Wages & White Lion Invs., L.L.C. v. U.S. Food & Drug Admin.

Decision Date26 October 2021
Docket NumberNo. 21-60766,21-60766
Parties WAGES AND WHITE LION INVESTMENTS, L.L.C., doing business as Triton Distribution, Petitioner, v. UNITED STATES FOOD AND DRUG ADMINISTRATION, Respondent.
CourtU.S. Court of Appeals — Fifth Circuit

Eric Heyer, Thompson Hine, L.L.P., Washington, DC, Anthony J. Hornbach, Esq., Thompson Hine, L.L.P., Cincinnati, OH, for Petitioner.

Lindsey E. Powell, Esq., U.S. Department of Justice, Washington, DC, Noah T. Katzen, Hilary Keith Perkins, Esq., U.S. Department of Justice, Civil Division, Washington, DC, Alisa Beth Klein, Esq., U.S. Department of Justice, Civil Division, Appellate Section, Washington, DC, Mark Raza, Chief Counsel, Wendy S. Vicente, U.S. Food and Drug Administration, Food and Drug Division, OGC, Silver Spring, MD, for Respondent.

Leane K. Capps, Esq., Polsinelli, P.C., Dallas, TX, for Amici Curiae American Academy of Pediatrics, American Cancer Society Cancer Action Network, American Heart Association, American Lung Association, Campaign for Tobacco-Free Kids, Parents Against Vaping e-cigarettes, Truth Initiative Foundation, doing business as Truth Initiative.

Before Elrod, Oldham, and Wilson, Circuit Judges.

Andrew S. Oldham, Circuit Judge:

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 Family Smoking Prevention and Tobacco Control Act ("TCA") to regulate tobacco products. Pub. L. No. 111-31, 123 Stat. 1776 (2009). The TCA authorizes the Secretary of Health and Human Services to implement the Act through the Food and Drug Administration ("FDA"). See 21 U.S.C. §§ 387a(b), 393(d)(2). The TCA prohibits manufacturers from selling any "new tobacco product" without authorization. See id. § 387j(a). In 2016, the FDA deemed electronic nicotine delivery systems ("ENDS")—colloquially called "electronic cigarettes" or "e-cigarettes"—a "new tobacco product." 81 Fed. Reg. 28,973 (May 10, 2016) ("Deeming Rule"); see also Big Time Vapes, Inc. v. FDA , 963 F.3d 436, 443 (5th Cir. 2020) ("In the TCA, Congress delegated to the Secretary the power to ‘deem’ which tobacco products should be subject to the Act's mandates."). Thus, the TCA and the Deeming Rule generally prohibited the marketing of e-cigarettes.

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. 21 U.S.C. § 387j(b)(c).

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 PMTA deadline.

Originally, the FDA demanded that all PMTAs must be filed within 24 months of the Deeming Rule—i.e. , by 2018. The FDA later purported to extend the PMTA deadline to 2022. But then, in response to litigation from anti-smoking groups, the FDA moved the deadline up to September 9, 2020. Second, and crucial to this case, the FDA changed the regulatory requirements for PMTAs. Initially, the FDA's guidance stated that "in general, FDA does not expect that applicants will need to conduct long-term studies to support an application." A.74; see also A.92 (same). As Triton's case illustrates, however, the FDA later changed its mind and required the very thing it said it would not—namely, long-term studies of e-cigarettes.

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 21 U.S.C. § 387j(c)(2). The FDA acknowledged that it did not consider Triton's letter in its determination because the FDA "received [the letter] near the completion of scientific review." A.14–15. The "key basis" for the denial, wrote the FDA, was that Triton's PMTA lacked "robust and reliable evidence" from long-term studies, such as a "randomized controlled trial," a "longitudinal cohort study," or "other evidence ... evaluat[ing] the impact of the new flavored vs. Tobacco-flavored products on adult smokers’ switching or cigarette reduction over time." A.49.

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, 129 S.Ct. 1749, 173 L.Ed.2d 550 (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, 117 S.Ct. 1636, 137 L.Ed.2d 945 (1997) ); see also Nken , 556 U.S. at 433–34, 129 S.Ct. 1749 ("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.

A.

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." 5 U.S.C. § 706(2). "The APA's arbitrary-and-capricious standard requires that agency action be reasonable and reasonably explained." FCC v. Prometheus Radio Project , ––– U.S. ––––, 141 S. Ct. 1150, 1158, 209 L.Ed.2d 287 (2021). We must not "substitute" our "own policy judgment for that of the agency." Ibid. Still, we must ensure that "the agency has acted within a zone of reasonableness and, in particular, has reasonably considered the relevant issues and reasonably explained the decision." Ibid. ; see also Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co. , 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983) ("[T]he agency must examine the relevant data and articulate a satisfactory explanation for its action including a ‘rational connection between the facts found and the choice made.’ " (quoting Burlington Truck Lines v. United States , 371 U.S. 156, 168, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962) )). "Put simply, we must set aside any action premised on reasoning that fails to account for ‘relevant factors’ or evinces ‘a clear error of judgment.’ " Univ. of Tex. M.D. Anderson Cancer Ctr. v. HHS , 985 F.3d 472, 475 (5th Cir. 2021) (quoting Marsh v. Or. Nat. Res. Council , 490 U.S. 360, 378, 109 S.Ct. 1851, 104 L.Ed.2d 377 (1989) ).

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, 103 S.Ct. 2856 ; see also DHS v. Regents of the Univ. of Cal. , ––– U.S. ––––, 140 S. Ct. 1891, 1909, 207 L.Ed.2d 353 (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, ––– U.S. ––––, ––––, ––– S.Ct. ––––, ––– L.Ed.2d ––––, 2021 WL 3732667, at *1 (U.S. Aug. 24, 2021).

Triton has shown a strong likelihood of success on the merits. That's because the FDA failed to "reasonably consider[ ] the relevant issues and reasonably explain[ ]" the Order. Prometheus , 141 S. Ct. at 1158 ; see also Michigan v. EPA , 576 U.S. 743, 750, 752, 135 S.Ct. 2699, 192 L.Ed.2d 674 (2015) ("[A]gency action is lawful only if it rests on a consideration of the relevant factors" and "important aspect[s] of the problem." (quotation omitted)). The relevant factors the FDA inadequately addressed or explained include: (1) Triton's marketing plan; (2) Triton's reliance interests; (3) less disruptive alternatives; (4) device-type preferences; and (5) evidence on the potential benefits of flavored e-cigarettes....

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