En Fuego Tobacco Shop LLC v. U.S. Food & Drug Admin.
En Fuego Tobacco Shop LLC v. U.S. Food & Drug Admin.
Opinion of the Court
In an order dated July 2, 2018, the District Court for the Eastern District of Texas transferred this matter to this court under the Fifth Circuit's first-to-file rule. The court in Texas found that there is a "likelihood of substantial overlap" between this case and Cigar Association of America v. FDA , which has been pending before this court since July 2016. Plaintiffs are Texas-based stakeholders in the premium cigar industry. They now ask the court to retransfer the case to the Eastern District of Texas, where they originally filed this action. Plaintiffs assert that retransfer is appropriate because there is not substantial overlap between the two cases, and further, because the interests of justice and convenience obligate this court to respect Plaintiffs' choice of forum.
For the reasons that follow, the court declines to retransfer this case. Instead, the court consolidates this matter with Cigar Association of America v. FDA and directs the parties to meet and confer and propose a summary judgment briefing schedule.
II. BACKGROUND
A. The Deeming Rule
On April 25, 2014, the U.S. Food and Drug Administration ("FDA") issued a Proposed Rule that would make, or "deem," cigars, pipe tobacco, and e-cigarettes subject to the federal Food, Drug, and Cosmetic Act (the "FD & C Act"),
[A]ny cigar as defined in this part, except a cigar that: (1) Is wrapped in whole tobacco leaf; (2) contains a 100 percent leaf tobacco binder; (3) contains primarily long filler tobacco; (4) is made by combining manually the wrapper, filler, *4and binder; (5) has no filter, tip, or non-tobacco mouthpiece and is capped by hand; (6) has a retail price (after any discounts or coupons) of no less than $10 per cigar (adjusted, as necessary, every 2 years, effective July 1st, to account for any increases in the price of tobacco products since the last price adjustment); (7) does not have a characterizing flavor other than tobacco; and (8) weighs more than 6 pounds per 1000 units.
After receiving and considering comments, on May 10, 2016, the FDA published a final rule "deeming" all categories of cigars subject to the TCA, including premium cigars, pipe tobacco, and certain other products (for example, e-cigarettes), as proposed in Option 1 described above. See Final Rule Deeming Products To Be Subject to the Federal Food, Drug, and Cosmetic Act, as Amended by the Family Smoking Prevention and Tobacco Control Act; Restrictions on the Sale and Distribution of Tobacco Products and Required Warning Statements for Tobacco Products ,
Most significantly for purposes of this litigation, the Deeming Rule mandates that, by August 10, 2018, packaging and advertisements for all cigar products must display one of six pre-approved health warnings statements. See Cigar Ass'n of Am. v. U.S. Food & Drug Admin. ,
(i) WARNING: Cigar smoking can cause cancers of the mouth and throat, even if you do not inhale.
(ii) WARNING: Cigar smoking can cause lung cancer and heart disease.
(iii) WARNING: Cigars are not a safe alternative to cigarettes.
(iv) WARNING: Tobacco smoke increases the risk of lung cancer and heart disease, even in nonsmokers.
(v) (A) WARNING: Cigar use while pregnant can harm you and your baby; or
(B) SURGEON GENERAL WARNING: Tobacco Use Increases the Risk of Infertility, Stillbirth and Low Birth Weight
(vi) WARNING: This product contains nicotine. Nicotine is an addictive chemical.
In addition to the Deeming Rule, the FDA also promulgated in May 2016 a separate rule, referred to as the "User Fee Rule." That Rule assesses "user fees" on manufacturers and importers of cigars and pipe tobacco, but not other newly deemed products, like e-cigarettes. See 21 U.S.C. § 387s ;
B. The Cigar Association Litigation
On July 15, 2016, a group of plaintiffs, led by the Cigar Association of America, filed suit in this District Court against the FDA, the United States Department of Health and Human Services ("HHS"), and others. See Compl., Cigar Ass'n of Am. v. FDA , No. 16-cv-01460 (D.D.C.), ECF No. 1. Plaintiffs in Cigar Association are three non-profit associations that represent cigar manufacturers, importers, distributors, suppliers, and consumers, as well as premium cigar and tobacco retail shops (collectively "Cigar Association plaintiffs"). The Cigar Association plaintiffs' nine-count complaint challenges the Deeming Rule and the User Fee Rule on a host of grounds. Their various claims assert that: (1) the Deeming Rule's timeline for premarket review is arbitrary and capricious under the Administrative Procedure Act ("APA"); (2) the User Fee Rule violates the APA and the Due Process and Equal Protection Clauses; (3) the cost-benefit analysis underlying the Deeming Rule violates the Unfunded Mandates Reform Act and the Regulatory Flexibility Act; (4) the FDA's decision not to select Option 2, which would have excluded premium cigars from the Deeming Rule, is unlawful under the APA; (5) the warning label requirements contravene the APA and the First Amendment; (6) the Rule's treatment of retailers who blend tobacco as "manufacturers" is unlawful under the APA and TCA; and finally, (7) the Rule's classification of pipes as "components" of a tobacco product, as opposed to an unregulated accessory, is arbitrary and capricious under the APA.
Since its inception, much water has passed under the bridge in Cigar Association . Due to regulatory developments that arose after the complaint was filed, the case stood still for six months while the parties attempted to reach some agreement over the contested issues. Ultimately, the parties elected to litigate two sets of claims on separate tracks. The parties agreed to defer resolving challenges to the premarket review process, the FDA's decision to select Option 1, and the agency's cost-benefit analysis. See Cigar Ass'n ,
On May 15, 2018, the court granted in part and denied in part the Cigar Association parties' cross-motions for partial summary judgment. See
Thereafter, to enable an immediate appeal, the court entered judgment in favor of Defendants as to those claims challenging the warnings requirement. The court enjoined enforcement of the requirement pending the outcome of the appeal. See Cigar Ass'n of Am. v. U.S. Food & Drug Admin. ,
C. The En Fuego Litigation
Plaintiffs in the instant case include three entities: (1) En Fuego Tobacco Shop LLC, "a premium cigar retailer and lounge with locations" around Texas; (2) Cuba Libre Enterprises LLC (doing business as El Cubano Cigars), "a manufacturer of handmade premium cigars" based in Texas; and (3) the Texas Cigar Merchants Association, "a Texas-incorporated not-for profit association representing premium cigar manufacturers and retailers in the State of Texas." Am. Compl., ECF No. 20 [hereinafter Am. Compl.], ¶¶ 20-22 (collectively, "Plaintiffs"). They brought this action in January 2018 in the District Court for the Eastern District of Texas against the FDA and its Commissioner, and HHS and its Secretary (collectively, "Defendants"), challenging the Deeming Rule on various grounds as it applies to premium cigars. See generally Compl., ECF No. 1; see also Am. Compl. Plaintiffs' Amended Complaint contains eight counts. Taken together, those counts challenge (1) the Deeming Rule's health warnings mandate under the First Amendment, the TCA, and APA; (2) the Rule's warnings plan pre-approval requirement under the First Amendment; and (3) the Rule itself under the Appointments Clause. Am. Compl. ¶¶ 64-149.
On March 19, 2018, Defendants filed a motion to transfer En Fuego to this court based on the Fifth Circuit's "first-to-file rule." See Mot. to Transfer, ECF No. 18. Shortly thereafter, Plaintiffs filed a Motion for Summary Judgment. See Mot. for Summ. J., ECF No. 22. On May 22, 2018, Magistrate Judge Kimberly C. Priest Johnson denied the Motion to Transfer, see Order, ECF No. 35, which Defendants then appealed to District Judge Amos Mazzant, see Defs.' Objections, ECF No. 40. The parties then completed summary judgment briefing and held oral argument in the case. Pls.' Mot. to Retransfer, ECF No. 73 [hereinafter Pls.' Mot.], Mem. in Supp., ECF No. 73-1 [hereinafter Pls.' Mem.], at 4-5.
But the court in Texas never reached the merits. Instead, on July 2, 2018, Magistrate *7Judge Johnson withdrew the Order Denying Transfer and issued a new order granting the Motion to Transfer. See generally Order, ECF No. 55 [hereinafter Transfer Order]. She determined "that the present lawsuit and Cigar Association involve common subject matter and core issues that substantially overlap." Id. at 6. Plaintiffs then appealed the order to the District Court judge. Judge Mazzant affirmed Magistrate Judge Johnson's decision, holding that there was a "likelihood of substantial overlap" warranting transfer. See Order Denying Defendants' "Emergency Appeal," ECF No. 60, at 4 (quotation and citation omitted).
Following the transfer, Plaintiffs filed the instant motion on October 1, 2018, asking this court either to retransfer the case back to the District Court for the Eastern District of Texas or, in the alternative, to refuse to consolidate it with Cigar Association . Pls.' Mem. at 1-2.
III. DISCUSSION
Because "[c]onsiderations of comity and orderly administration of justice dictate that two courts of equal authority should not hear the same case simultaneously," Washington Metro. Area Transit Auth. v. Ragonese ,
Like the D.C. Circuit, the Fifth Circuit has developed its own first-to-file jurisprudence. See Mann Mfg., Inc. v. Hortex, Inc. ,
A. Review of the First-to-File Transfer
Plaintiffs are somewhat schizophrenic in their argument as to why this court should retransfer this matter. In one breath, Plaintiffs argue that the court should reanalyze the first-to-file inquiry under D.C. Circuit precedent, which they insist demands strict identity of parties and claims. See Pls.' Mem. at 10 (arguing that "the authority governing this Court's discretion is much tighter than in the Fifth Circuit" and the En Fuego case "fails" the D.C. Circuit's first-to-file standard); see also Pls.' Reply in Support of Pls.' Mot., ECF No. 76 [hereinafter Pls.' Reply], at 3-7. Yet, in the next breath, Plaintiffs seem to argue that the court must conduct essentially a de novo review of whether En *8Fuego and Cigar Association "substantially overlap," applying Fifth Circuit law. See Pls.' Mem. at 6 (arguing that, under Fifth Circuit law, following the initial transfer, "it is then for the first court to make the 'ultimate determination' of whether the overlap is sufficient to justify retaining the case in that court or it instead should be sent back to the court in which it was filed"). Having reviewed the applicable authorities, the court does not believe its task is to make either of those determinations.
Plaintiffs' assertion that this court should analyze the retransfer motion under D.C. Circuit law is not only unfounded, but is also inconsistent with D.C. Circuit precedent on retransfers. Plaintiffs cite no authority for the proposition that, after receiving a second-filed transferred case, a district court in this jurisdiction must apply D.C. Circuit first-to-file principles in determining whether to retransfer the case. The main case on which Plaintiffs rely-National Industries for the Blind v. Department of Veterans Affairs ,
Although the D.C. Circuit has said little about retransfer motions, the available guidance does not support repeating the first-to-file analysis under D.C. Circuit precedent. In Hill v. Henderson , the Circuit stated that "at the time of a motion to retransfer[,] the transfer order would be law of the case binding the second district court (in the absence of clear error or manifest injustice) ..."
Nor is this court obligated to perform a de novo review of the Texas federal court's decision under the Fifth Circuit's first-to-file law. For one, conducting such a review would be contrary to the D.C. Circuit's admonition that "unless exceptional circumstances appear, the transferee court should not directly review the transfer order." In re Briscoe ,
*9Moreover, Plaintiffs' request that this court "pick up the analysis where the Texas district court left off," Pls.' Mem. at 2, overstates the transferee court's role in the first-to-file analysis under Fifth Circuit law. Plaintiffs' understanding rests largely on a portion of the Fifth Circuit's decision in Mann , in which the court stated that "the ultimate determination of whether there actually was a substantial overlap requiring consolidation of the two suits" rests with the transferee court, Mann ,
B. Whether Consolidation of En Fuego and Cigar Association is Appropriate
Having now received the En Fuego matter, this court's principal inquiry is to decide whether to consolidate En Fuego with Cigar Association or allow the two cases to proceed on separate tracks. See Sutter Corp. ,
Here, the court finds that there are sufficient "common question[s] of law or fact" to warrant consolidating this case with Cigar Association . Fed. R. Civ. P. 42(a). Cigar Association and En Fuego "share basic relevant facts." Both cases involve the same administrative record concerning promulgation of the Deeming Rule's health warnings requirement, which will serve as the court's primary, if not exclusive, source of facts to decide the presented legal issues.
More importantly, several of the claims and contentions of the parties in Cigar Association and En Fuego overlap. See Defs.' Opp. at 5. Both groups of plaintiffs attack the Deeming Rule's health warnings requirement as unconstitutionally compelled speech in violation of the First Amendment. Compare En Fuego Counts II, III, Am. Compl. ¶¶ 64-96 with Cigar Ass'n of Am. Count VII, Compl. ¶¶ 142-48. Both also assert that the warnings requirement violates the APA and TCA. Compare En Fuego Counts V, VI, Am. Compl. ¶¶ 108-29 with Cigar Ass'n of Am. Count VI, Compl. ¶¶ 134-41. Indeed, the court already has addressed, to some degree, these contentions in its Cigar Association decision, a part of which is now before the D.C. Circuit. See Cigar Ass'n ,
To be sure, there are differences between the claims and theories asserted by the En Fuego and Cigar Association plaintiffs. Most significantly, unlike the Cigar Association plaintiffs, the En Fuego plaintiffs do not concede that "the content of the warnings is [ ] purely factual and uncontroversial as applied to premium cigars." Am. Compl. ¶¶ 64-72; Pls.' Mem. at 4, 8-9. In other words, the En Fuego plaintiffs believe that the warnings regime is subject to strict scrutiny or at least intermediate scrutiny under Central Hudson . Am. Compl. ¶ 66; see also RJ Reynolds Tobacco Co. v. FDA ,
Plaintiffs also argue that consolidation is inappropriate because of the different postures of the En Fuego and Cigar Association litigations. See Pls.' Mem. at 11. It is true that the two cases are in different places. A portion of Cigar Association has been resolved and certain rulings are on appeal. En Fuego , by contrast, is fully briefed, yet remains unresolved on the merits. In other circumstances, these differences might warrant non-consolidation. But here, both cases involve cross-motions for summary judgment largely on an administrative record. There is no real gain or loss of efficiency by consolidating the matters, as opposed to keeping them on separate tracks. Indeed, consolidation does not extinguish the independent nature or status of different cases and therefore permits the court to treat them individually. See Bank Markazi v. Peterson , --- U.S. ----,
C. Whether to Stay the En Fuego Matter
Having decided to retain this matter and consolidate it with Cigar Association , the court now turns to Defendants' request that the court stay these proceedings pending the outcome of the appeal in Cigar Association . See Defs.' Opp. at 14-17. The court will not issue a stay. Defendants did not move to stay this matter, but rather introduced the request in their Opposition to Plaintiffs' Motion to Retransfer. See
Nor is a stay otherwise warranted. Defendants argue that the court should stay this case because the "D.C. Circuit's decision in Cigar Association will likely control *12the outcome of the central claims raised in this case." Id. at 14. Perhaps it will; perhaps it won't. Whatever the outcome of the D.C. Circuit proceedings, it would be patently unfair to the En Fuego plaintiffs to further delay reaching the merits of their challenges. They have waited long enough, having filed this action nearly one year ago. Moreover, as Plaintiffs point out, staying this matter could put them in the difficult position of having to litigate this case on an expedited basis if the D.C. Circuit rules against the Cigar Association plaintiffs on appeal, as a negative ruling would start the clock on dissolving the present stay of the warnings requirement. In the face of this risk to Plaintiffs, Defendants have shown no hardship attendant to moving forward. See Landis v. North Am. Co. ,
Accordingly, the court finds no compelling reason to stay this matter until resolution of the appellate proceedings in Cigar Association .
V. CONCLUSION
For the reasons set forth above, Plaintiffs' Motion to Retransfer to the District Court for the Eastern District of Texas or, in the Alternative, to Set for Non-Consolidated Adjudication on the Merits Before this Court is denied. This court will retain this matter and it shall be consolidated with Cigar Association of America v. FDA , Case No. 1:16-cv-01460-APM. The En Fuego parties shall make all future filings on the Cigar Association docket.
No later than January 25, 2019, the parties shall submit a Joint Status Report recommending a schedule for further proceedings, including oral argument on the cross-motions. Upon entering a scheduling order, unless the parties indicate otherwise, the court will deem moot Plaintiffs' pending motion for summary judgment filed at ECF No. 22.
Hereinafter, for ease of reference, the court refers to the FD & C Act, as amended by the TCA, as the "TCA."
It may be appropriate to order a retransfer, however, if changed circumstances have frustrated the original purpose of the transfer. See Scarborough v. Nat'l Ass'n of Sur. Bond Producers ,
The court recognizes that the En Fuego plaintiffs are of the view that the court can consider extra-administrative record evidence in deciding their constitutional challenges. Even if that position is correct, it does not alter the conclusion that the two cases share a common factual basis.
As to the last of these claims, it is not obvious to the court which count of the Amended Complaint asserts that the FDA acted in violation of the APA by insisting that the warnings requirement go into effect while the FDA accepts comments about regulating premium cigars. Plaintiffs' motion cites to paragraphs 130 to 149 of their Amended Complaint, see Pls.' Mem. at 9, but those paragraphs assert violations of the Appointments Clause.
Reference
- Full Case Name
- EN FUEGO TOBACCO SHOP LLC v. UNITED STATES FOOD AND DRUG ADMINISTRATION
- Cited By
- 3 cases
- Status
- Published