Case 6:20-cv-00176-JCB Document 76 Filed 11/23/20 Page 1 of 9 PageID #: 10093
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TYLER DIVISION
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`CIVIL ACTION NO. 6:20-cv-00176
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`R.J. REYNOLDS TOBACCO COMPANY;
`SANTA FE NATURAL TOBACCO
`COMPANY, INC.; ITG BRANDS, LLC;
`LIGGETT GROUP LLC; NEOCOM, INC.;
`RANGILA ENTERPRISES INC.; RANGILA
`LLC; SAHIL ISMAIL, INC.; and IS LIKE
`YOU INC.;
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`Plaintiffs,
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`v.
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`UNITED STATES FOOD AND DRUG
`ADMINISTRATION;
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`UNITED STATES DEPARTMENT OF
`HEALTH AND HUMAN SERVICES;
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`STEPHEN M. HAHN,
`in his official capacity as Commissioner of the
`United States Food and Drug Administration;
`and
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`ALEX M. AZAR II,
`in his official capacity as Secretary of the United
`States Department of Health and Human
`Services;
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`Defendants.
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`PLAINTIFFS’ MOTION TO EXTEND POSTPONEMENT
`OF RULE’S EFFECTIVE DATE
`Plaintiffs respectfully request that the Court grant a 90-day extension of the 120-day
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`postponement of the Rule’s effective date, without prejudice to Plaintiffs’ ability to seek additional
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`relief if it becomes necessary. In support of this request, Plaintiffs state as follows:
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`Case 6:20-cv-00176-JCB Document 76 Filed 11/23/20 Page 2 of 9 PageID #: 10094
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`1.
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`On May 6, 2020, Plaintiffs and Defendants filed a joint motion requesting that the
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`Court postpone for 120 days the effective date of a Final Rule issued by the Food and Drug
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`Administration (“FDA”), which would require the use of eleven new graphic warnings on cigarette
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`packages and advertisements, see Tobacco Products; Required Warnings for Cigarette Packages and
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`Advertisements, 85 Fed. Reg. 15,638 (Mar. 18, 2020) (to be codified at 21 C.F.R. pt. 1141) (“the Rule”).
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`See Joint Mot., ECF No. 30 at ¶¶ 1, 4, 7 (May 6, 2020). Defendants stipulated that, “[i]n light of the
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`disruptive effects of the global outbreak of COVID-19 on both the regulated community affected by
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`the Rule and on FDA, . . . justice require[d] a 120-day postponement of the Rule’s effective date, from
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`June 18, 2021, to October 16, 2021.” See id. ¶ 4. Plaintiffs explained that the Rule would cause
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`irreparable harm, including substantial compliance costs for the Manufacturer Plaintiffs. See id. at
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`¶¶ 5–6. Plaintiffs further noted that they would need to seek expedited relief from the Court if the
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`joint motion were not granted. See id. at ¶ 5.
`2.
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`On May 8, 2020, the Court granted the parties’ joint motion. See Order, ECF No. 33
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`(May 8, 2020) (“Postponement Order”). The Court agreed that Plaintiffs would suffer “irreparable
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`injury absent postponement of the rule’s effective date” because they “would face imminent
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`compliance costs” and “those costs would not be reimbursed by the government if plaintiffs
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`prevail[ed] on the merits.” See id. at 1–2. The Court thus postponed the Rule’s effective date for 120
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`days—from June 18, 2021, to October 16, 2021—and set forth a briefing schedule to facilitate an
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`orderly and efficient resolution of this case. See id. at 1–4.
`3.
`Court’s May 8, 2020 order. See, e.g., Pls.’ Mot. for Summ. J. and a Prelim. Inj., ECF No. 34 (May 15,
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`The parties then proceeded to file merits briefs in accordance with the schedule in the
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`2020); Defs.’ Combined Cross-Mot. for Summ. J. and Opp. to Pls.’ Mot., ECF No. 37 (July 2, 2020).
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`In addition, Defendants filed a motion to dismiss for improper venue. Defs.’ Mot. to Dismiss, ECF
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`No. 36 (July 2, 2020). Those motions remain pending before the Court. At a status conference on
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`November 19, 2020, the Court indicated that it will rule on the motion to dismiss imminently and that
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`it anticipates scheduling an oral argument on the merits motions.
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`Case 6:20-cv-00176-JCB Document 76 Filed 11/23/20 Page 3 of 9 PageID #: 10095
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`4.
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`199 days have elapsed since the Court postponed the Rule’s effective date, and the
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`Manufacturer Plaintiffs now find themselves facing the same imminent compliance costs that the
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`original postponement was designed to address. These costs include the need to spend millions of
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`dollars and thousands of employee hours to prepare to comply with the Rule. See Pls.’ Mot. for Summ.
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`J. and a Prelim. Inj. at 59–64; Pls.’ Combined Reply and Resp., ECF No. 59 at 39–40 (Aug. 14, 2020);
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`Decl. of Lamar W. Huckabee, ECF. No. 34-5 (May 15, 2020) (“Huckabee Decl.”) (reattached here as
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`Exhibit A); Decl. of Kim Reed, ECF No. 34-6 (May 15, 2020) (“Reed Decl.”) (reattached here as
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`Exhibit B); Decl. of Francis G. Wall, ECF No. 34-7 (May 15, 2020) (“Wall Decl.”) (reattached here as
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`Exhibit C). If the current effective date remains in place, the Manufacturer Plaintiffs will incur, inter
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`alia, the following imminent compliance costs:
`a. The Manufacturer Plaintiffs will need to re-design hundreds of packaging labels (not
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`including the variations required to accommodate the eleven different graphic warnings)
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`to comply with the Rule. See Huckabee Decl. ¶ 8 (390 labels total for R.J. Reynolds
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`Tobacco Co. and Santa Fe Natural Tobacco Co., Inc.); Reed Decl. ¶ 7 (121 labels for ITG
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`Brands, LLC); Wall Decl. ¶ 13 (200 labels for Liggett Group LLC). This in turn requires
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`the Manufacturer Plaintiffs to spend significant funds and thousands of hours of employee
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`and supplier time related to modifying the current printing process, redesigning the
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`packages, and gaining approval for the new designs and operational changes. See
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`Huckabee Decl. ¶¶ 10, 12–13; Reed Decl. ¶¶ 9, 11–12; Wall Decl. ¶¶ 17–18. Some of this
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`logistics, design, and approval work has already had to be done, see Huckabee Decl. ¶ 10
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`(“process has been underway”); Reed Decl. ¶ 18 (“must continue with these steps”); Wall
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`Decl. ¶ 7 (“continuing economic costs”), and all of it necessarily must be completed before
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`the next substantial compliance step: the engraving of the printing cylinders. It must
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`therefore be finished before December 2020 for Liggett and before January 2021 for R.J.
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`Reynolds, Santa Fe, and ITG Brands. See Huckabee Decl. ¶ 11; Reed Decl. ¶ 10; Wall Decl.
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`¶ 19.
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`Case 6:20-cv-00176-JCB Document 76 Filed 11/23/20 Page 4 of 9 PageID #: 10096
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`b. The Manufacturer Plaintiffs must also purchase additional blank cylinder bases and tools.
`See Huckabee Decl. ¶ 11; Reed Decl. ¶ 10; Wall Decl. ¶ 19. They must then hire companies
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`to begin engraving cylinders that will be used to apply ink to new packages—at a cost of
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`over $17.8 million—by December 2020 for Liggett and by January 2020 for R.J. Reynolds,
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`Santa Fe, and ITG Brands. See Huckabee Decl. ¶ 11 (“the work to engrave the cylinders
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`will take several months and must begin within ten months after the Rule is published
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`(taking into account the 120-day postponement of the effective date)”); Reed Decl. ¶ 10
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`(“the work to engrave the cylinders will take at least five months and must begin within
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`ten months after the Rule is published”); Wall Decl. ¶¶ 19, 23 (“Under ideal circumstances,
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`the engraving process would take approximately five or six months, meaning engraving
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`would need to begin by December 2020. This estimate likely materially underestimates
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`the time required to complete the engraving process, especially given the COVID-19
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`crisis.”); see also id. ¶ 23 (noting that there are a “limited number of companies that engrave
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`cylinders and print packaging” and that “many different cigarette manufacturers would be
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`competing for finite engraving and printing capacity”).
`c. After that, the Manufacturer Plaintiffs must incur additional costs of more than ten million
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`dollars and thousands of employee and supplier hours to redesign webpages, and to
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`redesign, print, and replace point-of-sale advertisements at hundreds of thousands of
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`retailers. See Huckabee Decl. ¶ 15; Reed Decl. ¶ 15; Wall Decl. ¶ 25.
`d. The Manufacturer Plaintiffs must then manufacture cigarettes in compliant packaging
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`starting no later than July 2021, which would result in hundreds of millions of dollars of
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`misbranded inventory if the Rule were subsequently invalidated. See Huckabee Decl. ¶ 16;
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`Reed Decl. ¶ 16; Wall Decl. ¶¶ 11, 28.
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`5.
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`These expenditures of resources for the purpose of meeting the Rule’s requirements
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`constitute irreparable harm because Plaintiffs cannot recover money damages should the Rule and/or
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`the graphic-warning requirement in the Tobacco Control Act be invalidated. See Pls.’ Mot. for Summ.
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`J. and a Prelim. Inj. at 62–63; Postponement Order at 2. Moreover, compliance efforts would be even
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`Case 6:20-cv-00176-JCB Document 76 Filed 11/23/20 Page 5 of 9 PageID #: 10097
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`more burdensome and complex given the COVID-19 pandemic and the accompanying disruptions
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`to business operations. See Huckabee Decl. ¶ 17; Reed Decl. ¶ 14; Wall Decl. ¶ 15.
`6.
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`Given the imminent irreparable injury that Plaintiffs face if the postponement of the
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`Rule is not extended, Plaintiffs request that the Court issue an order, pursuant to 5 U.S.C. § 705, that
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`the postponement of the Rule’s effective date be extended by 90 days, until January 14, 2022, and that
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`any obligation to comply with other deadlines tied to the issuance of the Rule is also postponed for
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`an additional 90 days.1 Plaintiffs have presented “a substantial case on the merits” of their claims,
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`which involve serious legal questions. See Weingarten Realty Investors v. Miller, 661 F.3d 904, 910 (5th
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`Cir. 2011) (explaining “the movant only needs to present a substantial case on the merits” when “there
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`is a serious legal question involved and the balance of equities heavily favors a stay”); see also Texas v.
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`EPA, 829 F.3d 405, 424, 435 (5th Cir. 2016) (applying stay factors from Nken v. Holder, 556 U.S. 418
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`(2009), in deciding to grant a stay under § 705); Nevada v. United States Dep’t of Labor, 227 F. Supp. 3d
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`696, 698 (E.D. Tex. 2017) (concluding that “whether the Department of Labor’s proposed overtime
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`regulations are legal” is a serious legal question); Tr. of Mot. to Dismiss Hearing (Sept. 9, 2020), at
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`17:6–10 (interpreting the case law as requiring “the Court to consider all of the equitable factors” and
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`noting the Court “reviewed and made some preliminary assessment of the likelihood of success on
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`the merits”). In addition, the “balance of equities heavily favors a stay,” Miller, 661 F.3d at 910,
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`particularly in light of the serious injuries that Plaintiffs face if an extension is not granted and the fact
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`1 The Tobacco Control Act imposes several additional labeling requirements, see 15 U.S.C.
`§ 1333(a)(1), 21 U.S.C. §§ 387c(a)(2), 387t(a), tied to the effective date of the graphic-warnings Rule,
`see Pub. L. No. 111-31, § 201(b); id. § 103(q)(5); id. § 301. If this Court extends the postponement of
`the effective date of the Rule by 90 additional days, Plaintiffs request that any obligation to comply
`with these additional requirements be postponed by an additional 90 days. See Postponement Order
`at 2 (“Any obligation to comply with a deadline tied to the effective date of the rule is similarly
`postponed, and those obligations and deadlines are now tied to the postponed effective date.”). The
`Rule also recommended (but did not require) that manufacturers submit compliance plans “as soon
`as possible . . . , and in any event within five months after publication of th[e] final rule.” 85 Fed. Reg.
`at 15,695. If the Court grants the relief sought in this motion, Plaintiffs would understand that
`language to recommend submission of the plans as soon as possible, and in any event within 5 months
`plus 210 days after the Rule’s publication.
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`Case 6:20-cv-00176-JCB Document 76 Filed 11/23/20 Page 6 of 9 PageID #: 10098
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`that Defendants and the public will face no meaningful harm if the extension is granted. See Pls.’ Mot.
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`for Summ. J. and a Prelim. Inj. at 64–65.
`7.
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`Plaintiffs further request that the 90-day extension be granted without prejudice to
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`Plaintiffs’ right to move for additional relief at a later date, including a motion requesting a further
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`postponement of the Rule’s effective date, and without prejudice to Plaintiffs’ pending motions.
`8.
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`As detailed in the certificate of conference, counsel for Plaintiffs and Defendants have
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`discussed Plaintiffs’ intention to file this motion, and Defendants’ counsel has noted that Defendants
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`oppose this motion for largely the reasons laid out in the existing merits briefing.
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`Case 6:20-cv-00176-JCB Document 76 Filed 11/23/20 Page 7 of 9 PageID #: 10099
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`Respectfully submitted,
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`/s/Ryan J. Watson
`Ryan J. Watson*
`D.C. Bar No. 986906
`Lead Attorney
`Christian G. Vergonis*
`D.C. Bar No 483293
`Alex Potapov*
`D.C. Bar No. 998355
`JONES DAY
`51 Louisiana Avenue, N.W.
`Washington, DC 20001-2113
`Telephone: 202-879-3939
`Facsimile: 202-626-1700
`rwatson@jonesday.com
`cvergonis@jonesday.com
`apotapov@jonesday.com
`
`Autumn Hamit Patterson
`Texas Bar No. 24092947
`JONES DAY
`2727 North Harwood Street, Suite 500
`Dallas, TX 75201-1515
`Telephone: 214-220-3939
`Facsimile: 214-969-5100
`ahpatterson@jonesday.com
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`Counsel for Plaintiffs R.J. Reynolds Tobacco Co.,
`Santa Fe Natural Tobacco Co., Neocom, Inc.,
`Rangila Enterprises Inc., Rangila LLC, Sahil
`Ismail, Inc., and Is Like You Inc.
`* admitted pro hac vice
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`November 23, 2020
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`Philip J. Perry (D.C. Bar No. 148696)*
`Monica C. Groat (D.C. Bar No. 1002696)*
`Nicholas L. Schlossman (D.C. Bar No. 1029362)*
`LATHAM & WATKINS LLP
`555 Eleventh Street NW
`Suite 1000
`Washington, DC 20004
`Tel: (202) 637-2200
`Fax: (202) 637-2201
`philip.perry@lw.com
`monica.groat@lw.com
`nicholas.schlossman@lw.com
`Attorneys for Plaintiff ITG Brands, LLC
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`Meaghan VerGow*
`D.C. Bar No. 977165
`Scott Harman-Heath*
`D.C. Bar No. 1671180
`O’MELVENY & MYERS LLP
`1625 Eye Street, N.W.
`Washington, D.C. 20006
`Telephone: 202-383-5504
`Facsimile: 202-383-5414
`mvergow@omm.com
`sharman@omm.com
`Leonard A. Feiwus*
`N.Y. Bar No. 2611135
`Nancy E. Kaschel*
`N.Y. Bar No. 2839314
`Deva Roberts*
`N.Y. Bar No. 5110846
`KASOWITZ BENSON TORRES LLC
`1633 Broadway
`New York, NY 10019
`Telephone: 212-506-1785
`Facsimile: 212-835-5085
`LFeiwus@kasowitz.com
`NKaschel@kasowitz.com
`DRoberts@kasowitz.com
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`Counsel for Plaintiff Liggett Group LLC
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`Case 6:20-cv-00176-JCB Document 76 Filed 11/23/20 Page 8 of 9 PageID #: 10100
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`CERTIFICATE OF SERVICE
`I hereby certify that on November 23, 2020, a true and correct copy of the foregoing was
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`electronically filed with the clerk of court for the U.S. District Court for the Eastern District of Texas,
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`using the CM/ECF system, which will send a notice of electronic filing to all counsel of record.
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`/s/Ryan J. Watson
`Ryan J. Watson*
`D.C. Bar No. 986906
`Lead Attorney
`JONES DAY
`51 Louisiana Avenue, N.W.
`Washington, DC 20001-2113
`Telephone: 202-879-3939
`Facsimile: 202-626-1700
`rwatson@jonesday.com
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`Counsel for Plaintiffs R.J. Reynolds Tobacco
`Co., Santa Fe Natural Tobacco Co.,
`Neocom, Inc., Rangila Enterprises Inc.,
`Rangila LLC, Sahil Ismail, Inc., and Is
`Like You Inc.
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`Case 6:20-cv-00176-JCB Document 76 Filed 11/23/20 Page 9 of 9 PageID #: 10101
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`CERTIFICATE OF CONFERENCE
`I hereby certify, pursuant to Local Rule CV-7(i), that (1) I complied with the meet and confer
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`requirement in Local Rule CV-7(h), and (2) this motion is opposed.
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`I have conducted the personal conference required by Local Rule CV-7(i). Specifically, I
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`emailed Defendants’ counsel on November 19, 2020, to inform them of Plaintiffs’ expectation that
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`Plaintiffs would likely need to seek an additional postponement of 90 days. The next day, on Friday,
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`November 20, 2020, I, along with Christian G. Vergonis and Alex Potapov, had a telephone
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`conference with Stephen M. Pezzi and Michael H. Baer to discuss whether Defendants would join or
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`oppose Plaintiffs’ request for an additional postponement of the Rule’s effective date. After a collegial
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`discussion where both sides discussed the issues in good faith, Defendants’ counsel stated that
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`Defendants intended to oppose the motion for largely the same reasons Defendants opposed
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`Plaintiffs’ motion for a preliminary injunction. The conference participants then concluded that the
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`discussion had ended in an impasse, leaving an open issue for the Court to resolve.
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`/s/Ryan J. Watson
`Ryan J. Watson*
`D.C. Bar No. 986906
`Lead Attorney
`JONES DAY
`51 Louisiana Avenue, N.W.
`Washington, DC 20001-2113
`Telephone: 202-879-3939
`Facsimile: 202-626-1700
`rwatson@jonesday.com
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`Counsel for Plaintiffs R.J. Reynolds Tobacco
`Co., Santa Fe Natural Tobacco Co.,
`Neocom, Inc., Rangila Enterprises Inc.,
`Rangila LLC, Sahil Ismail, Inc., and Is
`Like You Inc.
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