Five Things: What Today’s Federal Appeals Court Loss Means for Cigars

Today, the cigar industry suffered a resounding defeat at the U.S. Court of Appeals for the District of Columbia.

It’s the latest ruling in Cigar Association of America et al. v. United States Food and Drug Administration et al., the joint lawsuit filed by three cigar trade groups—Cigar Association of America (CAA), Cigar Rights of America (CRA), and Premium Cigar Association (PCA)—against FDA over the 2016 deeming regulations, which marked the first time cigars were regulated on a federal level. The lawsuit was filed in 2016 and has largely been argued in the U.S. District Court for the District of Columbia, though today’s ruling relates to an appeal in a different court with a very similar name.

The cigar industry filed an appeal over various topics: whether FDA’s timeline for implementing parts of the regulations was legal, whether FDA had properly evaluated the economic impacts of the regulations for cigars, whether FDA could change the Feb. 15, 2007 grandfather date, whether FDA could charge user fees for other products it regulates, and whether pipes should be considered a “component or part” or an “accessory,” which would change how FDA regulated pipes.

Unfortunately, the cigar industry wasn’t able to win any of its arguments. The decision—which was made by two judges appointed by Bill Clinton and one appointed by Donald Trump—was unanimous outside of a bit of deviation by one judge about the pipe issue, though it was a concurring opinion, meaning that one judge ultimately ruled the same way about pipes, though the way he got there was a bit different than the other two.

1. WHAT DOES THIS MEAN FOR TODAY?

Not much.

First, this was an appeal, meaning one court had already ruled against the cigar industry on all of these issues. None of what was decided today reverses any existing laws, none of it changes the status quo in terms of how cigars are sold today, and it doesn’t directly change how cigars are sold in say, 90 days or 180 days. Cigar companies are already being charged user fees, which won’t change; pipes are already regulated; which isn’t changing.

And then there’s substantial equivalence, a form of product approval, which is currently on hold for most cigars sold in humidors. The notable exception is that flavored cigars were required to submit substantial equivalence reports last September.

So today’s decision changes none of the laws currently enforced, it also doesn’t change the “hold” status that substantial equivalence is on as that’s related to a different part of the lawsuit and FDA isn’t expected to be able to move forward with substantial equivalence until next spring at the earliest.

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If the cigar industry had won today, it’s quite possible that nothing would have changed today either.

In a couple of instances—the user fees and the grandfather date—it seems likely that if the cigar industry won those specific battles in the appeals court, it would then mean that FDA has the authority to choose what the agency would like to do—instead of relying on Congress to tell the agency what to do—and FDA could have chosen the status quo. In one instance—the user fee question—the court even acknowledged that was the outcome.

There’s also the possibility, as is often the case, that the appeals court could have sent some of these specifics where the cigar industry might have won back to the lower court to reevaluate. That would mean the cigar industry could have “won” today but “lost” at some point tomorrow, returning us right back to the same place: no change in the status quo.

2. IT’S ONE FEWER BULLET IN THE CHAMBER

You might read the above and think, “so this didn’t really matter one way or the other.” And it might not.

There’s a chance—it seems unlikely—that FDA finishes its aforementioned review and then decides to roll back some regulations for cigars. There’s a chance that either the lower court or maybe even a higher court—the Supreme Court—takes a different approach that negates the end result of what happened today. I wouldn’t bet on the latter, but I suppose there’s technically a chance.

Practically, the issue is that the cigar industry is only going to have so many shots to defeat or water down the deeming regulations. I don’t think anyone can tell you how many more opportunities are left, but it’s not endless and so—as I said to Patrick, our resident baseball expert, earlier today—this is like what happens when you are down a few runs in the sixth inning of a baseball game: the game isn’t over, but you only have so many outs left before it is.

3. IT WAS UNEXPECTEDLY BAD

This was a resounding defeat. Slam dunk. Shutout. Whatever you want to call it, it was obviously ugly, even if you—like me—don’t have a juris doctor.

Losing like this is not great, particularly when it’s not expected. The leaders of the cigar industry are lucky that more people in the cigar business will likely read this article than will bother downloading the decision itself, but it makes the job of raising money for the CRA and PCA more challenging.

I listened to the hearing in May—which can be helpful in determining where the judges might lean based on the questions they ask—and it was clear the user fees argument was probably not going to go the cigar industry’s way, but it seemed like everything else was in play.

As it turns out, it wasn’t. And in a lot of the specific points, it doesn’t seem like it was close.

4. MARYLAND REARS ITS UGLY HEAD AGAIN

I’m not just talking about the flag.

In 2018, a group of pediatricians and anti-tobacco groups filed a lawsuit in Maryland, suing FDA over what they considered unlawful delays for the implementation of the deeming regulations. They argued that FDA’s decision(s) to delay various parts of the deeming rule was outside of the authority Congress had given the agency. In May 2019, the court ruled against FDA, accelerating the deadline for substantial equivalence to May 12, 2020, about 450 days earlier than planned. That date was ultimately delayed because of COVID-19 and then other things, but the impacts of the case—which saw FDA and (eventually) the cigar industry on the same side—continues to be problematic.

The issue is that the cigar industry largely stayed out of the Maryland case, at least until the last minute. It’s a strategy that has been criticized by other judges and was once again subject to criticism today.

After evaluating the arguments the cigar groups made regarding whether FDA failed to properly give guidance regarding substantial equivalence—and ruling against those arguments—Judge Judith W. Rogers went out of her way to criticize the legal strategy in regard to Maryland:

Furthermore, the court need not consider appellants’ contention that FDA acted arbitrarily and capriciously by inadequately considering “whether instructions needed to be in place before substantial equivalence reports were due,” Appellants Br. 20–21, because appellants “forfeited” it by failing to raise it before the district court, Cigar Ass’n of Am., 480 F. Supp. 3d at 274; see District of Columbia v. Air Florida, Inc., 750 F.2d 1077, 1084 (D.C. Cir. 1984).

5. THE LAWSUIT STILL HAS MORE WINS THAN LOSSES

The cigar industry wasn’t likely to win every time it went to court, and it hasn’t. But overall, the lawsuit has been very effective at allowing people to continue to buy and sell premium cigars as if this was 2015, the year before the deeming regulations took effect. If five years ago you offered a world with the regulations as they relate to cigars today—what’s in effect, what’s been thrown out, what’s on delay—most people probably would have taken the hypothetical 2021 world of having to pay user fees, never having to put warning labels on boxes or ads, and having substantial equivalence still delayed.

They would take that world because it’s a pretty good one, particularly when you compare it to how other products are getting regulated.

Today’s ruling isn’t great. It’s not a win, but it’s important that the industry and consumers understand that the overall results have still been very effective. Each of the three trade groups could do a better job at promoting this fact, but the CRA and PCA—both organizations who actively talk about the real need for more money—should be fundraising today. They should be fundraising every day, but today is one where there’s a specific call to action.

And since—as of this post being published—neither have said anything, I’ll do the PR/fundraising copy for them, this one’s on the wheel:

Today, the U.S. Court of Appeals for the District of Columbia ruled in favor of FDA in an appeal brought forth by <insert trade organization name> and <insert the other two trade organizations>. Unfortunately, the court did not find our arguments compelling. We hoped that the appeals court would grant us more relief, specifically:

• Punishing FDA for not setting clear deadlines for its various regulations which make it more challenging for your business to plan for the future,
• Making it clear that FDA had not properly evaluated the financial impact its regulations would have on premium cigar manufacturers and retailers,
• Clarifying that FDA created an arbitrary grandfather date of Feb. 15, 2007 that makes no sense in the context of “science-based regulation,”
• Recognizing that pipes, which contain no tobacco, should not be regulated like a product that contains nicotine,
• Giving FDA the authority to charge user fees for products like e-cigarettes that are actually targeted at underage users.

While today’s ruling is disappointing, the overall results of the joint lawsuit have been very effective and have helped your business. Since the lawsuit was filed in 2016, we have been able to produce major victories, including:

• FDA warning labels are not required for any cigars or pipe tobacco. Every other deemed tobacco product FDA regulates is required to be sold with these warning labels.
• Substantial equivalence is indefinitely suspended, which has given confidence to cigar manufacturers to continue to introduce new products. Premium cigars are the only product category that FDA regulates where premarket approval is currently suspended.
• Major delays to other regulations. The deeming regulations went into effect in August 2016 and through the lawsuit and other mechanisms, cigar companies have avoided the most strenuous parts of the regulations, all of which were set to already have taken place.

However, these victories are not free. The lawsuit costs millions of dollars per year and benefits every single person who makes, sells and purchases a cigar in the United States. Most importantly, we aren’t done.

We will be back in federal court, likely within the next 90 days, to continue to argue that FDA went too far when trying to regulate premium cigars. And we need your support so that we can continue to protect your rights. Whether it’s the ability to introduce new cigars, buy a cigar without a giant warning label, blend pipe tobacco in your store, or not be forced to pay increased taxes and user fees on cigars—all of this takes legal firepower, and we need more of it.

<BIG DONATE HERE BUTTON>

<Maybe a quote from a manufacturer or retailer>

If you have questions about today’s ruling, the legal battle in general, or are curious to know more ways you can get involved, please do not hesitate to call <someone at this organization.> 

Please, use that or something similar. It’s better than the crickets.