The Impact of U.S. Supreme Court Appointments and Confirmations on Tobacco Merchants

    Here’s why you need to care who is on the United States Supreme Court.

    U.S. Supreme Court Appointment Impact on Tobacco Merchants

    The current news about appointments and confirmations to the United States Supreme Court may have a greater—and more favorable—impact on tobacco merchants than they realize. Industry attorneys have long argued that the Tobacco Control Act is not being reasonably and fairly interpreted by the federal agency charged with administering it: the U.S. Food and Drug Administration (FDA). Consequently, challenges are pending in federal court to contest these interpretations. The issue facing those federal courts is determining which standard of review should be applied by the court to a government agency’s own reading of the statute that it is charged with administering.

    Based on current interpretations of the case law, a lower federal court is limited in what it can do to dispense justice in the face of arguably overreaching agency interpretations of a congressional statute. The good news is that the composition of the United States Supreme Court appears to be changing in a favorable way that could possibly remedy the situation.
    In a 1984 case titled Chevron U.S.A. Inc. vs. The Natural Resources Defense Council Inc. the United States Supreme Court addressed the issue and set out the so-called “Chevron two-step test.” Essentially, the court stated that if Congress has spoken directly to the precise question at issue and if the intent of Congress is clear, that is the end of the matter. This is because the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.

    Moving on to the second step, if the court determines that Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is “whether the agency’s answer is based on a permissible construction [emphasis added] of the statute.”

    The Chevron case was never intended by the United States Supreme Court to require “blind deference” to an agency’s interpretation of a statute as reflected in rules and regulations promulgated by that agency. Some judgment by the court is needed. It makes sense that a federal court should look closely at these agency decisions without having its latitude severely restricted to adjudicate reasonable interpretations of congressional intent. Otherwise politics can be too heavily involved, the administrative state becomes too unwieldy, and the interest of the agency can be elevated above the public’s interest.

    So what are some unreasonable interpretations of the Tobacco Control Act by the FDA?
    Consider the substantial equivalence (SE) process as implemented by the regulatory agency. Under the Tobacco Control Act, a “new tobacco product” must undergo premarket review by the FDA. One of the premarket review pathways is the so-called SE process, in which an applicant demonstrates that a new tobacco product is “substantially equivalent” to an appropriate predicate product. The Tobacco Control Act provides that a new tobacco product is substantially equivalent to a predicate product if it “has the same characteristics as the predicate tobacco product” or “has different characteristics and the information submitted contains information … that demonstrates that … the [new tobacco] product does not raise different questions of public health.”

    As the SE standard has been applied by the FDA, it is clearly difficult—if not impossible—to comply with, unless the “new product” is virtually identical to the predicate product. Moreover, the agency requires redundant or unnecessary collection of information from companies pursuing this process. The SE process has proven overly burdensome, opaque and arbitrary, and it lacks clearly established or consistent standards for FDA reviews and industry submissions. Rather than providing clear guidance, the FDA instead appears to be regulating company by company and report by report in a completely arbitrary and unpredictable fashion. In fact, and most importantly, nowhere is it disclosed by the agency what is required to successfully file and complete the SE process. Further exacerbating the lack of transparency, the FDA has set unrealistic deadlines for applicants to respond to detailed and demanding information requests.

    Yet another example is the fact that Congress created a new product pathway for so-called “minor modifications” to a predicate product. However, that pathway has never been implemented in a manner contemplated by Congress and thus has been rarely used by the industry.

    Other examples of arguably unreasonable interpretations of congressional intent are the position that the agency has taken with product quantity changes, the definition of what is a “predicate product” and the requirement of behavioral studies in the context of SE reports.

    Unfortunately, federal courts have interpreted the Chevron case in such a way as to cause them to defer heavily to the agency and essentially “wash their hands” of the burden of reviewing the agency interpretations. Perhaps some agency deference is appropriate—but not the near total abdication that seems currently to be exercised by lower federal courts in their review.

    Fortunately, in a dissenting 2013 court opinion, Chief Justice John Roberts joined by Justice Anthony Kennedy and Justice Samuel Alito Jr. objected to so-called “Chevron deference” to agencies by stating the following:

    “My disagreement with the court is fundamental. It is also easily expressed: A court should not defer to an agency until the court decides, on its own, that the agency is entitled to deference.”

    Moreover, in a lower court opinion concurred in by now Justice Neil Gorsuch he also objected to excessive Chevron deference to agencies by stating the following:

    “And it is a problem for the people whose liberties may now be impaired not by an independent decision-maker [meaning a federal court] seeking to declare the law’s meaning as fairly as possible—the decision-maker promised to them by law—but by an avowedly politicized administrative agent seeking to pursue whatever policy whim may rule the day.”

    Existing United States Supreme Court opinions can be narrowed, overturned or clarified as the composition of the membership of the court changes. There is hope.

    This story first appeared in the November/December 2018 issue of Tobacco Business magazine. Members of the tobacco industry are eligible for a complimentary subscription to our magazine. Click here for details.

    Contributed by Henry C. Roemer III, a business law attorney and partner at Finger, Roemer, Brown & Mariani LLP. He has extensive legal experience in tobacco and business transactional matters, and he represents tobacco companies in all aspects of compliance with federal, state and local matters.

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