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Attorneys for Plaintiffs International Premium
Cigar and Pipe Retailers Association and Cigar
Rights of America

VMark S. Raffman
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Attorneys for Plaintiff Cigar Association of
America  


Case 1:16-cv-01460-APM Document 62 Filed 10/03/17 Page 6 of 63

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

CIGAR ASSOCIATION OF AMERICA, )
INTERNATIONAL PREMIUM CIGAR )
AND PIPE RETAILERS ASSOCIATION, )
AND CIGAR RIGHTS OF AMERICA, )
)
Plaintiffs, )
)
v. ) Civil Action No. 16-1460 (APM)
)
UNITED STATES FOOD AND DRUG )
ADMINISTRATION, UNITED STATES )
DEPARTMENT OF HEALTH AND )
HUMAN SERVICES, DON J. WRIGHT, )
M.D., and SCOTT GOTTLIEB, M.D. )
)
Defendants. )

MEMORANDUM IN SUPPORT OF PLAINTIFFS’ MOTIONS
FOR A PRELIMINARY INJUNCTION AND FOR PARTIAL SUMMARY JUDGMENT

Dated: October 3, 2017 Michael J. Edney, DC Bar No. 492024
Caroline M. Mew, DC Bar No. 467354
NORTON ROSE FULBRIGHT US LLP
799 9th Street, NW, Suite 1000
Washington, DC 20001-4501
Telephone: (202) 662-0200
Fax: (202) 662-4643
michael.edney@nortonrosefulbright.com
caroline.mew@nortonrosefulbright.com

Attorneys for Plaintiffs International Premium
Cigar and Pipe Retailers Association and
Cigar Rights of America

Mark S. Raffman, DC Bar No. 414578
GOODWIN PROCTER LLP
901 New York Avenue NW
Washington, DC 20001
Telephone: (202) 346-4000
Fax: (202) 346-4444
mraffman@goodwinlaw.com

Attorneys for Plaintiff Cigar Association of
America
Case 1:16-cv-01460-APM Document 62 Filed 10/03/17 Page 7 of 63

TABLE OF CONTENTS

Page

INTRODUCTION ......................................................................................................................... 1
BACKGROUND ........................................................................................................................... 3
I. The Cigar and Pipe Tobacco Industries ................................................................. 3
II. Congress Enacts the Tobacco Control Act to Combat Product
Manipulation and Marketing to Youth .................................................................. 4
III. The Rule Subjects All Cigars and Pipe Tobacco to the Cigarette
Regulatory Scheme ................................................................................................ 6
A. The Premarket Review Process ................................................................. 6
B. The FDA Massively Increases the Size and Scope of Health
Warnings on Cigar Packages and Advertisements .................................... 8
1. The Existing Cigarette and Cigar Warning Regimes..................... 8
2. The Expanded FDA Warnings....................................................... 8
C. The FDA Issues a Rule Imposing User Fees on Cigars and Pipe
Tobacco, But Not E-Cigarettes ................................................................ 11
IV. The FDA’s New Regulatory Approach ............................................................... 12
ARGUMENT............................................................................................................................... 14
I. Standard of Review.............................................................................................. 14
II. The FDA’s Warnings Violate the First Amendment ........................................... 16
A. The FDA’s Larger and Broader Warnings Violate the First
Amendment.............................................................................................. 16
1. The FDA’s Warnings Restrict Commercial Speech, and the
Central Hudson Test Applies....................................................... 17
2. The FDA’s Warnings Fail the Central Hudson Test ................... 18
a. The FDA’s warnings do not serve a substantial
government interest.......................................................... 19
b. The FDA’s warnings do not directly or materially
advance the reduction of underaged cigar and pipe
tobacco use....................................................................... 20
c. The FDA’s warnings are not narrowly tailored ............... 22
B. The FDA’s Warnings Also Fail the Standard for Compelled
Commercial Disclosures .......................................................................... 27
C. The FDA’s Warning Plan Pre-Approval Requirement Violates the
First Amendment ..................................................................................... 30

-i-
Case 1:16-cv-01460-APM Document 62 Filed 10/03/17 Page 8 of 63

TABLE OF CONTENTS
(continued)
Page

1. The Warning Plan Scheme Is an Unconstitutional Prior
Restraint ....................................................................................... 30
2. The Warning Plan Scheme Is an Unconstitutional
Restriction of Speech ................................................................... 32
III. The FDA’s Warnings Violate the Tobacco Control Act and the
Administrative Procedure Act.............................................................................. 33
A. The Tobacco Control Act Requires Agency Findings on How
Warnings Will Affect Tobacco Use......................................................... 33
B. The Rule Is Arbitrary and Capricious Because the FDA Ignored
Statutorily Required Considerations and Inverted Its Own Risk
Assessment............................................................................................... 35
IV. Plaintiffs Are Entitled to a Preliminary Injunction Against Enforcement of
the Warning Requirements .................................................................................. 37
V. The FDA’s Decision to Impose User Fees on Cigars and Pipe Tobacco,
But Not E-Cigarettes, Is Contrary to Law ........................................................... 39
A. Congress Did Not Limit User Fees to the Tobacco Products Listed
in its Allocation........................................................................................ 40
B. Congress Deliberately Imposed a “User Fee,” Not a Tax ....................... 42
C. The User Fee Rule, As Impermissible Economic Favoritism,
Raises Constitutional Questions Under the Fifth Amendment ................ 43
VI. The FDA Erroneously Interpreted the Act to Treat Retailers Who Blend
Finished Pipe Tobacco as Tobacco Product Manufacturers ................................ 44
VI. Pipes Are Not “Components” of a Tobacco Product........................................... 46
CONCLUSION............................................................................................................................ 49

-ii-
Case 1:16-cv-01460-APM Document 62 Filed 10/03/17 Page 9 of 63

TABLE OF AUTHORITIES

Page(s)

Cases

11126 Baltimore Blvd., Inc. v. Prince George’s Cty.,
58 F.3d 988 (4th Cir. 1995) .....................................................................................................32

*44 Liquormart, Inc. v. Rhode Island,
517 U.S. 484 (1996)...........................................................................................................17, 32

Adirondack Med. Ctr. v. Sebelius,
740 F.3d 692 (D.C. Cir. 2014) .................................................................................................41

AFL-CIO v. FEC,
333 F.3d 168 (D.C. Cir. 2003) .................................................................................................16

All. for Nat. Health U.S. v. Sebelius,
775 F. Supp. 2d 114 (D.D.C. 2011) .............................................................................15, 27, 41

All. for Nat. Health U.S. v. Sebelius,
786 F. Supp. 2d 1 (D.D.C. 2011) .............................................................................................15

*Am. Beverage Ass’n v. City & Cty. of S.F.,
--- F.3d ----, 2017 WL 4126944 (9th Cir. Sept. 19, 2017)...............................22, 24, 29, 38, 39

Am. Council of Life Insurers v. D.C. Health Benefit Exch. Auth.,
815 F.3d 17 (D.C. Cir. 2016) .............................................................................................42, 43

Am. Meat Inst. v. U.S. Dep’t of Agric.,
760 F.3d 18 (D.C. Cir. 2014) (en banc).............................................................................19, 28

Am. Petroleum Inst. v. EPA,
862 F.3d 50 (D.C. Cir. 2017) ...................................................................................................36

Armour v. City of Indianapolis,
132 S. Ct. 2073 (2012).............................................................................................................43

Ass’n of Private Colls. & Univs. v. Duncan,
870 F. Supp. 2d 133 (D.D.C. 2012) .........................................................................................36

Bad Frog Brewery, Inc. v. N.Y. State Liquor Auth.,
134 F.3d 87 (2d Cir. 1998).......................................................................................................17

Burk v. Augusta-Richmond Cty.,
365 F.3d 1247 (11th Cir. 2004) ...............................................................................................31

-iii-
Case 1:16-cv-01460-APM Document 62 Filed 10/03/17 Page 10 of 63

Bus. Roundtable v. SEC,
647 F.3d 1144 (D.C. Cir. 2011) .........................................................................................46, 49

*Central Hudson Gas & Elec. Co. v. Pub. Serv. Comm’n of N.Y.,
447 U.S. 557 (1980).......................................................................17, 18, 19, 20, 27, 28, 30, 32

Chamber of Commerce v. SEC,
412 F.3d 133 (D.C. Cir. 2005) .................................................................................................46

CTIA-The Wireless Ass’n v. City of Berkeley, Cal.,
854 F.3d 1105 (9th Cir. 2017) .................................................................................................28

Cty. of L.A. v. Shalala,
192 F.3d 1005 (D.C. Cir. 1999) ...............................................................................................41

Del. Dep’t of Nat. Res. & Envtl. Control v. EPA,
785 F.3d 18 (D.C. Cir. 2015) ...................................................................................................35

Desert Outdoor Adver., Inc. v. City of Moreno Valley,
103 F.3d 814 (9th Cir. 1996) ...................................................................................................31

Discount Tobacco City & Lottery, Inc. v. United States,
674 F.3d 509 (6th Cir. 2012) ...................................................................................................30

Dist. Hosp. Partners, L.P. v. Burwell,
786 F.3d 46 (D.C. Cir. 2015) ...................................................................................................36

Dwyer v. Cappell,
762 F.3d 275 (3d Cir. 2014)...............................................................................................18, 29

Edenfield v. Fane,
507 U.S. 761 (1993)...........................................................................................................18, 20

Edward J. DeBartolo Corp. v. Fla. Gulf Coast Bldg. & Constr. Trades Council,
485 U.S. 568 (1988).................................................................................................................34

Elrod v. Burns,
427 U.S. 347 (1976).................................................................................................................38

Emily’s List v. FEC,
581 F.3d 1 (D.C. Cir. 2009) .....................................................................................................42

Empress Casino Joliet Corp. v. Balmoral Racing Club, Inc.,
651 F.3d 722 (7th Cir. 1992) ...................................................................................................42

Entm’t Software Ass’n v. Blagojevich,
469 F.3d 641 (7th Cir. 2006) .............................................................................................22, 28

- iv -
Case 1:16-cv-01460-APM Document 62 Filed 10/03/17 Page 11 of 63

*FW/PBS, Inc. v. City of Dall.,
493 U.S. 215 (1990)...........................................................................................................30, 31

Gonzales v. Carhart,
550 U.S. 124 (2007).................................................................................................................47

Gordon v. Holder,
721 F.3d 638 (D.C. Cir. 2013) .................................................................................................38

Greater New Orleans Broad. Ass’n, Inc. v. United States,
527 U.S. 173 (1999).................................................................................................................23

Gustafson v. Alloyd Co., Inc.,
513 U.S. 561 (1995).................................................................................................................48

Ibanez v. Fla. Dep’t of Bus. & Prof’l Regulation, Bd. of Accountancy,
512 U.S. 136 (1994).................................................................................................................29

Individual Reference Servs. Grp., Inc. v. FTC,
145 F. Supp. 2d 6 (D.D.C. 2001) .............................................................................................15

Int’l Dairy Foods Ass’n v. Amestoy,
92 F.3d 67 (2d Cir. 1996).............................................................................................20, 28, 33

*Lorillard Tobacco Co. v. Reilly,
533 U.S. 525 (2001)...................................................................................18, 19, 20, 22, 23, 33

Milavetz, Gallop & Milavetz, P.A. v. United States,
559 U.S. 229 (2010).................................................................................................................28

*Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29 (1983).......................................................................................................15, 35, 36

*N.Y. Magazine v. Metro. Transp. Auth.,
136 F.3d 123 (2d Cir. 1988).....................................................................................................31

Nat’l Ass’n of Mfrs. v. SEC,
748 F.3d 359 (D.C. Cir. 2014) .................................................................................................22

Nat’l Ass’n of Mfrs. v. SEC,
800 F.3d 518 (D.C. Cir. 2015) .................................................................................................22

*Nat’l Cable Television Ass’n, Inc. v. United States,
415 U.S. 336 (1974)...........................................................................................................42, 43

Nat’l Mining Ass’n v. Kempthorne,
512 F.3d 702 (D.C. Cir. 2008) .................................................................................................43

-v-
Case 1:16-cv-01460-APM Document 62 Filed 10/03/17 Page 12 of 63

Nat’l Wildlife Fed’n v. Hodel,
839 F.2d 694 (D.C. Cir. 1988) .................................................................................................45

Noble Energy, Inc. v. Salazar,
671 F.3d 1241 (D.C. Cir. 2012) ...............................................................................................40

Nutritional Health All. v. Shalala,
144 F.3d 220 (2d Cir. 1998).....................................................................................................32

Poett v. United States,
657 F. Supp. 2d 230 (D.D.C. 2009) .........................................................................................15

Pub. Citizen Inc. v. La. Attorney Disciplinary Bd.,
632 F.3d 212 (5th Cir. 2011) ...................................................................................................29

Pub. Citizen v. FMCSA,
374 F.3d 1209 (D.C. Cir. 2004) ...............................................................................................35

Pursuing Am.’s Greatness v. FEC,
831 F.3d 500 (D.C. Cir. 2016) ...........................................................................................18, 38

*R.J. Reynolds Tobacco Co. v. FDA,
823 F. Supp. 2d 36 (D.D.C. 2011) ...............................................................................16, 37, 38

*R.J. Reynolds Tobacco Co. v. FDA,
845 F. Supp. 2d 266 (D.D.C. 2012) .........................................................................................26

*R.J. Reynolds Tobacco Co. v. FDA,
696 F.3d 1205 (D.C. Cir. 2012) ...................................................................8, 18, 19, 20, 21, 22

Riley v. Nat’l Fed’n of the Blind of N.C., Inc.,
487 U.S. 781 (1988).................................................................................................................31

Rosen v. Port of Portland,
641 F.2d 1243 (9th Cir. 1981) .................................................................................................31

Rubin v. Coors Brewing Co.,
514 U.S. 476 (1995).....................................................................................................17, 20, 22

Se. Promotions Ltd. v. Conrad,
420 U.S. 546 (1975).................................................................................................................32

Seafarers Int’l Union v. U.S. Coast Guard,
81 F.3d 179 (D.C. Cir. 1996) ...................................................................................................43

In re Search of Kitty’s E.,
905 F.2d 1367 (10th Cir. 1990) ...............................................................................................31

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Case 1:16-cv-01460-APM Document 62 Filed 10/03/17 Page 13 of 63

Smoking Everywhere, Inc. v. FDA,
680 F. Supp. 2d 62 (D.D.C. 2010) ...........................................................................................38

St. Joseph Abbey v. Castille,
712 F.3d 215 (5th Cir. 2013) ...................................................................................................43

Stewart v. D.C. Armory Bd.,
789 F. Supp. 402 (D.D.C. 1992) ..............................................................................................39

Thompson v. Clark,
741 F.2d 401 (D.C. Cir. 1984) ...........................................................................................46, 49

Thompson v. W. States Med. Ctr.,
535 U.S. 357 (2002).................................................................................................................27

Tillman v. Miller,
133 F.3d 1402 (11th Cir. 1998) .........................................................................................24, 29

U.S. West, Inc. v. FCC,
182 F.3d 1224 (10th Cir. 1999) ...............................................................................................26

United Space All., LLC v. Solis,
824 F. Supp. 2d 68 (D.D.C. 2011) ...........................................................................................15

United States v. Sperry Corp.,
493 U.S. 52 (1989)...................................................................................................................43

United States v. Wenger,
427 F.3d 840 (10th Cir. 2005) .................................................................................................28

Va. State Bd. of Pharmacy v. Va. Citizens Consumer Prot. Council,
425 U.S. 748 (1976).................................................................................................................32

*Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio,
471 U.S. 626 (1985).............................................................................19, 22, 24, 27, 28, 29, 30

Rules and Statutes

5 U.S.C. § 603................................................................................................................................46

5 U.S.C. § 604................................................................................................................................46

5 U.S.C. § 706................................................................................................................................15

7 U.S.C. § 518d..............................................................................................................................41

15 U.S.C. § 1333..................................................................................................................8, 24, 36

21 U.S.C. § 321(rr)(1)....................................................................................................................47

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21 U.S.C. § 387..............................................................................................................................44

21 U.S.C. § 387a ..............................................................................................................................5

21 U.S.C. § 387d........................................................................................................................5, 44

21 U.S.C. § 387e ..................................................................................................................5, 44, 45

21 U.S.C. § 387f ........................................................................................................5, 6, 11, 33, 34

21 U.S.C. § 387g............................................................................................................................47

21 U.S.C. § 387i.........................................................................................................................5, 44

21 U.S.C. § 387j...............................................................................................................5, 7, 44, 47

21 U.S.C. § 387q............................................................................................................................36

21 U.S.C. § 387s ..........................................................................................................12, 39, 40, 41

21 C.F.R. § 1143.1 ...........................................................................................................................9

21 C.F.R. § 1143.3 .........................................................................................................................11

21 C.F.R. § 1143.5 ...................................................................................................9, 10, 24, 30, 33

Legislative and Administrative Materials

H.R. Rep. No. 111-58 (2009).........................................................................................................42

Proposed Rule, Deeming Tobacco Products to Be Subject to the Federal Food,
Drug, and Cosmetic Act, 79 Fed. Reg. 23,142 (Apr. 25, 2014) ........................6, 12, 16, 19, 21

Final Rule, Requirements for the Submission of Data Needed to Calculate User
Fees, 81 Fed. Reg. 28,707 (May 10, 2016)......................................................12, 13, 39, 40, 42

Final Rule, Deeming Tobacco Products to Be Subject to the Federal Food, Drug,
and Cosmetic Act, 81 Fed. Reg. 28,974
(May 10, 2016).....1, 2, 6, 7, 9, 11, 12, 13, 14, 19, 20, 21, 24, 30, 33, 34, 36, 40, 44, 45, 46, 48

Other Authorities

Component, Merriam-Webster, http://www.merriam-
webster.com/dictionary/component;........................................................................................47

New Webster’s Comprehensive Dictionary of the English Language 207 (1985
ed.) ...........................................................................................................................................47

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INTRODUCTION

In May 2016, the Food and Drug Administration (the “FDA”) regulated cigars and pipe

tobacco for the first time. See Final Rule, Deeming Tobacco Products To Be Subject to the

Federal Food, Drug, and Cosmetic Act, 81 Fed. Reg. 28,974 (May 10, 2016) (the “Deeming

Rule”). To do so, the FDA used a statute—the Family Smoking Prevention and Tobacco Control

Act (the “TCA”)—that established an elaborate system for regulating cigarettes. See Pub. L. No.

111–31, 123 Stat. 1776 (2009). The Act was entirely agnostic on whether and how cigars and

pipe tobacco should be regulated, leaving that issue to the agency’s study.

Through the Deeming Rule, the agency foisted the entire cigarette regulatory apparatus,

virtually unaltered, onto cigars and pipe tobacco. The Rule required all cigars—even premium

cigars handmade as they have been for centuries—to navigate a devastatingly expensive FDA

review process. While this made sense for a cigarette market with fewer than 100 widely

marketed products, it spelled ruin for a cigar industry with endless variety and more than 20,000

different products. Each would have to run the FDA gauntlet, or be pulled from the market.

The current Administration recognized the folly of this exercise, delayed many aspects of

the Rule, and promised rulemaking dockets to adjust them. But the FDA’s acknowledgement

that the Rule is deeply flawed did not go far enough. It left behind—with quickly approaching

compliance deadlines—four unjustifiable aspects of the Rule. Each is contrary to established law.

First, the FDA required dramatically larger and more intrusive health warnings on cigar

and pipe tobacco packaging and advertisements, in plain violation of the First Amendment.

These warnings must cover 30 percent of the two most prominent panels of any package and 20

percent of any advertisement. The FDA also requires these warnings on virtually all

communications between local retailers and their customers. The FDA’s new warnings cover up

to 475 percent more package space than the warnings long required by the Federal Trade
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Commission (the “FTC”) for most of the cigar manufacturing industry. These warnings destroy

cigar boxes, through whose intricate artwork cigar manufacturers have long conveyed the

craftsmanship and quality of their products.

The Rule’s breathtaking confiscation of communication with consumers is a classic

restriction of commercial speech that fails any First Amendment standard. Here, the agency

never bothered, even for a moment, to explain how the existing warnings were failing. Instead, it

concluded that there was no “reliable evidence” that the bigger warnings would have any effect

on cigar or pipe tobacco use. The agency went forward nonetheless: Shooting first and asking

questions later never satisfies the First Amendment.

If that were not enough, the FDA barred anyone—from the largest cigar company to the

cigar store around the corner—from advertising any cigar product until it has submitted a

warning plan and the FDA has approved it. Not to worry, the FDA says, it will probably get

back to anyone who wants to speak to consumers within twelve months, but no promises. This is

a prior restraint, and it is unconstitutional.

The Court should issue a preliminary injunction against the FDA warnings requirement.

Plaintiffs are incurring millions in costs to redesign packages and advertising, now, and those

costs will multiply each month until the August 10, 2018 compliance date. The cost of molding

speech to a requirement violates the First Amendment and is classic irreparable harm.

Second, the FDA mangled Congress’s mandate that every industry regulated under the

TCA pay for its own regulation. In the Deeming Rule, the FDA chose to regulate cigars, pipe

tobacco, and e-cigarettes. Of those, it is charging only cigars and pipe tobacco, which in turn pay

for the cost of regulating e-cigarettes. The Act calls these “user fees,” but when all “users” of a

regulatory system do not pay, it is a “tax.” Nothing gives the FDA that power.

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Third and fourth, the FDA crammed two square pegs into round holes, with devastating

consequences. It treated retailers who also blend two finished pipe tobacco products for a

customer as “manufacturers,” subject to crushing regulatory burdens. And it requires every

wooden pipe to go through FDA premarket review. Not one of the hundreds of individual pipe

craftsmen, nor many pipe tobacco retailers, will be able to run this gauntlet; centuries-old

traditions will die with no benefit to public health. Neither FDA interpretation, fortunately, can

be squared with the text of the Act.

BACKGROUND

I. THE CIGAR AND PIPE TOBACCO INDUSTRIES

Plaintiffs Cigar Association of America, Inc., International Premium Cigar and Pipe

Retailers Association, and Cigar Rights of America are non-profit associations that represent

many manufacturers, retailers, and consumers of cigars and pipe tobacco. Many of Plaintiffs’

members are family-owned small businesses, and they have invested their lives and their

livelihoods in continuing the tradition of hand-crafting leaf tobacco into world-recognized cigars.

Plaintiffs therefore have a vital interest in ensuring that any regulation of cigars, pipes, and pipe

tobacco is consistent with statutory and constitutional requirements.

The cigar industry is a fraction of the size of the cigarette industry by production and

sales volume, and the premium segment is even smaller—less than one percent. See AR 129595;

AR129899; AR130336. Unlike the cigarette industry, which is dominated by a handful of large

corporate manufacturers with billions in revenue, the cigar and pipe tobacco industries are

populated by small businesses making low-volume product lines. AR130336–37; AR134763.

The process of crafting a premium cigar is slow and painstaking, the products unique to

the hands that form them. They are hardly innovative products; they have been made the same

way for centuries. Some manufacturers grow, harvest, and age the tobacco themselves; others

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source the plant from farms the world over; all transform it into a rare artisanal good. See

AR129899. Whereas cigarettes roll off of mechanical assembly lines millions at a time,

premium cigars are largely made manually by skilled tradesmen from natural tobacco leaf.

AR129915–16; AR159689. In fact, the process of manufacturing a premium cigar takes two to

five years or more, from the planting of the tobacco seed, to the harvest, to the cultivation of the

natural wrapper, to the rolling of the cigar. AR159757–59.

Crop variations, the inherent imperfections that result from manual production, and

consumer demand for new, and often rare, cigars, have led to considerable diversity in the cigar

market, with more than 20,000 different products. AR130349; AR159690. Likewise, pipe

tobacco makers draw on their expert knowledge to constantly adjust tobacco blends, casings, and

flavorings to maintain a consistent sensory experience for their customers. AR130239. The

typical cigar consumer is an older adult who smokes infrequently and seeks out well known

makers and blends, as well as special editions and limited releases, much like a wine connoisseur

hunts for renowned vintages. AR129608; AR130339–42.

II. CONGRESS ENACTS THE TOBACCO CONTROL ACT TO COMBAT
PRODUCT MANIPULATION AND MARKETING TO YOUTH

Congress passed the Family Smoking Prevention and Tobacco Control Act (the “TCA”)

in an effort to combat the manufacturer manipulation and youth use of cigarettes and smokeless

tobacco. See generally Pub. L. No. 111–31, 123 Stat. 1776. 1 The TCA contains a lengthy

recitation of legislative findings focused on cigarettes and underage tobacco use. See TCA § 2,

123 Stat. at 1776–81. The findings never mention cigars or pipe tobacco. See id. Congress

1
Citations to the TCA herein are limited to sections 1–6 of the Act (TCA §§ 1–6), which were
not codified in the United States Code but can be found in the Statutes at Large (123 Stat. at
1776–83). Other citations are to the amended sections of the Food, Drug, and Cosmetic Act
(“FD&C Act”) (FD&C Act §§ 901–920) and the United States Code (21 U.S.C. §§ 387–387u).

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mandated immediate regulation of only cigarettes, roll-your-own tobacco, and smokeless

tobacco. See FD&C Act § 901(b), 21 U.S.C. § 387a(b). The TCA also authorized the FDA to

“deem” other tobacco products by appropriate regulation. Id.

In the Act, Congress crafted a premarket review scheme for cigarettes and smokeless

tobacco. See id. § 910, 21 U.S.C. § 387j. Recognizing that the system would go into immediate

effect for cigarettes and smokeless tobacco, the Act required cigarette products that were not on the

market as of February 15, 2007 (the “predicate date”) to obtain FDA approval. See id. § 910(a), 21

U.S.C. § 387j(a). If a manufacturer could demonstrate to the FDA that a cigarette product was

“substantially equivalent” to one on the market as of the predicate date, the Act allowed the

manufacturer to bypass the full premarket review process and some of its many statutorily

mandated scientific inquiries. See id. §§ 905(j), 910(a)(2)(A), 21 U.S.C. §§ 387e(j), 387j(a)(2)(A).

In addition to the premarket review process, the TCA imposes other regulatory burdens

on cigarettes and smokeless tobacco. Among other things, the statute requires manufacturers:

(a) to submit lists of ingredients for each tobacco product; (b) to test each product for what the

FDA terms “harmful or potentially harmful constituents” and to provide those results to the

agency; (c) to submit documents relating to the health and toxicological effects of products,

ingredients, and additives to the FDA; (d) to register with the FDA and to undergo a biennial

inspection; and (e) to maintain extensive records and reports. Id. §§ 904(a), 905(b)–(d), (g),

909(a), 21 U.S.C. §§ 387d(a), 387e(b)–(d), (g), 387i(a).

The Act also authorizes, but does not require, the FDA to mandate warning labels on

tobacco products. Id. § 906(d), 21 U.S.C. § 387f(d). Understanding the implications on

commercial speech, Congress required weighty findings before the FDA could impose health

warnings on a tobacco product. Specifically, the FDA must study and determine “the increased

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or decreased likelihood that existing users of tobacco products will stop using such products” and

“the increased or decreased likelihood that those who do not use tobacco products will start using

such products.” Id. § 906(d)(1)(A)–(B), 21 U.S.C. § 387f(d)(1)(A)–(B).

III. THE RULE SUBJECTS ALL CIGARS AND PIPE TOBACCO TO THE
CIGARETTE REGULATORY SCHEME

On May 10, 2016, the agency promulgated a Final Rule deeming all cigars, pipe tobacco,

and e-cigarettes subject to almost all of the regulatory scheme for cigarettes. See generally 81

Fed. Reg. at 28,974–29,106.

A. The Premarket Review Process

The FDA began with transplanting the cigarette premarket review process and its

February 15, 2007 predicate date. Congress designed the 2007 date for a cigarette regulatory

scheme that began just two years after the predicate date—in 2009. This decision destroyed the

substantial equivalence pathway to FDA approval that was absolutely indispensable for making

the process survivable for cigarettes. As the FDA recognized in the Proposed Rule, “cigar

manufacturers may not be able to identify a viable predicate[,]” because they would need to

reach back nine years before the predicate date. 79 Fed. Reg. 23,142, 23,176 (Apr. 25, 2014).

Even without the ill-suited predicate date, the premarket review process was already

poised to treat cigars and pipe tobacco far more harshly than cigarettes. Each product—whether

proceeding through substantial equivalence or not—needed to traverse a data-intensive and

expensive agency review process. That may have made sense for the cigarette industry, where

fewer than 100 cigarette products are meaningfully marketed in the United States. 2 But the cigar

2
The FDA has estimated that there are approximately 5,300 active UPCs for cigarettes and
smokeless tobacco and related products combined. AR010618–19. But the four major cigarette
companies that account for more than 90 percent of U.S. cigarette sales actively market only ten
to twenty brands each. AR130336.

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industry has more than 20,000 separate products—so-called “stock-keeping units” or “SKUs.”

AR130349; AR159690. That arises from the handmade manufacturing process and consumer

demand for different seed varietals, shapes, and blends. The cost of the FDA premarket review

process is directly proportional to the number of different products, but the agency never showed

that varied blends were dangerous. The comparatively crushing expense inevitably would have

led to product exit and business failure, along lines having nothing to do with public health.

Where the agency made changes to the cigarette regulatory scheme, it treated cigars and

pipe tobacco more harshly than the cigarette products that were the primary concern of Congress.

For example, Congress permitted cigarette and smokeless tobacco products to remain on the

market until the FDA resolved their substantial equivalence applications. FD&C Act §

910(a)(2)(B), 21 U.S.C. § 387j(a)(2)(B). The FDA forced cigar and pipe tobacco manufacturers

to pull those products after a year if the FDA had not gotten around to deciding their

applications. 81 Fed. Reg. at 29,011.

The arbitrary inequities of the Deeming Rule extend to pipe tobacco. The FDA defined

“component or part” in a way to require every traditional pipe—often crafted from wood by

hand—to pass through premarket review. Id. at 29,042. It did so with no analysis of their impact

on public health. See id. Likewise, the FDA concluded that retail establishments that blend

finished pipe tobacco for customers are “tobacco product manufacturers” and therefore must

comply with the burdensome premarket review, testing, registration, and other obligations imposed

on the actual manufacturing companies. See id. at 29,049.

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B. The FDA Massively Increases the Size and Scope of Health Warnings on
Cigar Packages and Advertisements

1. The Existing Cigarette and Cigar Warning Regimes

The Rule next imposed a substantially more onerous health warnings regime on cigars

and pipe tobacco than what currently applies to cigarettes. Cigarette health warnings have been

in place since the 1965 Federal Cigarette Labeling and Advertising Act (“FCLAA”). The FDA’s

attempt to require larger and more glaring warnings was struck down in R.J. Reynolds Tobacco

Co. v. FDA (R.J. Reynolds III), 696 F.3d 1205 (D.C. Cir. 2012). Under the current cigarette

warning system, one warning label appears on one side panel of a cigarette package, covering

only around 4.8 percent of the package. See 15 U.S.C. § 1333(a)(1) (2008). Since 2012, the

FDA made no other attempt, but instead decided to massively increase the size of cigar warnings.

Most of the cigar industry is already subject to a Federal Trade Commission warnings

scheme. Under the FTC scheme, covered entities must display a series of five warning

statements “clearly and conspicuously” on their advertising and packaging. See, e.g., Decision

and Order at 3, In the Matter of Swedish Match N. Am., Inc., Docket No. C-3970 (F.T.C. Aug.

18, 2000), 2000 WL 1207446 (Ex. A). 3 The warning must appear on the principal display panel

of packages and must be printed in one of six sizes, depending on the size of the package. Id. at 5–

6. On average, the FTC warnings cover roughly 13 to 15 percent of one package panel. See id.

2. The Expanded FDA Warnings

After virtually no study or analysis, the FDA decided dramatically to increase the size of

the cigar health warnings. The new package warnings must occupy at least 30 percent of the two

3
On June 26, 2000, seven leading cigar firms, comprising about 95 percent of the U.S. cigar
market at that time, agreed to the FTC settlement. See Press Release, Fed. Trade Comm’n, FTC
Announces Settlements Requiring Disclosure of Cigar Health Risks (June 26, 2000) (Ex. B).
Those manufacturers not covered by the FTC consent decree post warnings required by the State
of California on all of their U.S. packaging. AR021315.

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principal display panels—those “most likely to be displayed, presented, shown, or examined by

the consumer.” 21 C.F.R. §§ 1143.1, 1143.5(a)(2). These warnings are approximately 195 to

237 percent larger on any one panel than the FTC warnings. When combined with the

requirement to cover two display panels, the FDA mandate covers approximately 390 to 475

percent more of the package surface area than the FTC cigar warnings, and substantially more of

the package surface area than the current warnings for cigarettes.

Warnings are also required on all cigars and pipe tobacco advertisements. Incredibly, the

FDA is requiring warnings on the advertisements of retailers, the small businesses that sell

cigars and pipe tobacco in local communities. See id. § 1143.5(a), (b). The FDA extended

coverage to retailers, even though they would be selling and displaying packages bearing

warnings placed by the manufacturers.

The advertising warnings are huge. Cigar advertisements must display a warning

covering at least 20 percent of the area of the advertisement. 21 C.F.R. § 1143.5(b). It must be

printed in at least 12-point font and be surrounded by a rectangular border between 3 and 4

millimeters wide. Id. § 1143.5(b)(2). These requirements apply to any visual medium:

Newspaper ads, websites, social media, e-mails, billboards, pamphlets, catalogs, and direct

mailings are all covered. 4 If a retailer advertises on the radio, a warning must be read. See 81

Fed. Reg. at 29,064. In virtually all retail stores, six warning statements must be printed in at least

17-point font on a sign no smaller than 8.5 x 11 inches that is posted on or within 3 inches of each

cash register. 21 C.F.R. § 1143.5(a)(3). This is the most valuable display space in any store.

4
The FDA says it may release guidance on how to place a warning on a website and presumably
social media, see 81 Fed. Reg. at 29,064, but has not yet done so. As explained below, how to
implement the 20 percent requirement on a website is not altogether clear.

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The Rule requires rotation of the six cigar warning messages. Four of the warnings were

taken directly from the FTC scheme, one of the warnings was an alternative to a pregnancy-

related warning in the FTC decree, and the FDA added one new warning regarding nicotine:

(1) WARNING: Cigar smoking can cause cancers of the mouth and throat, even
if you do not inhale;
(2) WARNING: Cigar smoking can cause lung cancer and heart disease;
(3) WARNING: Cigar use while pregnant can harm you and your baby;
Or FTC scheme: SURGEON GENERAL WARNING: Tobacco Use
Increases the Risk of Infertility, Stillbirth, and Low Birth Weight;
(4) WARNING: Cigars are not a safe alternative to cigarettes;
(5) WARNING: Tobacco smoke increases the risk of lung cancer and heart
disease, even in nonsmokers; and
(6) WARNING: This product contains nicotine. Nicotine is an addictive chemical.

Compare id. § 1143.5(a)(1), with Decision and Order at 3, Swedish Match. On packages, each of

the six 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.” 21 C.F.R.

§ 1143.5(c)(1). On advertisements, the warning statements “must be rotated quarterly in

alternating sequence in each advertisement for each brand of cigar.” Id. § 1143.5(c)(2).

Each retailer or manufacturer must submit to the FDA a plan for rotating warnings twelve

months before advertising or commercially marketing a particular cigar brand. Id. § 1143.5(c)(3).

Until the agency approves that warning plan, a manufacturer or retailer cannot sell or advertise its

products, on pain of FDA enforcement. See id. § 1143.5(c); 81 Fed. Reg. at 29,072–73. The Rule

contains no final deadline for agency action on warning plans. See 21 C.F.R. § 1143.5(c).

Even after the FDA approves a cigar warning plan, manufacturers and retailers must submit

a “supplement” to the plan and await FDA review before making changes to the distribution,

display, or rotation of warnings. Ctr. for Tobacco Prods., Food & Drug Admin., Submission of

Warning Plans for Cigars: Guidance for Industry 7 (Dec. 2016) (Ex. C). New brands also require

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new warning plans or supplements and waiting for FDA review before speaking about them. Id.

That means any change in the mode of advertising or the name of a product will silence

manufacturers and retailers again until the FDA has finished its second review. See id.

The Deeming Rule also imposes new warning requirements on pipe tobacco. 81 Fed.

Reg. at 29,060. Under the Rule, all pipe tobacco packages must bear the following warning

statement on the package label: “WARNING: This product contains nicotine. Nicotine is an

addictive chemical.” 21 C.F.R. § 1143.3(a)(1). The warning must occupy at least 30 percent of

the two principal display panels and must be printed in at least 12-point font. Id. § 1143.3(a)(2).

In advertisements, the warning must occupy at least 20 percent of the area of the advertisement

and must be printed in at least 12-point font. Id. § 1143.3(b)(1)–(2).

Congress required the FDA to analyze the effect of a warning on tobacco use before

imposing a new warnings requirement on any tobacco product. FD&C Act § 906(d)(1), 21

U.S.C. § 387f(d)(1). But stunningly, the FDA conceded that it did not have the scientific

research to determine the effect of larger warnings on cigar and pipe tobacco use, despite the fact

that the FTC warnings scheme was in place and available for study over the past sixteen years.

To quote the FDA: “Reliable evidence on the impacts of warning labels . . . on users of cigars . . .

[and] pipe tobacco . . . does not, to our knowledge, exist.” AR023973. The FDA instead

promised to “conduct research and keep abreast of scientific developments regarding the efficacy

of the health warnings in the final rule and the ways in which their efficacy could be improved.”

81 Fed. Reg. at 29,065.

C. The FDA Issues a Rule Imposing User Fees on Cigars and Pipe Tobacco, But
Not E-Cigarettes

The FDA simultaneously promulgated a separate rule that imposed user fees on some, but

not all, newly deemed products. See Final Rule, Requirements for the Submission of Data

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Case 1:16-cv-01460-APM Document 62 Filed 10/03/17 Page 26 of 63

Needed to Calculate User Fees, 81 Fed. Reg. 28,707 (May 10, 2016) (the “User Fee Rule”). To

fund the FDA’s regulatory activities under the TCA, Congress required the FDA to charge so-

called “user fees” to the regulated entities. FD&C Act § 919, 21 U.S.C. § 387s. But when the

FDA sought to regulate cigars, pipe tobacco, and e-cigarettes, it charged user fees only to cigars

and pipe tobacco. 81 Fed. Reg. at 28,710–12. For e-cigarettes, regulation was free. Id. The

result is that the cigar, pipe tobacco, cigarette, and smokeless tobacco industries are paying for

the regulation of e-cigarettes, upsetting the congressional mandate that industries subject to the

TCA (and by extension their citizen consumers) would pay for their own regulation.

IV. THE FDA’S NEW REGULATORY APPROACH

From the day it proposed the Deeming Rule, the FDA knew that the cigarette regulatory

scheme would be ill-suited for cigar and pipe tobacco products. The FDA acknowledged “that

different kinds of cigars (e.g., small cigars, cigarillos, large cigars, premium cigars) may have the

potential for varying effects on public health, if there are differences in their effects on youth

initiation, the frequency of their use by youth and young adults, and other factors.” 79 Fed. Reg.

at 23,143. The agency also appeared to recognize that the costs of the regulatory scheme and the

massive health warnings would be particularly debilitating for premium, handmade cigars, with

little corresponding public health benefit. Thus, the agency sought comments on whether a class

of premium cigars should be exempted from regulation altogether, labeling this as so-called

“Option 2.” Id. at 23,150.

Despite receiving an overwhelming number of comments proving these issues were

serious problems, the FDA finalized a rule almost identical to the one it had proposed. No

exemption was made for premium cigar manufacturers. See generally 81 Fed. Reg. at 28,974–

29,106. The agency never explained how running all types of cigars through the premarket

review process would advance the public health. Instead, it applied the entire cigarette scheme

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and its absurdly ill-suited 2007 predicate date in rote fashion. See id. at 28,976–81, 28,993. It

simply waved its hands at generalized public health concerns, claiming premium cigars were also

unhealthy. See id. at 29,020. As for warnings, the agency never explained why the longstanding

FTC warning scheme was not good enough. See id. at 29,062–73.

Barely two months after the FDA finalized the Deeming Rule, Plaintiffs filed this

lawsuit. See Dkt. 1. Plaintiffs asserted nine claims under the Administrative Procedure Act and

the U.S. Constitution, challenging the agency’s irrational actions with respect to the predicate

date and the substantial equivalence process, its arbitrary rejection of Option 2, its inequitable

user fee rule, its flawed cost–benefit analysis, its unlawful warning label requirements, and its

countertextual regulation of tobacco blending and pipes. See id. On February 13, 2017,

Plaintiffs filed an exhaustive, 65-page motion for summary judgment on all claims. See Dkt. 22.

Rather than file a responsive brief in March 2017, the FDA sought extensions totaling six

months, Dkts. 26, 27, 34.

Then, on July 28, 2017, the FDA announced a new “comprehensive plan” for the

regulation of tobacco products, conceding that the focus of its regulatory efforts should be

combatting cigarette use—the public health problem that was the cornerstone of the TCA. 5 The

FDA acknowledged the Deeming Rule’s severe problems. The FDA extended the deadlines for

cigar and pipe manufacturers to submit product review applications 3½ years, and provided that

manufacturers could continue to market their products while the agency reviews product

applications. See July 28 FDA News Release, at 2. In the meantime, the FDA said it would

5
See Press Release, FDA, FDA Announces Comprehensive Regulatory Plan to Shift Trajectory
of Tobacco-Related Disease, Death (July 28, 2017) at 1 (“July 28 FDA News Release”) (Ex. D).
Among other things, the FDA explained: “A key piece of the FDA’s approach is demonstrating
a greater awareness that nicotine—while highly addictive—is delivered through products that
represent a continuum of risk and is most harmful when delivered through smoke particles in
combustible cigarettes.” Id.

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reopen a rulemaking docket for the appropriate regulatory treatment of premium cigars,

suggesting that its decision not to exempt premium cigars was unsupportable on the current

record. Id. For those cigars and pipe tobacco products that remain subject to regulation, the

agency committed “to issue foundational rules to make the product review process more

efficient, predictable, and transparent for manufacturers,” including outlining the information

required for substantial equivalence applications. Id. at 3.

The agency’s announcement, however, does not go far enough to clean up the Deeming

Rule. The FDA left in place certain aspects of the Rule that inflict disproportionate burdens on

cigars and pipe tobacco and transgress clear legal limitations, to no good end. Chief among them

is the health warning requirement, which the agency has yet to justify with the reasoned decision-

making that is mandated by the First Amendment. The agency also stubbornly insists that small

business retailers who blend finished pipe tobacco should be regulated as “manufacturers,” and that

tobacco pipes crafted by small business artisans should be subject to premarket review by the

agency. And each quarter, it continues to exact unlawful user fees from cigar and pipe tobacco

manufacturers by taxing them with the costs of regulating e-cigarettes. The Court should finish

what the agency started and vacate these aspects of the flawed Deeming Rule scheme.

To this end, Plaintiffs have narrowed their motion to seek relief from the parts of the

Deeming Rule that impose near-term deadlines on Plaintiffs’ members. Plaintiffs will present

motions seeking relief from other aspects of the Rule—now with longer-term deadlines—should

the agency not appropriately modify the Rule through its announced rulemaking dockets.

ARGUMENT

I. STANDARD OF REVIEW

Summary judgment under the Administrative Procedure Act “serves as the mechanism for

deciding, as a matter of law, whether [an] agency action is supported by the administrative record

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and otherwise consistent with the APA standard of review.” All. for Nat. Health U.S. v. Sebelius,

775 F. Supp. 2d 114, 118 (D.D.C. 2011). The APA demands that a court “hold unlawful and set

aside agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). In assessing agency

action under the APA, “the Court must engage in a ‘thorough, probing, in-depth review’” to

determine “whether the agenc[y] ha[s] ‘examine[d] the relevant data and articulate[d] a satisfactory

explanation for its action.’” Individual Reference Servs. Grp., Inc. v. FTC, 145 F. Supp. 2d 6, 25

(D.D.C. 2001). The court “considers whether the agency acted within the scope of its legal

authority, whether the agency has explained its decision, whether the facts on which the agency

purports to have relied have some basis in the record, and whether the agency considered the

relevant factors.” Id. Counsel’s “post hoc rationalizations” will not do; “an agency’s action must

be upheld, if at all, on the basis articulated by the agency itself.” Motor Vehicle Mfrs. Ass’n of

U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 50 (1983).

When the constitutionality of an agency’s action is challenged, the court “must (like any

appellate tribunal) determine for itself whether the agency based its decision on the appropriate

constitutional standard.” United Space All., LLC v. Solis, 824 F. Supp. 2d 68, 78 (D.D.C.

2011). The court’s role is the same whether the suit proceeds under the APA or directly under

the Constitution. All. for Nat. Health U.S. v. Sebelius, 786 F. Supp. 2d 1, 12 n.10 (D.D.C. 2011).

“‘[A] reviewing court owes no deference to the agency’s pronouncement on a constitutional

question,’ and must instead make ‘an independent assessment of a citizen’s claim of

constitutional right when reviewing agency decision-making.’” Poett v. United States, 657 F.

Supp. 2d 230, 241 (D.D.C. 2009). This sort of searching “‘[i]ndependent judicial judgment is

especially appropriate in the First Amendment area.’” Id. The Court “do[es] not accord [an

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agency] deference when its regulations create ‘serious constitutional difficulties.’” AFL-CIO v.

FEC, 333 F.3d 168, 175 (D.C. Cir. 2003).

The Court weighs four factors in deciding whether to preliminarily enjoin agency action:

“(1) whether there is a substantial likelihood of success on the merits; (2) whether the movant will

suffer irreparable harm if the injunction is not granted; (3) whether the injunction will substantially

injure other parties; and (4) whether the public interest would be furthered by the injunction.” R.J.

Reynolds Tobacco Co. v. FDA (R.J. Reynolds I), 823 F. Supp. 2d 36, 42–43 (D.D.C. 2011).

II. THE FDA’S WARNINGS VIOLATE THE FIRST AMENDMENT

The FDA warnings requirement violates the First Amendment in two ways. First, the

dramatically increased size of the new warnings unconstitutionally restricts speech by crowding

out manufacturer communication with consumers and violates any applicable standard for

government-compelled speech. Second, the warnings scheme is an unconstitutional prior

restraint on speech, as it requires manufacturers and retailers wishing to speak with consumers to

submit a warning rotation plan to the FDA in advance and wait for the FDA’s approval.

A. The FDA’s Larger and Broader Warnings Violate the First Amendment

For more than sixteen years, the majority of the cigar market has been required to display

health warnings on product packages and advertisements pursuant to a Federal Trade

Commission mandate. See 79 Fed. Reg. at 23,163. The FDA made these warnings dramatically

larger. They are required to cover 30 percent of the two display panels of any cigar package and

20 percent of any covered advertisement. That makes these warnings on even one package panel

roughly 195 to 237 percent larger than the FTC warnings, and the warnings drape two sides rather

than one side of the package. See Decl. of Rob Norris (“Norris Decl.”) ¶ 8 & Exs. B–C. As such,

they cover roughly 390 to 475 percent more of the package surface area. The FDA is also

confiscating 20 percent of every cigar advertisement—whether from the corner cigar shop or the

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largest manufacturing company—for its warning message. The warnings are required whatever

the medium—the newspaper, an email to long-time retail customers, a website, or a radio ad—and

whoever the speaker—a manufacturer or corner cigar store. This dramatically expands the size and

scope of advertising warnings, in plain violation of the First Amendment. Manufacturers and

retailers used the space taken by these new warnings to speak with consumers, and now they cannot.

1. The FDA’s Warnings Restrict Commercial Speech, and the Central
Hudson Test Applies

The First Amendment protects the messages manufacturers convey on cigar and pipe

tobacco packages, and the sheer size and scope of the FDA warnings mandate restricts that

speech. For centuries, cigars have been known by their distinctive, artistic, aesthetically pleasing

boxes. The designs, symbols, and trademarks on the packages send a message to consumers

about the qualities of the products—their luxury and distinction—and the craftsmanship with

which they were assembled. AR130350; AR134770; Decl. of Rakesh Patel (“Patel Decl.”) ¶¶ 4–

5. Cigar packages also communicate information about the products—their country of origin,

seed varietal, process of manufacture, and other qualities.

Cigar and pipe tobacco packaging, like advertising about those products, is plainly a

medium of commercial speech protected by the First Amendment. See 44 Liquormart, Inc. v.

Rhode Island, 517 U.S. 484, 504–08 (1996) (advertising ban “prohibit[ing] truthful,

nonmisleading speech about a lawful product” is subject to First Amendment scrutiny); Rubin v.

Coors Brewing Co., 514 U.S. 476, 480–83 (1995) (First Amendment applies to information on

beer labels); Bad Frog Brewery, Inc. v. N.Y. State Liquor Auth., 134 F.3d 87, 96–97 (2d Cir.

1998) (beer label that “communicates no information beyond the source of the product” is

protected as commercial speech). Constitutional protections apply with full force to speech

regarding tobacco products because, “so long as the sale and use of tobacco is lawful for adults,

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the tobacco industry has a protected interest in communicating information about its products

and adult customers have an interest in receiving that information.” Lorillard Tobacco Co. v.

Reilly, 533 U.S. 525, 571 (2001).

The new warning labels will commandeer a significant amount of space on cigar and pipe

tobacco packaging, a dramatically larger scope of advertisements, and at the retail counter. This

is space manufacturers and retailers will be barred from using for their own speech, and the sheer

size and glaring format of these warnings guarantee that the government’s message will be

dominate. This crowding out effect is a restriction of commercial speech, and thus the increase

of warning size must meet the standard established by the Supreme Court in Central Hudson Gas

& Electric Co. v. Public Service Commission of New York, 447 U.S. 557 (1980). See Dwyer v.

Cappell, 762 F.3d 275, 284 (3d Cir. 2014) (a disclosure requirement intended to “make [speech]

so burdensome” that speakers cease using a particular means of communication amounts to “an

outright ban . . . properly analyzed under the Central Hudson standard of scrutiny”); see also

Pursuing Am.’s Greatness v. FEC, 831 F.3d 500, 507 & n.3 (D.C. Cir. 2016) (acknowledging that

a compelled disclosure could be so prominent to become a restriction of commercial speech).

2. The FDA’s Warnings Fail the Central Hudson Test

The FDA has the burden of justifying a regulation restricting the space and prominence of a

company’s communications with consumers. Edenfield v. Fane, 507 U.S. 761, 770 (1993). And

“its burden is not light.” R.J. Reynolds III, 696 F.3d at 1218. To uphold the Rule, the FDA must

prove that: (1) the asserted governmental interest is substantial; (2) the regulation directly advances

the governmental interest asserted; and (3) the regulation is not more extensive than is necessary to

serve that interest. Cent. Hudson, 447 U.S. at 566. Here, the FDA fails all three elements.

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a. The FDA’s warnings do not serve a substantial government
interest

The FDA’s stated interest in the new labeling requirements is “to help current and

potential tobacco users understand and appreciate the serious adverse health consequences

associated with tobacco use and the addictive nature of tobacco products.” 79 Fed. Reg. at

23,163; see also id. at 23,165, 23,166; 81 Fed. Reg. at 28,981; AR023975. Standing alone, this

is not a “substantial interest” under Central Hudson.

The D.C. Circuit rejected the last FDA attempt to justify a tobacco warning requirement

through “an interest in ‘effectively communicating health information’ regarding the negative

effects of cigarettes.” R.J. Reynolds III, 696 F.3d at 1221. 6 According to the Court, “an interest

in ‘effective’ communication is too vague to stand on its own,” as it is “merely a description of

the means by which [the FDA] plans to accomplish its goal of reducing smoking rates, and not

an independent interest capable of sustaining the Rule.” Id. As the Supreme Court has further

explained, an effort to reduce adult use of a tobacco product cannot justify restrictions of speech:

The State’s interest in preventing underage tobacco use is substantial, and even
compelling, but it is no less true that the sale and use of tobacco products by
adults is a legal activity. We must consider that tobacco retailers and
manufacturers have an interest in conveying truthful information about their
products to adults, and adults have a corresponding interest in receiving truthful
information about tobacco products. . . . As the State protects children from
tobacco advertisements, tobacco manufacturers and retailers and their adult
consumers still have a protected interest in communication.

Lorillard Tobacco, 533 U.S. at 564 (citations omitted); see also R.J. Reynolds III, 696 F.3d at

1218 n.13 (“[W]e are skeptical that the government can assert a substantial interest in discouraging

6
American Meat Institute overruled R.J. Reynolds to the limited extent that it “may be read
as . . . limiting Zauderer to cases in which the government points to an interest in correcting
deception.” Am. Meat Inst. v. U.S. Dep’t of Agric., 760 F.3d 18, 22–23 (D.C. Cir. 2014) (en
banc). But R.J. Reynolds also analyzed the warnings under the Central Hudson test, and nothing
in American Meat touches the D.C. Circuit’s exposition of the Central Hudson factors, which
remains binding precedent.

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consumers from purchasing a lawful product, even one that has been conclusively linked to

adverse health consequences . . . .”). Instead, to satisfy Central Hudson, the FDA must

demonstrate how a restriction of speech will reduce youth use of tobacco products. Lorillard,

533 U.S. at 555. When the Government rests a rule restricting speech on simply improving

information, the judicial inquiry ends, and the rule is unconstitutional. See, e.g., Int’l Dairy

Foods Ass’n v. Amestoy, 92 F.3d 67, 73 (2d Cir. 1996) (labeling law failed Central Hudson

because asserted interests in “strong consumer interest and the public’s ‘right to know’” were

“insufficient to justify compromising protected constitutional rights”).

b. The FDA’s warnings do not directly or materially advance the
reduction of underaged cigar and pipe tobacco use

After identifying a constitutionally irrelevant interest, the FDA predictably made no effort

to demonstrate whether and how the larger warnings would reduce underaged use. The agency’s

burden “‘is not satisfied by mere speculation or conjecture; rather, a government 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.’” Rubin, 514 U.S. at 487

(quoting Edenfield, 507 U.S. at 770–71). The agency has conceded, however, that “[r]eliable

evidence on the impacts of warning labels . . . on users of cigars [and] pipe tobacco . . . does not, to

[the agency’s] knowledge, exist” and claims it needs to study the issue. AR023973; 81 Fed. Reg.

at 29,065. This is a problem: “Central Hudson requires FDA to find and present data supporting

its claims prior to imposing a burden on commercial speech.” R.J. Reynolds III, 696 F.3d at 1221.

And the “FDA cannot get around the First Amendment by pleading incompetence or futility.” Id.

The evidence in the record simply does not indicate a regulatory problem with respect to

underaged use of cigars or pipe tobacco, much less one that the warning labels would begin to

solve. As an initial matter, underaged use simply is not the same issue for cigars, particularly

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premium cigars, as it is for cigarettes. See Decl. of Cecil R. Reynolds, Ph.D. (“Reynolds Decl.”)

¶¶ 25–48; Supplemental Decl. of Cecil R. Reynolds, Ph.D. (“Reynolds Supp. Decl.”) ¶¶ 3–11.

Only a small percentage (2.5%) of the underaged reported using cigar products—and even fewer

for premium cigars—and these numbers have been decreasing over time. Reynolds Decl. ¶¶ 25–

27, 29, 39, 44–46; Reynolds Supp. Decl. ¶ 11. Indeed, a recent FDA-funded study reported no

statistically significant use of premium cigars by the underaged. Reynolds Decl. ¶¶ 25–26. The

agency made no specific findings regarding underaged pipe tobacco use in the Final Rule and

ignored a study reporting youth usage rates of 0.2%. 81 Fed. Reg. at 29,048–49. Nor have there

been congressional findings that cigar or pipe tobacco manufacturers are targeting their

marketing or advertising at the underaged or manipulating their products to appeal to the

underaged. Compare TCA § 2(47)–(49), 123 Stat. at 1781 (findings on cigarette industry).

The FDA’s tepid reliance on studies of cigarette use is also not enough to justify broad

speech restrictions on cigars and pipe tobacco, which have dramatically different usage patterns.

See 79 Fed. Reg. at 23,164–65 (discussing cigarette studies); 81 Fed. Reg. at 29,064 (same);

Reynolds Decl. ¶ 72. Even if such studies were relevant, they show that health warnings do not

materially affect the causes of underaged smoking. See Reynolds Decl. ¶¶ 71–80; Reynolds

Supp. Decl. ¶ 12. The causes of underaged smoking are peer pressure, modeling, and underaged

access and availability. See Reynolds Decl. ¶¶ 54–70. The record does not include, and

Plaintiffs’ expert has not found, evidence that underawareness of the health risks of smoking is a

cause for underaged use. The agency—just like in R.J. Reynolds—did not present data showing

that better communication of health risks will reduce smoking among the underaged, a

population that regrettably feels invincible no matter what they are told. See id. ¶ 59. Absent

such evidence, the rule cannot stand, as “[a] restriction that ‘provides only ineffective or remote

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support for the government’s purposes’ is not sufficient.” R.J. Reynolds III, 696 F.3d at 1218–

19; see also Nat’l Ass’n of Mfrs. v. SEC, 800 F.3d 518, 527 (D.C. Cir. 2015).

c. The FDA’s warnings are not narrowly tailored

The FDA fails both aspects of the “narrowly tailored” requirement. Narrow tailoring

“requires a reasonable fit between the means and ends of the regulatory scheme.” Lorillard

Tobacco, 533 U.S. at 561. In addition, the FDA must show that there are no other options

available that “could advance [its] asserted interest in a manner less intrusive to [Plaintiffs’] First

Amendment rights.” Rubin, 514 U.S. at 491. “The government cannot satisfy that standard if it

presents no evidence that less restrictive means would fail.” Nat’l Ass’n of Mfrs. v. SEC, 748

F.3d 359, 372 (D.C. Cir. 2014), overruled on other grounds by Am. Meat Inst., 760 F.3d 18, and

adhered to on panel reh’g, 800 F.3d 518.

(1) The massive warnings do not “reasonably fit” any
substantial government objective

First, there is no “reasonable fit” between the required warnings and the FDA’s stated

goals. The warnings commandeer a significant portion of a product’s packaging and advertising,

occupying 30 percent of the product’s two principal displays and 20 percent of any advertising.

Court after court has struck down such large warnings as just too big. Cf. Entm’t Software Ass’n

v. Blagojevich, 469 F.3d 641, 652 (7th Cir. 2006) (finding that a four-square-inch warning label

to be placed on a 7.5-by-5.5-inch DVD box—covering 39 percent of just one panel—“literally

fails to be narrowly tailored [because] the sticker covers a substantial portion of the box”). Just

last month, the Ninth Circuit held that a San Francisco mandated health warning covering just 20

percent of advertisements of beverages with added sugar was unduly burdensome under the more

relaxed Zauderer standard. Am. Beverage Ass’n v. City & Cty. of S.F., --- F.3d ----, 2017 WL

4126944, at *8 (9th Cir. Sept. 19, 2017).

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The burdens of the warnings are massive, and the FDA did not “‘carefully calculate[]’ the

costs and benefits associated with the burden on speech.” Greater New Orleans Broad. Ass’n,

Inc. v. United States, 527 U.S. 173, 188 (1999); see also Lorillard, 533 U.S. at 564–65. With

regard to the package component of the warnings, many manufacturers rely on their ornate

packaging as a significant way to differentiate their products at the point of sale. See Patel Decl.

¶ 4; Decl. of Robert Brady (“Brady Decl.”) ¶ 6; Decl. of Nadia Trowbridge (“Trowbridge Decl.”)

¶ 7. This is particularly important in the premium cigar industry—where customers are often not

brand-loyal and regularly look for new products such that packaging is a means of brand

competition. See AR129897. The warnings nearly destroy this medium: The intricate artwork,

world-recognized trademarks, and message of careful craftsmanship is almost entirely obscured by

the warnings covering 30 percent of two main panels, as is apparent in the exhibits to the

declarations of Plaintiffs’ members. Patel Decl. Ex. A; Brady Decl. Ex. A; Trowbridge Decl. Exs.

A–C. Even when packages are redesigned so there is blank space for the warnings and artwork is

not covered, manufacturers will be in a losing battle with the Government’s message in large black

text over a stark white background. The Government’s message will dominate, forever

compromising manufacturer communication with customers.

The FDA warnings are also far more expensive to administer than the FTC warnings.

Because the FDA warnings are defined in terms of their percent coverage of a given package’s

display area, rather than having set dimensions, cigar manufacturers will be forced to design and

print countless new labels to fit each distinctive package. Norris Decl. ¶¶ 6–7, 16.

The agency also made no effort to justify the extraordinary burdens of the advertising

warnings. As an initial matter, the FDA extended the warnings beyond manufacturers to retailer

advertising. The corner cigar store—whose advertisements never before have required warnings—

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must display or recite the warnings in virtually every communication with customers, whether sent

by electronic or U.S. mail, published in the newspaper, posted online, placed on social media,

spoken on the radio, or broadcast on television. 81 Fed. Reg. at 29,064. The FDA imposed all

these requirements on retailer speech, even though the packages customers come to see and buy

will bear health warnings. Even the retailers of cigarettes, the products at the heart of the TCA, are

not subject to such burdensome and obtrusive warning requirements. See 15 U.S.C. § 1333.

Take retailer websites: They announce store hours and special offers on the cigar of the

month. They will be marred by warnings covering at least 20 percent of the first screen and

perhaps more if the reader can scroll down. Decl. of John Anderson (“Anderson Decl.”) ¶ 9 &

Ex. A. Cramming a warning into a Twitter or Instagram post leaves little room for anything else.

See id. ¶¶ 10–12 & Exs. A–B. Many retailers purchase expensive 15-second radio spots during

peak hours. Decl. of George Koebel (“Koebel Decl.”) ¶ 6. Up to 7 seconds will be for reading a

warning. Id. ¶ 7; see Tillman v. Miller, 133 F.3d 1402, 1404 & n.4 (11th Cir. 1998) (requirement

that five seconds of a 30-second television ad be reserved for a disclaimer violated Zauderer).

Retailers say they will abandon these media if forced to display warnings. Koebel Decl. ¶ 7;

Anderson Decl. ¶ 13. That is hallmark of an unconstitutional speech restriction. See Am.

Beverage Ass’n, 2017 WL 4126944, at *8.

On top of all this, retailers must print all six of the cigar health warnings on a sign no

smaller than 8.5 x 11 inches that is posted on or within 3 inches of each cash register. 21 C.F.R.

§ 1143.5(a)(3). This is the most valuable display space in any store, and retailers will lose it to

these signs, which bear only the government’s message. Many may be forced to move their

registers and reconfigure their stores to comply with the Rule. All of these compliance costs

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come crashing down not on large corporate conglomerates with in-house legal departments, but

on sole proprietorships with a dozen employees.

Manufacturer advertising will be similarly burdened. Cigar manufacturers will have to

remove, discard, and replace point-of-sale advertisements—signs, clocks, and “shelf-talkers,”

which describe the product for sale—because they all must bear the new warnings. Patel Decl. ¶¶

10–13 & Ex. B. This will cost the industry tens of millions. Id. Retailers and manufacturers alike

will seek but fail to compete with the Government’s glaring black-on-white message, covering a

fifth of all advertising, in addition to shrouding every box in the store. The regime, and its

duplicative requirements, will turn every retail humidor into a museum of Government speech.

Hardly the “reasonable fit” between costs and public health benefits required by the First

Amendment, the FDA concedes there is nothing to be gained through its new warnings. It bears

repeating: The agency says there is no “[r]eliable” scientific evidence that the new warnings will

reduce tobacco use. AR023973.

(2) The FDA ignored alternatives less restrictive of speech

Second, the FDA rode roughshod over an obvious less restrictive alternative: The FTC

warnings regime that was already in place. The FDA warnings are approximately 195 to 237

percent larger than the FTC warnings, which cover just one panel of the box. See Norris Decl.

¶ 8 & Exs. B–C. When the FDA requirement of covering the two principal panels is considered,

the FDA warnings cover up to 475 percent more space that manufacturers currently use to speak

with consumers. See id. ¶¶ 6–8 & Ex. C. As important, much of the industry has molded its

speech around the FTC warnings over the last 16 years; the change in size mandated by the FDA

and the shrouding of that trade dress is infinitely more disruptive to speech and will require

extensive and expensive product redesign across the industry. See id. ¶¶ 3–16. The advertising

warnings too have been enlarged. On manufacturer advertising, they are approximately 250 to

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500 percent larger. The FDA mandate also vacuums advertising by the smallest of businesses—

cigar and pipe tobacco retail stores—into the burdens of warnings. That is even though the

retailers will be selling products with health warnings affixed.

The FDA, however, spent not even a drop of ink analyzing whether to adopt the FTC size

and scope alternative. See U.S. West, Inc. v. FCC, 182 F.3d 1224, 1238–39 (10th Cir. 1999)

(agency’s “failure to adequately consider an obvious and substantially less restrictive alternative”

indicated that “it did not narrowly tailor” its regulations). The agency did nothing whatsoever to

demonstrate that the FTC warnings were failing to inform consumers about the health effects of

smoking, much less that they were ineffective in reducing the use of tobacco products. The FTC

warnings were not some theoretical alternative measure, whose effects on human behavior would

be difficult to study. The agency had the entire Nation as an open laboratory for the last sixteen

years, and it could have tested whether the existing warnings scheme falls short of the

government’s requirements. But the agency concluded that there was no “[r]eliable evidence” on

the effect of warnings on the use of tobacco. AR023973. That is a problem of the agency’s own

making or, in this case, inaction. One would expect from a scientific agency, or any government

entity seeking to restrict speech, some serious analysis about how an existing warnings scheme

with nearly identical substance is failing to inform consumers and how an adjustment will solve

that problem. Recitation of an aphorism—“bigger is better”—is not good enough to satisfy the

First Amendment.

In any event, the existing warnings are only one of many alternatives less restrictive of

speech. The government “could disseminate its anti-smoking message itself” through

government advertising and public information campaigns. R.J. Reynolds Tobacco Co. v. FDA

(R.J. Reynolds II), 845 F. Supp. 2d 266, 276 (D.D.C. 2012), aff’d on other grounds, 696 F.3d

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1205 (D.C. Cir. 2012), overruled on other grounds by Am. Meat Inst., 760 F.3d 18. There are

numerous other established methods that are more likely than larger health warnings to reduce

underage tobacco use: Raising the minimum legal age to purchase tobacco products; increasing

penalties and enforcement measures relating to sales of tobacco to, or possession or use of

tobacco by, the underaged; increasing support for programs aimed at the social factors

underlying tobacco use by the underaged; and raising the prices of tobacco products. See

Reynolds Decl. ¶¶ 81–83; Reynolds Supp. Decl. ¶ 10. All of these measures are directed at the

root causes of underaged tobacco use and involve no restriction of speech. None was analyzed

by the FDA and demonstrated to be inadequate. After all, “regulating speech must be a last—not

first—resort.” Thompson v. W. States Med. Ctr., 535 U.S. 357, 373 (2002).

The FDA’s warnings severely restrict the commercial speech of cigar manufacturers and

retailers, and the agency has not carried its burden on any of the Central Hudson factors. The

FDA’s warnings violate the First Amendment.

B. The FDA’s Warnings Also Fail the Standard for Compelled Commercial
Disclosures

Because the warnings confiscate so much of a cigar or pipe tobacco advertisement or

package space, they crowd out manufacturer and retailer communication with consumers and

should be analyzed as restrictions on commercial speech under Central Hudson. Whether or not

Central Hudson applies, the FDA warnings also fail the Supreme Court’s standard for applying

the First Amendment to routine commercial disclosures under Zauderer v. Office of Disciplinary

Counsel of the Supreme Court of Ohio, 471 U.S. 626 (1985). Under Zauderer, even “purely

factual and uncontroversial disclosures” violate the First Amendment if they are “unjustified” or

“unduly burdensome.” 471 U.S. at 651. That is, notwithstanding its more lenient standards,

“Zauderer cannot justify a disclosure so burdensome that it essentially operates as a restriction

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on constitutionally protected speech, . . . [n]or can it sustain mandates that ‘chill[] protected

commercial speech.’” Am. Meat Inst., 760 F.3d at 27.

First, there has been no charge of consumer “deception” by cigar or pipe tobacco

manufacturers that the FDA warnings are required to correct. Because the FDA did not bother to

show a pattern of consumer deception, it is not entitled to rely on the Zauderer standard. See 471

U.S. at 651; see also Milavetz, Gallop & Milavetz, P.A. v. United States, 559 U.S. 229, 250–53

(2010) (describing Zauderer’s roots in disclosures intended to combat consumer deception). 7

Second, the new and substantially larger warning labels are “unjustified” insofar as they

do not advance a “substantial government interest.” The D.C. Circuit has questioned “whether

Zauderer would permit government reliance on interests that do not qualify as substantial under

Central Hudson’s standard.” Am. Meat, 760 F.3d at 23. The only circuit to have fully answered

the question has said “no.” CTIA-The Wireless Ass’n v. City of Berkeley, Cal., 854 F.3d 1105,

1117 (9th Cir. 2017) (“Central Hudson explicitly requires that a substantial interest be furthered

by a challenged regulation prohibiting or restricting commercial speech, and we see nothing in

Zauderer that would allow a lesser interest to justify compelled commercial speech.”). The

FDA’s stated interest in increasing understanding of the health risks of cigar and pipe tobacco

products is not a constitutionally recognized substantial interest, and the agency has made no

effort to show that the larger warnings will reduce underaged cigar or pipe tobacco use. See

supra Sections II.A.2.a–A.2.b; see also Int’l Dairy Foods Ass’n, 92 F.3d at 74 (“[C]onsumer

7
Plaintiffs understand that the D.C. Circuit has taken a different view than the Seventh and
Tenth Circuits, but preserve this issue for further appellate review. Compare Am. Meat, 760 F.3d
at 22–23, with Entm’t Software Ass’n, 469 F.3d at 652 (reading Zauderer as limited to
disclosures that are “reasonably related to the State’s interest in preventing deception of
consumers”), and United States v. Wenger, 427 F.3d 840, 849 (10th Cir. 2005) (same).

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curiosity alone is not a strong enough state interest to sustain the compulsion of even an accurate,

factual statement in a commercial context.”).

Third, the labels are “unduly burdensome” because they are too large. See Zauderer, 471

U.S. at 651. The warning labels confiscate 30 percent of two sides of packages, 20 percent of

visual advertisements, and a significant share of audio advertisements, where manufacturers would

otherwise communicate the qualities of their products. See, e.g., Koebel Decl. ¶¶ 4, 6 & Exs. A–

C; Trowbridge Decl. ¶ 4 & Exs. A–C. The Ninth Circuit’s decision in American Beverage

Association is completely on point. There, San Francisco had required health warnings covering

20 percent of all advertisements of beverages with added sugar. Am. Beverage Ass’n, 2017 WL

4126944, at *2. That is the exact same percentage as the FDA is requiring on cigar and pipe

tobacco advertisements, and less than the 30 percent of the two principal panels that the FDA is

requiring for packages. The court held that a warning covering 20 percent of an advertisement was

too large because it “overwhelms other visual elements in the advertisement.” Id. at *8.

In so doing, the Ninth Circuit followed a long tradition of striking down mandated

disclosures that take up too much space and are too prominent a part of the advertisement or

package. Id.; Dwyer, 762 F.3d at 284 (advertising rule requiring publication of complete court

opinions rather than excerpts “is so cumbersome that it effectively nullifies the advertisement”);

Pub. Citizen Inc. v. La. Attorney Disciplinary Bd., 632 F.3d 212, 228 (5th Cir. 2011) (striking

down requirement of disclosure in font size “that is so large that an advertisement can no longer

convey its message”); Tillman, 133 F.3d at 1404 & n.4 (striking down as unduly burdensome

requirement that five seconds of a 30-second television ad—or 17 percent—be reserved for a

disclaimer); see also Ibanez v. Fla. Dep’t of Bus. & Prof’l Regulation, Bd. of Accountancy, 512

U.S. 136, 146–47 (1994) (disclosure requirement that effectively foreclosed certain

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advertisements was unduly burdensome). There is not a glimmer of daylight between the San

Francisco ordinance and the FDA rule. Both are health warning requirements; both take up too

large a percentage of the medium; both are unconstitutional. 8

In sum, the warning requirements fail to satisfy First Amendment scrutiny under either a

Zauderer or a Central Hudson analysis.

C. The FDA’s Warning Plan Pre-Approval Requirement Violates the First
Amendment

The Rule also silences a retailer or manufacturer who wishes to speak to consumers for

twelve months or more while the FDA considers its plan to comply with the mechanical task of

rotating warning statements. The plan must be submitted twelve months before communicating

with consumers through a package or advertising, and the FDA makes no promise to approve the

plan in that time. See 21 C.F.R. § 1143.5(c)(3); 81 Fed. Reg. at 29,072–73. Until the agency

approves that warning plan, a manufacturer or retailer cannot speak about its products. See 81

Fed. Reg. at 29,072–73.

1. The Warning Plan Scheme Is an Unconstitutional Prior Restraint

The warning plan system is a wholly unjustified prior restraint of commercial speech and

violates the First Amendment. Regulations requiring advance government approval of speech

amount to prior restraints and bear a heavy presumption of unconstitutionality. FW/PBS, Inc. v.

City of Dall., 493 U.S. 215, 225 (1990). Most courts have declined to carve out commercial

8
The Sixth Circuit’s resolution in Discount Tobacco City & Lottery, Inc. v. United States, 674
F.3d 509 (6th Cir. 2012), is not the salvation the FDA claims. See 81 Fed. Reg. at 28,988.
Under consideration there was the TCA’s directive that cigarettes bear graphic warnings to be
chosen by the FDA. Discount Tobacco, 674 F.3d at 552–53. The Sixth Circuit confronted a
facial challenge to the statute, not to any FDA rule actually requiring warnings, and evaluated the
issue against alleged decades of deception by cigarette companies about the risks and
addictiveness of cigarette smoking. See id. at 562–63. Neither circumstance applies here:
Plaintiffs challenge the Deeming Rule, not the TCA, and there have been no similar findings of
deception in the case of cigar manufacturers.

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speech, as prior restraints are “particularly abhorrent to the First Amendment,” and “the

requirement of procedural safeguards in a system of prior restraints should not be loosened even

in the context of commercial speech.” N.Y. Magazine v. Metro. Transp. Auth., 136 F.3d 123, 131

(2d Cir. 1988); see also Desert Outdoor Adver., Inc. v. City of Moreno Valley, 103 F.3d 814, 818

(9th Cir. 1996); In re Search of Kitty’s E., 905 F.2d 1367, 1371 (10th Cir. 1990).

The FDA’s pre-approval and waiting period system fails every requirement for prior

restraints of commercial speech. First, there is no reason—much less a compelling one—why

speaking to the marketplace should wait for twelve months or longer while the FDA considers a

plan for the rotation of the six mandated messages. See Burk v. Augusta-Richmond Cty., 365

F.3d 1247, 1251 (11th Cir. 2004) (“Prior restraints are presumptively unconstitutional and face

strict scrutiny.”); Rosen v. Port of Portland, 641 F.2d 1243, 1250 (9th Cir. 1981) (prior restraints

“are permitted only when the infringement is minimal and there is a compelling governmental

interest which cannot be protected by any other means”). This is not an issue of stopping

packaging or advertisements of cigars and pipe tobacco without a health warning. The only issue

the pre-approval and waiting period process addresses is whether the six approved warnings are

rotated with the frequency the FDA prefers. If a retailer or manufacturer’s plan implements

rotation incorrectly, the FDA can detect the error and seek its correction while the speech is

underway. There is absolutely no serious public health reason why the agency cannot address

deficiencies in warning rotation while the speech is occurring.

Second, there is no time limit on FDA consideration. The waiting period to speak is thus

indefinite, and that is per se unconstitutional. See FW/PBS, 493 U.S. at 226 (“[A] prior restraint

that fails to place limits on the time within which the decisionmaker must [act] is impermissible.”);

Riley v. Nat’l Fed’n of the Blind of N.C., Inc., 487 U.S. 781, 802 (1988) (licensing scheme

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unconstitutional because “[t]he statute on its face does not purport to require when a determination

must be made, nor is there an administrative regulation or interpretation doing so”); Se. Promotions

Ltd. v. Conrad, 420 U.S. 546, 560 (1975) (“any restraint prior to judicial review can be imposed

only for a specified brief period and only for the purpose of preserving the status quo,” and “a

prompt final judicial determination must be assured”); Nutritional Health All. v. Shalala, 144 F.3d

220, 228 (2d Cir. 1998) (the absence of a final deadline for agency action renders prior restraint

unconstitutional). The Rule requires submission of a warning plan twelve months before speaking,

but even then, the speaker needs to wait for FDA approval of the plan, however long it takes. That

is not some remote possibility, given the staggering number of cigar brands and the FDA’s

historical difficulty timely reviewing tobacco product submissions.

Even if a year were the target, courts have rejected shorter waiting periods designed to

prevent serious harms. See 11126 Baltimore Blvd., Inc. v. Prince George’s Cty., 58 F.3d 988,

1000–01 (4th Cir. 1995) (citing cases), abrogated on other grounds by City of Littleton v. Z.J.

Gifts D-4, L.L.C., 541 U.S. 774 (2004). Whether “WARNING: Cigar smoking can cause lung

cancer and heart disease” is swapped out quickly enough for “WARNING: Cigars are not a safe

alternative to cigarettes” is not even close to justifying a year-long waiting period.

2. The Warning Plan Scheme Is an Unconstitutional Restriction of Speech

Under the FDA scheme, a retailer who one day wishes to announce to the public that he

has a particular cigar for sale at a particular price must wait twelve months to do so. The

warning plan scheme restricts the essence of commercial speech—“who is producing and selling

what product, for what reason, and at what price.” Va. State Bd. of Pharmacy v. Va. Citizens

Consumer Prot. Council, 425 U.S. 748, 765 (1976); see also 44 Liquormart, 517 U.S. at 495–

504. It must satisfy Central Hudson but does not.

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The warning plan gag order does not directly advance any “substantial” governmental

interest. Here, the FDA would need to show that not just warnings, but the FDA’s advance

ability to fine tune their rotation, will reduce underaged tobacco use. But the FDA has done

nothing of the kind. See Int’l Dairy Foods Ass’n, 92 F.3d at 73.

Nor has the FDA demonstrated any “reasonable fit” between means and ends. Lorillard

Tobacco, 533 U.S. at 561. The FDA says the warning plan regime is designed to ensure that the

different warnings “reach[] as many individuals as possible” and do not “grow stale from

overuse if repeated too many times for the same individual,” 81 Fed. Reg. at 29,072. But that is

an argument for warning rotation, not for gagging speech while the FDA ponders a plan to rotate

warnings in advance of speaking. Said another way, the FDA has not explained why it cannot

ensure sufficient rotation by enforcement and counseling while speech is occurring. After all,

compliance with warning rotation is not that difficult to understand. The Rule lays out the rotation

requirement in excruciating detail. See 21 C.F.R. § 1143.5(a)(1)–(3), (b)(1)–(2), (c)(1)–(2).

Under any standard, the warning plan regime offends the First Amendment.

III. THE FDA’S WARNINGS VIOLATE THE TOBACCO CONTROL ACT AND
THE ADMINISTRATIVE PROCEDURE ACT

Although the record conclusively demonstrates the unconstitutionality of the FDA’s new

warning scheme, the Court need not reach the constitutional question because the warning

mandate also violates the TCA and the APA.

A. The Tobacco Control Act Requires Agency Findings on How Warnings Will
Affect Tobacco Use

Congress sought to prevent violations of the First Amendment. So it barred any advertising

regulations not “consistent with” the First Amendment. FD&C Act § 906(d)(1), 21 U.S.C.

§ 387f(d)(1). And it required the Secretary of HHS to make findings on the effect of a regulation

such as one requiring health warnings, based on “(A) the increased or decreased likelihood that

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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.” Id.

The FDA made no determination at all about the warnings’ effect on decreasing cigar or

pipe tobacco use. Instead, the agency simply asserted that the warning labels would help

consumers “appreciate the risks” of cigars and pipe tobacco. E.g., 81 Fed. Reg. at 29,064,

29,065, 29,070, 29,075. But that is not the inquiry Congress required. It required findings on the

likelihood of reducing cigar and pipe tobacco use. Stunningly, the FDA admitted it could not

make the statutorily mandated finding: “Reliable evidence on the impacts of warning labels . . .

on users of cigars . . . [and] pipe tobacco . . . does not, to our knowledge, exist.” AR023973

(emphasis added). It said it would have to study the issue in the future. See 81 Fed. Reg. at

29,065 (the agency intends to “conduct research and keep abreast of scientific developments

regarding the efficacy of the health warnings in the final rule and the ways in which their

efficacy could be improved”). The statute requires findings on the “increased or decreased

likelihood” of smoking initiation or cessation before warnings are imposed, not after. FD&C

Act § 906(d)(1), 21 U.S.C. § 387f(d)(1).

Congress was wise to require explicit agency findings that warning labels would reduce

tobacco use. That is because the Constitution requires the same evidence before the government

restricts speech. See supra Section II.A.2.b. If there were any ambiguity about the rigor of

findings the TCA requires before the FDA imposes a warning mandate, the Court should demand

that the agency find specifically and with evidence that the warnings would reduce tobacco use,

particularly youth tobacco use, so as to avoid the serious constitutional problems that otherwise

would result. See Edward J. DeBartolo Corp. v. Fla. Gulf Coast Bldg. & Constr. Trades

Council, 485 U.S. 568, 575 (1988) (“[W]here an otherwise acceptable construction of a statute

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would raise serious constitutional problems, the Court will construe the statute to avoid such

problems unless such construction is plainly contrary to the intent of Congress.”).

B. The Rule Is Arbitrary and Capricious Because the FDA Ignored Statutorily
Required Considerations and Inverted Its Own Risk Assessment

In any event, the statutory mandate to specifically determine whether and how the

warnings mandate would reduce tobacco use demonstrates that the rule is arbitrary and

capricious in violation of the APA:

When Congress says a factor is mandatory, that expresses its judgment that such a
factor is important. In accordance with this principle, we have held that “the
complete absen[c]e of any discussion” of a statutorily mandated factor “leaves us
with no alternative but to conclude that [the agency] failed to take account of this
statutory limit on [its] authority,” making the agency’s reasoning arbitrary and
capricious.

Pub. Citizen v. FMCSA, 374 F.3d 1209, 1216 (D.C. Cir. 2004); see Motor Vehicle Mfrs. Ass’n of

U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42–43 (1983). The agency conceded

that it did not and could not reach an issue Congress made important. The rule is by definition

arbitrary and capricious.

Further, the agency arbitrarily accepted massive costs without identifying corresponding

benefits. See State Farm, 463 U.S. at 43; Del. Dep’t of Natural Res. & Envtl. Control v. EPA,

785 F.3d 1, 16–18 (D.C. Cir. 2015). Each product label will undergo what the FDA terms a

“major change,” the labeling requirements are “a large contributor to the costs of this rule,” and

the costs are astronomical. AR023952, AR024017, AR024019. For example, one premium

cigar manufacturer has 1,670 unique products. AR130285–86. Under the FDA’s own

calculation of the cost for a warning change, this manufacturer will need to spend between

$2,571,800 and $27,820,530. See AR024019.

Again, the agency did not show how the new warnings would cause reductions in tobacco

use, much less as against the dramatically less costly alternative of adopting the FTC warning

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scheme already in place for much of the industry. The failure to consider this obvious alternative

renders the scheme arbitrary and capricious. See State Farm, 463 U.S. at 48. 9

The warning scheme is also internally inconsistent with the agency’s own findings,

rendering it arbitrary and capricious. See Dist. Hosp. Partners, L.P. v. Burwell, 786 F.3d 46, 59

(D.C. Cir. 2015) (inconsistent reasoning violates the APA). The cigar warnings are more severe

than those for cigarettes. See 15 U.S.C. § 1333. They cover a considerably greater portion of

packages and advertisements, and they apply to nearly everything said about cigars and pipe

tobacco by retailers, where cigarette warnings are not required of retailers at all. But the agency

has determined that cigarettes are at the most dangerous end of the risk continuum. FDA News

Release at 1 (nicotine “is most harmful when delivered through . . . cigarettes”). Skipping

directly to dramatically larger and broader cigar warnings, while leaving cigarette warnings

untouched in the five years since the D.C. Circuit struck down the agency’s prior effort and the

three years since the agency proposed the cigar warnings, is irreconcilable with the agency’s own

conclusions and arbitrary in violation of the APA. 10

9
The agency’s failure to seriously analyze the efficacy of larger warnings dovetails with the
agency’s disregard for the alternative of waiting for the study and research Congress required
from the Tobacco Products Scientific Advisory Committee (the “TPSAC” or the “Committee”).
FD&C Act § 917(c), 21 U.S.C. § 387q(c). Citing First Amendment concerns, at least one
commenter suggested that the FDA defer imposing the warning label requirements on newly
deemed products until the FDA or the Committee could complete scientific research, taking into
account the distinctive usage patterns among different tobacco products. AR160638–39.
10
Various other labeling requirements were imposed as part of the Deeming Rule. See FD&C
Act § 903(a)(2), (a)(4). These requirements have the same compliance date as the health
warning requirements. 81 Fed. Reg. at 29,006. The Court should vacate all aspects of the Rule
that implicate labeling changes, to allow the agency to consider all labeling requirements as a
collective whole, and to avoid penalizing regulated entities (by subjecting them to multiple
rounds of label revisions) for the agency’s own transgression of constitutional rights. See Am.
Petroleum Inst. v. EPA, 862 F.3d 50, 71 (D.C. Cir. 2017) (explaining that when the various
aspects of a regulation do not operate “entirely independently of one another,” vacatur in full is
the proper course); Ass’n of Private Colls. & Univs. v. Duncan, 870 F. Supp. 2d 133, 154
(D.D.C. 2012) (vacating entire rule because its component parts were “obviously ‘intertwined’”).

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IV. PLAINTIFFS ARE ENTITLED TO A PRELIMINARY INJUNCTION AGAINST
ENFORCEMENT OF THE WARNING REQUIREMENTS

The Court weighs four factors in determining whether to enjoin agency action:

“(1) whether there is a substantial likelihood of success on the merits; (2) whether the movant

will suffer irreparable harm if the injunction is not granted; (3) whether the injunction will

substantially injure other parties; and (4) whether the public interest would be furthered by the

injunction.” R.J. Reynolds Tobacco Co. v. FDA (R.J. Reynolds I), 823 F. Supp. 2d 36, 42–43

(D.D.C. 2011). Here, all of the factors require injunctive relief.

First, the text of the TCA and the administrative record together establish that it is

substantially likely that that the warning label regime violates the Constitution and the TCA. See

supra Sections II.A–II.C.

Second, Plaintiffs’ members already have begun to incur serious compliance costs, which

will only mount as the effective date of the rule approaches. Plaintiffs’ members—largely family

businesses—have commenced designing new labels and packages, at tremendous expense, and

have prepared and submitted warning plans to the FDA. Patel Decl. ¶¶ 6–9; Brady Decl. ¶¶ 4–10;

Trowbridge Decl. ¶¶ 5–11; Norris Decl. ¶¶ 5, 11. Plaintiffs’ manufacturer and retailer members

each offer hundreds or thousands of unique products and package configurations. E.g., Brady

Decl. ¶¶ 4; Trowbridge Decl. ¶ 6. Recognizing that each discrete package will require adjustments

for the FDA’s new labels, Plaintiffs’ members have already commenced redesign and replacement

efforts expected to cost from hundreds of thousands to millions of dollars—on top of the expenses

of printing the new labels, buying new equipment, hiring additional staff, discarding unusable

inventory, and preparing a distribution system for warning rotation. Patel Decl. ¶¶ 9, 14; Brady

Decl. ¶ 10; Trowbridge Decl. ¶¶ 7–11; Norris Decl. ¶¶ 11–18. Many of Plaintiffs’ members also

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anticipate that their redesigns will not be complete by August 2018, forcing them to apply the new

labels to their existing packages at the expense of their valuable trade dress. Brady Decl. ¶¶ 6, 9.

Members of Plaintiffs’ associations are undoubtedly suffering irreparable harm. The

threatened deprivation of First Amendment rights is irreparable harm. See R.J. Reynolds I, 823

F. Supp. 2d at 50–51 (where an FDA tobacco warnings requirement “threaten[s]” “First

Amendment interests,” there is irreparable harm); see also Elrod v. Burns, 427 U.S. 347, 373

(1976) (plurality op.) (“The loss of First Amendment freedoms, for even minimal periods of

time, unquestionably constitutes irreparable injury.”); Am. Beverage Ass’n, 2017 WL 4126944,

at *9 (“[A] colorable First Amendment claim is irreparable injury sufficient to merit the grant of

relief.”); Gordon v. Holder, 721 F.3d 638, 653 (D.C. Cir. 2013) (“[A] prospective violation of a

constitutional right constitutes irreparable injury for these purposes.”). And the costs of

preparing to comply with an illegal rule are irreparable because of the difficulty of recovering

them from the agency. R.J. Reynolds I, 823 F. Supp. 2d at 51 n.32; Smoking Everywhere, Inc. v.

FDA, 680 F. Supp. 2d 62, 77 n.19 (D.D.C. 2010).

Third, an injunction will harm neither the FDA nor the public. The FDA has admitted

that “[r]eliable evidence on the impacts of warning labels” on cigar users “does not, to our

knowledge, exist,” AR023973, so the agency cannot claim that either its mission or the public

health will be affected by a temporary delay in the implementation of the warning label regime.

The FDA can hardly claim an emergency, given that the FTC warnings have been printed on

most cigar packages and advertisements for decades.

Fourth, an injunction is in the public interest. “[E]nforcement of an unconstitutional law

is always contrary to the public interest.” Gordon, 721 F.3d at 653; see also Pursuing Am.’s

Greatness, 831 F.3d at 511 (“[T]here is always a strong public interest in the exercise of free

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speech rights otherwise abridged by an unconstitutional regulation.”); Am. Beverage Ass’n, 2017

WL 4126944, at *9 (injunction against health warning ordinance was merited because “it is

always in the public interest to prevent the violation of a party’s constitutional rights”); Stewart

v. D.C. Armory Bd., 789 F. Supp. 402, 406 (D.D.C. 1992) (“[T]he public clearly has an interest

in free speech, . . . [which] will be served by ensuring that plaintiffs’ First Amendment rights are

not infringed before the constitutionality of the regulation has been definitively determined.”).

As all factors support Plaintiffs, the Court should preliminarily enjoin the warning system.

V. THE FDA’S DECISION TO IMPOSE USER FEES ON CIGARS AND PIPE
TOBACCO, BUT NOT E-CIGARETTES, IS CONTRARY TO LAW

To pay for the TCA’s regulatory scheme, Congress imposed “user fees” on the

“manufacturer[s] and importer[s] of tobacco products subject to” the TCA. FD&C Act § 919, 21

U.S.C. § 387s. Congress established a default allocation formula that would assign user fees based

on the classes of tobacco products in existence at the time of the TCA. Id. § 919(b)(2)(B)(i)–(ii),

§ 387s(b)(2)(B)(i)–(ii). Nonetheless, Congress made allowance for innovation and contemplated

user fees for future products, whether originally regulated by Congress or later deemed subject to

the Act by the FDA. Id. § 919(b)(2)(B)(iii), § 387s(b)(2)(B)(iii) (“[N]o user fees shall be assessed

on a class of tobacco products unless such class of tobacco products is listed in section 387a(b) of

this title [originally regulated] or is deemed by the Secretary in a regulation under section 387a(b)

of this title to be subject to this subchapter [newly deemed].” (emphasis added)). All newly

deemed products, including e-cigarettes, meet that simple standard.

The FDA, however, imposed user fees on all regulated tobacco products, except e-

cigarettes. See 81 Fed. Reg. at 28,712. The FDA acknowledged that its decision created an

unjustifiable “free rider” problem: Manufacturers and importers of e-cigarettes would not pay

for their regulation; instead it would be charged to all other tobacco products, including cigars

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and pipe tobacco. Id. The FDA’s only rejoinder is that it somehow lacked statutory discretion to

impose user fees on e-cigarettes because they were not listed in Congress’s initial allocation

formula. Id. Even if it could create a new fee regime, the FDA said it would decline to do so

because substantial work would be involved. Id. In reaching the conclusion that it was all too

hard, the FDA passed by common metrics that would subject new tobacco products to

Congress’s allocation formula (e.g., “20 cigarettes = 1 e-cigarette cartridge = 1 standard

container of moist snuff = 4 large cigars”). Id.

The FDA’s selective implementation of a user fee is contrary to law for three reasons.

First, the FDA interpreted the statute incorrectly—it does have authority to charge user fees to e-

cigarettes—and the Rule should be reversed for that reason alone. Second, charging only some

regulated products turns what Congress designated as a “user fee” into a “tax,” which the FDA

lacks authority to impose. Finally, the FDA’s User Fee Rule is bald economic favoritism raising

constitutional problems, which the Court should construe the statute to avoid.

A. Congress Did Not Limit User Fees to the Tobacco Products Listed in its
Allocation

The text of the Act plainly does not restrict user fees to those tobacco products listed in the

statutory allocation formula. The agency’s erroneous determination to the contrary alone requires

vacatur because the Rule rests on a faulty interpretation of the statute. See Noble Energy, Inc. v.

Salazar, 671 F.3d 1241, 1246 n.5 (D.C. Cir. 2012) (“[W]hen an agency incorrectly concludes that

Congress mandated a particular regulatory interpretation of a statute . . . this court will vacate and

remand.”). The statute says that “the Secretary shall in accordance with this section assess user

fees on, and collect such fees from, each manufacturer and importer of tobacco products subject to

this chapter.” FD&C Act § 919(a), 21 U.S.C. 387s(a) (emphasis added). E-cigarettes—by merit

of the Deeming Rule—are undoubtedly “tobacco products subject to this chapter.” Id.

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The Act then sets out yearly total assessments, followed by allocations by product class,

drawn from another statute. Id. § 919(b)(1)–(2), § 387s(b)(1)–(2). That statute, the Fair and

Equitable Tobacco Reform Act of 2004, lists product class allocations for fiscal years 2005

through 2014. 7 U.S.C. § 518d(b)–(c). Neither provision says that user fees shall be imposed

only on those tobacco products identified in the allocation provisions. “Congress generally

knows how to use the word ‘only’ when drafting laws.” Adirondack Med. Ctr. v. Sebelius, 740

F.3d 692, 697 (D.C. Cir. 2014).

Moreover, Section 919(b)(2)(B)(iii) states that user fees may be assessed so long as a

tobacco product is “listed in section [901(b)]” (i.e., a product is originally regulated) or is “deemed

by the Secretary in a regulation under section [901(b)]” (i.e., a product is newly deemed). FD&C

Act § 919(c)(2)(B)(iii), 21 U.S.C. § 387s(b)(2)(B)(iii). In other words, all deemed products,

regardless of whether they are listed in Section 919(b)(2)(B)(i), are subject to user fees. Section

919(b)(2)(B)(iv) similarly shows Congress’s intent that manufacturers and importers of regulated

tobacco products pay their own way: If a product is not “deemed” but “otherwise would be

assessed” user fees, the “amount of user fees . . . shall be reallocated to the classes of tobacco

products [that are deemed and subject to user fees] . . . based on the same relative percentages

otherwise determined under clause (ii).” Id. 919(b)(2)(B)(iv) , 21 U.S.C. § 387s(b)(2)(B)(iv).

What the statute does not provide for is a shifting of user fees from deemed products not identified

in the TCA to other tobacco products that happened to exist at the time of TCA’s enactment.

The structure of the Act reinforces that user fees must be collected for all regulated entities.

Cty. of L.A. v. Shalala, 192 F.3d 1005, 1014 (D.C. Cir. 1999) (court considers “the structure and

context of the statutory scheme”). Congress intended for the TCA to be self-sustaining, and to

pay for regulation using “fees assessed on manufacturers and importers of tobacco products,” not

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just some tobacco products. H.R. Rep. No. 111-58, pt. 1, at 21 (2009) (emphasis added). Should

e-cigarettes overtake large segments of the marketplace for tobacco products (a trend consistent

with current data), the FDA either would lack sufficient funding for its regulatory activities or

saddle other tobacco products with the crushing expense of regulating e-cigarettes.

Should the Act be ambiguous, the agency’s interpretation is plainly unreasonable. The

FDA offered no reason why alternative methods of calculating user fees were too difficult to

implement. See 81 Fed. Reg. at 28,712; see also Emily’s List v. FEC, 581 F.3d 1, 22 n.20 (D.C.

Cir. 2009) (administrative convenience excuses must be “reasonably explained”).

B. Congress Deliberately Imposed a “User Fee,” Not a Tax

In any event, the Rule is contrary to the term “user fee” in the Act. “User fees” are:

(1) predicated on a voluntary act by a payer; (2) paid for a specific service or benefit, including

the “benefit” of regulation; and (3) not meant for the benefit of others. Nat’l Cable Television

Ass’n, Inc. v. United States, 415 U.S. 336, 340-41 (1974); see also U.S. Gov’t Accountability

Office, GAO-08-386SP, Federal User Fees: A Design Guide 4-5 (2008). When a person or an

entity is obligated to provide funds for government regulation of someone else, the payment is no

longer a user fee but a tax. See Am. Council of Life Insurers v. D.C. Health Benefit Exch. Auth.,

815 F.3d 17, 19 (D.C. Cir. 2016) (“[I]n practice the key question [for distinguishing a fee from a

tax] is whether a charge raises revenue merely to cover the cost of offering a service to the

payers of the fee … or whether it also raises revenue for purposes that aren’t especially

beneficial or useful to the payers, or required for the pursuit of their businesses.”); Empress

Casino Joliet Corp. v. Balmoral Racing Club, Inc., 651 F.3d 722, 728 (7th Cir. 1992) (user fee is

“reasonable estimate of the cost imposed [on the agency] by the person required to pay the fee”).

The User Fee Rule calls for some manufacturers of tobacco products pay for the system

as a whole, while others “free ride” by obtaining the “benefits” of regulation without any of the

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costs. Because cigar, pipe tobacco, cigarette, and other manufacturers provide a benefit for

“other members of society”—e-cigarette manufacturers—the FDA’s rule transforms Congress’s

user fee into a tax. See Nat’l Cable Television Ass’n, 415 U.S. at 341 (distinction between “fee”

and “tax” depends on whether payer receives “benefit not shared by other members of society”);

Am. Council of Life Insurers, 815 F.3d at 21 (assessment on life insurance policies issued by

both regulated and non-regulated entities constituted “redistribution of resources mark[ing] the

charge as a tax,” not a user fee); see also United States v. Sperry Corp., 493 U.S. 52, 60 (1989)

(user fee must represent “fair approximation of the cost of benefits supplied” to payer); Seafarers

Int’l Union v. U.S. Coast Guard, 81 F.3d 179, 186 (D.C. Cir. 1996) (“[A]n agency cannot load

on expenses in the guise of collecting licensing fees.”).

C. The User Fee Rule, As Impermissible Economic Favoritism, Raises
Constitutional Questions Under the Fifth Amendment

The FDA, without providing any meaningful reason, preferentially treats e-cigarettes by

mandating that all other tobacco products fund their regulation. This is naked economic

favoritism. Economic discrimination still requires a rational basis under the Fifth Amendment’s

Due Process Clause. St. Joseph Abbey v. Castille, 712 F.3d 215, 223 (5th Cir. 2013).

Administrative convenience—avoiding a few more paragraphs in the final rule—is not a rational

basis. Cf. Armour v. City of Indianapolis, 132 S. Ct. 2073, 2081 (2012) (rational basis existed

where equal treatment would have yielded benefits “too small to justify the administrative

expense”). More importantly, Congress did not authorize this economic discrimination and, to the

extent the Act is ambiguous, it should be interpreted to avoid the agency’s constitutionally

problematic result. Nat’l Mining Ass’n v. Kempthorne, 512 F.3d 702, 711 (D.C. Cir. 2008)

(“[C]ourts make every effort to construe statutes so as to find their constitutional foundations and

thus avoid needless constitutional confrontations.”).

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VI. THE FDA ERRONEOUSLY INTERPRETED THE ACT TO TREAT
RETAILERS WHO BLEND FINISHED PIPE TOBACCO AS TOBACCO
PRODUCT MANUFACTURERS

Tobacco retailers, for centuries, have blended pipe tobacco in-store to meet the particular

tastes of their customers. Even though the retailer is blending two finished, FDA-approved pipe

tobacco products, the agency decided to treat it as a “manufacturer”:

All entities that meet the definition of “tobacco product manufacturer” in section
900(20) of the FD&C Act, including retail establishments that blend pipe
tobacco, are subject to and must comply with all applicable statutory and
regulatory requirements for tobacco product manufacturers.

81 Fed. Reg. at 29,049 (emphasis added). 11 Now such mom-and-pop retailers must register as

manufacturers and subject themselves to burdensome regulatory requirements made for the

world’s largest companies. See 81 Fed. Reg. at 29,004, 29,049. Each in-store blend will be

dragged through premarket review, product testing, and ingredient listing; each store through

annual registration and recordkeeping requirements. See FD&C Act §§ 904, 905, 909, 910, 21

U.S.C. §§387d, 387e, 387i, 387j. The result: Retailers will end their long-standing practice and

stop blending pipe tobacco, despite their customers’ requests.

The agency’s interpretation is wrong. Retailers blending finished pipe tobacco are not

“manufacturers.” They are simply taking two end-use, FDA-approved products and performing

a service that consumers themselves could do on their own. 12 Congress understood this. When

it referred to “manufacture” of tobacco products in Section 905 of the FD&C Act, it expressly

11
“Tobacco product manufacturer” is defined under the statute as “any person, including any
repacker or relabeler, who—(A) manufacturers, fabricates, assembles, processes, or labels a
tobacco product; or (B) imports a finished tobacco product for sale or distribution in the United
States.” FD&C Act § 900(20), 21 U.S.C. § 387(20).
12
See AR130239–40 (“As a practical matter, FDA should not want to regulate mixing of blends
by retailers because retailers receive products that were manufactured by persons subject to
FDA’s laws and regulations, and blend already mixed and/or processed products on a relatively
small scale in a somewhat imprecise way.”); AR081246–47 (same); Anderson Decl. ¶¶ 14–16.

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distinguished retailers: “The term ‘manufacture, preparation, compounding, or processing’ shall

include repackaging or otherwise changing the container, wrapper, or labeling of any tobacco

product package in furtherance of the distribution of the tobacco product from the original place

of manufacture to the person who makes final delivery or sale to the ultimate consumer or user.”

Id. § 905(a)(1), 21 U.S.C. § 387e(a)(1) (emphasis added). Thus, a retailer—“the person who

makes final delivery or sale to the ultimate consumer or user”—cannot be the same as a

“manufacturer” under the Act.

Even if the statute were ambiguous on this point, the agency’s interpretation is not

reasonable. There is no public health reason for eliminating this long-standing practice. Bulk

tobacco that is “blended” is itself a finished tobacco product produced by a regulated tobacco

product manufacturer who will be subject to premarket review. The FDA has not suggested (nor

could it) that blending of finished pipe tobacco chemically or physically alters the tobacco in any

way, may cause a dangerous chemical reaction in combination, or presents any public health risk

distinct from the end consumer products already approved by the FDA. Presumably, the

hundreds of years’ experience in blending pipe tobacco would have alerted someone to an acute

health risk by this point. In marked contrast, the agency specifically explained that the manifold

chemicals in cutting-edge e-cigarette liquids could react in ways unforeseen by anyone other

than experts. See 81 Fed. Reg. at 29,044–46.

The absence of any similar explanation for pipe tobacco is a hallmark of arbitrary and

capricious overregulation. The APA expects and demands that agencies distinguish between

industries: If there is evidence of public health problems for blended vaping, but not for pipe

tobacco, the agency must treat those industries differently. See Nat’l Wildlife Fed’n v. Hodel,

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839 F.2d 694, 722-23 (D.C. Cir. 1988) (secretary “too swiftly equated surface mining with

underground mining for the purpose at hand,” despite “‘basic differences’” between operations).

The FDA’s interpretation also is unreasonable because it imposes a significant burden

and expense on numerous small businesses around the country. As the Regulatory Flexibility

Act (“RFA”) makes the interests of small businesses a “relevant factor” for qualifying rules, 5

U.S.C. §§ 603-604, “the APA together with the Regulatory Flexibility Act require that a rule’s

impact on small businesses be reasonable and reasonably explained,” Nat’l Tel. Coop. Ass’n v.

FCC, 563 F.3d 536, 540 (D.C. Cir. 2009). The agency, however, admitted that it was “unable to

estimate the number of retailers who blend pipe tobacco” and that, “[w]ithout knowing baseline

numbers of such entities, it is not possible to estimate exit or compliance costs associated with

the rule’s expectations for manufacturing activities.” AR023938; see also AR023917. The

agency unreasonably punted on this issue and violated the APA. See Bus. Roundtable v. SEC,

647 F.3d 1144, 1148-49 (D.C. Cir. 2011); Chamber of Commerce v. SEC, 412 F.3d 133, 144

(D.C. Cir. 2005) (“[U]ncertainty may limit what the Commission can do, but it does not excuse

the Commission from its statutory obligation to do what it can to apprise itself—and hence the

public and Congress—of the economic consequences of a proposed regulation before it decides

whether to adopt the measure.”); Thompson v. Clark, 741 F.2d 401, 405 (D.C. Cir. 1984) (when

a “defective regulatory flexibility analysis cause[s] an agency to underestimate the harm inflicted

upon small businesses to such a degree that . . . th[e] harm clearly outweighs the claimed benefits

of the rule, . . . then the rule must be set aside”).

VII. PIPES ARE NOT “COMPONENTS” OF A TOBACCO PRODUCT

The FDA concluded that pipes are “components” of a tobacco product. See 81 Fed. Reg.

at 29,042. Its interpretation of the statute would require every pipe manufacturer, from one-man

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shops in the garage to large corporations, to undergo the crushingly expensive registration and

premarket review process. The agency’s contention is wrong.

The term “component” in the definition of “tobacco product” in § 201(rr) of the FD&C

Act does not include pipes. “Tobacco product” is defined as “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).” FD&C Act § 201(rr)(1), 21 U.S.C.

§ 321(rr)(1). A “component” is a “constituent part” or an “ingredient.” See Component,

Merriam-Webster, http://www.merriam-webster.com/dictionary/component; New Webster’s

Comprehensive Dictionary of the English Language 207 (1985 ed.) (“component” means

“constituent”). 13 A pipe is not a constituent part or ingredient of a product made or derived from

tobacco, and therefore is not subject to regulation as a tobacco product under the TCA.

This is borne out by the use of the term “component” in other parts of the statute.

Elsewhere, the term “component” is used as a concept similar to terms such as “additive,”

“ingredient,” and “constituent.” See, e.g., FD&C Act §§ 907(a)(3)(B)(ii) (discussing “an

additive, constituent (including a smoke constituent) or other component of a tobacco product”),

907(a)(4)(B)(i) (discussing “provisions respecting the construction, components, ingredients,

additives, constituents, including smoke constituents, and properties of the tobacco product”),

910(b)(1)(B) (requiring “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.

§§ 387g(a)(3)(B)(ii), 387g(a)(4)(B)(i), 387j(b)(1)(B); see also TCA § 3(5), 123 Stat. at 1782

(designating as one purpose of the TCA “to vest the Food and Drug Administration with the

13
“In interpreting statutory texts courts use the ordinary meaning of terms unless context
requires a different result.” Gonzales v. Carhart, 550 U.S. 124, 152 (2007).

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authority to regulate the levels of tar, nicotine, and other harmful components of tobacco

products” (emphasis added)). A statutory term is known by the traits of its companions,

including other terms in a series. See Gustafson v. Alloyd Co., Inc., 513 U.S. 561, 575 (1995)

(applying canon of noscitur a sociis). All of these terms denote a material that is integrated with

a product made of tobacco. A pipe carries tobacco, it is not a part of it, and thus is not a

“component” of a tobacco product.

Even if the term “component” were ambiguous, the agency’s interpretation is not

reasonable, particularly as applied to pipes. The FDA defined “component or part” to mean:

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) [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. The agency separately defined “accessories” because “accessories,

unlike components or parts, are expected to have little direct impact on the public health.” Id. at

28,975. There is nothing in the record to suggest that pipe architecture is being manipulated to

make tobacco more addictive or dangerous and have any other direct effect on public health. See

id. at 29,042; see also, e.g., AR130248 (comments detailing lack of health effect). Instead,

differentiation among pipes is almost all for aesthetic reasons. See Anderson Decl. ¶¶ 17–18.

Pipes are better classified as “accessories.”

The FDA’s interpretation will lead to regulatory burdens that pose an existential threat to

the small craftsmen carving premium pipes. The FDA has not adequately considered the effect

of this regulatory action on these particular small businesses. See, e.g., AR023986 (estimating

there are at least 4,610 different types of pipes, excluding hand-crafted pipes); AR023989

(“assum[ing]” that 5 percent of baseline newly deemed products, including pipes, will exit the

market rather than submit a marketing application); AR024042–44 (failing to specifically address

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premium pipe craftsman in analysis of economic effect of rule on small entities). Thus, once

again, the agency acted arbitrarily and capriciously in its failure to adequately assess the economic

effects of its rule. See Bus. Roundtable, 647 F.3d at 1148–49; Thompson, 741 F.2d at 405.

CONCLUSION

Plaintiffs’ motion for a preliminary injunction and partial summary judgment should be

granted.

Dated: October 3, 2017 Respectfully submitted,

/s/ Michael J. Edney
Michael J. Edney, DC Bar No. 492024
Caroline M. Mew, DC Bar No. 467354
NORTON ROSE FULBRIGHT US LLP
799 9th Street, NW, Suite 1000
Washington, DC 20001-4501
Telephone: (202) 662-0200
Fax: (202) 662-4643
michael.edney@nortonrosefulbright.com
caroline.mew@nortonrosefulbright.com

Attorneys for Plaintiffs International Premium
Cigar and Pipe Retailers Association and
Cigar Rights of America

/s/ Mark S. Raffman
Mark S. Raffman, DC Bar No. 414578
GOODWIN PROCTER LLP
901 New York Avenue NW
Washington, DC 20001
Telephone: (202) 346-4000
Fax: (202) 346-4444
mraffman@goodwinlaw.com

Attorneys for Plaintiff Cigar Association of
America

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