A Tale of Two Court Decisions

Thomas A. Briant, NATO Executive Director

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Two U.S. Circuit Court of Appeals. One similar issue. Two very differ­ent rulings. That is the scenario that the tobacco industry and the U.S. Food and Drug Administration (FDA) find them­selves in regarding the constitutionality of the agency’s proposed graphic cigarette health warnings.

This legal conundrum has arisen because the U.S. Circuit Courts of Appeal for the Sixth Circuit and the District of Columbia Circuit have issued seemingly contradictory decisions on whether the graphic cigarette warnings for cigarette packaging and advertisements violate the First Amendment of the U.S. Constitution.

For background purposes, it is impor­tant to understand that the First Amend­ment protects the right of free speech; the U.S. Supreme Court has extended this protection to commercial speech, which includes product advertising. In fact, the right of free speech includes the right to speak and the right not to speak at all. In this regard, if government action compels a person or a company to express certain views that the individual or company would not otherwise make if given a choice, then this action is known as com­pelled speech and is strictly limited by the First Amendment and precedent-setting Supreme Court decisions interpreting the right of free speech.

Two Lawsuits

The first lawsuit was filed against the FDA by Discount Tobacco City and Lottery, a NATO retail member; R.J. Reynolds Tobacco Co.; Lorillard Tobacco Co.; National Tobacco Co.; Commonwealth Brands Inc. (now Commonwealth-Alta­dis Inc.); and American Snuff Co.

This initial lawsuit involved a number of issues regarding the FDA tobacco regu­lations, including the requirement that all cigarette and smokeless tobacco advertise­ments be in black and white, free samples of cigarettes be prohibited, brand names no longer be used for event sponsorships, and a First Amendment challenge that cigarette manufacturers reserve 50% of the front and back of cigarette packages and 20% of the top of cigarette advertise­ments for graphic warning labels. When this first lawsuit was filed in August 2009, the FDA had not yet decided upon nor issued the actual color graphic warning labels. Rather, this lawsuit challenged the size of the graphic cigarette warnings as being unconstitutional.

The second lawsuit was filed Aug. 16, 2011, after the FDA had decided upon nine graphic cigarette health warning images, each with its own next text warning and the cessation hotline number (800) QUIT-NOW. This second case was filed against the FDA by R.J. Reynolds Tobacco Co., Lorillard Tobacco Co., Commonwealth Brands (now Commonwealth-Altadis Inc.), Liggett Group LLC and Santa Fe Natural Tobacco Co. Inc. The only issue in this lawsuit was whether the selected graphic warning images, the correspond­ing text warnings and the hotline number violated the First Amendment protection of commercial free speech.

Sixth Circuit Decision

The Sixth Circuit Court of Appeals decided that the increased size and placement of the new health warnings on cigarette packaging and advertising was “reasonably tailored to overcoming the informational deficit regarding tobacco harms.” The FDA argued that the larger warnings were necessary because there was a health information deficit about the consequences of tobacco, especially among youth.

In response, the plaintiff manu­facturers contended that the scale and size of the new warnings outweighed the government’s interest in conveying health information because consumers already understand the health risks of smoking. On this issue of the size of the new warnings, the court decided that the FDA’s use of these larger warnings was rationally related to the law’s purpose in educating consumers about the health consequences of smoking.

Apart from upholding the consti­tutionality of the increased size of the health warnings, the Sixth Circuit judges also held that an “advertiser’s rights are adequately protected as long as disclosure requirements are reasonably related to the State’s interest in preventing decep­tion of consumers.” Specifically, under this “reasonably related” test, the appeals court judges found that the nine new text warnings addressed the “negative health consequences of using tobacco” and dis­closed factual information. Moreover, the court put the burden on the plaintiff man­ufacturers to demonstrate that graphic warnings could never be factually accurate.

Under the court’s reasoning, the Sixth Circuit judges declared that pictures can also be “accurate and factual” and compared the use of graphic health warn­ings on cigarette packages to pictures of human organs in anatomy textbooks. This reasoning led the Sixth Circuit court to find that “there is no reason why a pic­ture could not also accurately represent a negative health consequence of smoking.”

In short, the Sixth Circuit judges held that the use of text and graphic health warning was “reasonably related to the government’s interest in preventing consumer deception” and conveyed “the factual health risks of smoking to provide consumers with truthful information as they make decisions about purchasing and using tobacco products.” That is, the health warnings are not considered “compelled speech” by the Sixth Circuit Appeals court, but constitute commercial speech “disclo­sures,” which are constitutional in this case.

DC Circuit Decision

In contrast to the Sixth Circuit court’s deci­sion, the District of Columbia Circuit held that the graphic cigarette health warnings violate the First Amendment’s protection of commercial speech because the “FDA failed to present any data … showing that enacting their proposed graphic warnings will accomplish the agency’s stated objec­tive of reducing smoking rates.”

This ruling was based on a differ­ent legal standard than the “reasonably related” test relied upon by the Sixth Circuit. The District of Columbia Circuit applied what is known as an “intermediate scrutiny” standard because it found that the government was compelling manufac­turers to use emotionally shocking graphic pictures to admonish smokers not to buy or smoke cigarettes. This intermediate scrutiny standard requires the FDA to demonstrate that its interest is substan­tial and the compelled action directly advances the government’s interest.

The FDA’s main interest in compelling the use of graphic warning images is to provide health information to prevent people from smoking or to urge smokers to quit smoking. However, the District of Columbia Circuit found that “the graphic images are not ‘purely’ factual because … they are primarily intended to evoke an emotional response, or, at most, shock the viewer into retaining the information in the text warning.” That is, the court found that warnings were intended not to purely provide educational health information, but to “browbeat consumers into quitting.”

In this context, the District of Colum­bia court went on to hold that the FDA did not prove that the use of graphic health warnings would actually reduce the smoking rate. The justices reviewed various studies conducted in other coun­tries that have cigarette graphic warning labels along with the FDA’s Regulatory Impact Analysis and determined that the studies and the FDA’s own analysis did not provide “a shred of evidence … showing that the graphic warnings will ‘directly advance’ its interest in reducing the number of Americans who smoke.”

Rather, the studies indicated that “large graphic warnings might induce individual smokers to reduce consumption” and the FDA’s own analysis estimated that “the new warnings would reduce smoking rates by a mere 0.088% ... a number the FDA concedes is ‘not statistically distinguishable from zero.’ ” In short, the court concluded that neither the studies nor the FDA’s analy­sis constituted substantial evidence that the graphic warnings would advance the FDA’s interest in reducing the smoking rate.

What’s Next

During the course of these two lawsuits and the appeals of the cases to the U.S. Courts of Appeal, the FDA issued a notice Feb. 24, 2012, that states that “the imple­mentation date for FDA’s final rule … which requires larger, more prominent health warnings on all cigarette packaging and advertisements in the United States and was scheduled to become effective in September 2012—is uncertain.” While the Sixth Circuit Court of Appeals declared the new graphic image warning labels constitutional, the District of Columbia Circuit Court of Appeals struck down the specific graphic warnings as being uncon­stitutional and remanded, or sent the issue back, to the FDA. This has created what is called a conflict between the circuit courts.

From a procedural point of view, either the tobacco industry plaintiffs or the FDA can take several steps. First, the tobacco industry plaintiffs have until Oct. 26, 2012, to file a petition for writ of certiorari with the U.S. Supreme Court asking the court to review the Sixth Circuit decision. Los­ing parties file this with the U.S. Supreme Court, asking it to accept an appeal of the case and the reasons why the court should “grant cert” to accept the appeal of the case.

Second, the FDA has 45 days from the date the District of Columbia Circuit Court of Appeals issued its decision to request a rehearing en banc. An “en banc” hearing is a hearing before the full panel of the District of Columbia appeals court, not just the three judges that initially decided the case. If an en bank hearing is not requested, then the FDA has the right to file a petition for writ of certiorari ask­ing the U.S. Supreme Court to accept an appeal of the District of Columbia appeals court decision. This writ will need to be filed on or about Nov. 22, 2012.

With these various means for either the tobacco industry litigants or the FDA to appeal the Sixth Circuit or District of Columbia Circuit decisions, the conclu­sion to this litigation is yet to be written

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