Cigar Ass'n of Am. v. U.S. Food & Drug Admin., Case No. 1:16-cv-01460 (APM)

• Decision Date: 03 February 2020
• Docket Number: Case No. 1:18-cv-01797 (APM),Case No. 1:16-cv-01460 (APM)
• Citation: 436 F.Supp.3d 70
• Parties: CIGAR ASSOCIATION OF AMERICA, et al., Plaintiffs, v. U.S. FOOD AND DRUG ADMINISTRATION, et al., Defendants. En Fuego Tobacco Shop LLC, et al., Plaintiffs, v. U.S. Food and Drug Administration, et al., Defendants.
• Court: U.S. District Court — District of Columbia

436 F.Supp.3d 70

CIGAR ASSOCIATION OF AMERICA, et al., Plaintiffs,

v.U.S. FOOD AND DRUG ADMINISTRATION, et al., Defendants.

En Fuego Tobacco Shop LLC, et al., Plaintiffs,

v.U.S. Food and Drug Administration, et al., Defendants.

Case No. 1:16-cv-01460 (APM)

Case No. 1:18-cv-01797 (APM)

United States District Court, District of Columbia.

Signed February 3, 2020

Mark S. Raffman, Andrew Kim, Mark A. Heller, Goodwin Procter, LLP, Washington, DC, for Plaintiffs Cigar Association of America and Cigar Rights of America.

Ryan E. Meltzer, Pro Hac Vice, Norton Rose Fulbright US LLP, Austin, TX, for Plaintiff Cigar Rights of America. Michael James Edney, Steptoe & Johnson LLP, Washington, DC, for Plaintiffs Cigar Association of America, Cigar Rights of America and Premium Cigar Association.

Stuart Justin Robinson, U.S. Department of Justice, San Francisco, CA, for Defendants United States Food and Drug Administration and United States Department of Health and Human Services.

Eric B. Beckenhauer, Garrett Joseph Coyle, U.S. Department of Justice, Washington, DC, for Defendants United States Food and Drug Administration, United States Department of Health and Human Services, Alex M. Azar, II and Norman E. Sharpless.

MEMORANDUM OPINION

Amit P. Mehta, United States District Court Judge

I. INTRODUCTION

On April 25, 2014, the U.S. Food and Drug Administration ("FDA") issued a proposed rule announcing its intent to "deem" cigars and certain other tobacco products subject to the federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301 et seq. , as amended by the Family Smoking Prevention and Tobacco Control Act of 2009 ("TCA"). To "deem" a tobacco product meant that the FDA would subject that product to a host of new regulatory requirements comparable to the statutory and regulatory requirements already imposed under the TCA against cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco. Among the new proposed requirements for newly deemed products was a health-warnings labeling regime for packaging and advertisements. With respect to cigar products, the proposed rule put forward two alternatives. Under "Option 1," the FDA would make all categories of cigar products subject to the TCA; under "Option 2," the FDA would regulate "only a subset of cigars," excluding "premium cigars" from the scope of the Rule. Generally speaking, "premium cigars" are hand-rolled, made with a higher-grade tobacco, and are more expensive. FDA's selection of Option 2 would mean that premium cigars would be excluded from the warnings label requirement.

Industry groups representing premium cigar retailers and manufacturers submitted comments expressing concerns about the proposed rule. These commenters objected to the regulation of premium cigars and asserted, among other things, that premium cigars do not pose the same public health concerns as mass-market cigars and other tobacco products because premium cigar consumers are only occasional users of the product and use the product differently. The public health effects of this difference in use, the commenters argued, are borne out by studies showing that premium cigar users have far lower disease and mortality rates than consumers of cigarettes and other tobacco products. And because of these differences in use, the commenters maintained, the same health warnings regime proposed for mass-market cigars and other tobacco products was not warranted for premium cigars.

The FDA rejected these arguments, concluding in its final rule that no evidence put forward during the notice-and-comment period supported exempting premium cigars from regulation. Accordingly, the FDA's final rule, known as the "Deeming Rule," selected Option 1: "deeming" all cigars, including premium cigars, to be subject to the TCA, and imposing health warnings requirements on all cigar products.

Plaintiffs in this case—a premium cigar retailer, a premium cigar manufacturer, and a non-profit association that represents premium cigar retailers and manufacturers—brought this action in January 2018 against the FDA and its Commissioner, and the U.S. Department of Health and Human Services ("HHS") and its Secretary (collectively, "Defendants"), challenging the Deeming Rule's warnings label regime for premium cigars on three primary bases: (1) the warnings label regime infringes on Plaintiffs' First Amendment rights; (2) the FDA imposed the new warnings label regime in violation of the Administrative Procedure Act ("APA"); and (3) the promulgation of the Deeming Rule violated the Appointments Clause.

For the reasons set forth below, the court finds that the FDA's subjecting of premium cigars to warnings requirements to be arbitrary and capricious in violation of the APA, insofar as the agency failed to provide a reasoned explanation for this action. The court thus declares unlawful and vacates that portion of the Deeming Rule that mandates premium cigars display designated public health warnings on packaging and advertisements. The court does not reach Plaintiffs' First Amendment and Appointments Clause challenges.

II. BACKGROUND

A. Statutory and Regulatory Background

The court starts with a brief overview of the relevant statutory and regulatory backdrop for this case.

In 2009, Congress enacted the TCA to empower the FDA to regulate and set national standards regarding the manufacturing, marketing, and distribution of tobacco products. Family Smoking Prevention and Tobacco Control Act, Pub. L. No. 111-31, § 3, 123 Stat. 1776, 1781–82 (2009). Congress acknowledged the "inherent[ ] dangerous[ness]" of tobacco products and nicotine and the strong public interest in regulating tobacco products and their advertising and promotion. Id. § 2. Congress also expressed its interest in reducing youth tobacco use, particularly in light of judicial findings that major U.S. tobacco companies specifically targeted and marketed their products to youth. Id. § 2(15). Congress further recognized that no other federal agency except the FDA "possesses the scientific expertise needed to implement effectively all provisions of the [TCA]." Id. § 2(45).

In light of these findings, the TCA authorized the Secretary of HHS to regulate the manufacture, distribution, and marketing of tobacco products. Id. § 901, codified at 21 U.S.C. § 387a (entitled "FDA authority over tobacco products"). The legislation immediately subjected "all cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco" to a panoply of statutory and regulatory requirements. 21 U.S.C. § 387a(b). It also reserved future application of the TCA to "any other tobacco products that the Secretary [of HHS] by regulation deems to be subject to this chapter." Id. (emphasis added). Congress defined "tobacco product" to mean "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)." Id. § 321(rr)(1).

B. Regulatory Background

1. The Proposed Deeming Rule

In the years following Congress's enactment of the TCA, cigar products were largely free from FDA regulation because cigars were not expressly listed in the Act's definition of "tobacco product." That unregulated status would soon change. 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; Regulations 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"). As a "deemed" product, cigars would become subject to a host of regulatory requirements comparable to those imposed on cigarettes and other tobacco products.

The FDA did not, however, immediately announce an intention to deem all cigar products. Rather, in the Proposed Deeming Rule, the FDA offered "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 types of cigars meeting the statutory definition of "tobacco product"—including premium cigars—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, FDA suggested the following definition for "covered cigar":

[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 eight identified characteristics contained in the definition of "covered cigar" were included as a way to exclude premium cigars from regulation. 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 "to ensure that the exclusion would apply only to those cigars that, because of how they are used, may have less of a public...