Nicopure Labs, LLC v. Food and Drug Administration

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

____________________________________

)

NICOPURE LABS, LLC, )

)

Plaintiff, )

)

v. ) Civil Action No. 16-0878 (ABJ)

)

FOOD AND DRUG )

ADMINISTRATION, et al., )

)

Defendants. )

____________________________________)

)

RIGHT TO BE SMOKE-FREE )

COALITION, et al., )

)

Plaintiffs, )

)

v. ) Civil Action No. 16-1210 (ABJ)

)

FOOD AND DRUG )

ADMINISTRATION, et al., )

)

Defendants. )

____________________________________)

MEMORANDUM OPINION

An electronic cigarette, or “e-cigarette,” is an electronic nicotine delivery device,

comprised of a liquid, an atomizer or heating element that heats the liquid to create a vapor, and a

battery that powers the heating element. Most liquids on the market contain nicotine.

On May 10, 2016, the Food and Drug Administration exercised its discretion to deem e-

cigarettes to be “tobacco products” subject to the set of federal laws that govern the promotion and

marketing of conventional cigarettes. 1 Plaintiff Nicopure Labs, LLC, which manufactures the

devices and the liquids, then brought this action against the FDA, the Acting Commissioner of

Food and Drugs, and the Secretary of Health and Human Services, challenging the rule that

announced the decision. 2 Nicopure claims that the deeming decision exceeded the agency’s

statutory authority under the Food, Drug, and Cosmetic Act, 21 U.S.C. § 301, et seq. (“FDCA”),

as amended by the Family Smoking Prevention & Tobacco Control Act, Pub. L. No. 111-31, 123

Stat. 1777 (2009) (“Tobacco Control Act” or “TCA”). Nicopure also contends that the deeming

decision was arbitrary and capricious and should be set aside under the Administrative Procedure

Act (“APA”), 5 U.S.C. § 706, and that several provisions of the Tobacco Control Act that now

govern the vaping industry violate the company’s First Amendment rights. Compl., Nicopure

Labs, LLC v. FDA, 16–878 (ABJ) [Dkt. # 1] (“Nicopure Compl.”).

In a separate action, the Right to be Smoke Free Coalition, American Vaping Association,

Electronic Vaping Coalition of America, Georgia Smoke Free Association, Kentucky Vaping

Retailers Association, Inc., Louisiana Vaping Association, Maryland Vaping Professionals, LLC,

Ohio Vapor Association, Tennessee Smoke Free Association, and the New Jersey Retailers

Coalition (collectively, “RSF”), filed their own challenge to the Deeming Rule on similar grounds.

1 See “Deeming Tobacco 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,” 81 Fed. Reg. 28,974 (May 10, 2016) (“Deeming Rule”). The Court will refer to these

products either as “e-cigarettes,” “electronic nicotine delivery systems,” or “ENDS.” The products

are known colloquially as “vaping” devices.

2 Nicopure’s complaint named the former Commissioner of Food and Drugs, Robert Califf,

and the former Secretary of Health and Human Services, Sylvia Matthews Burwell. Pursuant to

Federal Rule of Civil Procedure 25(d), their successors, Commissioner of Food and Drugs Scott

Gottlieb and Secretary of Health and Human Services Thomas E. Price have been automatically

substituted as defendants.

2

Compl., RSF v. FDA, 16–1210 (ABJ) [Dkt. # 1] (“RSF Compl.”). The Court consolidated the two

cases, Order (June 28, 2016) [Dkt. # 19], and both sides have filed motions for summary judgment.

After considering the record, the points and authorities set forth in the briefs submitted by both

sides and the amici, and the arguments presented at a hearing on the motions, the Court will uphold

the Deeming Rule. 3

The Court wishes to reassure the many worried vapers who followed these proceedings

closely that this case is not about banning the manufacture or sale of the devices. That is not what

the Deeming Rule does or what it was intended to accomplish. In the Deeming Rule, the FDA

simply announced that electronic cigarettes, or electronic nicotine delivery systems (“ENDS”)

would be subject to the same set of rules and regulations that Congress had already put in place

for conventional cigarettes.

3 On July 8, 2016, Nicopure filed its motion for summary judgment. Nicopure Labs, LLC’s

Mot. for Summ. J. [Dkt. # 20] (“Nicopure Mot.”); Mem. of P. & A. in Supp. of Nicopure’s Mot.

[Dkt. # 20-1] (“Nicopure Mem.”). RSF filed its motion for summary judgment on July 25, 2016,

joining in Nicopure’s arguments concerning the issues raised in both complaints, and focusing on

the issues unique to its motion. Pl. Trade Assocs.’ Mot. for Summ. J. [Dkt. # 21] (“RSF Mot.”);

Mem. of P. & A. in Supp. of RSF’s Mot. [Dkt. # 21-1] (“RSF Mem.”). The government filed an

opposition to both motions, as well as a cross-motion for summary judgment, on August 17, 2016.

Defs.’ Cross-Mot. for Summ. J. [Dkt. # 43] (“Defs.’ Cross-Mot.”); Mem. in Opp. to Pls.’ Mots.

for Summ. J. & in Supp. of Defs.’ Cross-Mot. [Dkt. # 43] (“Defs.’ Cross-Mem.”). Plaintiffs jointly

opposed the cross-motion and replied in support of their motions on August 26, 2016, Pls.’ Joint

Mem. in Opp. to Defs.’ Cross-Mot. & Reply in Supp. of Pls.’ Mots. for Summ. J. [Dkt. # 46]

(“Pls.’ Reply”), and defendants filed their cross-reply on September 9, 2016. Reply in Supp. of

Defs.’ Cross-Mot. [Dkt. # 48] (“Defs.’ Cross-Reply”). The Court also received amicus curiae

submissions from a number of groups in support of plaintiffs: Brief of Amicus Curiae Smoke-

Free Alternatives Trade Ass’n in Supp. of Pl.’s Mot. [Dkt. # 30]; Brief of Amicus Curiae the Nat’l

Center for Public Policy Research, and TechFreedom in Supp. of Pls. [Dkt. # 37]; Brief Amicus

Curiae of the Vape a Vet Project in Supp. of Pls. [Dkt. # 39]; Brief of Amici Curiae Clive Bates &

Fifteen Others in Supp. of Pls.’ Mot. [Dkt. # 41]. And it received an amicus curiae submission

from the Campaign for Tobacco-Free Kids and a number of other public health organizations in

support of defendants. Brief of Amici Curiae Public Health Orgs. in Supp. of Defs.’ Cross-Mot.

[Dkt. # 45]. The Court held a hearing on the cross-motions on October 11, 2016. Min. Entry (Oct.

11, 2016); Tr. of Mots. Hr’g [Dkt. # 50] (“Hr’g Tr.”).

3

The Rule requires manufacturers to subject their products to review before marketing them,

to tell the truth when making any claims about their health benefits, and to warn consumers about

the dangers of nicotine when offering a means to deliver the substance to consumers. In short, the

manufacturers of e-cigarettes are now required to tell the 30 million people who use the devices

what is actually in the liquid being vaporized and inhaled.

This case does not pose the question – which is better left to the scientific community in

any event – of whether e-cigarettes are more or less safe than traditional cigarettes. The Rule did

not purport to take the choice to use e-cigarettes away from former smokers or other adult

consumers; the issue is whether the FDA has the authority to require that the choice be an informed

one.

In the 2009 Tobacco Control Act, Congress mandated that “tobacco products” would be

regulated by the Secretary of HHS, and it stated that the provisions of the statute would apply not

only to cigarettes, but to other tobacco products that the Secretary deemed to be subject to the law

in the future. In the rule in question in this case, the FDA exercised its discretion under the Act to

deem e-cigarettes to be tobacco products subject to regulation under the Federal Food, Drug, and

Cosmetic Act and the Tobacco Control Act. The agency unquestionably had the power to do so;

indeed, the plaintiffs who brought this lawsuit and submitted 235 pages of argument to the Court

do not challenge that general proposition even though they maintain that the agency should have

taken a different approach to the task.

In the first portion of the case, though, plaintiffs claim that the FDA exceeded the authority

given to it by Congress because certain types of devices or liquids do not fall within the statutory

definition of a tobacco product that may be deemed to be subject to the TCA. But that challenge

is extremely narrow. The challenge to the FDA’s authority is not about whether the FDA had the

4

legal authority to regulate the “cigalikes” 4 that comprise a large portion of the e-cigarette market

– the plaintiffs in this case concede that the agency may regulate those products. And plaintiffs do

not challenge whether the FDA had the legal authority to regulate “closed” vaping systems, which

use e-liquid that comes in a disposable cartridge.

What plaintiffs do claim is that the agency exceeded its reach when it stated that the

deeming rule also covers “open” vaping systems – those built with refillable cartridges that hold

the liquid. Plaintiffs do not object to the regulation of all open system devices; they do not question

the agency’s power to regulate open vaping systems that are sold packaged together with liquid

containing nicotine or tobacco flavor. What plaintiffs contend is that the agency could not lawfully

undertake to regulate any open devices sold empty and on their own without any liquid, and that

it had no authority to regulate e-liquids that do not contain nicotine. Nicopure Compl. ¶¶ 21, 34;

RSF Compl. ¶¶ 43, 111–17. However, the FDA has plainly stated that the rule does not cover e-

liquids that do not contain, or are not derived from, nicotine or tobacco, unless those liquids are

reasonably intended to be used with nicotine-containing liquids.

The Court concludes that the agency acted within the scope of its statutory authority: it

was legally permitted to regulate that category of liquids, and to consider a refillable electronic

nicotine delivery system to be a “component” of a tobacco product and therefore subject to

regulation.

Plaintiffs also ask the Court to find that it was arbitrary and capricious to subject electronic

cigarette and liquid manufacturers to burdensome premarket review and labeling requirements,

4 The term “cigalikes” refers to e-cigarettes that are designed to look like a traditional

cigarette, with a small built-in cartridge containing pre-filled liquid. RSF Compl. ¶ 22. The parties

refer to these devices as “closed systems,” because the consumer cannot refill the liquid cartridge.

See id.; Nicopure Compl. ¶ 4.

5

and that the cost-benefit analysis underlying the deeming decision was deficient. They also object

to a number of the marketing restrictions triggered by the deeming decision on constitutional

grounds.

It bears repeating that the provisions the plaintiffs find most objectionable were not crafted

by the FDA as part of the Deeming Rule. Instead, they are requirements of the Tobacco Control

Act that was enacted by Congress. Congress gave the FDA broad authority to deem new products

to be “tobacco products” subject to that existing statutory regime, and the Court finds that it was

not arbitrary and capricious for the agency to decide to take that action with respect to e-cigarettes.

This opinion will lay out the reasons for the Court’s conclusions, and it will also explain

why the new rules being applied to e-cigarettes do not violate the First or the Fifth Amendments

to the Constitution, and why there was no requirement that the agency undertake the sort of formal

cost-benefit analysis that plaintiffs claim was omitted here.

When all is said and done, the Court will grant the agency’s cross-motion for summary

judgment, and it will deny plaintiffs’ motions for summary judgment. 5

5 On June 8, 2017, the parties filed a joint notice alerting the Court that “the FDA has

announced that it is deferring enforcement of all future compliance deadlines under the Deeming

Rule for three months,” in order to give “new leadership personnel at the Department and Health

and Human Services and the FDA an opportunity to more fully consider the issues raised by the

deeming rule.” Joint Notice [Dkt. # 54]. While the Right to be Smoke Free Coalition believes

that the Court should withhold its decision on the pending cross-motions until the agency’s review

is complete, id. at 2, no party has moved to stay the action, and nothing in this opinion prohibits

the FDA from continuing to work with industry representatives to establish a mutually acceptable

schedule for the implementation of the Rule. This opinion will refer to the compliance deadlines

that are set out in the Rule itself, notwithstanding the fact that some of those deadlines have been

extended.

6

TABLE OF CONTENTS

BACKGROUND ........................................................................................................................... 9

I. Statutory Background – the Relevant Provisions of the Tobacco Control Act ............... 9

The Deeming Provision and the Definition of “Tobacco Product”..................... 11

Premarket Review ................................................................................................... 11

1. The Substantial Equivalence Pathway................................................................... 12

2. The Premarket Review Process .............................................................................. 13

Ban on Distribution of Free Samples ..................................................................... 14

Ban on Modified Risk Statements .......................................................................... 15

II. Regulatory Background ................................................................................................. 17

III. Factual & Procedural Background ............................................................................... 20

STANDARD OF REVIEW ........................................................................................................ 24

ANALYSIS .................................................................................................................................. 25

I. FDA did not exceed its statutory authority when it deemed both open system vaping

devices and nicotine-free liquids to be “tobacco products.” ................................................... 25

The D.C. Circuit has not yet decided the issue...................................................... 26

The FDA has the statutory authority to regulate open-system

vaping devices....................................................................................................................... 27

1. The FDA’s characterization of an empty vaping device as a “component” of a

tobacco product survives step one of the Chevron analysis......................................... 29

2. The FDA’s interpretation is reasonable under Chevron step two....................... 34

Plaintiffs have standing to challenge the application of the Rule to non-nicotine-

based e-liquids, and their challenge is ripe, but the agency’s interpretation passes muster

under Chevron...................................................................................................................... 35

1. Plaintiffs have standing to challenge the application of the rulemaking to

nicotine-free products because they manufacture those products. ............................ 37

2. Plaintiffs’ challenge to the regulation of nicotine-free products is ripe.............. 38

3. The agency’s interpretation of the definition of “tobacco product” to include

certain non-nicotine-containing e-liquids meets the Chevron test.............................. 41

7

II. The FDA’s decision to deem e-cigarettes to be tobacco products comports

with the APA. .............................................................................................................................. 44

Legal Standard......................................................................................................... 45

The APA dispute is justiciable................................................................................ 45

The FDA’s decision to deem e-cigarettes to be tobacco products is reasonable and

supported by the record. ..................................................................................................... 48

Plaintiffs’ arguments that the Rule is arbitrary and capricious

are not persuasive. ............................................................................................................... 51

The agency appropriately rejected plaintiffs’ suggested

regulatory alternatives. ....................................................................................................... 53

The decision not to change the grandfather date for substantially equivalent

products is not arbitrary and capricious. .......................................................................... 56

FDA’s imposition of compliance deadlines was not arbitrary and

capricious.............................................................................................................................. 57

III. The Deeming Rule is not invalid due to any deficiencies in the

cost-benefit analysis. ................................................................................................................... 59

The agency was not required to do a cost-benefit analysis. ................................. 60

Even if Michigan v. EPA does apply, the agency complied with its

requirements. ....................................................................................................................... 62

The agency’s consideration of costs and benefits satisfied the APA. .................. 63

IV. The agency complied with the purely procedural requirements of the Regulatory

Flexibility Act. ............................................................................................................................. 70

V. The Deeming Rule is not unconstitutional; RSF has abandoned its equal protection

claim, and its due process argument fails. ................................................................................ 72

VI. The marketing restrictions in the Tobacco Control Act do not violate the First

Amendment. ................................................................................................................................ 74

Central Hudson has not been supplanted by Sorrell. ............................................ 76

The Tobacco Control Act’s ban on the distribution of free samples is

constitutional. ....................................................................................................................... 78

1. The Tobacco Control Act’s ban on the distribution of free samples regulates

conduct, not speech. ........................................................................................................ 78

8

2. Even if sampling is considered to be expression, plaintiffs concede that the

government has a substantial interest in eliminating youth access

to tobacco products. ........................................................................................................ 84

3. The FDA has sufficient evidence to show that the sampling ban directly and

materially advances the interest in eliminating youth access to

tobacco products. ............................................................................................................ 85

4. The ban on free samples is not more extensive than necessary to serve

FDA’s substantial interest.............................................................................................. 87

The regulation of modified-risk tobacco products satisfies the Central Hudson

test. ...................................................................................................................................... 89

CONCLUSION ........................................................................................................................... 93

BACKGROUND

I. Statutory Background – the Relevant Provisions of the Tobacco Control Act

The Tobacco Control Act was enacted in 2009. 6 Congress introduced the legislation by

setting out forty-nine findings related to the public health risks posed by the use of tobacco

products, and products containing nicotine in particular:

x “A consensus exists within the scientific and medical communities that tobacco

products are inherently dangerous and cause cancer, heart disease, and other serious

adverse health effects,” TCA § 2(2);

x “Nicotine is an addictive drug,” id. § 2(3);

x “Tobacco is the foremost preventable cause of premature death in America,” id.

§ 2(13);

x “It is in the public interest for Congress to adopt legislation to address the public

health crisis created by actions of the tobacco industry,” id. § 2(29);

6 The FDA has engaged in previous attempts to regulate the tobacco industry. In 1996, it

promulgated a rule that concluded that nicotine was a “drug” subject to the provisions of the

Federal Food, Drug, and Cosmetic Act. See 61 Fed. Reg. 44619 (1996). But the Supreme Court

rejected the agency’s interpretation in FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120

(2000). The Court concluded that, in determining that nicotine was a “drug,” the FDA had

exceeded its statutory authority, and the Court struck down the regulation. Id. at 125–26. In 2009,

Congress responded to the Court’s decision by passing the Tobacco Control Act.

9

x Because the only known safe alternative to smoking is cessation, interventions

should target all smokers to help them quit completely,” id. § (2)(34).

In its findings, Congress emphasized the harms that arise when children use tobacco

products, and the associated dangers of tobacco-related marketing to minors:

x “The use of tobacco products by the Nation’s children is a pediatric disease of

considerable proportions that results in new generations of tobacco-dependent

children and adults,” TCA § 2(1);

x “Virtually all new users of tobacco products are under the minimum legal age to

purchase such products,” id. § 2(4);

x “Tobacco advertising and marketing contribute significantly to the use of nicotine-

containing tobacco products by adolescents,” id. § 2(5);

x “Because past efforts to restrict advertising and marketing of tobacco products have

failed adequately to curb tobacco use by adolescents, comprehensive restrictions

on the sale, promotion, and distribution of such products are needed,” id. § 2(6);

x “Children, who tend to be more price sensitive than adults, are influenced by

advertising and promotion practices that result in drastically reduced cigarette

prices,” id. § 2(24).

Congress also made specific findings concerning the impact of what the statute calls

“modified risk statements” – manufacturers’ statements that certain products might reduce the

risks associated with nicotine or tobacco – including labels announcing that a tobacco product is

“low tar” or “light”:

x “Unless tobacco products that purport to reduce the risks to the public of tobacco

use actually reduce such risks, those products can cause substantial harm to the

public health,” TCA § 2(37);

x “The only way to effectively protect the public health from the dangers of

unsubstantiated modified risk tobacco products is to empower the Food and Drug

Administration to require that products that tobacco manufacturers sold or

distributed for risk reduction be reviewed in advance of marketing, and to require

that the evidence relied on to support claims be fully verified,” id. § 2(43).

Finally, the statute recognizes that the FDA:

10

[I]s a regulatory agency with the scientific experience to identify harmful

substances in products to which consumers are exposed, to design standards

to limit exposure to those substances, to evaluate scientific studies

supporting claims about the safety of products, and to evaluate the impact

of labels, labeling, and advertising on consumer behavior in order to reduce

the risk of harm and promote understanding of the impact of the product on

health.

Id. § 2(44).

The Deeming Provision and the Definition of “Tobacco Product”

In light of those findings, Congress mandated in section 901 of the TCA that “[t]obacco

products . . . shall be regulated by the Secretary [of Health and Human Services].” TCA § 901,

codified at 21 U.S.C. § 387a. This unequivocal assignment of responsibility goes on to provide:

This chapter shall apply to all cigarettes, cigarette tobacco, roll-your-own

tobacco, and smokeless tobacco and to any other tobacco products that

the Secretary by regulation deems to be subject to this chapter.

Id., codified at 21 U.S.C. § 387a(b) (emphasis added).

Congress then amended the definitions section of the Federal Food, Drug, and Cosmetic

Act to define the term “tobacco product.” TCA § 101. For purposes of the TCA, a “tobacco

product” is:

any product made or derived from tobacco that is intended for human

consumption, including any component, part, or accessory of a tobacco

product (except for raw materials other than tobacco used in manufacturing

a component, part, or accessory of a tobacco product).

21 U.S.C. 321(rr)(1). Neither the TCA nor the FDCA further defines the terms “component,”

“part,” or “accessory.”

Premarket Review

In the TCA, Congress also imposes a number of regulatory requirements on all tobacco

products. First, the statute requires that all “new tobacco products” must receive FDA approval

before they may be introduced or delivered into interstate commerce. TCA § 910; 21 U.S.C.

§ 387j(a). The statute defines the term “new tobacco product” as “any tobacco product (including

11

those products in test markets) that was not commercially marketed in the United States as of

February 15, 2007.” Id. The law provides two main “pathways” to FDA approval: the less

onerous “substantial equivalence” pathway, and the more demanding “premarket review”

pathway. 7

1. The Substantial Equivalence Pathway

One way to get a new tobacco product approved is to show that it is “substantially

equivalent” to an existing tobacco product. 21 U.S.C. § 387j. The existing or “predicate” product

to be used for comparison purposes must have been “commercially marketed . . . in the United

States as of February 15, 2007.” 21 U.S.C. § 387j(a)(2)(A)(i)(I).

To invoke the substantial equivalence or SE pathway, the sponsor of a new tobacco product

must file a report demonstrating that the product is substantially equivalent to a product that had

already been commercially marketed as of the February 2007 grandfather date. 21 U.S.C.

§ 387j(b). A new tobacco product is substantially equivalent to the predicate tobacco product if

it:

(i) has the same characteristics of the predicate tobacco product; or

(ii) has different characteristics and the information submitted [in the

substantial equivalence report] contains information . . . that

demonstrates that it is not appropriate to regulate the product

. . . because the product does not raise different questions of public

health.

7 There is a third pathway – the “substantial equivalence exception” pathway, see 21 U.S.C.

§ 387j(a)(3)(A)(i)–(iii) – but that pathway is not implicated by the challenges brought in this case.

12

21 U.S.C. § 387j(a)(3)(A). 8 If the FDA concludes that the new tobacco product is substantially

equivalent to the predicate tobacco product under either provision, it must issue an order allowing

the product to be commercially marketed. 21 U.S.C. § 387j(c).

2. The Premarket Review Process

If a manufacturer of a new product cannot invoke the substantial equivalence pathway

– because there was no predicate product on the market as of February 15, 2007 – it must obtain

approval from FDA before it can market the product. See 21 U.S.C. 387j(a)(2). The sponsor of

the new tobacco product must submit a detailed application that includes: “full reports of all

information, published or known to, or which should reasonably be known to, the applicant,

concerning investigations which have been made to show the health risks of such tobacco product

and whether such tobacco product presents less risk than other tobacco products,” and “a full

statement of the components, ingredients, additives, and properties, and of the principle or

principles of operation, of such tobacco product.” 21 U.S.C. § 387j(b)(1). 9

The FDA must either approve or deny a premarket review application within 180 days. 21

U.S.C. § 387j(c)(1)(A). A denial may only be based on one of the four reasons set forth in the

statute: (1) the applicant has failed to show that the marketing of the product is appropriate for

public health; (2) the manufacturing, processing, or packing process does not conform to statutory

8 The term “characteristics” is defined by the TCA to mean “the materials, ingredients,

design, composition, heating source, or other features of a tobacco product.” 21 U.S.C.

§ 387j(a)(3)(B).

9 Plaintiffs refer to these applications by the acronym “PMTA,” or “premarket tobacco

application.” See Nicopure Compl. ¶ 38; RSF Compl. ¶ 34. To avoid confusion, the Court will

refer to this process as “premarket review,” and it will not use the acronym.

13

requirements; (3) the label is false or misleading; or (4) the application does not conform with the

standards set for tobacco products in 21 U.S.C. § 387g. 21 U.S.C. § 387j(c)(2). 10

Ban on Distribution of Free Samples

In the TCA, Congress also specifically instructed the agency to regulate the distribution of

free samples of tobacco products. TCA § 102. The statute directed the Secretary of Health and

Human Services to reissue a 1996 final rule no sooner than 180 days after June 22, 2009, and it

required that the rule amend the Federal Register to provide that “no manufacturer, distributor, or

retailer may distribute or cause to be distributed any free samples of cigarettes, smokeless tobacco,

or other tobacco products (as that term is defined in section 201 of the [FDCA]).” 21 U.S.C.

§ 387a–1. Congress directed the agency to permit the distribution of free samples of smokeless

tobacco “in a qualified adult-only facility,” 11 but it also demanded that the agency develop clear

rules governing certain public events: no free samples of smokeless tobacco may be distributed

“at any football, basketball, baseball, soccer, or hockey event or any other sporting or

entertainment event determined by the Secretary to be covered by this subparagraph.” Id. § 387a–

1(2)(G).

10 The section of the TCA that provides standards for tobacco products indicates that the

Secretary of HHS “may adopt tobacco product standards” in addition to those set forth by statute

“if the Secretary finds that a tobacco product standard is appropriate for the protection of public

health,” and the statute provides factors for the Secretary to consider in making that determination.

21 U.S.C. § 387g(a)(3).

11 The statute defines “qualified adult-only facility” as “a facility or restricted area that”: (1)

requires appropriate authorities to check patrons’ photo ID and verify their dates of birth; (2) does

not sell, serve, or distribute alcohol; (3) is not located immediately across from a space used for

youth-oriented marketing; (4) is a temporary structure, operated for the purpose of distributing free

samples of smokeless tobacco; (5) is enclosed by a barrier; and (6) does not display any advertising

or brand names. 21 U.S.C. 387a–1(a)(2)(G).

14

The agency did as Congress required. On March 19, 2010, the FDA promulgated a rule

entitled “Regulations Restricting the Sale and Distribution of Cigarettes and Smokeless Tobacco

to Protect Children and Adolescents,” 75 Fed. Reg. 13,225-03 (Mar. 19, 2010). The rule, which

is now codified at 21 C.F.R. part 1140, contains the required language. See 21 C.F.R. § 1140.16.

Ban on Modified Risk Statements

As part of the regulatory regime imposed on tobacco products in the TCA, Congress also

addressed manufacturers’ attempts to market certain products as being less harmful to health than

other tobacco products. By amending section 911 of the FDCA, the TCA prohibits the introduction

of “any modified risk tobacco product” into interstate commerce unless that product has been pre-

cleared by the FDA. TCA § 101; 21 U.S.C. § 387k(a). A “modified risk tobacco product” is

defined first as “any tobacco product that is sold or distributed for use to reduce harm or the risk

of tobacco-related disease associated with commercially marketed tobacco products.” 21 U.S.C.

§ 387k(b)(1). Second, the definition applies to a product:

(i) the label, labeling, or advertising of which represents explicitly or

implicitly that –

(I) the tobacco product presents a lower risk of tobacco-related

disease or is less harmful than one or more other

commercially marketed tobacco products;

(II) the tobacco product or its smoke contains a reduced level of

a substance or presents a reduced exposure to a substance; or

(III) the tobacco product or its smoke does not contain or is free

of a substance;

(ii) the label, labeling, or advertising of which uses the descriptors

“light”, “mild”, or “low” or similar descriptors; or

(iii) the tobacco product manufacturer . . . has taken any action directed

to consumers through the media or otherwise, other than by means

of the tobacco product’ s label, labeling, or advertising . . . that

would be reasonably expected to result in consumers believing that

the tobacco product or its smoke may present a lower risk of disease

or is less harmful than one or more commercially marketed tobacco

15

products, or presents a reduced exposure to, or does not contain or

is free of, a substance or substances.

21 U.S.C. § 387k(b)(2)(A).

A manufacturer that intends to market a tobacco product with modified risk representations

must file an application with the Secretary of HHS demonstrating that any claims “relating to the

effect of the product on tobacco-related diseases and health-related conditions” are supported by

the scientific literature. 21 U.S.C. § 387k(d). An application may be granted “only if the Secretary

determines that the applicant has demonstrated that” the product will:

(A) significantly reduce harm and the risk of tobacco-related disease to

individual tobacco users; and

(B) benefit the health of the population as a whole taking into account

both users of tobacco products and persons who do not currently use

tobacco products.”

21 U.S.C. § 387k(g)(1).

There is an exception to that provision, “if the Secretary makes the finding required” by

subsection (g)(1), and makes several additional findings listed in subsection (g)(2), which requires

proof that an order granting the application would promote the public health, is limited to a claim

that a product “does not contain or is free of a substance or contains a reduced level of a substance,

or presents a reduced exposure to a substance in tobacco smoke,” “scientific evidence is not

available and . . . cannot be made available without conducting long-term epidemiological

studies,” and the available data “demonstrates that a measurable and substantial reduction in

morbidity or mortality among individual tobacco users is reasonably likely in subsequent studies.”

21 U.S.C. 387k(g)(2)(A). 12

12 The TCA contains other provisions that are important to the protection of public health,

such as requiring that tobacco products bear a warning about the addictive nature of the products,

see 21 U.S.C. § 387f(d)(1)–(2), and banning all flavored cigarettes, but those provisions are not

relevant to the issues in this lawsuit.

16

II. Regulatory Background

On May 10, 2016, the FDA exercised the authority Congress conferred upon it in 21 U.S.C.

§ 387a(b) to deem e-cigarettes (and other products not relevant to this opinion) to be “tobacco

products” subject to the TCA. Deeming Rule, 81 Fed. Reg. at 28,976 (“Products that meet the

statutory definition of ‘tobacco products’ include . . . ENDS (including e-cigarettes, e-hookah, e-

cigars, vape pens, advanced refillable personal vaporizers, and electronic pipes”). The statute

defines a “tobacco product” to include “any component, part, or accessory of a tobacco product,”

21 U.S.C. § 321(rr), but the agency made clear that it was regulating only components and parts

of the newly-deemed tobacco products, not their accessories. See Deeming Rule, 81 Fed. Reg. at

28,975. According to the FDA, the purpose of the Rule was twofold:

(1) To deem all products that meet the definition of “tobacco product” under

the law, except accessories of a newly deemed tobacco product, and subject

them to the tobacco control authorities in chapter IX of the [FDCA] and

FDA’s implementing regulations; and (2) to establish specific restrictions

that are appropriate for the protection of public health for the newly deemed

tobacco products.

Id. The agency announced that the Rule would become effective ninety days after publication,

and that the “newly deemed products will become subject to the same [FDCA] provisions and

relevant regulatory requirements to which cigarettes . . . are subject.” Id. at 28,976.

So, as of August 8, 2016, the manufacturers of ENDS products have been subject to the

following two statutory provisions that govern cigarettes and other tobacco products:

x The prohibition of the sale or distribution of products bearing “modified

risk” descriptors (such as “light,” “low,” or “mild”) and claims, without

FDA approval; and

x The prohibition on the distribution of free samples.

Id.

17

The TCA would have also authorized the agency to impose the premarket review

requirement on manufacturers immediately, thereby halting sales until premarket applications

were approved. See 21 U.S.C. § 387b (finding that a tobacco product is adulterated if it is required

to have a premarket review order but does not have one); 21 U.S.C. § 331(a) (making it unlawful

to introduce an adulterated tobacco product into interstate commerce). But as part of the Deeming

Rule, the agency opted to implement the statutory requirement more gradually. The FDA

announced that all new tobacco products will be required to submit applications for premarket

authorization of their products through one of the pathways under a “staggered initial compliance

period[] . . . followed by continued compliance periods for FDA review:”

[M]anufacturers of all newly deemed, new tobacco products will have a

12-, 18- or 24-month initial compliance period in which to prepare

applications for marketing authorization, as well as a 12-month continued

compliance period after those dates in which to obtain authorization from

FDA (resulting in total compliance periods of 24, 30, or 36 months). After

the close of the continued compliance period, products will be subject to

enforcement unless they are grandfathered or are the subject of a marketing

authorization order.

18

Deeming Rule, 81 Fed. Reg. at 28,977–78. 13

As part of the Deeming Rule, the FDA defined the terms that Congress failed to define in

the TCA. The decision applies to “components” and “parts” of the newly deemed tobacco

products, and the agency defined “component or part” as “any software or assembly of materials

intended or reasonably expected: (1) [t]o alter or affect the tobacco product’s performance,

composition, constituents, or characteristics; or (2) to be used with or for the human consumption

of a tobacco product.” Deeming Rule, 81 Fed. Reg. at 28,975. 14 The agency provided a

“nonexhaustive list of examples of components and parts used with electronic nicotine delivery

systems (ENDS) (including e-cigarettes):”

E-liquids; atomizers; batteries (with or without variable voltage);

cartomizers (atomizer plus replaceable fluid-filled cartridge); digital

13 According to the Deeming Rule, the compliance periods depend on the pathway selected:

• A manufacturer that elects to submit a substantial equivalence report

must do so by February 8, 2018 – eighteen months after the Rule

became effective.

• A manufacturer submitting a premarket review application must do

so by August 8, 2018 – twenty-four months after the Rule became

effective.

• Under either approach, FDA will continue the compliance period for

at least twelve months while the applications are considered, and, on

a case-by-case basis, FDA will defer enforcement further – to give

the agency the time it needs to review and determine whether to

grant the requests.

Deeming Rule, 81 Fed. Reg. at 28,977–78. As the Court explained above, those compliance

deadlines have since been extended by three months. See Joint Notice at 2.

14 While the Deeming Rule recognizes that the TCA uses the term “component” and “part”

as distinct terms, the agency decided “for purposes of this final rule,” to use “the terms

‘component’ and ‘part’ interchangeably and without emphasizing the distinction between the

terms.” Deeming Rule, 81 Fed. Reg. at 28,975. But the agency also noted that it may “clarify the

distinctions between ‘component’ and ‘part’ in the future.” Id.

19

display/lights to adjust settings; clearomisers, tank systems, flavors, vials

that contain e-liquid, and programmable software.

Id. 15

The agency added that its definition of “component or part . . . excludes anything that is an

accessory of a tobacco product,” and it defined the term “accessory” to mean:

any product that is intended or reasonably expected to be used with or for

the human consumption of a tobacco product; does not contain tobacco and

is not made or derived from tobacco; and meets either of the following: (1)

[i]s not intended or reasonably expected to affect or alter the performance,

composition, constituents, or characteristics of a tobacco product or (2) is

intended or reasonably expected to affect or maintain the performance,

composition, constituents, or characteristics of a tobacco product but (i)

solely controls moisture and/or temperature of a stored product or (ii) solely

provides an external heat source to initiate but not maintain combustion of

a tobacco product.

Id. The agency explained that it was declining to regulate accessories of the newly-deemed

tobacco products because “accessories, unlike components or parts, are expected to have little

direct impact on the public health.” Id.

III. Factual & Procedural Background

An e-cigarette, or electronic nicotine delivery device, is a battery powered device that heats

an “e-liquid.” An individual uses an e-cigarette by inhaling a vapor through the mouthpiece of a

device that heats an “e-liquid,” producing a vapor which the user inhales through a mouthpiece.

Decl. of Jeffrey Stamler [Dkt. # 20-2] (“Stamler Decl.”) ¶ 3. There are two main types of e-

cigarettes on the market today: closed systems and open systems. Id. ¶ 8. In a closed system,

15 Plaintiffs complain that the FDA has defined “component or part” broadly enough to

encompass even batteries and software when they argue that the agency exceeded its authority.

See, e.g., Nicopure Mem. at 1, 10. But in the Deeming Rule, the agency specifically explained

that it intended “to limit enforcement of the premarket authorization provisions to finished tobacco

products,” “sealed in final packaging intended for consumer use.” Deeming Rule, 81 Fed. Reg. at

28,995. Therefore, as became clear during the hearing, plaintiffs’ claim is focused on the

application of the Deeming Rule to open system devices and nicotine-free liquids, and any

challenge to the application of the rule to batteries or other parts alone would be premature.

20

“the amount of liquid, flavor, and nicotine content (if any) is set by the manufacturer and cannot

be altered by the consumer.” Id. ¶ 9. Closed-system products are available in both a single-use,

disposable form – also known as a “cigalike” – and a “rechargeable” form, into which a user can

insert a “proprietary replacement cartridge” that contains the e-liquid. Id.; RSF Compl. ¶ 22. In

an open system, the device has a chamber or cartridge that can be refilled, and “the consumer

separately purchases e-liquid of his or her choosing.” Stamler Decl. ¶ 10. Consumers can purchase

e-liquid directly from a manufacturer, or they can go to a retail establishment called a “vape shop.”

Id. 16

Nicopure is a limited liability company based in Florida. Nicopure Compl. ¶ 9. It

“distributes battery-powered vaping devices under the Triton, Reactor, Tracer, and G6 brand

names.” Id. Triton, Reactor, and Tracer are all open-system devices, and G6 is a closed-system

device. Id. “Nicopure also manufactures and distributes nicotine-and-non-nicotine ‘e-liquid’

under the Halo and eVo brand names.” Id.

On May 10, 2016, Nicopure filed suit to challenge the legality of the Deeming Rule in four

respects. In Count I, Nicopure alleges that the FDA exceeded its statutory authority in violation

of sections 706(2)(A) and (C) of the APA when it enacted the Deeming Rule, because the Rule’s

“definition of ‘tobacco product’ and attendant proposed reach of its provisions is unambiguously

foreclosed by, and is an unreasonable construction of, the text of the [TCA].” Nicopure Compl.

¶ 34. At the hearing, Nicopure focused in particular on the Rule’s application to open system

devices and nicotine-free e-liquids. Hr’g Tr. at 13:14–14:15. But it also objects to the application

of the rule to “hundreds of products that are neither made nor derived from tobacco nor intended

16 There is evidence in the record that pen-like open-system devices are also frequently used

for the purpose of smoking marijuana. See AR 15,582, 20,956–57.

21

for human consumption,” such as “programmable software, batteries, digital display/lights, and

glass or plastic vials.” Nicopure Compl. ¶¶ 21, 26 (internal quotation marks and alterations

omitted). Notably, Nicopure does not argue that the FDA did not have the legal authority to deem

e-cigarettes to be tobacco products.

Nicopure’s Count II alleges that it was arbitrary and capricious for the FDA to enact a rule

that requires e-cigarette manufacturers to undergo premarket review. Nicopure Compl. ¶¶ 36–45.

The company maintains that the Deeming Rule “fails to come to grips with the extraordinary

burden this approval regime will have, both on manufacturers and on FDA itself,” id. ¶ 41, and

that the Rule “arbitrarily discounts the safety benefits offered by vaping devices and e-liquids.”

Id. ¶ 42. In Count III, Nicopure alleges that the FDA violated the APA in promulgating the Rule

because its cost-benefit analysis was deficient. It alleges that the FDA “overstates the Rule’s

benefits, fails to quantify the Rule’s benefits, understates the Rule’s tremendous costs, and

erroneously concludes that the Rule’s benefits outweigh its costs.” Id. ¶ 48. Finally, Count IV

brings two challenges under the First Amendment: that the restriction on modified-risk statements

prohibits manufacturers from making truthful and nonmisleading statements about their products,

and that the ban on the distribution of free samples violates Nicopure’s right to free speech. Id.

¶¶ 54–55. Nicopure requests that the Court vacate the Deeming Rule and declare it unlawful. Id.,

Relief Requested. 17

The Right to be Smoke Free plaintiffs filed their eight-count complaint about a month later,

on June 20, 2016. RSF Compl. The plaintiffs are “national and state-wide trade associations

representing the entire ENDS industry (i.e., manufacturers, distributors, and retailors).” Id. at 1.

17 The complaint also requested a preliminary injunction, but Nicopure never filed the

necessary motion, see Local Civil Rule 65.1, and it later abandoned its request for preliminary

relief. See Min. Entry (June 8, 2016).

22

In Count I, RSF asserts that the Deeming Rule is arbitrary and capricious because it did not

establish a new “Grandfather Date for ENDS products,” and because the agency failed to “apply

its enforcement authority so that some ENDS manufacturers, including e-liquid companies, would

have the opportunity to forego the [premarket review] pathway and avail themselves of the option

to submit SE Reports.” Id. ¶ 75. Count II alleges that the agency’s “application of the [premarket]

process to ENDS products violates the APA, and, thus, should be set aside as unlawful and

enjoined.” Id. ¶ 82. In Count III, RSF objects to the fact that the FDA, in implementing the TCA,

treated e-cigarettes in the same manner that it treats cigarettes, and it posits that this “one size fits

all” approach violates the due process and equal protection clauses of the Constitution. Id. ¶¶ 88–

89. Count IV alleges that the ban on free samples violates the First Amendment and the APA. Id.

¶¶ 90–100. In Count V, RSF alleges that the TCA’s modified risk provision requires

“manufacturers of tobacco products to secure FDA’s approval before making truthful, non-

misleading claims about their products,” in violation of the First Amendment and the APA. Id.

¶¶ 101–10. Count VI challenges the definition of “tobacco product” under the APA. Id. ¶¶ 111–

17. Count VII alleges that the FDA violated the Regulatory Flexibility Act, 5 U.S.C. § 601, et

seq., by failing to conduct an appropriate cost-benefit analysis. Id. ¶¶ 117–27. And Count VIII

alleges that the failure to conduct an appropriate cost-benefit analysis violates the APA. Id.

¶¶ 128–33. RSF requests a declaration that the Deeming Rule violates the APA, the Regulatory

Flexibility Act, and the First Amendment, and that that the Tobacco Control Act itself violates the

First Amendment, the Due Process Clause, and the Equal Protection Clause. Id., Request for

Relief. 18

18 RSF also requested “[a] preliminary and permanent injunction,” but they, too, failed to

comply with Local Rule 65.1.

23

In light of the substantial overlap between the two sets of allegations, the Court

consolidated the cases. See Order (June 28, 2016) [Dkt. # 19].

STANDARD OF REVIEW

Summary judgment is appropriate when the pleadings and evidence show that “there

is no genuine dispute as to any material fact and [that] the movant is entitled to judgment

as a matter of law.” Fed. R. Civ. P. 56(a). However, in cases involving review of agency

action under the Administrative Procedure Act, Rule 56 does not apply due to the limited role

of a court in reviewing the administrative record. Select Specialty Hosp.-Akron, LLC v. Sebelius,

820 F. Supp. 2d 13, 21 (D.D.C. 2011). Under the APA, the agency’s role is to resolve factual

issues and arrive at a decision that is supported by the administrative record, and the court’s role

is to “determine whether or not as a matter of law the evidence in the administrative record

permitted the agency to make the decision it did.” Occidental Eng’g Co. v. INS, 753 F.2d 766,

769–70 (9th Cir. 1985), citing Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402,

415 (1971); see also Richards v. INS, 554 F.2d 1173, 1177 & n.28 (D.C. Cir. 1977).

In reviewing an agency’s interpretation of a statute, courts use the two-step analysis

outlined in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842–

43 (1984). Step one involves determining whether Congress has spoken directly to the precise

question at issue. If it has, “the court, as well as the agency, must give effect to the

unambiguously expressed intent of Congress,” and that is the end of the matter. Id.; Nat’l

Treasury Emps. Union v. Fed. Labor Relations Auth., 392 F.3d 498, 500 (D.C. Cir. 2004). If the

statute is silent or ambiguous on the question, Chevron instructs the Court to go on to a second

step and determine “whether the agency’s answer is based on a permissible construction of

the statute.” Chevron, 467 U.S. at 843. An agency’s interpretation will warrant deference if

it is reasonable. Pauley v. BethEnergy Mines, Inc., 501 U.S. 680, 702 (1991).

24

ANALYSIS

I. FDA did not exceed its statutory authority when it deemed both open system vaping

devices and nicotine-free liquids to be “tobacco products.”

In Count I of Nicopure’s complaint, and in Count VI of the RSF complaint, plaintiffs

challenge FDA’s statutory authority to regulate two specific vaping products: open-system vaping

devices that do not contain any e-liquid, and e-liquids that do not contain nicotine or that are not

made or derived from tobacco. See Nicopure Compl. ¶¶ 33–34; RSF Compl. ¶¶ 111–17; Nicopure

Mem. at 9–14.

Congress mandated in the TCA that “tobacco products . . . shall be regulated by the

Secretary,” and it made clear that its mandate applied not only to “all cigarettes, cigarette tobacco,

roll your own tobacco, and smokeless tobacco,” but also to “any other tobacco products that the

Secretary by regulation deems to be subject” to its provisions. 21 U.S.C. § 387a. Congress defined

“tobacco product” to include:

any product made or derived from tobacco that is intended for human

consumption, including any component, part, or accessory of a tobacco

product (except for raw materials other than tobacco used in manufacturing

a component, part, or accessory of a tobacco product).

21 U.S.C. § 321(rr)(1) (emphasis added).

Nicopure argues that its “open-system vaping devices (and their constituent parts)” are not

“tobacco products” because they are “neither ‘made or derived from tobacco,’ nor intended for

human consumption[,]” and that Nicopure’s “non-nicotine containing e-liquids are not ‘made or

derived from tobacco.’” Nicopure Mem. at 9. 19 The FDA takes the position that all of these items

19 Throughout its pleadings in this case, Nicopure repeatedly quotes just a portion of the

statutory definition of “tobacco product” in this manner and omits the portion that includes any

“component, part, or accessory” of a tobacco product. See e.g., Nicopure Mem. at 1 (“Congress

expressly defined ‘tobacco product’ as a product made or derived from tobacco and intended for

human consumption. The majority of Nicopure’s products are neither.”). This leaves a misleading

impression and the deliberate excision undercuts the persuasive force of plaintiff’s arguments.

25

are “components” and “parts” of tobacco products and that therefore, they are covered by the

statutory definition. The Court finds that the FDA was well within its statutory authority to

regulate the narrow set of products at issue in this case.

The D.C. Circuit has not yet decided the issue.

At the outset, defendants argue that judgment should be entered in their favor because the

D.C. Circuit already ruled on the legality of the regulation of e-cigarettes in Sottera, Inc. v. FDA,

627 F.3d 891 (D.C. Cir. 2010). While it is true that the Court of Appeals addressed the issue of

the regulation of some electronic cigarettes in that opinion, it did not decide the precise issues

presented in this lawsuit.

The plaintiffs in Sottera manufactured what are referred to in this case as closed-system e-

cigarettes: the Court described the products at issue as “battery-powered products that allow users

to inhale nicotine vapor without fire, smoke, ash, or carbon monoxide” that were “[d]esigned to

look like a traditional cigarette.” Id. at 893. After the agency blocked the importation of plaintiffs’

products because they “appeared to be adulterated, misbranded, or unapproved drug-device

combinations under the FDCA,” plaintiffs sought a preliminary injunction, seeking a ruling that

their products could only be regulated under the TCA, and not under the FDCA. Id.

The D.C. Circuit held that while the “FDA cannot regulate customarily marketed tobacco

products under the FDCA’s drug/device provisions . . . it can regulate tobacco products marketed

for therapeutic purposes under those provisions, and . . . it can regulate customarily marketed

tobacco products under the [TCA].” Id. at 898. Thus, at the urging of the e-cigarette industry, the

Court recognized that “the FDA has authority under the [TCA] to regulate electronic cigarettes,

enabling it to mitigate or perhaps extinguish any harm to the public health.” Id.

26

While the decision is an important part of the legal backdrop of this case, the Sottera

Court’s rejection of the drug/device provisions of the FDCA as a basis to regulate e-cigarettes does

not answer the questions posed here: whether a particular category of ENDS products can be

regulated as “components or parts” of tobacco products. Defendants note that the only difference

between the products at issue in Sottera and the products sold by plaintiffs is the fact that plaintiffs

manufacture open-system vaping devices. Defs.’ Cross-Mem. at 24. And the agency suggests that

the Court should not be swayed by what it sees as a change in position by the industry:

Having insisted in Sottera that e-cigarettes are regulable as tobacco

products, manufacturers cannot now avoid that conclusion simply by

making their products refillable. Indeed, while the question presented in

Sottera was whether e-cigarettes should be regulated as drugs/devices or

instead as tobacco products, the choice Plaintiffs offer here is markedly

different: whether refillable e-cigarettes should be regulated as tobacco

products, or, as Plaintiffs urge, not at all.

Id. at 24–25. But plaintiffs have conceded that most ENDS products may be lawfully regulated

under the TCA, and notwithstanding Sottera, the Court must go on to utilize the Chevron analysis

to determine, as a matter of first impression, whether the agency has interpreted the statute

properly.

The FDA has the statutory authority to regulate open-system vaping devices.

The threshold determination – whether the agency’s reading of “component or part” to

include empty open vaping devices, or nicotine-free liquids sold separately, is consistent with the

TCA – turns on “whether Congress has directly spoken to the precise question at issue.” Chevron,

467 U.S. at 842.

The D.C. Circuit has explained:

Under the first step of Chevron, the reviewing court “must first exhaust the

traditional tools of statutory construction to determine whether Congress has

spoken to the precise question at issue.” The traditional tools include

examination of the statute’s text, legislative history, and structure, as well as

its purpose.

27

Bell Atl. Tel. Cos. v. FCC, 131 F.3d 1044, 1047 (D.C. Cir. 1997), quoting Nat. Res. Def. Council

v. Browner, 57 F.3d 1122, 1125 (D.C. Cir. 1995). The court is required to utilize these methods

to determine whether Congress has “unambiguously foreclosed the agency’s statutory

interpretation.” Catawba Cty. v. EPA, 571 F.3d 20, 35 (D.C. Cir. 2009).

Congress may have done so in one of two ways: either by prescribing a

precise course of conduct other than the one chosen by the agency, or by

granting the agency a range of interpretive discretion that the agency has

clearly exceeded . . . And if the agency has either violated Congress’s

precise instructions or exceeded the statute’s clear boundaries then, as

Chevron puts it, “that is the end of the matter” – the agency’s interpretation

is unlawful.

Vill. of Barrington v. Surface Transp. Bd., 636 F.3d 650, 659–60 (D.C. Cir. 2011).

Starting with the text, it is true that Congress did not specifically define the words

“component” or “part” in the TCA. But “the absence of a statutory definition does not render a

word ambiguous.” Nat. Res. Def. Council v. EPA, 489 F.3d 1364, 1373 (D.C. Cir. 2007). In the

absence of an express statutory definition, courts are simply bound to give the terms used in the

statute their ordinary meaning. Petit v. U.S. Dep’t of Educ., 675 F.3d 769, 781 (D.C. Cir. 2012).

The burden is on the plaintiffs challenging the agency interpretation to “do more than offer a

reasonable, or even the best, interpretation” of the statute; plaintiffs must instead show “that the

statute unambiguously forecloses the agency’s interpretation.” Id., quoting Vill. of Barrington,

636 F.3d at 661. In other words, if a court determines “that statutory ambiguity has left the agency

with a range of possibilities and that the agency’s interpretation falls within that range, then the

agency will have survived Chevron step one.” Vill. of Barrington, 636 F.3d at 660.

The Court must therefore begin with the plain language of the TCA. Lindeen v. SEC, 825

F.3d 646, 653 (D.C. Cir. 2016), quoting Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730,

28

739 (1989). The statutory definition of a “tobacco product” authorizes the FDA to extend the

provisions of the TCA to cover:

any product made or derived from tobacco that is intended for human

consumption, including any component, part, or accessory of a tobacco

product (except for raw materials other than tobacco used in manufacturing

a component, part, or accessory of a tobacco product).

21 U.S.C. § 321(rr)(1).

In exercising its deeming authority to regulate e-cigarettes under the TCA, the FDA defined

the terms “component or part” together to mean: “any software or assembly of materials intended

or reasonably expected: (1) to alter or affect the tobacco product’s performance, composition,

constituents, or characteristics; or (2) to be used with or for the human consumption of a tobacco

product.” Deeming Rule, 81 Fed. Reg. at 28,975. According to the FDA, applying this definition

means that the term “tobacco product” covers not only all-in-one electronic nicotine delivery

systems, but also empty open system devices and liquids sold separately, including nicotine-free

liquids intended to be mixed with nicotine-based liquids. Defs.’ Cross-Mem. at 25–40. Since the

agency justifies these two applications of the statute on different grounds, and it has raised

threshold jurisdictional issues with respect to the challenge to the regulation of e-liquids, this

opinion will address the agency’s authority to regulate the two challenged products separately.

1. The FDA’s characterization of an empty vaping device as a

“component” of a tobacco product survives step one of the Chevron

analysis.

The FDA’s approach to empty vaping devices is not inconsistent with the ordinary meaning

of the terms “component” and “part” that are used in the statute, and therefore, it is not foreclosed

by the TCA. To shed light on the ordinary meaning of an undefined statutory term, the Court turns

to the dictionary. See, e.g., Taniguchi v. Kan Pac. Saipan, Ltd., 132 S. Ct. 1997, 2002 (2012).

29

The word “component” is defined in the Merriam Webster dictionary as “a constituent

part,” Component, Merriam-Webster Dictionary, http://www.merriam-webster.com/dictionary/

component, and the dictionary offers the example of stereo components. Id. Similarly, the Oxford

English Dictionary defines “component” to mean “[a] constituent element or part.” Oxford

English Dictionary, 2d ed. (1989). The word “part” is defined by Merriam-Webster as “an

essential portion or integral element,” Part, Merriam-Webster Dictionary, http://www.merriam-

webster.com/dictionary/part, and by the Oxford English Dictionary as “[a] piece or section of

something which together with another or others makes up the whole (whether actually separate

from the rest or not),” and as “[a]n essential element; an integral portion of a larger whole.” Oxford

English Dictionary, 3d ed. (2005). 20

The agency’s interpretation is entirely consistent with the plain meaning of the statute: the

device – which contains the heating element and the battery – and the liquid are the “components”

of an electronic nicotine delivery system just as an amplifier and a speaker are “components” of a

stereo system. And while a sophisticated audiophile might have some choices to make about what

to include in a sound system today, the device plus the liquid are undeniably the two essential

components of an open vaping system: a consumer cannot use a vaping device for its primary

20 The frequent appearance of the word “part” in the definition of “component” suggests that

is was entirely appropriate for the FDA to consider them in tandem.

30

purpose without adding the liquid, and there is nothing to do with the liquid without the device.

(Indeed, it might be fair to say that the device is the electronic nicotine delivery system.) 21

Putting aside the dictionary, a better analogy might be that just as an empty fountain pen is

obviously a “component” of an ink pen (or “writing system”), even when the ink is sold separately,

and it is no less of a pen than a cartridge pen that comes packaged together with several disposable

cartridges, so too the empty open device is a “component” of an electronic nicotine delivery

system, particularly since plaintiffs agree that the device would constitute a tobacco product if it

were simply packaged together with a few e-liquid cartridges. Hr’g Tr. at 14:22–15:5. There is

no logic to plaintiffs’ contention that the packaging should be dispositive, and the Court finds that

the physical separation of the liquid from the device at the point of sale is of no significance. Both

are “components.”

21 To supplement the textual analysis, the FDA seeks to draw support from the legislative

history of a related statute. It points out that when Congress authorized the Consumer Product

Safety Commission to require that liquid nicotine containers be child resistant in the Child Nicotine

Poisoning Prevention Act of 2015, Pub. L. No. 114-116, § 2(a), 130 Stat. 3 (2016), it expressly

recognized FDA’s authority to regulate e-cigarettes and their components, citing the FDCA, the

TCA, and the then-pending Notice of Proposed Rulemaking concerning vaping products:

Nothing in this Act shall be construed to limit or otherwise affect the

authority of the Secretary of Health and Human Services to regulate, issue

guidance, or take action regarding the manufacture, marketing, sale,

distribution, importation, or packaging, including child-resistant packaging,

of nicotine, liquid nicotine, liquid nicotine containers, electronic cigarettes,

electronic nicotine delivery systems or other similar products that contain

or dispense liquid nicotine, or any nicotine-related products . . .

See Defs.’ Cross-Mem. at 29–30, citing Child Nicotine Poisoning Prevention Act of 2015, Pub. L.

No. 114-116, § 2(b)(1), 130 Stat. 3 (2016). This provision in separate legislation does not provide

powerful evidence of what Congress had in mind when it enacted the TCA, but its

acknowledgement of the agency’s power to regulate not just liquid nicotine and electronic

cigarettes, but also nicotine delivery systems and “other similar products that contain or dispense”

nicotine suggests that the FDA’s reading of the statute is not inconsistent with Congressional

intent.

31

Plaintiffs attempt to avoid this plain reading of the text of the statutory definition by

pointing to the structure of the TCA. They argue that because Congress used the term

“component” in other parts of the statute to “refer to items inseparable from the product made or

derived from tobacco,” and “not to refer to separate products not so made or derived,” the vaping

devices at issue here cannot be considered to be “components” or “parts.” Nicopure Mem. at 11,

citing Japan Whaling Ass’n v. Am. Cetacean Soc’y, 478 U.S. 221, 238–39 (1986) (“Without strong

evidence to the contrary,” the Supreme Court “doubt[s] that Congress intended the same phrase to

have significantly different meanings in two adjoining paragraphs of the same subsection”). In

other words, according to plaintiffs, any “component” or “part” referred to in the TCA must be

inseparable from the whole notwithstanding the ordinary definitions of the terms. But a review of

the statute does not bear this out.

Plaintiffs first point to 21 U.S.C. § 387(17), a provision that defines the term “smoke

constituent” to include “any chemical or chemical compound in mainstream or sidestream tobacco

smoke that either transfers from any component of the cigarette to the smoke or that is formed by

the combustion or heating of tobacco, additives, or other component of the tobacco product.”

Nicopure Mem. at 11. They also cite 21 U.S.C. § 387d(a), which requires manufacturers to list

“all ingredients . . . added by the manufacturer to the tobacco, paper, filter, or other part of each

tobacco product.” Id. And finally, plaintiffs rely on 21 U.S.C. § 387g(a)(1)(A), which prohibits

“a cigarette or any of its component parts (including the tobacco, filter, or paper)” from containing

flavors. Taking those portions of the statute together, plaintiffs argue that the context of the TCA

as a whole supports their argument that the terms “component or part” must mean a part physically

connected to the whole.

32

But “[t]o prevail on its Chevron Step One argument, [plaintiffs have] to do better than

concoct an interpretation purportedly based on the statute’s context. [Plaintiffs] ‘must show that

the statute unambiguously forecloses the [agency’s] interpretation.’” Pharm. Research & Mfrs. of

Am. v. FTC, 790 F.3d 198, 207 (D.C. Cir. 2015), quoting Vill. of Barrington, 636 F.3d at 661.

Plaintiffs “context” argument fails to meet that standard. The three provisions cited do not prove

plaintiffs’ point because none specifically defines the terms “component” or “part,” and each either

uses the terms in passing, or simply lists examples of what components of a particular type of

tobacco product might be. The fact that the components of a conventional cigarette may be

physically connected to that item does not mean that the components of an entirely different sort

of product must be.

Finally, the D.C. Circuit has directed reviewing courts to “exhaust the traditional tools of

statutory construction,” including examining a statute’s purpose, when they embark on the “search

for the plain meaning of the statute.” Bell Atl. Tel. Cos., 131 F.3d at 1047. Here, Congress

specified that the purpose of the TCA was to give the agency flexibility in regulating tobacco

products, and particularly those products that may be attractive to minors. The list of statutory

purposes set out in the legislation includes: “to ensure that the Food and Drug Administration has

the authority to address issues of particular concern to public health officials, especially the use of

tobacco by young people and dependence on tobacco;” “to provide new and flexible enforcement

authority to ensure that there is effective oversight of the tobacco industry’s efforts to develop,

introduce, and promote less harmful tobacco products;” and “to impose appropriate regulatory

controls on the tobacco industry.” TCA §§ 3(2), (4), (8). These unequivocal statements of the

intent behind the legislation support the Court’s finding that the agency’s commonsense

interpretation is not inconsistent with the statutory definition of a tobacco product. Thus, the Court

33

finds that the FDA’s conclusion that it has the authority to regulate open vaping systems, even if

they are empty and packaged alone, is not precluded by the statute and survives analysis under the

first step of the Chevron test.

2. The FDA’s interpretation is reasonable under Chevron step two.

In the court’s view, the ordinary terms “component” and “part” are not ambiguous, and the

FDA’s exercise of its deeming authority to cover the products at issue falls squarely within the

limits of the statute. But to the extent the statute is ambiguous, for all of the same reasons, the

agency’s interpretation “is based on a permissible construction of the statute,” Chevron, 467 U.S.

at 843, and therefore, it “merits judicial deference.” Bell Atl. Tel. Cos., 131 F.3d at 1047.

The Court should “defer to the agency’s permissible interpretation,” so long as “the agency

has offered a reasoned explanation for why it chose that interpretation.” Vill. of Barrington, 636

F.3d at 660. At Chevron step two, a court “may not disturb an agency rule unless it is ‘arbitrary

or capricious in substance, or manifestly contrary to the statute.’” Mayo Found. for Med. Educ. &

Research v. United States, 562 U.S. 44, 53 (2011), quoting Household Credit Servs., Inc. v.

Pfennig, 541 U.S. 232, 242 (2004).

There is no linguistic or statutory basis for plaintiffs’ contention that a component or part

may only be regulated if it is “physically part of a product containing tobacco (or material derived

from tobacco) when introduced into commerce.” Pls.’ Reply at 6; Nicopure Mem. at 10–12.

Plaintiffs do not dispute that a vaping device can be regulated as a tobacco product when it comes

all in one piece, or even in two pieces in one box. See Hr’g Tr. at 14:22–15:2 (“[Plaintiffs’

counsel]: If it’s sold in a kit with a nicotine-containing liquid, then that kit or that product that’s

being sold . . . would meet the definition of tobacco product because the product[] . . . includes the

e-liquids that’s got the nicotine derived from tobacco.”). But the definition of “tobacco product”

34

is not limited to products made or derived from tobacco since it specifically includes “components”

and “parts” of tobacco products. 21 U.S.C. § 321(rr)(1).

Plaintiffs object to the characterization of an empty ENDS device as a component on the

basis that those devices are “separate consumer product[s] that contain[] neither tobacco nor

anything derived from tobacco.” See Nicopure Mem. at 10. But an empty open vaping system is

not a generic consumer item with multiple potential functions, like a box or a bowl. The purpose

of those items might not be evident until the consumer chooses to use them in a certain way. But

an open-system vaping device is a unique item with a single function, and it is fundamental to the

vaping process: you can’t vape without it. Therefore, the FDA’s interpretation of the term

“component” to encompass an empty open system vaping device is based on a permissible

construction of the TCA. Chevron, 467 U.S. at 843.

The Court reaches the same conclusion with respect to plaintiffs’ challenge to the agency’s

treatment of e-liquids, but it must first address the jurisdictional questions raised by the defense.

Plaintiffs have standing to challenge the application of the Rule to non-

nicotine-based e-liquids, and their challenge is ripe, but the agency’s

interpretation passes muster under Chevron.

Plaintiffs challenge that portion of the Rule that purports to cover e-liquids that do not

contain nicotine. In light of the definition of a tobacco product in section 321(rr)(1) of the TCA,

the agency acknowledged in the Deeming Rule that it did not have the power to regulate e-liquids

that are not made or derived from tobacco, or e-liquids that are not components or parts of a tobacco

product. See, e.g., Deeming Rule, 81 Fed. Reg. at 29,017. However, it stated its intention to

regulate the entire line of e-liquid cartridges, “including cartridges that include varying degrees of

nicotine or those that do not contain nicotine, if they meet the definition of component or part.”

Id. The FDA then advanced the position that an e-liquid without nicotine can be a “component”

of a tobacco product under the TCA, and therefore subject to FDA regulation, “if it is intended or

35

reasonably expected to be used with or for the human consumption of a tobacco product (e.g., with

liquid nicotine).” Id. 22 The Rule goes on to provide:

FDA is not bound by the manufacturer or distributor’s subjective claims of

intent. Rather, FDA can consider the totality of the circumstances,

including direct and circumstantial objective evidence, which encompasses

a variety of factors such as the circumstances surrounding the distribution

of the product or the context in which it is sold . . . and sales data.

Id. at 29,015.

Plaintiffs maintain that this aspect of the Rule contravenes the TCA, see Nicopure Mem.

at 13–14, and before addressing the merits, defendants briefly argue that the Court lacks

jurisdiction to hear this claim. They argue that plaintiffs lack standing because they have not

alleged sufficient facts to demonstrate that their liquids are subject to the Rule. Defs.’ Cross-Mem.

at 33–35. Defendants also maintain that the claim is not ripe; they point out that plaintiffs do not

yet know if the FDA will initiate enforcement proceedings against their non-nicotine-based e-

liquids, and that, in light of the agency’s stated intention to review nicotine-free e-liquids on a

“case-by-case” basis, any challenge to that aspect of the regulation should wait until the agency

initiates an enforcement proceeding. Id. at 35–37. Therefore, the Court must determine whether

it has jurisdiction before it may go on to assess whether the agency’s interpretation of the statute

is reasonable.

22 As the agency explained at the hearing:

So the rule doesn’t purport to cover all nicotine-free e-liquids, it only

purports to cover them under certain circumstances, and those are when the

nicotine-free e-liquid is made or derived from tobacco. One example is a

tobacco-flavored e-liquid, regardless of its nicotine content. Another

example is if the nicotine-free e-liquid meets the definition of component

or part. And so one example of that that the FDA gave is nicotine-free e-

liquids that are intended to be mixed with liquid nicotine.

Hr’g Tr. at 30:15–31:7.

36

1. Plaintiffs have standing to challenge the application of the rulemaking

to nicotine-free products because they manufacture those products.

Article III of the Constitution restricts the power of the federal courts to hear only “Cases”

and “Controversies.” U.S. Const. art. III, § 2, cl. 1. A federal court is “forbidden . . . from acting

beyond its authority,” NetworkIP, LLC v. FCC, 548 F.3d 116, 120 (D.C. Cir. 2008), and a court

has “an affirmative obligation” to ensure that it has standing before reaching the merits of a dispute.

James Madison, Ltd. v. Ludwig, 82 F.3d 1085, 1092 (D.C. Cir. 1996), quoting Herbert v. Nat’l

Acad. of Scis., 974 F.2d 192, 196 (D.C. Cir. 1992).

“The doctrine of standing gives meaning to these constitutional limits by ‘identify[ing]

those disputes which are appropriately resolved through the judicial process.’” Susan B. Anthony

List v. Driehaus, 134 S. Ct. 2334, 2341 (2014) (alterations in original), quoting Lujan v. Defs. of

Wildlife, 504 U.S. 555, 560 (1992); see also Clapper v. Amnesty Int’l USA, 133 S. Ct. 1138, 1146

(2013) (“‘One element of the case-or-controversy requirement’ is that plaintiffs ‘must establish

that they have standing to sue.’”), quoting Raines v. Byrd, 521 U.S. 811, 818 (1997). This

“doctrine limits the category of litigants empowered to maintain a lawsuit in federal court to seek

redress for a legal wrong.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016).

“[T]he irreducible constitutional minimum of standing contains three elements.” Lujan,

504 U.S. at 560. First, the plaintiff must have suffered an “injury in fact,” or, in other words, “an

invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or

imminent.” Id. “Second, there must be a causal connection between the injury and the conduct

complained of,” or, said another way, the injury alleged must be “traceable to the challenged action

of the defendant.” Id. Third, it must be likely that “the injury will be redressed by a favorable

decision.” Id. at 561.

37

Defendants argue that plaintiffs have not alleged sufficient facts to show that the regulation

of nicotine-free liquids described in the Rule applies to their products, and that therefore, plaintiffs

have failed to allege they will suffer any actual or imminent harm. They complain that “plaintiffs

make no effort to explain how their nicotine-free e-liquids are manufactured, marketed, distributed,

or sold,” Defs.’ Cross-Mem. at 34, and that plaintiffs “make no showing that the nicotine-free e-

liquids they manufacture are . . . even subject to the deeming rule – by alleging, for example, that

those e-liquids are intended to be mixed with liquid nicotine.” Id. at 33.

Plaintiff Nicopure has supplied the Court with a declaration stating that it manufactures

approximately 160 different kinds of nicotine-free e-liquid, see Stamler Decl. ¶ 14, and therefore,

the Court finds that it has standing to challenge the agency’s decision to regulate these products as

part of the Rule. It is of little moment that plaintiffs have not specified whether their nicotine-free

liquids are or are not intended to be mixed with liquid nicotine, since the agency has already

specifically stated that it is not bound to take manufacturers at their word. Thus, under the terms

of the Rule, plaintiffs could be subject to enforcement proceedings if they do not submit their

nicotine-free e-liquids to the premarket review process. See 21 U.S.C. 387j(a)(2).

2. Plaintiffs’ challenge to the regulation of nicotine-free products is ripe.

The Court also finds that plaintiffs’ challenge to this aspect of the rule is ripe,

notwithstanding the agency’s assurances that, should plaintiffs violate the law, the agency would

assess whether enforcement was appropriate “after a ‘case-by-case’ review,” Defs.’ Cross-Mem.

at 36, quoting Deeming Rule, 81 Fed. Reg. at 29,032, which would “take into account ‘the totality

of the circumstances.’” Id., quoting 81 Fed. Reg. at 29,015.

“The ripeness doctrine generally deals with when a federal court can or should decide a

case. Part of the doctrine is subsumed into the Article III requirement of standing, which requires

a petitioner to allege inter alia an injury in fact that is ‘imminent’ or ‘certainly impending.’” Am.

38

Petrol. Inst. v. EPA, 683 F.3d 382, 386 (D.C. Cir. 2012). And “[e]ven if a case is ‘constitutionally

ripe,’ . . . there may also be ‘prudential reasons for refusing to exercise jurisdiction.’” Id., quoting

Nat’l Park Hosp. Ass’n v. Dep’t of Interior, 538 U.S. 803, 808 (2003). As the D.C. Circuit has

explained:

The fundamental purpose of the ripeness doctrine is “to prevent the courts,

through avoidance of premature adjudication, from entangling themselves

in abstract disagreements over administrative policies, and also to protect

the agencies from judicial interference until an administrative decision has

been formalized and its effects felt in a concrete way by the challenging

parties.”

Sprint Corp. v. FCC, 331 F.3d 952, 957 (D.C. Cir. 2003), quoting Nat’l Park Hosp., 538 U.S. at

807–08. While the constitutional aspect of ripeness may involve the same impending injury-in-

fact requirement that is necessary for standing, the prudential aspect of ripeness requires more: a

court must “balance[] ‘the fitness of the issues for judicial decision and the hardship to the parties

of withholding court consideration.’” Nat’l Treasury Emps. Union v. United States, 101 F.3d

1423, 1427–28 (D.C. Cir. 1996), quoting Abbott Labs. v. Gardner, 387 U.S. 136, 149 (1967), and

citing Duke Power Co. v. Carolina Envtl. Study Grp., Inc., 438 U.S. 59, 81–82 (1978). The fitness

of an issue for judicial decision depends on whether there are “contingent future events that may

not occur as anticipated, or indeed may not occur at all.” Thomas v. Union Carbide Agric. Prods.

Co., 473 U.S. 568, 580–81 (1985) (citations omitted).

In Abbott Laboratories, the Supreme Court considered two factors in evaluating whether a

pre-enforcement challenge was ripe for adjudication: First, it considered whether “the issue

tendered is a purely legal one,” and second, it asked whether the issue presented was a “final

agency action” under the APA. 387 U.S. at 149–50. “[P]urely legal claim[s]” are “presumptively

reviewable.” Nat’l Ass’n of Home Builders v. U.S. Army Corps of Eng’rs (“NAHB”), 417 F.3d

1272, 1282 (D.C. Cir. 2005), quoting Nat’l Mining Ass’n v. Fowler, 324 F.3d 752, 757 (D.C. Cir.

39

2003). And the D.C. Circuit has rejected the notion that a future exercise of agency discretion

makes a purely legal claim unripe. Id.

Defendants argue that plaintiffs do not know whether the FDA will ever initiate

enforcement proceedings against their non-nicotine-based e-liquids, and that in light of the

agency’s stated intention that it will review nicotine-free e-liquids on a “case-by-case” basis, any

challenge to that aspect of the regulation should wait until the agency decides to initiate an

enforcement proceeding. Defs.’ Cross-Mem. at 35–37.

But that line of reasoning has been rejected by binding D.C. Circuit precedent. In NAHB,

the plaintiffs challenged the issuance of certain permits by the Army Corps of Engineers under the

Clean Water Act. Id. at 1274. The Army Corps was authorized by statute to issue permits either

on a class-wide basis, or on a case-by-case basis. Id. The agency’s regulations required that a

“case-by-case” or “individual” permit be issued only after the agency completed a comprehensive

procedure, which included “site-specific documentation and analysis, public interest review,

public notice and comment, and, if necessary, a public hearing.” Id. at 1275. Plaintiffs challenged

the agency’s issuance of particular class-wide permits, and argued that the agency had exceeded

its statutory authority, and that it had acted in violation of the APA, when it issued certain

regulations surrounding those permits. Id. at 1277. The district court dismissed the case,

concluding that a plaintiff’s challenge was not a final agency action “until [his] individual permit

is rejected.” Id. at 1278.

But the Court of Appeals reversed the judgment of the district court, noting that the

question was better framed as a ripeness inquiry, and that the challenge was ripe for adjudication.

See id. at 1281. Plaintiffs, the Court of Appeals explained, were challenging the Army Corps’s

“statutory authority . . . and that the Corps failed to offer a reasoned basis for their [decision],” and

40

it held that those “purely legal” issues were ripe for adjudication. Id. at 1281–82. As to the Army

Corps’s argument that its decision was not “fit for review because their applicability to a given

activity remains within the Corps’[s] discretion,” the Court of Appeals replied, “[w]e have already

debunked this theory,” and it noted that just because “the Corps retains some measure of discretion

with respect to the [challenged decisions] does not make the [plaintiffs’] purely legal challenge

unripe.” Id. at 1282.

Plaintiffs here are in a similar posture to the plaintiffs in NAHB. The agency has indicated

that its enforcement activities against manufacturers who produce non-nicotine based e-liquids

will be undertaken on a case-by-case basis. Deeming Rule, 81 Fed. Reg. at 29,032. And while

defendants ask the Court to wait until the agency decides to enforce the statute on a manufacturer

of non-nicotine-based e-liquid, the Court can determine whether the statute authorizes the

regulation of those products in the first instance. The question in this case is not about whether

the regulation will apply to a particular nicotine-free e-liquid; the challenge is whether nicotine-

free e-liquids can be regulated at all. There may very well be future litigation about whether the

agency’s case-by-case review was lawful – but that is not the challenge being brought in this case.

So the Court can determine under Chevron whether the nicotine-free e-liquids at issue are

subject to regulation.

3. The agency’s interpretation of the definition of “tobacco product” to

include certain non-nicotine-containing e-liquids meets the Chevron

test.

Nicopure challenges whether the agency can lawfully regulate nicotine-free e-liquids. See

Nicopure Mem. at 9–14. Nicopure’s CEO has averred that 83% of the company’s products do

contain nicotine, Stamler Decl. ¶ 14, so the challenge relates to a relatively small percentage of the

liquids that Nicopure sells. The agency explains that the Deeming Rule only purports to regulate

nicotine-free e-liquids in three circumstances: (1) when e-liquids claiming to be nicotine-free

41

actually contain high levels of nicotine, Defs.’ Cross-Mem. at 37, quoting Deeming Rule, 81 Fed.

Reg. at 29,034; (2) when the e-liquid is tobacco flavored – because that flavor is “made or derived

from tobacco,” id., quoting Deeming Rule, 81 Fed. Reg. at 29,102; and (3) when the e-liquid is

reasonably expected to be mixed with liquid nicotine – because those liquids would be

“components or parts” of a tobacco product. Id., citing Deeming Rule, 81 Fed. Reg. at 29,017.

This approach comports with the statute.

There is no dispute in this case that e-liquids that are marketed as nicotine-free but that

actually contain nicotine, and e-liquids that are tobacco-flavored, are clearly and unambiguously

covered by the TCA’s definition of “tobacco product,” Chevron, 467 U.S. at 842, because both

are “made or derived from tobacco.” 21 U.S.C. § 321(rr)(1). 23 What Nicopure challenges is the

FDA’s authority to regulate those liquids that do not contain nicotine. 24

23 See Hr’g Tr. at 10:1–6 (conceding that plaintiffs are not challenging the agency’s authority

to regulate closed cartridge systems where the liquid in the system is nicotine that is made or

derived from tobacco); id. at 32:1–4 (not objecting to defendants’ argument that the agency can

regulate tobacco-flavored e-liquids).

24 While it may be true that some percentage of the Nicopure’s products are not tobacco based

and do not initially contain nicotine, see Stamler Decl. ¶ 6 (“Although some of Nicopure's e-liquid

products contain nicotine, others do not.”), any consumer who chooses to purchase a flavored

liquid online – including fruit or dessert flavored items with youthful appeal such as “grape vape”

or “cookie karma” – is immediately offered a choice to purchase the liquid at seven different levels

of nicotine content, ranging from 0 milligrams per milliliter to 24 milligrams per milliliter. See,

e.g., https://www.halocigs.com/e-liquid/premium-flavors/. So even e-liquids that do not “contain”

nicotine and sold with nicotine in them. Stamler avers that “of Nicopure’s approximately 950 e-

liquid SKU’s, 83% contain nicotine. The remaining e-liquid SKU’s do not contain nicotine and

are not made or derived from tobacco.” Stamler Decl. ¶ 14. But he does not specify what portion

of its sales ultimately involve that relatively small percentage of nicotine-free liquids, and of those,

which are sold to retail outlets where the nicotine can also be added, according to the users’

individual specifications. Indeed, the declaration makes clear that Nicopure’s open-system devices

are popular “because of their flexibility and options.” Id. ¶ 12.

42

The agency takes the position that it may lawfully regulate an e-liquid that does not contain

nicotine as a “component” of a tobacco product where the e-liquid “is intended or reasonably

expected to be used with or for the human consumption of a tobacco product (e.g., with liquid

nicotine).” Deeming Rule, 81 Fed. Reg. at 29,017. The Court must give the term “component”

its ordinary meaning, Petit, 675 F.3d at 781, and the burden is on the plaintiffs to show “that the

statute unambiguously forecloses the agency’s interpretation.” Id., quoting Vill. of Barrington,

636 F.3d at 661 (emphasis in original).

Plaintiffs advance the theory that because “Congress defined ‘tobacco product’ to mean a

product ‘made or derived from tobacco[,] FDA does not have license to extend that definition to

products not made or derived from tobacco, regardless of the circumstances.” Pls.’ Reply at 8.

But plaintiffs are ignoring the applicable half of the statutory definition. The agency is not relying

on a showing that nicotine-free e-liquids are “made or derived from tobacco” to justify its authority

to regulate them; it contends that a nicotine-free e-liquid is a “component” of a tobacco product

which is comprised of several components. Deeming Rule, 81 Fed. Reg. at 29,017.

This interpretation is not inconsistent with the TCA. The statutory definition of a regulable

“tobacco product” specifically includes any component of a tobacco product, 21 U.S.C. § 321(rr),

and if an ENDS device with nicotine or a tobacco derivative in it is, as plaintiffs acknowledge, a

tobacco product, then a nicotine-free liquid that gets added to the mix – to provide flavor or make

the inhalation experience less harsh – becomes a “component” of the tobacco product when it is

added.

So because plaintiffs have not met their burden to show “that the statute unambiguously

forecloses the agency’s interpretation,” Vill. of Barrington, 636 F.3d at 661, the agency’s

43

interpretation can be upheld at Chevron step one. 25 And plaintiffs have not proffered any reasons

for why it would be an unreasonable interpretation at step two.

II. The FDA’s decision to deem e-cigarettes to be tobacco products comports with the

APA.

In Count II of Nicopure’s complaint, and in Count II of RSF’s complaint, plaintiffs allege

that the decision to subject companies to premarket review is arbitrary and capricious in violation

of the Administrative Procedure Act. Nicopure Compl. ¶¶ 35–45; RSF Compl. ¶¶ 76–82. And in

Count III of Nicopure’s complaint and Count VIII of RSF’s complaint, plaintiffs allege that the

agency’s cost-benefit analysis was unlawful because the agency failed to consider alternatives and

failed to adequately quantify the costs and the benefits of the Deeming Rule. Nicopure Compl.

¶¶ 46–51; RSF Compl. ¶¶ 128–33.

Plaintiffs find fault in many aspects of the regulatory regime. But the requirements that

plaintiffs claim are unreasonable flow automatically from the statute. Thus, the only issue to be

resolved is whether the final agency action – the decision to deem ENDS products to be subject to

the TCA – was arbitrary and capricious. The remainder of plaintiffs’ concerns are better directed

to Congress.

It is important to note at the outset that the decision to deem e-cigarettes to be tobacco

products will not ban e-cigarettes from the market. It will unquestionably subject the products to

heightened regulation, but the deeming decision does not – and could not – completely ban those

products from the market. The question before the Court, therefore, is whether it was reasonable

25 Plaintiffs observe that under the terms of the statute, the agency may only regulate nicotine

that is made or derived from tobacco, and that therefore, it cannot regulate products containing

synthetic nicotine. Hr’g Tr. at 10:7–13; 11:10–17. But neither plaintiff seems to manufacture

products that contain synthetic nicotine – nicotine that is made or derived in a laboratory or from

other non-tobacco sources. See id. at 35:3–15. So the Court does not need to reach the issue of

whether the agency may lawfully regulate e-liquids that contain synthetic nicotine.

44

for the agency to conclude that vaping should no longer be completely unregulated, given the

marked increase in use, the absence of any regulation of the products and manufacturers in the

market, and the potential for public harm given the known dangers of nicotine.

Legal Standard

Under the Administrative Procedure Act, 5 U.S.C. § 701 et seq., the agency’s role

is to resolve factual issues and arrive at a decision that is supported by the administrative record,

and the court’s role is to “determine whether or not as a matter of law the evidence in the

administrative record permitted the agency to make the decision it did.” Occidental Eng’g

Co., 753 F.2d at 769–70, citing Overton Park, 401 U.S. at 415; see also Richards, 554 F.2d at

1177 & n.28. A court must “hold unlawful and set aside agency action, findings, and

conclusions” that are “arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law,” 5 U.S.C. § 706(2)(A), in excess of statutory authority, id. § 706(2)(C), or

“without observance of procedure required by law,” id. § 706(2)(D). However, the scope of

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

463 U.S. 29, 43 (1983). The agency’s decision is presumed to be valid, see Overton Park, 401

U.S. at 415, and the court must not “substitute its judgment for that of the agency.” State Farm,

463 U.S. at 43. A court must be satisfied, though, that the agency has examined the relevant

data and articulated a satisfactory explanation for its action, “including a ‘rational connection

between the facts found and the choice made.’” Alpharma, Inc. v. Leavitt, 460 F.3d 1, 6 (D.C.

Cir. 2006), quoting State Farm, 463 U.S. at 43.

The APA dispute is justiciable.

While the APA allows for judicial review of agency decisions for “[a] person suffering

legal wrong because of agency action, or adversely affected or aggrieved by agency action within

45

the meaning of a relevant statute,” 5 U.S.C. § 702, agency action is unreviewable “to the extent

that . . . agency action is committed to agency discretion by law.” Id. § 701(a)(2). Judicial review

is foreclosed where the relevant statute is “drawn so that a court would have no meaningful

standard against which to judge the agency’s exercise of discretion.” Heckler v. Chaney, 470 U.S.

821, 830 (1985); see also Sierra Club v. Jackson, 648 F.3d 848, 855 (D.C. Cir. 2011); Steenholdt

v. FAA, 314 F.3d 633, 638 (D.C. Cir. 2003). The Supreme Court has cautioned that this exception

to the APA should be construed narrowly. See Webster v. Doe, 486 U.S. 592, 599 (1988)

(“[S]ubsection (a)(2) applies ‘in those rare instances where statutes are drawn in such broad terms

that in a given case there is no law to apply.’”), quoting Overton Park, 401 U.S. at 410; Barlow v.

Collins, 397 U.S. 159, 166 (1970) (“Preclusion of judicial review . . . is not lightly to be inferred.”).

The Court has recently cautioned that there is a “strong presumption” in favor of judicial review

of administrative action, Mach Mining, LLC v. EEOC, 135 S. Ct. 1645, 1651 (2015), quoting

Bowen v. Mich. Acad. of Family Physicians, 476 U.S. 667, 670 (1986), which can be rebutted

where a “statute’s language or structure demonstrates that Congress wanted an agency to police

its own conduct.” Id.

The agency argues that its decision to deem is so committed to agency discretion that it is

unreviewable. Defs.’ Cross-Mem. at 39–40. It points to the deeming provision of the TCA, id. at

39, which gives the Secretary of HHS the authority to apply the TCA’s provisions “to any other

tobacco products that the Secretary by regulation deems to be subject to [the TCA],” 21

U.S.C.§ 387a(b), and it argues that “Congress’s choice of the deferential word ‘deems’ and the

absence of any standard – beyond the requirement that the product meet the definition of a ‘tobacco

product’ – demonstrate that Congress committed the exercise of this authority to the agency’s

broad discretion.” Defs.’ Cross-Mem. at 39.

46

The government relies primarily on Webster v. Doe, 486 U.S. 592 (1998) for the

proposition that the Secretary’s decision to “deem” is committed to agency discretion. See Defs.’

Cross-Mem. at 7–8. In Webster, the Supreme Court reviewed a provision of the National Security

Act of 1947, which provided that the Director of the CIA “may, in his discretion, terminate the

employment of any officer or employee of the Agency whenever he shall deem such termination

necessary or advisable in the interests of the United States.” Webster, 486 U.S. at 594, quoting 50

U.S.C. § 403(c). The Court observed that Congress gave the CIA responsibility “to protect all

sources of intelligence information from disclosure,” and thus vested “extraordinary deference [in]

the Director.” Id. at 601. The Court concluded that because “[s]hort of permitting cross-

examination of the Director concerning his views of the Nation’s security and whether the

discharged employee was inimical to those interests,” there was “no basis on which a reviewing

court could properly assess an Agency termination decision.” Id. at 600.

The D.C. Circuit disagreed with government’s reading of Webster in Marshall County

Health Care Authority v. Shalala, 988 F.3d 1221 (D.C. Cir. 1993). In Marshall County, the

government cited Webster for the proposition that it was the word “deem” in the National Security

Act in Webster that made the Director’s decision unreviewable. See id. at 1224. The Court of

Appeals rejected that argument; it explained that that lack of justiciability in Webster stemmed not

from the word “deem,” but rather from the phrase “advisable in the interests of the United States.”

Id. And it noted that in Webster, “[t]he statute, after all, dealt with national security – an area in

which the judiciary almost invariably defers to the executive branch.” Id.

In this case, when the Secretary exercised the authority to “deem” e-cigarettes to be tobacco

products, the agency was interpreting the statutory definition of “tobacco product.” So while it is

47

true that the statute did not provide standards for when and how the agency was to exercise its

discretion to deem, the Court concludes that the decision is reviewable.

However, the language of the deeming provision – with its use of the words “may” and

“deem,” is the kind of language that, even if judicial review is permitted, “fairly exudes deference.”

Webster, 486 U.S. at 600. And the Court of Appeals has reaffirmed that APA review in cases like

this one should be undertaken with deference. See Nuclear Energy Inst., Inc. v. EPA, 373 F.3d

1251, 1289 (D.C. Cir. 2004) (advising that when a court reviews an agency’s evaluation of

“scientific data within its technical expertise,” its review should be “extremely deferential”),

quoting Huls Am. Inc. v. Browner, 83 F.3d 445, 452 (D.C. Cir. 1996). Courts review scientific

judgments of the agency “not as the chemist, biologist, or statistician that [courts] are qualified

neither by training nor experience to be, but as a reviewing court exercising [its] narrowly defined

duty of holding agencies to certain minimal standards of rationality.” Ctr. for Biological Diversity

v. EPA, 749 F.3d 1079, 1087–88 (D.C. Cir. 2014) (quoting “[d]ecades of decisions” of the Court

of Appeals on scientific deference), quoting Ethyl Corp. v. EPA, 541 F.2d 1, 36 (D.C. Cir. 1976).

The Court’s APA review must therefore be undertaken with that deference in mind.

The FDA’s decision to deem e-cigarettes to be tobacco products is reasonable

and supported by the record.

The decision to deem e-cigarettes to be tobacco products is not arbitrary and capricious for

a number of reasons. First and foremost, nicotine is indisputably harmful. Deeming Rule, 81 Fed.

Reg. at 28,988 (describing nicotine as “one of the most addictive substances used by humans”).

There is evidence in the record that e-cigarettes “may deliver as much nicotine as other tobacco

products,” id. at 29,029, 29,031, and even when they deliver less amounts of nicotine, “lower levels

of nicotine . . . still have the potential to addict users.” Id. at 29,031.

48

Second, the agency explained that “adolescents appear to be particularly vulnerable to the

adverse effects of nicotine on the central nervous system,” and that nicotine may have lasting

effects on adolescent brain development. Id. at 29,029, 29,033. And the agency detailed the

“alarming” rise in e-cigarette use by middle and high school students. Id. at 29,028. In particular,

the agency cited data showing that “the rate of e-cigarette use” among high school students

“increased from 1.7 percent in 2011 to 7.7 percent in 2013, and 2.7 percent of high school students

who had never tried a cigarette indicated that they were considering using e-cigarettes in the next

year.” Id. While the agency acknowledged that “long-term studies are not yet available to

determine whether these youth and young adults are only experimenting with tobacco use,

becoming established ENDS users or dual users, or transitioning to combusted products,” it also

noted the absence of evidence that would enable it “to conclude that youth and young adults are

using ENDS as a means to quit smoking.” Id. The FDA also explained that “[r]esearchers noted

that some teens are more likely to use e-cigarettes prior to combustible tobacco products for several

reasons including the availability of e-cigarettes in flavors attractive to youth.” Id. at 28,985.

Moreover, the increase in adolescent users is not the entire story. Among adults, the use

of e-cigarettes has more than doubled between 2012 and 2014 – from 1.4 percent to 3.7 percent.

See AR 23,871, AR 15,666. And the agency found that:

[E]vidence from the most recent studies on ENDS use among young adults

and adults indicates that among adults who had never smoked cigarettes,

prevalence of ever e-cigarette use was highest among young adults aged 18

to 24 and decreased with increasing age. However, current cigarette

smokers and recent former smokers (i.e., those who quit smoking within the

past year) were more likely to use e-cigarettes than long-term former

smokers (i.e., those who quit smoking more than 1 year ago) and adults who

had never smoked. Current cigarette smokers who had tried to quit in the

past year were also more likely to use e-cigarettes than those who had not

tried to quit. It is noted that it cannot be determined by the research findings:

(1) Whether former cigarette smokers who now exclusively use e-cigarettes

would not have ceased smoking cigarettes regardless of e-cigarette use; and

49

(2) whether the e-cigarette use preceded quitting or the quitting occurred

first and then was followed by later e-cigarette use.

Deeming Rule, 81 Fed. Reg. at 28,985.

Furthermore, given the proliferation of these products, “[a]t present, there is significant

variability in the concentration of chemicals amongst products – including variability between

labeled content and concentration . . . and actual content and concentration.” Deeming Rule, 81

Fed. Reg. at 28,984. In other words, the manufacturers, if they remain unregulated, are free to

mislabel their products without consequence. See id. at 29,034; id. at 29,029 (“Absent a regulatory

standard, FDA acknowledges that it may not be possible to account for the wide variability of

concentrations of constituents in [e-cigarette] flavors.”). So the agency concluded that requiring

premarket review of e-cigarettes, and regulating modified-risk claims, would benefit public health.

In light of all of those findings, and in light of the deference that the Court must give the

agency on APA review, the Court finds that there is a rational relationship between the facts found

and the choice made. See Alpharma, 430 F.3d at 6. The Court’s conclusion is buttressed by these

Congressional findings in the TCA, which apply with equal force to the regulation of e-cigarettes:

x “Nicotine is an addictive drug,” TCA § 2(3);

x “Virtually all new users of tobacco products are under the minimum legal

age to purchase such products,” id. § 2(4);

x “Tobacco advertising and marketing contribute significantly to the use of

nicotine-containing products by adolescents,” id. § 2(5);

x “Because past efforts to restrict advertising and marketing of tobacco

products have failed adequately to curb tobacco use by adolescents,

comprehensive restrictions on the sale, promotion, and distribution of such

products are needed,” id. § 2(6);

x “It is in the public interest for Congress to enact legislation that provides

the Food and Drug Administration with the authority to regulate tobacco

products and the advertising and promotion of such products,” id. § 2(12);

x “It is essential that the Food and Drug Administration review products sold

or distributed for use to reduce risks or exposures associated with tobacco

50

products and that it be empowered to review any advertising and labeling

for such products,” id. § 2(36);

x “It is also essential that manufacturers, prior to marketing such products, be

required to demonstrate that such products will meet a series of rigorous

criteria, and will benefit the health of the population as a whole, taking into

account both users of tobacco products and persons who do not currently

use tobacco products.” Id. 26

Plaintiffs’ arguments that the Rule is arbitrary and capricious are not

persuasive.

Plaintiffs argue that the decision to deem e-cigarettes to be tobacco products is arbitrary

and capricious because the Deeming Rule is “at war with itself regarding the rationale for

regulating vaping products;” it will “undermine the TCA’s core goal of reducing the deaths and

disease resulting from use of tobacco products;” and it “fails to consider numerous alternatives

that would avoid a ‘significant degree of product exit’ while still achieving Congress’s public-

26 The legislative history reflects that Congress was well aware of the advent of e-cigarettes

at the time that the TCA was passed. Defs.’ Cross-Mem. at 28 & n.9, citing 155 Cong. Rec. H6626

(June 12, 2009) (statement of Rep. Buyer) (“[I]n the marketplace right now, there are many

different types of products . . . [Y]ou have an electronic cigarette, whereby it’s a nicotine delivery

device.”), and 155 Cong. Rec. H4367 (Apr. 1, 2009) (statement of Rep. Buyer) (expressing

concern that “these new innovative types of nicotine delivery devices could not make their access

to the market.”); 155 Cong. Rec. S6010 (June 3, 2009) (statement of Sen. Burr) (“Then we have a

new category called electronic cigarettes . . . It actually runs off a battery. It extracts the nicotine

and delivers it into the system in a totally different way than the tobacco-headed cigarette.”).

Indeed, Senator Burr seemed to propose that all electronic cigarettes should be “grandfathered” in

to the SE pathway. 155 Cong. Rec. S6335–36 (June 9, 2009) (statement of Sen. Burr) (“There are

electronic cigarettes . . . and other products that have less risk. All those products in February

2007 were not in the marketplace. They are banned. They are eliminated. What are we asking

the FDA to do? We are asking them to grandfather three categories of products and let all adults

who choose to use a tobacco product choose from the most risky categories . . . Any claim – any

claim – that [the proposed TCA] reduces the cost of health care is only because we have

grandfathered in smokers who will die sooner, not that we have allowed them a pathway through

this bill to ever experience not only products that are currently on the marketplace that reduce the

risk from 100 percent to as little as 1 percent, but we have completely eliminated any additional

innovation in product in the future . . . .”). The fact that Congress passed the TCA in its current

form notwithstanding the concerns raised by Congressman Buyer and Senator Burr provides

further support for the conclusion that the Secretary’s decision to deem e-cigarettes to be tobacco

products, and therefore subject to premarket review, is reasonable and fully consistent with the

intent of the statute.

51

health objective.” Nicopure Mem. at 15–26. And RSF seems to argue that the decision to subject

e-cigarettes to the premarket review requirement is arbitrary and capricious because the agency

“offers no evidence or explanation as to how such manufacturers will be able to conduct the

necessary long-term clinical health studies, which FDA concedes do not exist, within the two year

compliance period.” RSF Compl. ¶ 79.

Once the Secretary of HHS made the decision to deem ENDS as tobacco products, the

requirement of premarket review is established by statute. So the question is not whether it is

arbitrary and capricious to make these plaintiffs comply with those requirements. The question is,

instead, whether it was reasonable for the agency to determine that it was appropriate to subject

ENDS products – the majority of which plaintiffs agree are covered by the statute – to the

regulatory regime that Congress specifically determined must be imposed on all tobacco products.

Nicopure also argues that the Deeming Rule ignores evidence “that vaping products are far

less risky than cigarettes.” Nicopure Mem. at 19 (emphasis in original). It states that the agency

has disregarded evidence that “inhalation of e-vapor ‘is of less risk to a user than the inhalation of

. . . smoke from combusted tobacco products,’ and that use of vaping products ‘is likely less

hazardous for an individual user than continued smoking of traditional cigarettes.’” Id., quoting

Deeming Rule, 81 Fed. Reg. at 29,033, 29,035. For that reason, Nicopure argues that the Rule is

“at war with itself.” Nicopure Mem. at 15–16. But this argument is not persuasive. Just because

there is evidence that e-cigarettes may be less risky than conventional cigarettes does not mean

that e-cigarettes are not risky at all, and the agency detailed its concerns about the addictive nature

and health risks of nicotine inhalation alone, particularly in adolescents. See Deeming Rule, 81

Fed. Reg. at 28,981 (“The Surgeon General has long recognized that the addictive nature of

tobacco products is due to the presence of highly addictive nicotine that can be absorbed into the

52

bloodstream.”); id. at 28,983–85 (“FDA noted in the [notice of proposed rulemaking] that many

public health benefits will flow from deeming tobacco products (including e-cigarettes and other

ENDS). Even if a category of products were to prove generally beneficial, individual products

within that category may raise concerns. For example, some products may be particularly

attractive to youth or deliver unexpected high levels of toxicants.”).

Moreover, the record before the agency included a substantial volume of comments

submitted by public health organizations such as the American Academy of Family Physicians,

the American Academy of Pediatrics, the Cancer Action Network, the American Heart

Association, the American Lung Association, and the American Psychological Association – all

of which urged the agency to “strengthen[]” and make “comprehensive” the proposed Deeming

Rule, in order to “prevent the manufacturers of tobacco products from designing and marketing

their products in ways that undercut the full potential of the Tobacco Control Act to achieve its

lifesaving objectives.” Comments of 24 Public Health Organizations to the Proposed Deeming

Rule (Dkt. No. FDA-214-N-0189) (Aug. 8, 2014) at 4; see also AR 145,543 (including the first

page of those comments). Given the deference that the Court gives to scientific judgments, Ctr.

for Biological Diversity, 749 F.3d at 1087–88, the Court finds that plaintiffs’ objections do not

overcome the agency’s scientific judgment that regulation of ENDS products under the TCA is in

the interest of public health.

The agency appropriately rejected plaintiffs’ suggested regulatory

alternatives.

As the D.C. Circuit has explained, agencies “ha[ve] wide discretion to determine where to

draw administrative lines,” ExxonMobil Gas Mktg. Co. v. FERC, 297 F.3d 1071, 1085 (D.C. Cir.

2002), quoting AT&T Corp. v. FCC, 220 F.3d 607, 627 (D.C. Cir. 2000), and courts “are generally

unwilling to review line-drawing performed by [the agency] unless a [challenger] can demonstrate

53

that the lines drawn . . . are patently unreasonable, having no relationship to the underlying

regulatory problem.” Id., quoting Cassell v. FCC, 154 F.3d 478, 485 (D.C. Cir. 1998). But

agencies must also consider “reasonable alternatives” as part of the requirement of “reasoned

decisionmaking.” See Am. Gas Ass’n v. FERC, 593 F.3d 14, 19 (D.C. Cir. 2010); see also State

Farm, 463 U.S. at 43 (requiring agencies to “articulate a satisfactory explanation for its action

including a rational connection between the facts found and the choice made.”).

Nicopure argues that the agency failed to “meaningfully” consider alternatives to the

premarket review requirement, including three options in particular. Nicopure Mem. at 21. First,

Nicopure contends that the agency should have waited to deem until the agency had “sufficient

data to reach a conclusion – one way or the other – regarding the health effects of vaping products

before choosing whether and how to regulate them.” Id. at 23 (emphasis in original). Second,

Nicopure contends that the agency should have adopted the European Union’s approach to

regulating vaping products, which includes many of the same requirements, but does not require

premarket review. Id. at 24. Third, Nicopure faults the agency for failing to consider “crafting a

streamlined [premarket review] process for products, such as vaporizers, that fall on the safer side

of the risk continuum.” Id.

The law is clear that plaintiffs are not entitled to the regulatory alternative that they prefer.

Rather, the Court must give appropriate deference to the expertise of the agency, and ensure that

the agency considered the alternatives proffered by the plaintiffs and rejected them for reasons that

are rational.

And it bears repeating that premarket review is a creature of statute and not a new

regulatory requirement dreamed up and imposed on ENDS manufacturers by the FDA. The EU

model would subject manufacturers to disclosure, advertising, good manufacturing practices,

54

misbranding, and other requirements, but it would not require manufacturers to obtain premarket

review. See Nicopure Mem. at 24. Whatever one might think about the benefits of the EU

approach as a policy matter, a rule that adopted that approach would have been contrary to the

TCA, because the TCA requires that all tobacco products must undergo some kind of premarket

review. 21 U.S.C. § 387j(a). Plaintiffs argue that the agency could exercise enforcement

discretion – and that it exercised similar discretion in allowing for an extended compliance

schedule. See Pls.’ Reply at 18. There is certainly nothing in the statute or the Rule that would

bar the parties from engaging in constructive negotiations to establish a more manageable timeline.

But the fact that there may be reasons for the agency to be flexible when implementing the

premarket review requirements does not mean it was unreasonable for the agency to decline to

adopt the EU approach and eliminate premarket review altogether. See Deeming Rule, 81 Fed.

Reg. at 28,998.

Similarly, plaintiffs’ argument about a “streamlined” premarket review process,

see Nicopure Mem. at 24, finds little support in the TCA, and the agency appropriately rejected

that argument as well. See Deeming Rule, 81 Fed. Reg. at 28,998. As the agency concluded, “all

tobacco products going through the [premarket] pathway must meet all the requirements for a

premarket authorization in section 910 of the [FDCA] before FDA can issue such an

authorization.” Id.

Finally, the agency did consider the suggestion that it should defer the deeming regulation

indefinitely, and it rejected it, finding that it did not have to “meet a particular public health

standard to deem tobacco products.” See Deeming Rule, 81 Fed. Reg. at 28,983. And it supported

its decision by setting out the public health benefits of the rule in great detail. Id. at 28,983–85.

55

The decision not to change the grandfather date for substantially equivalent

products is not arbitrary and capricious.

In Count I of the Right to be Smoke-Free complaint, plaintiffs complain that under the

Deeming Rule, no ENDS products will be able to utilize the substantial equivalence pathway for

approval, and this will “effectively ban ENDS products from the marketplace.” RSF Compl. ¶ 74.

RSF alleges: “FDA had the authority and statutory duty to either establish a new Grandfather Date

for ENDS products or apply its enforcement authority so that some ENDS manufacturers,

including e-liquid companies, would have the opportunity to forego the [premarket review]

pathway and avail themselves of the option to submit SE reports.” Id. ¶ 75. But here again, RSF’s

complaint about the impact of the grandfather date provision is better directed to Congress than

the FDA.

As the Court explained in the background section of this opinion, one way to get a new

tobacco product approved under the TCA is to show that it is “substantially equivalent” to an

existing tobacco product. 21 U.S.C. § 387j(a). This pathway is only available to existing or

“predicate” products that had been “commercially marketed . . . in the United States as of February

15, 2007.” 21 U.S.C. § 387j(a)(2)(A). So, to the extent that there were no “substantially

equivalent” ENDS products on the market as of that date, the substantial equivalence pathway

would not provide a pathway to seek approval of that product.

Thus, it was Congress that set the grandfather date in the TCA, and RSF has not pointed

the Court to any authority for the proposition that the agency can ignore a statutory command.

RSF argues that “[w]hen viewed in the TCA’s overall statutory context, it is apparent that Congress

did not intend for the February 15, 2007 grandfather date to be strictly applied to all categories of

deemed products.” RSF Mem. at 18. But “the starting point for interpreting a statute is the

language of the statute itself.” CPSC v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980). The statute

56

unambiguously points to a specific date – February 15, 2007 – and it contains no exceptions for

items deemed to be tobacco products in the future. 21 U.S.C. § 387j(a)(2)(A). 27 While the Court

is sympathetic to RSF’s policy argument that as new products come to market, the grandfather

date will become obsolete, see RSF Mem. at 18–19, the path forward is to seek an amendment to

the statute, which is already underway. Hr’g Tr. at 57:22–58:1 (“THE COURT: Isn’t your

problem with Congress and not the agency? And aren’t you already working on that right now?

[Counsel for RSF]: We are. There are two bills in front of Congress right now.”).

The statute is clear, and FDA had no power to change it. So RSF’s challenge to the

grandfather date fails.

FDA’s imposition of compliance deadlines was not arbitrary and capricious.

Under the terms of the Rule, a manufacturer who wishes to submit a premarket review

application must do so by August 8, 2018 – twenty-four months after the Rule became effective.

Deeming Rule, 81 Fed. Reg. at 28,978. After August 8, 2018, FDA will continue the compliance

period for at least twelve more months, and, on a case-by-case basis, it will defer enforcement

further to give the agency the time it needs to review and determine whether to grant the requests.

Id.

RSF alleges in Count II that the agency’s decision to establish a two-year compliance

period to comply with the premarket review requirement was arbitrary and capricious because

companies will not be able to complete the necessary applications in the required timeframe. RSF

Compl. ¶¶ 77–82. The Court finds that the agency reasonably balanced the competing comments

it received, from the view that FDA should “craft the [premarket review] process to acknowledge

27 This is true notwithstanding the legislative history that reveals that this very issue was

raised at the time the statute was under consideration. See footnote 25, supra, quoting 155 Cong.

Rec. S6335–36 (June 9, 2009) (statement of Sen. Burr).

57

the position of e-cigarettes on the continuum of nicotine-delivering products,” to the position that

the FDA should “impose strict regulations on the sale of e-cigarettes, including extensive

premarket review, to ensure that future generations are not burdened by nicotine addiction.”

Deeming Rule, 81 Fed. Reg. at 29,000.

The FDA explained:

Some comments expressed concern about the extended availability of

newly deemed, new tobacco products without scientific review. Others

provided additional data regarding youth and young adult use of flavored

tobacco products. In addition, other comments discussed the potential

public health benefits from the availability of certain flavored newly

deemed products . . . . Taking the diverse comments on these issues, as well

as the uncertainty regarding the positive or negative impact on public health

from products like ENDS, into account, FDA has decided to implement the

compliance policy with staggered initial compliance periods based on the

expected complexity of the applications, followed by continued compliance

periods for FDA review, such that our enforcement discretion will end

twelve months after each initial compliance period. Under the policy

described here for the staggered compliance periods, and while FDA is

conducting its review of marketing applications during the continued

compliance period, the Agency does not intend to take enforcement action

against products remaining on the market for failure to have a premarket

authorization order.

Id. at 29,010

While other approaches may have been reasonable as well, the Court is not persuaded that

the agency’s decisions about whether to impose a compliance period at all, and how long a period

would be necessary, are irrational given the range of viewpoints that had been presented during

the notice and comment period. See Alpharma, 460 F.3d at 6. Therefore, the Court concludes that

the agency’s imposition of a compliance period did not violate the APA.

RSF argues that if the Deeming Rule is not vacated, “FDA risks banning or nearly

eliminating the e-liquid and device categories from the market when the two year [premarket

review] compliance period expires.” RSF Mem. at 21. RSF is particularly concerned because

58

premarket review applications usually require long-term clinical studies, and those studies do not

currently exist. See id. at 25; see also Deeming Rule, 81 Fed. Reg. at 28,984, 29,028.

But the FDA specifically took that issue into consideration, and plaintiff’s concerns are

somewhat premature. The Deeming Rule recognizes that “in some cases, it may be possible for

an applicant to obtain a [premarket review] authorization order without conducting any new

nonclinical or clinical studies where there is an established body of evidence regarding the public

health impact of the product.” Deeming Rule, 81 Fed. Reg. at 28,997. And on the day that the

agency promulgated the Deeming Rule, it also issued a draft guidance on premarket review

applications. See Draft FDA Guidance for Industry, Premarket Tobacco Product Applications for

Electronic Nicotine Delivery Systems (May 2016), AR 28,350. The guidance recognizes that a

marketing authorization may issue “if there is an established body of evidence regarding the health

impact (individual or population) of [a] product or a similar product that can be adequately bridged

to [that] product, such as data from the published literature or government-sponsored databases.”

Id., AR 28,395–96.

III. The Deeming Rule is not invalid due to any deficiencies in the cost-benefit analysis.

In Count III of the Nicopure complaint and in Count VIII of the Right to be Smoke-Free

complaint, plaintiffs allege that the Deeming Rule violates the APA because the agency’s cost-

benefit analysis was insufficient. Nicopure Compl. ¶¶ 47–51; RSF Compl. ¶¶ 129–33. But the

agency was not required to undertake a cost-benefit analysis when it implemented the statutory

deeming provision. And even if “some” cost-benefit analysis was required, the agency did “some”

analysis in this case, and there is no legal authority for the proposition that the Court has the

authority to review it de novo as plaintiffs seem to be asking it to do. Because the balance struck

by the agency was reasonable, the Court finds that the cost-benefit analysis was adequate.

59

The agency was not required to do a cost-benefit analysis.

Plaintiffs point to the Supreme Court’s recent decision in Michigan v. EPA, 135 S. Ct. 2699

(2015) as support for their contention that the FDA was required to complete a cost-benefit analysis

before taking action under the deeming provision. See Nicopure Mem. at 26–27. But that decision,

which involved a statutory obligation to undertake the analysis, does not apply in this case.

The opinion in Michigan v. EPA concerned the provision of the Clean Air Act related to

electric utility steam generating units. 135 S. Ct. at 2705. In the Act, Congress directed the EPA

to conduct a study of the public health hazards related to emissions from these power-plants, and

it required the agency to regulate the emissions “if the Administrator finds such regulation is

appropriate and necessary after considering the results of the study.” 42 U.S.C. § 7412(n)(1)(A).

Faced with this mandatory language, the EPA determined “that cost [made] no difference to the

initial decision to regulate,” Michigan, 135 S. Ct. at 2706, and it read the Clean Air Act to preclude

the consideration of “any type of cost” as part of the decision of whether or not to regulate the

emissions. Id. at 2707 (emphasis in original).

However, the Supreme Court ruled that it was implicit in the use of the specific words

“appropriate and necessary” that some consideration of cost should be part of the analysis. Id. at

2707. Therefore, it concluded that “it was unreasonable for EPA to read § 7412(n)(1)(A) to mean

that cost is irrelevant to the initial decision to regulate power plants.” Id. at 2711.

Here the statutory provision at issue does not include the words that led the Supreme Court

in Michigan v. EPA to call for some assessment of costs as part of the decision that had been

delegated to the agency. The Tobacco Control Act mandates that tobacco products “shall” be

regulated by the Secretary, and it requires that its provisions be applied not only to conventional

cigarettes, but also to “any other tobacco products that the Secretary by regulation deems to be

60

subject to this chapter.” 21 U.S.C. § 387a(b). The statute does not limit the Secretary’s authority

to deem to when he finds it “appropriate and necessary” to do so. Therefore, plaintiffs can point

to no source for a requirement that costs be taken into account when the deeming power is

exercised, and Michigan v EPA is distinguishable. 28

Plaintiffs have scoured the rest of the statute, though, and they point to one of the ten stated

purposes of the TCA: “to impose appropriate regulatory controls on the tobacco

industry.” Nicopure Mem. at 27, quoting TCA § 3(8). They argue that the use of the word

“appropriate” in the background section of the statute requires the agency to evaluate costs when

exercising its authority under the deeming provision. Id. But plaintiffs have not pointed to any

legal precedent that would authorize a court to add limits to a statutory provision that contains no

limits simply because the word “appropriate” can be found in another part of the legislation, much

less any case law that would imply statutory prerequisites from a general, introductory statement

of purpose. Michigan v. EPA certainly does not go that far. 29

Even if the plaintiffs were correct in their assertion that one should look to the introductory

sections of a statute to shed light on a clear statutory directive, a review of the entire set

Congressional findings that accompany the TCA reinforces the conclusion that the legislature did

28 Indeed, the Supreme Court observed that even when the words “appropriate and necessary”

do appear, “[t]here are undoubtedly settings in which the phrase . . . does not encompass cost,”

Michigan, 135 S. Ct. at 2711; there is nothing in the opinion that requires a cost-benefit analysis

when they do not appear.

29 Plaintiffs assert that Michigan v. EPA “forecloses” the defendant’s argument to this effect,

Pls.’ Reply at 24, but here they misread the decision again. In Michigan, the Supreme Court

rejected the EPA’s argument that since other parts of the Clean Air Act expressly mentioned cost,

one could not imply a cost-benefit analysis to be necessary in section 7412(n)(1)(A) in the absence

of an explicit requirement there. 135 S. Ct. at 2708–09. But the “appropriate and necessary”

language that was read to impose the requirement to consider costs was found in the very provision

of the Clean Air Act that was under review; the Court did not suggest that it could be imported

from some other general introductory statements found elsewhere in the statute.

61

not intend to circumscribe the agency’s authority. See, e.g., TCA § 2(12) (finding that “it is in the

public interest for Congress to enact legislation that provides the Food and Drug Administration

with the authority to regulate tobacco products and the advertising and promotion of such products.

The benefits to the American people from enacting such legislation would be significant in human

and economic terms”); id. § 2(36) (finding that the FDA’s authority to review modified-risk claims

and to require premarket review of tobacco products “will benefit the health of the population as

a whole”); id. § 2(44) (finding that the “Food and Drug Administration is a regulatory agency with

the scientific expertise to identify harmful substances in products to which consumers are

exposed,” and that the agency “routinely makes decisions about whether and how products may

be marketed in the United States”). Congress’s statements of purpose further emphasize the

breadth and legitimacy of the agency’s authority, and they weigh against plaintiffs’ attempt to read

hurdles into the deeming provision that are not supported by the text of the provision itself. See,

e.g., TCA § 3(1) (explaining that the purpose of the TCA is “to provide authority to the [FDA] to

regulate tobacco products under the [FDCA], by recognizing it as the primary Federal regulatory

authority with respect to the manufacture, marketing, and distribution of tobacco products”); id.

§ 3(3) (explaining that another purpose of the TCA is “to authorize the [FDA] to set national

standards controlling the manufacture of tobacco products and the identity, public disclosure, and

amount of ingredients used in such products”). For all of these reasons, the Court finds that the

decision in Michigan v. EPA did not impose any requirement that the FDA assess the costs of

compliance before deeming e-cigarettes to be tobacco products.

Even if Michigan v. EPA does apply, the agency complied with its

requirements.

Moreover, the problem in Michigan was that the agency failed to conduct any cost-benefit

analysis at all, and the Court concluded that the “appropriate and necessary” language gave rise to

62

a requirement to conduct some consideration of costs. Michigan, 135 S. Ct. at 2711 (holding that

it was “unreasonable for EPA to read § 7412(n)(1)(A) to mean that cost is irrelevant to the initial

decision to regulate power plants,” and requiring the agency to “consider cost – including, most

importantly, cost of compliance – before deciding whether regulation is appropriate and

necessary”). The Court made it quite clear that it did not read the statute to require a formal cost-

benefit analysis, and it underscored that it would not dictate what the assessment should consist

of.

We need not and do not hold that the law unambiguously required the

Agency, when making this preliminary estimate, to conduct a formal cost-

benefit analysis in which each advantage and disadvantage is assigned a

monetary value. It will be up to the Agency to decide (as always, within

the limits of reasonable interpretation) how to account for cost.

Id.

Here, the administrative record reflects that the agency expressly considered both the

burdens the decision would impose on the vaping industry and the benefits to the public. See

Deeming Rule, 81 Fed. Reg. at 28,980. Thus, even if the agency was bound by the decision in

Michigan v. EPA to pay “some attention to cost,” 135 S. Ct. at 2707, that was done in this case,

and the decision cannot be overturned on that basis.

The agency’s consideration of costs and benefits satisfied the APA.

Plaintiffs contend that the Court should reject the outcome of the agency’s assessment of

costs and benefits under the APA. But the Supreme Court made it clear in that even when such an

analysis is required, the Court cannot review it de novo. See Michigan, 135 S. Ct. at 2711 (“It will

be up to the agency to decide (as always, within the limits of reasonable interpretation) how to

account for cost.”).

In situations where a cost-benefit analysis is required by the applicable statute, the Court

must analyze the agency’s decision making with deference. See Consumer Elecs. Ass’n v. FCC,

63

347 F.3d 291, 303 (D.C. Cir. 2003) (holding that the principle set forth in State Farm that “a court

is not to substitute its judgment for that of the agency” is “especially true when the agency is called

upon to weigh the costs and benefits of alternative policies”), quoting Ctr. for Auto Safety v. Peck,

751 F.2d 1336, 1342 (D.C. Cir. 1985); see also Am. Trucking Ass’ns, Inc. v. Fed. Motor Carrier

Safety Admin., 724 F.3d 243, 254 (D.C. Cir. 2013) (“It is not for us to undertake our own economic

study and substitute the Court’s views for those of the agency.”). When a court reviews a challenge

to an agency’s cost-benefit analysis, its role is limited to determining “whether the decision was

based on a consideration of the relevant factors and whether there has been a clear error of

judgment,” Ctr. for Auto Safety, 751 F.2d at 1342, quoting State Farm, 463 U.S. at 43, because

“[s]uch cost-benefit analyses epitomize the types of decisions that are most appropriately entrusted

to the expertise of an agency.” Id., quoting Office of Commc’n of United Church of Christ v. FCC,

707 F.2d 1413, 1440 (D.C. Cir. 1983). Thus, the plaintiffs must overcome a high threshold to

show error. Am. Trucking Ass’ns, 724 F.3d at 254, quoting NAHB, 682 F.3d at 1040. With that

deference in mind, the Court concludes that the balance the agency struck in this case was

reasonable.

The FDA prepared a Regulatory Impact Analysis which weighed the costs and benefits of

the Deeming Rule, see AR 23,912–24,067 (“RIA”). In the RIA, the agency described the benefits

of the Deeming Rule as “potentially coming from”:

x premarket review, which will result in fewer harmful or addictive

products from reaching the market than would be the case in the

absence of the rule;

x youth access restrictions and prohibitions on free samples, which

can be expected to constrain youth access to tobacco products and

curb rising uptake;

x health warning statements, which will help consumers understand

and appreciate the risks of using tobacco products;

64

x prohibitions against false or misleading claims and unsubstantiated

modified risk claims; and

x other changes, such as FDA monitoring of product developments

and changes and required ingredient listings.

Id. at AR 23,978. While the agency conceded that it could not “quantify the benefits of the final

rule due to lack of information and substantial uncertainties associated with estimating its effects,”

it concluded that the rule was justified in light of those “welfare gains.” Id. It explained:

Asserting our authority over these tobacco products will also enable FDA

to take further regulatory action in the future as appropriate for the

protection of public health. These further regulatory actions would be

expected to yield benefits in turn. The rule will enable FDA to determine

the number of regulated entities, establish effective compliance programs,

and monitor the number and types of products that are being marketed to

the public. It will also authorize the agency to take enforcement action

against adulterated or misbranded products, reducing the potential public

health dangers of such products. By asserting authority over all products

that meet the statutory definition of tobacco product (except for accessories

of the newly deemed tobacco products), FDA will also be correcting any

possible misperception that, because certain tobacco products are not

regulated, they must be safe.

Id. at 23,973. While the agency conceded in the RIA that “[r]eliable evidence on the impacts of

. . . premarket review, and marketing restrictions on users of . . . ENDS does not, to our

knowledge, exist,” it concluded that the Deeming Rule was justified by “the welfare gains” of the

rule, which “would be equal to the value that affected individuals attribute to mechanisms that

better align consumption and production decisions with socially optimal patterns.” Id.

And as to costs, the agency began its assessment in the RIA by attempting to quantify the

number of affected entities. It found that “the baseline number of manufacturers and importers of

ENDS products is uncertain,” but it estimated that there were between 640 and 800 ENDS devices

on the market, and between 19,900 to 79,800 e-liquid mixtures on the market. RIA, AR 23,980,

23,989 (Table 6). In light of an industry survey that found that “[t]oo many companies are making

e-liquid in their kitchens/bathrooms,” the FDA concluded that “few if any of [those companies]

65

will continue to manufacture after this final rule takes effect,” and so it limited its analysis to “the

formal manufacturers in the market.” Id. at 23,980.

The agency identified three main potential costs: product consolidation, compliance, and

market adjustment.

x Product consolidation. Because “nearly all ENDS products will be subject

to premarket review,” the agency predicted “considerable product

consolidation and exit.” RIA, AR 23,989–90. It assumed that “54 percent

of delivery systems and somewhere between 50 and 87.5 percent of e-

liquids [would] not submit a marketing application and will exit the market

after the initial compliance period . . . ends.” RIA, AR 23,990. The agency

made the assumption that “90 percent of products seeking marketing

authorization will obtain marketing authorization,” which the agency

explained was “comparable to the high end of observed medical product

approval rates.” Id. at 23,990 & n.38. So, after the compliance period ends,

the agency anticipated that between 266 to 332 vaping devices, and between

900 to 1,800 e-liquids would remain on the market. Id. at 23,991 (Table 7).

But the agency also noted that the cost of product exit would be mitigated

by the increase in the “overall quality level of the products in the market

compared to the quality level that would otherwise prevail” without the

premarket review process. Id.

x Compliance costs. The agency conceded that “[e]stimating expected costs

of submitting [premarket review applications] is made complicated not only

by the flexibility firms have to decide on how best to provide the

information in the [premarket review application], but also by the diversity

of products in the ENDS category.” RIA, AR 23,997. That difficulty

notwithstanding, the agency estimated that an initial premarket review

application – covering up to fifteen products per application – would cost

between $181,686 and $2,014,120 per application. Id. at 23,998 (Table

11a). And for delivery devices, the agency estimated a total cost of

$285,656 to $2,622,224 per application. Id. at 24,001–02 (Table 12a).

Given the number of participants in the market, the agency predicted a total

cost of complying with the premarket review requirements of between about

$164 million and $329 million for e-liquids, and between $131 million and

$164 million for delivery devices. Id. at 24,009 (Table 17).

x Market adjustment. In light of the agency’s prediction of market

consolidation, another cost that the agency recognized was the cost of

“market adjustment,” such as the “friction costs” of displaced workers

looking for other jobs. RIA, AR 24,015. But because of the “considerable

uncertainties associated with predicting effects of the rule on business

decisions,” the agency concluded that it lacked “a basis for estimating the

costs of market adjustment here.” Id.

66

Taking all of those costs together, the agency estimated in the RIA the quantified and

unquantified costs of the Deeming Rule to the ENDS industry:

x Quantified costs. The agency estimated that that the present value

of the quantified costs for ENDS products ranged from $507.6

million to $738.6 million. RIA, AR 24,025–26.

x Unquantified costs. The agency did not quantify other costs, such

as “some consumer costs for users . . . due to loss of product variety

or higher prices,” “compliance costs for components and parts,” “the

cost of testing and reporting for harmful and potentially harmful

constituents,” “market adjustment (friction) costs,” “exit of

manufacturers,” and “the switch to pure retailing among retailers

such as vape shops who currently engage in manufacturing

activities.” Id. at AR 24,024.

The RIA measured the Deeming Rule’s potential value “by dividing its total costs by the

number of people expected to benefit from it.” Id. at AR 24,026–27. It explained that the basis

for this calculation is that it “measures what the rule’s expected beneficiaries would need to be

willing to pay on average for the rule in order for the benefits to equal the costs.” Id. at AR 24,027.

The RIA’s “primary estimate of the value of costs of this final rule, annualized over 20

years, is $66.4 million with a 3 percent discount rate and $77.1 million with a 7 percent discount

rate.” RIA, AR 24,027. And the agency cited data in the RIA showing approximately 34.9 million

users of newly-deemed tobacco products. Id. So the RIA concluded that the “break-even annual

willingness-to-pay for this rule . . . [is] approximately $2 per current user at both discount rates.”

Id. The agency noted, though, that the Deeming Rule also has an impact on non-users of tobacco

products, both from a deterrence perspective, and from a reduction in second-hand exposure. Id.

And the agency factored in the benefits to parents, to the extent that their children are deterred

from use. Id. While FDA could not quantify the numbers of people in those categories, it noted

that “the break-even annual willingness-to-pay would be even lower than the estimated $2 per

user.” Id.

67

FDA incorporated the RIA’s analysis into the Deeming Rule. Deeming Rule, 81 Fed. Reg.

at 28,980–81. The agency concluded in the Rule that “[t]he direct benefits of making each of the

newly deemed tobacco products subject to the requirements of [the FDCA] are difficult to

quantify,” so it did not “predict the size of these benefits at this time.” Id. And the agency

summarized the quantified costs over a twenty year period in a table. Id. Based on that analysis,

the agency concluded that “the benefits of the final rule justify the costs.”

Among other effects, new products will be subject to an evaluation to ensure

they meet the appropriate public health standard for the pathway before they

can be marketed, labeling cannot contain misleading statements, and FDA

will be made aware of the ingredients in newly deemed tobacco products.

If, without the final rule, new products would pose substantially greater

health risks than those already on the market, the premarket requirements

made effective by this final rule would keep such products from appearing

on the market and worsening the health effects of tobacco product use.

Id.

Plaintiffs argue that “conducting a cost-benef

This text is long and has been trimmed here. Open the source document for the complete record.