On August 24, 2012, the D.C. Circuit struck down regulations promulgated by the FDA under the Family Smoking Prevention and Tobacco Control Act (the “Act”), which would have required cigarette packages to bear one of nine graphic images depicting the negative health consequences of smoking.  Because the D.C. Circuit’s decision appears to be in conflict with a decision of the Sixth Circuit upholding that portion of the Act authorizing the FDA’s rule making, the matter may be headed for the Supreme Court.

The Act gave the FDA the authority to regulate the manufacture and sale of tobacco products, including cigarettes.  For purposes of this discussion, the Act mandated that cigarette packages and advertising bear one of nine new text warning statements plus graphic images and that the warning comprise the top 50% of the front and back of cigarette packaging and 20% of the area of each cigarette advertisement.  Under the Act, the FDA was directed to issue regulations identifying the graphic components of the warnings. As discussed below, prior to FDA issuing its proposed graphic warnings, several tobacco companies had lost a facial challenge to that portion of the Act.

The FDA conducted a rule making and issued the regulations on June 22, 2011.  During the course of the rulemaking the FDA conducted an 18,000 person perception study and reviewed over 1,000 comments. Regarding the study, the FDA conceded that the study did not permit the FDA to reach firm conclusions about the “long-term, real-world effects” of the proposed warnings.  Here is one of the FDA graphic images:

Cigarettes_graphic

After the FDA finalized its rule, several tobacco companies filed suit asserting that the rule violated the First Amendment.  The district court granted the companies’ motion for a preliminary injunction and then their motion for summary judgment.  The FDA appealed the summary judgment ruling.

As with many First Amendment cases, the court began its analysis by trying to ascertain the correct level of scrutiny, and, in this case, as in many First Amendment cases, the decision on the level of scrutiny appears to have been outcome determinative. Courts reviewing First Amendment challenges can apply one of three standards:  strict scrutiny applied to laws governing political speech; intermediate scrutiny applied to laws regulating commercial speech (“Central Hudson test”); or reasonableness for laws requiring purely factual disclosures reasonably related to the State’s interest in preventing deception of consumers (“Zauderer test”).

The court began its analysis by noting that the First Amendment protects a corporation’s right both to speak and to refrain from speaking and that “this case raises novel questions about the scope of the government’s authority to force the manufacturer of a product to go beyond making purely factual and accurate commercial disclosures and undermine its own economic interest … by making every single pack of cigarettes … a mini billboard for the government’s anti-smoking message.”

The FDA argued that the graphic images warnings were factual and non-controversial disclosures and thus only needed to be reasonably related to the governmental interest to be advanced under Zauderer.  The court disagreed, finding that for disclosure to be reviewed under the Zauderer standard there must be a showing that the disclosed information was necessary to prevent consumer deception.  The court found the FDA had made no such showing and rejected arguments from the FDA and various state AGs as amici that the graphic images were necessary to cure years of deception by the tobacco companies.  The court also refused to consider the images as “factual and non-controversial” given that their stated purpose was to evoke an emotional response in consumers.

The court then turned to the Central Hudson test, which asks 3 questions: 1) is the asserted governmental interest substantial; 2) does the regulation directly advance the government interest asserted; and 3) is the fit between the government’s end and means reasonable.  The court noted that because the regulations in question had been done under the APA, the findings supporting the regulation to be examined under Central Hudson must be supported by substantial evidence.

The court accepted that the proffered interest –reducing smoking rates — was substantial.  However, the court found that “the FDA has not provided a shred of evidence,” much less substantial evidence, that the graphic images will directly advance the interest of reducing smoking rates.  The FDA’s consumer perception study was inconclusive and the court dismissed evidence regarding the use of labels in other countries as insufficient.  The court closed by noting that while the FDA’s desire to counter the $12 billion a year the tobacco industry spends in advertising was understandable, that desire did not trump the First Amendment.

The dissent took issue with two key findings of the majority.  First, the dissent would characterize the images as providing factually accurate information regarding the effects of cancer.  Second, the dissent would find the graphic images necessary to overcome the years of deception the tobacco industry was seen as engaging in regarding the effects of smoking.  Thus, the dissent found the regulations passed scrutiny under Zauderer.  The dissent also found the rule passed scrutiny under Central Hudson.

The dissent’s analysis was similar to that employed by the Sixth Circuit in ruling on the tobacco industry’s facial challenge to the Act.  The Sixth Circuit found that Zauderer provided the proper analytical framework.  The Sixth Circuit then found that as described in the statute the graphic images to be developed provided necessary factual information to overcome the tobacco industry’s alleged history of deception and the persistency of nicotine addiction.  The court also found the Act passed scrutiny under Central Hudson for the same reasons.

The conflicting approaches and opinions of the D.C. and Sixth Circuits may set the Act and the regulations up for review by the Supreme Court.  The Court could skip the case based on the procedural difference between the D.C. Circuit’s review of the rule versus the Sixth Circuit’s adjudication of the facial challenge.  The Roberts Court, however, has been active on First Amendment issues issuing opinions in Citizens United, IMS/Sorrell, the Stolen Valor case, the Westboro Baptist funeral protest case, and the Animal Crush case.  Thus, the high profile and conflicting opinions presented by this case make the matter ripe for review.