Cigar Association of America v. FDA ( 2020 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 29, 2019 Decided July 7, 2020
No. 18-5195
CIGAR ASSOCIATION OF AMERICA, ET AL.,
APPELLANTS
v.
UNITED STATES FOOD AND DRUG ADMINISTRATION, ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:16-cv-01460)
Michael J. Edney argued the cause for appellants. With
him on the briefs were Mark S. Raffman and Andrew Kim.
Mark Brnovich, Attorney General, Office of the Attorney
General for the State of Arizona, and Keith Miller, Senior
Litigation Counsel, were on the brief for amicus curiae State
of Arizona in support of appellants.
Lindsey Powell, Attorney, U.S. Department of Justice,
argued the cause for appellees. With her on the brief were
Jessie K. Liu, U.S. Attorney, Mark B. Stern, Alisa B. Klein, and
Tyce R. Walters, Attorneys, U.S. Department of Justice, and
Robert P. Charrow, General Counsel, U.S. Department of
Health and Human Services.
2
Nandan M. Joshi, Allison M. Zieve, and Scott L. Nelson
were on the brief for amicus curiae Public Citizen in support
of appellees.
Mark Greenwold and Andrew N. Goldfarb were on the
brief for amici curiae Public Health Groups in support of
appellees.
Rachel Bloomekatz was on the brief for amicus curiae
Public Health Law Center in support of appellees.
Justin M. Pearson and Paul M. Sherman were on the brief
for amicus curiae J. Scott Armstrong in support of neither
party.
Before: GARLAND and KATSAS, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge KATSAS.
KATSAS, Circuit Judge: The Tobacco Control Act permits
the Food and Drug Administration to regulate tobacco products
for the public health, but only after considering whether the
regulation would likely increase or decrease the number of
smokers. Under this authority, the FDA promulgated
regulations requiring extensive health warnings on packaging
and in advertising for cigars and pipe tobacco. The FDA
concluded that these warnings would help communicate the
health risks of smoking, but it failed to consider how the
warnings would likely affect the number of smokers. We hold
that this failure violated the Tobacco Control Act and the
Administrative Procedure Act.
3
I
A
The Family Smoking Prevention and Tobacco Control
Act, Pub. L. No. 111-31, 123 Stat. 1776 (2009) (Tobacco
Control Act), amended the Federal Food, Drug, and Cosmetic
Act (FDCA) to establish a comprehensive regulatory scheme
for tobacco products. As amended, the FDCA regulates
cigarettes, cigarette tobacco, roll-your-own tobacco, and
smokeless tobacco. 21 U.S.C. § 387a(b). The FDCA also now
extends to “any other tobacco products” that the Secretary of
Health and Human Services “by regulation deems to be subject
to” the FDCA. Id. The FDCA further provides that the
Secretary may by regulation restrict the sale or distribution of
any tobacco product if he “determines that such regulation
would be appropriate for the protection of the public health.”
Id. § 387f(d)(1). In making that determination, the Secretary
must consider the likelihood that the regulation will increase or
decrease the number of tobacco users in the overall population.
See id. The FDA administers the Tobacco Control Act for the
Secretary. See id. § 387a(e); Office of the Commissioner
Reorganization, 74 Fed. Reg. 41,713, 41,732 (Aug. 18, 2009).
Under this authority, the FDA promulgated a regulation
deeming the FDCA to cover all tobacco products. Deeming
Tobacco Products to Be Subject to the FDCA, 81 Fed. Reg.
28,973 (May 10, 2016) (Deeming Rule). The Deeming Rule
subjects newly regulated tobacco products, including cigars
and pipe tobacco, to requirements akin to those previously
imposed by statute on cigarettes, cigarette tobacco, roll-your-
own tobacco, and smokeless tobacco. Id. at 28,976. To that
end, it requires extensive health warnings on packages and in
advertisements for cigars and pipe tobacco.
4
The Deeming Rule makes it unlawful to manufacture or
sell any cigar product without one of six rotating warning
statements. 21 C.F.R. § 1143.5(a)(1). Collectively, the
warnings inform prospective and current smokers that cigars
cause various diseases, create pregnancy risks, are addictive,
and are not a safe alternative to cigarettes. Id. The warnings
must be printed on at least thirty percent of the two “principal
display panels” of each cigar package, with contrasting white-
on-black or black-on-white ink. See id. § 1143.5(a)(2). For
cigars sold individually, the warnings must appear on an 8.5 x
11-inch sign posted within three inches of the cash register. Id.
§ 1143.5(a)(3). For both kinds of warnings, the regulation
specifies the necessary font, font size, capitalization,
punctuation, and centering. Id. § 1143.5(a)(2)(ii)–(v),
(a)(3)(ii)–(iv). The same warnings also must cover at least
twenty percent of cigar advertisements. Id. § 1143.5(b).
Manufacturers must submit to the FDA a “proposed warning
plan” at least twelve months before selling or advertising any
cigar product. Id. § 1143.5(c).
For pipe tobacco, packages and advertisements must bear
a warning that the product contains nicotine, an addictive
chemical. 21 C.F.R. § 1143.3(a)(1). The warning must follow
the same formatting requirements as the warnings for cigars.
Id. § 1143.3(a) (packaging); § 1143.3(b) (advertising).
In promulgating these requirements, the FDA stated that
“[t]he warning statements required by this final rule will help
consumers better understand and appreciate the risks and
characteristics of tobacco products.” Deeming Rule, 81 Fed.
Reg. at 28,981. At the same time, the FDA acknowledged that
“[r]eliable evidence on the impacts of warning labels … on
users of cigars, pipe tobacco, waterpipe tobacco, and
[electronic nicotine delivery systems] does not, to our
knowledge, exist.” Deeming Tobacco Products to Be Subject
5
to the FDCA, Final Regulatory Impact Analysis, ECF Doc. 81-
2 at 62 (May 2016).
B
Three cigar and pipe tobacco industry associations
challenged various provisions of the Deeming Rule in the
district court. As relevant here, the plaintiffs argued that the
warning requirements for cigars and pipe tobacco violate the
Tobacco Control Act and the Administrative Procedure Act
because the FDA did not adequately consider how the warnings
would affect smoking. The plaintiffs also argued that the
warning requirements violate the First Amendment.
The district court rejected these challenges to the warning
requirements. On these claims, the court denied the plaintiffs’
motion for summary judgment, granted the FDA’s cross-
motion for summary judgment, and denied as moot the
plaintiffs’ motion for a preliminary injunction. Cigar Ass’n of
Am. v. FDA, 315 F. Supp. 3d 143, 159–74 (D.D.C. 2018). The
court then entered final judgment on the claims under Federal
Rule of Civil Procedure 54(b). J.A. 330. Finally, the court
stayed enforcement of the warning requirements during this
appeal. Cigar Ass’n of Am. v. FDA, 317 F. Supp. 3d 555(D.D.C. 2018).
II
Our analysis begins, and ends, with the plaintiffs’ statutory
claims. Those claims arise under the Administrative Procedure
Act, which provides for judicial review of any “final agency
action for which there is no other adequate remedy in a court.”
5 U.S.C. § 704. The APA instructs a reviewing court to set
aside agency action found to be “arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law.” Id.§ 706(2)(A). When a district court reviews agency action
6
under the APA, we in turn review the district court’s decision
de novo. See Deppenbrook v. PBGC, 778 F.3d 166, 171–72
(D.C. Cir. 2015).
A
The plaintiffs contend that the cigar and pipe tobacco
warning requirements are arbitrary and capricious because the
agency failed to comply with the Tobacco Control Act. Under
the APA, agency action is arbitrary and capricious if the agency
“failed to consider an important aspect of the problem” before
it, Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State Farm
Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983), including any
“factor the agency must consider under its organic statute,”
Lindeen v. SEC, 825 F.3d 646, 657 (D.C. Cir. 2016) (quotation
marks omitted). When Congress requires an agency to
consider something, we ask whether the agency has reached an
“express and considered conclusion” pursuant to the statutory
mandate. Time Warner Entm’t Co. v. FCC, 56 F.3d 151, 175
(D.C. Cir. 1995) (quotation marks omitted). “Merely
referencing a requirement is not the same as complying with
that requirement. And stating that a factor was considered—or
found—is not a substitute for considering or finding it.”
Gerber v. Norton, 294 F.3d 173, 185 (D.C. Cir. 2002) (cleaned
up); accord Susquehanna Int’l Grp., LLP v. SEC, 866 F.3d 442,
446 (D.C. Cir. 2017) (same).
The FDA promulgated the warning requirements under
section 906(d)(1) of the FDCA, which provides:
The Secretary may by regulation require restrictions
on the sale and distribution of a tobacco product,
including restrictions on the access to, and the
advertising and promotion of, the tobacco product, if
the Secretary determines that such regulation would
be appropriate for the protection of the public health.
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The Secretary may by regulation impose restrictions
on the advertising and promotion of a tobacco product
consistent with and to [the] full extent permitted by
the first amendment to the Constitution. The finding
as to whether such regulation would be appropriate for
the protection of the public health shall be determined
with respect to the risks and benefits to the population
as a whole, including users and nonusers of the
tobacco product, and taking into account—
(A) the increased or decreased likelihood that
existing users of tobacco products will stop using such
products; and
(B) the increased or decreased likelihood that
those who do not use tobacco products will start using
such products.
21 U.S.C. § 387f(d)(1).
Section 906(d)(1) establishes three clear propositions.
First, the FDA “may” impose warning requirements for a
tobacco product if it determines that the warnings are
“appropriate for the protection of the public health.” Second,
this “finding” on public health “shall be determined” for the
“population as a whole, including users and nonusers of the
tobacco product.” Third, the finding “shall … tak[e] into
account” two further considerations: (A) the “likelihood that
existing users of tobacco products will stop using such
products” and (B) the “likelihood that those who do not use
tobacco products will start using such products.” Therefore,
although the FDA “may” decide whether to regulate, it “shall”
consider the two factors when doing so. And “[w]hen a statute
distinguishes between ‘may’ and ‘shall,’ it is generally clear
that ‘shall’ imposes a mandatory duty.” Kingdomware Techs.,
Inc. v. United States, 136 S. Ct. 1969, 1977 (2016). The FDA
8
thus cannot regulate under section 906(d)(1) without
considering the likely impact on tobacco cessation and
adoption rates.
Our textual analysis fits comfortably with the rest of the
Tobacco Control Act, which expresses a consistent concern for
reducing smoking. In the Act, Congress found that “[b]ecause
the only known safe alternative to smoking is cessation,
interventions should target all smokers to help them quit
completely.” Tobacco Control Act § 2(34), 123 Stat. at 1779.
Likewise, Congress specified a purpose “to promote cessation
to reduce disease risk and the social costs associated with
tobacco-related diseases.” Id. § 3(9), 123 Stat. at 1782. As part
of that goal, it invoked the FDA’s expertise “to evaluate the
impact of labels, labeling, and advertising on consumer
behavior in order to reduce the risk of harm.” Id. § 2(44), 123
Stat. at 1780. In section 906(d)(1), it specifically directed the
FDA to consider the impact of any regulation on cessation and
adoption rates—separately identified in their own
subsections—even as the FDA considers other public-health
issues as well. 21 U.S.C. § 387f(d)(1). And it required the
FDA to assess cessation and adoption rates in justifying various
other administrative actions concerning tobacco. See id.
§§ 387g(a)(3)(B)(i) (product standards), 387j(c)(4) (new
product approval).
Furthermore, our interpretation accords with common
sense. The required package warnings occupy more than four
times the surface area than do the package warnings previously
required under settlements among large cigar manufacturers
and the Federal Trade Commission. See, e.g., In re Swedish
Match N. Am., Inc., Dkt. No. C-3970, 2000 WL 1207446(F.T.C. Aug. 25, 2000). By the FDA’s own estimate, the
warnings will cost over $100 million to implement. Final
Regulatory Impact Analysis, ECF Doc. 81-2 at 114–15. And
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they affect the speech interests of manufacturers. See, e.g., R.J.
Reynolds Tobacco Co. v. FDA, 696 F.3d 1205, 1211–12 (D.C.
Cir. 2012). When requiring a product to bear such obtrusive
and expensive health warnings, it is difficult to imagine a more
important “aspect of the problem,” State Farm, 463 U.S. at 43,
than whether the warnings will actually affect product usage.
The FDA responds that section 906(d)(1) “does not require
a finding that a regulation will reduce the use of tobacco
products” and that Congress gave it “leeway to determine what
measures would be appropriate for the protection of the public
health, as long as the agency considered the effects of
regulation across all populations.” Appellees’ Br. 23. The
FDA is partially correct; section 906(d)(1) requires a “finding”
only on whether the regulation under consideration “would be
appropriate for the protection of the public health.” But the
provision then specifies how that finding “shall be
determined,” namely by addressing risks and benefits for the
entire population “and taking into account” the two specific
considerations that we have highlighted. We decline to read
the latter requirement out of the statute.
B
The Deeming Rule does not consider the impact of health
warnings on smoking cessation and adoption rates. In fact, the
rule scrupulously avoids that issue, and the FDA barely even
contends otherwise. Instead, the FDA candidly acknowledged
that “[r]eliable evidence on the impacts of warning labels … on
users of cigars [and] pipe tobacco … does not, to our
knowledge, exist.” Final Regulatory Impact Analysis, ECF
Doc. 81-2 at 62.
The FDA now highlights its conclusion that the expanded
health warnings are “an effective means to help consumers
understand and appreciate the risks of using tobacco products.”
10
Deeming Rule, 81 Fed. Reg. at 29,064; see also id. at 28,981.
Perhaps the new warnings will more effectively convey health
risks, but section 906(d)(1) also requires the FDA to consider
“the increased or decreased likelihood” that consumers will act
on that information by deciding not to smoke. Presumably the
two issues are related, for consumers are unlikely to heed
warnings that they do not read or cannot understand. But “the
relatedness of the concept discussed to the statutorily mandated
factor that the agency does not discuss does not relieve the
agency of the duty of compliance with the congressional
instruction.” Pub. Citizen v. Fed. Motor Carrier Safety Admin.,
374 F.3d 1209, 1217 (D.C. Cir. 2004). Because the regulation
contains no discussion tying the warnings to reduced smoking,
the FDA failed to bridge the gap between effective
communication and fewer smokers.
By its terms, section 906(d)(1) required the FDA to “tak[e]
into account” whether the warning requirements would affect
the number of smokers. Because the FDA declined even to
consider that question, it violated section 906(d)(1) and acted
arbitrarily and capriciously.
C
The district court held that the FDA satisfied section
906(d)(1) by making this statement in the notice of proposed
rulemaking:
Based on the available data on the addictiveness of
nicotine ... , the known adverse health effects of some
of the products covered by this proposed rule, such as
certain cigars and waterpipes, the likelihood that users
of these products could co-use or migrate to other
tobacco products like cigarettes, and the risk that
failure to act will reinforce consumers’ existing
confusion and misinformation about these products’
11
safety or lack of harmfulness, FDA believes that the
sale and distribution restrictions the Agency is
proposing—minimum age and identification
requirements (including vending machine
requirements) and health warning requirements—
meet the public health standard set forth in section
906(d) .... Specifically, FDA has concluded that the
restrictions would be appropriate for the protection of
the public health with respect to the risks and benefits
to the population as a whole, including the increased
likelihood that existing users will quit using tobacco
products and the decreased likelihood that new users
will initiate tobacco product use.
Deeming Tobacco Products to Be Subject to the FDCA, 79
Fed. Reg. 23,142, 23,146 (proposed Apr. 25, 2014) (NPRM);
see Cigar Ass’n, 315 F. Supp. 3d. at 159–61.
We cannot uphold a final rule based on reasoning that
appears only in the notice. The APA “prescribes a three-step
procedure for so-called ‘notice-and-comment rulemaking.’”
Perez v. Mortgage Bankers Ass’n, 575 U.S. 92, 96 (2015).
First, the agency must issue a “notice of proposed rulemaking.”
5 U.S.C. § 553(b). Second, the agency must accept public
comments. Id. § 553(c). Third, the agency must issue a final
rule including a “general statement of … basis and purpose,”
id., which must address significant comments and forms the
basis for judicial review, see Nat’l Mining Ass’n v. MSHA, 512
F.3d 696, 700 (D.C. Cir. 2008); 1 K. Hickman & R. Pierce,
Administrative Law Treatise § 5.4 (6th ed. 2019); 2 id. § 11.1.
Not surprisingly, the statement of basis and purpose must come
“after” consideration of comments and thus also “after notice
required by” section 553(b). See 5 U.S.C. § 553(c). We thus
cannot uphold a final rule based on strands of reasoning that
precede public comment and appear nowhere in the final rule.
12
The district court reasoned that the Deeming Rule
incorporated the notice. See Cigar Ass’n, 315 F. Supp. 3d. at
161 (citing Deeming Rule, 81 Fed. Reg. at 29,062). Here is the
putative incorporation: “FDA finds there is a strong scientific
basis to require health warnings on cigar packages and in cigar
advertising (as well as on signs for unpackaged cigars), which
was extensively discussed in the NPRM (79 Fed. Reg. 23,142,
at 23,167 through 23,170).” Deeming Rule, 81 Fed. Reg. at
29,062 (cleaned up). This incorporates not the entire notice,
but two passages beginning some 21 pages after the single page
quoted by the district court. In the first incorporated passage,
the FDA argued that warnings “are necessary to alert young
people to the dangers of initiating cigar use, as well as to help
current cigar smokers better understand and appreciate the
health risks of using cigars.” NPRM, 79 Fed. Reg. at 23,167.
The second passage addressed whether the proposed cigar
warnings accurately convey the health risks of smoking cigars.
Id. at 23,167–70. In both passages, the FDA again focused on
effectively conveying information—without serious
consideration of how the information might affect smoking.
In any event, the notice would not satisfy section 906(d)(1)
even if the Deeming Rule had fully incorporated it. For
starters, the passage quoted by the district court failed to
disentangle the effects of health warnings from those of age
minimums and identification requirements, which involve not
simply speech but outright prohibition of certain sales of
tobacco products. Moreover, the quoted passage does little
more than parrot the governing statutory language, rather than
set forth evidence or a reasonable explanation of the likelihood
that the proposed warnings would cause smokers to quit and
prevent others from starting. Later in the notice, the FDA did
elaborate on the various proposed regulations. In doing so, it
cited many studies indicating that age minimums and
identification requirements would likely reduce underage
13
smoking. See NPRM, 79 Fed. Reg. at 23,160–62. But as for
the warning requirements, the FDA said only that “[t]he
purpose of health warnings is to help current and potential
tobacco users understand and appreciate the serious adverse
health consequences associated with tobacco product use and
the addictive nature of tobacco products.” Id. at 23,163; see
also id. at 23,164 (“FDA believes that the proposed warnings
would help both users and nonusers better understand and
appreciate these dangers.”). This is essentially the same
reasoning contained in the final rule, which we have held to be
insufficient.
III
Congress required the FDA to consider whether any
regulation under section 906(d)(1) would likely affect the
number of tobacco users. In promulgating the warning
requirements for cigars and pipe tobacco, the FDA failed to
satisfy that obligation. We therefore reverse the grant of
summary judgment to the FDA and the denial of summary
judgment to the plaintiffs. Given our disposition on the merits,
we dismiss as moot the plaintiffs’ appeal from the denial of
their motion for a preliminary injunction. Finally, we remand
to the district court for further proceedings consistent with this
opinion.
So ordered.