The en banc Fifth Circuit held 10-6 that the U.S. Food and Drug Administration’s (FDA) denial of a flavored e-cigarette product manufacturer’s premarket tobacco application (PMTA) was arbitrary and capricious, and that the agency’s error was not harmless. See Wages and White Lion Investments, L.L.C. v. FDA, No. 21-60800 (5th Cir. Jan. 3, 2024) (en banc). In so holding, the Fifth Circuit joins the Eleventh Circuit, which rejected FDA’s denial of a similar vaping product PMTA, and disagrees with the Second, Third, Fourth, Seventh, and Ninth Circuits, which have sided with FDA in cases raising analogous issues.
According to the Fifth Circuit majority, FDA sent the industry on “a wild goose chase.” In a long series of “meetings, PowerPoint decks, proposed rules, comment periods, guidance documents, and enforcement priorities,” FDA explained to the industry what companies should and should not include in their marketing applications. According to the guidance, the agency did not expect that manufacturers would need to submit specific studies in support of their applications. Instead, it would “be possible to support a marketing order for an [electronic nicotine delivery system] product without conducting new nonclinical or clinical studies given other data sources can support the PMTA.” FDA also emphasized the central importance each company’s marketing plan would play in its assessment of their products. Finally, the agency invited manufacturers to rely on existing data about unflavored products rather than conducting detailed long-term studies that would be necessary to generate new data specific to each flavored product.
Heeding these detailed instructions, thousands of manufacturers prepared and submitted applications for millions of products. FDA denied them all for reasons that the Fifth Circuit majority views as contradictory to the detailed guidance it had provided the industry all along the way. It faulted petitioners, for example, for having failed to conduct clinical trials and longitudinal cohort studies—the very studies it had previously said were not necessarily required to support a PMTA. It also rejected petitioners’ attempt to use data regarding unflavored products to support inferences regarding their own flavored products. And finally, it refused even to read petitioners’ marketing plans—the ones it had insisted on would be critical to its evaluation of their applications.
The Fifth Circuit majority held that FDA’s marketing denial orders violated four deeply-rooted principles of administrative law. First, it failed to give petitioners fair notice that it would deny their applications unless they submitted clinical trial data and longitudinal cohort studies, and therefore could not reject their applications on those grounds. Second, it changed its policy on what kinds of data and evidence would be required to support a PMTA without acknowledging its change in policy and without providing a reasoned explanation for the change. Third, it ignored petitioners’ reasonable and serious reliance interests. FDA attempted to justify its decisions during the litigation on grounds other than the ones it gave in the marketing denial orders themselves, but the majority held that the Chenery doctrine required it to ignore such post hoc rationales.
The court also rejected FDA’s attempt to find safe harbor in the harmless error rule. FDA argued that any error it had made in denying petitioners’ PMTAs was harmless because “there [wa]s nothing special about petitioners’ applications, so the agency [would] deny them on remand even if [the court] sen[t] the case back and order[ed] FDA to conform its decisionmaking to the [Administrative Procedure Act].” The Fifth Circuit rejected that argument, explaining that the harmless error rule applies “only where there is not the slightest uncertainty as to the outcome of the agency’s proceedings on remand.” By contrast, the court said, in any case where the agency’s decision was discretionary, the harmless error rule simply does not apply.
FDA’s denials of petitioners’ PMTAs, the court held, were a textbook example of the sort of discretionary agency decisions that fall outside the scope of the harmless error rule. The standards FDA applies in reviewing PMTAs are discretionary; the “applications are highly fact specific”; and “the ultimate decision to approve or deny an application turns on FDA’s ever-evolving understanding of what ‘public health’ requires.” The harmless-error rule therefore “simply d[id] not apply.”
The Supreme Court has already denied two petitions for certiorari challenging FDA denials of PMTAs filed by e-cigarette product manufacturers. The question now is whether the Department of Justice will seek certiorari here, and, if so, whether the Court will be more interested in the issue now that there is an even deeper circuit split.
