CASE PREVIEW

Menthol vapes and forum shopping, FDA tobacco control comes before justices

The Supreme Court will hear oral arguments on Tuesday in a clash over whether a North Carolina-based company can challenge the Food and Drug Administration’s denial of its application to market e-cigarettes in the conservative U.S. Court of Appeals for the 5th Circuit, based in Louisiana. The company, R.J. Reynolds Vapor Company, joined a lawsuit by retailers based in Texas and Mississippi – two states covered by the 5th Circuit.

Although the dispute may seem like a technical one, the FDA contends that the stakes are high. If the lower court’s decision allowing RJR Vapor’s case to go forward stands, the FDA says, other manufacturers will also try to get around the restrictions that federal law imposes on where such challenges can be filed. More broadly, the FDA cautions, the 5th Circuit’s ruling could open the door to efforts by other plaintiffs to file their challenges to federal agency actions in courts that they believe will be friendly to them. That kind of forum-shopping, the FDA suggests, is “harmful to the Judiciary.” 

The law at the center of the case is the Family Smoking Prevention and Tobacco Control Act. Enacted in 2009, it gives the FDA the power to regulate tobacco products and requires manufacturers to obtain the FDA’s permission before putting a new tobacco product on the market.

If the FDA denies a marketing request, the law provides that “any person adversely affected” by that denial can “file a petition for judicial review of such regulation or denial with the United States Court of Appeals for the District of Columbia Circuit or for the circuit in which such person resides – which, for a corporation, is usually where it is incorporated – “or has their principal place of business.”

In 2016, the FDA issued a rule indicating that the law applies to e-cigarettes and e-liquids. RJR Vapor applied for permission to market (among others) its menthol-flavored Vuse brand e-cigarettes, which is one of the most popular e-cigarette brands among adults. The FDA rejected RJR Vapor’s application, finding that it had not shown (as the law requires) that its product would be “appropriate for the protection of the public health.”

The Supreme Court heard arguments in December in a separate dispute over the FDA’s rejection of two different companies’ applications to sell flavored vape liquids. The 5th Circuit set aside the FDA’s denials in those cases, accusing the agency of sending those companies and other manufacturers “on a wild goose chase.”

RJR Vapor is incorporated in and has its principal place of business in North Carolina, which is part of the U.S. Court of Appeals for the 4th Circuit – which had turned aside challenges to the FDA’s denials of applications to sell e-cigarette products. Instead, RJR Vapor filed a petition for review in the 5th Circuit, joined by Avail Vapor, a Texas retailer that sells its products, and by a trade association for Mississippi gas stations and convenience stores that sell RJR Vapor’s products.

A divided panel of the 5th Circuit denied the FDA’s motion to transfer the case to the D.C. Circuit. In an unsigned order, the majority – made up of Judge Edith Jones, a Reagan appointee, and Judge James Ho, a Trump appointee – explained that Avail Vapor and the trade association “are undisputedly in this circuit,” and they were “adversely affected by” the denial because the retailers indicated that they would go out of business if the denial stood.

Judge Stephen Higginson, an Obama appointee, dissented. He would have transferred the case to either the D.C. Circuit or the 4th Circuit.

The FDA came to the Supreme Court, which agreed in October to weigh in.

In its brief in the Supreme Court, the FDA urges the justices to reverse the 5th Circuit’s decision and send the case back to the court of appeals with instructions to send it to the D.C. Circuit. The FDA tells the court first that the retailers do not have the right to go to court seeking review of the FDA’s denial of RJR Vapor’s application.

The FDA points to the law’s use of the phrase “adversely affected” to describe who can file a petition for review of the FDA’s denial of a marketing application. That phrase, the FDA stresses, is a term of art in federal administrative law that invokes a doctrine known as the “zone of interests” test – the idea that someone can only go to court to seek review of an agency action if it is relying on an interest that is among those protected by the law at the center of the dispute.

The provision requiring the FDA to rule on an application to market e-cigarette products does not implicate the interests of retailers like Avail or the trade group’s members, the FDA argues. Instead, the agency asserts, when it issues an order ruling on applications like RJR Vapor’s, the order “always or nearly always” only regulates the manufacturer; any effect on retailers is only indirect.

But in any event, the FDA continues, RJR Vapor also cannot rely on the retailers to seek judicial review in the 5th Circuit. The Tobacco Control Act, the FDA writes, “makes clear that a person may sue in a circuit only if that person is based there. A manufacturer may not sue based on a retailer’s residence.”

Although a legal principle known as joinder allow lawsuits that could have been brought separately to be brought and considered together, the FDA acknowledges, that principle does not give the parties more rights or expand the court’s power. Because RJR Vapor is based in North Carolina and incorporated there, it could not file a petition for review in the 5th Circuit, and it also cannot join anyone else’s petition there.

RJR Vapor and the retailers counter that the Supreme Court lacks the power to review this case at all. They say that the general federal law that authorizes the Supreme Court to grant review, and on which the FDA relies, does not give the Supreme Court the power to review non-final orders in cases – like this one – that began in a court of appeals, rather than a federal trial court. At the very least, RJR and the retailers say, “this jurisdictional question is sufficiently complicated and rare that” the justices do not need to address it here and should instead dismiss the case without deciding it.

But if they don’t do that, RJR Vapor and the retailers continue, the Supreme Court should uphold the 5th Circuit’s ruling. The federal law governing administrative agencies applies a “lenient” approach, allowing anyone harmed by an agency’s action to challenge that action if their interests are even “arguably” related to the interests protected by the law.

Here, RJR Vapor and the retailers say, the retailers fall squarely within the law’s definition of “any person adversely affected” by the FDA’s denial of RJR Vapor’s application: The FDA threatened them with enforcement action (which can include criminal penalties) if they did not stop selling the menthol-flavored Vuse brand e-cigarettes at the center of the dispute. But if they cannot sell those e-cigarettes, the retailers explain, they will lose substantial amounts of money, and Avail Texas will likely go out of business.

The structure of the Tobacco Control Act also confirms that the retailers can bring this suit, RJR Vapor and the retailers add. Although the law specifically provides that only an applicant itself can go to court to challenge the withdrawal of marketing authorization, it provides more broadly that “any person adversely affected” can challenge the denial of authorization – which signals that the latter is not limited to applicants. And if “any person adversely affected” is not limited to applicants, then it would apply to the retailers, who after RJR are the most likely to be “adversely affected”

The FDA argues that the 5th Circuit’s rule would also allow “ready evasion” of the limits that the law places on where challenges to the FDA’s orders can be filed. Congress, it stresses, outlined three places where lawsuits may be brought: in the D.C. Circuit, in the place where the plaintiff resides, or in the place where it has its principal place of business. But the 5th Circuit would allow lawsuits to be brought “anywhere in the country so long as” the plaintiff “finds a local retailer willing to join its petition.”

This, the FDA continues, creates incentives for forum-shopping. And indeed, the FDA notes, “[a]t least eight other out-of-circuit manufacturers — based in China, California, Florida, Michigan, North Carolina, Ohio, and Washington — have since relied on the same tactic to seek judicial review in the Fifth Circuit.”

The 5th Circuit’s approach could have ripple effects beyond the Tobacco Control Act, the FDA warns, because other laws authorizing challenges to agency actions contain similar restrictions. “But the logic of the decision below would make it easier for challengers to avoid those restrictions,” the FDA writes, as long as they could find someone who lives in the circuit where they want to file their lawsuit and then “seek review alongside that person.”

And the broader problem of forum-shopping, the FDA concludes, can prove “harmful to the Judiciary.” “When parties throughout the country deploy complex procedural strategems to channel their cases to a single circuit, even when they have no meaningful ties to that circuit,” the FDA posits, “they erode the perception that judicial decisions rest on universally applicable rules of law.”

RJR Vapor and the retailers pushes back against the FDA’s insistence that allowing the case to go forward in the 5th Circuit will circumvent the restrictions that Congress intended in the Tobacco Control Act. Unless the case is brought in the D.C. Circuit, they observe, at least one of the challengers must be in the circuit where the case is filed. “And there are a number of reasons why an out-of-circuit applicant may not be able to find an in-circuit co-petitioner” to bring the case, they add – for example, because the manufacturer sells directly to consumers or because there is not a retailer willing to pursue the litigation.

This article was originally published at Howe on the Court.