CIGAR ASSOCIATION OF AMERICA, еt 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
08/19/20
Case 1:16-cv-01460-APM Document 214 Filed 08/19/20 Page 1 of 38
I. INTRODUCTION
This matter comes before the court once more on a challenge to aspects of the United States Food and Drug Administration’s (“FDA”) proposed regulation of pipe tobacco and cigar products, including the category of product known as premium cigars. On May 10, 2016, the FDA published a final rule “deeming” cigars, pipe tobacco, and certain other products (e.g., e-cigarettes) subject to the federal Family Smoking Prevention and Tobacco Control Act of 2009. The FDA’s “Final Deeming Rule” subjects these newly deemed products to comparable statutory and regulatory requirements already imposed on cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco. In a previous opinion, this court addressed, among other things, the Deeming Rule’s imposition of health warnings on cigar product packaging and advertising (a decision since reversed by the D.C. Circuit) and the imposition of a user fee on manufacturers and importers of cigar and pipe tobacco products. In this opinion, the court considers six challenges stemming from the FDA’s implementation and imminent enforcement of the requirement that manufacturers of new tobacco products covered by the Act obtain premarket authorization from the FDA before
For the reasons set forth below, the court grants in part and denies in part Plaintiffs’ Motion for Partial Summary Judgment, denies as moot Plaintiffs’ Motion for a Preliminary Injunction, and grants in part and denies in part Defendants’ Cross-Motion for Partial Summary Judgment. In issuing the Final Deeming Rule, the FDA arbitrarily failed to address commenters’ requests for a streamlined substantial equivalence process for premium cigars undergoing premarket review. Accordingly, the court remands the Final Deeming Rule for the limited purpose of considering that issue anew and enjoins enforcement of the premarket review requirements against premium cigars during that time. In all other respects, however, Defendants’ actions were lawful, reasonable, and adequately explained.
II. BACKGROUND
A. Statutory Background
In 2009, Congress enacted the Family Smoking Prevention and Tobacco Control Act (“TCA”) to “provide authority to the [FDA] to regulate tobacco products . . . by recognizing it as the primary Federal regulatory authority with respect to the manufacture, marketing, and distribution of tobacco products,” among other purposes. Pub. L. No. 111-31, § 3, 123 Stat. 1776, 1781–82 (2009). The legislation immediately subjected “all cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco” to a panoply of statutory and regulatory requirements, and also reserved future application of the TCA to “any other tobacco products that the Secretary [of Health and Human Services] by regulation deems to be subject to this chapter.”
A central feature of the TCA is its “‘comprehensive restrictions on the sale, promotion, and distribution’ of tobaсco products.” Nicopure Labs, LLC v. FDA, 944 F.3d 267, 272 (D.C. Cir. 2019) (quoting § 2(6), 123 Stat. at 1777). The TCA therefore requires tobacco product manufacturers to obtain premarket authorization before introducing a “new tobacco product” into interstate commerce.
The TCA establishes three pathways for manufacturers of new tobacco products to seek premarket authorization. Under the substantial equivalence pathway that most cigar and pipe tobacco manufacturers are expected to use, a manufacturer can submit a report to the FDA showing that its product is “substantially equivalent” to either (a) a product that was marketed on or before February 15, 2007, or (b) a product that has already been found to be substantially equivalent to such a grandfathered product.
Alternatively, if the FDA concludes that a new tobacco product has been modified in only a “minor” respect from a product that is already permissibly marketed under the TCA, the agency may “exempt” the modified product from “the requirements of this subsection relating to the
Failure to obtain premarket authorization via an appropriate pathway can carry serious consequences. A tobacco product marketed without appropriate authorization is considered “adulterated” and “misbranded.”
B. Regulatory Background
1. Proposed Deeming Rule
On April 25, 2014, the FDA issued a proposed rule that would “deem” cigars, pipe tobacco, and e-cigarettes to be subject to the TCA. See 79 Fed. Reg. 23,142 (Apr. 25, 2014) (“Proposed Deeming Rule”). In the Proposed Deeming Rule, the FDA proposed two options which “would providе 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 nearly all products meeting the statutory definition of “tobacco product”—including cigars and pipe tobacco—to be subject to the TCA. Id. Under Option 2, the FDA would deem “only a subset of cigars” and “exclude from the scope of [the] proposed rule certain cigars that we refer to as ‘premium cigars.’” Id. To effectuate this carve-out, Option 2 proposed a definition of “premium cigar” as:
[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. In explaining why it had proposed an option that might treat premium cigars differently, the FDA stated that “it has been suggested that different kinds of cigars may have the potential for varying effects on рublic health, based on possible differences in their effects on dual use [with other tobacco products], youth initiation and frequency of use by youth and young adults.” Id. at 23,143. “Accordingly,” the agency said, it “is seeking comment on these options to determine whether all cigars should be subject to deeming and what provisions of the proposed ruled may be appropriate or not appropriate for different kinds of cigars.” Id.
In addition, regarding premarket review, the FDA sought comment on “what FDA actions or regulatory approaches, if any, should be taken for proposed deemed tobacco products that are ‘new tobacco products,’” and whether the agency should “consider a different compliance policy for proposed deemed tobacco products that cannot, as a practical matter, use the [substantial equivalence] pathway.” Id. at 23,174–76.
2. Final Deeming Rule
The FDA selected Option 1 and promulgated the final Deeming Rule on May 10, 2016, thus deeming all categories of cigars, including “premium cigars,” to be subject to the TCA. See 81 Fed. Reg. 28,974, 29,020 (May 10, 2016) (codified at 21 C.F.R. pts. 1100, 1140, 1143) (“Final Deeming Rule”). The agency “concluded that deeming all cigars, rather than a subset, more completely protects the public health.” Id.
3. Subsequent Regulatory and Judicial Developments
Just over a year after the FDA finalized the Deeming Rule, and six months following the start of a new administration, the FDA issued a press release describing “a new comprehensive plan for tobacco and nicotine regulation.” FDA Announces Comprehensive Regulatory Plan to Shift Trajectory of Tobacco-Related Disease, Death, FOOD & DRUG ADMIN. (July 27, 2017) (“July 27 Press Release”).1 The FDA announced three policy changes that are relevant here. First, the agency stated that it “plan[ned] to issue foundational rules to make the product review process more efficient, predictable, and transparent for manufacturers,” and, to that end, it would “issue regulations outlining what information the agency expects to be included in . . . reports to demonstrate Substantial Equivalence.” Close to two years later, in April 2019, the FDA issued a
Second, the FDA announced that it “plan[ned] to issue guidance” that would “extend timelines to submit tobacco product review applications for newly regulated tobacco products that were on the market as of Aug. 8, 2016.” July 27 Press Release. That guidance came quickly but ultimately was doomed. In an August 2017 guidance document, the FDA declared that it would defer enforcement of the premarket review provisions until August 2021 for cigars and pipe tobacco, and until August 2022 for noncombustible products (like many e-cigarettes). See Guidance for Industry: Extension of Certain Tobacco Product Compliance Deadlines Related to the Final Deeming Rule, 82 Fed. Reg. 37459 (notice of availability) [hereinafter 2017 Guidance]; see also Defs.’ Cross-Mot. for Partial Summ. J., ECF No. 180, Defs.’ Mem. in Opp’n to Pls.’ Mot. for a Prelim. Inj. & for Partial Summ. J. & in Supp. of Defs.’ Cross-Mot. for Partial Summ. J., ECF No. 180-1 [hereinafter Defs.’ Cross-Mot.], at 11–12. A coalition of public health groups and doctors challenged the 2017 Guidance in the District of Maryland, and in May 2019, the court vacated the compliance deadline extensions, concluding that they violated the TCA and were not exempt from the Administrative Procedure Act’s notice and сomment requirements. Am. Acad. of Pediatrics v. FDA (“AAP”), 379 F. Supp. 3d 461, 498 (D. Md. 2019). The AAP court thereafter ordered the FDA to require that premarket applications be filed by May 12, 2020. Am. Acad. of Pediatrics v. FDA, 399 F. Supp. 3d 479, 487 (D. Md. 2019). Due to the COVID-19 pandemic, the court extended the application deadline to where it remains today, September 9, 2020. See Joint Status Report, Ex. 1, ECF No. 199-1.
Third, the FDA announced in its July 27 Press Release that it intended to issue an advanced
To date, the agency has not yet issued a proposed rule regarding premium cigars, see Hr’g Tr. at 6; however, with only weeks to go before the September 9 substantial equivalence deadline, the FDA recently indicated its intent to issue premarket enforcement guidance specific to premium cigars. Citing the comparatively low risk of youth smoking initiation for premium cigars, the need for additional research on their public health effects, and the potentially “large influx of premarket applications” for the products, the FDA, on August 5, 2020, requested authorization from the AAP court to issue “a guidance” document describing “how manufacturers and importers of premium cigars may, on a case-by-case basis, request deferral of enforcement of the premarket authorization requirement for products meeting thе definition of premium cigars set forth in the guidance.” See Defs.’ Notice of Filing of Request for Clarification of Scope of Remedy Order in AAP v. FDA with Respect to FDA’s Forthcoming Enforcement Guidance on Premium Cigars, ECF No. 209, at PDF pp. 3–4 [hereinafter August 2020 Notice]. In its request, the FDA defines a premium cigar slightly differently than it did in the Proposed Deeming Rule. According to the updated definition, a premium cigar is:
a cigar that: (1) is wrapped in whole tobacco leaf; (2) contains a 100 percent leaf tobacco binder; (3) contains at least 50 percent (of the filler by weight) long filler tobacco (i.e., whole tobacco leaves that run the length of the cigar); (4) is handmade or hand rolled (i.e., no machinery was used apart from simple tools, such as scissors to cut the tobacco prior to rolling); (5) has no filter, nontobacco tip, or nontobacco mouthpiece; (6) does not have a characterizing flavor other than tobacco; (7) contains only tobacco, water, and vegetable gum with no other ingredients or additives; and (8) weighs more than 6 pounds per 1,000 units.
C. Procedural Background
The Cigar Associatiоn of America, the Premium Cigar Association (formerly known as the International Premium Cigar and Pipe Retailers Association), and Cigar Rights of America (collectively, “Plaintiffs”) filed a fourteen-count complaint in July 2016, challenging the Final Deeming Rule and another rule, see Compl., ECF No. 1; see also Third Am. Compl., ECF No. 184 [hereinafter Third Am. Compl.], ¶ 1.2 Plaintiffs have amended their complaint three times, see Third Am. Compl., and have sought resolution of their claims piecemeal, see Cigar Ass‘n of Am. v. FDA (“Cigar I”), 315 F. Supp. 3d 143 (D.D.C. 2018) (addressing Plaintiffs’ challenges to, among other things, the Final Deeming Rule’s warning label requirements for cigar and pipe tobacco products and the User Fee Rule), rev’d in part, appeal dismissed in part sub nom. Cigar Ass‘n of Am. v. FDA, No. 18-5195, 2020 WL 3738096 (D.C. Cir. July 7, 2020); Order, ECF No. 158 (resolving Count X of Plaintiffs’ Amended Complaint).
Plaintiffs now seek summary judgment on the following six counts in their Third Amended Complaint, all of which are premised on the Administrative Procedure Act (“APA”), see Pls.’ Mot. for Summ. J. or a Prelim. Inj., ECF No. 178, Mem. in Supp. of Pls.’ Mot. for Summ. J. or a Prelim. Inj., ECF No. 178-1 [hereinafter Pls.’ Mot.]:
Count I: Challenge to the FDA’s failure to adjust the TCA’s February 15, 2007 grandfather date for cigar and pipe tobacco products, Third Am. Compl. ¶¶ 104–123; Pls.’ Mot. at 27–33; - Count XI: Challenge to the FDA’s decision to enforce the TCA’s premarket review requirements without first issuing guidance about the substantial equivalence process, Third Am. Compl. ¶¶ 179–190; Pls.’ Mot. at 19–23;
- Count XII: Challenge to the FDA’s enforcement of the substantial equivalence requirements against premium cigars during the pendency of new rulemaking about those products, Third Am. Compl. ¶¶ 191–199; Pls.’ Mot. at 34–38;
- Count XIII: Challenge to the Final Deeming Rule’s effective date as being premised on legal error regarding the FDA’s disсretion to set later compliance dates, Third Am. Compl. ¶¶ 200–213; Pls.’ Mot. at 24–26;
- Count XIV: Challenge to the FDA’s failure to establish a more streamlined substantial equivalence process for premium cigars, Third Am. Compl. ¶¶ 214–227; Pls.’ Mot. at 38–43; and
- Count XV: Challenge to the FDA’s cost-benefit analysis with respect to cigars and pipe tobacco, Third Am. Compl. ¶¶ 228–245; Pls.’ Mot. at 43–46.
In addition, Plaintiffs seek a preliminary injunction enjoining the FDA’s enforcement of the premarket review process against cigar and pipe tobacco products pending the resolution of Plaintiffs’ claims. See Pls.’ Mot. at 46–51. Defendants seek summary judgment in their favor on each count. See generally Defs.’ Cross-Mot. The court heard argument on the parties’ motions on July 22, 2020. See Minute Entry (July 22, 2020).
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 and is otherwise consistent with the APA standard of review.” Louisiana v. Salazar, 170 F. Supp. 3d 75, 83 (D.D.C. 2016) (citing Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415 (1971)). The court must uphold an agency’s decision unless it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”
IV. DISCUSSION
The court begins its analysis by considering Counts I, XIII, XI, and XV, which apply equally to all cigar and pipe tobacco products. The court then will consider the claims specific to premium cigars only.
A. Challenges Applicable to All Cigar and Pipe Tobacco Products
1. Count I – Challenge to the 2007 Grandfather Date
The TCA requires that, with limited exceptions, all “new tobacco product[s]” must undergo premarket review. See
During the rulemaking process for the Deeming Rule, commenters expressed concerns that requiring manufacturers of new tobacco products to look back nearly a decade to identify substantially equivalent products would be burdensome for cigar and pipe tobacco manufacturers. See Pls.’ Mot. at 27–29 (collecting comments). The FDA responded that it did “not believe that we have the authority to alter or amend this grandfathering date, which is set by statute,” but it requested comments on whether there were “other legal interpretations of the substantial equivalence grandfather provision that FDA should consider.” 79 Fed. Reg. at 23,174, 23,176. After considering comments, the FDA concluded in the Final Deeming Rule that it “lacks authority to change the grandfather date.” 81 Fed. Reg. at 28,993.
Plaintiffs now challenge that determination. They contend that the FDA has the authority to adjust the grandfather date, and that it arbitrarily failed to do so for newly deemed cigar and pipe tobacco products. See Pls.’ Mot. at 27–33. Plaintiffs do not dispute that the statute plainly fixes February 15, 2007 as the grandfather date, but they insist that four other statutory authorities empower the FDA to alter that date by regulation. See Pls.’ Reply in Further Supp. of Pls.’ Mot. & Opp’n to Defs.’ Cross-Mot., ECF No. 185 [hereinafter Pls.’ Reply] at 32–34. None of those provisions, however, grants the FDA authority to rewrite the statutorily-established date.3
First, Plaintiffs cite
4 Availаble at https://dictionary.cambridge.org/us/dictionary/english/standard.
5 Available at https://www.merriam-webster.com/dictionary/standard.
6 Insofar as Plaintiffs are actually arguing that the FDA should have regulated cigars and pipe tobacco under Section 387g in lieu of deeming the products under Section 387a, see Pls.’ Reply at 32–33, that argument is not before the court as Plaintiffs are not challenging the FDA’s decision to deem the products. Even if the argument were properly presented, however, it would be unavailing. Both Sections 387a and Section 387g are part of Chapter IX of the TCA, and the entire chapter applies only once a product is “deem[ed] to be subject” to the Act. See
Third, Plaintiffs cite
Fourth, Plaintiffs cite
In sum, the FDA correctly concluded that it cannot alter the grandfather date, and so its
2. Count XIII – Challenge to the 2016 Effective Date
The FDA’s Final Deeming Rule went into effect on August 8, 2016. 81 Fed. Reg. at 28,974, 29,003. To prioritize the FDA’s resources and give manufacturers more time to comply, the preamble to the rule announced “staggered compliance periods” during which the FDA would defer enforcement of the TCA’s premarket review requirement for most products until roughly 2019. Id. at 29,010, 29,014. In Count XIII of their Third Amended Complaint, Plaintiffs contend that the FDA premised the Final Deeming Rule’s August 8, 2016 effective date on two faulty legal assumptions: (1) that “it could set later compliance dates for statutory provisions triggered by the deeming decision,” and (2) “that it could adjust those compliance dates in the future without further notice-and-comment rulemaking.” Pls.’ Mot. at 24–25; see also Third Am. Compl. ¶¶ 200–13. Plaintiffs source these two alleged legal errors to the ruling in AAP, in which the court concluded that the FDA’s 2017 Guidance postponing the Final Deeming Rule’s compliance dates by multiple years contravened the TCA and was impermissibly issued without undergoing notice-and-comment rulemaking. See 379 F. Supp. 3d at 498. Plaintiffs posit that the same errors that the AAP court found infected the 2017 Guidance also infected the 2016 Final Deeming Rule, and because the Final Deeming Rule’s effective date was premised on those faulty assumptions, the rule itself must be vacated. See Pls.’ Mot. at 24–26; Pls.’ Reply at 26. The FDA responds that Plaintiffs’ claim is unreviewable and unavailing on the merits. See Defs.’ Cross-Mot. at 27.
As a threshold matter, the court rejects the FDA’s contentions that Plaintiffs’ challenge is
Nevertheless, the court agrees with the FDA that Plaintiffs’ challenge fails on the merits. See Defs.’ Cross-Mot. at 29–31. First, Plaintiffs incorrectly assert that the AAP court “held that the Family Smoking Prevention Act denies the agency the discretion to set later compliance dates for substantial equivalence reports and other premarket review applications, once an agency rule deeming products subject to the Act hаs taken effect.” Pls.’ Mot. at 24; see also Pls.’ Reply at 29. That description overstates the AAP court’s holding. The AAP court was only confronted with a challenge to the 2017 Guidance extending the compliance dates without notice and comment; it had no occasion to rule on the validity of the original compliance dates in the Final Deeming Rule. See AAP, 379 F. Supp. 3d at 468–69. Indeed, the parties in AAP “agree[d] that the FDA has some discretion to allow for a compliance period for new tobacco products,” id. at 484, and the court
Moreover, anоther court in this District has expressly held that the FDA’s “imposition of a compliance period” in the Final Deeming Rule “did not violate the APA,” and that the “agency’s decisions about whether to impose a compliance period at all” were not arbitrary. Nicopure, 266 F. Supp. 3d at 400. Though the Nicopure court was not directly presented with a statutory challenge to the FDA’s authority to set later compliance periods, it did observe in dicta that “[t]here is certainly nothing in the statute . . . that would bar” the FDA from “establish[ing] a more manageable timeline” for premarket review. Id. at 398. Thus, the Nicopure court appears to endorse the FDA’s authority to set later compliance periods in the Final Deeming Rule, and the AAP court arguably questions that authority, but neither case directly answers the question. This tension reinforces this court’s conclusion that the holding in AAP should not be read as broadly as Plaintiffs insist. Thus, the central premise of Plaintiffs’ challenge—that the FDA erroneously
7 The Fourth Circuit never reached Plaintiffs’ argument because it concluded that Judge Grimm had properly denied Plaintiffs’ motion to intervene in that case. See In re Cigar Ass’n of Am., 812 F. App’x 128 (4th Cir. 2020).
As for Plaintiffs’ second asserted legal error, nothing in the Rule or its preamble suggests that the FDA set the Rule’s effective date “on the assumption that the agency could monitor events and adjust [the compliance] dates later, without notice-and-comment rulemaking.” Pls.’ Mot. at 25. Nor does any portion of the Rule support Plaintiffs’ supposition that had the FDA understood that future compliance extensions would require notice and comment, it would have selected a later effective date for the Rule and, by extension, later compliance dates. See id. at 26. To the contrary, the FDA insisted that “[b]y providing a date in which the continued compliance period ends, manufacturers will have an incentive to submit a complete application and respond substantively and expeditiously to questions raised during the review process instead of an incomplete or deficient application just to stay on the market indefinitely.” 81 Fed. Reg. at 29,011. Further, the FDA expressed that “it would negatively impact public health if FDA were to significantly delay implementation of its premarket requirement authorities after issuance of this deeming rule.” Id. at 28,997. Thus, it appears that the FDA fixed the Final Deeming Rule’s premarket compliance periods with the understanding that they would be firm, and that additional extensions would be considered only on a “case-by-case basis,” id. at 29,010—a classic and lawful exercise of agency enforcement discretion, see AAP, 379 F. Supp. 3d at 493. While it is true that there is some tension between the FDA’s stated belief that “[a]gency compliance/enforcement policies are not subject to the requirements that govern notice-and-comment rulemaking,”
Plaintiffs point to the FDA’s statement that it “would ‘clarify the compliance periods for manufacturers of newly deemed tobacco products’ with revised guidance following publication of the Final Deeming Rule,” see Pls.’ Mot. at 25 (quoting 81 Fed. Reg. at 29,005), but they take that statement out of context. Those compliance periods involved registration and listing requirements, which are governed by a separate statutory framework than premarket review. See 81 Fed. Reg. at 29,004–05, 29,006. Plaintiffs also highlight the FDA’s assurance that it would “review and revise [its premarket compliance] policy as appropriate,” and that if it were to change the compliance periods, it would “provide notice to affected entities.” See Pls.’ Mot. at 26 (quoting 81 Fed. Reg. 29,008). But an agency always may review and revise its earlier pronouncemеnts, whether they be legislative rules or policy statements. That unremarkable statement is too slender a reed to support Plaintiffs’ weighty inference that the agency “would necessarily have set a later effective date” had it known that it could not amend its compliance periods in the future without undergoing notice-and-comment rulemaking. See id.
In sum, the validity of the Final Deeming Rule’s premarket compliance periods remains unresolved, and there is no basis to find that the FDA predicated its setting of the effective date on the assumption it could later extend the compliance periods without notice-and-comment rulemaking. Therefore, Plaintiffs have not shown that the setting of the effective date was “based on [a] faulty legal premise.” See Phillips Petroleum Co. v. FERC, 792 F.2d 1165, 1171 (D.C. Cir. 1986).
As part its “new comprehensive plan for tobacco and nicotine regulation,” the FDA announced in 2017 that it “plan[ned] to issue foundational rules to make the product review process more efficient, predictable, and transparent for manufacturers,” and that it would “issue regulations outlining what information the agency expects to be included in . . . reports to demonstrate Substantial Equivalence.” July 27 Press Release. In April 2019, the FDA issued a proposed rule seeking comments on what should be included in substantial equivalence reports. See 84 Fed. Reg. at 12,740. That rule is not yet finalized, however. See Hr’g Tr. at 6. And because the AAP court vacated the FDA’s 2017 Guidance extending the compliance periods for manufacturers’ premarket review, see AAP, 379 F. Supp. 3d at 498, cigar and pipe tobacco manufacturers now must submit their applications by September 9, 2020, without the benefit of the promised substantial equivalence regulations, see Am. Acad. of Pediatrics, 399 F. Supp. 3d at 487; Joint Status Report, Ex. 1, ECF No. 199-1.
Plaintiffs cry foul, arguing that “[t]he FDA’s decision to enforce the substantial equivalence process against cigars and pipe tobacco, without finalizing necessary implementing rules, is arbitrary, capricious, and not in accordance with law.” Pls.’ Mot. at 19 (cleaned up). Plaintiffs advance two arguments. First, they assert that the agency was statutorily required to issue substantial equivalence regulations specific to cigars and pipe tobacco “before enforcing the substantial equivalence process against cigars and pipe tobacco.” See id. at 22–23; Pls.’ Reply at 15–17. This requirement, Plaintiffs argue, stems from the text of the TCA, which provides that manufacturers’ substantial equivalence reports must be submitted “in such form and manner as the [FDA] shall prescribe.” Pls.’ Mot. at 22 (emphasis in original) (quoting
The court need not decide Plaintiffs’ first challenge because, еven if Plaintiffs are correct that the FDA must issue product-specific substantial equivalence regulations before requiring substantial equivalence reports, it does not follow that the FDA must have issued those regulations concurrently with the Final Deeming Rule. The Final Deeming Rule gave manufacturers of newly deemed tobacco products 18 months after the August 2016 effective date to submit their substantial equivalence reports, 81 Fed. Reg. at 29,010–12, and the FDA’s authority to set later compliance periods is not challenged here. Consequently, at the time the FDA issued the Final Deeming Rule, the FDA had at least 18 months to issue the regulations Plaintiffs say were required. Thus, even accepting Plaintiffs theory that the FDA’s present “demand for substantial equivalence reports without issuing a final rule specifying the form and content of such reports violates the [TCA],” Pls.’ Mot. at 23, that is not a flaw that is traceable to the Final Deeming Rule and therefore would not justify the primary remedy Plaintiffs seek, which is to vacate the Final Deeming Rule.
Plaintiffs’ second argument, that the FDA’s failure to issue such “key rules and guidance . . . undermines an essential justification for the Final Deeming Rule and renders its enforcement arbitrary and capricious,” Pls.’ Mot. at 22, fares no better. First, a central premise of Plaintiff’s argument—that the FDA “promised to issue guidance and implementing rules for applying the substantial equivalence process to cigars and pipe tobacco,” in the Final Deeming Rule, see Pls.’ Mot. at 9—is factually incorrect. The FDA did note that it was finalizing draft guidance to “help provide clarity regarding submission requirements for marketing applications,” but none of this guidance was specific to cigars and pipe tobacco. See 81 Fed. Reg. at 29,001; see also
Second, Plaintiffs incorrectly assert that developments occurring after the FDA issued its Final Deeming Rule in 2016 retroactively render the Rule arbitrary and capricious. See Pl.’s Mot. at 21–22. The agency’s promise in 2017 to issue “foundational rules” governing the substantial equivalence reporting, see July 27 Press Release, and the subsequent developments that have created obstacles to fulfilling that promise, including the AAP court’s setting of a sooner-than-anticipated substantial equivalence deadline, were not before the FDA when it issued the Final Deeming Rule in 2016. These developments are therefore not part of the administrative record in this case, and they have no bearing on whether the Final Deeming Rule was arbitrary. See CTS Corp. v. EPA, 759 F.3d 52, 64 (D.C. Cir. 2014) (“[I]n an Administrative Procedure Act case, a reviewing court should have before it neither more nor less information than did the agency when it made its decision.” (cleaned up)). Plaintiffs cite National Lime Ass’n v. EPA, 627 F.2d 416 (D.C. Cir. 1980), in support of their argument that a reviewing court may evaluate an agency’s “course of implementing [a] rule” when an agency relies on “flexibility built into the regulatory scheme to support the rationality of its standards,” see Pls.’ Mot. at 18 (cleaned up), but the court in that case never looked beyond the administrative record, and it expressly remanded the issue to
Plaintiffs were not left without a remedy; they just did not pursue it. The proper avenue for Plaintiffs to seek redress for these subsequent developments would be to petition the FDA to amend its Final Deeming Rule and appeal a denial, see Alon Ref. Krotz Springs, Inc. v. Envtl. Prot. Agency, 936 F.3d 628, 643 (D.C. Cir. 2019) (explaining that “arguments . . . that recent developments compel the amendment of an older regulation . . . are always cognizable through review of the denial of a petition to amend”), or bring a challenge under
At oral argument, Plaintiffs tried another tack, contending that the FDA failed to “run to
The court is sympathetic to the bind Plaintiffs find themselves in. But because the court is presented with only a challenge to the Final Deeming Rule, and because that challenge is solely premised on the unfairness of subsequent developments which have no bearing on the reasonableness of the Rule, the court cannot provide relief. See Banner Health v. Burwell, 126 F. Supp. 3d 28, 81 (D.D.C. 2015) (The court “cannot invalidate a rulemaking” solely “because it subsequently becomes clear that [the] rulemaking was unwise.”), aff’d in part, rev’d in part on other grounds sub nom. Banner Health v. Price, 867 F.3d 1323 (D.C. Cir. 2017).11
4. Count XV – Challenge to the FDA’s Cost-Benefit Analysis
As part of the Final Deeming Rule, the FDA conducted a Regulatory Impact Analysis pursuant to Executive Orders 12866 and 13563, which require agencies to “assess all costs and benefits of available regulatory alternatives.” 81 Fed. Reg. at 29,074. The FDA concluded that the final rule would annually cost between $66 and $77 million per year— about $2 per current user of tobacco products. See Final Regulatory Impacts Analysis, Joint App’x Vol. III, ECF No. 81-2 [hereinafter JA Vol. III], at AR023917, AR024027. The FDA thoroughly considered the qualitative benefits of the rule (including benefits stemming from premarket review), id. at AR023973–79, but it was unable to accurately quantify them “due to lack of information and substantial uncertainties associated with estimating” effects of the Final Deeming Rule, id. at AR023978. Therefore, the FDA conducted a “break-even” analysis—an economic tool that
In Count XV, Plaintiffs argue that the FDA’s cost-benefit analysis was arbitrary and capricious because it (1) failed to quantify the “benefits of applying the substantial equivalence requirements of the Final Deeming Rule to cigars and pipe tobacco,” Pls.’ Mot. at 44, and (2) neglected to separately consider whether the cost of regulating cigars and pipe tobacco, and premium cigars in particular, was justified by the benefits, id. at 44–45; see also Pls.’ Reply at 37–38. The FDA responds that its cost-benefit analysis is unreviewable because it was taken pursuant to executive orders that provide no private right of action, the TCA does not require a cost-benefit analysis, and the FDA did not rely оn its analysis to justify the Final Deeming Rule. See Defs.’ Cross-Mot. at 37–41; Defs.’ Reply at 20–21. Even if its analysis were reviewable, the FDA continues, it properly concluded that the benefits of the Final Deeming Rule justify the cost. Defs.’ Cross-Mot. at 41–43.
First, the court rejects the FDA’s contention that because it undertook the cost-benefit analysis pursuant to Executive Orders 12866 and 13563, its reasoning is unreviewable under the APA. See Defs.’ Cross-Mot. at 37–39. It is true that those executive orders create no private right of action to enforce their terms, see id. at 38 (citing the relevant passages of both orders), but all that means is that a litigant cannot obtain judicial review based on alleged violations of the orders. Even when an agency’s “regulatory impact analysis was conducted pursuant to Executive Orders,” the analysis is reviewable under the APA whenever the “government relie[s] on” the analysis in its final rule. See Council of Parent Attorneys & Advocates, Inc. v. DeVos, 365 F. Supp. 3d 28, 54 n.11 (D.D.C. 2019) (citing Nat’l Ass’n of Home Builders v. EPA, 682 F.3d 1032, 1039–40 (D.C. Cir. 2012)). The cases the FDA cites are inapposite because they all involved arguments that the
The same goes for the FDA’s statutory argument. Whether or not the TCA requires the FDA to evaluate costs and benefits when deeming new tobacco products (the court need not decide this question), the agency did so, and its analysis is reviewable under the APA insofar as it relied on the cost-benefit analysis as part of its rulemaking. See Nat’l Ass’n of Home Builders, 682 F.3d at 1039–40 (explaining that although an agency may “not have a statutory duty to demonstrate that the benefits of the amended rule outweigh its costs,” if the “agency decides to rely on a cost-benefit analysis as part of its rulemaking, a serious flaw undermining that analysis can render the rule unreasonable” (citations omitted)).
The question, then, is whether the FDA relied on its cost-benefit analysis in its Final Deeming Rule. An agency relies on a cost-benefit analysis when, for instance, it concludes that the analysis “support[s]” its final decision. Id. at 1040. The FDA insists its cost-benefit analysis did not support its final decision, noting that “it conducted a cost-benefit analysis because the Executive Orders required one,” and “it did not claim [in the Final Deeming Rule] that its assessment that the benefits of the rule outweighed the costs was a reason why it was adopting the rule.” Defs.’ Reply at 20 (citing 81 Fed. Reg. at 28,975, 29,074). It certainly would be an odd
The principle “that a court is not to substitute its judgment for that of the agency” is “especially true when the agency is called upon to weigh the costs and benefits of alternative polices.” Consumer Elecs. Ass’n v. FCC, 347 F.3d 291, 303 (D.C. Cir. 2003) (cleaned up). “[I]n view of the complex nature of economic analysis typical in the regulation promulgation process,” a court’s review is deferential, and the plaintiff’s “burden to show error is high.” Nat’l Wildlife Fed’n v. EPA, 286 F.3d 554, 563 (D.C. Cir. 2002). The court will uphold an agency’s decision against an arbitrary and capricious challenge so long as it is “reasonable and reasonably explained.” Nw. Corp. v. Fed. Energy Regulatory Comm’n, 884 F.3d 1176, 1179 (D.C. Cir. 2018).
Here, Plaintiffs have identified nothing arbitrary or capricious about the FDA’s cost-benefit analysis. First, the Nicopure district court already considered and rejected a similar argument that the FDA unreasonably “fail[ed] to quantify the benefits of the” Final Deeming Rule. 266 F. Supp. 3d at 406. As that court found, the agency “provided substantial detail on the benefits of the rule, and the reasons why quantification was not possible.” Id. That was enough. See Inv. Co. Inst. v. Commodity Futures Trading Comm’n, 720 F.3d 370, 379 (D.C. Cir. 2013) (“[T]he law does not require agencies to measure the immeasurable.”). Plaintiffs contend that the “purported benefits [the FDA] identified are susceptible to quantification, particularly given how long cigar and pipe
As to Plaintiffs’ second argument that the FDA should have calculated the benefits of requiring premarket review specifically for cigars and pipe tobacco, see Pls.’ Mot. at 44–45; Pls.’ Reply at 37–38, Plaintiffs have not identified an enforceable legal requirement that the FDA undertake a “rigorous, quantitative economic analysis” specific to cigars and pipe tobacco, see Inv. Co. Inst. Comm’n, 720 F.3d at 379 (cleaned up). Nor have they identified anything about the benefits analysis that the FDA actually conducted that is arbitrary or unreasonable.12 Instead, they simply assert that the agency “should have done some work, any work,” to identify the unique costs and benefits of subjecting cigars, pipe tobacco, and premium cigars to premarket review because of the unique natures of these products. Pls.’ Mot. at 44–46; Pls.’ Reply at 38–40. However, “there is no legal support for the proposition that every product or industry affected by a rulemaking is entitled to a separate cost-benefit analysis.” Nicopure, 266 F. Supp. 3d at 407.
In sum, to the extent the FDA “relied” on its cost-benefit analysis in the Final Deeming Rule and its analysis is subject to APA review, see Council of Parent Attorneys & Advocates, Inc.,
B. Challenges Applicable Only to Premium Cigars
Plaintiffs raise two additional challenges that are particular to premium cigars. In Count XII, they argue that [e]nforcing the substantial equivalence process against premium cigars, while the agency has a formal rulemaking open potentially to exempt premium cigars from any regulation, is arbitrary and capricious.” Pls.’ Mot. at 34. And in Count XIV, Plaintiffs contend that the FDA arbitrarily ignored commenters’ requests to establish a separate, streamlined substantial equivalence process for premium cigars. Id. at 42. Because the court grants Plaintiffs’ motion as to Count XIV and enjoins the FDA’s enforcement of the premarket and substantial equivalence review requirements as to premium cigars, it does not reach Plaintiffs’ arguments in Count XII.
1. The FDA’s Request for Regulatory Alternatives for Premium Cigars
In the Proposed Deeming Rule, the FDA requested comments on whether it should deem all cigar and pipe tobacco products to be subject to the TCA under “Option 1,” or whether it should exclude premium cigars “from the scope of [the] proposed rule” under “Option 2,” 79 Fed. Reg. at 23,143, and “provide a separate regulatory regime” for those products, id. at 23,150. The FDA also stated that it was considering a hybrid approach, wherein it would “include elements of both options,” id. at 23,150, and requested comment on whether “a different regulatory scheme for covered cigars . . . or other category of cigars wоuld adequately address the dangers of tobacco use by adults,” id. The agency additionally requested comment on “what FDA actions or regulatory
Commenters heeded the FDA’s call, urging the agency to develop a streamlined premarket review scheme for premium cigars. The Cigar Association of America, for instance, submitted a detailed proposal outlining “an alternative premarket approach under [
2. The FDA’s Failure to Respond to Commenters’ Suggestions
In Count XIV, Plaintiffs argue that the FDA failed to meaningfully respond to these substantial comments. See Pls.’ Mot. at 41–42. The court agrees. The closest the FDA came to
At least one comment stated that FDA should eliminate the premarket and [substantial equivalence] application requirements for cigars and instead implement a system by which cigar manufacturers could introduce new products to the market after providing 90 days’ notice to FDA of their intentions to do so.
(Response) FDA disagrees. Sections [387e] and [387j] of the [TCA] establish specific requirements that apply to new tobacco products before they may be marketed.
81 Fed. Reg. 28,995; see also Defs.’ Reply at 18 n.11 (citing this passage as the sole example of the FDA’s consideration of commenters’ requests that the agency consider “an easier substantial equivalence process for premium cigars”).
This cursory response is not reasoned decision-making. For one, the FDA mischaracterizes commenters’ suggestions. Though commenters did propose eliminating premarket review altogether, they also proposed options in which premium cigars would still be subject to the substantial review requirements, albeit in a streamlined form. E.g., Cmt. of Cigar Ass’n of Am., JA Vol. III at AR129920 (“[I]f the agency will not exempt cigars from the premarket review requirement, [the commenter] proposes that the agency consider an alternative premarket approach under [the substantial equivalence provisions]” of the TCA.). Two, the FDA incorrectly implies that it has no authority to adjust the substantial equivalence requirements for premium cigars. While it may be true that the agency could not issue a rule converting a substantial equivalence application into a substantial equivalence “order” after 60 or 90 days of inaction, see
The FDA’s arguments to the contrary are not persuasive. First, the agency contends that because the substantial equivalence requirement is “an automatic statutory consequence of deeming,” the FDA had no obligation to consider commenters’ requests for streamlined procedures. See Defs.’ Reply at 18. Not so. It is true that newly deemed products are automatically subject to premarket review, including substantial equivalence, but the FDA retains statutory discretion to “prescribe” the “form and manner” that the substantial equivalence reports must take. See
Second, the FDA argues that it “need not ‘solve every problem before it in the same proceeding,’” and that the comments were outside the scope of the proposed rule. Defs.’ Cross-Mot. at 35–36 (quoting Mobil Oil Exploration & Producing, S.E., Inc. v. United Distrib. Cos., 498 U.S. 211, 231 (1991)). But that argument overlooks how the agency actually framed its request for сomments in the proposed Rule. The “agency asked for comments not only on whether to regulate premium cigars at all but whether the various types of regulation set forth in the Proposed Deeming Rule were appropriate for particular products.” Cigar Ass’n of Am. v. FDA (“Cigar II”), 436 F. Supp. 3d 70, 89 (D.D.C. 2020). By inviting comments on whether it should develop “a different regulatory scheme for” premium cigars, 79 Fed. Reg. at 23,150, what “actions or regulatory approaches . . . should be taken for” newly deemed products, id. at 23,174, and whether the agency should “consider a different compliance policy for proposed deemed tobacco products that cannot, as a practical matter, use the [substantial equivalence] pathway,” id. at 23,176, the FDA placed these issues on the table. It was therefore “incumbent upon the agency” to address relevant, substantial comments to this effect. See Cigar II, 436 F. Supp. 3d at 89.
Finally, the FDA argues that this issue is prudentially unripe for adjudication in light of the agency’s recently filed, pending request before the AAP court to issue guidance that would, on a case-by-case basis, allow premium cigar manufacturers to receive enforcement deferrals from the premarket authorization requirements. See Tr. of 8/10/2020 Hr’g., ECF No. 213, at 5. The court disagrees. An agency cannot “stave off judicial review of a challenged rule simply by initiating a
C. The Remedy
Having concluded that the agency arbitrarily failed to consider a streamlined substantial equivalence process for premium cigars, the court must now consider the scope of the remedy. That question turns on the definition of premium cigars. As noted, the Proposed Deeming Rule suggested a definition of premium cigars, see 79 Fed. Reg. at 23,150, but the FDA did not settle on a definition in the Final Deeming Rule because it decided to regulate all cigars under Option 1, see 81 Fed. Reg. at 29,020. Plaintiffs Premium Cigar Association and Cigar Rights of America urge the court to define “premium cigars” as they are defined in the Proposed Deeming Rule, but to omit the $10 retail price element, Pls.’ Mot. at 37 (citing 79 Fed. Reg. at 23,150). Plaintiff Cigar Association of America, on the other hand, opposes that definition, contending that “the approрriate remedy is to set aside the Final Deeming Rule as it applies to all cigars, so that FDA may decide in the first instance what qualifies as a ‘premium cigar.’” Id. at 38 n.12.; see also id.
Contrary to the Cigar Association of America’s contention, however, the FDA has already addressed what qualifies as a “premium cigar,” at least for purposes of this case. In its August 2020 Notice, the FDA defined a premium cigar as:
a cigar that: (1) is wrapped in whole tobacco leaf; (2) contains a 100 percent leaf tobacco binder; (3) contains at least 50 percent (of the filler by weight) long filler tobacco (i.e., whole tobacco leaves that run the length of the cigar); (4) is handmade or hand rolled (i.e., no machinery was used apart from simple tools, such as scissors to cut the tobacco prior to rolling); (5) has no filter, nontobacco tip, or nontobacco mouthpiece; (6) does not have a characterizing flavor other than tobacco; (7) contains only tobacco, water, and vegetable gum with no other ingredients or additives; and (8) weighs more than 6 pounds per 1,000 units.”
August 2020 Notice at PDF p. 3, n.2. This definition, which omits the $10 retail price component in the Proposed Deeming Rule, is similar to the definition that commenters urged the FDA to adopt during the rulemaking for the Final Deeming Rule. See, e.g., Cmt. of Cigar Ass’n of Am., JA Vol. III at AR130346–48. Thus, the court need not “devise” a definition of premium cigars out of whole cloth. Cf. Pls.’ Mot. at 38 n.12 (quoting County of Los Angeles v. Shalala, 192 F.3d 1005, 1011–12 (D.C. Cir. 1999)).
Accordingly, the court remands the Final Deeming Rule for the limited purpose of considering whether a streamlined substantial equivalence process is appropriate for premium cigars. The court further finds that additional equitable relief is warranted and necessary to grant Plaintiffs a complete remedy. See Ind. & Mich. Elec. Co. v. Fed. Power Comm’n, 502 F.2d 336, 346 (D.C. Cir. 1974) (“A court sitting in review of an administrative agency . . . may adjust its relief to the exigencies of the case in accordance with the equitable principles governing judicial action.”); 3 CHARLES H. KOCH, JR. & RICHARD MURPHY, ADMIN. L. & PRAC. § 8:31 (3d ed. 2020) (“[I]njunctive relief under the APA is controlled by principles of equity.”); see also Role Models Am., Inc. v. White, 317 F.3d 327, 333–34 (D.C. Cir. 2003) (directing the district court to enter a “permanent injunction . . . until the Government remedies the procedural errors” outlined in the court’s opinion). The court therefore enjoins the FDA from enforcing the premarket review requirement against premium cigars, as that term is defined in the August 2020 Notice, until the agency’s review is complete.14 The FDA will retain discretion to specify the amount of time premium cigar manufacturers will have to file substantial equivalence reports after the agency completes its review.
The court is mindful that the relief afforded here is in tension with the relief afforded by the court in AAP, but ultimately this court sees no conflict because the AAP court did not have before it the specific issues presented here, nor does anything in its order foreclose another court from remedying errors made by the FDA in promulgating the Final Deeming Rule.
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 FDA’s refusal to adjust the 2007 grandfather date for cigars and pipe tobacco products (Count I) was not arbitrary or capricious;
- Plaintiffs have not shown that the 2016 Effective Date was premised on legal error (Count XIII);
- The FDA’s imminent enforcement of the substantial equivalence process against cigars and pipe tobacco without finalizing implementing rules (Count XI) does not render the Final Deeming Rule arbitrary, capricious, or contrary to law;
The FDA’s cost-benefit analysis (Count XV) was reasonable and reasonably explained to the extent it is reviewable; and - The FDA arbitrarily failed to address commenters’ suggestions that the FDA create a streamlined substantial equivalence process for premium cigars (Count XIV).
The court therefore remands the Final Deeming Rule to the FDA to consider developing a streamlined substantial equivalence process for premium cigars. The court further enjoins the FDA from enforcing the premarket review requirements against premium cigars, as those products are defined in the August 2020 Notice, until the agency has completed its review. No later than August 31, 2020, the parties shall submit a Joint Status Report proposing a schedule for further proceedings in this matter, if necessary.
Dated: August 19, 2020
Amit P. Mehta
United States District Judge