Cigar Ass'n of Am. v. City of Philadelphia

NOT PRECEDENTIAL

Argued: June 23, 2021

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil Action No. 2-20-cv-03220) District Judge: Honorable Gene E.K. Pratter

Kelly S. Diffily [ARGUED]

CITY OF PHILADELPHIA LAW DEPARTMENT

Counsel for Appellants

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Mark A. Aronchick

Andrew M. Erdlen

John S. Summers [ARGUED]

HANGLEY ARONCHICK SEGAL PUDLIN & SCHILLER

Counsel for Appellees

Before: CHAGARES, PORTER, and ROTH, Circuit Judges.

OPINION ^[*]

PORTER, Circuit Judge.

Faced with a sharp increase in the public's use of flavored tobacco products, the City of Philadelphia enacted Ordinance 180457 in December 2019. The measure bans the sale of tobacco products with "characterizing flavors," defined as any "taste or aroma, other than the taste or aroma of tobacco." Phila., Pa., Code § 9-639 (2021).

A group of cigar manufacturers, importers, and distributors sued Philadelphia in the Philadelphia Court of Common Pleas, seeking declaratory and injunctive relief against the Ordinance, as well as money damages. Philadelphia removed the action to federal court. The plaintiffs then moved for a preliminary injunction.

The District Court granted the plaintiffs' motion. See Cigar Ass'n of Am. v. City of Philadelphia, 500 F.Supp.3d 428 (E.D. Pa. 2020). It ruled that the Ordinance was preempted by Pennsylvania state law and that the plaintiffs would suffer unrecoverable

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economic loss unless an injunction issued. From the District Court's injunction order, Philadelphia brings this interlocutory appeal. We will affirm.

I

Pennsylvania law prohibits the sale of tobacco to minors. But Philadelphia considers state law to be inadequate to deal with the health consequences of tobacco use by both minors and adults. According to Philadelphia, most of the youth who have used tobacco report starting with a flavored tobacco product. This problem is worse in minority and low-income neighborhoods.

To combat this public health threat, Philadelphia passed the law at issue, which prohibits the sale of tobacco products with a taste or aroma other than that of tobacco. Phila., Pa., Code § 9-639. The Ordinance includes a narrow exception for "Tobacco Products Distribution Business[es]," defined as businesses closed to minors that derive ninety percent or more of their sales from tobacco products and do not sell food. Id.

As noted, the District Court granted the plaintiffs' motion for a preliminary injunction. Cigar Ass'n of Am., 500 F.Supp.3d at 438. The court began its analysis with a discussion of the two Pennsylvania statutes at issue: 53 Pa. Cons. Stat. § 301 and 18 Pa. Cons. Stat. § 6305. Id. at 430. The first statute is the preemption provision. It provides, with exceptions not relevant here, that "the provisions of [18 Pa. Cons. Stat. § 6305] (relating to sale of tobacco products) shall preempt and supersede any local ordinance or rule concerning the subject matter of [section 6305]." 53 Pa. Cons. Stat. § 301(a). The second statute, section 6305, contains five prohibitions related to the sale of tobacco, three of which expressly mention minors. 18 Pa. Cons. Stat. § 6305.

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To resolve the legality of the Ordinance, the court answered two questions. Cigar Ass'n of Am., 500 F.Supp.3d at 430. First, what is section 6305's subject matter? Id. Second, does the Ordinance concern that subject matter? Id. The court concluded that the subject matter of section 6305 is "youth access to tobacco," and that the Philadelphia Ordinance does concern that subject matter. Id. at 430-31. Accordingly, the plaintiffs demonstrated a likelihood of success on the merits of their preemption claim. Id. at 43135. Turning to the issue of irreparable harm, the court concluded, based on a report from an expert for the plaintiffs, that the plaintiffs would suffer substantial economic harm if the Ordinance were to go into effect, and that the harm would be unrecoverable because of Philadelphia's Eleventh Amendment immunity from suit for money damages. Id. at 436-37.

The District Court then found that "the balance of the equities and the public interest both weigh in favor of an injunction." Id. at 437. The court declined to "second-guess" the General Assembly's judgment "that it is in the public interest to preempt enactments like the Ordinance at issue in this case." Id. at 438. Having determined that all factors favored a preliminary injunction, the District Court issued one. Id.

This interlocutory appeal followed.

II

This case was removed to the District Court under 28 U.S.C. §§ 1441 and 1446. We have appellate jurisdiction under 28 U.S.C. § 1292(a)(1). "When reviewing a district court's grant of a preliminary injunction, we review the court's findings of fact for clear error, its conclusions of law de novo, and the ultimate decision granting the preliminary

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injunction for an abuse of discretion." Bimbo Bakeries USA, Inc. v. Botticella, 613 F.3d 102, 109 (3d Cir. 2010). A district court abuses its discretion when it issues an injunction based "'on an erroneous view of the law or on a clearly erroneous assessment of the evidence,' which includes an improper application of the correct law to the facts." Hope v. Warden York Cnty. Prison, 972 F.3d 310, 320 (3d Cir. 2020) (citation omitted) (quoting Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990)). A district court's factual finding is clearly erroneous "when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Id. (internal quotation marks omitted) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)).

III

"Preliminary injunctive relief is 'an extraordinary remedy' and 'should be granted only in limited circumstances.'" Kos Pharms., Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir. 2004) (quoting Am. Tel. &Tel. Co. v. Winback & Conserve Program, Inc., 42 F.3d 1421, 1426-27 (3d Cir. 1994)). A party seeking a preliminary injunction "must meet the threshold for the first two 'most critical' factors: it must demonstrate that it can win on the merits (which requires a showing significantly better than negligible but not necessarily more likely than not) and that it is more likely than not to suffer irreparable harm in the absence of preliminary relief." Reilly v. City of Harrisburg, 858 F.3d 173, 179 (3d Cir. 2017) (footnote omitted).^[1] "If these gateway factors are met, a court then

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considers the remaining two factors"-the balance of the equities and the public interest-"and determines in its sound discretion if all four factors, taken together, balance in favor of granting the requested preliminary relief." Id.

Philadelphia argues that the plaintiffs failed to establish either of the first two gateway factors, so the entry of a preliminary injunction was an abuse of discretion. We disagree.

A

We begin with the merits. "As a city of the first class pursuant to the First Class City Home Rule Act, Philadelphia 'may exercise all powers and authority of local self-government and shall have complete powers of legislation and administration in relation to its municipal functions.'" Holt's Cigar Co. v. City of Phila., 10 A.3d 902, 906 (Pa. 2011) (footnote omitted) (quoting 53 Pa. Cons. Stat. § 13131). "Under the concept of home rule, the ability of a locality to exercise municipal functions is limited only by its home rule charter, the Pennsylvania Constitution, and enactments of the General Assembly." Id. The General Assembly is empowered by the Pennsylvania Constitution to "deny 'at any time' powers that otherwise may have been reserved to a home rule municipality." Mitchell's Bar & Rest., Inc. v. Allegheny Cnty., 924 A.2d 730, 739 (Pa. Commw. Ct. 2007) (quoting Pa. Const. art. IX, § 2). "Under the doctrine of preemption, '[a] municipality may not exercise power or authority in violation of the preemption

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doctrine, which provides that when the legislature has preempted a field the state has retained all regulatory and legislative power for itself and therefore prohibits local legislation in that area.'" Id. at 736-37 (alteration in original) (quoting Nutter v. Dougherty, 921 A.2d 44, 56 (Pa. Commw. Ct. 2007) (en banc)).

"When examining an express preemption clause," Pennsylvania courts "focus on [its] plain wording . . ., which necessarily contains the best evidence of the legislature's pre-emptive intent." JoJo Oil Co. v. Dingman Twp. Zoning Hearing Bd., 77 A.3d 679, 690 (Pa. Commw. Ct. 2013). The express preemption clause at issue provides that "the provisions of [18 Pa. Cons. Stat. § 6305] (relating to sale of tobacco products) shall preempt and supersede any local ordinance or rule concerning the subject matter of [section 6305]." 53 Pa. Cons. Stat. § 301(a). Section 6305, in turn, contains five prohibitions: (1) "sell[ing] a tobacco product to any minor"; (2) "furnish[ing], by purchase, gift or other means, a tobacco product to a minor"; (3) "locat[ing] or plac[ing] a vending machine containing a tobacco product in a location accessible to minors"; (4) "display[ing] or offer[ing] a cigarette for sale out of a pack of cigarettes"; or (5) "display[ing] or offer[ing] for sale tobacco products in any manner which enables [a customer] . . . to physically handle tobacco products prior to purchase unless the tobacco products are located within the line of sight or under the control of a cashier or other employee during business hours, except[ing] . . . retail stores which derive 75% or more of sales revenues from tobacco products." 18 Pa....