USCA Case #18-5195 Document #1850427 Filed: 07/07/2020 Page 1 of 13
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`
`United States Court of Appeals
`FOR THE DISTRICT OF COLUMBIA CIRCUIT
`
`
`
`Decided July 7, 2020
`
`Argued October 29, 2019
`
`
`No. 18-5195
`
`CIGAR ASSOCIATION OF AMERICA, ET AL.,
`APPELLANTS
`
`v.
`
`UNITED STATES FOOD AND DRUG ADMINISTRATION, ET AL.,
`APPELLEES
`
`
`Appeal from the United States District Court
`for the District of Columbia
`(No. 1:16-cv-01460)
`
`
`Michael J. Edney argued the cause for appellants. With
`him on the briefs were Mark S. Raffman and Andrew Kim.
`
`Mark Brnovich, Attorney General, Office of the Attorney
`General for the State of Arizona, and Keith Miller, Senior
`Litigation Counsel, were on the brief for amicus curiae State
`of Arizona in support of appellants.
`
`Lindsey Powell, Attorney, U.S. Department of Justice,
`argued the cause for appellees. With her on the brief were
`Jessie K. Liu, U.S. Attorney, Mark B. Stern, Alisa B. Klein, and
`Tyce R. Walters, Attorneys, U.S. Department of Justice, and
`Robert P. Charrow, General Counsel, U.S. Department of
`Health and Human Services.
`
`
`
`

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`USCA Case #18-5195 Document #1850427 Filed: 07/07/2020 Page 2 of 13
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`2
`Nandan M. Joshi, Allison M. Zieve, and Scott L. Nelson
`were on the brief for amicus curiae Public Citizen in support
`of appellees.
`
`Mark Greenwold and Andrew N. Goldfarb were on the
`brief for amici curiae Public Health Groups in support of
`appellees.
`
`Rachel Bloomekatz was on the brief for amicus curiae
`Public Health Law Center in support of appellees.
`
`Justin M. Pearson and Paul M. Sherman were on the brief
`for amicus curiae J. Scott Armstrong in support of neither
`party.
`
`Before: GARLAND and KATSAS, Circuit Judges, and
`RANDOLPH, Senior Circuit Judge.
`
`Opinion for the Court filed by Circuit Judge KATSAS.
`
`KATSAS, Circuit Judge: The Tobacco Control Act permits
`the Food and Drug Administration to regulate tobacco products
`for the public health, but only after considering whether the
`regulation would likely increase or decrease the number of
`smokers.
` Under this authority, the FDA promulgated
`regulations requiring extensive health warnings on packaging
`and in advertising for cigars and pipe tobacco. The FDA
`concluded that these warnings would help communicate the
`health risks of smoking, but it failed to consider how the
`warnings would likely affect the number of smokers. We hold
`that this failure violated the Tobacco Control Act and the
`Administrative Procedure Act.
`
`
`
`

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`USCA Case #18-5195 Document #1850427 Filed: 07/07/2020 Page 3 of 13
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`3
`I
`
`A
`
`The Family Smoking Prevention and Tobacco Control
`Act, Pub. L. No. 111-31, 123 Stat. 1776 (2009) (Tobacco
`Control Act), amended the Federal Food, Drug, and Cosmetic
`Act (FDCA) to establish a comprehensive regulatory scheme
`for tobacco products. As amended, the FDCA regulates
`cigarettes, cigarette tobacco, roll-your-own tobacco, and
`smokeless tobacco. 21 U.S.C. § 387a(b). The FDCA also now
`extends to “any other tobacco products” that the Secretary of
`Health and Human Services “by regulation deems to be subject
`to” the FDCA. Id. The FDCA further provides that the
`Secretary may by regulation restrict the sale or distribution of
`any tobacco product if he “determines that such regulation
`would be appropriate for the protection of the public health.”
`Id. § 387f(d)(1). In making that determination, the Secretary
`must consider the likelihood that the regulation will increase or
`decrease the number of tobacco users in the overall population.
`See id. The FDA administers the Tobacco Control Act for the
`Secretary. See id. § 387a(e); Office of the Commissioner
`Reorganization, 74 Fed. Reg. 41,713, 41,732 (Aug. 18, 2009).
`
`Under this authority, the FDA promulgated a regulation
`deeming the FDCA to cover all tobacco products. Deeming
`Tobacco Products to Be Subject to the FDCA, 81 Fed. Reg.
`28,973 (May 10, 2016) (Deeming Rule). The Deeming Rule
`subjects newly regulated tobacco products, including cigars
`and pipe tobacco, to requirements akin to those previously
`imposed by statute on cigarettes, cigarette tobacco, roll-your-
`own tobacco, and smokeless tobacco. Id. at 28,976. To that
`end, it requires extensive health warnings on packages and in
`advertisements for cigars and pipe tobacco.
`
`
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`USCA Case #18-5195 Document #1850427 Filed: 07/07/2020 Page 4 of 13
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`The Deeming Rule makes it unlawful to manufacture or
`sell any cigar product without one of six rotating warning
`statements. 21 C.F.R. § 1143.5(a)(1). Collectively, the
`warnings inform prospective and current smokers that cigars
`cause various diseases, create pregnancy risks, are addictive,
`and are not a safe alternative to cigarettes. Id. The warnings
`must be printed on at least thirty percent of the two “principal
`display panels” of each cigar package, with contrasting white-
`on-black or black-on-white ink. See id. § 1143.5(a)(2). For
`cigars sold individually, the warnings must appear on an 8.5 x
`11-inch sign posted within three inches of the cash register. Id.
`§ 1143.5(a)(3). For both kinds of warnings, the regulation
`specifies
`the necessary font, font size, capitalization,
`punctuation, and centering.
`
`Id. § 1143.5(a)(2)(ii)–(v),
`(a)(3)(ii)–(iv). The same warnings also must cover at least
`twenty percent of cigar advertisements. Id. § 1143.5(b).
`Manufacturers must submit to the FDA a “proposed warning
`plan” at least twelve months before selling or advertising any
`cigar product. Id. § 1143.5(c).
`
`For pipe tobacco, packages and advertisements must bear
`a warning that the product contains nicotine, an addictive
`chemical. 21 C.F.R. § 1143.3(a)(1). The warning must follow
`the same formatting requirements as the warnings for cigars.
`Id. § 1143.3(a) (packaging); § 1143.3(b) (advertising).
`
`In promulgating these requirements, the FDA stated that
`“[t]he warning statements required by this final rule will help
`consumers better understand and appreciate the risks and
`characteristics of tobacco products.” Deeming Rule, 81 Fed.
`Reg. at 28,981. At the same time, the FDA acknowledged that
`“[r]eliable evidence on the impacts of warning labels … on
`users of cigars, pipe tobacco, waterpipe tobacco, and
`[electronic nicotine delivery systems] does not, to our
`knowledge, exist.” Deeming Tobacco Products to Be Subject
`
`
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`USCA Case #18-5195 Document #1850427 Filed: 07/07/2020 Page 5 of 13
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`5
`to the FDCA, Final Regulatory Impact Analysis, ECF Doc. 81-
`2 at 62 (May 2016).
`
`B
`
`Three cigar and pipe tobacco industry associations
`challenged various provisions of the Deeming Rule in the
`district court. As relevant here, the plaintiffs argued that the
`warning requirements for cigars and pipe tobacco violate the
`Tobacco Control Act and the Administrative Procedure Act
`because the FDA did not adequately consider how the warnings
`would affect smoking. The plaintiffs also argued that the
`warning requirements violate the First Amendment.
`
`The district court rejected these challenges to the warning
`requirements. On these claims, the court denied the plaintiffs’
`motion for summary judgment, granted the FDA’s cross-
`motion for summary judgment, and denied as moot the
`plaintiffs’ motion for a preliminary injunction. Cigar Ass’n of
`Am. v. FDA, 315 F. Supp. 3d 143, 159–74 (D.D.C. 2018). The
`court then entered final judgment on the claims under Federal
`Rule of Civil Procedure 54(b). J.A. 330. Finally, the court
`stayed enforcement of the warning requirements during this
`appeal. Cigar Ass’n of Am. v. FDA, 317 F. Supp. 3d 555
`(D.D.C. 2018).
`
`II
`
`Our analysis begins, and ends, with the plaintiffs’ statutory
`claims. Those claims arise under the Administrative Procedure
`Act, which provides for judicial review of any “final agency
`action for which there is no other adequate remedy in a court.”
`5 U.S.C. § 704. The APA instructs a reviewing court to set
`aside agency action found to be “arbitrary, capricious, an abuse
`of discretion, or otherwise not in accordance with law.” Id.
`§ 706(2)(A). When a district court reviews agency action
`
`
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`USCA Case #18-5195 Document #1850427 Filed: 07/07/2020 Page 6 of 13
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`under the APA, we in turn review the district court’s decision
`de novo. See Deppenbrook v. PBGC, 778 F.3d 166, 171–72
`(D.C. Cir. 2015).
`
`A
`
`The plaintiffs contend that the cigar and pipe tobacco
`warning requirements are arbitrary and capricious because the
`agency failed to comply with the Tobacco Control Act. Under
`the APA, agency action is arbitrary and capricious if the agency
`“failed to consider an important aspect of the problem” before
`it, Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State Farm
`Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983), including any
`“factor the agency must consider under its organic statute,”
`Lindeen v. SEC, 825 F.3d 646, 657 (D.C. Cir. 2016) (quotation
`marks omitted). When Congress requires an agency to
`consider something, we ask whether the agency has reached an
`“express and considered conclusion” pursuant to the statutory
`mandate. Time Warner Entm’t Co. v. FCC, 56 F.3d 151, 175
`(D.C. Cir. 1995) (quotation marks omitted).
` “Merely
`referencing a requirement is not the same as complying with
`that requirement. And stating that a factor was considered—or
`found—is not a substitute for considering or finding it.”
`Gerber v. Norton, 294 F.3d 173, 185 (D.C. Cir. 2002) (cleaned
`up); accord Susquehanna Int’l Grp., LLP v. SEC, 866 F.3d 442,
`446 (D.C. Cir. 2017) (same).
`
`The FDA promulgated the warning requirements under
`section 906(d)(1) of the FDCA, which provides:
`
`The Secretary may by regulation require restrictions
`on the sale and distribution of a tobacco product,
`including restrictions on the access to, and the
`advertising and promotion of, the tobacco product, if
`the Secretary determines that such regulation would
`be appropriate for the protection of the public health.
`
`
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`USCA Case #18-5195 Document #1850427 Filed: 07/07/2020 Page 7 of 13
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`The Secretary may by regulation impose restrictions
`on the advertising and promotion of a tobacco product
`consistent with and to [the] full extent permitted by
`the first amendment to the Constitution. The finding
`as to whether such regulation would be appropriate for
`the protection of the public health shall be determined
`with respect to the risks and benefits to the population
`as a whole, including users and nonusers of the
`tobacco product, and taking into account—
`
`(A) the increased or decreased likelihood that
`existing users of tobacco products will stop using such
`products; and
`
`(B) the increased or decreased likelihood that
`those who do not use tobacco products will start using
`such products.
`
`21 U.S.C. § 387f(d)(1).
`
`Section 906(d)(1) establishes three clear propositions.
`First, the FDA “may” impose warning requirements for a
`tobacco product if it determines that the warnings are
`“appropriate for the protection of the public health.” Second,
`this “finding” on public health “shall be determined” for the
`“population as a whole, including users and nonusers of the
`tobacco product.” Third, the finding “shall … tak[e] into
`account” two further considerations: (A) the “likelihood that
`existing users of tobacco products will stop using such
`products” and (B) the “likelihood that those who do not use
`tobacco products will start using such products.” Therefore,
`although the FDA “may” decide whether to regulate, it “shall”
`consider the two factors when doing so. And “[w]hen a statute
`distinguishes between ‘may’ and ‘shall,’ it is generally clear
`that ‘shall’ imposes a mandatory duty.” Kingdomware Techs.,
`Inc. v. United States, 136 S. Ct. 1969, 1977 (2016). The FDA
`
`
`
`

`

`USCA Case #18-5195 Document #1850427 Filed: 07/07/2020 Page 8 of 13
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`thus cannot regulate under section 906(d)(1) without
`considering the likely impact on tobacco cessation and
`adoption rates.
`
`Our textual analysis fits comfortably with the rest of the
`Tobacco Control Act, which expresses a consistent concern for
`reducing smoking. In the Act, Congress found that “[b]ecause
`the only known safe alternative to smoking is cessation,
`interventions should target all smokers to help them quit
`completely.” Tobacco Control Act § 2(34), 123 Stat. at 1779.
`Likewise, Congress specified a purpose “to promote cessation
`to reduce disease risk and the social costs associated with
`tobacco-related diseases.” Id. § 3(9), 123 Stat. at 1782. As part
`of that goal, it invoked the FDA’s expertise “to evaluate the
`impact of labels, labeling, and advertising on consumer
`behavior in order to reduce the risk of harm.” Id. § 2(44), 123
`Stat. at 1780. In section 906(d)(1), it specifically directed the
`FDA to consider the impact of any regulation on cessation and
`adoption
`rates—separately
`identified
`in
`their
`own
`subsections—even as the FDA considers other public-health
`issues as well. 21 U.S.C. § 387f(d)(1). And it required the
`FDA to assess cessation and adoption rates in justifying various
`other administrative actions concerning tobacco. See id.
`§§ 387g(a)(3)(B)(i) (product standards), 387j(c)(4) (new
`product approval).
`
`Furthermore, our interpretation accords with common
`sense. The required package warnings occupy more than four
`times the surface area than do the package warnings previously
`required under settlements among large cigar manufacturers
`and the Federal Trade Commission. See, e.g., In re Swedish
`Match N. Am., Inc., Dkt. No. C-3970, 2000 WL 1207446
`(F.T.C. Aug. 25, 2000). By the FDA’s own estimate, the
`warnings will cost over $100 million to implement. Final
`Regulatory Impact Analysis, ECF Doc. 81-2 at 114–15. And
`
`
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`USCA Case #18-5195 Document #1850427 Filed: 07/07/2020 Page 9 of 13
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`they affect the speech interests of manufacturers. See, e.g., R.J.
`Reynolds Tobacco Co. v. FDA, 696 F.3d 1205, 1211–12 (D.C.
`Cir. 2012). When requiring a product to bear such obtrusive
`and expensive health warnings, it is difficult to imagine a more
`important “aspect of the problem,” State Farm, 463 U.S. at 43,
`than whether the warnings will actually affect product usage.
`
`The FDA responds that section 906(d)(1) “does not require
`a finding that a regulation will reduce the use of tobacco
`products” and that Congress gave it “leeway to determine what
`measures would be appropriate for the protection of the public
`health, as long as the agency considered the effects of
`regulation across all populations.” Appellees’ Br. 23. The
`FDA is partially correct; section 906(d)(1) requires a “finding”
`only on whether the regulation under consideration “would be
`appropriate for the protection of the public health.” But the
`provision
`then specifies how
`that
`finding “shall be
`determined,” namely by addressing risks and benefits for the
`entire population “and taking into account” the two specific
`considerations that we have highlighted. We decline to read
`the latter requirement out of the statute.
`
`B
`
`The Deeming Rule does not consider the impact of health
`warnings on smoking cessation and adoption rates. In fact, the
`rule scrupulously avoids that issue, and the FDA barely even
`contends otherwise. Instead, the FDA candidly acknowledged
`that “[r]eliable evidence on the impacts of warning labels … on
`users of cigars [and] pipe tobacco … does not, to our
`knowledge, exist.” Final Regulatory Impact Analysis, ECF
`Doc. 81-2 at 62.
`
`The FDA now highlights its conclusion that the expanded
`health warnings are “an effective means to help consumers
`understand and appreciate the risks of using tobacco products.”
`
`
`
`

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`USCA Case #18-5195 Document #1850427 Filed: 07/07/2020 Page 10 of 13
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`Deeming Rule, 81 Fed. Reg. at 29,064; see also id. at 28,981.
`Perhaps the new warnings will more effectively convey health
`risks, but section 906(d)(1) also requires the FDA to consider
`“the increased or decreased likelihood” that consumers will act
`on that information by deciding not to smoke. Presumably the
`two issues are related, for consumers are unlikely to heed
`warnings that they do not read or cannot understand. But “the
`relatedness of the concept discussed to the statutorily mandated
`factor that the agency does not discuss does not relieve the
`agency of the duty of compliance with the congressional
`instruction.” Pub. Citizen v. Fed. Motor Carrier Safety Admin.,
`374 F.3d 1209, 1217 (D.C. Cir. 2004). Because the regulation
`contains no discussion tying the warnings to reduced smoking,
`the FDA failed
`to bridge
`the gap between effective
`communication and fewer smokers.
`
`By its terms, section 906(d)(1) required the FDA to “tak[e]
`into account” whether the warning requirements would affect
`the number of smokers. Because the FDA declined even to
`consider that question, it violated section 906(d)(1) and acted
`arbitrarily and capriciously.
`
`C
`
`The district court held that the FDA satisfied section
`906(d)(1) by making this statement in the notice of proposed
`rulemaking:
`
`Based on the available data on the addictiveness of
`nicotine ... , the known adverse health effects of some
`of the products covered by this proposed rule, such as
`certain cigars and waterpipes, the likelihood that users
`of these products could co-use or migrate to other
`tobacco products like cigarettes, and the risk that
`failure to act will reinforce consumers’ existing
`confusion and misinformation about these products’
`
`
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`USCA Case #18-5195 Document #1850427 Filed: 07/07/2020 Page 11 of 13
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`11
`safety or lack of harmfulness, FDA believes that the
`sale and distribution restrictions the Agency is
`proposing—minimum
`age
`and
`identification
`requirements
`(including
`vending
`machine
`requirements) and health warning requirements—
`meet the public health standard set forth in section
`906(d) .... Specifically, FDA has concluded that the
`restrictions would be appropriate for the protection of
`the public health with respect to the risks and benefits
`to the population as a whole, including the increased
`likelihood that existing users will quit using tobacco
`products and the decreased likelihood that new users
`will initiate tobacco product use.
`
`Deeming Tobacco Products to Be Subject to the FDCA, 79
`Fed. Reg. 23,142, 23,146 (proposed Apr. 25, 2014) (NPRM);
`see Cigar Ass’n, 315 F. Supp. 3d. at 159–61.
`
`We cannot uphold a final rule based on reasoning that
`appears only in the notice. The APA “prescribes a three-step
`procedure for so-called ‘notice-and-comment rulemaking.’”
`Perez v. Mortgage Bankers Ass’n, 575 U.S. 92, 96 (2015).
`First, the agency must issue a “notice of proposed rulemaking.”
`5 U.S.C. § 553(b). Second, the agency must accept public
`comments. Id. § 553(c). Third, the agency must issue a final
`rule including a “general statement of … basis and purpose,”
`id., which must address significant comments and forms the
`basis for judicial review, see Nat’l Mining Ass’n v. MSHA, 512
`F.3d 696, 700 (D.C. Cir. 2008); 1 K. Hickman & R. Pierce,
`Administrative Law Treatise § 5.4 (6th ed. 2019); 2 id. § 11.1.
`Not surprisingly, the statement of basis and purpose must come
`“after” consideration of comments and thus also “after notice
`required by” section 553(b). See 5 U.S.C. § 553(c). We thus
`cannot uphold a final rule based on strands of reasoning that
`precede public comment and appear nowhere in the final rule.
`
`
`
`

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`USCA Case #18-5195 Document #1850427 Filed: 07/07/2020 Page 12 of 13
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`The district court reasoned that the Deeming Rule
`incorporated the notice. See Cigar Ass’n, 315 F. Supp. 3d. at
`161 (citing Deeming Rule, 81 Fed. Reg. at 29,062). Here is the
`putative incorporation: “FDA finds there is a strong scientific
`basis to require health warnings on cigar packages and in cigar
`advertising (as well as on signs for unpackaged cigars), which
`was extensively discussed in the NPRM (79 Fed. Reg. 23,142,
`at 23,167 through 23,170).” Deeming Rule, 81 Fed. Reg. at
`29,062 (cleaned up). This incorporates not the entire notice,
`but two passages beginning some 21 pages after the single page
`quoted by the district court. In the first incorporated passage,
`the FDA argued that warnings “are necessary to alert young
`people to the dangers of initiating cigar use, as well as to help
`current cigar smokers better understand and appreciate the
`health risks of using cigars.” NPRM, 79 Fed. Reg. at 23,167.
`The second passage addressed whether the proposed cigar
`warnings accurately convey the health risks of smoking cigars.
`Id. at 23,167–70. In both passages, the FDA again focused on
`effectively
`conveying
`information—without
`serious
`consideration of how the information might affect smoking.
`
`In any event, the notice would not satisfy section 906(d)(1)
`even if the Deeming Rule had fully incorporated it. For
`starters, the passage quoted by the district court failed to
`disentangle the effects of health warnings from those of age
`minimums and identification requirements, which involve not
`simply speech but outright prohibition of certain sales of
`tobacco products. Moreover, the quoted passage does little
`more than parrot the governing statutory language, rather than
`set forth evidence or a reasonable explanation of the likelihood
`that the proposed warnings would cause smokers to quit and
`prevent others from starting. Later in the notice, the FDA did
`elaborate on the various proposed regulations. In doing so, it
`cited many studies indicating that age minimums and
`identification requirements would likely reduce underage
`
`
`
`

`

`USCA Case #18-5195 Document #1850427 Filed: 07/07/2020 Page 13 of 13
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`smoking. See NPRM, 79 Fed. Reg. at 23,160–62. But as for
`the warning requirements, the FDA said only that “[t]he
`purpose of health warnings is to help current and potential
`tobacco users understand and appreciate the serious adverse
`health consequences associated with tobacco product use and
`the addictive nature of tobacco products.” Id. at 23,163; see
`also id. at 23,164 (“FDA believes that the proposed warnings
`would help both users and nonusers better understand and
`appreciate these dangers.”). This is essentially the same
`reasoning contained in the final rule, which we have held to be
`insufficient.
`
`III
`
`Congress required the FDA to consider whether any
`regulation under section 906(d)(1) would likely affect the
`number of tobacco users. In promulgating the warning
`requirements for cigars and pipe tobacco, the FDA failed to
`satisfy that obligation. We therefore reverse the grant of
`summary judgment to the FDA and the denial of summary
`judgment to the plaintiffs. Given our disposition on the merits,
`we dismiss as moot the plaintiffs’ appeal from the denial of
`their motion for a preliminary injunction. Finally, we remand
`to the district court for further proceedings consistent with this
`opinion.
`
`So ordered.
`
`
`
`