MO v. FDA: PLAINTIFFS’ CONSOLIDATED MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS, OR IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT, AND REPLY IN SUPPORT OF PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT, Jan 15, 2016

January 23, 2016 12:47 pm by Gene Borio

The PDF is Here

EXCERPT:

In the Second SE Directive, however, FDA disregards the clear statutory distinction between the regulation of tobacco products and the regulation of tobacco product labels, and seeks to use a supposedly nonreviewable “guidance” document to impose a premarket review requirement on tobacco product labels. FDA’s defense of that extra-statutory power grab disregards settled precedent on the reviewability of final agency action, upends the structure of the Tobacco Control Act, and rewrites the plain statutory language. . . .

FDA makes virtually no attempt to establish that, as a matter of plain meaning, a tobacco product with a modified label but the identical physical characteristics constitutes a “new tobacco product” that “was not commercially marketed in the United States as of February 15, 2007.” . . .

FDA seeks to use the Second SE Directive to manufacture a third exception, arrogating to itself pre-approval authority that Congress expressly and deliberately withheld. . . .

the Court should enter summary judgment for Plaintiffs, declare the Second SE Directive to be unlawful, vacate it, and enjoin its enforcement.

END EXCERPT

FULL TEXT:

Case 1:15-cv-01590-APM Document 35 Filed 01/15/16 Page 1 of 36

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

PHILIP MORRIS USA INC. et al., Plaintiffs,

v.

UNITED STATES FOOD AND DRUG ADMINISTRATION et al.,

Defendants.

Civil Action No. 1:15-cv-1590

Oral Argument Requested

PLAINTIFFS’ CONSOLIDATED MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS, OR IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT, AND REPLY IN SUPPORT OF PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT

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TABLE OF CONTENTS

INTRODUCTION …….1

ARGUMENT …….3

I. PLAINTIFFS’ CLAIMS ARE RIPE FOR REVIEW ……. 3

A. The Second SE Directive Is Final Agency Action………4

1. The Second SE Directive Constitutes The Consummation Of FDA’s Decision-Making Process …….4

2. Legal Consequences Flow From The Second SE Directive ……..5

B. Withholding Judicial Review Would Cause Plaintiffs Substantial Hardship ………8

II. THE SECOND SE DIRECTIVE EXCEEDS FDA’S STATUTORY AUTHORITY ……. 10

A. The Label-Change Requirements Conflict With The Structure Of The Tobacco Control Act ………11

B. The Label-Change Requirements Conflict With The Text Of The Tobacco Control Act ……12

C. The Product-Quantity Change Requirements Conflict With The Tobacco Control Act ……14

III. THE SECOND SE DIRECTIVE VIOLATES THE APA BECAUSE IT IS ARBITRARY AND CAPRICIOUS AND WAS ISSUED WITHOUT NOTICE-ANDCOMMENT RULEMAKING ……. 15

A. The Second SE Directive Is Arbitrary And Capricious …….15

B. The Second SE Directive Is A Substantive Rule Promulgated Without Notice And Comment ……..18

IV. THE SECOND SE DIRECTIVE VIOLATES THE FIRST AMENDMENT …….. 20

A. The Second SE Directive Must Meet The Requirements Of The First Amendment …….20

B. The Second SE Directive Imposes An Unlawful Prior Restraint ……21

C. The Second SE Directive Fails Central Hudson……23

i

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V. THE SECOND SE DIRECTIVE IS UNCONSTITUTIONALLY VAGUE …… 24 CONCLUSION ……25 ii

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TABLE OF AUTHORITIES

Page(s)

Cases

44 Liquormart, Inc. v. Rhode Island,

517 U.S. 484 (1996) …….23

*

Abbott Labs. v. Gardner,

387 U.S. 136 (1967) ………4, 9

Am. Meat Inst. v. U.S. Dep’t of Agric.,

760 F.3d 18 (D.C. Cir. 2014) ………23

Am. Tort Reform Ass’n v. OSHA,

738 F.3d 387 (D.C. Cir. 2013) …….7, 8

*

Appalachian Power Co. v. EPA,

208 F.3d 1015 (D.C. Cir. 2000) ………1, 4, 5

Arrow Air, Inc. v. Dole,

784 F.2d 1118 (D.C. Cir. 1986) …….16

BBK Tobacco & Foods, LLP v. FDA,

672 F. Supp. 2d 969 (D. Ariz. 2009) ………7

Beaulieu v. City of Alabaster,

454 F.3d 1219 (11th Cir. 2006) …….8

Bennett v. Spear,

520 U.S. 154 (1997) …….4

*

Cent. Hudson Gas & Electric Corp. v. Pub. Serv. Comm’n of N.Y.,

447 U.S. 557 (1980) …….21

Chamber of Commerce of U.S. v. FEC,

69 F.3d 600 (D.C. Cir. 1995) …….8

Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc.,

467 U.S. 837 (1984) …….11

Ciba-Geigy Corp. v. EPA,

801 F.2d 430 (D.C. Cir. 1986) …….5, 7

* Authorities upon which Plaintiffs chiefly rely are marked with an asterisk.

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Cmty. Nutrition Inst. v. Young,

818 F.2d 943 (D.C. Cir. 1987) …….19

CropLife Am. v. EPA,

329 F.3d 876 (D.C. Cir. 2003) ………5, 18

CSI Aviation Servs., Inc. v. U.S. Dep’t of Transp.,

637 F.3d 408 (D.C. Cir. 2011) ………6

Desert Outdoor Adver., Inc. v. City of Moreno Valley,

103 F.3d 814 (9th Cir. 1996) ………22

Dillmon v. Nat’l Transp. Safety Bd.,

588 F.3d 1085 (D.C. Cir. 2009) …….18

Disc. Tobacco City & Lottery, Inc. v. United States,

674 F.3d 509 (6th Cir. 2012) ………22

Elec. Privacy Info. Ctr. v. U.S. Dep’t of Homeland Sec.,

653 F.3d 1 (D.C. Cir. 2011) ………6

FCC v. Fox Television Stations, Inc.,

132 S. Ct. 2307 (2012) ………24, 25

Fed. Express Corp. v. Holowecki,

552 U.S. 389 (2008) …….10

Fla. Power & Light Co. v. EPA,

145 F.3d 1414 (D.C. Cir. 1998) …….8

Frozen Food Express v. United States,

351 U.S. 40 (1956) ………9

*

Gen. Electric Co. v. EPA,

290 F.3d 377 (D.C. Cir. 2002) …….5, 18, 19

Indep. Bankers Ass’n of Am. v. Smith,

534 F.2d 921 (D.C. Cir. 1976) ………7

March v. United States,

506 F.2d 1306 (D.C. Cir. 1974) …….10

MedImmune, Inc. v. Genentech, Inc.,

549 U.S. 118 (2007) …….10

Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co.,

463 U.S. 29 (1983) …….16

iv

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N.Y. Magazine v. Metro. Transp. Auth.,

136 F.3d 123 (2d Cir. 1998)…….22, 23

Nat. Res. Def. Council v. EPA,

643 F.3d 311 (D.C. Cir. 2011) …….19

Nat’l Mining Ass’n v. McCarthy,

758 F.3d 243 (D.C. Cir. 2014) …….10

Nat’l Org. for Marriage, Inc. v. Walsh,

714 F.3d 682 (2d Cir. 2013)………8

Neb. Press Ass’n v. Stuart,

427 U.S. 539 (1976) …….21

Peachlum v. City of York,

333 F.3d 429 (3d Cir. 2003)………8

Pearson v. Shalala,

164 F.3d 650 (D.C. Cir. 1999) …….21

Perez v. Mortg. Bankers Ass’n,

135 S. Ct. 1199 (2015) …….16

Pharm. Research & Mfrs. of Am. v. U.S. Dep’t of Health & Human Servs.,

_ F. Supp. 3d _, 2015 WL 5996374 (D.D.C. 2015) ………5, 7

R.J. Reynolds Tobacco Co. v. FDA,

696 F.3d 1205 (D.C. Cir. 2012) …….23

Rural Cellular Ass’n v. FCC,

685 F.3d 1083 (D.C. Cir. 2012) …….11

Se. Promotions, Ltd. v. Conrad,

420 U.S. 546 (1975) …….22

In re Search of Kitty’s E.,

905 F.2d 1367 (10th Cir. 1990) …….22

SEC v. Chenery Corp.,

318 U.S. 80 (1943) …….17

Sorrell v. IMS Health Inc.,

131 S. Ct. 2653 (2011) …….23

Syncor Int’l Corp. v. Shalala,

127 F.3d 90 (D.C. Cir. 1997) ………19

v

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United States v. Article of Drug Designated B-Complex Cholinos Capsules,

362 F.2d 923 (3d Cir. 1966)…….21

United States v. Cole,

84 F. Supp. 3d 1159 (D. Or. 2015) ……21

United States v. Regenerative Scis., LLC,

878 F. Supp. 2d 248 (D.D.C. 2012) ………21

Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc.,

425 U.S. 748 (1976) ………21, 22

Walter O. Boswell Mem’l Hosp. v. Heckler,

749 F.2d 788 (D.C. Cir. 1984) …….17

Whitaker v. Thompson,

353 F.3d 947 (D.C. Cir. 2004) …….20

Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio,

471 U.S. 626 (1985) …….21

Statutes

21 U.S.C. §§ 331-334 ……7, 8

21 U.S.C. § 360c(i) ……..13

21 U.S.C. § 371(h) ………18

TCA § 900(6) ………12

TCA § 901(d) …….8

TCA § 902(6) ………10

TCA § 903(a) ………10

TCA § 903(b) …….11, 12

TCA § 905……..15

TCA § 905(i) ……16

TCA § 910……..15

TCA § 910(a) …….2, 12, 14, 17

TCA § 910(c) ………15

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TCA § 911……..11

TCA § 911(g) ………15

Regulations

21 C.F.R. § 10.115(d) ……..18

Other Authorities

The 510(k) Program: Evaluating Substantial Equivalence in Premarket Notifications (510(k)): Guidance for Industry and FDA Staff (July 28, 2014) ……13

FDA Documentation for the Generic Clearance of Focus Groups (Mar. 31, 2015) ……..24, 25

FDA, Reports on Substantial Equivalence: An Update (Aug. 21, 2012) ……13

FDA, Webinar, Compliance Training for Small Businesses, “Draft Guidance— Substantial Equivalence Reports: Manufacturer Requests for Extensions or to Change the Predicate Tobacco Product” (Aug. 2014) …….13

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INTRODUCTION

The Tobacco Control Act imposes premarket review requirements on “new tobacco products,” but generally authorizes FDA to impose pre-approval requirements on tobacco product labels only through notice-and-comment rulemaking, which would afford manufacturers an indisputable right to judicial review of the agency’s action. In the Second SE Directive, however, FDA disregards the clear statutory distinction between the regulation of tobacco products and the regulation of tobacco product labels, and seeks to use a supposedly nonreviewable “guidance” document to impose a premarket review requirement on tobacco product labels. FDA’s defense of that extra-statutory power grab disregards settled precedent on the reviewability of final agency action, upends the structure of the Tobacco Control Act, and rewrites the plain statutory language.

According to FDA, the Second SE Directive is not subject to judicial review because it “do[es] not establish legally enforceable responsibilities” and compliance is merely an “option[ ]” for manufacturers. FDA Br. 15, 17. But for a manufacturer unable or unwilling to comply with the Second SE Directive, the only options are forgoing label and product-quantity changes altogether or making those changes without what FDA itself describes as the “required premarket authorization,” First SE Directive at 1 n.1 (AR040) (emphasis added), leaving the manufacturer exposed to the threat of substantial civil and criminal penalties for marketing a “misbranded and adulterated” product. Second SE Directive at 2 (AR004). In light of the Directive’s far-reaching “legal consequences,” Plaintiffs’ challenge to that final agency action is ripe for review. Appalachian Power Co. v. EPA, 208 F.3d 1015, 1022 (D.C. Cir. 2000).

On the merits, FDA has little to say about the structure of the Tobacco Control Act, which establishes that “new tobacco products” are generally subject to pre-approval by FDA, but new labels are not, except where FDA adopts a pre-approval requirement through notice and

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comment or the label makes a “modified risk claim.” FDA seeks to use the Second SE Directive to manufacture a third exception, arrogating to itself pre-approval authority that Congress expressly and deliberately withheld. In so doing, FDA eviscerates the carefully calibrated statutory structure and leaves itself searching for a textual hook for its pre-approval powers.

That search is in vain. FDA makes virtually no attempt to establish that, as a matter of plain meaning, a tobacco product with a modified label but the identical physical characteristics constitutes a “new tobacco product” that “was not commercially marketed in the United States as of February 15, 2007.” TCA § 910(a)(1)(A). It instead urges the Court to construe the definition of “new tobacco product” “in [t]andem” with other purportedly relevant statutory provisions, FDA Br. 23—a clear concession that the operative definition itself lends FDA no support. FDA is likewise unsuccessful in attempting to establish that a tobacco product packaged in a different quantity somehow has undergone a “modification” that renders the product “new,” TCA § 910(a)(1)(B), which is not surprising given that FDA’s position defies the common-sense proposition that a product remains the same whether it is distributed in large or small quantities. Nor can FDA shore up its statutory interpretation by invoking Chevron deference, which is inapplicable to the Second SE Directive for a number of reasons, including that Chevron deference does not apply to policy statements and interpretive rules—the classifications that FDA affixes to the Directive—or to substantive rules that raise serious constitutional concerns or that conflict with the clear statutory structure and text, as the Directive plainly does.

FDA’s effort to reconcile the Second SE Directive with the APA is equally unavailing. In particular, FDA does not explain why it chose to mandate premarket review of label and product-quantity changes rather than adopt other regulatory alternatives, such as a requirement that manufacturers notify FDA of label and product-quantity changes at the time those changes

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are introduced—an alternative that would enable FDA to keep “abreast of products in the marketplace” without delaying implementation of those changes. FDA Br. 26. FDA likewise has no explanation for its failure to conduct notice-and-comment rulemaking, which is mandated by both the Tobacco Control Act and the APA.

Similarly, FDA’s First Amendment arguments are misdirected. According to FDA, Plaintiffs’ speech is being used only for “evidentiary” purposes that do not implicate the First Amendment. FDA Br. 34. But Plaintiffs are not challenging FDA’s use of speech for an alleged “evidentiary” purpose—for example, to punish manufacturers that make false statements. Plaintiffs are instead challenging the Second SE Directive’s requirement that they wait at least 90 days and often more before modifying their product labels. FDA offers no justification for that potentially indefinite, government-imposed prior restraint on Plaintiffs’ protected speech.

FDA fares no better in defending the imprecision of the Second SE Directive’s label- change requirements. According to FDA, Plaintiffs can secure the requisite regulatory certainty by conducting consumer testing to determine whether consumers view a label change as creating a “distinct” product. FDA Br. 44. But, even if requiring Plaintiffs to incur the costs and inefficiencies of consumer testing were compatible with the First and Fifth Amendments, FDA gives no assurance that it would defer to the results of that testing—leaving the agency with the unfettered discretion to determine for itself whether a label change triggers premarket review.

For each of these reasons, the Court should vacate the Second SE Directive.

ARGUMENT

I. PLAINTIFFS’ CLAIMS ARE RIPE FOR REVIEW.

FDA seeks to insulate the Second SE Directive from judicial review by interposing a supposed ripeness barrier. But Plaintiffs’ challenge to the Second SE Directive plainly meets both factors this Court considers when determining whether a claim is “ripe” for review: The

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Directive is final and otherwise “fit[ ] . . . for judicial decision,” and there would be substantial “hardship” to Plaintiffs from “withholding court consideration.” Abbott Labs. v. Gardner, 387

U.S. 136, 149 (1967). A contrary conclusion would afford FDA unchecked authority to use so- called “guidance” documents to impose regulatory requirements shielded from judicial scrutiny.

A. The Second SE Directive Is Final Agency Action.

According to FDA, the Second SE Directive is not “fit[ ]” for judicial review because it “is not final agency action.” FDA Br. 13. To be “final,” agency action must “mark the consummation of the agency’s decisionmaking process” and “the action must be one by which rights or obligations have been determined, or from which legal consequences will flow.” Bennett v. Spear, 520 U.S. 154, 177-78 (1997) (internal quotation marks omitted). The Second SE Directive satisfies both requirements.

1. The Second SE Directive Constitutes The Consummation Of FDA’s Decision-Making Process.

Although FDA points to language in the Second SE Directive stating that the document reflects only the agency’s “current thinking,” FDA Br. 13, courts determine whether agency action is “final” by looking beyond the “boilerplate” disclaimers that agencies routinely (and unsuccessfully) invoke as part of a “charade[ ] intended to keep . . . courts at bay.” Appalachian Power Co., 208 F.3d at 1023 (internal quotation marks omitted). Pro forma language aside, an agency reaches the consummation of its decision-making after releasing a draft, soliciting and ostensibly considering comments, and then issuing a final articulation of its position. See id. at 1022 (holding that the “first condition” of finality was “satisfied” where the “‘Guidance,’ as issued in September 1998, followed a draft circulated four years earlier and another, more extensive draft circulated in May 1998”). Here, FDA solicited comments on the Draft Directive in September 2011, issued the First SE Directive in March 2015, and released the Second SE

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Directive in September 2015—an iterative process that manifests all the features of finality, but without the safeguards of notice-and-comment rulemaking. See Pharm. Research & Mfrs. of Am. v. U.S. Dep’t of Health & Human Servs., _ F. Supp. 3d _, 2015 WL 5996374, at *7 (D.D.C.
2015) (holding that an FDA interpretive rule was final because it “‘was issued after extensive deliberation,’ and [was] ‘not a preliminary or tentative agency conclusion’”).

Nor is the Second SE Directive non-final simply because FDA could conceivably revise its position in the future. The D.C. Circuit has repeatedly rejected that reasoning because it could insulate agency action from judicial review in perpetuity due to the ever-present possibility of a future shift in the agency’s position. See, e.g., CropLife Am. v. EPA, 329 F.3d 876, 881-82 (D.C. Cir. 2003); Gen. Electric Co. v. EPA, 290 F.3d 377, 383 (D.C. Cir. 2002). The relevant question is not whether agency action is permanently set in stone, but whether it would, “as a practical matter, have a binding effect.” Appalachian Power Co., 208 F.3d at 1021. The Second SE Directive sets forth binding criteria regarding “whether premarket review is required” for label and product-quantity changes, Second SE Directive at 3 (AR005) (emphasis added), and therefore constitutes FDA’s “final word on the matter short of an enforcement action.” Ciba- Geigy Corp. v. EPA, 801 F.2d 430, 435-36 (D.C. Cir. 1986) (internal quotation marks omitted).

2. Legal Consequences Flow From The Second SE Directive.

FDA asserts that the Second SE Directive “does not create or confer any rights . . . and does not operate to bind FDA or the public.” FDA Br. 13 (internal quotation marks omitted). Yet, failure to comply with the Directive would subject Plaintiffs to serious legal repercussions. The Directive definitively declares FDA’s position that the Tobacco Control Act’s premarket review requirements apply to label and product-quantity changes, and emphasizes that a “new tobacco product that does not comply with [those] premarket requirements . . . is both misbranded and adulterated.” Second SE Directive at 2 (AR004). When an agency “issue[s] a

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definitive statement of [its] legal position” and puts companies “to the painful choice between costly compliance and the risk of prosecution,” the agency “cannot . . . evade judicial review” by claiming its action is not “final.” CSI Aviation Servs., Inc. v. U.S. Dep’t of Transp., 637 F.3d 408, 412-13 (D.C. Cir. 2011); see also Elec. Privacy Info. Ctr. v. U.S. Dep’t of Homeland Sec., 653 F.3d 1, 7 (D.C. Cir. 2011) (“It is enough for the agency’s statement to ‘purport to bind’ those subject to it, that is, to be cast in ‘mandatory language’ so ‘the affected private parties are reasonably led to believe that failure to conform will bring adverse consequences.’”).

FDA’s belief that it has the authority to take enforcement action based on noncompliance with the Second SE Directive is clear from the Interim Enforcement Policy it issued in the wake of Plaintiffs’ earlier lawsuit, where FDA committed that it would not “take steps to initiate any judicial or administrative adversarial proceedings” regarding label and product-quantity changes while it “consider[ed] new comments to the guidance.” First SE Directive at 1 n.1 (AR040). If FDA’s “guidance” were truly nonbinding—as the agency purports—it would have been unnecessary for FDA to declare that it was temporarily exercising its discretion not to enforce the First SE Directive.

FDA attempts to diminish the significance of the Interim Enforcement Policy on the ground that “it is related to enforcement of” the Tobacco Control Act, not the First SE Directive, because “[t]he obligation to submit an SE Report” derives from the Act, rather than from the agency’s “guidance.” FDA Br. 13, 19. Like the Second SE Directive, however, the First SE Directive established the obligation to submit two new types of substantial equivalence reports mentioned nowhere in the Tobacco Control Act and declared FDA’s expectation that manufacturers would comply with its definitive construction of the Act’s premarket review requirements. Now that FDA’s Interim Enforcement Policy has been displaced by the Second

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SE Directive, Plaintiffs again face possible sanctions for failing to submit label and product- quantity changes for premarket review.

Moreover, even if FDA’s imposition of premarket review requirements on label and product-quantity changes is based on its interpretation of the Act, courts have “frequently held that an agency’s interpretation of . . . [a] statute, with the expectation that regulated parties will conform to and rely on this interpretation, is final agency action fit for judicial review.” Indep. Bankers Ass’n of Am. v. Smith, 534 F.2d 921, 929 & n.29 (D.C. Cir. 1976) (citing cases); see also Ciba-Geigy Corp., 801 F.2d at 438 (same); Pharm. Research & Mfrs. of Am., 2015 WL 5996374, at *12. Indeed, FDA’s interpretation of the Act—that label and product-quantity changes can create a “new tobacco product” in the absence of physical changes to the product— is hardly an intuitive one that would have been apparent before FDA issued its “guidance.”

FDA’s reliance on BBK Tobacco & Foods, LLP v. FDA, 672 F. Supp. 2d 969 (D. Ariz.
2009), to support the absence of finality is misplaced. FDA Br. 13. The district court in BBK Tobacco held that an FDA guidance document—which stated that rolling papers were covered by the Tobacco Control Act’s ban on cigarettes containing certain characterizing flavors—was not final because it did “not provide any legal basis from which the FDA can institute civil or criminal legal proceedings.” 672 F. Supp. 2d at 975. Here, by contrast, FDA has made clear that, absent FDA premarket review, tobacco products that are distributed with new labels rendering the product “distinct” or that are packaged in modified quantities will be deemed “both misbranded and adulterated,” Second SE Directive at 2 (AR004), which gives rise to the threat of significant civil and criminal penalties in FDA enforcement actions. See 21 U.S.C. §§ 331-334.

Nor does American Tort Reform Ass’n v. OSHA, 738 F.3d 387 (D.C. Cir. 2013), support FDA’s position. FDA Br. 13. There, the court held that a challenge to an agency

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pronouncement regarding the preemptive effect of the Occupational Safety and Health Act was not ripe “because OSHA lacks the legal authority to render dispositive decisions on preemption.” Am. Tort Reform Ass’n, 738 F.3d at 396. FDA, in contrast, unquestionably has rulemaking authority to implement the Tobacco Control Act’s premarket review provisions—subject to the requirements of the APA and other legal limits—and to take enforcement action against manufacturers that do not comply. See 21 U.S.C. §§ 331-334; TCA § 901(d).

B. Withholding Judicial Review Would Cause Plaintiffs Substantial Hardship.

Because Plaintiffs’ claims are fit for judicial review, the Court need not consider the additional question of hardship. See Fla. Power & Light Co. v. EPA, 145 F.3d 1414, 1421 (D.C. Cir. 1998). In any event, withholding judicial review of the Second SE Directive would impose substantial hardship on Plaintiffs because it would require them to comply with the Directive’s unlawful premarket review requirements to avoid the imposition of civil and criminal penalties.

According to FDA, Plaintiffs would not face hardship in the absence of judicial review because the agency “has not pursued a single civil or criminal enforcement action” under the Second SE Directive. FDA Br. 14. But enforcement action is not a prerequisite to judicial review—especially where, as here, First Amendment rights are at stake. See Nat’l Org. for Marriage, Inc. v. Walsh, 714 F.3d 682, 689 (2d Cir. 2013) (“a real and imminent fear of . . . chilling” protected speech “is enough” to establish ripeness).1 The absence of enforcement activity simply reflects that, under FDA’s compulsion, Plaintiffs have been complying with the Second SE Directive or have postponed label and product-quantity changes in the absence of

1 Thus, if there were any doubt as to ripeness here—and there is not—it would be dispelled by the fact that the Second SE Directive is currently chilling Plaintiffs’ protected speech. See Chamber of Commerce of U.S. v. FEC, 69 F.3d 600, 603-04 (D.C. Cir. 1995) (in evaluating ripeness, a court “must bear in mind” that a rule allegedly “infringes on . . . First Amendment rights”); Beaulieu v. City of Alabaster, 454 F.3d 1219, 1227 (11th Cir. 2006) (“Because this case involves an alleged violation of the First Amendment, our review of this suit’s ripeness is at its most permissive”); Peachlum v. City of York, 333 F.3d 429, 434 (3d Cir. 2003) (same).

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premarket review. See Crosthwaite Decl. ¶ 6; O’Brien Decl. ¶ 17; Newman Decl. ¶ 7. Their suit is nevertheless ripe because the Second SE Directive “has a direct effect on [Plaintiffs’] day-today business” by prohibiting Plaintiffs from implementing label changes that render a product “distinct” and from changing the quantity in which their products are packaged without submitting a Same Characteristics SE Report or Product Quantity Change SE Report and then waiting at least 90 days for “provisional” products and indefinitely for all other products (or, alternatively, submitting a traditional premarket authorization application or substantial equivalence report). Abbott Labs., 387 U.S. at 152. As a direct result of these requirements, several Plaintiffs have decided to postpone label changes that had been planned before FDA promulgated the Second SE Directive. See Newman Decl. ¶ 7; O’Brien Decl. ¶¶ 8-14, 16-18. Absent judicial review, Plaintiffs will continue to be “in [this] dilemma”: “‘Either they must comply with the [Second SE Directive] and incur the [associated] costs . . . or they must . . . risk prosecution.’” Abbott Labs., 387 U.S. at 152. That message is clear from the mandatory terms of the Directive as well as the Interim Enforcement Policy that preceded it. See Frozen Food Express v. United States, 351 U.S. 40, 44-45 (1956) (agency action was reviewable where the agency “warn[ed]” companies that they “risk[ed]” incurring penalties if they failed to comply).

FDA’s proposal that a tobacco product manufacturer could nevertheless “come up with its own approach to satisfy statutory or regulatory requirements”—or “move forward with the changes they wish to make without submitting any type of SE report” (FDA Br. 15)—is illusory. Neither the Tobacco Control Act nor the Second SE Directive gives any hint of a supposed alternative approach to satisfying the premarket review requirements for new tobacco products. And the Directive is clear that a premarket application or substantial equivalence report is required for all tobacco products that are “new” due to a “distinct” label change or product

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quantity change. Second SE Directive at 5, 16 (AR007, AR018). A manufacturer that sought to chart its own course for premarket review—or that decided to forgo those procedures altogether—would therefore face potential criminal or civil liability for marketing a misbranded and adulterated product. See TCA §§ 902(6)(A), 903(a)(6). Judicial review of the Second SE Directive is thus the only viable means of relieving the substantial hardship currently confronting Plaintiffs. See MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 128-29 (2007) (“where threatened action by government is concerned, [courts] do not require a plaintiff to expose himself to liability before bringing suit to challenge the basis for the threat”) (emphasis omitted).

II. THE SECOND SE DIRECTIVE EXCEEDS FDA’S STATUTORY AUTHORITY.

On the merits, FDA begins by seeking to cloak the Second SE Directive in Chevron deference, pointing to the supposedly “careful administrative process” that produced the Directive. FDA Br. 11. At the same time, FDA—attempting to avoid the requirements of notice-and-comment rulemaking—asserts that the Directive is merely “an interpretive rule or a policy statement,” and expressly disclaims that it has the force of law. Id. at 16.

Chevron deference is inapplicable whether the Second SE Directive is an interpretive rule, policy statement, or substantive rule. If the Second SE Directive is an interpretive rule or policy statement, then, at most, the Court should accord the agency’s interpretation of the Tobacco Control Act a “‘measure of respect’ under the less deferential Skidmore standard” to the extent that it actually reflects the agency’s expertise and has been consistently applied. Fed. Express Corp. v. Holowecki, 552 U.S. 389, 399 (2008); see also Nat’l Mining Ass’n v. McCarthy, 758 F.3d 243, 251 (D.C. Cir. 2014) (“Legislative rules generally receive Chevron deference, but interpretive rules and general statements of policy often do not.”). FDA, however, has not proffered any good grounds for believing it has any peculiar insights into the meaning of “new tobacco product.” See, e.g., March v. United States, 506 F.2d 1306, 1316 (D.C. Cir. 1974)

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(“Administrative construction is less potent than it otherwise would be where it does not rest upon matters peculiarly within the [agency’s] field of expertise.”). Nor has FDA’s statutory interpretation been consistent. See Pls. Br. 29-30. Thus, if FDA is correct that the Second SE Directive is an interpretive rule or policy statement, the Directive is not entitled to any deference.

Alternatively, if the Directive is a substantive rule, then it is unlawful because it was not promulgated through notice and comment, and is still not entitled to Chevron deference because it gives rise to “serious constitutional difficulty,” Rural Cellular Ass’n v. FCC, 685 F.3d 1083, 1090 (D.C. Cir. 2012), and conflicts with the “clear congressional intent” expressed in the structure and plain text of the Tobacco Control Act, Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843 n.9 (1984).

A. The Label-Change Requirements Conflict With The Structure Of The Tobacco Control Act.

The structure of the Tobacco Control Act makes clear that Congress intended to draw sharp lines between the regulation of a tobacco product and the regulation of a tobacco product’s label. Pls. Br. 18-19. While “new tobacco products” are subject to premarket review, Congress authorized FDA to pre-approve label changes in only two narrow circumstances: (1) where the label makes a “modified risk” claim, TCA § 911, and (2) where FDA adopts a specific label preapproval regulation through notice-and-comment rulemaking, id. § 903(b).

FDA does not dispute that the Second SE Directive’s label-change requirements fall outside each of those two statutory delegations of authority. It instead emphasizes that the Second SE Directive “does not request or require that manufacturers submit product labels for prior approval.” FDA Br. 28. But the Directive requires that, prior to implementing a label change that would render a product “distinct,” a manufacturer submit a Same Characteristics SE Report containing a “[f]ull identification” of the “new tobacco product,” including information

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regarding “its different name, logo, packaging font or color.” Second SE Directive at 10 & n.9 (AR0012). And the manufacturer cannot implement that label change without waiting at least 90 days for “provisional” products and an indefinite period for all other products. Thus, the change to the label triggers the obligation to submit the substantial equivalence report, must be described in the report, and cannot be implemented if FDA concludes that the relabeled product is not substantially equivalent to its predecessor. The Second SE Directive therefore establishes precisely the type of label pre-approval procedure that Congress made clear can only be promulgated through notice-and-comment rulemaking. TCA § 903(b).2

B. The Label-Change Requirements Conflict With The Text Of The Tobacco Control Act.

FDA never engages with the central statutory question in this case: whether a tobacco product with a modified label but the same physical characteristics can constitute a “new tobacco product” within the plain meaning of the Tobacco Control Act. The Second SE Directive asserts that the product with a modified label is a “new tobacco product” if the label renders the product “distinct” from its predecessor because the newly labeled product “was not commercially marketed in the United States as of February 15, 2007.” TCA § 910(a)(1)(A); see also Second SE Directive at 5 (AR007). In their opening brief, Plaintiffs identified numerous flaws with that statutory interpretation, including FDA’s dispositive concession that a label is not “part” of a tobacco product and the Tobacco Control Act’s careful distinction between a “tobacco product” and its label. See Pls. Br. 21-22; see also TCA § 900(6) (distinguishing in the definition of “counterfeit tobacco product” between “a tobacco product” and “the container or labeling of such a product”) (emphasis added). In response, FDA says nothing about the plain meaning of

2 In any event, if FDA is correct that the Second SE Directive does not amount to a label preapproval procedure, then there is no reason why a less burdensome notice requirement would not be adequate to achieve FDA’s regulatory objectives. See infra at 17.

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this controlling statutory language, and instead tries to cobble together ancillary provisions of the Act to justify its extra-statutory expansion of its premarket review powers.

FDA argues first that the “definition of ‘new tobacco product’ must be read in light of that section’s definition of ‘substantial equivalence.’” FDA Br. 23. In particular, FDA pins its statutory hopes on the proposition (stated nowhere in the Act) that a product with the “same characteristics” as a predicate product must be “identical” to the predicate and that Congress therefore “must have contemplated that there would be tobacco products that have the same physical attributes as predicate products but would nonetheless be ‘new tobacco products.’” Id. (emphasis omitted). A product that is not “identical” in all respects to a single predicate may nevertheless satisfy the “same characteristics” test if its characteristics are the same as the characteristics of a single predicate or a range of predicate products. That possibility gives content to the “same characteristics” prong without distorting the definition of “new tobacco product” to encompass label changes.3

FDA also attempts to cherry-pick support for the Second SE Directive from various other statutory provisions. For example, FDA points to the requirements that a manufacturer that changes the name of an existing tobacco product brand (1) list the renamed product under Section 905(i) as a product that it has introduced for commercial distribution and (2) report

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3 Although FDA now disparages the view that a new product may have multiple predicates, the agency itself echoed that view at least twice in advising manufacturers how to prepare substantial equivalence reports. See FDA, Webinar, Compliance Training for Small Businesses, “Draft Guidance—Substantial Equivalence Reports: Manufacturer Requests for Extensions or to Change the Predicate Tobacco Product” (Slide 14) (Aug. 2014); FDA, Reports on Substantial Equivalence: An Update, at 23 (Aug. 21, 2012). FDA also adopted the same interpretation of the Medical Device Amendments, where “[a] manufacturer may use multiple predicate devices to help demonstrate substantial equivalence.” The 510(k) Program: Evaluating Substantial Equivalence in Premarket Notifications (510(k)): Guidance for Industry and FDA Staff, at 11 (July 28, 2014). While FDA emphasizes that the Medical Device Amendments refer to products with the “‘same technological characteristics,’” FDA Br. 29 (quoting 21 U.S.C. § 360c(i)(1)(A)), Congress’s omission of the word “technological” in the Tobacco Control Act simply reflects that tobacco products generally are not perceived to include “technological” components.

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ingredients and harmful and potentially harmful constituents (“HPHC”) under Sections 904(a)(1) and (a)(3). FDA Br. 24-25. But the product listing requirement for renamed products was imposed by FDA guidance, not by the Act itself. See Second SE Directive at 6 n.7 (AR008). The fact that FDA requires a new listing when a brand name is changed does not mean that Congress intended to subject tobacco products with modified labels to premarket review. Likewise, the fact that a change to a brand name triggers the need to update ingredient and HPHC reports only underscores that Congress knew how to establish requirements that apply to products with new brand names and elected not to do so with respect to premarket review.4

FDA’s assertion that the Second SE Directive’s label-change requirements serve the overarching purpose of the Tobacco Control Act also falls flat. FDA Br. 26. According to FDA, Congress “enacted the premarket review requirement to ensure that every time a tobacco company launches a new product, it must demonstrate to FDA that the new product satisfies one of three pathways before it is commercially distributed.” Id. A tobacco product with a different label but the identical physical characteristics, however, will have undergone premarket review when the product was commercially introduced with the predecessor label (or will have qualified for “grandfathered” status). It does not further the Tobacco Control Act’s objectives to subject the identical tobacco product to premarket review a second time.

C. The Product-Quantity Change Requirements Conflict With The Tobacco Control Act.

FDA is equally unsuccessful in its effort to reconcile the Second SE Directive’s product- quantity change requirements with the plain language of the Tobacco Control Act. According to FDA, a change to the quantity in which a product is packaged is a “modification” to the product under Section 910(a)(1)(B) because “a product that contains a different quantity in the package

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4 In the context of a change to a brand name, the ingredient and HPHC listing requirements can be satisfied by submitting a new listing or by incorporating another listing by reference.

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. . . does not have the same ‘amount of ingredients, materials, [and] other features’” as the predicate. FDA Br. 32 (second alteration in original). But FDA’s tortured syntax—a package contains a quantity of product; a product does not “contain a . . . quantity in the package”—lays bare the absence of textual support for the product-quantity change requirements. After all, the Tobacco Control Act imposes premarket review requirements on “new tobacco products,” not “new tobacco packages,” TCA §§ 905, 910, and a tobacco product has the same ingredients, materials, and other features whether sold in large or small quantities.

The product-quantity requirements are also inconsistent with the structure of the Tobacco Control Act. In particular, the Second SE Directive requires manufacturers to submit information regarding likely consumer use of the product in a Product Quantity Change SE Report, but the Act itself only requires manufacturers to submit information on behavioral aspects of tobacco use in applications for premarket authorization and for approval of “modified risk” products. TCA §§ 910(c), 911(g)(2); see also Pls. Br. 44. FDA responds that “Congress broadly delegated to FDA the authority to specify what should be included in an SE Report and imposed no constraint on that delegation.” FDA Br. 32. But under FDA’s open-ended reading of the statute, it could require substantial equivalence reports to include the full set of extensive information that Congress designated for inclusion in a premarket authorization application. A grant of such boundless regulatory power would nullify Congress’s decision to establish substantial equivalence reports as a distinct and streamlined pathway to market.

III. THE SECOND SE DIRECTIVE VIOLATES THE APA BECAUSE IT IS ARBITRARY AND CAPRICIOUS AND WAS ISSUED WITHOUT NOTICE-AND-COMMENT RULEMAKING.

A. The Second SE Directive Is Arbitrary And Capricious.

The Second SE Directive is arbitrary and capricious because FDA did not present a reasoned explanation for these new regulatory requirements, consider reasonable alternatives, or

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adequately explain its shifting interpretations of the Tobacco Control Act. Pls. Br. 25-30. In other words, FDA did not “articulate a satisfactory explanation for its action” that sufficiently “enable[s] [this Court] to conclude that [it] was the product of reasoned decisionmaking.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 52 (1983).

FDA seeks to excuse all of these shortcomings by arguing that the Second SE Directive is not a substantive rule. FDA Br. 19. But even if the Directive were not a substantive rule—a flawed premise in its own right, see infra at 18-20—FDA would still have been required to provide a reasoned explanation for its new regulatory requirements, consider alternatives to those requirements, and explain its reasons for departing from its prior statutory interpretations. Those hallmarks of reasoned decision-making apply equally to substantive rules and to less formal types of agency action, such as interpretive rules. See Perez v. Mortg. Bankers Ass’n, 135 S. Ct. 1199, 1209 (2015) (explaining that interpretive rules are reviewed under the arbitrary and capricious standard); Arrow Air, Inc. v. Dole, 784 F.2d 1118, 1128 (D.C. Cir. 1986) (holding that agencies must “offer a reasoned explanation” for interpretive rules that is “expressed ‘with sufficient clarity so that [the] decision[ ] may be readily understood’”) (alterations in original).

FDA’s effort to square the Second SE Directive with these APA requirements fails across the board. FDA claims that the Second SE Directive “does explain why the agency believes certain label and product-quantity changes render the products ‘new’ under the TCA,” FDA Br. 20, but the Directive nowhere explains why the imposition of those new requirements on label and product-quantity changes is warranted in light of the existing obligations imposed by the Tobacco Control Act, including the requirements that manufacturers submit semi-annual reports disclosing changes to their product labels. TCA § 905(i)(1)(B), (3)(D). While FDA identifies purported inadequacies in that reporting obligation in its brief, those post hoc rationalizations are

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an improper basis for defending the Directive. See SEC v. Chenery Corp., 318 U.S. 80, 93-94 (1943) (an agency “must be measured by what [it] did, not by what it might have done”).

Nor does FDA provide a viable explanation for the Second SE Directive’s failure to consider alternatives to its burdensome premarket review obligations. While FDA asserts that “the agency did consider comments received,” FDA Br. 21, the Second SE Directive made no mention of the alternatives proposed by several Plaintiffs, including a notice requirement that would enable FDA to keep track of label changes without delaying manufacturers’ ability to introduce new labels to the market. See, e.g., RAI Services Co. Comments on First SE Directive, at 24 (Apr. 3, 2015) (AR129). The fact that the Tobacco Control Act already requires manufacturers to inform FDA of label changes on a semi-annual basis underscores that this alternative is not only reasonable but also consistent with congressional intent that label changes generally be subject to notice (rather than premarket review). FDA’s failure to consider that reasonable alternative—and a similar notice framework for product-quantity changes—was arbitrary and capricious. See Walter O. Boswell Mem’l Hosp. v. Heckler, 749 F.2d 788, 797 (D.C. Cir. 1984).

FDA’s explanation for its shifting interpretations of the Tobacco Control Act is likewise inadequate. FDA initially interpreted the Act as making a label a “part” of a tobacco product under Section 910(a)(1)(B) and later read the statute as extending premarket review to label changes under the completely different definition of “new tobacco product” in Section 910(a)(1)(A). While FDA acknowledges that its statutory justification for premarket review of label changes has evolved, FDA Br. 21-22, it describes the shifting positions as a “refine[ment]” in “part of its statutory analysis” and does not identify anything in the Second SE Directive that

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comes close to the “reasoned analysis” that is required where an agency departs from a previous position. Dillmon v. Nat’l Transp. Safety Bd., 588 F.3d 1085, 1089-90 (D.C. Cir. 2009).

B. The Second SE Directive Is A Substantive Rule Promulgated Without Notice And Comment.

FDA asserts that the Second SE Directive is an “interpretive rule or a policy statement”— refusing to make a choice between the two alternatives—but “is certainly not a substantive rule” subject to notice-and-comment rulemaking requirements under the APA and Tobacco Control Act. FDA Br. 15-16. Because the Second SE Directive imposes regulatory requirements on tobacco product manufacturers that carry concrete legal consequences for noncompliance, FDA’s effort to evade its notice-and-comment obligations is unavailing.

FDA’s argument that the Second SE Directive is not a substantive rule rests largely on the definitions of a “guidance document” in the Federal Food, Drug, and Cosmetic Act and in the agency’s own rules, which provide that guidance documents do “not create or confer any rights” on any person. FDA Br. 17 (citing 21 U.S.C. § 371(h)(1)(A); 21 C.F.R. § 10.115(d)). But FDA is simply begging the question. If the Directive is truly “guidance,” then it does not create legal obligations and is not subject to notice and comment. To make that determination, however, the Court must do more than consider the boilerplate disclaimer that FDA affixed to the document. The Court must examine the practical consequences of the Directive and determine whether “‘it has the force of law.’” Gen. Electric Co., 290 F.3d at 385; see also CropLife Am., 329 F.3d at 883 (a “characterization of [the agency’s] own action is not controlling if it self-servingly disclaims any intention to create a rule . . . but the record indicates otherwise”).

Regardless of its “nonbinding” disclaimer—and FDA’s assertion that the Second SE Directive “does not impose any new burdens on Plaintiffs,” FDA Br. 17—the Second SE Directive creates new duties with which manufacturers must comply. They must submit a

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tobacco product for premarket review before making a label change that renders the product “distinct” and before changing the quantity in which a product is packaged. Second SE Directive at 5, 16 (AR007, 018). To meet those requirements, the Second SE Directive directs manufacturers to submit Same Characteristics SE Reports and Product Quantity Change SE Reports, which are not addressed anywhere in the Tobacco Control Act, or, alternatively, to submit a full premarket authorization application or substantial equivalence report. The Directive therefore bears all the features of a substantive rule that “adds content to the governing legal norms.” Syncor Int’l Corp. v. Shalala, 127 F.3d 90, 96 (D.C. Cir. 1997); see also Nat. Res. Def. Council v. EPA, 643 F.3d 311, 320 (D.C. Cir. 2011) (holding that EPA guidance was a substantive rule because it established regulatory alternatives to a statutorily mandated program).

Moreover, FDA has made clear to manufacturers that “failure to conform will bring adverse consequences” in the form of an FDA enforcement action for marketing a misbranded and adulterated product. Gen. Electric Co., 290 F.3d at 383; see also Second SE Directive at 2 (AR004). Among other things, FDA issued an Interim Enforcement Policy stating that it would not “issue any warning letters or take steps to initiate any judicial or administrative proceedings” to enforce the First SE Directive while it was considering whether to revise that Directive, First SE Directive at 1 n.1 (AR040), and the Second SE Directive identifies several circumstances in which the agency “intends to exercise enforcement discretion and not take enforcement action against a new tobacco product” that would otherwise be misbranded and adulterated due to a label or product-quantity change. Second SE Directive at 13 (AR0015). Those pronouncements manifest FDA’s belief that it has the power to enforce the Second SE Directive against manufacturers that do not comply with its new regulatory requirements and that it unequivocally intends to do so. See, e.g., Cmty. Nutrition Inst. v. Young, 818 F.2d 943, 948-49 (D.C. Cir. 1987)

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(per curiam) (considering “formal” and “informal” “statements” in determining whether FDA had led regulated parties to conclude that agency action was substantive and binding). Because FDA failed to engage in notice-and-comment rulemaking before imposing these new substantive obligations and potential enforcement consequences, the Second SE Directive cannot stand.

IV. THE SECOND SE DIRECTIVE VIOLATES THE FIRST AMENDMENT.

A. The Second SE Directive Must Meet The Requirements Of The First Amendment.

FDA contends that the Second SE Directive “does not implicate the First Amendment,” FDA Br. 34—even though it prohibits Plaintiffs from making certain modifications to constitutionally protected commercial speech on their product labels for a period of at least 90 days for “provisional” products and indefinitely for all other products. Like FDA’s other attempts to dodge the merits of Plaintiffs’ arguments, the agency’s position rests on a misreading of the relevant case law and a mischaracterization of the Second SE Directive’s effects.

According to FDA, “[n]othing in the First Amendment prohibits the government from using a person’s speech as evidence to establish whether it is distributing a particular type of product under the FDCA.” FDA Br. 34. FDA may well be free in certain circumstances to consider a manufacturer’s speech for its evidentiary value—i.e., to determine whether a product’s label is misleading. But that is not what the Second SE Directive does. It imposes a prior restraint on manufacturers’ speech by prohibiting “distinct” label changes without FDA authorization. The Directive is not an evidentiary tool; it is an outright prohibition on speech.

FDA’s position finds no support in Whitaker v. Thompson, 353 F.3d 947 (D.C. Cir.
2004), which simply holds that the government may use a product’s label as evidence of a manufacturer’s “intent that consumers will purchase and use the product for a particular purpose—and, therefore, as evidence whether the product is or is not a drug” under federal law.

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Id. at 953. In that case—and the others on which FDA relies—the First Amendment question was whether the government could use speech to infer the speaker’s intent. Id.; see also United States v. Article of Drug Designated B-Complex Cholinos Capsules, 362 F.2d 923, 927 (3d Cir.
1966) (same); United States v. Cole, 84 F. Supp. 3d 1159, 1166 (D. Or. 2015) (same); United States v. Regenerative Scis., LLC, 878 F. Supp. 2d 248, 256 (D.D.C. 2012) (applying Whitaker). But the Second SE Directive does not look to Plaintiffs’ speech to determine whether Plaintiffs intend their products to be “new tobacco products”; it instead bars manufacturers from implementing label changes that render their products “distinct” in the absence of premarket review. And, according to FDA, whether a relabeled product is “distinct” turns not on the manufacturer’s intent, but rather on consumers’ perceptions. Second SE Directive at 7-8 (AR009-10). The prohibition on that prior restraint rests at the core of the First Amendment. See Neb. Press Ass’n v. Stuart, 427 U.S. 539, 559 (1976).

B. The Second SE Directive Imposes An Unlawful Prior Restraint.

FDA also questions “the applicability of traditional prior restraint doctrine to commercial speech.” FDA Br. 40. The Supreme Court, however, has never squarely addressed whether or how the prior-restraint doctrine applies in the context of commercial speech, and the cases on which FDA relies make clear that they do not reach the issue. See, e.g., Cent. Hudson Gas & Electric Corp. v. Pub. Serv. Comm’n of N.Y., 447 U.S. 557, 571 n.13 (1980); Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U.S. 626, 668 n.13 (1985) (Brennan, J., concurring); Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc., 425 U.S. 748, 771-72 n.24 (1976); see also Pearson v. Shalala, 164 F.3d 650, 660 (D.C. Cir. 1999).

The majority of courts of appeals that have addressed the question have held that the prior-restraint doctrine does apply to commercial speech because there is “no reason why the requirement of procedural safeguards should be relaxed whether speech is commercial or not.”

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N.Y. Magazine v. Metro. Transp. Auth., 136 F.3d 123, 131 (2d Cir. 1998); see also In re Search of Kitty’s E., 905 F.2d 1367, 1371 (10th Cir. 1990) (applying prior-restraint principles in the commercial-speech context); Desert Outdoor Adver., Inc. v. City of Moreno Valley, 103 F.3d 814, 818 (9th Cir. 1996) (same). But see Disc. Tobacco City & Lottery, Inc. v. United States, 674 F.3d 509, 533 (6th Cir. 2012). These courts have recognized that prior restraints are “particularly abhorrent to the First Amendment” and that, as a result, “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, 136 F.3d at 131.5

The Second SE Directive imposes a particularly onerous and blunt prior restraint, delaying label changes to “provisional” tobacco products for at least 90 days and label changes to all other products indefinitely. Pls. Br. 35-39. While FDA disputes the characterization of the restraint with respect to “non-provisional” products as “indefinite,” FDA Br. 42, it does not deny that the timetable for review set forth in the Second SE Directive is purely aspirational and does not bind the agency or assure “prompt final judicial determination.” Se. Promotions, Ltd. v. Conrad, 420 U.S. 546, 560 (1975). Nor does FDA identify objective criteria that will cabin its review of proposed label changes. At least on its face, the Second SE Directive authorizes FDA to reject Same Characteristics SE Reports—and thereby block manufacturers’ constitutionally protected speech—for any reason or no reason at all. The First Amendment does not tolerate such unfettered powers of censorship.

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5 In addition, the reasons that courts have offered when questioning whether the prohibition on prior restraints applies to commercial speech are inapplicable here. In Virginia State Board of Pharmacy, 425 U.S. 748, the Court suggested that, “[s]ince advertising is the sine qua non of commercial profits, there is little likelihood of its being chilled by proper regulation and forgone entirely” and that “[a]ttributes such as these . . . may also make inapplicable the prohibition against prior restraints.” Id. at 772 n.24. The Second SE Directive, however, has already chilled speech by leading several Plaintiffs to postpone planned changes to tobacco product labels. See, e.g., Newman Decl. ¶ 7; O’Brien Decl. ¶¶ 8-14, 16-18. Thus, even if the prior-restraint doctrine were not fully applicable to all types of commercial speech, it would plainly apply here.

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C. The Second SE Directive Fails Central Hudson.

The Second SE Directive is also unconstitutional under Central Hudson because FDA has not met its burden of demonstrating that the Directive directly advances a substantial government interest and that it does so in a way that is no more extensive than necessary. See R.J. Reynolds Tobacco Co. v. FDA, 696 F.3d 1205, 1218 (D.C. Cir. 2012), overruled in part on other grounds by Am. Meat Inst. v. U.S. Dep’t of Agric., 760 F.3d 18 (D.C. Cir. 2014) (en banc). While FDA dismisses Central Hudson as toothless because “[c]ommercial speech is not ‘at the First Amendment’s core,’” FDA Br. 35, both the Supreme Court and the D.C. Circuit regularly invalidate commercial-speech restrictions under Central Hudson. See, e.g., Sorrell v. IMS Health Inc., 131 S. Ct. 2653, 2672 (2011) (commercial speech by pharmacies and pharmaceutical manufacturers); 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 502-03 (1996) (alcoholic-beverage pricing); see also R.J. Reynolds Tobacco Co., 696 F.3d at 1222.

FDA offers little defense of the Second SE Directive’s most serious shortcoming under Central Hudson: the availability of alternatives that would enable FDA to accomplish its stated objectives while imposing a far less significant burden on Plaintiffs’ protected speech. See N.Y. Magazine, 136 F.3d at 132 (concluding that a prior restraint was “certainly more extensive than is necessary to serve the governmental interest”). In particular, FDA could advance its “interest[ ] in keeping abreast of tobacco products in the marketplace” (FDA Br. 36) by requiring—as Plaintiffs suggested in their comments—that manufacturers provide notice of label changes at the time they are implemented; based on those submissions, FDA could then take appropriate regulatory action against manufacturers whose labels are misleading or otherwise unlawful. FDA’s only response is to criticize Plaintiffs’ alternative for supposedly “read[ing] ‘premarket’ and ‘review’ out of the statutory mandate of ‘premarket review’ for new tobacco products.” FDA Br. 39-40. But “premarket review” is not an end unto itself; it must serve some

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underlying statutory objective that justifies the burden it imposes on Plaintiffs’ First Amendment rights. Assuming that Congress even intended to extend premarket review to label changes in the absence of notice-and-comment rulemaking—and, as discussed, it clearly did not— premarket review in this setting could only be intended to give FDA the tools to ensure that labels are not misleading and to alert the agency to the rebranding of tobacco products that have the identical characteristics as products previously marketed under a different name. Those informational objectives would readily be accomplished through a requirement that manufacturers provide contemporaneous notice of label changes.

V. THE SECOND SE DIRECTIVE IS UNCONSTITUTIONALLY VAGUE.

The Second SE Directive is unconstitutionally vague because it fails to “give fair notice of conduct that is forbidden or required.” FCC v. Fox Television Stations, Inc., 132 S. Ct. 2307, 2317 (2012). In fact, the Second SE Directive has already prompted several Plaintiffs to postpone product label changes, O’Brien Decl. ¶¶ 8-14; Newman Decl. ¶ 7, which may—or may not—have created “distinct” products subject to premarket review, depending on how FDA chooses to interpret the Directive’s opaque requirements.

In response, FDA puts the onus on manufacturers to “exercise reasonable judgment in determining” whether, in the agency’s view, a label change will result in a “distinct product.” FDA Br. 44. But the Second SE Directive fails to provide manufacturers with meaningful guidance to inform that judgment—leaving Plaintiffs to guess about whether particular changes to a label’s color, font, or text are sufficient to create a “distinct” product subject to the Directive’s premarket review requirements. When in doubt, FDA suggests that manufacturers “conduct consumer testing to assess consumer perception.” Id. By its very nature, however, any regulatory requirement that derives its content from subjective views expressed in consumer testing is impermissibly vague. See FDA Documentation for the Generic Clearance of Focus

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Groups, at 1 (Mar. 31, 2015), available at tinyurl.com/h7977bb (stating that focus groups “do not yield meaningful quantitative findings” for regulatory purposes). In any event, FDA gives no assurance that it would even adhere to the results of that testing in determining whether the manufacturer was required to pursue premarket review before implementing a label change.

This opacity affords FDA boundless discretion to decide whether a label change renders a product “distinct” and thus a “new tobacco product.” See Fox Television, 132 S. Ct. at 2317 (explaining that “precision and guidance are necessary so that those enforcing the law do not act in an arbitrary or discriminatory way”). FDA argues that Plaintiffs’ concerns about arbitrary enforcement are “overstated” because “FDA has not pursued a single civil or criminal enforcement action” for violations of the Second SE Directive and FDA’s enforcement policy “ordinarily gives firms the opportunity to correct violations voluntarily.” FDA Br. 45 (footnote omitted). But the fact that FDA has not yet invoked its enforcement authority does not mean that manufacturers do not face the threat of an enforcement action in the future if they guess wrong as to whether, in FDA’s view, a label change is sufficiently “distinct” to create a “new tobacco product.” And the possibility that FDA may choose to exercise its discretion to give manufacturers a chance to correct violations does not mean that FDA will always do so or that the threat of enforcement is any less real. Indeed, FDA’s emphasis on its “enforcement discretion” simply underscores its belief that the requirements of the Second SE Directive are binding on manufacturers. Id. The possibility that FDA may deign to exercise that enforcement discretion in a particular case is no substitute for the clear and concrete regulatory standards mandated by the Constitution.

CONCLUSION

For the foregoing reasons, the Court should enter summary judgment for Plaintiffs, declare the Second SE Directive to be unlawful, vacate it, and enjoin its enforcement.

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Case 1:15-cv-01590-APM Document 35 Filed 01/15/16 Page 34 of 36

Dated: January 15, 2016 Respectfully Submitted,

/s/ Miguel A. Estrada

Miguel A. Estrada (D.C. Bar No. 456289)

Amir C. Tayrani (D.C. Bar No. 490994)

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, NW

Washington, DC 20036-5306

Telephone: (202) 955-8500

Fax: (202) 530-9016

MEstrada@gibsondunn.com

ATayrani@gibsondunn.com

Robert N. Weiner (D.C. Bar No. 298133)

Anthony J. Franze (D.C. Bar No. 461023)

ARNOLD & PORTER LLP

555 Twelfth Street, NW

Washington, DC 20004-1206

Telephone: (202) 942-5000

Fax: (202) 942-5999

robert.weiner@aporter.com

anthony.franze@aporter.co…

Counsel for Plaintiffs Philip Morris USA Inc. and

U.S. Smokeless Tobacco Company LLC

Noel J. Francisco (D.C. Bar No. 464752)

Ryan J. Watson (D.C. Bar No. 986906)

JONES DAY

51 Louisiana Avenue, NW

Washington, DC 20001

Telephone: (202) 879-3939

Fax: (202) 626-1700

njfrancisco@jonesday.com

rwatson@jonesday.com

Counsel for Plaintiffs R.J. Reynolds Tobacco Co.,

American Snuff Company, and Santa Fe Natural

Tobacco Company, Inc.

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Case 1:15-cv-01590-APM Document 35 Filed 01/15/16 Page 35 of 36

Mark S. Brown (D.C. Bar No. 455359)

Ashley C. Parrish (D.C. Bar No. 464683)

KING & SPALDING LLP

1700 Pennsylvania Avenue, NW

Washington, DC 20006

Telephone: (202) 737-0500

Fax: (202) 626-3737

mbrown@kslaw.com

aparrish@kslaw.com

Counsel for Plaintiffs R.J. Reynolds Tobacco Co.,

American Snuff Company, and Santa Fe Natural

Tobacco Company, Inc.

Mark H. Lynch (D.C. Bar No. 193110)

Scott D. Danzis (D.C. Bar No. 481426)

Benjamin C. Block (D.C. Bar No. 479705)

COVINGTON & BURLING LLP

One City Center

850 Tenth Street, NW

Washington, DC 20001-4956

Telephone: (202) 662-6000

Fax: (202) 662-6291

mlynch@cov.com

bblock@cov.com

sdanzis@cov.com

Counsel for Plaintiff ITG Brands LLC

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Case 1:15-cv-01590-APM Document 35 Filed 01/15/16 Page 36 of 36

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on this 15th day of January, 2016, I caused the foregoing Consolidated Memorandum of Law in Opposition to Defendants’ Motion to Dismiss, or in the Alternative, Motion for Summary Judgment, and Reply in Support of Plaintiffs’ Motion for Summary Judgment to be filed and served via the Court’s CM/ECF filing system.

/s/ Miguel A. Estrada Miguel A. Estrada (D.C. Bar No. 456289)

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