NICOPURE v FDA: SUPPLEMENTAL MEMORANDUM re Minute Order by AMERICAN E-LIQUID MANUFACTURING STANDARDS ASSOCIATION, et. al. Nov 1, 2016

November 2, 2016 4:31 pm by Gene Borio

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EXCERPT:

Pursuant to the Court’s October 26, 2016 order, Plaintiffs Nicopure Labs, LLC and the Right To Be Smoke-Free Coalition, et al. submit this memorandum concerning the ripeness of their challenge to FDA’s statutory authority to regulate e-liquids that do not contain nicotine and are not derived from tobacco (“Non-Tobacco E-liquids”).1 Plaintiffs’ challenge presents a purely legal threshold question: Whether FDA may ever regulate Non-Tobacco E-liquids, under any circumstance. Such a facial challenge is fit for review, and postponing review would expose Plaintiffs to significant hardship, including criminal penalties. The Court should thus hold that the issue is ripe for decision and invalidate the challenged portion of the Deeming Rule.

END EXCERPT

FULL TEXT:

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

NICOPURE LABS, LLC, et al.

Plaintiffs,

v.

FOOD AND DRUG ADMINISTRATION, et al.

Defendants.

Civ. No. 1:16-cv-0878-ABJ F

PLAINTIFFS’ JOINT SUPPLEMENTAL MEMORANDUM

Eric P. Gotting (No. 456406) Azim Chowdhury (No. 986331)

KELLER AND HECKMAN LLP

1001 G Street, N.W. Suite 500 West

Washington, D.C. 20001

Tel. (202) 434-4100

Facsimile (202) 434-4646 gotting@khlaw.com chowdhury@khlaw.com

Counsel for Plaintiffs Right To Be Smoke-Free Coalition, et al.

Benjamin C. Block (No. 479705) Kevin King (No. 1012403)

COVINGTON & BURLING LLP

One City Center

850 Tenth Street, NW Washington, DC 20001-4956

Tel. (202) 662-5205

Facsimile (202) 778-5205 bblock@cov.com kking@cov.com

Counsel for Plaintiff Nicopure Labs, LLC

November 1, 2016

INTRODUCTION

Pursuant to the Court’s October 26, 2016 order, Plaintiffs Nicopure Labs, LLC and the Right To Be Smoke-Free Coalition, et al. submit this memorandum concerning the ripeness of their challenge to FDA’s statutory authority to regulate e-liquids that do not contain nicotine and are not derived from tobacco (“Non-Tobacco E-liquids”).1 Plaintiffs’ challenge presents a purely legal threshold question: Whether FDA may ever regulate Non-Tobacco E-liquids, under any circumstance. Such a facial challenge is fit for review, and postponing review would expose Plaintiffs to significant hardship, including criminal penalties. The Court should thus hold that the issue is ripe for decision and invalidate the challenged portion of the Deeming Rule.

ARGUMENT

The ripeness inquiry turns on: (1) the fitness of the issues for judicial decision; and (2) the hardship to the parties of withholding immediate review. See Nat’l Ass’n of Home Builders v. U.S. Army Corps of Eng’rs, 440 F.3d 459, 463–64 (D.C. Cir. 2006) (NAHB II). Plaintiffs’ chal- lenge satisfies both of those criteria.

Plaintiffs’ challenge is purely legal and thus fit for review.

“Purely legal” facial challenges to agency regulations are “presumptively reviewable.” Nat’l Ass’n of Home Builders v. U.S. Army Corps of Eng’rs, 417 F.3d 1272, 1282 (D.C. Cir. 2005) (citation and quotation marks omitted) (NAHB I). The D.C. Circuit has “repeatedly” ap- plied this presumption to claims, such as those made by Plaintiffs here, “that an agency’s action is … contrary to law.” Id. (citation and quotation marks omitted). It is thus FDA’s burden “to

1 Nicopure manufactures Non-Tobacco E-liquids, see ECF 20-2, at ¶¶ 6, 11, 14, 17, which stud- ies show many consumers prefer, see, e.g., Miech et al., What are Kids Vaping? Results from a National Survey of U.S. Adolescents, at 5, Tobacco Control (Aug. 25, 2016), available at tobaccocontrol.bmj.com/co… (“[T]he majority of US youth who use vaporisers and e-cigarettes do not vape nicotine.”).

overcome the presumption that” Plaintiffs’ challenge is “fit for judicial decision.” Cement Kiln Recycling Coal. v. EPA, 493 F.3d 207, 215 (D.C. Cir. 2007). FDA cannot carry that burden.

FDA incorrectly asserts that review is premature because the Deeming Rule calls for “case-by-case” review of whether Non-Tobacco E-liquids are “tobacco products.” See FDA Mem., ECF 42-2, at 35-36 (quoting 81 Fed. Reg. at 29,032). That a rule is administered on a case-by-case basis does not prevent a challenge to that rule from being ripe; to the contrary, courts regularly conduct pre-enforcement review of such rules.

The D.C. Circuit’s decision in NAHB II illustrates FDA’s error. The court addressed a rule that required “project-specific,” “case-by-case” determinations based on “‘the totality of the factors.’” 440 F.3d at 464 (quoting 66 Fed. Reg. 4550, 4553). As here, the plaintiffs argued that the rule exceeded the agency’s authority—i.e., that the rule was categorically invalid. See id. The court distinguished that “purely legal” threshold challenge from the one at issue in Sprint Corp. v. FCC, 331 F.3d 952 (D.C. Cir. 2003), because the former, unlike the latter, was “not ‘inter- twined with how the [agency] might exercise its discretion in the future.’” NAHB II, 440 F.3d at 464 (quoting Sprint, 331 F.3d at 954). Like the claim here, the plaintiffs “rest[ed] not on the as- sumption that the agency will exercise its discretion unlawfully in applying the regulation but on whether its faithful application would carry the agency beyond its statutory mandate.’” Id. (quo- tation marks omitted; emphasis in original); see NAHB I, 417 F.3d at 1282 (“That [an agency] retains some measure of discretion … does not make [a] purely legal challenge unripe.”).

Many other cases apply the same core proposition—pre-enforcement review is proper when a plaintiff challenges an agency’s authority to act. In Gardner v. Toilet Goods Ass’n, the Supreme Court found a pre-enforcement challenge to FDA rules ripe even though the rules’ ap- plicability depended on a product’s “intended use” and other product-specific inquiries. 387 U.S. 167, 170–71 (1967). The challenge was ripe because plaintiffs argued that the rules were “irrec- oncilable with the statute”—thus eliminating any need to evaluate them “in the context of a specific [enforcement] attempt.” Id. at 171–72. Similarly, the D.C. Circuit recently rejected EPA’s argument that plaintiffs had to “wait for” a Clean Air Act rule “to be applied” because the rule called for “case-by-case” application. Nat’l Envtl. Dev. Ass’n’s Clean Air Project v. EPA, 752 F.3d 999, 1008 (D.C. Cir. 2014). EPA’s ripeness objection “misse[d] the point” because the suit presented “a purely legal question”—whether the rule was contrary to law; when a plaintiff asserts such a claim “[i]t is unnecessary to wait for the [rule] to be applied in order to determine its legality.” Id.; see also Harris v. FAA, 353 F.3d 1006, 1011–12 (D.C. Cir. 2004).

Sprint is not to the contrary. The Sprint petitioners argued that the FCC “did not ade- quately explain” a rule that allowed the use of specialized telephone area codes. 331 F.3d at 955–57. The case was not ripe in part because the court could not decide that claim without resolving two fact-intensive subsidiary issues. See id. at 957–58. Thus, unlike Plaintiffs’ argument here, the Sprint challenge “depend[ed] on the concrete facts of a particular” application. Id. The D.C. Circuit has distinguished Sprint on this basis at least twice—once in NAHB II (as discussed above), and again in Cablevision Systems Corp. v. FCC, 649 F.3d 695 (D.C. Cir. 2011). In Ca- blevision, the court rejected the agency’s ripeness objection, even though the challenged order “reserve[d] some matters for case-by-case adjudication,” because the provision in question had been “finally resolved.” Id. at 714–16. So too here: The Deeming Rule asserts authority over Non-Tobacco E-liquids, and that threshold jurisdictional assertion—which Plaintiffs argue is ul- tra vires—has been “finally resolved” regardless of how FDA applies the Rule in the future.

Postponing review would subject Plaintiffs to significant hardship.

Under the hardship prong, courts focus on “whether postponing judicial review would impose an undue burden on them or would benefit the court.” NAHB II, 440 F.3d at 464 (emphasis in original). Accordingly, a case is generally ripe if deferring review would put industry to the Hobson’s choice of complying with rules that are “outside the scope of the [agency’s] authority” or facing “penalties for failing to do so.” Id. at 465. In other words, if a regulation “requires the plaintiff to adjust [its] conduct immediately,” it is “‘ripe’ for review at once.” Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 891 (1990).2

That principle applies here. First, if review is postponed, manufacturers will not know whether their Non-Tobacco E-liquids are subject to the pre-market review (“PMTA”) require- ment until it is too late to generate the studies—which require the products be on the market— needed to obtain FDA approval. See RTBSF Mem., ECF 21-1, at 32-36 & n.21. Furthermore, manufacturers face two compliance deadlines in the immediate future: By December 31, 2016, they must register their domestic manufacturing facilities with FDA and provide a list identifying all of their tobacco products (including marketing materials for such products); by February 8, 2017, they must provide FDA a complete ingredient listing for each of those products, as well as certain health documents. See 81 Fed. Reg. at 29,006 (compliance deadlines for TCA §§ 904 and 905). Thus, if Non-Tobacco E-liquids are “tobacco products” under the Act—and, for the rea- sons given in Plaintiffs’ memoranda, they are not—manufacturers must undertake compliance measures and spend millions of dollars preparing PMTAs right now. The penalties for failing to do so are substantial. For example, a product is “misbranded” if its manufacturer does not in- clude it on a product list required by § 905(i), does not register its facility under § 905(b), or fails

2 See also Cohen v. United States, 650 F.3d 717, 735–36 (D.C. Cir. 2011) (en banc) (“When the hardship [plaintiffs] suffer is compliance with allegedly unlawful administrative procedures, we have consistently held claims are ripe for review.”); NAHB I, 417 F.3d at 1283 (suit ripe when rule “required [plaintiffs] to adjust their conduct immediately”); Gardner, 387 U.S. at 171 (suit ripe because rules were “self-executing, and ha[d] an immediate and substantial impact upon the [plaintiffs]”). Current hardship is unnecessary; rather, “[t]he ‘prospect’ of hardship is sufficient to make a claim fit for judicial review.” Harris, 353 F.3d at 1012 (emphasis added).

to submit the ingredient listing required by § 904. See TCA §§ 903(a)(6), 903(a)(10). It is unlawful to sell misbranded products; such products are subject to seizure and the persons who market them are subject to fines and criminal penalties. See 21 U.S.C. §§ 331(a), 333, 334. Thus, absent immediate judicial review, Plaintiffs must choose between (i) submitting compliance reports for their Non-Tobacco E-liquids (notwithstanding Plaintiffs’ belief that these are not tobacco prod- ucts) or (ii) having their products removed from the market and facing potential criminal prosecution. Courts have found the hardship prong met in those circumstances before. See, e.g., Gardner, 387 U.S. at 172.3 These burdens further distinguish this case from Sprint, in which the challenged FCC rule “d[id] not command anyone to do anything” and “d[id] not subject anyone to civil or criminal liability.” 331 F.3d at 958; see also NAHB I, 417 F.3d at 1284.

If Non-Tobacco E-liquids are tobacco products, the modified-risk provisions apply.

A tobacco product is a “modified risk tobacco product” under the TCA’s modified- exposure provision, and hence may not be sold without FDA approval, if it is marketed as being “free of a substance.” TCA § 911(b)(2)(A)(i)(III). Non-Tobacco E-liquids are, by definition, marketed as being “free of” nicotine or tobacco; indeed, it may be illegal not to say so. See TCA § 903(a)(7). Thus, if they are tobacco products, they are necessarily modified-risk tobacco prod- ucts and must be taken off the market immediately. See 81 Fed. Reg. at 29,005–06. Congress could not have intended that outcome, which would undercut the Act’s goals by cutting off con- sumer access to the safest e-liquids, see TCA §§ 3(7)–(9), and violate the First Amendment by preventing Plaintiffs from making truthful statements, see Nicopure Mem., ECF 20-1, at 39–45.

3 Using FDA’s estimates, see AR24,009–24,014, and assuming (per Nicopure’s declaration, see ECF 20-2, ¶ 14) that Non-Tobacco E-liquids make up 17 percent of the market, complying with the facility registration, product listing, ingredient disclosure, and health records rules will cost millions of dollars industry-wide. That burden, which would be unnecessary if FDA lacks statu- tory authority, further supports the need for prompt review. See Gardner, 387 U.S. at 172–73.

Respectfully submitted,

Eric P. Gotting (No. 456406) Azim Chowdhury (No. 986331)

KELLER AND HECKMAN LLP

1001 G Street, N.W. Suite 500 West

Washington, D.C. 20001

Tel. (202) 434-4100

Facsimile (202) 434-4646 gotting@khlaw.com chowdhury@khlaw.com

Counsel for Plaintiffs Right To Be Smoke-Free Coalition, et al.

_/s/ Benjamin C. Block Benjamin C. Block (No. 479705) Kevin King (No. 1012403)

COVINGTON & BURLING LLP

One City Center

850 Tenth Street, NW Washington, DC 20001-4956

Tel. (202) 662-5205

Facsimile (202) 778-5205 bblock@cov.com kking@cov.com

Counsel for Plaintiff Nicopure Labs, LLC

November 1, 2016

CERTIFICATE OF SERVICE

I hereby certify that on November 1, 2016, I caused the foregoing document to be elec- tronically filed with the Clerk of the Court using the Court’s CM/ECF system. I further certify that the foregoing document is being served on all counsel of record via transmission of notices of electronic filing generated by CM/ECF. /s/ Benjamin C. Block Benjamin C. Block

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