In late June, the U.S. District Court for the District of Montana held that federal law preempts the Montana Attorney General (AG) from removing the cigarette brands of Grand River Enterprises Six Nations, Ltd. (Grand River) from the state tobacco directory based on Grand River’s alleged violations of the Federal Food, Drug, and Cosmetics Act (FDCA). The FDCA preempts state law actions based solely on FDCA violations if the U.S. Food and Drug Administration (FDA) has not already found that such violations exist, the court explained.
The recent ruling shows the delineation of tobacco regulatory authority between state governments and FDA, even where an underlying agreement between a state and a regulated party requires compliance with federal law.
State Tobacco Directories
In connection with the 1998 Tobacco Master Settlement Agreement, most of the settling states adopted laws establishing directories of cigarette manufacturers and their product brand families. Under these laws, cigarette manufacturers may not sell their products in a given state unless they submit certifications to be listed on the state’s directory. A state agency—usually the state AG or department of revenue—maintains the directory as a publicly-available list of cigarette brands and manufacturers that are compliant with state law.
Federal Food, Drug, and Cosmetics Act
The FDCA, as amended by the Family Smoking Prevention and Tobacco Control Act of 2009 (TCA), grants FDA its authority to regulate tobacco products. FDA implements several regulatory regimes under this authority, notably including its premarket review of new tobacco products. FDA administers this review by offering new tobacco product manufacturers two main pathways to market: (1) the premarket tobacco product application (PMTA) process and (2) the substantial equivalence (SE) process.
Under the PMTA process, an applicant must demonstrate that its new tobacco product is “appropriate for the protection of the public health.” This requires the submission of several pieces of information regarding potential health risks, manufacturing/processing methods, and other items as required under FDA’s final PMTA rule. Under the SE process, an applicant must demonstrate that its new tobacco product is “substantially equivalent” to a “predicate” tobacco product—i.e., one which was either commercially marketed in the United States as of February 15, 2007, or previously determined to be substantially equivalent and in compliance with the FDCA/TCA. FDA enforces these premarket review requirements by sending warning letters, filing civil money penalty complaints, initiating product seizures, and more against persons or entities dealing in unauthorized new tobacco products. For instance, we have previously covered FDA’s ongoing enforcement of its premarket review requirements against sellers of unauthorized e-cigarette products.
State AGs, Directories, and Preemption
In settlement of previous disputes, Grand River and the Montana AG had entered into an assurance of voluntary compliance (AVC) as a condition of Grand River being listed on the state directory. Grand River agreed under the AVC to comply with “all local, state, and federal laws.” In the recent case, the Montana AG sent a notice of removal asserting that Grand River “marketed and promoted adulterated and misbranded cigarettes on the Directory for sale in Montana in violation of federal law.” The Montana AG alleged that Grand River removed eight brand styles from the FDA SE review process, which caused FDA to deem those brand styles “adulterated and misbranded.” Generally, federal law prohibits the marketing and promotion of tobacco products deemed “adulterated and misbranded.”
However, the Montana AG said, Grand River neither stopped selling the brand styles in Montana (allegedly violating federal law) nor updated its Montana directory certifications to reflect its products’ premarket review status (allegedly violating state law). Pursuant to the AVC, the Montana AG concluded that it was within its right to immediately remove Grand River from the directory for alleged violations of federal and state law arising from its “adulterated and misbranded” product sales.
The district court found that federal law preempts the Montana AG from de-listing Grand River based on its purported FDCA violations. The court explained that FDA—not a state AG—is responsible for investigating violations of the FDCA. FDA itself did not determine that Grand River violated the FDCA by listing the “adulterated and misbranded” products on Montana’s directory. Removal of Grand River from the directory on this basis would require litigating the issue of whether listing those brand styles amounts to an FDCA violation. And under the FDCA, “all such proceedings for enforcement, or to restrain violations, of this chapter shall be by and in the name of the United States,” subject to limited exceptions. The Montana AG was therefore preempted from litigating the alleged FDCA violation in the absence of FDA enforcement, the court said.
It mattered not to the court that the AVC required Grand River comply with “all local, state, and federal laws,” nor did it matter that state law requires a manufacturer to update its directory certifications to reflect its products’ premarket review status. The court found that the de-listing was nonetheless preempted because it was predicated on an underlying FDCA violation. Allowing the Montana AG to remove Grand River on this basis would require litigation of the alleged FDCA violation in the absence of FDA enforcement—a claim which the FDCA preempts.
Why It Matters
The recent Montana federal court decision is a stark reminder that state regulators cannot usurp FDA’s primary authority over FDCA enforcement. It underscores the importance of federalism as a limit to state AGs’ enforcement authority—especially given the growing regulatory significance of state AGs across industry sectors.
In the tobacco space specifically, this decision further highlights the importance of understanding both federal and state aspects of tobacco regulation. Industry members can benefit from keen understandings of state regulators’ authority vis-à-vis FDA, and vice-versa.
