WAGES AND WHITE LION INVESTMENTS, L.L.C., doing business as TRITON DISTRIBUTION v. UNITED STATES FOOD AND DRUG ADMINISTRATION
No. 21-60766
United States Court of Appeals for the Fifth Circuit
October 26, 2021
Before ELROD, OLDHAM, and WILSON, Circuit Judges. Andrew S. Oldham, Circuit Judge.
Petition for Review of an Order of the Food and Drug Administration
The Food and Drug Administration denied Triton‘s application to market flavored e-cigarettes. Triton moved for a stay pending disposition of its petition for review. We grant the stay.
I.
A.
In 2009, Congress enacted the
This created a serious and obvious problem because, by the time the FDA got around to issuing the Deeming Rule, manufacturers were widely marketing e-cigarettes throughout the United States. To avoid an overnight shutdown of the entire e-cigarette industry, the FDA delayed enforcement of the Deeming Rule. Then the FDA forced e-cigarette makers to meet a series of requirements and staggered deadlines to keep their products on the market.
As relevant here, the FDA required e-cigarette manufacturers to submit premarket tobacco applications (“PMTAs“). The PMTA process is “onerous,” to put it mildly. See Big Time Vapes, 963 F.3d at 439 (“The PMTA process is onerous, requiring manufacturers to gather significant amounts of information.“). A manufacturer must submit to the FDA information on the product‘s health risks, ingredients, and manufacturing process. The manufacturer also must include samples of the product and its proposed labeling.
In the months and years following the Deeming Rule, the FDA moved its regulatory goalposts in at least two important ways. First, it moved the
B.
Wages and White Lion Investments, LLC, doing business as Triton Distribution (“Triton“), is a Texas-based manufacturer of e-cigarettes. Some of its e-cigarette products have been on the market since August 4, 2016—before the Deeming Rule‘s effective date. Triton submitted a timely PMTA for certain flavored e-cigarettes. So did many other e-cigarette manufacturers.
On August 26, 2021, the FDA announced that it would deny the PMTAs for 55,000 flavored e-cigarettes. In its press release, the FDA explained that it would do so because it “likely” needed evidence from long-term studies to grant a PMTA for flavored e-cigarettes. Less than a week after the FDA changed its regulatory requirements, Triton submitted a letter stating that it intended to conduct long-term studies of its products.
About two weeks later, on September 14, the FDA issued a marketing denial order (“Order“) to Triton. See
Triton then petitioned for review and moved to stay the Order pending that review.1 We granted a temporary administrative stay to prevent the FDA from shutting down Triton‘s business. Now we enter a full stay pending disposition of Triton‘s petition.
II.
For a stay pending review, we must consider four factors: (1) whether the requester makes a strong showing that it‘s likely to succeed on the merits; (2) whether the requester will be irreparably injured without a stay; (3) whether other interested parties will be irreparably injured by a stay; and (4) where the public interest lies. Nken v. Holder, 556 U.S. 418, 426 (2009). “The first two factors are the most critical.” Valentine v. Collier, 956 F.3d 797, 801 (5th Cir. 2020) (per curiam). “‘The party seeking the stay bears the burden of showing its need.‘” Tex. League of United Latin Am. Citizens v. Hughs, 978 F.3d 136, 143 (5th Cir. 2020) (quoting Clinton v. Jones, 520 U.S. 681, 708 (1997)); see also Nken, 556 U.S. at 433-34 (“The party requesting a stay bears the burden of showing that the circumstances justify an exercise of that discretion.“). Triton has met its burden: The first three factors support a stay, while the fourth is at worst neutral.
First, likelihood of success. The Administrative Procedure Act (“APA“) directs courts to “hold unlawful and set aside agency action[s]” that are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”
In reviewing an agency‘s action, we may consider only the reasoning “articulated by the agency itself“; we cannot consider post hoc rationalizations. State Farm, 463 U.S. at 50; see also DHS v. Regents of the Univ. of Cal., 140 S. Ct. 1891, 1909 (2020) (“An agency must defend its actions based on the reasons it gave when it acted.“). Our review is “not toothless.” Sw. Elec. Power Co. v. EPA, 920 F.3d 999, 1013 (5th Cir. 2019). In fact, after Regents, it has serious bite. See 140 S. Ct. at 1907–15; see also, e.g., Texas v. Biden, 10 F.4th 538, 552–57 (5th Cir. 2021) (per curiam); Biden v. Texas, No. 21A21, 2021 WL 3732667, at *1 (U.S. Aug. 24, 2021).
1.
The FDA failed to reasonably consider Triton‘s proposed marketing plan. The FDA repeatedly stated that a marketing plan is “a critical factor in[] FDA‘s statutorily required determination.” Premarket Tobacco Product Applications and Recordkeeping Requirements, 86 Fed. Reg. 55,300, 55,324 (Oct. 5, 2021) (“Final Rule“); see also 84 Fed. Reg. 50,566, 50,581 (Sept. 25, 2019) (“Proposed Rule“) (“The applicant‘s marketing plans . . . will provide input that is critical to FDA‘s determination of the likelihood of changes in tobacco product use behavior, especially when considered in conjunction with other information contained in the application.” (emphasis added)); A.45 n.xix (“Limiting youth access and exposure to marketing is a critical aspect of product regulation.” (emphasis added)); A.45 (Premarket “assessment includes evaluating the appropriateness of the proposed marketing plan.“). Here, however, the FDA simply ignored Triton‘s plan. It stated: “[F]or the sake of efficiency, the evaluation of the marketing plan in applications will not occur at this stage of review, and we have not evaluated any marketing plans submitted with these applications.” A.45 n.xix.
Second, the FDA claimed that its purported expertise and experience showed that no marketing plan would be sufficient, so it stopped looking:
It is theoretically possible that significant mitigation efforts could adequately reduce youth access and appeal such that the risk for youth initiation would be reduced. However, to date, none of the ENDS PMTAs that FDA has evaluated have proposed advertising and promotion restrictions that would decrease appeal to youth to a degree significant enough to address and counter-balance the substantial concerns, and supporting evidence, discussed above regarding youth use. Similarly, we are not aware of access restrictions that, to date, have been successful in sufficiently decreasing the ability of youth to obtain and use ENDS.
A.45 n.xix. This statement is insufficient. For one thing, it‘s unreasonable for the FDA to stop looking at proposed plans because past ones have been unpersuasive. That‘s like an Article III judge saying that she stopped reading briefs because she previously found them unhelpful.
For another, reliance on expertise and experience, like efficiency, is no substitute for “reasoned decisionmaking.” Michigan, 576 U.S. at 750. Of course, “[a]gencies . . . have expertise and experience in administering their statutes that no court can properly ignore.” Judulang, 565 U.S. at 53. But here that hurts, not helps, the FDA. That‘s because experience and expertise bring responsibility:
[A]n agency‘s “experience and expertise” presumably enable the agency to provide the required explanation, but they do not substitute for the explanation, any more than an expert witness‘s credentials substitute for the substantive requirements applicable to the expert‘s testimony under [Federal Rule of Evidence] 702. The requirement of explanation presumes the expertise and experience of the agency and still demands an adequate explanation in the particular matter.
CS Wind Viet. Co., Ltd. v. United States, 832 F.3d 1367, 1377 (Fed. Cir. 2016) (citations omitted).
The FDA did not meet its obligation. Its statement on marketing plans is conclusory, unsupported, and thus wholly insufficient. See, e.g., United Techs. Corp. v. U.S. Dep‘t of Def., 601 F.3d 557, 562 (D.C. Cir. 2010) (“We do not defer to the agency‘s conclusory or unsupported suppositions.” (quotation omitted)); Texas v. Biden, 10 F.4th at 556 (collecting cases).2 This “omission alone [likely] renders [the FDA‘s] decision arbitrary and capricious.” Regents, 140 S. Ct. at 1913.
2.
The FDA also failed to reasonably consider Triton‘s legitimate reliance interests. Between the Deeming Rule‘s effective date and the deadline for PMTAs, the FDA held public meetings and issued guidance on
Then the FDA “pull[ed] a surprise switcheroo on regulated entities.” Env‘t Integrity Project v. EPA, 425 F.3d 992, 996 (D.C. Cir. 2005) (Sentelle, J.); accord Azar v. Allina Health Servs., 139 S. Ct. 1804, 1810 (2019) (citing the “surprise switcheroo” doctrine). Almost a year after the PMTA deadline, the FDA issued its first marketing denial orders for various flavored e-cigarettes and announced that it required the very studies it originally expected it didn‘t need. See Press Release, FDA Denies Marketing Applications for About 55,000 Flavored E-Cigarette Products for Failing to Provide Evidence They Appropriately Protect Public Health (Aug. 26, 2021). It explained: “[T]he evidence of benefits to adult smokers for such products would likely be in the form of a randomized controlled trial or longitudinal cohort study, although the agency does not foreclose the possibility that other types of evidence could be adequate if sufficiently robust and reliable” and
The law requires more. “When an agency changes course, . . . it must be cognizant that longstanding policies may have engendered serious reliance interests that must be taken into account.” Regents, 140 S. Ct. at 1913 (quotation omitted). This does not mean that the FDA could not have “determine[d], in the particular context before it, that other interests and policy concerns outweigh any reliance interests. Making that difficult decision was the agency‘s job, but the agency failed to do it.” Id. at 1914. This reinforces that the Order was likely arbitrary, capricious, or otherwise unlawful.
3.
The FDA insufficiently addressed alternatives to issuing the Order as well. “[W]hen an agency rescinds [or alters] a prior policy[,] its reasoned analysis must consider the alternatives that are within the ambit of the existing policy.” Regents, 140 S. Ct. at 1913 (emphasis added) (quotation omitted). While considering less disruptive alternatives, the FDA “was required to assess whether there were reliance interests, determine whether they were significant, and weigh any such interests against competing policy concerns.” Id. at 1915. The FDA did not consider alternatives when changing from its no-long-term-studies-necessary policy to its apparent long-term-studies-required policy.
And even if the FDA did, it failed to adequately assess reliance interests. “So it would be impossible for the [Order] to properly weigh the
4.
The FDA also failed to adequately address Triton‘s contention that its reusable e-cigarette will reduce youth popularity compared to disposable e-cigarettes. In January 2020 guidance, the FDA found that “youth overwhelmingly prefer [disposable] ENDS products” because they “are easy to conceal” and “can be used discreetly.” Enforcement Priorities for Electronic Nicotine Delivery Systems and Other Deemed Products on the Market Without Premarket Authorization; Guidance for Industry; Availability, 85 Fed. Reg. 720, 722 (Jan. 7, 2020). By contrast, the FDA found in the Order that the type of system didn‘t matter. Specifically, the FDA found that “preference for device types and popularity of certain styles is likely fluid and affected by the marketplace” and “that the removal of one flavored product option prompted youth to migrate to another ENDS type that offered the desired flavor option, underscoring the fundamental role of flavor in driving appeal.” A.42.
Because its “new policy rest[ed] upon factual findings that contradict those which underlay its prior policy,” the FDA had to provide “a more detailed justification.” FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009). The FDA initially said that disposable e-cigarettes pose risks to youths. When Triton said that concern doesn‘t apply to its reusable e-cigarettes, the FDA turned around and ignored its prior disposable-reusable distinction. The FDA failed to adequately explain this change. This further reinforces that the Order is likely arbitrary, capricious, or otherwise unlawful.
5.
In announcing its rule that the manufacturer must provide long-term studies to get approval for flavored e-cigarettes, the FDA resorted entirely to
The FDA responded to much of Triton‘s evidence for the first time before our court. But “[i]t is a fundamental precept of administrative law that an administrative agency cannot make its decision first and explain it later.” Texas v. Biden, 10 F.4th at 558–59; see also Sherley v. Sebelius, 689 F.3d 776, 784 (D.C. Cir. 2012) (Sentelle, C.J.) (“The failure to respond to comments is significant only insofar as it demonstrates that the agency‘s decision was not based on a consideration of the relevant factors.” (quotation omitted)); Circus Circus Casinos, Inc. v. NLRB, 961 F.3d 469, 476 (D.C. Cir. 2020) (“New rules set through adjudication must meet the same standard of reasonableness as notice and comment rulemaking.” (citing Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359, 374 (1998))).
For example, Triton urged the FDA to consider a 2015 survey of 20,000 e-cigarette users showing that nearly a third of the respondents “started out using tobacco or menthol flavors” and then began using other flavored e-cigarettes. A.296. Similarly, Triton asserted that flavored e-cigarettes “could serve an important role in transitioning existing adult users away from more harmful, combustible cigarette products.” Ibid. But in the Order, the FDA ignored the first point altogether and gave the second short shrift. The FDA cannot cure those deficiencies by offering post hoc rationalizations before our court. The very fact that the FDA perceived the need to rehabilitate its Order with new and different arguments before our
6.
The FDA makes four other counterarguments. They fail.
First, the FDA argues that its consistency “in reviewing other manufacturers’ similar applications to market flavored e-cigarette products is a hallmark of good government, not a reason to fault the agency.” Opp. at 23 (citation omitted). Consistency is great—but only when the agency is consistently following the law. As the Supreme Court has made clear: “Arbitrary agency action becomes no less so by simple dint of repetition.” Judulang, 565 U.S. at 61; see also id. (“[L]ongstanding capriciousness receives no special exemption from the APA.“).
Second, the FDA insists that the reasoning in the Order is consistent with its prior guidance. According to the FDA, it didn‘t make a rule requiring long-term studies because it left open that “other types of evidence could be adequate[] and will be evaluated on a case-by-case basis.” A.37.
But the administrative record makes clear that the FDA now requires direct evidence through studies performed “over time” for flavored e-cigarettes. A.46; see also, e.g., A.37 n.vi; A.47 n.xxiii. And it‘s clear the FDA expressly rejected reliance on evidence it approved of in its pre-Order guidance, such as observational and consumer-perception studies. Compare A.46-47, with A.99. The FDA did not have to completely flip flop for there to be a change in position. Cf. Sw. Airlines Co. v. Fed. Energy Regul. Comm‘n, 926 F.3d 851, 856 (D.C. Cir. 2019) (“A full and rational explanation becomes especially important when, as here, an agency elects to shift its policy or depart from its typical manner of administering a program.” (quotation omitted)). It is enough that the FDA‘s guidance indicated long-term studies
Plus, if we accepted the FDA‘s current position that it did not acknowledge a change in policy in the Order, then the Order would obviously be arbitrary and capricious. That‘s because “[w]hen an agency changes its existing position, it . . . must at least display awareness that it is changing position and show that there are good reasons for the new policy.” Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2125–26 (2016) (quotation omitted); see also id. at 2126 (explaining that an “unexplained inconsistency in agency policy is a reason for holding an [action] to be an arbitrary and capricious change from agency practice” (quotation omitted)); Fox, 556 U.S. at 515 (“[T]he requirement that an agency provide reasoned explanation for its action would ordinarily demand that it display awareness that it is changing position. An agency may not . . . depart from a prior policy sub silentio.“). It would be impossible for the FDA to display awareness that it was changing position if it believed it wasn‘t.
Third, the FDA argues that Triton should not have relied on the agency‘s pre-Order guidance. This is because, the FDA claims,
Fourth and last, the FDA argues that Triton‘s reliance interests shouldn‘t matter because Triton has been breaking the law and the FDA‘s non-enforcement was entirely discretionary. Regents squarely forecloses this argument. There, the Department of Homeland Security (“DHS“) tried to rescind the Deferred Action for Childhood Arrivals (“DACA“) program because of “the Attorney General‘s conclusion that DACA was unlawful.” Regents, 140 S. Ct. at 1910. The United States argued that justified ignoring potential reliance interests. Id. at 1913–14. The Supreme Court rejected that argument. Ibid. The Court instead required reasonable consideration of the relevant issues and the “important aspects of the problem.” Id. at 1910 (quotation omitted). That was because, the Court explained, “deciding how best to address a finding of illegality moving forward can involve important policy choices.” Ibid. The same is true here. The FDA was free to make that policy choice, but it had to address Triton‘s reliance interests in a reasonable and reasonably explained decision.
For these reasons, Triton has shown a likelihood of success based on its APA challenge. So this critical factor favors granting a stay. We therefore need not address Triton‘s argument that the FDA violated the Due Process
B.
Next, irreparable injury. Triton alleges that because of the Order, it “has stopped production of all of its flavored ENDS products, representing 90 percent of its annual revenue, thereby requiring the company to make plans to lay off its employees within approximately two weeks and threatening the company‘s very existence.” Stay Mot. at 21; see also A.15–16 (Declaration of Triton‘s General Manager). The FDA does not contest that allegation.
Triton‘s alleged injury is irreparable for two independent reasons. First, we‘ve explained that “substantial financial injury” may be “sufficient to show irreparable injury.” Texas v. EPA, 829 F.3d 405, 433 (5th Cir. 2016). Triton‘s alleged financial injury “threatens the very existence of [its] business.” Id. at 434. Even assuming the financial costs are recoverable, this suffices to show irreparable injury. See id. at 434 n.41 (“Even recoverable costs may constitute irreparable harm where the loss threatens the very existence of the movant‘s business.” (quotation omitted)).
Second, the costs are likely unrecoverable. “Indeed, complying with [an agency order] later held invalid almost always produces the irreparable harm of nonrecoverable compliance costs.” Id. at 433 (quotation omitted). The FDA does not contend that Triton has an avenue to recover costs from complying with the Order. That‘s probably because federal agencies generally enjoy sovereign immunity for any monetary damages. See, e.g., Alabama-Coushatta Tribe of Texas v. United States, 757 F.3d 484, 488 (5th Cir. 2014); Louisiana v. United States, 948 F.3d 317, 320 (5th Cir. 2020); Muniz-Muniz v. U.S. Border Patrol, 741 F.3d 668, 671 (6th Cir. 2013) (“Sovereign immunity extends to agencies of the United States.” (quotation omitted)).
The FDA makes no developed argument contesting irreparable harm. See Opp. at 11, 13 (mentioning “irreparable injury” in passing). So such arguments are forfeited. See, e.g., DeVoss v. Sw. Airlines Co., 903 F.3d 487, 490 n.1 (5th Cir. 2018) (concluding that an argument was “forfeited” because it wasn‘t “structured“); Texas v. EPA, 829 F.3d at 435 (“Because EPA offers nothing beyond this cursory comment, it has waived any argument about the scope of the stay.“).
In these circumstances, given Triton‘s uncontested allegations of injury and the FDA‘s failure to make a developed argument challenging this factor, we conclude that Triton has met its burden of showing irreparable harm. Thus, the two most critical factors favor granting a stay.
C.
Now, the balance of harms and public interest.
The balance of the harms favors a stay. We‘ve explained that “the maintenance of the status quo is an important consideration in granting a stay.” Barber v. Bryant, 833 F.3d 510, 511 (5th Cir. 2016) (quotation omitted). And staying the Order will preserve the status quo ante. Cf. Turning Point Brands, Inc. v. FDA, No. 21-3855, ECF No. 19 at 9–10 (6th Cir. Oct. 8, 2021) (FDA letter rescinding a marketing denial order and stating the “FDA has no intention of initiating an enforcement action against any of your tobacco products identified in” the relevant PMTA). “Given the great likelihood that [Triton] will ultimately succeed on the merits, combined with the undeniable, irreparable harm that [the Order] would inflict on” Triton and the FDA‘s failure to make a developed argument on this factor, we conclude,
The public-interest factor is at worst neutral. The “public interest is in having governmental agencies abide by the federal laws that govern their existence and operations.” Texas v. Biden, 10 F.4th at 559 (quotation omitted). “And ‘there is generally no public interest in the perpetuation of unlawful agency action.‘” Id. at 560 (alteration omitted) (quoting League of Women Voters of U.S. v. Newby, 838 F.3d 1, 12 (D.C. Cir. 2016)). Although the FDA fails to argue this factor, amici curiae do. They argue that the public interest cuts against a stay because continued sale of flavored e-cigarettes will endanger the youth much more than it might help adults. “But our system does not permit agencies to act unlawfully even in pursuit of desirable ends.” Alabama Ass‘n of Realtors, 141 S. Ct. at 2490. So we conclude that this factor is at best neutral, or, in all events, outweighed by the three other factors favoring a stay.
III.
Finally, the FDA argues that Triton requests relief we cannot give. We have no authority, says the FDA, to permit Triton to continue marketing and selling the products denied in the Order. But again, the APA says otherwise. Under
The immigration context is instructive. Consider an alien that is unlawfully present in the United States. Suppose the Government attempts to remove the alien. Then the alien argues that he should not be removed because he deserves asylum, and he asks us to stay the removal pending our
Triton‘s request is not materially different. It merely seeks to preserve the status quo ante, before the FDA issued the Order. In other words, “the relief sought here would simply suspend administrative alteration of the status quo.” Nken, 556 U.S. at 430 n.1. So we reject the FDA‘s argument that we lack authority to grant a stay that provides interim relief.
*
*
*
Three factors—including the two most critical—favor granting a stay, while one factor is at worst neutral. Triton has thus met its burden. Contrary to the FDA‘s suggestion, we have the authority to give Triton relief pending review. For the foregoing reasons, Triton‘s motion for a stay pending review of its petition is GRANTED.