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Bellion Spirits, LLC v. United States

United States District Court, District of Columbia

September 27, 2018

BELLION SPIRITS, LLC, et al., Plaintiffs,
UNITED STATES OF AMERICA, et al., Defendants.



         A vodka maker's hopes of advertising the health benefits of its product were thwarted when a federal administrative agency found the claims to be unsubstantiated. This vodka maker, which is actually two entities - Plaintiffs Bellion Spirits, LLC and Chigurupati Technologies Private Ltd. (jointly, “Bellion”) - then filed suit in this Court against the administrative agency - the Alcohol and Tobacco Tax and Trade Bureau (TTB) - and a host of other governmental entities. Bellion asserts claims under the Administrative Procedure Act and the First and Fifth Amendments to the U.S. Constitution. In this litigation's first volley, Plaintiffs seek to supplement the record with two peer-reviewed scientific articles and three declarations. Finding that this case does not present one of the narrow circumstances in which a party can supplement an administrative record on judicial review, the Court will deny the Motion.

         I. Background

         Given the early stage of this litigation, a cursory rehearsal of the facts will do. Bellion Spirits is an independent distributor of Bellion Vodka, which is infused with NTX, a proprietary blend of ingredients developed by Chigurapati Technologies. See ECF No. 16 (Am. Compl.), ¶¶ 15-16. Plaintiffs sought approval to add eight claims espousing the health benefits of NTX to the label of Bellion Vodka. These statements included, among other things, that NTX reduces “alcohol-induced oxidative damage to the liver, ” “helps maintain normal liver enzyme production and function, ” “helps protect DNA from alcohol-induced damage, ” and “reduces alcohol-induced DNA damage.” Id, ¶ 24. Under the applicable regulatory regime, Bellion first had to pass through TTB's administrative process before printing these claims, as the agency's governing regulations prohibit health-related claims that are false or misleading. See 27 C.F.R. § 5.42(b)(8)(ii)(A). A sub-category of such statements - those that make a “specific health claim” - must also be “adequately substantiated by scientific or medical evidence, ” among other additional requirements. Id. § 5.42(b)(8)(ii)(B)(2); see also Id. §§ 4.39(a)(1), 7.29(a)(1).

         Bellion thus filed a petition with TTB, which sought the Food and Drug Administration's counsel in evaluating the health claims. See ECF No. 22 (Pl. Motion) at 4; ECF No. 23 (Def Opp.) at 4. After receiving and reviewing a memorandum from the FDA memorializing its findings, TTB denied Bellion's petition. It found that “none of the eight claims is adequately substantiated” and their inclusion on a label would “create a misleading impression as to the effects on health consumption of alcoholic beverages infused with NTX.” Pl. Motion, Exh. F (Petition Response Letter) at 35.

         Bellion, dissatisfied with TTB's ruling, filed this suit against the agency and a number of other governmental entities, which the Court will collectively refer to as “TTB.” Plaintiffs challenge TTB's denial of Bellion's two claims concerning NTX's effect on DNA, but raise no opposition to TTB's denial of the other six here. See Am. Compl., ¶¶ 1, 24. Plaintiffs bring both statutory and constitutional causes of action. In their statutory count, Bellion contends that, by relying on the FDA's advice, TTB acted beyond its authority and thus ran afoul of the APA (Count III). See 5 U.S.C. § 706(2)(C); Am. Compl., ¶¶ 89-101. Only TTB, and not the FDA, Plaintiffs posit, may regulate the sale of alcohol. See Am. Compl., ¶¶ 93-94.

         Bellion also advances three constitutional claims, two of which arise under the First Amendment. In one (Count I), Plaintiffs take issue with TTB's conclusion that Bellion's health claims are not substantiated by credible scientific evidence. They allege various errors in TTB's conclusion and assert that, because Bellion's claims are in fact supported by credible evidence, barring them violates Plaintiffs' First Amendment rights. Id., ¶¶ 71-79. Bellion's second First Amendment claim (Count II) takes a categorical shot at TTB's procedures. Plaintiffs contend that the applicable regulations amount to an unconstitutional prior restraint because they lack definite standards for approving a label's health-related claims and do not impose on the agency any timeframe for responding to a petitioner's request, thus granting the agency “unbridled discretion.” Id., ¶ 86. In a similar vein, Bellion's last constitutional cause of action asserts that TTB regulations are unconstitutionally vague. They thus bring a “facial and as-applied challenge” under the Fifth Amendment's Due Process Clause (Count IV). Id., ¶ 103.

         Before any briefing on the merits of the parties' dispute has occurred, Bellion now moves to supplement the administrative record with five documents and the testimony of two live witnesses. The first two documents are peer-reviewed studies that, Plaintiffs say, support their claims about NTX's effect on alcohol-induced DNA damage. See Pl. Motion at 10-11. TTB, however, did consider these studies before their publication in peer-reviewed literature, and those earlier versions are indeed part of the administrative record. Plaintiffs thus seek only to add to the record the fact of peer review. Id.

         Bellion also wishes to submit three declarations and in-court testimony of two of those declarants. The first declaration, from Dr. Jeffrey Blumberg, concludes that credible scientific studies support Bellion's health claim and criticizes FDA's memorandum finding the contrary. Id. at 12-13. Plaintiffs also ask that Dr. Blumberg be permitted to testify at a hearing. In the second declaration, Plaintiffs attack what they see as a weakness in the logical chain that permitted TTB to deny their request. They say that TTB's decision hinges on a conclusion that consumers would draw a particular inference from Bellion's claims regarding the effect of NTX on DNA - namely, that “consuming an alcohol[ic] beverage infused with NTX will provide a reduction of risk from alcohol induced damage to the liver and brain.” Id. at 15 (quoting Petition Response Letter at 41). Plaintiffs thus submit the declaration of Dr. David Stewart, a marketing expert, to “explain[] what an implied claim is, and how TTB erred by finding the existence of an implied claim without requisite data to support that conclusion.” Id. at 15. They also request that Dr. Stewart have an opportunity to testify. Finally, Plaintiffs move to add an affidavit from Harsha Chigurupati, Bellion's President and owner, “confirming that the active compound studied in the Bellion research was the commercially available Bellion Vodka.” Id. at 2. Plaintiffs say that TTB doubted this link. Id.

         II. Legal Standard

         In reviewing agency action, “it is black-letter administrative law that . . . a reviewing court ‘should have before it neither more nor less information than did the agency when it made its decision.'” Hill Dermaceuticals, Inc. v. Food & Drug Admin., 709 F.3d 44, 47 (D.C. Cir. 2013) (quoting Walter O. Boswell Mem'l Hosp. v. Heckler, 749 F.2d 788, 792 (D.C. Cir. 1984)). It is only in “certain limited, and highly exceptional, circumstances” that a court may permit a party to supplement the administrative record. The Cape Hatteras Access Preservation Alliance v. U.S. Dep't of Interior, 667 F.Supp.2d 111, 114-15 (D.D.C. 2009). There are, nonetheless, several “accepted exceptions” to the general rule barring extra-record evidence. IMS, P.C. v. Alvarez, 129 F.3d 618, 624 (D.C. Cir. 1997). Although courts have articulated these exceptions in slightly divergent manners, see United Student Aid Funds, Inc. v. DeVos, 237 F.Supp.3d 1, 3 (D.D.C. 2017) (noting these variations), the parties here repeat the same four exceptions. See Pl. Motion at 8; Def. Opp. at 9.

         A plaintiff can supplement an administrative record by adding evidence not before the agency: “(1) when the agency failed to examine all relevant factors; (2) when the agency failed to explain adequately its grounds for decision; (3) when the agency acted in bad faith; or (4) when the agency engaged in improper behavior.” Styrene Info. & Research Ctr., Inc. v. Sebelius, 851 F.Supp.2d 57, 63 (D.D.C. 2012) (citing IMS, 129 F.3d at 624). These four exceptions serve the same underlying purpose: they grant plaintiffs a means of securing “effective judicial review” when the agency's failure to explain its action or improper behavior precluded the creation an adequate record. MS, 129 F.3d at 624 (quoting Camp v. Pitts, 411 U.S. 138, 142-43 (1973)); see also Styrene Info. & Research Ctr., 851 F.Supp.2d at 63 (“Underlying all of these exceptions is the assessment that resort to extra-record information [is necessary] to enable judicial review to become effective.”) (quoting Calloway v. Harvey, 590 F.Supp.2d 29, 38 (D.D.C 2008)).

         III. Analysis

         Because Plaintiffs' claims arising under the APA and the Constitution implicate distinct considerations, the ...

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