Elec. Clouds, Inc. v. U.S. Food & Drug Admin.

94 F.4th 950

ELECTRIC CLOUDS, INC. andCloud 9 Vapor Products, L.L.C., Petitioners, v. UNITED STATES FOOD AND DRUG ADMINISTRATION, Respondent.American Academy of Family Physicians; American Academy of Pediatrics;American Cancer Society Cancer Action Network; American Heart Association;American Lung Association of Oklahoma; American Medical Association;Campaign for Tobacco-Free Kids; Colorado Medical Society;Parents Against Vaping E-Cigarettes; Truth Initiative, Amici Curiae.

No. 21-9577

No. 21-9578

United States Court of Appeals, Tenth Circuit

FILED February 27, 2024

PETITION FOR REVIEW FROM AN ORDER OF THE U.S. FOOD AND DRUG ADMINISTRATION (FDA Nos. PM0002382 & PM002523)

Jerad Wayne Najvar, Najvar Law Firm, PLLC, Houston, Texas, for Petitioners.

Joshua M. Koppel, Appellate Staff Attorney, U.S. Department of Justice, Washington D.C. (Bryan M. Boynton, Principal Deputy Assistant Attorney General, and Alisa B. Klein, Appellate Staff Attorney, with him on the briefs), for Respondent.

William B. Schultz, Andrew N. Goldfarb, and Trillium Chang of Zuckerman Spaeder LLP, Washington D.C., and Dennis A. Henigan and Connor Fuchs, Campaign for Tobacco-Free Kids, Washington, D.C., filed an amicus curiae brief in support of Respondent.

Before BACHARACH, BALDOCK, and MURPHY, Circuit Judges.

BACHARACH, Circuit Judge.

This case arose from concern over the spread of nicotine. Traditionally, nicotine had come mainly from cigarettes. But nicotine now comes from other sources, such as e-cigarettes. With e-cigarettes, users inhale vaporized liquid rather than smoke; the vapor comes from heated liquids called e-liquids.

E-liquids contain nicotine, which harms human health. So the Food and Drug Administration began requiring manufacturers to apply for approval before they could continue selling e-liquids. Because the application process would be new, the FDA issued guidance for manufacturers.

With this guidance, manufacturers blitzed the FDA with applications to market e-liquids bearing attractive flavors. Our petitions for review involve applications from two of these manufacturers: Electric Clouds, Inc. and Cloud 9 Vapor Products, L.L.C. With their applications, Electric Clouds and Cloud 9 submitted scientific data and marketing proposals to restrict access for children. The FDA rejected the applications without reviewing the proposed restrictions on access, and Electric Clouds and Cloud 9 seek judicial review on two main issues:

1. Notice: Because the application process was new, the FDA provided manufacturers with guidance. For example, the FDA suggested to manufacturers that they would need to show enough benefits to adult users to offset the risk of attracting children to e-liquids. Did this suggestion mislead manufacturers to believe that they wouldn't need long-term clinical studies or comparisons involving flavored and non-flavored e-liquids? We answer no.

2. Harmless error: The FDA studied existing access restrictions based on age and found that they had generally proved ineffective. Electric Clouds and Cloud 9 proposed age restrictions like those that the FDA had regarded as ineffective. Did the FDA prejudice Electric Clouds or Cloud 9 by rejecting their applications without reviewing their proposed age-restrictions? We again answer no.

1. FDA approval is required to manufacture e-liquids.

The FDA considered the applications against the backdrop of federal law, which permits approval only if the availability of the e-liquid "would be appropriate" to protect public health. 21 U.S.C. § 387j(c)(2)(A). To apply this standard, the FDA must balance

• the chance that more adult users will transition away from tobacco use and

• the risk that more children will start using e-liquids.

21 U.S.C. § 387j(c)(4)(A)-(B).

In balancing these factors, the FDA has considered the advantages and disadvantages of e-liquids. The disadvantages mainly involve the presence of nicotine. See Family Smoking Prevention and Tobacco Control Act, Pub. L. 111-31, § 2(3), 123 Stat. 1776, 1777 (2009); Avail Vapor, LLC v. FDA, 55 F.4th 409, 414-15 (4th Cir. 2022). So the FDA has set out to encourage adult users to transition to e-liquids without making them attractive to children. Breeze Smoke, LLC v. FDA, 18 F.4th 499, 504-05 (6th Cir. 2021). This task was complicated by the growing use of flavors in e-liquids. These flavors attract children by making the e-liquids taste like fruit, mint, candy, desserts, and other sweets. See Avail Vapor, 55 F.4th at 415.

2. The FDA denied the applications by Electric Clouds and Cloud 9 to market flavored e-liquids.

With this regulatory framework in place, Electric Clouds and Cloud 9 applied for approval to manufacture flavored e-liquids bearing names like Ice Cream Dream, Berries Gone Wild, Cap'n Berry Crack, Banana Colada, Apple Pie, and Candy Man. ER6-10, 306-23.

The FDA denied the applications, finding that Electric Clouds and Cloud 9 hadn't shown that their flavored e-liquids would help adult smokers enough to offset the risk to youth. ER14-15, ER325-26. The FDA considered the manufacturers' scientific evidence, but regarded it as deficient based on the absence of

• long-term, product-specific studies of cigarette reduction or comparisons to tobacco-flavored e-liquids (such as a randomized controlled trial or longitudinal cohort study) or

• other evidence that had reliably evaluated the effect of flavoring on adults reducing their use of cigarettes or transitioning to e-liquids.

ER14-15, 325-26.

Given these deficiencies, the FDA rejected the applications without reviewing the proposed marketing plans. ER15, 325. The FDA acknowledged that marketing plans might theoretically reduce the risk to youth. ER35 n.xix, 352 n.xix. But the FDA pointed out that it hadn't yet seen any marketing plans that would sufficiently offset the risk of attracting young consumers. Id.

3. The FDA didn't mislead Electric Clouds or Cloud 9 by ambushing them with a new, undisclosed evidentiary standard.

Electric Clouds and Cloud 9 argue in part that the FDA misled them by imposing rigid requirements after suggesting a more flexible approach. The changes, according to Electric Clouds and Cloud 9, involved requirements for long-term clinical studies and comparisons between e-liquids based on the presence of flavoring.

An agency must explain changes in its position, particularly when a regulated party has relied on the earlier position. FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515-16, 129 S.Ct. 1800, 173 L.Ed.2d 738 (2009). Electric Clouds and Cloud 9 argue that the FDA changed its position after fostering reliance on its written guidance, proposed rule, and statements in a public meeting. We disagree, concluding that the FDA didn't deviate from its earlier statements. See Prohibition Juice Co. v. FDA, 45 F.4th 8, 20-21 (D.C. Cir. 2022) (rejecting a similar challenge because the FDA's final determinations were consistent with the FDA's 2019 Guidance).

3.1 The FDA's statements didn't mislead Electric Clouds or Cloud 9 on the need for long-term clinical studies or the equivalent.

Electric Clouds and Cloud 9 argue that three of the FDA's statements had suggested to manufacturers that they could forgo long-term clinical studies:

1. the Guidance in 2019 for e-liquid manufacturers, FDA, Guidance for Industry, Premarket Tobacco Applications for Electronic Nicotine Delivery Systems (June 2019),

2. a 2019 proposed rule, Premarket Tobacco Product Applications and Recordkeeping Requirements, 84 Fed. Reg. 50,566 (Sept. 25, 2019), and

3. an FDA public meeting on October 22-23, 2018.

3.1.1 The 2019 Guidance didn't mislead the manufacturers.

Electric Clouds and Cloud 9 argue that they were misled by the FDA's guidance. Granted, "[t]he fair-notice requirement extends to informal guidance." Breeze Smoke, LLC v. FDA, 18 F.4th 499, 504 (6th Cir. 2021). But the guidance itself stressed that

• it was not binding,

• the FDA would continue to adapt to new information, and

• manufacturers would need to show empirical data at multiple points in time.

In both 2019 and 2020, the FDA issued guidance, beginning both times with warnings that they "represent[ ] the current thinking of the [FDA] on this topic" and are "not binding on the FDA or the public." ER47, ER115 (emphasis added). The 2019 Guidance added that "guidances . . . should be viewed only as recommendations, unless specific regulatory or statutory requirements are cited." ER117. To emphasize the nonbinding nature of the guidance, the FDA included a bolded disclaimer on every page saying that it "[c]ontains nonbinding recommendations." See Wages & White Lion Invs., LLC v. FDA, 90 F.4th 357, 398 n.6 (5th Cir. 2024) (en banc) (Haynes, J., dissenting) ("The conditional language used by the FDA in its nonbinding guidance documents indicates that it never guaranteed that a certain type of evidence would be sufficient.").¹

With these disclaimers, the FDA emphasized in the 2020 Guidance that the requirements would change based on new information: "Manufacturers cannot have settled expectations to market unlawful products, especially in the face of evolving public health concerns." ER72, Enforcement Priorities for Electronic Nicotine Delivery Systems (ENDS) and Other Deemed Products on the Market Without Premarket Authorization (Revised): Guidance for Industry (Apr. 2020). Given the development of new information, the FDA reminded manufacturers that they

• would need to adapt their compliance policies based on "changed circumstances" and

• couldn't reasonably rely "on a . . . policy subject to change at any time."

ER79-80.²

Regardless of these reminders, the 2019 Guidance shouldn't have induced Electric Clouds or Cloud 9 to omit long-term clinical studies or the equivalent. In the guidance, the FDA regarded long-term clinical studies as the strongest type of evidence; however, the FDA also acknowledged that existing data might suffice. For example, the FDA said that it would consider "established bod[ies] of evidence," such as ...