In FDA v. Wages and White Lion Investments, LLC,the Supreme Court is set to decide whether the court of appeals erred in ruling that the Food and Drug Administration’s (FDA) denial of authorization for new e-cigarette products was arbitrary and capricious.
Under the Family Smoking Prevention and Tobacco Control Act, companies must obtain FDA authorization before introducing a new tobacco product into interstate commerce. The FDA issued a rule extending its regulatory authority to e-cigarettes and e-liquids used in e-cigarettes. Triton and Vapetasia, two companies with new e-liquid products, applied for FDA authorization to sell their dessert and candy-flavored e-liquids. The Act mandates that the FDA analyze, among other factors, whether a product would be “appropriate for the protection of public health.” The FDA denied the companies’ applications in September 2021, citing the substantial risk to youth and the lack of studies supporting the companies’ argument that the products would help adult smokers quit traditional tobacco products. The FDA also declined to evaluate the companies’ marketing plans, which the companies allege were designed to mitigate the risk to the public health by restricting how their products are sold.
The companies appealed the FDA’s decision to the Fifth Circuit U.S. Court of Appeals, which determined that the FDA had improperly denied their applications under the arbitrary and capricious standard. The appellate court criticized the FDA for requiring the companies to submit studies supporting their application—evidence beyond the statutory framework—and ignoring the companies’ marketing plans. The FDA appealed the decision to the Supreme Court.
Before the Supreme Court, the FDA argued that it correctly required “valid scientific evidence” supporting the companies’ applications and that, even if the FDA were required to evaluate marketing plans, any error in failing to do so was harmless because it would have been insufficient to address the danger to the public health. The companies counter that the FDA changed the criteria it used to evaluate the e-liquids midway through the process, from focusing on whether the products had lower levels of harmful ingredients than traditional products to later requiring evidence of randomized controlled studies showing that such products would help traditional tobacco smokers quit smoking. They also argue that the FDA committed prejudicial error by failing to consider the companies’ marketing plans which were specifically designed to protect the public health.
The Justices heard oral argument on December 2, 2024, focusing on whether the FDA’s denial had been arbitrary and capricious given the potential change in evaluation criteria. Chief Justice Roberts, with Justices Thomas and Alito, questioned whether the FDA had an obligation to lay out the specific criteria it would use to evaluate applications and whether the non-binding, internal FDA memo requiring studies in support of applications was a change to the evaluation criteria. Justices Kagan and Jackson pressed the companies on exactly how a change in criteria could have occurred if the FDA’s position had always been that e-liquid flavors caused significant risk to youth. Justice Sotomayor pointed out that the standard for the FDA’s application process was always the statutory standard and similarly questioned how requesting studies in support of an application constituted a change to the standard. Justice Kavanaugh inquired how relief would be different from the companies’ simply resubmitting their applications. Justices Gorsuch and Barrett focused on whether due process required the FDA to give the companies notice and a hearing during the application process.
The Court’s forthcoming decision could clarify the FDA’s authority under the Act regarding the evidentiary burdens for an administrative agency’s approval and procedural fairness in its regulatory decision-making. As Dykema pointed out last term, the end of Chevron deference has given businesses more opportunities to challenge agency regulatory enforcement.
A ruling against the FDA may prompt changes to how agencies evaluate applications and handle transparency in their processes. In a larger sense, the Court’s decision may also build on its opinion from last term in Loper Bright Enterprises, Inc. v. Raimondo, Sec. of Commerce, and may shed additional light on what the Court believes should be the correct relationship between an agency’s interpretation of statutory law, especially when that interpretation is reflected in non-binding agency guidance, and the independent judgment of the judiciary. The Court’s opinion may add teeth to its already groundbreaking decision to end Chevron deference or could even walk back some of that ruling.
Stay tuned for Dykema’s client alert discussing the Court’s opinion, which is expected later in the term.
For more information, please contact Chantel Febus, James Azadian, Kyle Asher, or Christopher Sakauye.