Premium Cigar Industry Beats FDA in Court, Regulations Vacated

The premium cigar industry has won its lawsuit against FDA.

Judge Amit P. Mehta of the U.S. District Court for the District of Columbia has ruled in the premium cigar industry’s favor by vacating the U.S. Food & Drug Administration’s (FDA) deeming regulations for premium cigars. The ruling means that the deeming regulations introduced by the agency in 2016 do not apply to any cigar that meets the court’s definition of “premium cigar,” meaning that those cigars are unregulated by FDA.

That definition is the same one that has been used in this lawsuit since it was proposed in August 2020, it says a cigar is considered a “premium cigar” if it meets all of the following criteria:

1. is wrapped in whole tobacco leaf;
2. contains a 100 percent leaf tobacco binder;
3. contains at least 50 percent (of the filler by weight) long filler tobacco (i.e., whole tobacco leaves that run the length of the cigar);
4. is handmade or hand rolled (i.e., no machinery was used apart from simple tools, such as scissors to cut the tobacco prior to rolling);
5. has no filter, nontobacco tip, or nontobacco mouthpiece;
6. does not have a characterizing flavor other than tobacco;
7. contains only tobacco, water, and vegetable gum with no other ingredients or additives;
8. and weighs more than 6 pounds per 1,000 units.

In short, any non-flavored cigar you find sold in a humidor in the U.S. should qualify. There will be some exceptions, but the vast majority of large, non-flavored cigars will qualify.

Today’s ruling came in Cigar Association of America et al. v. United States Food and Drug Administration et al., a seven-year-old lawsuit that was filed by the Cigar Association of America (CAA), the Cigar Rights of America (CRA) and the Premium Cigar Association (PCA), three cigar trade groups. The lawsuit has been successful at having specific provisions—like warning labels for cigars—thrown out, as well as contributing to significant delays to other parts of the regulations for premium cigars, but nothing compares to today’s victory, which is a resounding win.

The lawsuit has taken many twists and turns—and the plaintiffs lost a number of the battles—but the most recent part of the litigation has focused on the validity of the whole rule itself. It largely centers on a process that dates back to 2014 when FDA proposed its deeming regulations, a set of rules that would apply to tobacco and nicotine products other than cigarettes and traditional smokeless tobacco, two types of products that the agency already regulated. As part of the U.S. government’s rulemaking process, FDA is required to inform the public about upcoming regulations and solicit feedback about those proposed rules.

In 2014, the agency asked whether “premium cigars” were used in a different way than other cigars—like little cigars and cigarillos—and whether the difference in use(s) should lead to different rules. In 2016, when FDA announced the finalized rules, the agency said it received no evidence about those questions.

Mehta has consistently found that the agency did receive feedback, specifically from the CRA. The cigar trade group provided analysis from a study led by an FDA researcher that indicated that cigar smokers do not have higher “all-cause” mortality rates than non-smokers. The decision to ignore the comment has been a focal point of Mehta’s recent rulings, including today’s.

Per Mehta:

The central question the FDA faced in deciding whether to deem was “whether [premium] cigar smokers used the product in a materially different way from non-premium cigar smokers and whether those material differences might warrant a different regulatory approach.” Cigar IV, 2022 WL 2438512 at *6. The agency then ignored relevant data in the record that commentors had highlighted and inexplicably made a “no data” finding. 81 Fed. Reg. at 29,020–24. The significance of the agency’s error supports vacatur.

Last July, Metha ruled against FDA and signaled that a victory like today’s was likely on the horizon. He found in favor of the cigar trade groups when it came to the questions of whether FDA acted improperly when crafting the rule but left open what he would do next.

There were two basic options:

• Vacating the Rule — This would mean that the 2016 deeming regulations would not apply to “premium cigars.” Because the deeming regulations are the foundation of FDA’s regulations for cigars, this would mean that both current and future regulations would not apply to “premium cigars” until FDA corrected the issue. FDA would have the opportunity to regulate “premium cigars,” but it would need to start the process over—comment periods, etc.—from square one.
• Remanding Without Vacatur — This would mean that Mehta would instruct FDA to fix the error it made. It could mean the regulations would not apply to “premium cigars” while FDA fixes the issue though Mehta can choose how to apply those rules. If FDA fixed the issue(s) to Mehta’s liking, FDA could then move forward with enforcing the regulations for “premium cigars.”

The second of those choices—the one that would have been better for FDA—is considered to be for “exceptional circumstances,” which Mehta says are not present in this case. Beyond failing to provide “disruptive consequences” that would justify this option, Mehta says that the evidence available now—compared to 2016—leads him to question whether FDA would regulate premium cigars:

Nor is it certain, as the FDA suggests, that on remand it would again deem premium cigars. Relevant new evidence has emerged in the years since the agency’s action. Most notably, in 2021, the FDA contracted with the National Academies of Sciences, Engineering, and Medicine (NASEM) “to conduct a comprehensive and systematic assessment and review of the scientific literature and provide a final report of the study results” concerning the usage patterns and health effects of premium cigar smoking.5 In March 2022, the NASEM released its report, and it contains important findings that may bear on the deeming question. See, e.g., Pl.’s Supplemental Mem., ECF No. 265, Ex. A, ECF No. 265-1 (NASEM report), at 11–13, 15–18. On remand, the agency “may wish” to consider this and other new evidence and seek comment before acting. Union Elec. Co. v. FERC, 890 F.2d 1193, 1196 (D.C. Cir. 1989). The court will not hazard a guess at how the agency would come out if it were to consider new evidence.

Because of all this, he chose the more obvious option: vacating the rule.

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As for what happens next, there are two obvious things to watch.

First, the premium cigar industry will almost certainly ask for FDA to reimburse user fees that it has paid to the agency. FDA requires user fees from six classes of tobacco products—cigarettes, roll-your-own, snuff, chewing tobacco, cigars and pipe tobacco—to fund FDA’s Center for Tobacco Products. These fees, currently about $100 million per year for all cigars, are assessed to each company based on the amount of excise taxes they pay in comparison to other cigar companies.

It should be noted that the $100 million per year figure is substantially more than just “premium cigars” as that number includes the user fees paid by mass-market cigars, flavored cigars and other cigars that won’t meet the definition. Rocky Patel provided a deposition in which he estimated that the user fees paid by premium cigar companies were between $15-20 million annually.

Second, the Department of Justice has the chance to appeal this case. It’s unclear whether that will happen.

The largest question is the murkiest: when will FDA try to regulate “premium cigars” again?

As recently as 2020, FDA stated that premium cigars were amongst the agency’s lowest priority. While the Department of Justice never rolled over during this legal battle, FDA has delayed many parts of the regulations for premium cigars, most notably the premarket product approval requirements.

In addition to continuing to grapple with e-cigarette and vaping products, FDA is planning four landmark regulatory initiatives: banning the sale of menthol cigarettes, banning the sale of flavored cigars, imposing nicotine limits on tobacco products and introducing requirements for tobacco manufacturing facilities. Because of today’s rulings, none of these regulations would apply to premium cigars that meet the aforementioned definition, at least for now.

FDA has the option to deem “premium cigars” as a regulated tobacco product, but it must complete the process that it did improperly from 2014-2016: announce proposed rules for premium cigars, solicit feedback, and introduce new rules. As Mehta notes in his decision, the evidence regarding premium cigar usage and health impacts that exists today is different than in 2014, and it’s unclear if the body of evidence, while still believed to be incomplete, is any better for FDA than it was in 2014.