In FDA v. Wages and White Lion Investments LLC, the U.S. Supreme Court’s unanimous decision in favor of the Food and Drug Administration serves as a reminder of the deference still accorded to regulatory agencies post-Loper Bright. The decision centered around the FDA’s mass boilerplate denial of millions of applications for approval of flavored electronic nicotine delivery devices (ENDS), or e-cigarettes. The narrowly crafted opinion in favor of the FDA focused on the nuances of the Administrative Procedure Act (APA) and deference to agency actions.
Background
In 2009, Congress enacted the Family Smoking Prevention and Tobacco Control Act (TCA), giving the FDA the authority to regulate the manufacturing, marketing, sale, and distribution of tobacco products. The act required the FDA to deny applications for new tobacco products unless the product was “appropriate for the protection of the public health.” The FDA was tasked with considering “the risks and benefits to the population as a whole” and “tak[e] into account” the “increased or decreased likelihood” that the new product would induce users of existing tobacco products to stop using them, and that non-users of tobacco products would not start using them.
When ENDS, especially flavored vapes, became popular, the FDA “deemed” ENDS to be tobacco products subject to the TCA’s premarket-authorization regime. The FDA set September 9, 2020, as the deadline for submitting premarket tobacco product applications (PMTAs) for marketing authorization of ENDS, with decisions due within a year. More than 6.5 million PMTAs were filed, exceeding the FDA’s anticipated volume “by several orders of magnitude” and imposing an “unprecedented” burden on the FDA to complete timely review.
Before the filing deadline in 2020, the FDA proposed a rule outlining PMTA application requirements and held meetings where agency officials provided guidance to the industry. The proposed rule was subject to notice-and-comment rulemaking, and the FDA adopted the final rule only in October 2021, after it had denied thousands of PMTAs. The guidance and final rule focused on four key issues:
- Type of Evidence Required: The FDA required scientific evidence sufficient to show that an ENDS product was “appropriate for the protection of public health.” In 2018 and 2019, it assured the industry that no specific studies or trials were mandatory, and alternatives such as observational studies, literature reviews, or evidence bridging their product to “a studied tobacco product” were acceptable. However, after the deadline for PMTAs had passed, the FDA circulated an internal memorandum in July 2021 stating that if an application lacked either a randomized controlled trial or a longitudinal cohort study, that deficiency was a “fatal flaw”, and the application would be denied. On August 21, 2021, the FDA backtracked and circulated a second internal memorandum, stating that it “would also consider evidence from another study design, provided that it could reliably and robustly assess behavior change” and compared “users of flavored products with those of tobacco-flavored products.” The FDA, however, backtracked again and rescinded that memorandum on August 25, 2021.
- Showing Required: Applicants would be required to demonstrate that their ENDS product presented less risk than other tobacco products. The FDA had advised that this showing could be met by comparisons between applicants’ product and a “representative sample of tobacco products on the market.”
- Enforcement Focus: The FDA stated that it would prioritize “flavored, cartridge-based” e-cigarette products because of youth preference for such devices.
- Marketing Plan Requirement: The FDA consistently advised manufacturers that the submission of marketing plans to limit the risk of youth marketing was “critical” to their applications’ success.
When the FDA issued mass denials from August 2021 onward, it justified its actions on grounds that applicants had not provided evidence from a randomized controlled trial, longitudinal cohort study, or some other method, showing that their flavored products had benefits over tobacco products in the market. The FDA also produced a review showing the FDA’s evolving understanding of how flavor, regardless of device type, drove youth smoking. Its focus on flavor alone conflicted with its assertions that enforcement would be prioritized based on device type. Further, the FDA had not reviewed the marketing plans for the sake of “efficiency,” despite previously describing such plans as “critical.”
Following denials of its PMTAs, Wages and White Lion Investments LLC, doing business as Triton Distribution, appealed to the Fifth Circuit Court of Appeals. In an en banc reversal in Triton’s favor, the court found that the FDA’s denial of Triton’s application was arbitrary and capricious, pointing to the surprise switch from the requirements articulated before the application deadline, the FDA’s changed position on scientific studies, and its refusal to review marketing plans it had initially presented as “critical.” The court also suggested that the FDA violated the APA’s notice-and-comment requirements by imposing a de facto ban on flavored ENDS through mass adjudicatory denials of the PMTAs.
The Supreme Court’s Analysis
The court first dismissed the question as to whether the APA or TCA required the FDA to use notice-and-comment rulemaking to set out the requirements for a PMTA, as it had not granted certiorari on that question. The court also declined to address whether the TCA unconstitutionally delegated lawmaking power to the FDA as to the contents of the PMTA; whether the TCA’s provisions were unconstitutionally vague; whether Triton was denied due process rights; and whether the FDA had violated the “major questions” doctrine. The court acknowledged that these issues were central to the Fifth Circuit’s “animating concern” that the FDA failed to give fair and accurate notice but held the issues were not before it.
The court focused its inquiry on whether the FDA arbitrarily changed the requirements for PMTAs between the time of its pre-application guidance and its mass denials. It explained that the court’s “change-in-position” doctrine required a two-step analysis. First, whether the agency changed its course and then, if so, whether it offered a satisfactory reason for the change. The scope of a reviewing court’s review “is narrow,” requiring “appropriate deference to agency decisionmaking,” and courts may not “substitute their own judgement for that of the agency.” The court agreed that “an agency should not mislead regulated entities” but held that agencies can “change their existing policies” if they “display awareness that they are changing position and consider serious reliance interests.”
The court stated that the TCA, and the FDA’s initial guidance, gave the FDA broad discretion on acceptable evidence and that “other evidence” in lieu of controlled trials had to constitute “rigorous scientific evidence.” It held that the FDA’s finding that the literature review submitted by Triton failed to qualify as “other [sufficient] evidence” was within the FDA’s broad discretion. The court acknowledged that the post-submission memos suggested changed behavior, but the FDA had represented that the internal memoranda played no role in its review of applications. Because “agencies are entitled to a presumption of regularity,” Triton had not met the high standard necessary for the court to question the FDA’s representations.
Similarly, as to the FDA’s requirement that applicants compare the health effects of flavored products to tobacco-flavored products, the court found that the FDA had not contradicted its prior announcements regarding its special concerns about flavored ENDS, and applicants had received adequate notice of them. As to the FDA’s alleged change in enforcement priority from flavored, cartridge-based ENDS to flavor alone, the court found the FDA’s paramount focus on flavor was consistent with its prior positions, given its attractiveness to minors. If the FDA had changed its position, it had offered “good reasons” for doing so, in the form of a national study showing flavor, not device type, drove youth demand. And while the prefiling guidance may have led applicants to believe that the FDA was more likely to authorize open-system over cartridge-based products, the court held that how an agency was likely to exercise its enforcement discretion was not a “serious reliance interest,” especially in a new industry without decades of reliance based on past agency actions.
The FDA did not contest the Fifth Circuit’s finding that it had arbitrarily changed its position regarding marketing plans but claimed it was harmless error in Triton’s case, as it had previously reviewed and rejected “indistinguishable” marketing plans. On this, the court found that the FDA’s argument created a tension between the “remand rule” from its jurisprudence in Chenery I and Chenery II (collectively, “Chenery”), and the APA’s instruction that reviewing courts take “due account” of the “the rule of prejudicial error that ordinarily applies in civil cases.” In Chenery, the court stated that an agency action could not stand “unless the grounds upon which the agency acted … were those upon which its actions can be sustained.” Where the agency raises a new, alternative ground for the first time in litigation, the reviewing court should remand to the agency for “additional investigation or explanation.” In the decision below, the Fifth Circuit held that the remand rule permits only the narrowest of exceptions not satisfied here, precluding it from finding that the FDA’s failure to consider marketing plans entirely was harmless error.
The court held that the Fifth Circuit had construed the remand rule too broadly, as it would require remand even where doing so was “pointless,” contrary to the APA’s adoption of the harmless error rule. However, the court also declined to adopt the FDA’s view that, based on the court’s teachings in Shinseki v. Sanders, a challenger must show the error had a “substantial bearing” on the agency’s decision. The court left it to the Fifth Circuit to resolve this tension following remand.
Takeaways
Given the unusual procedural history and regulatory maneuvering in the administrative record below, some of the court’s findings are likely to be case-specific. However, the unanimous decision in favor of the agency in the aftermath of the court’s disruption of long-standing administrative jurisprudence in Loper Bright Enterprises v. Raimondo suggests that deference to agency decision-making — versus their legal positions — is not dead. While Loper Bright directs lower courts not to give agencies controlling deference when they interpret the law, they still have deference when operating within that scope of the law or, as was the case here, when the question of whether the TCA authorized the FDA to regulate ENDS went unchallenged. By directing lower courts to afford “appropriate deference” to such decisions, and to avoid “substitut[ing] their own judgment” for the agency’s, it remains the case that just because a court might reach a different decision, the agency’s decision is not, for that reason, “arbitrary and capricious.”
The court’s narrowly crafted decision also left important statutory and constitutional questions unaddressed. Most of the events culminating in this appeal unfolded in the pre-Loper Bright era and, as noted, whether the FDA’s expansive “deeming” that ENDS fell within the scope of its authority was not challenged. Further, the court declined to address whether the nondelegation doctrine was implicated, and whether the agency’s actions were designed to effectively ban flavored vapes through mass adjudication rather than through a notice-and-comment process that would have allowed vape manufacturers to challenge the FDA’s authority to do so.
