CIGAR ASSOCIATION OF AMERICA, et al. v. U.S. FOOD AND DRUG ADMINISTRATION, et al.
Case No. 1:16-cv-01460 (APM)
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
May 15, 2018
I. INTRODUCTION
On May 10, 2016, the U.S. Food and Drug Administration (“FDA”) published a final rule “deeming” cigars, pipe tobacco, and certain other products (e.g., e-cigarettes) subject to the federal Food, Drug, and Cosmetic Act (“FD&C Act”),
For the reasons set forth below, the court grants in part and denies in part the parties’ cross-motions for partial summary judgment and denies Plaintiffs’ motion for a preliminary injunction as moot. The Deeming Rule’s health warning requirements are upheld in all respects, as is the User Fee Rule in its entirety. The court also affirms the agency’s classification of pipes as “components or parts” of tobacco products under the TCA. The court, however, concludes that Defendants’ rationale for subjecting retailers who blend pipe tobacco in-store to the requirements of
A. Statutory Background
In 2009, Congress enacted the TCA to “provide authority to the [FDA] to regulate tobacco products under the [FD&C Act] by recognizing it as the primary Federal regulatory authority with respect to the manufacture, marketing, and distribution of tobacco products,” and “to authorize the [FDA] to set national standards controlling the manufacture of tobacco products and the identity, public disclosure, and amount of ingredients used in such products,” among other purposes. Family Smoking Prevention and Tobacco Control Act, Pub. L. No. 111-31, § 3, 123 Stat. 1776, 1781–82 (2009). Congress made 49 legislative findings in the Act, in which it acknowledged the “inherent dangerous[ness]” of tobacco products and nicotine and the strong public interest in regulating tobacco products and their advertising and promotion, and discussed Congress’s interest in reducing youth tobacco use, in light of judicial findings that major U.S. tobacco companies specifically targeted and marketed their products to youth. TCA § 2. Congress further recognized that no other federal agency except the FDA “possesses the scientific expertise needed to implement effectively all provisions of the [TCA].” TCA § 2(45).
In light of those findings, the TCA authorized the Secretary of Health and Human Services to regulate the manufacture, distribution, and marketing of tobacco products. TCA § 901, codified at
B. Regulatory Background
1. The Cigar Product
Federal regulations define “cigar” to mean any “roll of tobacco that is wrapped in leaf tobacco or any substance containing tobacco” that is “not a cigarette.”
Within the category of traditional cigars are a sub-category known as “premium cigars.” See id. Premium cigars typically are hand-rolled, made with a higher-grade tobacco, or are more expensive. See id. The term “premium cigar” is not, however, defined by federal statute or regulation. See id.
Long before the FDA’s action in 2016, cigar products already were subject to some federal regulation. More than a decade earlier, in 2000, in settlements with the Federal Trade Commission (“FTC”), the seven largest U.S. cigar companies agreed to include warnings about significant adverse health risks on their packaging and advertisements. See, e.g., Decision & Order, In the Matter of Swedish Match N. Am., Inc., Docket No. C-3970 (F.T.C. Aug. 18, 2000), 2000 WL 1207446. The FTC settlements represented the first national requirements for health warnings on cigar products and applied to approximately 95 percent of the U.S. cigar market at the time. See Press Release, FTC, Nationwide Labeling Rules for Cigar Packaging and Ads Take Effect Today (Feb. 13, 2001), https://www.ftc.gov/news-events/press-releases/2001/02/nationwide-labeling-rules-cigar-packaging-and-ads-take-effect.
Pursuant to the consent orders, which remain in effect today, the covered cigar companies must display one of the five following health warning statements “clearly and conspicuously” on their advertising and packaging:
SURGEON GENERAL WARNING: Cigar Smoking Can Cause Cancers Of The Mouth And Throat, Even If You Do Not Inhale.
SURGEON GENERAL WARNING: Cigar Smoking Can Cause Lung Cancer And Heart Disease.
SURGEON GENERAL WARNING: Tobacco Use Increases The Risk Of Infertility, Stillbirth And Low Birth Weight.
SURGEON GENERAL WARNING: Cigars Are Not A Safe Alternative To Cigarettes.
SURGEON GENERAL WARNING: Tobacco Smoke Increases The Risk Of Lung Cancer And Heart Disease, Even In Nonsmokers.
See Decision & Order, In the Matter of Swedish Match N. Am., Inc., 2000 WL 1207446, at *3. The FTC consent orders specify the size and formatting of the health warnings, and require that
Additionally, the FTC consent orders require the health warnings to appear on visual advertisements in a set-off, rectangular box to ensure that the warnings are readily visible and conspicuous. Id. at *5–8. For audio advertisements, the health warning statement must be delivered so that an ordinary consumer can hear and comprehend it. Id. at *8–9. Cigar companies also were required to submit for FTC approval, in advance of the consent orders’ effective date, a plan for the rotation and display of the health warnings on cigar packages and advertisements. Id. at *11–12.
3. FDA Rules
a. The Deeming Rule
i. Proposed Rule
In the years following Congress’s enactment of the TCA, cigar products were free from FDA regulation because cigars were not expressly listed in the Act’s definition of “tobacco product.” A harbinger of change arrived in the spring of 2014. On April 25, 2014, the FDA issued a Proposed Rule that would make, or “deem,” cigars, pipe tobacco, and e-cigarettes subject to the TCA. See Deeming Tobacco Products To Be Subject to the Federal Food, Drug, and Cosmetic Act, as Amended by the Family Smoking Prevention and Tobacco Control Act; Restrictions on the Sale and Distribution of Tobacco Products and Required Warning Statements for Tobacco Products, 79 Fed. Reg. 23,142 (Apr. 25, 2014) (“Proposed Deeming Rule”). In the Proposed Deeming Rule, the FDA announced for consideration two options which “would provide two alternatives for the scope of the deeming provisions and, consequently, the application of the additional specific provisions.” Id. at 23,143. Under Option 1, the FDA would deem all products
[A]ny cigar as defined in this part, except a cigar that: (1) Is wrapped in whole tobacco leaf; (2) contains a 100 percent leaf tobacco binder; (3) contains primarily long filler tobacco; (4) is made by combining manually the wrapper, filler, and binder; (5) has no filter, tip, or non-tobacco mouthpiece and is capped by hand; (6) has a retail price (after any discounts or coupons) of no less than $10 per cigar (adjusted, as necessary, every 2 years, effective July 1st, to account for any increases in the price of tobacco products since the last price adjustment); (7) does not have a characterizing flavor other than tobacco; and (8) weighs more than 6 pounds per 1000 units.
Id. at 23,150. The FDA noted that, while it had proposed a definition with respect to Option 2, it remained “concerned that any attempts to create a subset of premium cigars that are excluded from regulatory authority might sweep other cigar products under its umbrella.” Id. The FDA therefore sought comment as to how to refine this definition, within the context of Option 2, “to ensure that the exclusion would apply only to those cigars that, because of how they are used, may have less of a public health impact than other types of cigars.” Id.
The FDA sought comment on both options. Its purpose was “to determine whether all cigars should be subject to deeming and what provisions of the proposed rule may be appropriate or not appropriate for different kinds of cigars,” as well as to determine the “relative merits of Option 1 versus Option 2, taking into account what is appropriate for the public health, including possible benefits to the public health or possible negative public health consequences of adopting one Option or the other.” Id. at 23,143, 23,145. As to Option 2, the FDA noted that while “all cigars are harmful and potentially addictive, it has been suggested that different kinds of cigars
ii. Final Rule
a. Health warning requirements
The FDA selected Option 1 and promulgated the final Deeming Rule on May 10, 2016, thus deeming all categories of cigars, including those referred to as “premium cigars,” to be subject to the TCA. See Final Rule Deeming Products To Be Subject to the Federal Food, Drug, and Cosmetic Act, as Amended by the Family Smoking Prevention and Tobacco Control Act; Restrictions on the Sale and Distribution of Tobacco Products and Required Warning Statements for Tobacco Products, 81 Fed. Reg. 28,974, 29,020 (May 10, 2016) (codified at 21 C.F.R. pts. 1100, 1140, 1143) (“Deeming Rule”). In support of its decision, the FDA stated that it “concluded that deeming all cigars, rather than a subset, more completely protects the public health.” Id. The FDA found that: “(1) All cigars pose serious negative health risks, (2) the available evidence does not provide a basis for FDA to conclude that the patterns of premium cigar use sufficiently reduce the health risks to warrant exclusion, and (3) premium cigars are used by youth and young adults.” Id.
Under the Deeming Rule as originally announced, the newly deemed products would be subject to comparable TCA provisions and regulatory requirements to which cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco were already subject. Id. at 28,976. These requirements include:
- Enforcement action against products determined to be adulterated or misbranded (other than enforcement actions based on
lack of a marketing authorization during an applicable compliance period); - Required submission of ingredient listing and reporting of [harmful and potentially harmful constituents];
- Required registration of tobacco product manufacturing establishments and product listing;
- Prohibition against sale and distribution of products with modified risk descriptors (e.g., “light,” “low,” and “mild” descriptors) and claims unless FDA issues an order authorizing their marketing;
- Prohibition on the distribution of free samples; and
- Premarket review applications and approvals.
Id.
And there is more. The Deeming Rule also sets out comprehensive warning statement requirements, for both cigar product packaging and advertisements. By August 10, 2018, cigar product packages must display one of the six following health warning statements:
- WARNING: Cigar smoking can cause cancers of the mouth and throat, even if you do not inhale.
- WARNING: Cigar smoking can cause lung cancer and heart disease.
- WARNING: Cigars are not a safe alternative to cigarettes.
- WARNING: Tobacco smoke increases the risk of lung cancer and heart disease, even in nonsmokers.
- (A) WARNING: Cigar use while pregnant can harm you and your baby.3 . . .
- WARNING: This product contains nicotine. Nicotine is an addictive chemical.
The Deeming Rule also specifies the placement and size of the required health warnings. With respect to packaging, each warning statement must “appear directly on the package” and must be “located in a conspicuous and prominent place on the two principal display panels of the package,” comprising “at least 30 percent of each of the principal display panels.”
These size mandates are more demanding than the size requirements under the FTC consent orders. According to Plaintiffs, the required package warnings are 195 to 237 percent larger on any one panel than under the FTC warnings scheme. And, when the Deeming Rule’s additional
b. Related deemed products
In addition to cigars, pipe tobacco, and e-cigarettes, the Deeming Rule also deemed the “components or parts” of those newly deemed products to be subject to the TCA. The FDA defines the statutory term “component or part” to mean:
[A]ny software or assembly of materials intended or reasonably expected: (1) [t]o alter or affect the tobacco product’s performance, composition, constituents, or characteristics; or (2) [t]o be used with or for the human consumption of a tobacco product. Component or part excludes anything that is an accessory of a tobacco product.
81 Fed. Reg. at 29,102;
Although it had the authority to do so, the FDA did not deem “accessories” of the newly deemed tobacco products subject to the TCA. The agency reasoned that “accessories, unlike components or parts, are expected to have little direct impact on the public health.” Id. at 28,975. The FDA defined “accessories” to mean “any product” intended or reasonably expected to be used with or for the human consumption of a tobacco product, but not containing, made, or derived from, tobacco, that is: (1) “not intended or reasonably expected to affect or alter the performance, composition, constituents, or characteristics of a tobacco product,” or (2) “intended or reasonably expected to affect or maintain the performance, composition, constituents, or characteristics of a tobacco product,” but solely: (i) “controls moisture and/or temperature of a stored tobacco product,” or (ii) provides an external heat source to initiate but not maintain combustion of a tobacco product.” Id. at 29,102;
b. The User Fee Rule
To fund the regulation of tobacco products under the TCA, Congress requires the FDA to “assess user fees on, and collect fees from, each manufacturer and importer of tobacco products subject to this subchapter.” See
When it promulgated the final Deeming Rule, the FDA simultaneously issued the User Fee Rule. Under that Rule, the FDA announced its intention to collect information from domestic manufacturers and importers of cigars and pipe tobacco in order to calculate the amount of user fees to be collected from these entities. See Requirements for the Submission of Data Needed To Calculate User Fees for Domestic Manufacturers and Importers of Cigars and Pipe Tobacco, 81 Fed. Reg. 28,707 (May 10, 2016);
c. FDA’s July 2017 Announcement of a “New Comprehensive Plan”
The presidential election of 2016 ushered in change to the FDA’s approach to the Deeming Rule. On July 28, 2017, the FDA announced a “new comprehensive plan” for regulating tobacco products and nicotine. See Pls.’ Mot. for Partial Summ. J., ECF No. 62 [hereinafter Pls.’ Mot.], Ex. D, ECF No. 62-4 [hereinafter FDA Press Release]. In accordance with the plan, the FDA delayed implementation of some provisions of the Deeming Rule, but allowed others to go into effect. For instance, the agency extended until August 8, 2021, the compliance period for tobacco manufacturers to submit applications for newly deemed products that were on the market as of August 8, 2016. See Joint Status Report (dated Sept. 5, 2017), ECF No. 51 [hereinafter Sept. 5, 2017 JSR], ¶ 3; FDA Press Release. The health warning requirements, on the other hand, were left undisturbed.
The FDA also announced its intention to issue Advance Notices of Proposed Rulemaking (“ANPRM”). The contemplated rulemaking included a focus on the previous issue of whether to regulate premium cigars. An ANPRM, the FDA stated, would seek public comment on “the patterns of use and resulting public health impacts from premium cigars, which were included in the FDA’s 2016 rule.” FDA Press Release. Commenting on the FDA’s “new comprehensive plan,” Mitch Zeller, Director of the FDA’s Center for Tobacco Products, explained: “Public input on these complex issues will help ensure the agency has the proper science-based policies in place to meaningfully reduce the harms caused by tobacco use.” Id.
In December 2017, the FDA formally announced its intention to initiate a rulemaking process focused on the question of premium cigars. See “Premium Cigars; Request for Scientific Information,” Agency Rule List - Fall 2017: Department of Health and Human Services, Unified Agenda of Regulatory and Deregulatory Actions, OIRA, https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201710&RIN=0910-AH88. The FDA observed that while it had received comments in response to the Proposed Deeming Rule “claiming that the health risks associated with cigar use generally, or with the use of premium cigars in particular were not significant because of the way such products are used,” these comments ultimately failed to provide an adequate scientific basis for excluding those products from regulation. Id. The FDA therefore announced its intention to issue an ANPRM to request scientific information “that might support” exempting premium cigars from regulation or regulating them in a manner different from other cigars. Id.
The agency issued the ANPRM in late March 2018. See Defs.’ Notice of Publication of ANPRM, ECF No. 91. It explained that in light of “the ongoing interest from many parties and sectors, such as industry and Members of Congress, in the regulatory status of premium cigars,” the purpose of the ANPRM is “to request relevant new and different information, data, and analysis not submitted in response to FDA’s proposed deeming rule . . . that could inform FDA’s regulation of premium cigars.” See Regulation of Premium Cigars, 83 Fed. Reg. 12,901, 12,902 (Mar. 26, 2018). Specifically, the FDA invited submission of comments, data, research results, and other information related to three topics: (1) the definition of premium cigars; (2) usage patterns of premium cigars; and (3) public health considerations associated with premium cigars. Id. at 12,903. The FDA also asked the public to submit studies or information regarding the Deeming
C. Procedural Background
The Cigar Association of America, the International Premium Cigar and Pipe Retailers Association, and Cigar Rights of America (collectively, “Plaintiffs”) filed suit in this court, seeking declaratory, injunctive, and other relief from the Deeming Rule and challenging the legality of the User Fee Rule.
After Defendants filed their Answer, Plaintiffs filed an initial motion for summary judgment on February 13, 2017. Thereafter, the newly installed FDA administration signaled an openness to evaluating the agency’s approach to aspects of the Deeming Rule. The parties accordingly requested multiple extensions of the briefing deadlines in order “to allow new leadership personnel at [HHS] to more fully consider the issues raised in [the] case and determine how best to proceed.” Joint Mot. to Amend Scheduling Order (dated May 1, 2017), ECF No. 34, at 1. The court granted the requests, resulting in over four months of extensions. After the FDA’s July 2017 announcement of its new comprehensive plan for the regulation of tobacco products, the parties sought one final 30-day extension of the briefing schedule. Joint Mot. to Amend Scheduling Order (dated Aug. 1, 2017), ECF No. 40, at 2–3. The court also granted this motion. Minute Order Aug. 7, 2017.
In a Joint Status Report dated September 5, 2017, the parties explained that, as a result of the FDA’s announcement, they had agreed to defer resolution of certain of Plaintiffs’ challenges to the Deeming Rule. Specifically, the parties agreed that Plaintiffs’ challenges relating to the premarket review process, the FDA’s decision to deem premium cigars subject to regulation, and the agency’s cost-benefit analysis underlying the Deeming Rule—claims asserted in Counts I, IV,
Other challenged aspects of the Rules remain unaffected by the agency’s July 2017 announcement, id., and as to those, Plaintiffs filed a new dispositive motion, this time only for partial summary judgment. Of the nine original counts in their Complaint, Plaintiffs presently seek summary judgment on six, asserting that: (1) the Deeming Rule’s health warning statement requirements violate the TCA and the Administrative Procedure Act (“APA”) (Count VI) and the First Amendment (Count VII); (2) the User Fee Rule’s assessment of user fees on domestic manufacturers and importers of cigars and pipe tobacco, but not e-cigarettes, violates the APA (Count II) and the Fifth Amendment (Count III); (3) the Deeming Rule’s treatment of retailers who blend pipe tobacco as “manufacturers” within the meaning of
In addition, Plaintiffs moved for a preliminary injunction on their challenge to the Deeming Rule’s health warnings mandates. See Pls.’ Mot. for Prelim. Inj., ECF No. 61. The parties consented to consolidating the motion for preliminary relief with briefing on the merits. See
III. LEGAL STANDARD
When reviewing an agency action under the APA, “summary judgment is the mechanism for deciding whether as a matter of law an agency action is supported by the administrative record
In reviewing an agency’s interpretation of a statute it is charged with administering, courts apply the familiar two-step framework outlined in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842–43 (1984). Step one requires the court to determine, using “traditional tools of statutory construction,” whether “Congress has spoken directly to the precise question at issue.” Id. at 842. If Congress has so spoken, “the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.” Id. at 843 n.9. But if the statute remains ambiguous—meaning it “can be read more than one way,” even after applying “traditional tools of statutory construction,” AFL-CIO v. FEC, 333 F.3d 168, 172–73 (D.C. Cir. 2003)—or is silent on the question at hand, courts proceed to step two to determine “whether the
“In some circumstances, there is an overlap in the analysis required pursuant to Chevron Step Two[] and that required under the arbitrary and capricious standard” of the APA. EchoStar Satellite LLC v. FCC, 704 F.3d 992, 1001 (D.C. Cir. 2013) (internal citation omitted). Under Chevron’s second step, a court asks whether an agency’s interpretation is “arbitrary or capricious in substance,” Judulang v. Holder, 565 U.S. 42, 52 n.7 (2011), an inquiry that parallels the standard of review under the APA. “Ultimately, under either standard of review, the relevant question” in this case “is whether the FDA’s decision represents the result of a reasonable exercise of its authority.” Amarin Pharm. Ireland Ltd. v. FDA, 106 F. Supp. 3d 196, 206 (D.D.C. 2015).
IV. DISCUSSION
A. Health Warning Requirements
Plaintiffs’ primary challenge is to the Deeming Rule’s health warning requirements, which they assert violate the First Amendment, the TCA, and the APA. The court first assesses whether the Deeming Rule’s health warning requirements run afoul of the TCA and the APA, and then turns to consider their constitutionality.
1. TCA and APA
Plaintiffs’ TCA and APA challenges to the Deeming Rule’s health warning requirements are two-fold. First, they assert that the agency failed to make the findings required by the TCA,
As to their first argument, Plaintiffs claim that the FDA made “no determination at all about the warnings’ effect on decreasing cigar or pipe tobacco use,” and thus failed to adhere to the statutory mandate provided by
Plaintiffs’ contention is unavailing: The agency did make the required statutory findings. The FDA first connected the Deeming Rule as a whole to the public health standard, stating that it “believes that the sale and distribution restrictions the Agency is proposing,” including the “health warning requirements,” “meet the public health standard set forth in”
The FDA also made findings specific to the importance and efficacy of the health warnings. Under sections titled “Effectiveness of Warnings” and “Proposed Addictiveness Warning” in the Proposed Deeming Rule, the agency observed: (1) “The use of tobacco packages to help consumers better understand and appreciate tobacco-related health risks has a number of advantages”; (2) “Requiring health warnings in advertisements similarly is an important means of helping consumers better understand and appreciate the health consequences of tobacco use”; (3) “FDA believes that the proposed warnings will be effective in helping consumers better
Notwithstanding what is plain on the record, Plaintiffs contend that these findings are insufficient for a host of reasons. First, Plaintiffs fault the FDA for making the statutorily required findings only in the Proposed Deeming Rule, and not the final version. Pls.’ Reply in Supp. of Pls.’ Mots. for a Prelim. Inj. & Partial Summ. J., ECF No. 78 [hereinafter Pls.’ Reply], at 30. But that is incorrect. Not only does the final rule expressly incorporate the findings from the Proposed Deeming Rule, see
Next, Plaintiffs assert that FDA itself conceded the lack of connection between the required health warnings and the likelihood of reducing cigar and pipe tobacco use, when it admitted that “there has not yet been extensive research regarding the effectiveness of health warnings on tobacco products other than cigarettes.”
In any event, the relative absence of such studies is not fatal. “It is not infrequent that the available data does not settle a regulatory issue and the agency must then exercise its judgment in moving from the facts and probabilities on the record to a policy conclusion.” State Farm, 463 U.S. at 52. That is precisely what the agency did here. It extrapolated from its experience with other tobacco products—particularly cigarettes—to reach its determination that the health warnings are appropriate for the public health and likely to affect cigar and pipe tobacco usage, as required by
Finally, Plaintiffs maintain that the “agency cannot seriously contend . . . that quantitative data was beyond its grasp,” as it “had sixteen years and an entire nation’s worth of data to examine the efficacy of the FTC warnings.” Pls.’ Reply at 31. Plaintiffs, however, have identified no requirement, statutory or otherwise, that compelled the FDA to undertake such studies to make the findings required by
Plaintiffs’ APA challenge to the warning requirements suffers the same fate. To the extent Plaintiffs suggest that the warnings mandate violates the APA because the agency failed to make the requisite findings under
As to Plaintiffs’ first argument, the court takes issue with the notion that the “baseline” for warning statements on cigar packaging and advertising begins with the FTC warning scheme. Plaintiffs cite no case requiring one agency to use as its starting point restrictions adopted by another agency, especially when the other agency’s restrictions arose not from rulemaking but from a consent agreement with the regulated parties and, importantly, do not cover all regulated products. In that respect, this case differs materially from State Farm, relied upon by Plaintiffs. There, the agency failed to consider, without explanation, an alternative regulatory approach, which the agency itself previously had endorsed as a way of achieving regulatory objectives. See State Farm, 463 U.S. at 48. Here, by contrast, the alternative endorsed by Plaintiffs—the FTC consent orders—was the result of another agency’s enforcement action and compromise and pre-dates the Deeming Rule by nearly fifteen years. State Farm therefore did not compel the FDA to take as its starting point the FTC warnings scheme.
In developing its own cigar warnings regime, the FDA was well within its discretion to look elsewhere. Primarily, the FDA considered the congressional mandates of the TCA itself and the World Health Organization Framework Convention on Tobacco Control (“FCTC”), to which the United States is a signatory. The Deeming Rule’s warning scheme is comparable to both. Under the TCA, Congress established for smokeless tobacco warning sizes of at least 30 percent of the packaging’s two principal panels, and at least 20 percent of the area for each advertisement.
Plaintiffs’ additional contention that the cigar warning regime is disproportionately more demanding than the required scheme for cigarettes, and therefore arbitrary and capricious, also is not well taken. The congressionally mandated sizes of warnings for cigarette packaging is actually greater than for cigar products. See
2. First Amendment Challenges
Count VII of Plaintiffs’ Complaint alleges that the Deeming Rule’s health warning and advertising disclosure requirements violate the First Amendment. Compl. ¶¶ 142–48. In their partial summary judgment motion, Plaintiffs assert that the Rule’s warnings scheme violates the First Amendment for two reasons: (1) increasing the size of the new health warnings unconstitutionally restricts speech by “crowding out” manufacturers’ and retailers’ ability to communicate with consumers, and (2) requiring manufacturers and retailers to submit a warning rotation plan to the FDA before they can communicate with consumers constitutes an unconstitutional prior restraint on speech. Pls.’ Mot. at 16. The court rejects the first contention as without merit, and does not reach the second because Plaintiffs did not raise a prior-restraint claim in their Complaint.
a. Commercial Speech
Plaintiffs’ challenge to the Deeming Rule’s warning requirements presents the following issue: Whether a warning statement of the size required by the FDA—comprising 30 percent of the principal panels of a cigar product package and 20 percent of a cigar product advertisement—infringes Plaintiffs’ commercial speech rights under the First Amendment. Plaintiffs assert that the Deeming Rule is unconstitutional because it unjustifiably and dramatically increases the size of health warnings already required by the FTC consent orders on cigar packages and advertisements, thereby crowding out and restricting the space available to manufacturers and retailers to communicate with consumers. Defendants counter that the Deeming Rule does not restrict the speech of cigar manufacturers or retailers, but instead merely requires Plaintiffs to make
As a threshold matter, the parties agree that the warning requirements imposed by the Deeming Rule impact only commercial speech, that is, “expression related solely to the economic interests of the speaker and its audience.” Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of New York, 447 U.S. 557, 561 (1980). Although commercial speech enjoys First Amendment protection, it is well established that such protection is “less extensive than that afforded ‘noncommercial speech.’” Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U.S. 626, 637 (1985). Therefore, there is no contention here that the Deeming Rule’s warning mandates are subject to strict scrutiny.
The parties’ threshold dispute instead centers on, if not strict scrutiny, then which constitutional test to apply. Plaintiffs maintain that the warning requirements should be assessed under the intermediate scrutiny standard set forth in Central Hudson, the case that typically governs “First Amendment questions arising in the arena of commercial speech.” See United States v. Philip Morris USA Inc., 855 F.3d 321, 327 (D.C. Cir. 2017) (internal quotation marks omitted). For a government restriction on commercial speech to survive intermediate scrutiny under Central Hudson, it must “directly advance a substantial governmental interest and be no more extensive than is necessary to serve that interest.” Millavetz, Gallop & Millavetz, P.A. v. United States, 559 U.S. 229, 249 (2010) (alterations and internal quotation marks omitted). The government can establish that its regulation “directly advances” the state interest involved by
Defendants, on the other hand, argue that the Deeming Rule’s warning requirements should be analyzed under the more “relaxed standard of review” set forth in Zauderer v. Office of Disciplinary Counsel. Zauderer applies “when the government uses a disclosure mandate to achieve a goal of informing consumers about a particular product trait,” provided “that the reason for informing consumers qualifies as an adequate interest.” AMI, 760 F.3d at 26. To withstand scrutiny under Zauderer, the disclosure requirements need only be “reasonably related to the [government’s] interest,” and not so “unjustified or unduly burdensome” as to chill protected commercial speech. See 471 U.S. at 651.
Zauderer’s more relaxed standard recognizes that there are “material differences between disclosure requirements and outright prohibitions on speech,” which, in the commercial speech context, warrant corresponding levels of scrutiny. Id. at 650. In Zauderer, the Supreme Court declined to apply Central Hudson’s intermediate scrutiny to analyze a state disciplinary rule requiring attorneys advertising their contingent-fee rates also to disclose that clients would remain responsible for litigation costs. Id. Observing that the rule required the disclosure of “purely factual and uncontroversial information” about contingent-fee arrangements, the court reasoned that the state was not seeking “to prevent attorneys from conveying information to the public” but instead “requir[ing] them to provide somewhat more information than they might otherwise be inclined to present.” Id. In such circumstances, the Court concluded, government regulation is assessed under a reasonableness test. Id. at 651. The Court explained that, “because the extension of First Amendment protection to commercial speech is justified principally by the value to
i. The Applicable Constitutional Test
The challenged provisions of the Deeming Rule require disclosures, but not every disclosure regime is subject to Zauderer’s reasonableness standard. Zauderer applies only to disclosures of “purely factual and uncontroversial information about the good or service being offered.” AMI, 760 F.3d at 27 (internal quotation marks omitted). The court therefore must first determine whether the disclosures are “purely factual” and “uncontroversial.”
Though the D.C. Circuit has been less than clear in “defin[ing] [the] terms [‘purely factual’ and ‘uncontroversial’] precisely,” see Nat’l Ass’n of Mfrs. v. SEC (NAM), 800 F.3d 518, 528 (D.C. Cir. 2015), at a minimum, “a disclosure requirement is ‘purely factual’ when there is no dispute about factual accuracy,” see Kimberly-Clark Corp. v. District of Columbia, 286 F. Supp. 3d 128, 140 (D.D.C. 2017) (citing AMI, 760 F.3d at 27). In Zauderer, for instance, the “purely factual” disclosure was that clients in a contingent-fee arrangement with an attorney would still have to pay costs, even if their lawsuit was unsuccessful; there was no dispute that such statement was accurate. 471 U.S. at 651; see also AMI, 760 F.3d at 27 (observing no dispute regarding whether country-of-origin labeling requirements qualify as “purely factual,” where “the facts conveyed are directly informative of intrinsic characteristics of the product”). The same is true here. Plaintiffs do not assert that the warning statements are anything but “purely factual.”
Moving on, the determination of whether these “purely factual” warning statements are “uncontroversial” poses a different inquiry than mere factual accuracy. See NAM, 800 F.3d at 528 (“‘[U]ncontroversial as a legal test . . . must mean something different than ‘purely factual.’’”). A disclosure is “controversial,” the court gathers, when it is “subject to misinterpretation by
Although Plaintiffs do not dispute that the Deeming Rule requires display of only “purely factual and uncontroversial information,” and thus do not challenge the “criteria triggering the application of Zauderer,” AMI, 760 F.3d at 27, they nonetheless maintain that Central Hudson’s intermediate scrutiny should apply. In Plaintiffs’ view, the sheer size, format, and duplication of the warnings required by the Deeming Rule transforms the Rule from a compelled disclosure to a restriction of speech governed by Central Hudson. As Plaintiffs point out, the D.C. Circuit has observed that Zauderer contemplated a line where “the compulsion to speak becomes more like a speech restriction than a disclosure.” Pursuing America’s Greatness v. FEC, 831 F.3d 500, 507 n.3 (D.C. Cir. 2016); see also id. (“[I]n some instances compulsion to speak may be as violative of the First Amendment as prohibition on speech.” (quoting Zauderer, 471 U.S. at 650)). The
The court is unpersuaded. The court has had the benefit of viewing samples of cigar packaging integrating the mandatory warning statements. It may be true, as Plaintiffs contend, that the Deeming Rule’s requirements demand “large[r] and stark[er]” warnings on packaging than those required under FTC consent orders, Pls.’ Reply at 5, and that the FDA’s regime compels use of a larger percentage of advertisements, see
Plaintiffs offer no convincing case law to persuade the court otherwise. Plaintiffs’ citation to Dwyer v. Cappell, does not advance their cause. See Pls.’ Mot. at 18; Pls.’ Reply at 5; cf. Transcript of Oral Arg. Hr’g, ECF No. 85 [hereinafter Hr’g Tr.], at 9–10 (Plaintiffs’ counsel admitting that there is no case that applies Central Hudson to a disclosure requirement). There, the New Jersey Supreme Court approved an attorney guideline prohibiting attorneys from advertising using complimentary quotations from judicial opinions, unless the full text of the judicial opinion appeared in full. Dwyer, 762 F.3d at 278. Observing that the challenged guideline “bears characteristics” of both a disclosure requirement and a restriction on speech, the Third Circuit ultimately opted to analyze the disclosure requirement under Zauderer, not Central Hudson. And, applying Zauderer, the court found the full-opinion disclosure requirement unduly burdensome and thus struck down the rule. Id. at 282–84. Thus, although Dwyer helps Plaintiffs in one sense—an example of a case invalidating a disclosure requirement even under Zauderer’s more lenient standard—it does not help them establish that Central Hudson is the appropriate test here.
Having concluded that Zauderer’s test is the correct one to apply in this case, the court now turns to assess whether the Deeming Rule’s health warning statement requirements withstand scrutiny under that decision.
ii. Application of Zauderer
Under Zauderer, a “purely factual” and “uncontroversial” disclosure requirement satisfies the First Amendment so long as it is (1) “reasonably related” to the government’s interest and (2) not “unjustified or unduly burdensome.” 471 U.S. at 651. Plaintiffs argue that the Deeming
a. Defendants have identified a substantial government interest.
In applying Zauderer, the court’s first task is to assess the adequacy of the government interest motivating the health warning requirements scheme. See AMI, 760 F.3d at 23.7 Whether Zauderer requires the government to articulate a “substantial” government interest, as Plaintiffs contend, see Pls.’ Reply at 20, is an open question in this Circuit. See AMI, 760 F.3d at 23. This court need not delve into that issue here, however, because the FDA has identified a substantial government interest: To “‘help consumers better understand and appreciate the risks and characteristics of tobacco products’” and “to help correct current misperceptions about the newly deemed products.” Defs.’ Cross-Mot. at 19 (quoting
The conclusion that the FDA’s stated interest qualifies as “substantial” is well-rooted in precedent. In Rubin v. Coors Brewing Co., 514 U.S. 476, 478 (1995), the Court considered whether a ban on placing alcohol content on beer labels violated brewers’ commercial speech rights. Id. at 478. Although the Court ultimately struck down the alcohol-content restriction under Central Hudson because it failed to advance a government interest in a direct and material way, see id., the Court did find the government’s stated interest to be substantial. The court held: “[T]he Government here has a significant interest in protecting the health, safety, and welfare of its citizens by preventing brewers from competing on the basis of alcohol strength, which could lead to greater alcoholism and its attendant social costs. Both panels of the Court of Appeals that heard this case concluded that the goal of suppressing strength wars constituted a substantial interest, and we cannot say that their conclusion is erroneous.” Id. at 485; cf. Edenfield, 507 U.S. at 769 (recognizing that the government has a substantial interest in “ensuring the accuracy of the commercial marketplace”). Consistent with Rubin, the D.C. Circuit has recognized that the “government has a substantial interest in ‘promoting the health, safety, and welfare of its citizens.’” Pearson v. Shalala, 164 F.3d 650, 656 (D.C. Cir. 1999) (quoting Rubin, 514 U.S. at 485). In Pearson, the Circuit held that, in defending regulations that required sellers of dietary supplements to obtain agency authorization before labeling such supplements with “health claims,” the FDA had articulated a substantial interest in “protection of public health.” Id. at 655–56.
The reasoning of AMI is also instructive. There, the D.C. Circuit recognized as substantial the government’s interest in country-of-origin labeling on meat cuts based on a number of factors: the “context and long history” of such disclosures; the consumer interest in extending such labeling to food products; and the “individual health concerns and market impacts that could arise in the event of a food-borne illness outbreak.” 760 F.3d at 23. As in AMI, “several aspects” of the government’s interest in this case “combine to make the interest substantial.” See id. For instance, health warning requirements similarly have a long history, having been imposed on tobacco products by Congress since 1965. See Defs.’ Cross-Mot. at 21. And “health concerns” also are necessarily implicated by the government’s goal, as there is no dispute that “tobacco products are dangerous to health when used in the manner prescribed.” FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 135, 161 (2000). If the government’s interest in country-of-origin labeling is a substantial one, surely the same is true of health warnings on packages and advertising of cigar and pipe tobacco products.
Notwithstanding the foregoing legal landscape, Plaintiffs vigorously assert that the FDA’s stated interest in informing the public about the adverse health consequences associated with tobacco use, “standing alone,” does not constitute a substantial government interest. Pls.’ Mot. at 19; Pls.’ Reply at 20–21. Citing the Supreme Court’s decision in Lorillard Tobacco Co. v. Reilly, 533 U.S. 525 (2001), and the D.C. Circuit’s decision in RJ Reynolds v. FDA, 696 F.3d at 1205,8
Plaintiffs alternatively maintain that the asserted government interest here merely aims to improve “information” and “consumer understanding,” Pls.’ Mot. at 20; Pls.’ Reply at 9, and therefore is disqualified as a substantial government interest by the D.C. Circuit’s decision in RJ Reynolds and the Second Circuit’s reasoning in International Dairy Foods Ass’n v. Amestoy, 92 F.3d 67 (2d Cir. 1996). The court disagrees with Plaintiffs’ reading of both cases.
In RJ Reynolds, the D.C. Circuit held that an FDA rule requiring cigarette packages to bear certain graphic warnings violated the First Amendment. 696 F.3d at 1208. There, the FDA’s “only explicitly asserted interest [during the rulemaking process] [was] an interest in reducing smoking rates.” Id. at 1218. Applying Central Hudson, the court held that the FDA had “not provided a shred of evidence” showing that the graphic warning requirements “directly advance” the
The interest asserted by the agency in the Deeming Rule does not suffer from the same defect. Here, the FDA’s stated interest is in actually communicating health risks to the public, not “effectively” communicating them, as in RJ Reynolds. That distinction is critical. The FDA’s stated interest in this case is a decidedly an objective one: To provide accurate information and to correct documented, widespread misperceptions about the health risks of cigar use. See, e.g., A.R. 7708. Therefore, the concern that the court in RJ Reynolds expressed—that an indeterminate interest in “effective communication” would allow the government to define its goal however it saw fit, 696 F.3d at 1221—is not present here. Additionally, the FDA in this case does not assert, as it did with respect to the graphic warnings in RJ Reynolds, that the particular formatting specifications it selected here constitute, in and of themselves, a substantial government interest. Rather, the FDA has consistently characterized the warnings’ formatting specifications as a means by which to “accomplish its goal” of providing accurate health information to the public, id. See, e.g.,
Nor is the interest asserted by the FDA anything like the interest rejected as insufficient in International Dairy Foods. There, the only government interest offered to sustain a Vermont law requiring dairy manufacturers to label milk from cows treated with a growth hormone was a “strong consumer interest and the public’s ‘right to know.’” Int’l Dairy Foods, 92 F.3d at 73. Indeed, the state of Vermont expressly disclaimed that “health or safety concerns prompted the passage” of the labeling law, likely because the record contained “no scientific evidence from which an objective observer could conclude that [the growth hormone] has any impact at all on dairy products.” Id. Observing that Vermont “could not justify the statute on the basis of ‘real’ harms,” the court concluded that the state’s interest—which amounted to mere “consumer curiosity”—was “not a strong enough state interest to sustain the compulsion of even an accurate, factual statement.” Id. at 73–74. By contrast, there can be no dispute that the Deeming Rule’s warning requirements can be justified on the basis of real, substantiated harms caused by cigar use. Far from satisfying mere curiosity, the information disclosed by the Deeming Rule “bears on a reasonable concern for human health or safety.” See id. at 74. International Dairy Foods therefore demands no different conclusion than that the government interest animating the Deeming Rule’s health warning statement requirements is a substantial one.
b. The Deeming Rule’s warning requirements are reasonably related to the government’s substantial interest.
Having established that the interest identified by the government to sustain the Deeming Rule is substantial, the court moves on to consider whether the warning requirements are
Unlike Central Hudson’s intermediate scrutiny—where the commercial speech restriction would have to be shown to “directly and materially advance the asserted governmental interest,” see Lorillard, 533 U.S. at 555 (alteration omitted)—Zauderer employs “less exacting scrutiny,” Milavetz, 559 U.S. at 249. Whereas the government would have to provide evidence of a measure’s effectiveness to satisfy Central Hudson, “such evidentiary parsing is hardly necessary” under Zauderer. AMI, 760 F.3d at 26. For this reason, the court again rejects Plaintiffs’ complaint that the FDA did not examine whether the existing FTC warning scheme was insufficient to communicate health risks of cigars before promulgating the Deeming Rule. Zauderer—and likely even Central Hudson—does not require such an inquiry. See Discount Tobacco City & Lottery, Inc. v. United States, 674 F.3d 509, 557 (6th Cir. 2012) (“[C]onstitutionality under [Zauderer] does not hinge upon some quantum of proof that a disclosure will realize the underlying purpose. A common-sense analysis will do. And the disclosure has to advance the purpose only slightly.” (citing Nat’l Elec. Mfrs. Ass’n v. Sorrell, 272 F.3d 104, 115 (2d Cir. 2001))); cf. AMI, 760 F.3d at 25 (observing that Central Hudson requires only that the government “show a ‘reasonable fit’ or a ‘reasonable proportion’ between means and ends” (citations omitted)).
In view of the record evidence, academic studies, see, e.g., A.R. 5144–50, 5290–99, 18745–55, 18756–64, and international consensus,
c. The Deeming Rule’s warning requirements are not “unduly burdensome.”
Finally, the court considers whether the Deeming Rule’s warning requirements are so “[u]njustified or unduly burdensome” as to “chill[] protected speech.” See Milavetz, 559 U.S. at 250 (internal citation omitted); AMI, 760 F.3d at 27 (“Zauderer cannot justify a disclosure so burdensome that it essentially operates as a restriction on constitutionally protected speech.”). Plaintiffs charge that the Deeming Rule’s warnings are so large and so costly that they are “unduly burdensome.” Pls.’ Reply at 21.10 The court disagrees.
Plaintiffs claim that the size of the mandated warnings will drown out their speech. To that end, they cite a number of decisions from other circuits striking down commercial speech
Tillman v. Miller, 133 F.3d 1402 (11th Cir. 1998) (per curiam), is likewise distinguishable. There, the Eleventh Circuit held unconstitutional a Georgia law requiring any television advertisement soliciting the filing of workers’ compensation claims or encouraging consultation of an attorney, medical provider, or clinic with regard to a workers’ compensation claim, to contain a five-second on-screen notice “in boldface Roman font 36 point type” warning about criminal and financial penalties for making a false workers’ compensation claim. Id. at 1403–04 n.1. As did the district court it was reviewing, the Eleventh Circuit centered its conclusion that the requirement was “too burdensome” on the fact that the disclosure was “not tied to an inherent11
explained in the Deeming Rule that it “intends to provide guidance on how to comply with the health warning requirements on unique types of media” and clarified that the formatting requirements of
This case differs from others cited by Plaintiffs in another critical respect: The disclosures required by the Deeming Rule are not so lengthy or cumbersome as to effectively rule out speech or “nullify” the message meant to be communicated. Requirements that an attorney include the full text of a judicial opinion on a law firm website instead of quoting excerpts of that opinion, see Dwyer, 762 F.3d at 275; that a Certified Financial Planner and Certified Public Accountant seeking to identify her credentials in advertisements include a disclaimer “stating that the recognizing agency is not affiliated with or sanctioned by the state or federal government,” and setting out the agency‘s “requirements for recognition, including . . . education, experience, and testing,” Ibanez v. Fla. Dep‘t of Bus. & Prof‘l Regulation, 512 U.S. 136, 146–47 (1994); and that an attorney advertisement include “at least all of the following information“: (1) the lawyer‘s name and office
So, to sum up the foregoing analysis: Because the warning statements are factual and uncontroversial disclosures aimed at informing the public about the risks of cigar and pipe tobacco use and at correcting the public‘s misperceptions about such products’ use, and because the Rule
b. Prior Restraint
Plaintiffs also challenge the warnings scheme as an unconstitutional prior restraint on speech because it impermissibly compels manufacturers and retailers “wishing to speak with consumers” to submit a warnings rotation plan to the FDA in advance and wait for the FDA‘s approval before they can so speak. Pls.’ Mot. at 16. The court does not reach this challenge, however, because Plaintiffs failed to raise it in their Complaint. And, despite the court‘s suggestion at oral argument, Hr‘g Tr. at 31, Plaintiffs have not filed a motion to amend the Complaint to add a prior restraint claim.
“It is well established that a party may not amend its complaint or broaden its claims through summary judgment briefing.” District of Columbia v. Barrie, 741 F. Supp. 2d 250, 263 (D.D.C. 2010); see also Sloan ex rel. Juergens v. Urban Title Servs., Inc., 652 F. Supp. 2d 51, 62 (D.D.C. 2009) (citing cases). This principle applies equally in cases, like this one, that raise constitutional challenges to an agency action. See, e.g., Zarmach Oil Servs., Inc. v. U.S. Dep‘t of Treasury, 750 F. Supp. 2d 150, 159 (D.D.C. 2010) (holding that the Fourth Amendment challenge, “having been raised for the first time in plaintiff‘s opposition,” was not properly before the court). The proper course for a plaintiff who seeks to add or broaden a claim is through a motion to amend under Rule 15(a). Barrie, 741 F. Supp. 2d at 264.
Plaintiffs’ Complaint, even generously read, does not contain a challenge to the Deeming Rule‘s warning plan submission requirement as an unconstitutional prior restraint on speech. Count VII of Plaintiffs’ Complaint—styled as “Violation of the First Amendment to the U.S. Constitution: The Final Rule‘s Warning Label Requirements Impermissibly Restrict Free
Finally, and perhaps most tellingly, Plaintiffs did not brief a prior restraint claim when they filed their initial motion for summary judgment. In that motion, filed before the parties agreed to narrow the issues for partial summary judgment briefing, Plaintiffs moved for judgment as to all claims asserted in their Complaint. See generally Pls.’ Mot. for Summ. J., ECF No. 22; cf. Pls.’ Mot. at 13 (describing their initial motion for summary judgment as “exhaustive” and relating to “all claims“). Nowhere, however, does that motion assert that the Deeming Rule‘s rotation-plan submission requirement constitutes an unconstitutional prior restraint on speech. Plaintiffs’ silence in their initial dispositive motion is strong evidence that they themselves did not understand their Complaint to contain a prior restraint challenge.
c. The FDA‘s announced rulemaking concerning premium cigars
Although the court holds that the Deeming Rule‘s health warning mandates do not violate the APA, the TCA, or the First Amendment, the court cannot let pass without comment what it “deems” to be a grossly unfair exercise of agency authority. The health warning requirements have an effective date of August 10, 2018. In the lead up to that date, the cigar industry has expended millions of dollars in designing and creating new, conforming packaging—a fact that the FDA does not contest. However, months before the effective date‘s arrival, the FDA issued an ANPRM, “seeking comments, data, results or other information that may inform regulatory actions FDA might take with respect to premium cigars.” 83 Fed. Reg. at 12,901. Some of the information the ANPRM seeks directly concerns the health warnings mandate. For example, the ANPRM asks for “[s]tudies or information on the required warning statements, . . . which will be required to appear on cigar packaging and advertising in the near future.” Id. at 12,904. The agency also seeks studies or information regarding “consumer perceptions of the health risks of premium cigars when compared to other tobacco products, including cigars,” and “consumer perceptions of the addictiveness of premium cigars, especially compared and contrasted with perceptions for other cigars.” Id. In total, the ANPRM seeks no less than two dozen categories of comments, data, or other information concerning the definition, usage patterns, and public health implications of premium cigars. The sheer breadth of the ANPRM begs the obvious question: Might the FDA in the near future do away with the health warning requirements for premium cigars? And yet another: Why is the agency insisting that the premium cigar industry expend millions of dollars to conform to regulatory mandates that might be rescinded only months after
The court‘s displeasure with the FDA‘s handling of the status of premium cigars, no doubt, provides little consolation to the industry. But the court can do no more. Its hands are tied by both the law and the posture of the case.
There is nothing inherently unlawful about an agency‘s decision to reconsider the wisdom of a regulation, even before it goes into effect. An agency is free to change its mind about an existing policy, “either with or without a change in circumstances.” State Farm, 463 U.S. at 57 (citation omitted); see also Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2125–26 (2016). Nor is an agency‘s present willingness to consider new information necessarily an indictment of its past decision-making. As the D.C. Circuit recently observed: “[A] change in an agency‘s course in reaction to new information does not indicate that its initial course was necessarily arbitrary and capricious when charted.” New Eng. Power Generators Ass‘n v. FERC, 879 F.3d 1192, 1201 (D.C. Cir. 2018). That is arguably what is occurring here. The ANPRM reaffirms that, at the time of the original rulemaking, there was a lack of evidence to justify differential treatment for premium cigars. 83 Fed. Reg. at 12,902 (explaining that “comments against regulation [of premium cigars] provided little data to support the opinions expressed and, where studies were submitted, provided little information about the studies cited“). The ANPRM also seeks only “new and different information, data, and analysis not submitted in response to FDA‘s proposed deeming rule.” Id. By so limiting the scope of the information and comments requested,
The court‘s power to act is limited in yet another way. The present posture of this case does not offer a basis on which to enjoin enforcement of the Deeming Rule‘s warning requirements during the pendency of the FDA‘s newly announced rulemaking process. The court already has rejected Plaintiffs’ statutory and constitutional challenges to the warning requirements, so the court has found no violation to be remedied. Additionally, Plaintiffs agreed to defer litigating their claim under the APA that the FDA‘s decision not to adopt “Option Two,” i.e., the option that would have excluded premium cigars from regulation, was itself arbitrary and capricious (Count V). See Joint Status Report (dated Sept. 8, 2017), ECF No. 53, ¶ 4. Therefore, there is no claim presently before the court that contests the agency‘s basis for subjecting premium cigars to regulation in the first instance.
Nor have Plaintiffs made a different challenge, namely to the FDA‘s refusal to stay the warnings requirement as to premium cigars during the pendency of the present rulemaking process. See Pls.’ Resp. to Defs.’ Notice of Publication of ANPRM, ECF No. 92, at 1 (expressing surprise that the decision to issue the ANPRM “was not accompanied by voluntary stay of enforcement of the mandated warnings provision“); cf. Clean Air Council v. Pruitt, 862 F.3d 1, 6–7 (D.C. Cir. 2017) (holding that agency‘s decision to stay implementation of a rule and thus “relieve[] regulated
In the end, even if fundamental fairness strongly favors a stay for premium cigars during the just-initiated rulemaking process, regrettably neither the law nor the posture of this case allows for such judicial relief.
B. User Fee Rule
When the FDA promulgated the Deeming Rule, it contemporaneously promulgated the User Fee Rule pursuant to its authority under the TCA. See
The court concludes that the FDA‘s decision not to impose the User Fee Rule on e-cigarettes is compelled by statute and, even if the statute were ambiguous or silent, is a reasonable interpretation of the TCA deserving of deference. Additionally, the court rejects Plaintiffs’ characterization of the user fee as a “tax,” along with Plaintiffs’ contention that imposing the User Fee Rule only on some newly “deemed” products violates the Fifth Amendment. Plaintiffs’ challenge to the User Fee Rule therefore fails.
1. Chevron Analysis
The question whether the FDA‘s decision to impose user fees on cigars and pipe tobacco but not e-cigarettes is consistent with the TCA requires analysis under Chevron‘s two-step framework.
a. Step One
At step one of Chevron, the court asks if Congress has spoken directly to the precise question at issue—here, whether the FDA can assess user fees on only some of the newly deemed tobacco products—by employing “traditional tools of statutory construction,” including “examination of the statute‘s text, legislative history, and structure, as well as its purpose.” Bell Atl. Tel. Co. v. FCC, 131 F.3d 1044, 1047 (D.C. Cir. 1997). To prevail at step one, Plaintiffs must
The TCA provides that the FDA “shall in accordance with [
The percentage share of
Plaintiffs’ step one argument relies on their reading of Section 387s(a), which requires FDA to assess user fees on ”each manufacturer and importer of tobacco products subject to this subchapter.”
Plaintiffs’ interpretation cannot, however, be squared with a plain reading of the statute.
Stifled by the statutory text, Plaintiffs resort to policy arguments to support their reading. They contend that Congress could not have intended to allow newly deemed tobacco products, like e-cigarettes, to become a free rider in funding the TCA‘s regulatory scheme. As Plaintiffs put it: “There is no provision in the statute for regulating a class of tobacco products and requiring other classes of products to pay the necessary costs of such regulation.” Pls.’ Reply at 34. That
In sum, the statute plainly provides that if one day deemed to be “tobacco products” by the FDA, “cigars” and “pipe tobacco” “shall” be subject to user fees to fund the statutory scheme.
b. Step Two
In the court‘s view, the plain text of the TCA mandates the assessment of user fees only on those enumerated classes of tobacco products. But, even assuming that the plain text of the TCA does not unambiguously compel the FDA‘s interpretation, and proceeding to Chevron‘s second step, the court holds, for the reasons stated above, that the FDA has offered in the User Fee Rule a “reasonable explanation of how its interpretation serves the statute‘s objectives.” Nat‘l Ass‘n of Broads. v. FCC, 789 F.3d 165, 175 (D.C. Cir. 2015). The court therefore defers to the agency‘s interpretation.
When promulgating the final User Fee Rule, the FDA addressed public comments asserting that the agency was required by statute to assess fees on all deemed tobacco products, including
[I]t is reasonable to conclude that Congress did not intend FDA to develop a new system that departs from the methodology mandated by FETRA. Any such system would necessarily be subjective, especially relative to the system Congress established for the enumerated six classes. As such, FDA‘s interpretation is a reasonable construction of the [TCA].
Id. at 28,712. In light of the FDA‘s reasonable—and in the court‘s view, compelled—interpretation of the statute, the court concludes that the User Fee Rule is entitled to deference.
2. The User Fees Are Not a “Tax”
Plaintiffs’ assertion that the uneven application of the User Fee Rule imposes a “tax” on the tobacco products assessed is readily dismissed. The court understands Plaintiffs to argue that, by excepting e-cigarette makers from paying a user fee, the FDA is not imposing on other tobacco products a “user fee,” as that term is commonly understood, but instead a “tax,” which the FDA does not have the authority to impose. According to Plaintiffs, a “user fee” is: “(1) predicated on a voluntary act by a payer; (2) paid for a specific service or benefit, including the ‘benefit’ of regulation; and (3) not meant for the benefit of others.” Pls.’ Mot. at 42 (citing Nat‘l Cable Television Ass‘n, Inc. v. United States, 415 U.S. 336, 340-41 (1974); U.S. Gov‘t Accountability Office, GAO-08-386SP, Federal User Fees: A Design Guide 4-5 (2008)). A “tax,” on the other
The court disagrees. In light of the court‘s conclusion above that Congress expressly intended that only the six classes of tobacco products enumerated in the statute be assessed user fees to pay for the FDA‘s regulation of tobacco products, the User Fee Rule does no more than that commanded by Congress. No general definition of “user fee” can compel the agency to do otherwise. That Congress chose not to include a mechanism to re-calculate the pro rata share formula to take account of newly deemed products, like e-cigarettes, does not turn the user fee into a “tax.” Cf. United States v. Sperry Corp., 493 U.S. 52, 60 (1989) (“This Court has never held that the amount of a user fee must be precisely calibrated to the use that a party makes of Government services.“). Plaintiffs’ argument is therefore unpersuasive.
3. The User Fee Rule Does Not Violate the Fifth Amendment
Characterizing the User Fee Rule as “naked economic favoritism,” Plaintiffs lodge a constitutional challenge to the Rule under the equal protection component of the Due Process Clause of the Fifth Amendment. Pls.’ Mot. at 43. Applying rational-basis review to the economic classification challenged here, as Plaintiffs concede is appropriate, see Sperry Corp., 493 U.S. at 65, the User Fee Rule readily satisfies the Constitution.
Applying rational-basis review, the User Fee Rule is constitutionally valid if “there is a plausible policy reason for the classification, the legislative facts on which the classification is apparently based rationally may have been considered to be true by the governmental decisionmaker, and the relationship of the classification to its goal is not so attenuated as to render the distinction arbitrary or irrational.” Armour v. City of Indianapolis, 566 U.S. 673, 682 (2012)
The Supreme Court‘s decision in United States v. Sperry Corp. is on point. There, the Court upheld the constitutionality of a statute requiring the Federal Reserve Bank of New York to deduct and pay into the U.S. Treasury a percentage of any award made by the Iran-U.S. Claims Tribunal in favor an American claimant. 493 U.S. at 54. Assessing the Due Process Clause challenge to the statute, the court applied rational-basis review and readily concluded that the statute‘s assessment of a user fee against successful claimants, rather than all claimants, passed muster. Id. at 65–66. In so holding, the Court provided justifications Congress “could have” relied on in imposing the user fees on only one class of persons. Id. at 65 (emphasis added). In finding that there were a number of rational grounds on which the statute could have rested, the Court noted that the case was unlike one “where the Court was unable to discern any legitimate interest that was served” by an economic classification. Id.
As in Sperry, there are a number of rational reasons that could explain why Congress opted to limit the FDA to assessing user fees on the enumerated six classes of tobacco products. For example, Congress reasonably could have determined that novel, newly deemed products, like e-cigarettes, were unlikely to overcome the market shares of the traditional enumerated products, and so it left for another day the question of how to account for a novel newly deemed product if it gained sufficient market share. Or, Congress could have decided that incorporating the FETRA scheme—and its readily available data—was the best way to assess user fees, as manufacturers
Although Plaintiffs invite the court to second-guess Congress‘s determination to assess user fees only on six classes of tobacco products, rational-basis review “is not a license for courts to judge the wisdom, fairness, or logic of legislative choices.” FCC v. Beach Commc‘ns, Inc., 508 U.S. 307, 315 (1993); see also Armour, 566 U.S. at 685 (“[T]he Constitution does not require the [government] to draw the perfect line nor even to draw a line superior to some other line it might have drawn. It requires only that the line actually drawn be a rational line.“). The basis for the User Fee Rule‘s classification between the six classes of tobacco products and any others is rational; the court therefore concludes that the User Fee Rule does not violate the Fifth Amendment.
C. Designation of Retail Establishments That Blend Pipe Tobacco as “Manufacturers” Subject to 21 U.S.C. § 387e
Plaintiffs next challenge the Deeming Rule‘s designation of tobacco retailers who blend pipe tobacco in-store as “manufacturers” within the scope of
In Plaintiffs’ view, subjecting these “mom-and-pop retailers” to the same requirements intended for manufacturers is contrary to the plain text of
1. Chevron Step One
At the first step of Chevron, the court must consider whether Congress has “directly spoken” to the precise question at issue. Here, that question is whether retailers who blend pipe tobacco are, in fact, “engaged in the manufacture, preparation, compounding, or processing of a
To prevail on their Chevron argument at the first step, Plaintiffs must show that the statute unambiguously forecloses the agency‘s interpretation. Pharm. Research & Mfrs. of Am. v. FTC, 790 F.3d 198, 207 (D.C. Cir. 2015). Correspondingly, for the agency to prevail at Chevron‘s first step, it must show that Congress was not “silent or ambiguous with respect to the specific issue” before the court. See Humane Soc. of U.S. v. Kempthorne, 579 F. Supp. 2d 7, 19 (D.D.C. 2008).
As required, the court begins with the statutory text. In pertinent part,
The term “manufacture, preparation, compounding, or processing” shall include repackaging or otherwise changing the container, wrapper, or labeling of any tobacco product package in furtherance of the distribution of the tobacco product from the original place of manufacture to the person who makes final delivery or sale to the ultimate consumer or user.
According to Plaintiffs, a retail pipe tobacco blender is not a “manufacturer“; instead, a retail blender “simply tak[es] two end-use, FDA-approved products and perform[s] a service that consumers themselves could do on their own.” Pls.’ Mot. at 44. Plaintiffs also contend that because the text of
For its part, the FDA defends its action by pointing to the definition of “tobacco product manufacturer” under
Starting with Plaintiffs’ arguments, the court finds them unpersuasive. The court agrees with Defendants that Plaintiffs incorrectly read Section 387e to exclude any and all retailers from its reach. A person‘s designation as a “retailer” does not preclude application of Section 387e; instead, the focus of the statutory text is on the activity that the person undertakes. If a person in fact “engage[s] in the manufacture, preparation, compounding, or processing of a tobacco product,” then he or she is covered by the plain terms of the provision. It matters not, for purposes of Section 387e, whether that establishment is also a retailer. Indeed, crediting Plaintiffs’ reading would—as Defendants point out—lead to the absurd conclusion that an establishment could undertake the full manufacture of a tobacco product, but not be subject to Section 387e, as long as it was the entity that made the final sale to the ultimate consumer. The statutory text cannot bear such a result.
At the same time, the court cannot accept the agency‘s interpretation of Section 387e because its reliance on the general definition of “tobacco product manufacturer” to interpret that
It may be that the act of blending pipe tobacco does constitute the “manufacture, preparation, compounding, or processing of a tobacco product,” but the agency neither makes that argument here nor did it make it during the rulemaking process. Cf. 81 Fed. Reg. at 29,049 (“All entities that meet the definition of ‘tobacco product manufacturer’ in [Section 387(20)] of the [TCA], including retail establishments that blend pipe tobacco, are subject to and must comply with all applicable statutory and regulatory requirements for tobacco product manufacturers.“). The court cannot now independently analyze that issue. See State Farm, 463 U.S. at 43 (stating that the court cannot “substitute its judgment for that of the agency“); PDK Labs. Inc. v. DEA, 362 F.3d 786, 798 (D.C. Cir. 2004) (“[I]t is important to remember that if we find that an agency‘s stated rationale for its decision is erroneous, we cannot sustain its action on some other basis the agency did not mention.“). Nor can the court ask the parties for further explanations. See State Farm, 463 U.S. at 50 (stating that the court may not accept “post hoc rationalizations for agency actions“); PDK Labs., 362 F.3d at 798 (stating that where an agency has not used its experience
2. Chevron Step Two and Remedy
Having concluded that the agency‘s reasoning was misguided, the court quickly disposes of Defendants’ contention that the agency‘s interpretation is entitled to deference at Chevron‘s second step. When, as here, “an agency incorrectly concludes that Congress mandated a particular regulatory interpretation of a statute—and the agency therefore stops itself at Chevron step one—this court will vacate and remand.” Noble Energy, Inc. v. Salazar, 671 F.3d 1241, 1246 n.5 (D.C. Cir. 2012). As the D.C. Circuit has instructed, “deference to an agency‘s interpretation of a statute is not appropriate when the agency wrongly believes that interpretation is compelled by Congress.” PDK Labs., 362 F.3d at 798 (citation and internal quotation marks omitted). Here, as discussed, in the final Deeming Rule, the agency wrongly rested its designation of retailers who blend tobacco as subject to Section 387(e)‘s requirements solely based on the definition of “tobacco product manufacturer” contained in Section 387(20). Congress compelled no such interpretation. Accordingly, the court vacates application of Section 387e‘s requirements to retail blenders of pipe tobacco and remands the question to the agency so that it can “bring its experience and expertise to bear in light of competing interests at stake.” Peter Pan Bus Lines, Inc. v. Fed. Motor Carrier Safety Admin., 471 F.3d 1350, 1354 (D.C. Cir. 2006) (citation omitted).
D. Pipes as “Components or Parts”
At last, the court turns to Plaintiffs’ challenge to the FDA‘s designation of pipes as “components or parts” of a tobacco product subject to regulation under the TCA, as opposed to “accessories” not subject to the Act. Compl. ¶¶ 115-60. The court concludes that the agency‘s
As amended by the TCA, the FD&C Act defines a “tobacco product” as:
any product made or derived from tobacco that is intended for human consumption, including any component, part or accessory of a tobacco product (except for raw materials other than tobacco used in manufacturing a component, part, or accessory of a tobacco product).
In making these distinctions, the FDA filled in definitional gaps left by Congress. The agency defined “component or part”18 as:
any software or assembly of materials intended or reasonably expected: (1) [t]o alter or affect the tobacco product‘s performance, composition, constituents or characteristics; or (2) to be used with or for the human consumption of a tobacco product. The term excludes anything that is an accessory of a tobacco product.
Id. In turn, the agency defined “accessory” to mean:
any product that is intended or reasonably expected to be used with or for the human consumption of a tobacco product; does not contain tobacco and is not made or derived from tobacco; and meets either of the following: (1) [i]s not intended or reasonably expected to affect or alter the performance, composition, constituents, or characteristics of a tobacco product or (2) is intended or reasonably expected to affect or maintain the performance, composition,
constituents, or characteristics of a tobacco product but (i) solely controls moisture and/or temperature of a stored product or (ii) solely provides an external heat source to initiate but not maintain combustion of a tobacco product.
Id. at 29,015. The agency concluded in the final Deeming Rule that “[b]oth e-cigarettes and pipes meet” the definition of “components or parts.” 81 Fed. Reg. at 29,042. It also provided, by way of contrast, a list of products meeting the definition of “accessories,” to include “ashtrays, spittoons, hookah tongs, cigar clips and stands, and pipe pouches,” as well as “humidors or refrigerators that solely control the moisture and/or temperature of a stored product and conventional matches and lighters that solely provide an external heat source to initiate but not maintain combustion of a tobacco product.” Id. at 28,975.
Plaintiffs challenge the agency‘s statutory analysis. Relying on a dictionary definition of “component” to mean an “ingredient” or “constituent part,” Plaintiffs maintain that “[a] pipe is not a constituent part or ingredient of a product made or derived from tobacco, and therefore is not subject to regulation as a tobacco product under the TCA.” Pls.’ Mot. at 47. Plaintiffs insist that to qualify as a component the object must be “integrated with a product made of tobacco,” and, because a pipe is merely a vessel for pipe tobacco, a pipe is simply not a “component.” Id. at 48. Moreover, even if the statutory term “component” were ambiguous, Plaintiffs say that FDA‘s classification of pipes as components, rather than unregulated “accessories,” is not a reasonable one entitled to deference because there is no record evidence to suggest that pipes do in fact “have . . . direct impact on the public health,” rendering the FDA‘s designation arbitrary and capricious under the APA. See 81 Fed. Reg. at 29,102.19
The court begins, as always, with the statutory text. See Sebelius v. Cloer, 569 U.S. 369, 376 (2013). The TCA does not offer a definition of “component” or “part,” so resorting to a dictionary to determine their plain meanings is the best next step. See Nicopure, 266 F. Supp. 3d at 383 (citing Taniguchi v. Kan Pac. Saipan, Ltd., 566 U.S. 560 (2012)). A “component” is a “constituent part” or “ingredient,” see Component, Merriam-Webster Dictionary, http://www.merriam-webster.com/dictionary/component, as well as “a constituent element or part,” see Component, Oxford English Dictionary, 2d ed. (1989). The word “constituent” means an “essential part,” “component,” or “element.” See Constituent, Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/constituent. And, a “part” is “an essential portion or integral element,” see Part, Merriam-Webster Dictionary, http://www.merriamwebster.com/dictionary/part, as well as a “piece or section of something which together with another or others makes up the whole (whether actually separate from the rest or not),” see Part, Oxford English Dictionary, 3d ed. (2005).
Taking these dictionary definitions together, treating a “pipe” as a “component or part” of a tobacco product is not foreclosed by the statutory text. If “component,” in this context, is taken to mean that which is “essential” or critical to the consumption of a tobacco product, then a pipe fits the definition. Neither the pipe nor the pipe tobacco has any independent use or function apart from the other, and Plaintiffs do not assert otherwise. Only when used together do the two create a consumable tobacco product, which is of course the object of regulation under the TCA. None of the definitions of the key terms requires the material regulated to be “integrated” into the tobacco product, as Plaintiffs contend. To the contrary, the word “part” includes in its definition those
This is the same conclusion the court reached in Nicopure. There, when assessing the agency‘s decision to regulate empty vaping devices in the Deeming Rule, the court reasoned that the device satisfied the plain meaning of a “component” because, “just as an empty fountain pen is obviously a ‘component’ of an ink pen . . . even when the ink is sold separately,” an empty vaping device is a “component” of an electronic nicotine delivery system. Nicopure, 266 F. Supp. 3d at 383-84. That analogy is instructive here: An empty pipe is a “component” of a delivery system for pipe tobacco, even though it is sold separate from the pipe tobacco itself.
To further bolster their argument at Chevron step one, Plaintiffs note that the undefined term “component” appears in other provisions of the statute as a bedfellow for terms like “additive” and “ingredient,” which Plaintiffs again take to mean that a component must be integrated with a product made of tobacco. Pls.’ Mot. at 47 (citing
Accordingly, the court finds that the agency‘s conclusion that a “pipe” is a “component or part” subject to regulation is not foreclosed by the statutory text and therefore survives Chevron step one review. See Nicopure, 266 F. Supp. 3d at 384-86 (rejecting the challenger‘s similar argument that “the context of the TCA as a whole supports [the] argument that the terms ‘component or part’ must mean a part physically connected to the whole“).
2. Chevron Step Two and Arbitrary and Capricious Review
Having rejected Plaintiffs’ argument at Chevron‘s first step, the court turns to consider whether the agency‘s interpretation of the TCA is a permissible one. Assessing Plaintiffs’ statutory and APA challenge to FDA‘s interpretation under the overlapping Chevron step two and “arbitrary and capricious” framework, the court holds that the FDA did not act unreasonably in designating “pipes” as “components or parts” subject to regulation.
Plaintiffs argue that, even if the statutory text is ambiguous, the FDA‘s interpretation is nonetheless an unreasonable one because “[t]here is nothing in the record to suggest that pipe architecture is being manipulated to make tobacco more addictive or dangerous and have any other direct effect on public health,” thus compelling the conclusion that a pipe is an “accessory,” rather than a “component or part” of a tobacco product. Pls.’ Mot. at 48. To that end, Plaintiffs assert that differentiation among pipes is merely for aesthetic reasons, citing public comments to the Proposed Deeming Rule contending that “while [pipes] enable the smoking of tobacco, they present no independent potential harm.” Id. (citing A.R. 130248).
Plaintiffs’ argument is unavailing. For starters, Plaintiffs do not take issue with the definition of “component or part” that the FDA applied to pipes. Plaintiffs do not dispel
Also bolstering the agency‘s interpretation is a comparison of pipes against objects that qualify as non-regulated “accessories.” Observing the agency‘s provided examples of “accessories,” it is clear that pipes are wholly unlike “ashtrays, spittoons, [or] hookah tongs,” that do nothing to affect the “performance, composition, constituents, or characteristics of a tobacco product,” or “conventional matches and lighters that solely provide an external heat source to initiate but not maintain combustion of a tobacco product.” Id. at 28,975. Rather, pipes are “fundamental” to the delivery and consumption of pipe tobacco. See Nicopure, 266 F. Supp. 3d at 386. Plaintiffs do not counter that reasoning.
In the alternative, Plaintiffs argue for the first time in their reply brief that the agency‘s failure to contend with whether to regulate all “components,” or not to regulate all “accessories,” instead of subsets of each, violates the APA. Plaintiffs did not, however, raise this argument in their initial Motion. See generally Pls.’ Mot. The court will adhere to the “well-settled prudential doctrine that courts generally will not entertain new arguments first raised in a reply,” and therefore declines to consider Plaintiffs’ belated challenge. Aleutian Pribilof Islands Ass‘n v. Kempthorne, 537 F. Supp. 2d 1, 12 n.5 (citing Herbert v. Nat‘l Acad. of Sci., 974 F.2d 192, 196 (D.C. Cir. 1992)).
V. CONCLUSION AND ORDER
For the reasons set forth above, Plaintiffs’ Motion for Partial Summary Judgment is granted in part and denied in part, Plaintiffs’ Motion for Preliminary Injunction is denied as moot, and Defendants’ Cross-Motion for Partial Summary Judgment is granted in part and denied in part, as follows:
- The Deeming Rule‘s health warning requirements comport with the TCA and the APA (Count VI) and do not violate the First Amendment (Count VII).
- The User Fee Rule (Counts II and III) is upheld in its entirety.
- The process by which the agency designated tobacco retailers who blend pipe tobacco in-store as subject to the requirements of
21 U.S.C. § 387e violates the APA (Count VIII). The court remands this issue to the agency for further proceedings consistent with this Memorandum Opinion. - The agency‘s designation of pipes as “components” of a tobacco product does not violate the APA (Count IX).
No later than June 11, 2018, the parties shall submit a Joint Status Report recommending how to proceed with the remaining, unresolved claims.
Dated: May 15, 2018
Amit P. Mehta
United States District Judge