AMY BERMAN JACKSON, United States District Judge.
An electronic cigarette, or "e-cigarette," is an electronic nicotine delivery device, comprised of a liquid, an atomizer or heating element that heats the liquid to create a vapor, and a battery that powers the heating element. Most liquids on the market contain nicotine.
On May 10, 2016, the Food and Drug Administration exercised its discretion to deem e-cigarettes to be "tobacco products" subject to the set of federal laws that govern the promotion and marketing of conventional cigarettes.
In a separate action, the Right to be Smoke Free Coalition, American Vaping Association, Electronic Vaping Coalition of America, Georgia Smoke Free Association, Kentucky Vaping Retailers Association, Inc., Louisiana Vaping Association, Maryland Vaping Professionals, LLC, Ohio Vapor Association, Tennessee Smoke Free Association, and the New Jersey Retailers Coalition (collectively, "RSF"), filed their own challenge to the Deeming Rule on similar grounds. Compl., RSF v. FDA, 16-1210 (ABJ) [Dkt. # 1] ("RSF Compl."). The Court consolidated the two cases, Order (June 28, 2016) [Dkt. # 19], and both sides have filed motions for summary judgment.
The Court wishes to reassure the many worried vapers who followed these proceedings closely that this case is not about banning the manufacture or sale of the devices. That is not what the Deeming Rule does or what it was intended to accomplish. In the Deeming Rule, the FDA simply announced that electronic cigarettes, or electronic nicotine delivery systems ("ENDS") would be subject to the same set of rules and regulations that Congress had already put in place for conventional cigarettes.
The Rule requires manufacturers to subject their products to review before marketing them, to tell the truth when making any claims about their health benefits, and to warn consumers about the dangers of nicotine when offering a means to deliver the substance to consumers. In short, the manufacturers of e-cigarettes are now required to tell the 30 million people who use the devices what is actually in the liquid being vaporized and inhaled.
This case does not pose the question — which is better left to the scientific community in any event — of whether e-cigarettes are more or less safe than traditional cigarettes. The Rule did not purport to take the choice to use e-cigarettes away from former smokers or other adult consumers; the issue is whether the FDA has the authority to require that the choice be an informed one.
In the 2009 Tobacco Control Act, Congress mandated that "tobacco products" would be regulated by the Secretary of HHS, and it stated that the provisions of the statute would apply not only to cigarettes, but to other tobacco products that the Secretary deemed to be subject to the law in the future. In the rule in question in this case, the FDA exercised its discretion under the Act to deem e-cigarettes to be tobacco products subject to regulation under the Federal Food, Drug, and Cosmetic
In the first portion of the case, though, plaintiffs claim that the FDA exceeded the authority given to it by Congress because certain types of devices or liquids do not fall within the statutory definition of a tobacco product that may be deemed to be subject to the TCA. But that challenge is extremely narrow. The challenge to the FDA's authority is not about whether the FDA had the legal authority to regulate the "cigalikes"
What plaintiffs do claim is that the agency exceeded its reach when it stated that the deeming rule also covers "open" vaping systems — those built with refillable cartridges that hold the liquid. Plaintiffs do not object to the regulation of all open system devices; they do not question the agency's power to regulate open vaping systems that are sold packaged together with liquid containing nicotine or tobacco flavor. What plaintiffs contend is that the agency could not lawfully undertake to regulate any open devices sold empty and on their own without any liquid, and that it had no authority to regulate e-liquids that do not contain nicotine. Nicopure Compl. ¶¶ 21, 34; RSF Compl. ¶¶ 43, 111-17. However, the FDA has plainly stated that the rule does not cover e-liquids that do not contain, or are not derived from, nicotine or tobacco, unless those liquids are reasonably intended to be used with nicotine-containing liquids.
The Court concludes that the agency acted within the scope of its statutory authority: it was legally permitted to regulate that category of liquids, and to consider a refillable electronic nicotine delivery system to be a "component" of a tobacco product and therefore subject to regulation.
Plaintiffs also ask the Court to find that it was arbitrary and capricious to subject electronic cigarette and liquid manufacturers to burdensome premarket review and labeling requirements, and that the cost-benefit analysis underlying the deeming decision was deficient. They also object to a number of the marketing restrictions triggered by the deeming decision on constitutional grounds.
It bears repeating that the provisions the plaintiffs find most objectionable were not crafted by the FDA as part of the Deeming Rule. Instead, they are requirements of the Tobacco Control Act that was enacted by Congress. Congress gave the FDA broad authority to deem new products to be "tobacco products" subject to that existing statutory regime, and the Court finds that it was not arbitrary and capricious for the agency to decide to take that action with respect to e-cigarettes.
This opinion will lay out the reasons for the Court's conclusions, and it will also explain why the new rules being applied to e-cigarettes do not violate the First or the
When all is said and done, the Court will grant the agency's cross-motion for summary judgment, and it will deny plaintiffs' motions for summary judgment.
BACKGROUND ... 370 I. Statutory Background — the Relevant Provisions of the Tobacco Control Act ... 370 A. The Deeming Provision and the Definition of "Tobacco Product" ... 372 B. Premarket Review ... 372 1. The Substantial Equivalence Pathway ... 372 2. The Premarket Review Process ... 373 C. Ban on Distribution of Free Samples ... 373 D. Ban on Modified Risk Statements ... 374 II. Regulatory Background ... 375 III. Factual & Procedural Background ... 377 STANDARD OF REVIEW ... 379 ANALYSIS ... 380 I. FDA did not exceed its statutory authority when it deemed both open system vaping devices and nicotine-free liquids to be "tobacco products." ... 380 A. The D.C. Circuit has not yet decided the issue ... 380 B. The FDA has the statutory authority to regulate open-system vaping devices ... 381 1. The FDA's characterization of an empty vaping device as a "component" of a tobacco product survives step one of the Chevron analysis ... 382 2. The FDA's interpretation is reasonable under Chevron step two ... 385 C. Plaintiffs have standing to challenge the application of the Rule to non-nicotine-based e-liquids, and their challenge is ripe, but the agency's interpretation passes muster under Chevron ... 386 1. Plaintiffs have standing to challenge the application of the rulemaking to nicotine-free products because they manufacture those products ... 387 2. Plaintiffs' challenge to the regulation of nicotine-free products is ripe ... 388 3. The agency's interpretation of the definition of "tobacco product" to include certain non-nicotine-containing e-liquids meets the Chevron test ... 389 II. The FDA's decision to deem e-cigarettes to be tobacco products comports with the APA ... 391 A. Legal Standard ... 391 B. The APA dispute is justiciable ... 392 C. The FDA's decision to deem e-cigarettes to be tobacco products is reasonable and supported by the record ... 393 D. Plaintiffs' arguments that the Rule is arbitrary and capricious are not persuasive ... 396 E. The agency appropriately rejected plaintiffs' suggested regulatory alternatives ... 397 F. The decision not to change the grandfather date for substantially equivalent products is not arbitrary and capricious ... 398 G. FDA's imposition of compliance deadlines was not arbitrary and capricious ... 399 III. The Deeming Rule is not invalid due to any deficiencies in the cost-benefit analysis ... 400 A. The agency was not required to do a cost-benefit analysis ... 400 B. Even if Michigan v. EPA does apply, the agency complied with its requirements ... 402 C. The agency's consideration of costs and benefits satisfied the APA ... 403 IV. The agency complied with the purely procedural requirements of the Regulatory Flexibility Act ... 407 V. The Deeming Rule is not unconstitutional; RSF has abandoned its equal protection claim, and its due process argument fails ... 408 VI. The marketing restrictions in the Tobacco Control Act do not violate the First Amendment ... 410 A. Central Hudson has not been supplanted by Sorrell ... 411 B. The Tobacco Control Act's ban on the distribution of free samples is constitutional ... 412 1. The Tobacco Control Act's ban on the distribution of free samples regulates conduct, not speech ... 412 2. Even if sampling is considered to be expression, plaintiffs concede that the government has a substantial interest in eliminating youth access to tobacco products ... 415 3. The FDA has sufficient evidence to show that the sampling ban directly and materially advances the interest in eliminating youth access to tobacco products ... 416 4. The ban on free samples is not more extensive than necessary to serve FDA's substantial interest ... 417 C. The regulation of modified-risk tobacco products satisfies the Central Hudson test ... 419 CONCLUSION ... 421
The Tobacco Control Act was enacted in 2009.
In its findings, Congress emphasized the harms that arise when children use tobacco products, and the associated dangers of tobacco-related marketing to minors:
Congress also made specific findings concerning the impact of what the statute calls "modified risk statements" — manufacturers' statements that certain products might reduce the risks associated with nicotine or tobacco — including labels announcing that a tobacco product is "low tar" or "light":
Id. § 2(44).
In light of those findings, Congress mandated in section 901 of the TCA that "[t]obacco products ... shall be regulated by the Secretary [of Health and Human Services]." TCA § 901, codified at 21 U.S.C. § 387a. This unequivocal assignment of responsibility goes on to provide:
Id., codified at 21 U.S.C. § 387a(b) (emphasis added).
Congress then amended the definitions section of the Federal Food, Drug, and Cosmetic Act to define the term "tobacco product." TCA § 101. For purposes of the TCA, a "tobacco product" is:
21 U.S.C. 321(rr)(1). Neither the TCA nor the FDCA further defines the terms "component," "part," or "accessory."
In the TCA, Congress also imposes a number of regulatory requirements on all tobacco products. First, the statute requires that all "new tobacco products" must receive FDA approval before they may be introduced or delivered into interstate commerce. TCA § 910; 21 U.S.C. § 387j(a). The statute defines the term "new tobacco product" as "any tobacco product (including those products in test markets) that was not commercially marketed in the United States as of February 15, 2007." Id. The law provides two main "pathways" to FDA approval: the less onerous "substantial equivalence" pathway, and the more demanding "premarket review" pathway.
One way to get a new tobacco product approved is to show that it is "substantially equivalent" to an existing tobacco product. 21 U.S.C. § 387j. The existing or "predicate" product to be used for comparison purposes must have been "commercially marketed ... in the United States as of February 15, 2007." 21 U.S.C. § 387j(a)(2)(A)(i)(I).
To invoke the substantial equivalence or SE pathway, the sponsor of a new tobacco product must file a report demonstrating that the product is substantially equivalent to a product that had already been commercially marketed as of the February
21 U.S.C. § 387j(a)(3)(A).
If a manufacturer of a new product cannot invoke the substantial equivalence pathway — because there was no predicate product on the market as of February 15, 2007 — it must obtain approval from FDA before it can market the product. See 21 U.S.C. § 387j(a)(2). The sponsor of the new tobacco product must submit a detailed application that includes: "full reports of all information, published or known to, or which should reasonably be known to, the applicant, concerning investigations which have been made to show the health risks of such tobacco product and whether such tobacco product presents less risk than other tobacco products," and "a full statement of the components, ingredients, additives, and properties, and of the principle or principles of operation, of such tobacco product." 21 U.S.C. § 387j(b)(1).
The FDA must either approve or deny a premarket review application within 180 days. 21 U.S.C. § 387j(c)(1)(A). A denial may only be based on one of the four reasons set forth in the statute: (1) the applicant has failed to show that the marketing of the product is appropriate for public health; (2) the manufacturing, processing, or packing process does not conform to statutory requirements; (3) the label is false or misleading; or (4) the application does not conform with the standards set for tobacco products in 21 U.S.C. § 387g. 21 U.S.C. § 387j(c)(2).
In the TCA, Congress also specifically instructed the agency to regulate the distribution of free samples of tobacco products. TCA § 102. The statute directed the Secretary of Health and Human Services to reissue a 1996 final rule no sooner than 180 days after June 22, 2009, and it required that the rule amend the Federal Register to provide that "no manufacturer, distributor, or retailer may distribute or
The agency did as Congress required. On March 19, 2010, the FDA promulgated a rule entitled "Regulations Restricting the Sale and Distribution of Cigarettes and Smokeless Tobacco to Protect Children and Adolescents," 75 Fed. Reg. 13,225-03 (Mar. 19, 2010). The rule, which is now codified at 21 C.F.R. part 1140, contains the required language. See 21 C.F.R. § 1140.16.
As part of the regulatory regime imposed on tobacco products in the TCA, Congress also addressed manufacturers' attempts to market certain products as being less harmful to health than other tobacco products. By amending section 911 of the FDCA, the TCA prohibits the introduction of "any modified risk tobacco product" into interstate commerce unless that product has been pre-cleared by the FDA. TCA § 101; 21 U.S.C. § 387k(a). A "modified risk tobacco product" is defined first as "any tobacco product that is sold or distributed for use to reduce harm or the risk of tobacco-related disease associated with commercially marketed tobacco products." 21 U.S.C. § 387k(b)(1). Second, the definition applies to a product:
21 U.S.C. § 387k(b)(2)(A).
A manufacturer that intends to market a tobacco product with modified risk representations must file an application with the Secretary of HHS demonstrating that any claims "relating to the effect of the product on tobacco-related diseases and health-related conditions" are supported by the scientific literature. 21 U.S.C. § 387k(d). An application may be granted "only if the Secretary determines that the applicant has demonstrated that" the product will:
21 U.S.C. § 387k(g)(1).
There is an exception to that provision, "if the Secretary makes the finding required" by subsection (g)(1), and makes several additional findings listed in subsection (g)(2), which requires proof that an order granting the application would promote the public health, is limited to a claim that a product "does not contain or is free of a substance or contains a reduced level of a substance, or presents a reduced exposure to a substance in tobacco smoke," "scientific evidence is not available and ... cannot be made available without conducting long-term epidemiological studies," and the available data "demonstrates that a measurable and substantial reduction in morbidity or mortality among individual tobacco users is reasonably likely in subsequent studies." 21 U.S.C. 387k(g)(2)(A).
On May 10, 2016, the FDA exercised the authority Congress conferred upon it in 21 U.S.C. § 387a(b) to deem e-cigarettes (and other products not relevant to this opinion) to be "tobacco products" subject to the TCA. Deeming Rule, 81 Fed. Reg. at 28,976 ("Products that meet the statutory definition of `tobacco products' include ... ENDS (including e-cigarettes, e-hookah, e-cigars, vape pens, advanced refillable personal vaporizers, and electronic pipes"). The statute defines a "tobacco product" to include "any component, part, or accessory of a tobacco product," 21 U.S.C. § 321(rr), but the agency made clear that it was regulating only components and parts of the newly-deemed tobacco products, not their accessories. See Deeming Rule, 81 Fed. Reg. at 28,975. According to the FDA, the purpose of the Rule was twofold:
Id. The agency announced that the Rule would become effective ninety days after publication, and that the "newly deemed products will become subject to the same [FDCA] provisions and relevant regulatory requirements to which cigarettes ... are subject." Id. at 28,976.
So, as of August 8, 2016, the manufacturers of ENDS products have been subject
Id.
The TCA would have also authorized the agency to impose the premarket review requirement on manufacturers immediately, thereby halting sales until premarket applications were approved. See 21 U.S.C. § 387b (finding that a tobacco product is adulterated if it is required to have a premarket review order but does not have one); 21 U.S.C. § 331(a) (making it unlawful to introduce an adulterated tobacco product into interstate commerce). But as part of the Deeming Rule, the agency opted to implement the statutory requirement more gradually. The FDA announced that all new tobacco products will be required to submit applications for premarket authorization of their products through one of the pathways under a "staggered initial compliance period[] ... followed by continued compliance periods for FDA review:"
Deeming Rule, 81 Fed. Reg. at 28,977-78.
As part of the Deeming Rule, the FDA defined the terms that Congress failed to define in the TCA. The decision applies to "components" and "parts" of the newly deemed tobacco products, and the agency defined "component or part" as "any software or assembly of materials intended or reasonably expected: (1) [t]o alter or affect the tobacco product's performance, composition, constituents, or characteristics; or (2) to be used with or for the human consumption of a tobacco product." Deeming Rule, 81 Fed. Reg. at 28,975.
E-liquids; atomizers; batteries (with or without variable voltage); cartomizers (atomizer plus replaceable fluid-filled cartridge); digital display/lights to adjust settings; clearomisers, tank systems, flavors, vials that contain e-liquid, and programmable software.
Id.
The agency added that its definition of "component or part ... excludes anything that is an accessory of a tobacco product," and it defined the term "accessory" to mean:
Id. The agency explained that it was declining to regulate accessories of the newly-deemed tobacco products because "accessories, unlike components or parts, are expected to have little direct impact on the public health." Id.
An e-cigarette, or electronic nicotine delivery device, is a battery powered device that heats an "e-liquid." An individual uses an e-cigarette by inhaling a vapor through the mouthpiece of a device that heats an "e-liquid," producing a vapor which the user inhales through a mouthpiece. Decl. of Jeffrey Stamler [Dkt. # 20-2] ("Stamler Decl.") ¶ 3. There are two main types of e-cigarettes on the market today: closed systems and open systems. Id. ¶ 8. In a closed system, "the amount of liquid, flavor, and nicotine content (if any) is set by the manufacturer and cannot be altered by the consumer." Id. ¶ 9. Closed-system products are available in both a single-use, disposable form — also known as a "cigalike" — and a "rechargeable" form, into which a user can insert a "proprietary replacement cartridge" that contains the e-liquid. Id.; RSF Compl. ¶ 22. In an open system, the device has a chamber or cartridge that can be refilled, and "the consumer separately purchases e-liquid of his or her choosing." Stamler Decl. ¶ 10. Consumers can purchase e-liquid directly from a manufacturer, or they can go to a retail establishment called a "vape shop." Id.
On May 10, 2016, Nicopure filed suit to challenge the legality of the Deeming Rule in four respects. In Count I, Nicopure alleges that the FDA exceeded its statutory authority in violation of sections 706(2)(A) and (C) of the APA when it enacted the Deeming Rule, because the Rule's "definition of `tobacco product' and attendant proposed reach of its provisions is unambiguously foreclosed by, and is an unreasonable construction of, the text of the [TCA]." Nicopure Compl. ¶ 34. At the hearing, Nicopure focused in particular on the Rule's application to open system devices and nicotine-free e-liquids. Hr'g Tr. at 13:14-14:15. But it also objects to the application of the rule to "hundreds of products that are neither made nor derived from tobacco nor intended for human consumption," such as "programmable software, batteries, digital display/lights, and glass or plastic vials." Nicopure Compl. ¶¶ 21, 26 (internal quotation marks and alterations omitted). Notably, Nicopure does not argue that the FDA did not have the legal authority to deem e-cigarettes to be tobacco products.
Nicopure's Count II alleges that it was arbitrary and capricious for the FDA to enact a rule that requires e-cigarette manufacturers to undergo premarket review. Nicopure Compl. ¶¶ 36-45. The company maintains that the Deeming Rule "fails to come to grips with the extraordinary burden this approval regime will have, both on manufacturers and on FDA itself," id. ¶ 41, and that the Rule "arbitrarily discounts the safety benefits offered by vaping devices and e-liquids." Id. ¶ 42. In Count III, Nicopure alleges that the FDA violated the APA in promulgating the Rule because its cost-benefit analysis was deficient. It alleges that the FDA "overstates the Rule's benefits, fails to quantify the Rule's benefits, understates the Rule's tremendous costs, and erroneously concludes that the Rule's benefits outweigh its costs." Id. ¶ 48. Finally, Count IV brings two challenges under the First Amendment: that the restriction on modified-risk statements prohibits manufacturers from making truthful and nonmisleading statements about their products, and that the ban on the distribution of free samples violates Nicopure's right to free speech. Id. ¶¶ 54-55. Nicopure requests that the Court vacate the Deeming Rule and declare it unlawful. Id., Relief Requested.
The Right to be Smoke Free plaintiffs filed their eight-count complaint about a month later, on June 20, 2016. RSF Compl. The plaintiffs are "national and state-wide trade associations representing the entire ENDS industry (i.e., manufacturers, distributors, and retailors)." Id. at 1. In Count I, RSF asserts that the Deeming Rule is arbitrary and capricious because it did not establish a new "Grandfather Date for ENDS products," and because the agency failed to "apply its enforcement authority so that some ENDS manufacturers, including e-liquid companies, would have the opportunity to forego the [premarket review] pathway and avail themselves of the option to submit SE Reports." Id. ¶ 75. Count II alleges that the
In light of the substantial overlap between the two sets of allegations, the Court consolidated the cases. See Order (June 28, 2016) [Dkt. # 19].
Summary judgment is appropriate when the pleadings and evidence show that "there is no genuine dispute as to any material fact and [that] the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). However, in cases involving review of agency action under the Administrative Procedure Act, Rule 56 does not apply due to the limited role of a court in reviewing the administrative record. Select Specialty Hosp.-Akron, LLC v. Sebelius, 820 F.Supp.2d 13, 21 (D.D.C. 2011). Under the APA, the agency's role is to resolve factual issues and arrive at a decision that is supported by the administrative record, and the court's role is to "determine whether or not as a matter of law the evidence in the administrative record permitted the agency to make the decision it did." Occidental Eng'g Co. v. INS, 753 F.2d 766, 769-70 (9th Cir. 1985), citing Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971); see also Richards v. INS, 554 F.2d 1173, 1177 & n.28 (D.C. Cir. 1977).
In reviewing an agency's interpretation of a statute, courts use the two-step analysis outlined in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Step one involves determining whether Congress has spoken directly to the precise question at issue. If it has, "the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress," and that is the end of the matter. Id.; Nat'l Treasury Emps. Union v. Fed. Labor Relations Auth., 392 F.3d 498, 500 (D.C. Cir. 2004). If the statute is silent or ambiguous on the question, Chevron instructs the Court to go on to a second step and determine "whether the agency's answer is based on a permissible
In Count I of Nicopure's complaint, and in Count VI of the RSF complaint, plaintiffs challenge FDA's statutory authority to regulate two specific vaping products: open-system vaping devices that do not contain any e-liquid, and e-liquids that do not contain nicotine or that are not made or derived from tobacco. See Nicopure Compl. ¶¶ 33-34; RSF Compl. ¶¶ 111-17; Nicopure Mem. at 9-14.
Congress mandated in the TCA that "tobacco products ... shall be regulated by the Secretary," and it made clear that its mandate applied not only to "all cigarettes, cigarette tobacco, roll your own tobacco, and smokeless tobacco," but also to "any other tobacco products that the Secretary by regulation deems to be subject" to its provisions. 21 U.S.C. § 387a. Congress defined "tobacco product" to include:
21 U.S.C. § 321(rr)(1) (emphasis added).
Nicopure argues that its "open-system vaping devices (and their constituent parts)" are not "tobacco products" because they are "neither `made or derived from tobacco,' nor intended for human consumption[,]" and that Nicopure's "non-nicotine containing e-liquids are not `made or derived from tobacco.'" Nicopure Mem. at 9.
At the outset, defendants argue that judgment should be entered in their favor because the D.C. Circuit already ruled on the legality of the regulation of e-cigarettes in Sottera, Inc. v. FDA, 627 F.3d 891 (D.C. Cir. 2010). While it is true that the Court of Appeals addressed the issue of the regulation of some electronic cigarettes in that opinion, it did not decide the precise issues presented in this lawsuit.
The plaintiffs in Sottera manufactured what are referred to in this case as closed-system e-cigarettes: the Court described the products at issue as "battery-powered products that allow users to inhale nicotine vapor without fire, smoke, ash, or carbon monoxide" that were "[d]esigned to look
The D.C. Circuit held that while the "FDA cannot regulate customarily marketed tobacco products under the FDCA's drug/device provisions ... it can regulate tobacco products marketed for therapeutic purposes under those provisions, and ... it can regulate customarily marketed tobacco products under the [TCA]." Id. at 898. Thus, at the urging of the e-cigarette industry, the Court recognized that "the FDA has authority under the [TCA] to regulate electronic cigarettes, enabling it to mitigate or perhaps extinguish any harm to the public health." Id.
While the decision is an important part of the legal backdrop of this case, the Sottera Court's rejection of the drug/device provisions of the FDCA as a basis to regulate e-cigarettes does not answer the questions posed here: whether a particular category of ENDS products can be regulated as "components or parts" of tobacco products. Defendants note that the only difference between the products at issue in Sottera and the products sold by plaintiffs is the fact that plaintiffs manufacture open-system vaping devices. Defs.' Cross-Mem. at 24. And the agency suggests that the Court should not be swayed by what it sees as a change in position by the industry:
Id. at 24-25. But plaintiffs have conceded that most ENDS products may be lawfully regulated under the TCA, and notwithstanding Sottera, the Court must go on to utilize the Chevron analysis to determine, as a matter of first impression, whether the agency has interpreted the statute properly.
The threshold determination — whether the agency's reading of "component or part" to include empty open vaping devices, or nicotine-free liquids sold separately, is consistent with the TCA — turns on "whether Congress has directly spoken to the precise question at issue." Chevron, 467 U.S. at 842, 104 S.Ct. 2778.
The D.C. Circuit has explained:
Bell Atl. Tel. Cos. v. FCC, 131 F.3d 1044, 1047 (D.C. Cir. 1997), quoting Nat. Res. Def. Council v. Browner, 57 F.3d 1122, 1125 (D.C. Cir. 1995). The court is required to utilize these methods to determine whether Congress has "unambiguously foreclosed the agency's statutory interpretation." Catawba Cty. v. EPA, 571 F.3d 20, 35 (D.C. Cir. 2009).
Vill. of Barrington v. Surface Transp. Bd., 636 F.3d 650, 659-60 (D.C. Cir. 2011).
Starting with the text, it is true that Congress did not specifically define the words "component" or "part" in the TCA. But "the absence of a statutory definition does not render a word ambiguous." Nat. Res. Def. Council v. EPA, 489 F.3d 1364, 1373 (D.C. Cir. 2007). In the absence of an express statutory definition, courts are simply bound to give the terms used in the statute their ordinary meaning. Petit v. U.S. Dep't of Educ., 675 F.3d 769, 781 (D.C. Cir. 2012). The burden is on the plaintiffs challenging the agency interpretation to "do more than offer a reasonable, or even the best, interpretation" of the statute; plaintiffs must instead show "that the statute unambiguously forecloses the agency's interpretation." Id., quoting Vill. of Barrington, 636 F.3d at 661. In other words, if a court determines "that statutory ambiguity has left the agency with a range of possibilities and that the agency's interpretation falls within that range, then the agency will have survived Chevron step one." Vill. of Barrington, 636 F.3d at 660.
The Court must therefore begin with the plain language of the TCA. Lindeen v. SEC, 825 F.3d 646, 653 (D.C. Cir. 2016), quoting Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 739, 109 S.Ct. 2166, 104 L.Ed.2d 811 (1989). The statutory definition of a "tobacco product" authorizes the FDA to extend the provisions of the TCA to cover:
21 U.S.C. § 321(rr)(1).
In exercising its deeming authority to regulate e-cigarettes under the TCA, the FDA defined the terms "component or part" together to mean: "any software or assembly of materials intended or reasonably expected: (1) to alter or affect the tobacco product's performance, composition, constituents, or characteristics; or (2) to be used with or for the human consumption of a tobacco product." Deeming Rule, 81 Fed. Reg. at 28,975. According to the FDA, applying this definition means that the term "tobacco product" covers not only all-in-one electronic nicotine delivery systems, but also empty open system devices and liquids sold separately, including nicotine-free liquids intended to be mixed with nicotine-based liquids. Defs.' Cross-Mem. at 25-40. Since the agency justifies these two applications of the statute on different grounds, and it has raised threshold jurisdictional issues with respect to the challenge to the regulation of e-liquids, this opinion will address the agency's authority to regulate the two challenged products separately.
The FDA's approach to empty vaping devices is not inconsistent with the ordinary meaning of the terms "component" and "part" that are used in the
The word "component" is defined in the Merriam Webster dictionary as "a constituent part," Component, Merriam-Webster Dictionary, http://www.merriam-webster.com/dictionary/component, and the dictionary offers the example of stereo components. Id. Similarly, the Oxford English Dictionary defines "component" to mean "[a] constituent element or part." Oxford English Dictionary, 2d ed. (1989). The word "part" is defined by Merriam-Webster as "an essential portion or integral element," Part, Merriam-Webster Dictionary, http://www.merriamwebster.com/dictionary/part, and by the Oxford English Dictionary as "[a] piece or section of something which together with another or others makes up the whole (whether actually separate from the rest or not)," and as "[a]n essential element; an integral portion of a larger whole." Oxford English Dictionary, 3d ed. (2005).
The agency's interpretation is entirely consistent with the plain meaning of the statute: the device — which contains the heating element and the battery — and the liquid are the "components" of an electronic nicotine delivery system just as an amplifier and a speaker are "components" of a stereo system. And while a sophisticated audiophile might have some choices to make about what to include in a sound system today, the device plus the liquid are undeniably the two essential components of an open vaping system: a consumer cannot use a vaping device for its primary purpose without adding the liquid, and there is nothing to do with the liquid without the device. (Indeed, it might be fair to say that the device is the electronic nicotine delivery system.)
Putting aside the dictionary, a better analogy might be that just as an empty fountain pen is obviously a "component" of an ink pen (or "writing system"), even when the ink is sold separately, and it is no less of a pen than a cartridge pen that
Plaintiffs attempt to avoid this plain reading of the text of the statutory definition by pointing to the structure of the TCA. They argue that because Congress used the term "component" in other parts of the statute to "refer to items inseparable from the product made or derived from tobacco," and "not to refer to separate products not so made or derived," the vaping devices at issue here cannot be considered to be "components" or "parts." Nicopure Mem. at 11, citing Japan Whaling Ass'n v. Am. Cetacean Soc'y, 478 U.S. 221, 238-39, 106 S.Ct. 2860, 92 L.Ed.2d 166 (1986) ("Without strong evidence to the contrary," the Supreme Court "doubt[s] that Congress intended the same phrase to have significantly different meanings in two adjoining paragraphs of the same subsection"). In other words, according to plaintiffs, any "component" or "part" referred to in the TCA must be inseparable from the whole notwithstanding the ordinary definitions of the terms. But a review of the statute does not bear this out.
Plaintiffs first point to 21 U.S.C. § 387(17), a provision that defines the term "smoke constituent" to include "any chemical or chemical compound in mainstream or sidestream tobacco smoke that either transfers from any component of the cigarette to the smoke or that is formed by the combustion or heating of tobacco, additives, or other component of the tobacco product." Nicopure Mem. at 11. They also cite 21 U.S.C. § 387d(a), which requires manufacturers to list "all ingredients ... added by the manufacturer to the tobacco, paper, filter, or other part of each tobacco product." Id. And finally, plaintiffs rely on 21 U.S.C. § 387g(a)(1)(A), which prohibits "a cigarette or any of its component parts (including the tobacco, filter, or paper)" from containing flavors. Taking those portions of the statute together, plaintiffs argue that the context of the TCA as a whole supports their argument that the terms "component or part" must mean a part physically connected to the whole.
But "[t]o prevail on its Chevron Step One argument, [plaintiffs have] to do better than concoct an interpretation purportedly based on the statute's context. [Plaintiffs] `must show that the statute unambiguously forecloses the [agency's] interpretation.'" Pharm. Research & Mfrs. of Am. v. FTC, 790 F.3d 198, 207 (D.C. Cir. 2015), quoting Vill. of Barrington, 636 F.3d at 661. Plaintiffs "context" argument fails to meet that standard. The three provisions cited do not prove plaintiffs' point because none specifically defines the terms "component" or "part," and each either uses the terms in passing, or simply lists examples of what components of a particular type of tobacco product might be. The fact that the components of a conventional cigarette may be physically connected to that item does not mean that the components of an entirely different sort of product must be.
Finally, the D.C. Circuit has directed reviewing courts to "exhaust the traditional tools of statutory construction," including examining a statute's purpose, when they embark on the "search for the plain meaning of the statute." Bell Atl. Tel. Cos.,
In the court's view, the ordinary terms "component" and "part" are not ambiguous, and the FDA's exercise of its deeming authority to cover the products at issue falls squarely within the limits of the statute. But to the extent the statute is ambiguous, for all of the same reasons, the agency's interpretation "is based on a permissible construction of the statute," Chevron, 467 U.S. at 843, 104 S.Ct. 2778, and therefore, it "merits judicial deference." Bell Atl. Tel. Cos., 131 F.3d at 1047.
The Court should "defer to the agency's permissible interpretation," so long as "the agency has offered a reasoned explanation for why it chose that interpretation." Vill. of Barrington, 636 F.3d at 660. At Chevron step two, a court "may not disturb an agency rule unless it is `arbitrary or capricious in substance, or manifestly contrary to the statute.'" Mayo Found. for Med. Educ. & Research v. United States, 562 U.S. 44, 53, 131 S.Ct. 704, 178 L.Ed.2d 588 (2011), quoting Household Credit Servs., Inc. v. Pfennig, 541 U.S. 232, 242, 124 S.Ct. 1741, 158 L.Ed.2d 450 (2004).
There is no linguistic or statutory basis for plaintiffs' contention that a component or part may only be regulated if it is "physically part of a product containing tobacco (or material derived from tobacco) when introduced into commerce." Pls.' Reply at 6; Nicopure Mem. at 10-12. Plaintiffs do not dispute that a vaping device can be regulated as a tobacco product when it comes all in one piece, or even in two pieces in one box. See Hr'g Tr. at 14:22-15:2 ("[Plaintiffs' counsel]: If it's sold in a kit with a nicotine-containing liquid, then that kit or that product that's being sold ... would meet the definition of tobacco product because the product[] ... includes the e-liquids that's got the nicotine derived from tobacco."). But the definition of "tobacco product" is not limited to products made or derived from tobacco since it specifically includes "components" and "parts" of tobacco products. 21 U.S.C. § 321(rr)(1).
Plaintiffs object to the characterization of an empty ENDS device as a component on the basis that those devices are "separate consumer product[s] that contain[] neither tobacco nor anything derived from tobacco." See Nicopure Mem. at 10. But an empty open vaping system is not a generic consumer item with multiple potential functions, like a box or a bowl. The purpose
The Court reaches the same conclusion with respect to plaintiffs' challenge to the agency's treatment of e-liquids, but it must first address the jurisdictional questions raised by the defense.
Plaintiffs challenge that portion of the Rule that purports to cover e-liquids that do not contain nicotine. In light of the definition of a tobacco product in section 321(rr)(1) of the TCA, the agency acknowledged in the Deeming Rule that it did not have the power to regulate e-liquids that are not made or derived from tobacco, or e-liquids that are not components or parts of a tobacco product. See, e.g., Deeming Rule, 81 Fed. Reg. at 29,017. However, it stated its intention to regulate the entire line of e-liquid cartridges, "including cartridges that include varying degrees of nicotine or those that do not contain nicotine, if they meet the definition of component or part." Id. The FDA then advanced the position that an e-liquid without nicotine can be a "component" of a tobacco product under the TCA, and therefore subject to FDA regulation, "if it is intended or reasonably expected to be used with or for the human consumption of a tobacco product (e.g., with liquid nicotine)." Id.
Id. at 29,015.
Plaintiffs maintain that this aspect of the Rule contravenes the TCA, see Nicopure Mem. at 13-14, and before addressing the merits, defendants briefly argue that the Court lacks jurisdiction to hear this claim. They argue that plaintiffs lack standing because they have not alleged sufficient facts to demonstrate that their liquids are subject to the Rule. Defs.' Cross-Mem. at 33-35. Defendants also maintain that the claim is not ripe; they point out that plaintiffs do not yet know if the FDA will initiate enforcement proceedings against their non-nicotine-based e-liquids, and that, in light of the agency's stated intention to review nicotine-free e-liquids on a "case-by-case" basis, any challenge to that aspect of the regulation should wait until the agency initiates an enforcement proceeding. Id. at 35-37. Therefore, the Court
Article III of the Constitution restricts the power of the federal courts to hear only "Cases" and "Controversies." U.S. Const. art. III, § 2, cl. 1. A federal court is "forbidden ... from acting beyond its authority," NetworkIP, LLC v. FCC, 548 F.3d 116, 120 (D.C. Cir. 2008), and a court has "an affirmative obligation" to ensure that it has standing before reaching the merits of a dispute. James Madison, Ltd. v. Ludwig, 82 F.3d 1085, 1092 (D.C. Cir. 1996), quoting Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 196 (D.C. Cir. 1992).
"The doctrine of standing gives meaning to these constitutional limits by `identify[ing] those disputes which are appropriately resolved through the judicial process.'" Susan B. Anthony List v. Driehaus, ___ U.S. ___, 134 S.Ct. 2334, 2341, 189 L.Ed.2d 246 (2014) (alterations in original), quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); see also Clapper v. Amnesty Int'l USA, 568 U.S. 398, 133 S.Ct. 1138, 1146, 185 L.Ed.2d 264 (2013) ("`One element of the case-or-controversy requirement' is that plaintiffs `must establish that they have standing to sue.'"), quoting Raines v. Byrd, 521 U.S. 811, 818, 117 S.Ct. 2312, 138 L.Ed.2d 849 (1997). This "doctrine limits the category of litigants empowered to maintain a lawsuit in federal court to seek redress for a legal wrong." Spokeo, Inc. v. Robins, ___ U.S. ___, 136 S.Ct. 1540, 1547, 194 L.Ed.2d 635 (2016).
"[T]he irreducible constitutional minimum of standing contains three elements." Lujan, 504 U.S. at 560, 112 S.Ct. 2130. First, the plaintiff must have suffered an "injury in fact," or, in other words, "an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent." Id. "Second, there must be a causal connection between the injury and the conduct complained of," or, said another way, the injury alleged must be "traceable to the challenged action of the defendant." Id. Third, it must be likely that "the injury will be redressed by a favorable decision." Id. at 561, 112 S.Ct. 2130.
Defendants argue that plaintiffs have not alleged sufficient facts to show that the regulation of nicotine-free liquids described in the Rule applies to their products, and that therefore, plaintiffs have failed to allege they will suffer any actual or imminent harm. They complain that "plaintiffs make no effort to explain how their nicotine-free e-liquids are manufactured, marketed, distributed, or sold," Defs.' Cross-Mem. at 34, and that plaintiffs "make no showing that the nicotine-free e-liquids they manufacture are ... even subject to the deeming rule — by alleging, for example, that those e-liquids are intended to be mixed with liquid nicotine." Id. at 33.
Plaintiff Nicopure has supplied the Court with a declaration stating that it manufactures approximately 160 different kinds of nicotine-free e-liquid, see Stamler Decl. ¶ 14, and therefore, the Court finds that it has standing to challenge the agency's decision to regulate these products as part of the Rule. It is of little moment that plaintiffs have not specified whether their nicotine-free liquids are or are not intended to be mixed with liquid nicotine, since the agency has already specifically stated that it is not bound to take manufacturers at their word. Thus, under the terms of the Rule, plaintiffs could be subject to enforcement
The Court also finds that plaintiffs' challenge to this aspect of the rule is ripe, notwithstanding the agency's assurances that, should plaintiffs violate the law, the agency would assess whether enforcement was appropriate "after a `case-by-case' review," Defs.' Cross-Mem. at 36, quoting Deeming Rule, 81 Fed. Reg. at 29,032, which would "take into account `the totality of the circumstances.'" Id., quoting 81 Fed. Reg. at 29,015.
"The ripeness doctrine generally deals with when a federal court can or should decide a case. Part of the doctrine is subsumed into the Article III requirement of standing, which requires a petitioner to allege inter alia an injury in fact that is `imminent' or `certainly impending.'" Am. Petrol. Inst. v. EPA, 683 F.3d 382, 386 (D.C. Cir. 2012). And "[e]ven if a case is `constitutionally ripe,' ... there may also be `prudential reasons for refusing to exercise jurisdiction.'" Id., quoting Nat'l Park Hosp. Ass'n v. Dep't of Interior, 538 U.S. 803, 808, 123 S.Ct. 2026, 155 L.Ed.2d 1017 (2003). As the D.C. Circuit has explained:
Sprint Corp. v. FCC, 331 F.3d 952, 957 (D.C. Cir. 2003), quoting Nat'l Park Hosp., 538 U.S. at 807-08, 123 S.Ct. 2026. While the constitutional aspect of ripeness may involve the same impending injury-in-fact requirement that is necessary for standing, the prudential aspect of ripeness requires more: a court must "balance[] `the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.'" Nat'l Treasury Emps. Union v. United States, 101 F.3d 1423, 1427-28 (D.C. Cir. 1996), quoting Abbott Labs. v. Gardner, 387 U.S. 136, 149, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967), and citing Duke Power Co. v. Carolina Envtl. Study Grp., Inc., 438 U.S. 59, 81-82, 98 S.Ct. 2620, 57 L.Ed.2d 595 (1978). The fitness of an issue for judicial decision depends on whether there are "contingent future events that may not occur as anticipated, or indeed may not occur at all." Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 580-81, 105 S.Ct. 3325, 87 L.Ed.2d 409 (1985) (citations omitted).
In Abbott Laboratories, the Supreme Court considered two factors in evaluating whether a pre-enforcement challenge was ripe for adjudication: First, it considered whether "the issue tendered is a purely legal one," and second, it asked whether the issue presented was a "final agency action" under the APA. 387 U.S. at 149-50, 87 S.Ct. 1507. "[P]urely legal claim[s]" are "presumptively reviewable." Nat'l Ass'n of Home Builders v. U.S. Army Corps of Eng'rs ("NAHB"), 417 F.3d 1272, 1282 (D.C. Cir. 2005), quoting Nat'l Mining Ass'n v. Fowler, 324 F.3d 752, 757 (D.C. Cir. 2003). And the D.C. Circuit has rejected the notion that a future exercise of agency discretion makes a purely legal claim unripe. Id.
Defendants argue that plaintiffs do not know whether the FDA will ever initiate enforcement proceedings against their non-nicotine-based e-liquids, and that in light of the agency's stated intention that it will review nicotine-free e-liquids on a
But that line of reasoning has been rejected by binding D.C. Circuit precedent. In NAHB, the plaintiffs challenged the issuance of certain permits by the Army Corps of Engineers under the Clean Water Act. Id. at 1274. The Army Corps was authorized by statute to issue permits either on a class-wide basis, or on a case-by-case basis. Id. The agency's regulations required that a "case-by-case" or "individual" permit be issued only after the agency completed a comprehensive procedure, which included "site-specific documentation and analysis, public interest review, public notice and comment, and, if necessary, a public hearing." Id. at 1275. Plaintiffs challenged the agency's issuance of particular class-wide permits, and argued that the agency had exceeded its statutory authority, and that it had acted in violation of the APA, when it issued certain regulations surrounding those permits. Id. at 1277. The district court dismissed the case, concluding that a plaintiff's challenge was not a final agency action "until [his] individual permit is rejected." Id. at 1278.
But the Court of Appeals reversed the judgment of the district court, noting that the question was better framed as a ripeness inquiry, and that the challenge was ripe for adjudication. See id. at 1281. Plaintiffs, the Court of Appeals explained, were challenging the Army Corps's "statutory authority ... and that the Corps failed to offer a reasoned basis for their [decision]," and it held that those "purely legal" issues were ripe for adjudication. Id. at 1281-82. As to the Army Corps's argument that its decision was not "fit for review because their applicability to a given activity remains within the Corps'[s] discretion," the Court of Appeals replied, "[w]e have already debunked this theory," and it noted that just because "the Corps retains some measure of discretion with respect to the [challenged decisions] does not make the [plaintiffs'] purely legal challenge unripe." Id. at 1282.
Plaintiffs here are in a similar posture to the plaintiffs in NAHB. The agency has indicated that its enforcement activities against manufacturers who produce non-nicotine based e-liquids will be undertaken on a case-by-case basis. Deeming Rule, 81 Fed. Reg. at 29,032. And while defendants ask the Court to wait until the agency decides to enforce the statute on a manufacturer of non-nicotine-based e-liquid, the Court can determine whether the statute authorizes the regulation of those products in the first instance. The question in this case is not about whether the regulation will apply to a particular nicotine-free e-liquid; the challenge is whether nicotine-free e-liquids can be regulated at all. There may very well be future litigation about whether the agency's case-by-case review was lawful — but that is not the challenge being brought in this case.
So the Court can determine under Chevron whether the nicotine-free e-liquids at issue are subject to regulation.
Nicopure challenges whether the agency can lawfully regulate nicotine-free e-liquids. See Nicopure Mem. at 9-14. Nicopure's CEO has averred that 83% of the company's products do contain nicotine, Stamler Decl. ¶ 14, so the challenge relates to a relatively small percentage of the liquids that Nicopure sells. The agency explains that the Deeming Rule only purports to regulate nicotine-free e-liquids in
There is no dispute in this case that e-liquids that are marketed as nicotine-free but that actually contain nicotine, and e-liquids that are tobacco-flavored, are clearly and unambiguously covered by the TCA's definition of "tobacco product," Chevron, 467 U.S. at 842, 104 S.Ct. 2778, because both are "made or derived from tobacco." 21 U.S.C. § 321(rr)(1).
The agency takes the position that it may lawfully regulate an e-liquid that does not contain nicotine as a "component" of a tobacco product where the e-liquid "is intended or reasonably expected to be used with or for the human consumption of a tobacco product (e.g., with liquid nicotine)." Deeming Rule, 81 Fed. Reg. at 29,017. The Court must give the term "component" its ordinary meaning, Petit, 675 F.3d at 781, and the burden is on the plaintiffs to show "that the statute unambiguously forecloses the agency's interpretation." Id., quoting Vill. of Barrington, 636 F.3d at 661 (emphasis in original).
Plaintiffs advance the theory that because "Congress defined `tobacco product' to mean a product `made or derived from tobacco[,] FDA does not have license to extend that definition to products not made or derived from tobacco, regardless of the circumstances." Pls.' Reply at 8. But plaintiffs are ignoring the applicable half of the statutory definition. The agency is not relying on a showing that nicotine-free e-liquids are "made or derived from tobacco" to justify its authority to regulate them; it contends that a nicotine-free e-liquid is a "component" of a tobacco product which is comprised of several components. Deeming Rule, 81 Fed. Reg. at 29,017.
So because plaintiffs have not met their burden to show "that the statute unambiguously forecloses the agency's interpretation," Vill. of Barrington, 636 F.3d at 661, the agency's interpretation can be upheld at Chevron step one.
In Count II of Nicopure's complaint, and in Count II of RSF's complaint, plaintiffs allege that the decision to subject companies to premarket review is arbitrary and capricious in violation of the Administrative Procedure Act. Nicopure Compl. ¶¶ 35-45; RSF Compl. ¶¶ 76-82. And in Count III of Nicopure's complaint and Count VIII of RSF's complaint, plaintiffs allege that the agency's cost-benefit analysis was unlawful because the agency failed to consider alternatives and failed to adequately quantify the costs and the benefits of the Deeming Rule. Nicopure Compl. ¶¶ 46-51; RSF Compl. ¶¶ 128-33.
Plaintiffs find fault in many aspects of the regulatory regime. But the requirements that plaintiffs claim are unreasonable flow automatically from the statute. Thus, the only issue to be resolved is whether the final agency action — the decision to deem ENDS products to be subject to the TCA — was arbitrary and capricious. The remainder of plaintiffs' concerns are better directed to Congress.
It is important to note at the outset that the decision to deem e-cigarettes to be tobacco products will not ban e-cigarettes from the market. It will unquestionably subject the products to heightened regulation, but the deeming decision does not — and could not — completely ban those products from the market. The question before the Court, therefore, is whether it was reasonable for the agency to conclude that vaping should no longer be completely unregulated, given the marked increase in use, the absence of any regulation of the products and manufacturers in the market, and the potential for public harm given the known dangers of nicotine.
Under the Administrative Procedure Act, 5 U.S.C. § 701 et seq., the agency's role is to resolve factual issues and arrive at a decision that is supported by the administrative record, and the court's role is to "determine whether or not as a matter of law the evidence in the administrative record permitted the agency to make the decision it did." Occidental Eng'g Co., 753 F.2d at 769-70, citing Overton Park, 401 U.S. at 415, 91 S.Ct. 814; see also
While the APA allows for judicial review of agency decisions for "[a] person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute," 5 U.S.C. § 702, agency action is unreviewable "to the extent that ... agency action is committed to agency discretion by law." Id. § 701(a)(2). Judicial review is foreclosed where the relevant statute is "drawn so that a court would have no meaningful standard against which to judge the agency's exercise of discretion." Heckler v. Chaney, 470 U.S. 821, 830, 105 S.Ct. 1649, 84 L.Ed.2d 714 (1985); see also Sierra Club v. Jackson, 648 F.3d 848, 855 (D.C. Cir. 2011); Steenholdt v. FAA, 314 F.3d 633, 638 (D.C. Cir. 2003). The Supreme Court has cautioned that this exception to the APA should be construed narrowly. See Webster v. Doe, 486 U.S. 592, 599, 108 S.Ct. 2047, 100 L.Ed.2d 632 (1988) ("[S]ubsection (a)(2) applies `in those rare instances where statutes are drawn in such broad terms that in a given case there is no law to apply.'"), quoting Overton Park, 401 U.S. at 410, 91 S.Ct. 814; Barlow v. Collins, 397 U.S. 159, 166, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970) ("Preclusion of judicial review ... is not lightly to be inferred."). The Court has recently cautioned that there is a "strong presumption" in favor of judicial review of administrative action, Mach Mining, LLC v. EEOC, ___ U.S. ___, 135 S.Ct. 1645, 1651, 191 L.Ed.2d 607 (2015), quoting Bowen v. Mich. Acad. of Family Physicians, 476 U.S. 667, 670, 106 S.Ct. 2133, 90 L.Ed.2d 623 (1986), which can be rebutted where a "statute's language or structure demonstrates that Congress wanted an agency to police its own conduct." Id.
The agency argues that its decision to deem is so committed to agency discretion that it is unreviewable. Defs.' Cross-Mem. at 39-40. It points to the deeming provision of the TCA, id. at 39, which gives the Secretary of HHS the authority to apply the TCA's provisions "to any other tobacco products that the Secretary by regulation deems to be subject to [the TCA]," 21 U.S.C. § 387a(b), and it argues that "Congress's choice of the deferential word `deems' and the absence of any standard — beyond the requirement that the product meet the definition of a `tobacco product' — demonstrate that Congress committed the exercise of this authority to the agency's broad discretion." Defs.' Cross-Mem. at 39.
The government relies primarily on Webster v. Doe, 486 U.S. 592, 108 S.Ct. 2047, 100 L.Ed.2d 632 (1988) for the proposition that the Secretary's decision to
The D.C. Circuit disagreed with government's reading of Webster in Marshall County Health Care Authority v. Shalala, 988 F.2d 1221 (D.C. Cir. 1993). In Marshall County, the government cited Webster for the proposition that it was the word "deem" in the National Security Act in Webster that made the Director's decision unreviewable. See id. at 1224. The Court of Appeals rejected that argument; it explained that that lack of justiciability in Webster stemmed not from the word "deem," but rather from the phrase "advisable in the interests of the United States." Id. And it noted that in Webster, "[t]he statute, after all, dealt with national security — an area in which the judiciary almost invariably defers to the executive branch." Id.
In this case, when the Secretary exercised the authority to "deem" e-cigarettes to be tobacco products, the agency was interpreting the statutory definition of "tobacco product." So while it is true that the statute did not provide standards for when and how the agency was to exercise its discretion to deem, the Court concludes that the decision is reviewable.
However, the language of the deeming provision — with its use of the words "may" and "deem," is the kind of language that, even if judicial review is permitted, "fairly exudes deference." Webster, 486 U.S. at 600, 108 S.Ct. 2047. And the Court of Appeals has reaffirmed that APA review in cases like this one should be undertaken with deference. See Nuclear Energy Inst., Inc. v. EPA, 373 F.3d 1251, 1289 (D.C. Cir. 2004) (advising that when a court reviews an agency's evaluation of "scientific data within its technical expertise," its review should be "extremely deferential"), quoting Huls Am. Inc. v. Browner, 83 F.3d 445, 452 (D.C. Cir. 1996). Courts review scientific judgments of the agency "not as the chemist, biologist, or statistician that [courts] are qualified neither by training nor experience to be, but as a reviewing court exercising [its] narrowly defined duty of holding agencies to certain minimal standards of rationality." Ctr. for Biological Diversity v. EPA, 749 F.3d 1079, 1087-88 (D.C. Cir. 2014) (quoting "[d]ecades of decisions" of the Court of Appeals on scientific deference), quoting Ethyl Corp. v. EPA, 541 F.2d 1, 36 (D.C. Cir. 1976). The Court's APA review must therefore be undertaken with that deference in mind.
The decision to deem e-cigarettes to be tobacco products is not arbitrary and capricious for a number of reasons. First and foremost, nicotine is indisputably
Second, the agency explained that "adolescents appear to be particularly vulnerable to the adverse effects of nicotine on the central nervous system," and that nicotine may have lasting effects on adolescent brain development. Id. at 29,029, 29,033. And the agency detailed the "alarming" rise in e-cigarette use by middle and high school students. Id. at 29,028. In particular, the agency cited data showing that "the rate of e-cigarette use" among high school students "increased from 1.7 percent in 2011 to 7.7 percent in 2013, and 2.7 percent of high school students who had never tried a cigarette indicated that they were considering using e-cigarettes in the next year." Id. While the agency acknowledged that "long-term studies are not yet available to determine whether these youth and young adults are only experimenting with tobacco use, becoming established ENDS users or dual users, or transitioning to combusted products," it also noted the absence of evidence that would enable it "to conclude that youth and young adults are using ENDS as a means to quit smoking." Id. The FDA also explained that "[r]esearchers noted that some teens are more likely to use e-cigarettes prior to combustible tobacco products for several reasons including the availability of e-cigarettes in flavors attractive to youth." Id. at 28,985.
Moreover, the increase in adolescent users is not the entire story. Among adults, the use of e-cigarettes has more than doubled between 2012 and 2014 — from 1.4 percent to 3.7 percent. See AR 23,871, AR 15,666. And the agency found that:
Deeming Rule, 81 Fed. Reg. at 28,985.
Furthermore, given the proliferation of these products, "[a]t present, there is significant variability in the concentration of chemicals amongst products — including variability between labeled content and concentration ... and actual content and concentration." Deeming Rule, 81 Fed. Reg. at 28,984. In other words, the manufacturers, if they remain unregulated, are free to mislabel their products without consequence. See id. at 29,034; id. at 29,029 ("Absent a regulatory standard, FDA acknowledges that it may not be possible to account for the wide variability of concentrations
In light of all of those findings, and in light of the deference that the Court must give the agency on APA review, the Court finds that there is a rational relationship between the facts found and the choice made. See Alpharma, 460 F.3d at 6. The Court's conclusion is buttressed by these Congressional findings in the TCA, which apply with equal force to the regulation of e-cigarettes:
Plaintiffs argue that the decision to deem e-cigarettes to be tobacco products is arbitrary and capricious because the Deeming Rule is "at war with itself regarding the rationale for regulating vaping products;" it will "undermine the TCA's core goal of reducing the deaths and disease resulting from use of tobacco products;" and it "fails to consider numerous alternatives that would avoid a `significant degree of product exit' while still achieving Congress's public-health objective." Nicopure Mem. at 15-26. And RSF seems to argue that the decision to subject e-cigarettes to the premarket review requirement is arbitrary and capricious because the agency "offers no evidence or explanation as to how such manufacturers will be able to conduct the necessary long-term clinical health studies, which FDA concedes do not exist, within the two year compliance period." RSF Compl. ¶ 79.
Once the Secretary of HHS made the decision to deem ENDS as tobacco products, the requirement of premarket review is established by statute. So the question is not whether it is arbitrary and capricious to make these plaintiffs comply with those requirements. The question is, instead, whether it was reasonable for the agency to determine that it was appropriate to subject ENDS products — the majority of which plaintiffs agree are covered by the statute — to the regulatory regime that Congress specifically determined must be imposed on all tobacco products.
Nicopure also argues that the Deeming Rule ignores evidence "that vaping products are far less risky than cigarettes." Nicopure Mem. at 19 (emphasis in original). It states that the agency has disregarded evidence that "inhalation of e-vapor `is of less risk to a user than the inhalation of ... smoke from combusted tobacco products,' and that use of vaping products `is likely less hazardous for an individual user than continued smoking of traditional cigarettes.'" Id., quoting Deeming Rule, 81 Fed. Reg. at 29,033, 29,035. For that reason, Nicopure argues that the Rule is "at war with itself." Nicopure Mem. at 15-16. But this argument is not persuasive. Just because there is evidence that e-cigarettes may be less risky than conventional cigarettes does not mean that e-cigarettes are not risky at all, and the agency detailed its concerns about the addictive nature and health risks of nicotine inhalation alone, particularly in adolescents. See Deeming Rule, 81 Fed. Reg. at 28,981 ("The Surgeon General has long recognized that the addictive nature of tobacco products is due to the presence of highly addictive nicotine that can be absorbed into the bloodstream."); id. at 28,983-85 ("FDA noted in the [notice of proposed rulemaking] that many public health benefits will flow from deeming tobacco products (including e-cigarettes and other ENDS). Even if a category of products were to prove generally beneficial, individual products within that category may raise concerns. For example, some products may be particularly attractive to youth or deliver unexpected high levels of toxicants.").
As the D.C. Circuit has explained, agencies "ha[ve] wide discretion to determine where to draw administrative lines," ExxonMobil Gas Mktg. Co. v. FERC, 297 F.3d 1071, 1085 (D.C. Cir. 2002), quoting AT & T Corp. v. FCC, 220 F.3d 607, 627 (D.C. Cir. 2000), and courts "are generally unwilling to review line-drawing performed by [the agency] unless a [challenger] can demonstrate that the lines drawn ... are patently unreasonable, having no relationship to the underlying regulatory problem." Id., quoting Cassell v. FCC, 154 F.3d 478, 485 (D.C. Cir. 1998). But agencies must also consider "reasonable alternatives" as part of the requirement of "reasoned decisionmaking." See Am. Gas Ass'n v. FERC, 593 F.3d 14, 19 (D.C. Cir. 2010); see also State Farm, 463 U.S. at 43, 103 S.Ct. 2856 (requiring agencies to "articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.").
Nicopure argues that the agency failed to "meaningfully" consider alternatives to the premarket review requirement, including three options in particular. Nicopure Mem. at 21. First, Nicopure contends that the agency should have waited to deem until the agency had "sufficient data to reach a conclusion — one way or the other — regarding the health effects of vaping products before choosing whether and how to regulate them." Id. at 23 (emphasis in original). Second, Nicopure contends that the agency should have adopted the European Union's approach to regulating vaping products, which includes many of the same requirements, but does not require premarket review. Id. at 24. Third, Nicopure faults the agency for failing to consider "crafting a streamlined [premarket review] process for products, such as vaporizers, that fall on the safer side of the risk continuum." Id.
The law is clear that plaintiffs are not entitled to the regulatory alternative that they prefer. Rather, the Court must give appropriate deference to the expertise of the agency, and ensure that the agency considered the alternatives proffered by the plaintiffs and rejected them for reasons that are rational.
And it bears repeating that premarket review is a creature of statute and not a new regulatory requirement dreamed up and imposed on ENDS manufacturers by the FDA. The EU model would subject manufacturers to disclosure, advertising, good manufacturing practices, misbranding,
Similarly, plaintiffs' argument about a "streamlined" premarket review process, see Nicopure Mem. at 24, finds little support in the TCA, and the agency appropriately rejected that argument as well. See Deeming Rule, 81 Fed. Reg. at 28,998. As the agency concluded, "all tobacco products going through the [premarket] pathway must meet all the requirements for a premarket authorization in section 910 of the [FDCA] before FDA can issue such an authorization." Id.
Finally, the agency did consider the suggestion that it should defer the deeming regulation indefinitely, and it rejected it, finding that it did not have to "meet a particular public health standard to deem tobacco products." See Deeming Rule, 81 Fed. Reg. at 28,983. And it supported its decision by setting out the public health benefits of the rule in great detail. Id. at 28,983-85.
In Count I of the Right to be Smoke-Free complaint, plaintiffs complain that under the Deeming Rule, no ENDS products will be able to utilize the substantial equivalence pathway for approval, and this will "effectively ban ENDS products from the marketplace." RSF Compl. ¶ 74. RSF alleges: "FDA had the authority and statutory duty to either establish a new Grandfather Date for ENDS products or apply its enforcement authority so that some ENDS manufacturers, including e-liquid companies, would have the opportunity to forego the [premarket review] pathway and avail themselves of the option to submit SE reports." Id. ¶ 75. But here again, RSF's complaint about the impact of the grandfather date provision is better directed to Congress than the FDA.
As the Court explained in the background section of this opinion, one way to get a new tobacco product approved under the TCA is to show that it is "substantially equivalent" to an existing tobacco product. 21 U.S.C. § 387j(a). This pathway is only available to existing or "predicate" products that had been "commercially marketed... in the United States as of February 15, 2007." 21 U.S.C. § 387j(a)(2)(A). So, to the extent that there were no "substantially equivalent" ENDS products on the market as of that date, the substantial equivalence pathway would not provide a pathway to seek approval of that product.
Thus, it was Congress that set the grandfather date in the TCA, and RSF has not pointed the Court to any authority for the proposition that the agency can ignore a statutory command. RSF argues that
The statute is clear, and FDA had no power to change it. So RSF's challenge to the grandfather date fails.
Under the terms of the Rule, a manufacturer who wishes to submit a premarket review application must do so by August 8, 2018 — twenty-four months after the Rule became effective. Deeming Rule, 81 Fed. Reg. at 28,978. After August 8, 2018, FDA will continue the compliance period for at least twelve more months, and, on a case-by-case basis, it will defer enforcement further to give the agency the time it needs to review and determine whether to grant the requests. Id.
RSF alleges in Count II that the agency's decision to establish a two-year compliance period to comply with the premarket review requirement was arbitrary and capricious because companies will not be able to complete the necessary applications in the required timeframe. RSF Compl. ¶¶ 77-82. The Court finds that the agency reasonably balanced the competing comments it received, from the view that FDA should "craft the [premarket review] process to acknowledge the position of e-cigarettes on the continuum of nicotine-delivering products," to the position that the FDA should "impose strict regulations on the sale of e-cigarettes, including extensive premarket review, to ensure that future generations are not burdened by nicotine addiction." Deeming Rule, 81 Fed. Reg. at 29,000.
The FDA explained:
Id. at 29,010
While other approaches may have been reasonable as well, the Court is not persuaded that the agency's decisions about whether to impose a compliance period at all, and how long a period would be necessary, are irrational given the range of viewpoints that had been presented during the notice and comment period. See Alpharma, 460 F.3d at 6. Therefore, the Court concludes that the agency's imposition of a compliance period did not violate the APA.
RSF argues that if the Deeming Rule is not vacated, "FDA risks banning or nearly eliminating the e-liquid and device categories from the market when the two year [premarket review] compliance period expires." RSF Mem. at 21. RSF is particularly concerned because premarket review applications usually require long-term clinical studies, and those studies do not currently exist. See id. at 25; see also Deeming Rule, 81 Fed. Reg. at 28,984, 29,028.
But the FDA specifically took that issue into consideration, and plaintiff's concerns are somewhat premature. The Deeming Rule recognizes that "in some cases, it may be possible for an applicant to obtain a [premarket review] authorization order without conducting any new nonclinical or clinical studies where there is an established body of evidence regarding the public health impact of the product." Deeming Rule, 81 Fed. Reg. at 28,997. And on the day that the agency promulgated the Deeming Rule, it also issued a draft guidance on premarket review applications. See Draft FDA Guidance for Industry, Premarket Tobacco Product Applications for Electronic Nicotine Delivery Systems (May 2016), AR 28,350. The guidance recognizes that a marketing authorization may issue "if there is an established body of evidence regarding the health impact (individual or population) of [a] product or a similar product that can be adequately bridged to [that] product, such as data from the published literature or government-sponsored databases." Id., AR 28,395-96.
In Count III of the Nicopure complaint and in Count VIII of the Right to be Smoke-Free complaint, plaintiffs allege that the Deeming Rule violates the APA because the agency's cost-benefit analysis was insufficient. Nicopure Compl. ¶¶ 47-51; RSF Compl. ¶¶ 129-33. But the agency was not required to undertake a cost-benefit analysis when it implemented the statutory deeming provision. And even if "some" cost-benefit analysis was required, the agency did "some" analysis in this case, and there is no legal authority for the proposition that the Court has the authority to review it de novo as plaintiffs seem to be asking it to do. Because the balance struck by the agency was reasonable, the Court finds that the cost-benefit analysis was adequate.
Plaintiffs point to the Supreme Court's recent decision in Michigan v. EPA, ___ U.S. ___, 135 S.Ct. 2699, 192 L.Ed.2d 674 (2015) as support for their
The opinion in Michigan v. EPA concerned the provision of the Clean Air Act related to electric utility steam generating units. 135 S.Ct. at 2705. In the Act, Congress directed the EPA to conduct a study of the public health hazards related to emissions from these power-plants, and it required the agency to regulate the emissions "if the Administrator finds such regulation is appropriate and necessary after considering the results of the study." 42 U.S.C. § 7412(n)(1)(A). Faced with this mandatory language, the EPA determined "that cost [made] no difference to the initial decision to regulate," Michigan, 135 S.Ct. at 2706, and it read the Clean Air Act to preclude the consideration of "any type of cost" as part of the decision of whether or not to regulate the emissions. Id. at 2707 (emphasis in original).
However, the Supreme Court ruled that it was implicit in the use of the specific words "appropriate and necessary" that some consideration of cost should be part of the analysis. Id. at 2707. Therefore, it concluded that "it was unreasonable for EPA to read § 7412(n)(1)(A) to mean that cost is irrelevant to the initial decision to regulate power plants." Id. at 2711.
Here the statutory provision at issue does not include the words that led the Supreme Court in Michigan v. EPA to call for some assessment of costs as part of the decision that had been delegated to the agency. The Tobacco Control Act mandates that tobacco products "shall" be regulated by the Secretary, and it requires that its provisions be applied not only to conventional cigarettes, but also to "any other tobacco products that the Secretary by regulation deems to be subject to this chapter." 21 U.S.C. § 387a(b). The statute does not limit the Secretary's authority to deem to when he finds it "appropriate and necessary" to do so. Therefore, plaintiffs can point to no source for a requirement that costs be taken into account when the deeming power is exercised, and Michigan v. EPA is distinguishable.
Plaintiffs have scoured the rest of the statute, though, and they point to one of the ten stated purposes of the TCA: "to impose appropriate regulatory controls on the tobacco industry." Nicopure Mem. at 27, quoting TCA § 3(8). They argue that the use of the word "appropriate" in the background section of the statute requires the agency to evaluate costs when exercising its authority under the deeming provision. Id. But plaintiffs have not pointed to any legal precedent that would authorize a court to add limits to a statutory provision that contains no limits simply because the word "appropriate" can be found in another part of the legislation, much less any case law that would imply statutory prerequisites from a general, introductory statement of purpose. Michigan v. EPA certainly does not go that far.
Moreover, the problem in Michigan was that the agency failed to conduct any cost-benefit analysis at all, and the Court concluded that the "appropriate and necessary" language gave rise to a requirement to conduct some consideration of costs. Michigan, 135 S.Ct. at 2711 (holding that it was "unreasonable for EPA to read § 7412(n)(1)(A) to mean that cost is irrelevant to the initial decision to regulate power plants," and requiring the agency to "consider cost — including, most importantly, cost of compliance — before deciding whether regulation is appropriate and necessary"). The Court made it quite clear that it did not read the statute to require a formal cost-benefit analysis, and it underscored that it would not dictate what the assessment should consist of.
Id.
Here, the administrative record reflects that the agency expressly considered both the burdens the decision would impose on the vaping industry and the benefits to the public. See Deeming Rule, 81 Fed. Reg. at 28,980. Thus, even if the agency was bound by the decision in Michigan v. EPA to pay "some attention to cost," 135 S.Ct. at 2707, that was done in this case, and the decision cannot be overturned on that basis.
Plaintiffs contend that the Court should reject the outcome of the agency's assessment of costs and benefits under the APA. But the Supreme Court made it clear in that even when such an analysis is required, the Court cannot review it de novo. See Michigan, 135 S.Ct. at 2711 ("It will be up to the agency to decide (as always, within the limits of reasonable interpretation) how to account for cost.").
In situations where a cost-benefit analysis is required by the applicable statute, the Court must analyze the agency's decision making with deference. See Consumer Elecs. Ass'n v. FCC, 347 F.3d 291, 303 (D.C. Cir. 2003) (holding that the principle set forth in State Farm 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 policies"), quoting Ctr. for Auto Safety v. Peck, 751 F.2d 1336, 1342 (D.C. Cir. 1985); see also Am. Trucking Ass'ns, Inc. v. Fed. Motor Carrier Safety Admin., 724 F.3d 243, 254 (D.C. Cir. 2013) ("It is not for us to undertake our own economic study and substitute the Court's views for those of the agency."). When a court reviews a challenge to an agency's cost-benefit analysis, its role is limited to determining "whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment," Ctr. for Auto Safety, 751 F.2d at 1342, quoting State Farm, 463 U.S. at 43, 103 S.Ct. 2856, because "[s]uch cost-benefit analyses epitomize the types of decisions that are most appropriately entrusted to the expertise of an agency." Id., quoting Office of Commc'n of United Church of Christ v. FCC, 707 F.2d 1413, 1440 (D.C. Cir. 1983). Thus, the plaintiffs must overcome a high threshold to show error. Am. Trucking Ass'ns, 724 F.3d at 254, quoting NAHB, 682 F.3d at 1040. With that deference in mind, the Court concludes that the balance the agency struck in this case was reasonable.
The FDA prepared a Regulatory Impact Analysis which weighed the costs and benefits of the Deeming Rule, see AR 23,912-24,067 ("RIA"). In the RIA, the agency described the benefits of the Deeming Rule as "potentially coming from":
Id. at AR 23,978. While the agency conceded that it could not "quantify the benefits of the final rule due to lack of information and substantial uncertainties associated with estimating its effects," it concluded that the rule was justified in light of those "welfare gains." Id. It explained:
Id. at 23,973. While the agency conceded in the RIA that "[r]eliable evidence on the impacts of ... premarket review, and marketing restrictions on users of ... ENDS does not, to our knowledge, exist," it concluded that the Deeming Rule was justified by "the welfare gains" of the rule, which "would be equal to the value that affected individuals attribute to mechanisms that better align consumption and production decisions with socially optimal patterns." Id.
And as to costs, the agency began its assessment in the RIA by attempting to quantify the number of affected entities. It found that "the baseline number of manufacturers and importers of ENDS products is uncertain," but it estimated that there were between 640 and 800 ENDS devices on the market, and between 19,900 to 79,800 e-liquid mixtures on the market. RIA, AR 23,980, 23,989 (Table 6). In light of an industry survey that found that "[t]oo many companies are making e-liquid in their kitchens/bathrooms," the FDA concluded that "few if any of [those companies] will continue to manufacture after this final rule takes effect," and so it limited its analysis to "the formal manufacturers in the market." Id. at 23,980.
The agency identified three main potential costs: product consolidation, compliance, and market adjustment.
Taking all of those costs together, the agency estimated in the RIA the quantified and unquantified costs of the Deeming Rule to the ENDS industry:
The RIA measured the Deeming Rule's potential value "by dividing its total costs by the number of people expected to benefit from it." Id. at AR 24,026-27. It explained that the basis for this calculation is that it "measures what the rule's expected beneficiaries would need to be willing to pay on average for the rule in order for the benefits to equal the costs." Id. at AR 24,027.
The RIA's "primary estimate of the value of costs of this final rule, annualized over 20 years, is $66.4 million with a 3 percent discount rate and $77.1 million with a 7 percent discount rate." RIA, AR 24,027. And the agency cited data in the RIA showing approximately 34.9 million users of newly-deemed tobacco products. Id. So the RIA concluded that the "break-even
FDA incorporated the RIA's analysis into the Deeming Rule. Deeming Rule, 81 Fed. Reg. at 28,980-81. The agency concluded in the Rule that "[t]he direct benefits of making each of the newly deemed tobacco products subject to the requirements of [the FDCA] are difficult to quantify," so it did not "predict the size of these benefits at this time." Id. And the agency summarized the quantified costs over a twenty year period in a table. Id. Based on that analysis, the agency concluded that "the benefits of the final rule justify the costs."
Id.
Plaintiffs argue that "conducting a cost-benefit analysis is not the same as conducting a reasoned cost-benefit analysis," and they identify four reasons why the agency's cost-benefit analysis should be found to violate the APA. Nicopure Mem. at 27-32.
First, plaintiffs argue that in failing to quantify the benefits of the rule, the agency "shirk[ed] a statutory responsibility simply because it [was] difficult." Id. at 27-28, quoting NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010). They posit that "[a]n agency cannot realistically determine that a rule's benefits justify its costs if it does not have at least a general grasp of the rule's benefits." Id. at 28. While it is true that the agency concluded that the "direct benefits [of the Deeming Rule] ... are difficult to quantify" monetarily, it is disingenuous to argue that the agency did not articulate "at least a general grasp of the rule's benefits," because the RIA provided substantial detail on the benefits of the rule, and the reasons why quantification was not possible. See RIA, AR 23,973-78. And, as noted above, there was no statutory duty to quantify the benefits at all, and even if such a duty can be implied from a statutory provision that lacks any requirement that the agency must find regulation to be "appropriate and necessary," Michigan v. EPA does not require that the benefits be quantified in any particular way when compared to the costs.
Second, plaintiffs contend that the FDA "substantially understate[d] the Rule's costs" because its estimates on the costs of premarket review are "divorced from reality," and because the agency failed to quantify a number of impacts, such as the "market adjustment (friction) costs" of lost revenues, job losses, and companies leaving the industry. Nicopure Mem. at 29-30, quoting Deeming Rule, 81 Fed. Reg. at 29,075. But the Court is not empowered to "undertake [its] own economic study and
Third, plaintiffs argue that "FDA loads the dice" because it excludes the unquantified costs from its break-even analysis. Nicopure Mem. at 31. According to the agency, the break-even analysis must, by design, include only the quantifiable costs, AR 24,026-27 ("Without being able to quantify the rule's benefits, a measure with which a rule's potential value can be compared is obtained by dividing its total costs by the number of people expected to benefit from it."), and Nicopure does not offer anything beyond its sharp language to explain why this approach is unreasonable.
Finally, plaintiffs argue that the Deeming Rule "fails to determine whether the cost of regulating [ENDS] products is justified by the benefits associated with such regulation." Nicopure Mem. at 32. But 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. And while the Deeming Rule did not directly weigh the costs of vaping against the benefits, it did separately address the costs to each of the regulated product categories, including the overall costs to the vaping industry. See, e.g., RIA, AR 24,025-26. Plaintiffs admit that they lack legal authority for their argument, Pls.' Reply at 27, and they rely solely on the conclusory argument that the agency's decision lacked reason. Id.
While plaintiffs would surely have assessed the various costs and benefits in a different manner, the Court does not have the power to take up the agency's analysis de novo. See Michigan, 135 S.Ct. at 2711. Given the agency's careful assessment of the costs and benefits to the entire ENDS industry, the Court finds that the agency considered the relevant factors and did not make a "clear error of judgment" when it exercised its discretion to deem electronic cigarettes to be tobacco products under the TCA and therefore subject to the statutory premarket review requirements. Ctr. for Auto Safety, 751 F.2d at 1342.
RSF alleges in Count VII that the agency violated the Regulatory Flexibility Act, as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. § 601, et seq., by failing to consider significant alternatives to the Deeming Rule, and by failing to appropriately balance the costs and benefits of the Deeming Rule on small businesses. RSF Compl. ¶¶ 119-27.
"The Regulatory Flexibility Act requires that agencies issuing rules under the Administrative Procedure Act publish a final regulatory flexibility analysis." Nat'l Tel. Coop. Ass'n v. FCC, 563 F.3d 536, 540 (D.C. Cir. 2009), citing 5 U.S.C. § 604. As the Court of Appeals has explained:
Id., quoting 5 U.S.C. § 604(a)(6).
But the statute's "requirements are `[p]urely procedural.'" Id., quoting U.S. Cellular Corp. v. FCC, 254 F.3d 78, 88 (D.C. Cir. 2001). While the statute sets out "precise, specific steps an agency must take," Aeronautical Repair Station Ass'n, Inc. v. FAA, 494 F.3d 161, 178 (D.C. Cir. 2007), it "imposes no substantive constraint on agency decisionmaking." Nat'l Tel. Coop. Ass'n, 563 F.3d at 540. The statute simply requires agencies to publish analyses that address specific topics, and if it does so, it has complied with the Regulatory Flexibility Act. Id.
Here, the agency completed a Regulatory Impact Analysis which contains a discussion of all of the required topics: The agency explained the purpose of the Deeming Rule. RIA, AR 23,969-73; see 5 U.S.C. § 604(a)(1). It responded to the comments to the initial regulatory flexibility analysis. AR 23,918-69; see 5 U.S.C. § 604(a)(2)-(3). It estimated the number of small businesses that the Deeming Rule would affect. AR 23,039-42; see 5 U.S.C. § 604(a)(4). It described the reporting, recordkeeping, and compliance costs. AR 23,991-24,026; see 5 U.S.C. § 604(a)(5). And it discussed significant proposed alternatives. AR 24,033-38; see 5 U.S.C. § 604(a)(6).
RSF argues that the agency violated the Regulatory Flexibility Act because it did not consider any alternatives to the burdens of the premarket review process, such as extending the two-year compliance period for premarket applications to be filed. RSF Mem. at 32-33. But the agency did specifically respond to concerns raised about the two-year compliance period. See Deeming Rule, 81 Fed. Reg. at 28,997-98 (explaining the agency's response to comments — on both sides of the issue — about the length of the compliance period). And even if an agency's explanation could be open to debate, the Regulatory Flexibility Act "requires nothing more than that the agency file a [final Regulatory Flexibility Analysis] demonstrating a `reasonable, good-faith effort to carry out [the statute]'s mandate.'" U.S. Cellular, 254 F.3d at 88, quoting Alenco Commc'ns, Inc. v. FCC, 201 F.3d 608, 625 (5th Cir. 2000).
Because the agency complied with the procedural requirements of the Regulatory Flexibility Act, judgment will be entered in favor of defendants on Count VII of RSF's complaint.
Count III of the Right to be Smoke-Free complaint alleges that the TCA — not the Deeming Rule — violates the equal protection clause and RSF's right to substantive due process. RSF Compl. ¶¶ 83-89. Since RSF has abandoned the equal protection argument,
The Due Process Clause provides that "[n]o person shall be ... deprived of life, liberty, or property, without due process of law." U.S. Const. amend. V. "The first inquiry in every due process challenge is whether the plaintiff has been deprived of a protected interest in `property' or `liberty.'" Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 59, 119 S.Ct. 977, 143 L.Ed.2d 130 (1999). Fundamental liberty interests are those that "are, objectively, deeply rooted in this Nation's history and tradition and implicit in the concept of ordered liberty, such that neither liberty nor justice would exist if they were sacrificed." Washington v. Glucksberg, 521 U.S. 702, 720-21, 117 S.Ct. 2258, 138 L.Ed.2d 772 (1997). For a law to permissibly infringe on an individual's fundamental liberty interest, it must be narrowly tailored to serve a compelling government interest. Id. at 721, 117 S.Ct. 2258. By contrast, when a law infringes on a nonfundamental liberty interest, it will be upheld unless there is "no `rational relationship between [the law] and some legitimate governmental purpose.'" Gordon v. Holder, 721 F.3d 638, 656 (D.C. Cir. 2013), quoting Am. Bus. Ass'n v. Rogoff, 649 F.3d 734, 742 (D.C. Cir. 2011).
It bears noting that RSF has not pointed to any fundamental right or liberty interest affected by the TCA, see RSF Compl. ¶¶ 83-89; RSF Mem. at 38-40. But when one applies the rational basis test that RSF concedes is appropriate, RSF Mem. at 38-39, the TCA passes muster.
RSF asks the Court to find that the TCA is unconstitutional because it creates a premarket review system that plaintiff feels it will never be able to satisfy. RSF Mem. at 39-40. But rational basis review "is not a license for courts to judge the wisdom, fairness, or logic of legislative choices, FCC v. Beach Commc'ns, Inc., 508 U.S. 307, 315, 113 S.Ct. 2096, 124 L.Ed.2d 211 (1993), and courts must uphold legislation "[e]ven if the classification involved... is to some extent both underinclusive and overinclusive." Vance v. Bradley, 440 U.S. 93, 108, 99 S.Ct. 939, 59 L.Ed.2d 171 (1979). Here, a rational basis can be discerned on the face of the TCA. See Gordon, 721 F.3d at 657 ("Although we are by no means restricted to the stated reasons for passing a law in our search for a `rational basis,' we need look no further than the statute itself to discern three rational bases for the [law]."), quoting Beach Commc'ns, 508 U.S. at 315, 113 S.Ct. 2096. Congress set forth a number of rational reasons for the premarket review requirement in the purposes section of the TCA: "to authorize the Food and Drug Administration to set national standards controlling the manufacture of tobacco products;" "to provide new and flexible enforcement authority to ensure that there is effective oversight of the tobacco industry's efforts to develop, introduce, and promote less harmful tobacco products;" "to ensure that consumers are better informed," and "to impose appropriate regulatory controls on the tobacco industry." TCA §§ 3(3), (4), (6), (8).
Because the TCA has a rational basis, judgment will be entered for defendants on RSF's due process challenge.
In the Tobacco Control Act, Congress directed the FDA to promulgate regulations restricting the distribution of free samples of tobacco products. TCA § 102. The statute also amended the Food, Drug, and Cosmetic Act to require manufacturers to apply for approval before they could market any tobacco product with a claim that it was "for use to reduce harm or the risk of tobacco-related disease associated with commercially marketed tobacco products." TCA § 101; 21 U.S.C. § 387k(b)(1). Nicopure and RSF allege that application of these statutory requirements to the vaping industry violates the First Amendment.
Count IV of both the Nicopure and RSF complaints alleges that the ban on the distribution of free samples of vaping devices or e-liquids is an unconstitutional restraint on the right to free speech. Nicopure Compl. ¶ 55; RSF Compl. ¶¶ 93-100. Plaintiffs also allege — in Count IV of the Nicopure complaint and Count V of the RSF complaint — that the TCA's regulation of "modified-risk" statements violates their First Amendment Rights. Nicopure Compl. ¶ 54; RSF Compl. ¶¶ 102-10.
It is questionable whether the mere distribution of a product sample rises to the level of constitutionally protected expression at all. But even if the claimed communicative element inherent in this practice implicates the First Amendment, the Supreme Court has made it clear that "when `speech' and `nonspeech' elements are combined in the same course of conduct, a sufficiently important governmental interest in regulating the nonspeech element can justify incidental limitations on First Amendment freedoms." United States v. O'Brien, 391 U.S. 367, 376, 88 S.Ct. 1673, 20 L.Ed.2d 672 (1968). Under the O'Brien test, "a government regulation is sufficiently justified if it is within the constitutional power of the Government; if it furthers an important or substantial governmental interest; if the governmental interest is unrelated to the suppression of free expression; and if the incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of that interest." Id. at 377, 88 S.Ct. 1673. To be upheld, though, a regulation must leave open ample alternative channels for communication. Clark v. Cmty. for Creative Non-Violence, 468 U.S. 288, 293, 104 S.Ct. 3065, 82 L.Ed.2d 221 (1984); see also Edwards v. District of Columbia, 755 F.3d 996, 1002 (D.C. Cir. 2014).
Moreover, to the extent the TCA regulates speech directly, it is well established that "[t]he constitution ... accords a lesser protection to commercial speech than to other constitutionally guaranteed expression." Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n, 447 U.S. 557, 562-63, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980), citing Ohralik v. Ohio State Bar Ass'n, 436 U.S. 447, 456, 98 S.Ct. 1912, 56 L.Ed.2d 444 (1978). In Central Hudson, the Supreme Court established a four-part test for determining whether the regulation of commercial speech violates the First Amendment; the court is required to ask: (1) is the expression protected by the First Amendment? (2) is the asserted government interest substantial? (3) does the regulation directly advance the governmental interest? and (4) is the regulation more extensive than is necessary to serve that interest? Id. at 566, 100 S.Ct. 2343. As the Ninth Circuit recently observed in Retail Digital Network, LLC v. Prieto, No. 13-56069, 861 F.3d 839, 845-46, 2017 WL 2562047, at *6 (9th Cir. June 14, 2017), while the Supreme Court "has engaged in considerable debate about the contours of
For the reasons set forth below, the Court concludes that the distribution of free samples is not protected speech, and that even if the act of handing out one's product involves some expression, the FDA's restriction of this activity passes the O'Brien and Central Hudson tests. See S.F. Arts & Athletics, Inc. v. U.S. Olympic Comm., 483 U.S. 522, 535-537, 537 n.16, 107 S.Ct. 2971, 97 L.Ed.2d 427 (1987) (evaluating a law under O'Brien and Central Hudson together because "their application ... is substantially similar"). The Court also concludes that the TCA's regulation of modified risk statements in this commercial setting satisfies Central Hudson. Both aspects of the statute, now extended to electronic nicotine delivery systems by virtue of the Deeming Rule, directly advance a substantial government interest, and neither is more extensive than necessary.
Plaintiffs argue that in light of the Supreme Court's decision in Sorrell v. IMS Health, 564 U.S. 552, 131 S.Ct. 2653, 180 L.Ed.2d 544 (2011), the regulations under review must be subjected to the heightened scrutiny that applies to content-based restrictions on speech. Nicopure Mem. at 34. But the Sorrell opinion did not alter or replace the Central Hudson immediate scrutiny standard to be applied to commercial speech, and indeed, the Court struck down the state statute involved by invoking the elements of the Central Hudson test.
In Sorrell, the Supreme Court examined a Vermont law which restricted the sale, disclosure, or use of prescriber-identifying information by pharmacies for marketing purposes, and the disclosure of the information to drug manufacturers in particular. 564 U.S. at 558-59, 131 S.Ct. 2653. At the outset, the Court determined whether the law involved a restriction based on the content of the communication or the identity of the speaker, and it determined, in that context, that a regulation on the dissemination of information — that it could be provided to some but not others, and for some purposes but not others — was a pure content-based restriction on speech that was subject to heightened scrutiny under the First Amendment. Id. at 563-64, 131 S.Ct. 2653.
The D.C. Circuit has not yet addressed the question of whether Sorrell calls for a new approach to regulations of commercial
So to the extent the Court finds that the TCA restricts commercial speech, it will apply the Central Hudson test.
The regulation of pure conduct does not ordinarily implicate First Amendment concerns. While the Supreme Court "has applied First Amendment scrutiny to a statute regulating conduct which has the incidental effect of burdening the expression of a particular political opinion," Arcara v. Cloud Books, Inc., 478 U.S. 697, 702, 106 S.Ct. 3172, 92 L.Ed.2d 568 (1986), citing O'Brien, 391 U.S. at 367, 88 S.Ct. 1673, the Court has emphasized that this doctrine has boundaries.
O'Brien, 391 U.S. at 376, 88 S.Ct. 1673. With that in mind, the Court has observed that an activity affected by a generally applicable governmental regulation must have "a significant expressive element" to warrant First Amendment protection. Arcara, 478 U.S. at 706-07, 106 S.Ct. 3172.
In Arcara, the district attorney brought an action under a New York public nuisance statute to shut down an adult book store, alleging that the owners were aware that the solicitation of prostitution and sexual activity were occurring openly on the premises. Id. at 698-99, 106 S.Ct. 3172. The owners of the store opposed the action on First Amendment grounds, arguing that the closure of the establishment would interfere with their First Amendment right to sell books. Id. at 700, 106 S.Ct. 3172. The New York Court of Appeals held that it was necessary to analyze the regulation under the O'Brien test because the closure order would impose an incidental burden on the owners' bookselling activities.
Since Arcara, the D.C. Circuit has explained that a District of Columbia law imposing a curfew on juveniles did not regulate expressive conduct at all, holding that while the curfew restriction "regulates the activity of juveniles during nighttime hours[,] it does not, by its terms, regulate expressive conduct." Hutchins v. District of Columbia, 188 F.3d 531, 548 (D.C. Cir. 1999).
This case does not involve symbolic action undertaken to convey a political message, and even any commercial message is entirely unstated. Plaintiffs argue that "sampling is essential to educating consumers and obtaining immediate, spontaneous feedback from the market." Pls.' Reply at 33. But this does not suggest that distributing samples conveys any particular message. Indeed, plaintiffs describe the activity in terms of its desired effect rather than its meaning: "sampling is an effective means of communicating and encouraging consumers `to try different and new ... products, enabling them to learn about their own preferences and possibly change their purchasing behavior as a result.'" Id., quoting AR 24,014. Plaintiffs add: "[i]nherent in sampling is an intent to inform consumers about a product's characteristics and quality." Id. at 32. But the fact that plaintiffs cannot even clearly articulate what implicit statement is allegedly being made, and they can say no more than "inherent in sampling is an intent," reveals that there is little likelihood that the message will be clearly understood by others.
Even if the Court were to view the distribution of free samples as inherently expressive — "try this!" — that limited message is not a "significant element" of the conduct being regulated. All sellers of products are animated by the intent that first time customers will become aware of a product's quality or value and the hope that those consumers will continue to purchase the product in the future. But courts have found that sale of products in general, and the sale of cigarettes in particular, is not protected speech. See Philip Morris USA, Inc. v. City & Cty. of San Fran., 345 Fed.Appx. 276, 277 (9th Cir. 2009) ("Selling cigarettes isn't [protected expressive activity] because it doesn't involve conduct with a `significant expressive element.' It doesn't even have `an expressive component.'"), quoting Arcara, 478 U.S. at 701-02, 106 S.Ct. 3172; Talk of the Town v. Dep't of Fin. & Bus. Servs., 343 F.3d 1063, 1069 (9th Cir. 2003). If "buy this!" is not expression, then handing the merchandise out for free does not change the analysis.
The authorities plaintiffs cite do not require a different outcome. Plaintiffs rely on Discount Tobacco City & Lottery, Inc. v. United States, 674 F.3d 509 (6th Cir. 2012), but the relevant portion of that case involved a challenge to a multi-part marketing regulation that not only banned the distribution of free samples, but also
Here, the sample ban is not part of a broader restriction on the marketing of e-cigarettes,
The second case plaintiff cites, Bailey v. Morales, 190 F.3d 320 (5th Cir. 1999), is not binding in this Circuit, and it can be distinguished from the case at hand. Bailey concerned a criminal statute that banned doctors from giving anything of value to prospective patients. Id. at 325. The Fifth Circuit held that giving something of value conveyed the following message: "hire me, try my service," id., and that the message was likely to be understood.
But this Court is not necessarily persuaded that this rises to the level of a constitutionally protected "significant expressive element." Also, Bailey involved the exchange of something of value for a prospective customer's business, which would typically result after a more explicit conversation. That alone reduces the communicative aspect of the conduct. Rumsfeld v. Forum for Academic & Institutional Rights, Inc., 547 U.S. 47, 66, 126 S.Ct. 1297, 164 L.Ed.2d 156 (2006) ("The expressive component of a law school's actions is not created by the conduct itself but by the speech that accompanies it. The fact that such explanatory speech is necessary is strong evidence that the conduct ... is not so inherently expressive that it warrants protection under O'Brien.").
Finally, the Bailey regulation was designed to prohibit a quid pro quo, and that bargain ("If you give me this, I will give you that") was the mutually understood message the Fifth Circuit felt obligated to protect. But the distribution of free samples does not communicate a request for reciprocation, and there is no obvious common understanding of some meaning that has been conveyed.
The government argues that if prohibiting sales at wholesale prices and banning coupons are not restrictions on speech, then neither is a ban on free samples. Defs.' Cross-Reply at 18-19. While plaintiffs assert that free samples allow sellers to "inform consumers about a product's characteristics and quality," Pls.' Reply. at 32, and that they are an "effective means of communicating and encouraging consumers `to try different and new ... products,'" id. at 33, quoting AR 24,014, coupons and promises of lower prices do the same. Plaintiffs note that the price regulation cases "distinguish sampling as an activity and limit their holdings to price regulation." Id., citing Nat'l Ass'n of Tobacco Outlets, 731 F.3d at 78 n.7 ("We need not here consider the persuasive value of [free sample cases because] they did not involve price regulation, but rather the provision of free samples and promotional gifts."). But the cases offer no persuasive reason for drawing the distinction.
For these reasons, the Court concludes that the distribution of free samples is not sufficiently expressive to constitute protected speech, and that the regulation promulgated by the FDA in accordance with the instructions set forth in the TCA is a regulation of conduct, with, at most, an incidental burden on commercial speech. This means that if the First Amendment applies at all, O'Brien is the appropriate test.
The Supreme Court took this approach in Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 121 S.Ct. 2404, 150 L.Ed.2d 532 (2001), when it applied O'Brien to a Massachusetts sales practices regulation because "Massachusetts seeks to regulate the placement of tobacco products for reasons unrelated to the communication of ideas." Id. at 569, 121 S.Ct. 2404. The Court held:
Id. at 570, 121 S.Ct. 2404. For the same reasons, the restrictions on distributing free samples withstand First Amendment scrutiny.
But even if one were to conclude that the ban is a regulation of speech, the legislation also satisfies the Central Hudson factors.
The Central Hudson test asks whether the expression that is being regulated
The FDA asserts that it has a substantial interest in preventing children and adolescents from gaining access to tobacco products. See Deeming Rule, 81 Fed. Reg. at 28,996. The Supreme Court has recognized that the state has a substantial interest in preventing youth tobacco use. Lorillard, 533 U.S. at 555, 564, 121 S.Ct. 2404. And plaintiffs concede that the FDA has asserted a substantial interest — to "eliminate a pathway for youth access to Tobacco products." Nicopure Mem. at 36, quoting Deeming Rule, 81 Fed. Reg. 28,973, 28,996. So this factor has been established.
The third Central Hudson question is whether the regulation directly and materially advances the substantial governmental interest. Cent. Hudson, 447 U.S. at 566, 100 S.Ct. 2343.
The government's burden "is not satisfied by mere speculation or conjecture; rather, a governmental body seeking to sustain a restriction on commercial speech must demonstrate that the harms it recites are real and that its restriction will in fact alleviate them to a material degree." Greater New Orleans Broad. Ass'n v. United States, 527 U.S. 173, 188, 119 S.Ct. 1923, 144 L.Ed.2d 161 (1999), quoting Edenfield v. Fane, 507 U.S. 761, 770-71, 113 S.Ct. 1792, 123 L.Ed.2d 543 (1993). So, "the regulation may not be sustained if it provides only ineffective or remote support for the government's purpose." Id., quoting Cent. Hudson, 447 U.S. at 564, 100 S.Ct. 2343.
The Supreme Court does not, however, "require that `empirical data come ... accompanied by a surfeit of background information," and it has "permitted litigants to justify speech restrictions by reference to studies and anecdotes pertaining to different locales altogether, or ... to justify restrictions based solely on history, consensus, and `simple common sense.'" Lorillard, 533 U.S. at 555, 121 S.Ct. 2404, quoting Florida Bar v. Went For It, Inc., 515 U.S. 618, 628, 115 S.Ct. 2371, 132 L.Ed.2d 541 (1995). An agency may rely on evidence generated by analogous situations "so long as whatever evidence the [agency] relies upon is reasonably believed to be relevant to the problem the [regulation] addresses." Hutchins, 188 F.3d at 569, quoting City of Renton v. Playtime Theatres, Inc., 475 U.S. 41, 51-52, 106 S.Ct. 925, 89 L.Ed.2d 29 (1986).
On this issue, the Sixth Circuit's analysis in Discount Tobacco comes out strongly on the side of the defendant. When the court was asked to evaluate a sampling ban on cigarettes, it observed that the FDA had proven that free samples of cigarettes were an "easily accessible source of the[] products to young people," 674 F.3d at 541, quoting 61 Fed. Reg. 44,460, and "freely obtainable, even with the tobacco industry's `voluntary codes that supposedly restrict distribution of free samples to underaged persons.'" Id., quoting 61 Fed. Reg. at 45,244-45 & nn.1206-08. Consequently, the Sixth Circuit concluded that "[b]anning such practices embodie[d] a narrow fit between the harm articulated
The FDA seeks to ban the distribution of free samples of e-cigarettes because they are "a pathway for youth to access tobacco products, which can help in reducing youth initiation." Deeming Rule, 81 Fed. Reg. at 28,986. It has produced substantial evidence that its free sample ban will directly reduce access to vaping products by minors. The Deeming Rule noted that "[f]ree samples give young people a risk-free and cost-free way to satisfy their curiosity about tobacco products, and, when distributed at cultural or social events, may increase social pressure on young people to accept and use the samples." Id., quoting 60 Fed. Reg. 41314, 41326. The FDA also pointed to anecdotal evidence of "extensive sampling of some newly deemed products in venues that attract youth, including" venues with large audiences, music festivals, and motorsport events, id., and cited a study by the Institute of Medicine of the National Academies, "Growing up Tobacco Free: Preventing Nicotine Addiction in Children and Youths," 1994, http://www.nap.edu/catalog/4757.html, and a study by Senator Richard Durbin. Durbin, R., et. al., "Gateway to Addiction? A Survey of Popular Electronic Cigarette Manufacturers and Targeted Marketing to Youth," April 14, 2014.
The Institute of Medicine study demonstrates that youth are more likely to experiment with cigarettes when exposed to them via free samples, and the Durbin study demonstrates that youth are very likely to be exposed to offers of free samples of e-cigarettes. Applying "simple common sense," Lorillard, 533 U.S. at 555, 121 S.Ct. 2404, the Court finds that all of this evidence goes well beyond the level of "conjecture and unproven belief." See Nicopure Mem. at 36.
And Nicopure's insistence that the FDA must show that minors in fact received e-cigarettes as free samples at one of the events "calls for an absurd preciseness," that is not necessary under Central Hudson. Hutchins, 188 F.3d at 544 (rejecting the assertion that the District of Columbia prove that its curfew resulted in a drop in juvenile arrests when it had relied on evidence from other cities that curfews reduce arrests). Because the FDA has shown that free e-cigarette samples will encourage youth initiation into use of electronic tobacco products, it has met its burden.
Finally, Central Hudson requires that the regulation may not be more extensive than necessary to serve the government's interest. Cent. Hudson, 447 U.S. at 566, 100 S.Ct. 2343. Central Hudson "requires something short of a least-restrictive-means standard," Bd. of Trs. v. Fox, 492 U.S. 469,
In Trans Union Corp. v. FTC, 267 F.3d 1138 (D.C. Cir. 2001), the D.C. Circuit upheld a statute that allowed consumers to "opt out" of allowing telecommunication companies to sell their credit information despite the existence of a "marginally less intrusive" option that would have allowed them to "opt in," because "a regulation is not ... invalid simply because a court concludes that the government's interest could be adequately served by some less-speech-restrictive alternative." Id. at 1142, quoting Turner Broad. Sys., Inc. v. FCC, 520 U.S. 180, 217-18, 117 S.Ct. 1174, 137 L.Ed.2d 369 (1997). And the Supreme Court has held that the ability to advertise through telephone directories, legal directories, newspapers, billboards, radio, television, and recorded messages accessible through telephone were "ample alternative channels for receipt of information" sufficient to justify a regulation on direct mail. Went For It, 515 U.S. at 634, 115 S.Ct. 2371.
Plaintiffs assert that a ban on sampling is more extensive than necessary because "free samples are `necessary to convince cigarette users to switch to' vaping because `the[] products are new.'" Nicopure Mem. at 37-38, quoting Deeming Rule, 81 Fed. Reg. at 29,054. Nicopure asserts that less restrictive alternatives such as (1) "limiting of free samples to adults at qualified-adult only facilities," (2) "prohibiting samples from leaving store premises," and (3) "prohibiting the distribution of free samples at public events" would be sufficient. Id. at 38.
But the FDA permissibly rejected these alternatives. The agency asserts that it "does not believe that it could achieve the same results by allowing samples of newly deemed products in qualified adult-only facilities," Deeming Rule, 81 Fed. Reg. at 28,986, and it points to previous findings that free samples of cigarettes are easily accessible, even to elementary school children, notwithstanding claimed industry efforts to restrict their distribution to underage persons. Defs.' Cross-Mem. at 77, citing 61 Fed. Reg. 44,396, 44,460; see also Discount Tobacco, 674 F.3d at 541.
Also, as the Supreme Court found in Went For It, there are "ample alternative channels" for delivering information about e-cigarettes to an appropriate adult audience, such as by discounting sample kits sold in stores to curious adults. See Went For It, 515 U.S. at 634, 115 S.Ct. 2371. Plaintiffs can also inform consumers via demonstrations, promotional literature, and other advertising.
So the Court concludes that a ban on free samples is not "substantially broader than necessary to achieve the government's interest" given the availability of other, less risky marketing options for the vaping industry. Trans Union Corp., 267
In sum, the TCA's placement of restrictions on the distribution of free samples of tobacco products does not burden constitutionally protected speech, and if it does, it withstands scrutiny under both the Central Hudson and O'Brien tests.
The TCA requires manufacturers to obtain agency pre-approval before it introduces into interstate commerce any tobacco product "which represents explicitly or implicitly" that it is "less harmful" than other tobacco products, that it "contains a reduced level of a substance or presents a reduced exposure to a substance," or that it "is free of a substance." 21 U.S.C. § 387k. Plaintiffs contend that the TCA violates the First Amendment as applied to them because it prohibits them from making truthful and non-misleading claims about some of their products without agency pre-approval. Nicopure Mem. at 39. And they argue that while the statute "in theory, only restricts modified risk claims, in practice, it `effectively produce[s] a total ban,'" because the FDA has never approved a modified risk tobacco product application. Id., quoting Lorillard, 533 U.S. at 583 n.3, 121 S.Ct. 2404.
Under Central Hudson, the Court must first "determine whether the expression is protected by the First Amendment." 447 U.S. at 566, 100 S.Ct. 2343. "For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading." Id. The TCA forbids manufacturers from saying something — that their product is "free" of a substance, or that it is less harmful than other tobacco products. See 21 U.S.C. § 387k. That is a clear restriction on truthful and non-misleading speech, which is appropriately analyzed under Central Hudson.
The next question under Central Hudson is whether "the asserted governmental interest is substantial." Cent. Hudson, 447 U.S. at 566, 100 S.Ct. 2343. The Deeming Rule states that the provision will advance four governmental interests — "improv[ing]" and "protecting" public health, "prevent[ing] the use of unsubstantiated modified risk claims, which may mislead consumers and lead them to initiate tobacco product use or continue using tobacco when they would otherwise quit," "allow[ing] for better-informed consumers," and "help[ing] to prevent the use of misleading marketing targeted to youth populations."
With this, the FDA has articulated a substantial interest in regulating modified-risk claims. See, e.g., Discount Tobacco, 674 F.3d at 535; TCA § 2(40) ("The dangers of products sold or distributed as modified risk tobacco products that do not in fact reduce risk are so high that there is a compelling governmental interest in ensuring that statements about modified risk tobacco products are complete, accurate, and relate to the overall disease risk of the product."); see also Edenfield, 507 U.S. at 769, 113 S.Ct. 1792 (finding a substantial government interest "in ensuring the accuracy of commercial information in the marketplace").
The third and fourth inquiries under Central Hudson are whether the regulation directly advances the governmental interest, and whether the regulation is no more extensive than necessary to serve that interest. Cent. Hudson, 447 U.S. at 566, 100 S.Ct. 2343.
In upholding the modified risk provisions against a First Amendment challenge, the Sixth Circuit found that premarket review of modified risk claims was not more extensive than necessary because "the government has made a reasonable determination that, in the context of a deadly and highly addictive product, it would be a virtual impossibility to unring the bell of misinformation after it has been rung." Discount Tobacco, 674 F.3d at 537. That reasoning applies with equal force to the regulation of e-cigarettes.
Plaintiffs assert that the modified risk regulation does not directly advance the governmental interest because, to do so, the "FDA would have to show that the [modified risk provision], by restricting truthful and non-misleading speech about the contents or characteristics of using vaping products, somehow benefits the public health on a population-wide basis." Nicopure Mem. at 42. But as with many other aspects of their challenge, plaintiffs lack legal authority for the standard they would have the Court impose. Plaintiffs also argue that the regulation is more extensive than necessary because instead of infringing on plaintiffs' constitutionally-protected interest in truthful and non-misleading speech, the FDA could have "simply required disclaimers, such as that the statements: (i) are not approved by the FDA; (ii) do not establish that the product is safer than any other tobacco product; or (iii) do not change the fact that quitting nicotine products altogether is healthier than using vaping products." Id. at 44. But Congress expressly rejected plaintiffs' argument that disclaimers would be adequate to achieve the government's interests. See TCA § 2(41) ("[C]onsumers have misinterpreted advertisements in which
And in the end, notwithstanding plaintiffs' rhetoric, this provision does not ban truthful statements about health benefits or reduced risks; it simply requires that they be substantiated.
For all of those reasons, the Court will deny plaintiffs' motions for summary judgment, and it will grant the agency's cross-motion for summary judgment. A separate order will issue.
Deeming Rule, 81 Fed. Reg. at 28,977-78. As the Court explained above, those compliance deadlines have since been extended by three months. See Joint Notice at 2.
See Defs.' Cross-Mem. at 29-30, citing Child Nicotine Poisoning Prevention Act of 2015, Pub. L. No. 114-116, § 2(b)(1), 130 Stat. 3 (2016). This provision in separate legislation does not provide powerful evidence of what Congress had in mind when it enacted the TCA, but its acknowledgement of the agency's power to regulate not just liquid nicotine and electronic cigarettes, but also nicotine delivery systems and "other similar products that contain or dispense" nicotine suggests that the FDA's reading of the statute is not inconsistent with Congressional intent.
Hr'g Tr. at 30:15-31:7.
