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Cigar Association of America v. U.S. Food & Drug Administration

United States District Court, District of Columbia

May 15, 2018



          Amit P. Mehta United States District Judge


         On May 10, 2016, the U.S. Food and Drug Administration (“FDA”) published a final rule “deeming” cigars, pipe tobacco, and certain other products (e.g., e-cigarettes) subject to the federal Food, Drug, and Cosmetic Act (“FD&C Act”), 21 U.S.C. §§ 301, et seq., as amended by the Family Smoking Prevention and Tobacco Control Act of 2009 (“TCA”). Known as the “Deeming Rule, ” the FDA's action subjects these newly “deemed” products to comparable statutory and regulatory requirements already imposed on cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco. At the same time, the FDA promulgated a separate rule, referred to as the “User Fee Rule, ” which assesses “user fees” on manufacturers and importers of cigars and pipe tobacco, but not other newly deemed products, like e-cigarettes. The FDA is statutorily authorized to collect user fees for the purpose of funding the FDA's regulation of tobacco products under the FD&C Act and the TCA.[1]

         Plaintiffs in this case are three non-profit associations that represent cigar manufacturers, importers, distributors, suppliers, and consumers, as well as premium cigar and tobacco retail shops. They brought this action in July 2016 against the FDA and its Commissioner, and the U.S. Department of Health and Human Services (“HHS”) and its Secretary (collectively, “Defendants”), challenging the Deeming Rule and the User Fee Rule on a host of grounds.[2] For reasons explained later in this opinion, not all of Plaintiffs' challenges to the Rules are presently before the court. Instead, the court addresses only the following subset of challenges: (1) the imposition of health warning requirements for cigar packaging and advertisements; (2) the assessment of user fees on cigar and pipe tobacco products, but not on another newly deemed product, e-cigarettes; (3) the treatment of retailers who blend pipe tobacco in-store as “manufacturers” subject to the regulatory requirements of 21 U.S.C. § 387e; and (4) the classification of pipes as “components” of tobacco products, thereby subjecting pipe makers to regulation. Plaintiffs also have moved to preliminarily enjoin implementation and enforcement of the Deeming Rule's health warning requirements.

         For the reasons set forth below, the court grants in part and denies in part the parties' cross-motions for partial summary judgment and denies Plaintiffs' motion for a preliminary injunction as moot. The Deeming Rule's health warning requirements are upheld in all respects, as is the User Fee Rule in its entirety. The court also affirms the agency's classification of pipes as “components or parts” of tobacco products under the TCA. The court, however, concludes that Defendants' rationale for subjecting retailers who blend pipe tobacco in-store to the requirements of 21 U.S.C. § 387e is arbitrary and capricious and therefore remands that issue to the FDA for further consideration.


         A. Statutory Background

         In 2009, Congress enacted the TCA to “provide authority to the [FDA] to regulate tobacco products under the [FD&C Act] by recognizing it as the primary Federal regulatory authority with respect to the manufacture, marketing, and distribution of tobacco products, ” and “to authorize the [FDA] to set national standards controlling the manufacture of tobacco products and the identity, public disclosure, and amount of ingredients used in such products, ” among other purposes. Family Smoking Prevention and Tobacco Control Act, Pub. L. No. 111-31, § 3, 123 Stat. 1776, 1781-82 (2009). Congress made 49 legislative findings in the Act, in which it acknowledged the “inherent dangerous[ness]” of tobacco products and nicotine and the strong public interest in regulating tobacco products and their advertising and promotion, and discussed Congress's interest in reducing youth tobacco use, in light of judicial findings that major U.S. tobacco companies specifically targeted and marketed their products to youth. TCA § 2. Congress further recognized that no other federal agency except the FDA “possesses the scientific expertise needed to implement effectively all provisions of the [TCA].” TCA § 2(45).

         In light of those findings, the TCA authorized the Secretary of Health and Human Services to regulate the manufacture, distribution, and marketing of tobacco products. TCA § 901, codified at 21 U.S.C. § 387a (entitled “FDA authority over tobacco products”). The legislation immediately subjected “all cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco” to a panoply of statutory and regulatory requirements, and also reserved future application of the TCA to “any other tobacco products that the Secretary [of Health and Human Services] by regulation deems to be subject to this chapter.” 21 U.S.C. § 387a(b) (emphasis added). Congress defined “tobacco product” to mean “any product made or derived from tobacco that is intended for human consumption, including any component, part, or accessory of a tobacco product (except for raw materials other than tobacco used in manufacturing a component, part, or accessory of a tobacco product).” 21 U.S.C. § 321(rr)(1). The FDA's decision in 2016 to “deem” cigars and pipe tobacco as “tobacco products, ” and thus subject them to regulation, gave rise to this litigation.

         B. Regulatory Background

         1.The Cigar Product

         Federal regulations define “cigar” to mean any “roll of tobacco that is wrapped in leaf tobacco or any substance containing tobacco” that is “not a cigarette.” 21 C.F.R. § 1143.1. There are three major categories of cigar products: (1) little cigars, (2) cigarillos, and (3) traditional cigars. See Defs.' Cross-Mot. for Partial Summ. J. & Mem. in Support, ECF No. 74 [hereinafter Defs.' Cross-Mot.], at 6-7. Little cigars resemble cigarettes in size and tobacco content and thus “are positioned as cheaper substitutes for cigarettes.” See Id. at 7. Cigarillos are a shorter, slimmer version of traditional cigars and, generally speaking, contain between 3 and 10 pounds of tobacco per thousand units. See Id. at 8. Traditional cigars are the largest cigar product, varying in length and diameter. See Id. While little cigars and cigarillos are machine-rolled, traditional cigars may be either machine-rolled or hand-rolled. See id.

         Within the category of traditional cigars are a sub-category known as “premium cigars.” See Id. Premium cigars typically are hand-rolled, made with a higher-grade tobacco, or are more expensive. See Id. The term “premium cigar” is not, however, defined by federal statute or regulation. See id.

         2. The Existing FTC Health Warning Statements Regime

         Long before the FDA's action in 2016, cigar products already were subject to some federal regulation. More than a decade earlier, in 2000, in settlements with the Federal Trade Commission (“FTC”), the seven largest U.S. cigar companies agreed to include warnings about significant adverse health risks on their packaging and advertisements. See, e.g., Decision & Order, In the Matter of Swedish Match N. Am., Inc., Docket No. C-3970 (F.T.C. Aug. 18, 2000), 2000 WL 1207446. The FTC settlements represented the first national requirements for health warnings on cigar products and applied to approximately 95 percent of the U.S. cigar market at the time. See Press Release, FTC, Nationwide Labeling Rules for Cigar Packaging and Ads Take Effect Today (Feb. 13, 2001),

         Pursuant to the consent orders, which remain in effect today, the covered cigar companies must display one of the five following health warning statements “clearly and conspicuously” on their advertising and packaging:

SURGEON GENERAL WARNING: Cigar Smoking Can Cause Cancers Of The Mouth And Throat, Even If You Do Not Inhale.
SURGEON GENERAL WARNING: Cigar Smoking Can Cause Lung Cancer And Heart Disease.
SURGEON GENERAL WARNING: Tobacco Use Increases The Risk Of Infertility, Stillbirth And Low Birth Weight.
SURGEON GENERAL WARNING: Cigars Are Not A Safe Alternative To Cigarettes.
SURGEON GENERAL WARNING: Tobacco Smoke Increases The Risk Of Lung Cancer And Heart Disease, Even In Nonsmokers.

See Decision & Order, In the Matter of Swedish Match N. Am., Inc., 2000 WL 1207446, at *3.

         The FTC consent orders specify the size and formatting of the health warnings, and require that they appear on the principal display panel on cigar packages and be rotated at random on a 12-month basis. See Id. at *4-7, *10-12.

         Additionally, the FTC consent orders require the health warnings to appear on visual advertisements in a set-off, rectangular box to ensure that the warnings are readily visible and conspicuous. Id. at *5-8. For audio advertisements, the health warning statement must be delivered so that an ordinary consumer can hear and comprehend it. Id. at *8-9. Cigar companies also were required to submit for FTC approval, in advance of the consent orders' effective date, a plan for the rotation and display of the health warnings on cigar packages and advertisements. Id. at *11-12.

         3.FDA Rules

         a. The Deeming Rule

         i. Proposed Rule

         In the years following Congress's enactment of the TCA, cigar products were free from FDA regulation because cigars were not expressly listed in the Act's definition of “tobacco product.” A harbinger of change arrived in the spring of 2014. On April 25, 2014, the FDA issued a Proposed Rule that would make, or “deem, ” cigars, pipe tobacco, and e-cigarettes subject to the TCA. See Deeming Tobacco Products To Be Subject to the Federal Food, Drug, and Cosmetic Act, as Amended by the Family Smoking Prevention and Tobacco Control Act; Restrictions on the Sale and Distribution of Tobacco Products and Required Warning Statements for Tobacco Products, 79 Fed. Reg. 23, 142 (Apr. 25, 2014) (“Proposed Deeming Rule”). In the Proposed Deeming Rule, the FDA announced for consideration two options which “would provide two alternatives for the scope of the deeming provisions and, consequently, the application of the additional specific provisions.” Id. at 23, 143. Under Option 1, the FDA would deem all products meeting the statutory definition of “tobacco product”-including cigars and pipe tobacco-except accessories of deemed products to be subject to the TCA. Id. Under Option 2, the FDA would deem “only a subset of cigars” and “exclude from the scope of [the] proposed rule certain cigars that we refer to as ‘premium cigars.'” Id. To effectuate this carve-out, Option 2 proposed a definition for “covered cigar” as:

[A]ny cigar as defined in this part, except a cigar that: (1) Is wrapped in whole tobacco leaf; (2) contains a 100 percent leaf tobacco binder; (3) contains primarily long filler tobacco; (4) is made by combining manually the wrapper, filler, and binder; (5) has no filter, tip, or non-tobacco mouthpiece and is capped by hand; (6) has a retail price (after any discounts or coupons) of no less than $10 per cigar (adjusted, as necessary, every 2 years, effective July 1st, to account for any increases in the price of tobacco products since the last price adjustment); (7) does not have a characterizing flavor other than tobacco; and (8) weighs more than 6 pounds per 1000 units.

Id. at 23, 150. The FDA noted that, while it had proposed a definition with respect to Option 2, it remained “concerned that any attempts to create a subset of premium cigars that are excluded from regulatory authority might sweep other cigar products under its umbrella.” Id. The FDA therefore sought comment as to how to refine this definition, within the context of Option 2, “to ensure that the exclusion would apply only to those cigars that, because of how they are used, may have less of a public health impact than other types of cigars.” Id.

         The FDA sought comment on both options. Its purpose was “to determine whether all cigars should be subject to deeming and what provisions of the proposed rule may be appropriate or not appropriate for different kinds of cigars, ” as well as to determine the “relative merits of Option 1 versus Option 2, taking into account what is appropriate for the public health, including possible benefits to the public health or possible negative public health consequences of adopting one Option or the other.” Id. at 23, 143, 23, 145. As to Option 2, the FDA noted that while “all cigars are harmful and potentially addictive, it has been suggested that different kinds of cigars may have the potential for varying effects on public health, based on possible differences in their effects on dual use, youth initiation[, ] and frequency of use by youth and young adults.” Id. at 23, 150. Plaintiffs and numerous other members of the public submitted detailed comments on the Proposed Deeming Rule.

         ii. Final Rule

          a. Health warning requirements

         The FDA selected Option 1 and promulgated the final Deeming Rule on May 10, 2016, thus deeming all categories of cigars, including those referred to as “premium cigars, ” to be subject to the TCA. See Final Rule Deeming Products To Be Subject to the Federal Food, Drug, and Cosmetic Act, as Amended by the Family Smoking Prevention and Tobacco Control Act; Restrictions on the Sale and Distribution of Tobacco Products and Required Warning Statements for Tobacco Products, 81 Fed. Reg. 28, 974, 29, 020 (May 10, 2016) (codified at 21 C.F.R. pts. 1100, 1140, 1143) (“Deeming Rule”). In support of its decision, the FDA stated that it “concluded that deeming all cigars, rather than a subset, more completely protects the public health.” Id. The FDA found that: “(1) All cigars pose serious negative health risks, (2) the available evidence does not provide a basis for FDA to conclude that the patterns of premium cigar use sufficiently reduce the health risks to warrant exclusion, and (3) premium cigars are used by youth and young adults.” Id.

         Under the Deeming Rule as originally announced, the newly deemed products would be subject to comparable TCA provisions and regulatory requirements to which cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco were already subject. Id. at 28, 976. These requirements include:

(1) Enforcement action against products determined to be adulterated or misbranded (other than enforcement actions based on lack of a marketing authorization during an applicable compliance period);
(2) Required submission of ingredient listing and reporting of [harmful and potentially harmful constituents];
(3) Required registration of tobacco product manufacturing establishments and product listing;
(4) Prohibition against sale and distribution of products with modified risk descriptors (e.g., “light, ” “low, ” and “mild” descriptors) and claims unless FDA issues an order authorizing their marketing;
(5) Prohibition on the distribution of free samples; and
(6) Premarket review applications and approvals.


         And there is more. The Deeming Rule also sets out comprehensive warning statement requirements, for both cigar product packaging and advertisements. By August 10, 2018, cigar product packages must display one of the six following health warning statements:

(i) WARNING: Cigar smoking can cause cancers of the mouth and throat, even if you do not inhale.
(ii) WARNING: Cigar smoking can cause lung cancer and heart disease.
(iii) WARNING: Cigars are not a safe alternative to cigarettes.
(iv) WARNING: Tobacco smoke increases the risk of lung cancer and heart disease, even in nonsmokers.
(v)(A) WARNING: Cigar use while pregnant can harm you and your baby.[3] . . .
(vi) WARNING: This product contains nicotine. Nicotine is an addictive chemical.

21 C.F.R. § 1143.5(a)(1). These health warnings must be displayed on a rotating basis. See Id. On cigar packages, each of the six health warning statements “must be randomly displayed in each 12-month period, in as equal number of times as is possible on each brand of cigar sold in product packaging and be randomly distributed in all areas of the United States in which the product is marketed.” Id. § 1143.5(c)(1). On cigar advertisements, the health warning statements “must be rotated quarterly in alternating sequence in each advertisement for each brand of cigar.” Id. § 1143.5(c)(2). Each cigar company must submit for FDA approval a plan for rotating warnings twelve months before advertising or commercially marketing a cigar product. Id. § 1143.5(c)(3).

         The Deeming Rule also specifies the placement and size of the required health warnings. With respect to packaging, each warning statement must “appear directly on the package” and must be “located in a conspicuous and prominent place on the two principal display panels of the package, ” comprising “at least 30 percent of each of the principal display panels.” Id. § 1143.5(a)(2). For cigars that are sold individually and not in a product package, the health warning statements must be posted at the retailer's point-of-sale on an 8.5 by 11-inch “clear, legible, and conspicuous” sign. Id. § 1143.5(a)(3). As to print and other visual advertisements, the warning statement must be located in the “upper portion of the area of the advertisement” and occupy “at least 20 percent of the area of the advertisement.” Id. § 1143.5(b).[4]

         These size mandates are more demanding than the size requirements under the FTC consent orders. According to Plaintiffs, the required package warnings are 195 to 237 percent larger on any one panel than under the FTC warnings scheme. And, when the Deeming Rule's additional requirement to cover a second display panel is included, Plaintiffs assert that the FDA's mandate covers approximately 390 to 475 percent more of a package's surface area than is required under the FTC's consent orders.

         b. Related deemed products

         In addition to cigars, pipe tobacco, and e-cigarettes, the Deeming Rule also deemed the “components or parts” of those newly deemed products to be subject to the TCA. The FDA defines the statutory term “component or part” to mean:

[A]ny 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) [t]o be used with or for the human consumption of a tobacco product. Component or part excludes anything that is an accessory of a tobacco product.

81 Fed. Reg. at 29, 102; 21 C.F.R. § 1100.3. Within the category of “component or part, ” the FDA included pipes used to consume pipe tobacco. 81 Fed. Reg. at 29, 042.

         Although it had the authority to do so, the FDA did not deem “accessories” of the newly deemed tobacco products subject to the TCA. The agency reasoned that “accessories, unlike components or parts, are expected to have little direct impact on the public health.” Id. at 28, 975. The FDA defined “accessories” to mean “any product” intended or reasonably expected to be used with or for the human consumption of a tobacco product, but not containing, made, or derived from, tobacco, that is: (1) “not intended or reasonably expected to affect or alter the performance, composition, constituents, or characteristics of a tobacco product, ” or (2) “intended or reasonably expected to affect or maintain the performance, composition, constituents, or characteristics of a tobacco product, ” but solely: (i) “controls moisture and/or temperature of a stored tobacco product, ” or (ii) provides an external heat source to initiate but not maintain combustion of a tobacco product.” Id. at 29, 102; 21 C.F.R § 1100.3. The FDA identified as examples of unregulated accessories items like “ashtrays, spittoons, hookah tongs, cigar clips and stands, and pipe pouches, ” as well as “humidors or refrigerators that solely control the moisture and/or temperature of a stored product and conventional matches and lighters that solely provide an external heat source to initiate but not maintain combustion of a tobacco product.” 81 Fed. Reg. at 28, 975.

         b. The User Fee Rule

          To fund the regulation of tobacco products under the TCA, Congress requires the FDA to “assess user fees on, and collect fees from, each manufacturer and importer of tobacco products subject to this subchapter.” See 21 U.S.C. § 387s. The user fees “are available only for the purpose of paying the costs of the activities of the [FDA] related to the regulation of tobacco products under . . . the [TCA].” Id. § 387s(c)(2).

         When it promulgated the final Deeming Rule, the FDA simultaneously issued the User Fee Rule. Under that Rule, the FDA announced its intention to collect information from domestic manufacturers and importers of cigars and pipe tobacco in order to calculate the amount of user fees to be collected from these entities. See Requirements for the Submission of Data Needed To Calculate User Fees for Domestic Manufacturers and Importers of Cigars and Pipe Tobacco, 81 Fed. Reg. 28, 707 (May 10, 2016); 21 C.F.R. § 1150.5. Domestic manufacturers and importers of cigars and pipe tobacco were required to submit information to support the assessment of user fees to the FDA on August 20, 2016. 81 Fed. Reg. at 28, 707; 21 C.F.R. § 1150.5. Because the FDA performs class allocations only on a full fiscal-year basis, domestic manufacturers and importers of cigars and pipe tobacco became subject to user fee assessments on October 1, 2016, the first full fiscal year following the User Fee Rule's effective date of August 8, 2016. 81 Fed. Reg. At 28, 707.

         Notably, the User Fee Rule excluded from coverage other newly deemed products, such as e-cigarettes. The FDA explained that it lacked the statutory authority to impose user fees on any newly deemed products other than cigars and pipe tobacco. See Id. at 28, 711-12.

         c. FDA's July 2017 Announcement of a “New Comprehensive Plan”

         The presidential election of 2016 ushered in change to the FDA's approach to the Deeming Rule. On July 28, 2017, the FDA announced a “new comprehensive plan” for regulating tobacco products and nicotine. See Pls.' Mot. for Partial Summ. J., ECF No. 62 [hereinafter Pls.' Mot.], Ex. D, ECF No. 62-4 [hereinafter FDA Press Release]. In accordance with the plan, the FDA delayed implementation of some provisions of the Deeming Rule, but allowed others to go into effect. For instance, the agency extended until August 8, 2021, the compliance period for tobacco manufacturers to submit applications for newly deemed products that were on the market as of August 8, 2016. See Joint Status Report (dated Sept. 5, 2017), ECF No. 51 [hereinafter Sept. 5, 2017 JSR], ¶ 3; FDA Press Release. The health warning requirements, on the other hand, were left undisturbed.

         The FDA also announced its intention to issue Advance Notices of Proposed Rulemaking (“ANPRM”). The contemplated rulemaking included a focus on the previous issue of whether to regulate premium cigars. An ANPRM, the FDA stated, would seek public comment on “the patterns of use and resulting public health impacts from premium cigars, which were included in the FDA's 2016 rule.” FDA Press Release. Commenting on the FDA's “new comprehensive plan, ” Mitch Zeller, Director of the FDA's Center for Tobacco Products, explained: “Public input on these complex issues will help ensure the agency has the proper science-based policies in place to meaningfully reduce the harms caused by tobacco use.” Id.

         d. Recent Regulatory Developments

          In December 2017, the FDA formally announced its intention to initiate a rulemaking process focused on the question of premium cigars. See “Premium Cigars; Request for Scientific Information, ” Agency Rule List - Fall 2017: Department of Health and Human Services, Unified Agenda of Regulatory and Deregulatory Actions, OIRA, The FDA observed that while it had received comments in response to the Proposed Deeming Rule “claiming that the health risks associated with cigar use generally, or with the use of premium cigars in particular were not significant because of the way such products are used, ” these comments ultimately failed to provide an adequate scientific basis for excluding those products from regulation. Id. The FDA therefore announced its intention to issue an ANPRM to request scientific information “that might support” exempting premium cigars from regulation or regulating them in a manner different from other cigars. Id.

         The agency issued the ANPRM in late March 2018. See Defs.' Notice of Publication of ANPRM, ECF No. 91. It explained that in light of “the ongoing interest from many parties and sectors, such as industry and Members of Congress, in the regulatory status of premium cigars, ” the purpose of the ANPRM is “to request relevant new and different information, data, and analysis not submitted in response to FDA's proposed deeming rule . . . that could inform FDA's regulation of premium cigars.” See Regulation of Premium Cigars, 83 Fed. Reg. 12, 901, 12, 902 (Mar. 26, 2018). Specifically, the FDA invited submission of comments, data, research results, and other information related to three topics: (1) the definition of premium cigars; (2) usage patterns of premium cigars; and (3) public health considerations associated with premium cigars. Id. at 12, 903. The FDA also asked the public to submit studies or information regarding the Deeming Rule's current health warning statements, and requested comment on “whether any additional or alternative warning statements would be appropriate.” Id. at 12, 904.

         C. Procedural Background

         The Cigar Association of America, the International Premium Cigar and Pipe Retailers Association, and Cigar Rights of America (collectively, “Plaintiffs”) filed suit in this court, seeking declaratory, injunctive, and other relief from the Deeming Rule and challenging the legality of the User Fee Rule.

         After Defendants filed their Answer, Plaintiffs filed an initial motion for summary judgment on February 13, 2017. Thereafter, the newly installed FDA administration signaled an openness to evaluating the agency's approach to aspects of the Deeming Rule. The parties accordingly requested multiple extensions of the briefing deadlines in order “to allow new leadership personnel at [HHS] to more fully consider the issues raised in [the] case and determine how best to proceed.” Joint Mot. to Amend Scheduling Order (dated May 1, 2017), ECF No. 34, at 1. The court granted the requests, resulting in over four months of extensions. After the FDA's July 2017 announcement of its new comprehensive plan for the regulation of tobacco products, the parties sought one final 30-day extension of the briefing schedule. Joint Mot. to Amend Scheduling Order (dated Aug. 1, 2017), ECF No. 40, at 2-3. The court also granted this motion. Minute Order Aug. 7, 2017.

         In a Joint Status Report dated September 5, 2017, the parties explained that, as a result of the FDA's announcement, they had agreed to defer resolution of certain of Plaintiffs' challenges to the Deeming Rule. Specifically, the parties agreed that Plaintiffs' challenges relating to the premarket review process, the FDA's decision to deem premium cigars subject to regulation, and the agency's cost-benefit analysis underlying the Deeming Rule-claims asserted in Counts I, IV, and V of Plaintiffs' Complaint-“should await the further regulatory action that the FDA has announced it intends to pursue, because those ...

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