. NELSON, A. WALLACE TASHIMA, and RAYMOND C. FISHER, Circuit Judges.

TASHIMA, Circuit Judge:

The question of the preemption of state law by federal tobacco legislation has been addressed numerous times. Today, we address the preemption issue in the context of the doctrine of fraudulent joinder, which is invoked to achieve diversity jurisdiction. We hold that the district court erroneously allowed the defendants-appellees to achieve diversity jurisdiction by its incorrect finding that the plaintiffs-appellants' state law claims were preempted and constituted fraudulent joinder. Because the district court should have remanded the action to state court, we vacate the judgment and remand with instructions to remand the action to state court. We have jurisdiction over the final judgment of the district court pursuant to 28 U.S.C. § 1291.

BACKGROUND

Benjamin Francis, an Alaska resident and citizen, died at age fifty-two from lung cancer. As Francis' survivor and on behalf of his estate, Dolores Hunter brought a wrongful death lawsuit in Alaska state court against Philip Morris USA, a Virginia corporation that produces, markets, and distributes cigarettes; Altria Group, the parent company of Philip Morris USA; and the Alaska Commercial Company ("ACC"), an Alaska corporation that sells merchandise, including cigarettes manufactured by Philip Morris, in stores throughout Alaska (all three Appellees are collectively referred to as "Appellees").

Hunter alleged that Francis' death resulted from defective products sold by Appellees. Hunter's complaint included claims of: (I) fraud and misrepresentation, (II) products liability, (III) failure to warn, (IV) deceptive advertising, (V) breach of warranty, (VI) conspiracy, and (VII) addiction defectiveness.

Philip Morris and Altria (together, the "Altria defendants") removed the case to the United States District Court for the District of Alaska. They argued that Hunter's state law claims against ACC were preempted by congressional policy not to remove tobacco from the market and that ACC therefore was fraudulently joined, resulting in complete diversity of citizenship. The Altria defendants then filed a motion to dismiss Hunter's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. Hunter filed a motion to remand asserting that her complaint adequately pleaded a strict products liability claim against ACC under Alaska state law. She argued that ACC was not fraudulently joined and, consequently, that total diversity between plaintiff and all defendants did not exist.

The district court denied Hunter's motion to remand. The court agreed with the Altria defendants that Hunter's state product liability claim against ACC was preempted because it would result in an effective ban on cigarettes, in contravention of congressional policy. Hunter therefore had stated no possible claim against ACC. The court accordingly found that ACC was fraudulently joined, resulting in diversity of citizenship. The court denied Hunter's motion for reconsideration.

The district court then granted the 12(b)(6) motion to dismiss, reasoning that Hunter had failed to identify the specific products Francis used and the alleged defects in the products, and that any product liability claims were preempted by the congressional intent not to ban the sale of cigarettes. The district court entered final judgment in favor of Appellees. Hunter timely appealed.

DISCUSSION

Hunter contends that the district court erred in denying her motion to remand the case to state court and, accordingly, that the court lacked jurisdiction to grant the Altria defendants' motion to dismiss. We review de novo the district court's denial of a motion to remand to state court for lack of removal jurisdiction. Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1243 (9th Cir.2009); Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir.2007).

A defendant may remove an action to federal court based on federal question jurisdiction or diversity jurisdiction. 28 U.S.C. § 1441. However, "`[i]t is to be presumed that a cause lies outside [the] limited jurisdiction[of the federal courts] and the burden of establishing the contrary rests upon the party asserting jurisdiction.'" Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 684 (9th Cir.2006) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994)) (alterations in original). The "strong presumption against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper," and that the court resolves all ambiguity in favor of remand to state court. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.1992) (per curiam) (internal quotation marks omitted).

"`The threshold requirement for removal under 28 U.S.C. § 1441 is a finding that the complaint contains a cause of action that is within the original jurisdiction of the district court.'" Ansley v. Ameriquest Mortgage Co., 340 F.3d 858, 861 (9th Cir.2003) (quoting Toumajian v. Frailey, 135 F.3d 648, 653 (9th Cir.1998)). In determining federal question jurisdiction, the well-pleaded complaint rule "provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Fisher v. NOS Commc'ns (In re NOS Commc'ns), 495 F.3d 1052, 1057 (9th Cir. 2007) (internal quotation marks and citations omitted). Thus, the plaintiff is "the master of his complaint" and may "avoid federal jurisdiction by relying exclusively on state law." Balcorta v. Twentieth Century-Fox Film Corp., 208 F.3d 1102, 1106 (9th Cir.2000). It is "settled law that a case may not be removed to federal court on the basis of a federal defense, including the defense of preemption, even if the defense is anticipated in the plaintiff's complaint, and even if both parties admit that the defense is the only question truly at issue in the case." Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 14, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983); see also Vaden v. Discover Bank, ___ U.S. ___, ___, 129 S.Ct. 1262, 1272, 173 L.Ed.2d 206 (2009) ("Federal jurisdiction cannot be predicated on an actual or anticipated defense."); Valles v. Ivy Hill Corp., 410 F.3d 1071, 1075 (9th Cir.2005) ("A federal law defense to a state law claim does not confer jurisdiction on a federal court, even if the defense is that of federal preemption and is anticipated in the plaintiff's complaint."); Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1319 (9th Cir.1998) ("Even when the area involved is one where complete preemption is the norm, if the complaint relies on claims outside of the preempted area and does not present a federal claim on its face, the defendant must raise its preemption defense in state court.").

As for diversity jurisdiction, federal district courts have jurisdiction over suits for more than $75,000 where the citizenship of each plaintiff is different from that of each defendant. 28 U.S.C. § 1332(a). Although an action may be removed to federal court only where there is complete diversity of citizenship, 28 U.S.C. §§ 1332(a), 1441(b), "one exception to the requirement for complete diversity is where a non-diverse defendant has been `fraudulently joined.'" Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir.2001). Joinder is fraudulent "`[i]f the plaintiff fails to state a cause of action against a resident defendant, and the failure is obvious according to the settled rules of the state.'" Hamilton Materials, 494 F.3d at 1206 (quoting McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987)) (alteration in original). In such a case, the district court may ignore the presence of that defendant for the purpose of establishing diversity. Morris, 236 F.3d at 1067.

The Altria defendants removed the case to federal court based on diversity of citizenship, not federal question jurisdiction. In order to establish diversity, the Altria defendants contended that Hunter's claims against ACC were both impermissibly vague and subject to conflict preemption and, accordingly, that ACC had been fraudulently joined. Removal accordingly was based on a meld of the implied preemption doctrine from the federal question context and the fraudulent joinder doctrine from the diversity context.

The Altria defendants relied in the district court, and rely here, on the Supreme Court's decision in Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 137, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000) ("FDA"), to argue that Hunter's product liability claim was impliedly preempted by the congressional intent to prevent the categorical ban of cigarettes. The issue in FDA was whether the FDA had jurisdiction to regulate tobacco products pursuant to the Food, Drug and Cosmetic Act ("FDCA"), 21 U.S.C. §§ 301-397.1 The Court held that "Congress has clearly precluded the FDA from asserting jurisdiction to regulate tobacco products" because, if the FDA were to regulate tobacco, the provisions of the FDCA would have required the FDA to ban tobacco altogether. Id. at 126, 137, 120 S.Ct. 1291. "Congress, however, has foreclosed the removal of tobacco...

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