Vape Company Lawsuit Charges FDA Fines Are Unconstitutional

A California-based online vape retailer has filed a lawsuit challenging the FDA Center for Tobacco Products’ right to impose so-called Civil Money Penalties (fines) through administrative proceedings. 

The retailer, Huff and Puffers LLC of Garden Grove, says the fines allowed under provisions of the Food, Drug and Cosmetic Act (of which the Tobacco Control Act is a part) are unconstitutional because they violate the company’s right to a jury trial. The company also charges that the FDA has engaged in selective enforcement, since no Big Tobacco company has received a Civil Money Penalty, despite selling vaping products without an FDA Marketing Granted Order (MGO).

The FDA notified Huff and Puffers in June that the agency would seek a Civil Money Penalty of $20,678 for selling vape products not authorized for sale by the FDA. 

The lawsuit, filed on Sept. 27 in the U.S. District Court for the Central District of California, cites the recent Supreme Court decision in SEC v. Jarkesy that found another federal administrative agency (the Securities and Exchange Commission) violated the Seventh Amendment to the Constitution by imposing punitive administrative fines without allowing a jury trial.

The court said that since the SEC’s civil fines are punitive in nature, rather than compensatory—the agency “is not obligated to return any money to victims”—that they “are designed to punish and deter,” and therefore can only be imposed after a jury trial.

Commentary on the case in SCOTUSblog noted that the Jarkesy decision “will have a far-reaching impact on dozens of federal administrative agencies that use similar processes”—like the FDA with its Civil Money Penalties.

Civil Money Penalties are imposed by administrative law judges in the Civil Remedies Division of the Department of Health and Human Services (HHS) Departmental Appeals Board. They are appealed through the same board, and only if the internal appeal is denied may the fined party seek review by a federal appeals court.

Lawyers for Huff and Puffers say in the lawsuit that the FDA process forces the company “to incur the time and expense of an unconstitutional proceeding.” 

Indeed, the expense of challenging the administrative fines probably dissuades most companies from fighting the action. The cost of appealing a fine internally and then again in federal court might be considerably more expensive than simply paying the fine.

The FDA has sought Civil Money Penalties against multiple vape product sellers, mostly for selling unauthorized disposable vapes. According to the agency, companies can pay the penalty, enter into a settlement agreement, request an extension to file an answer, or file an answer and request a hearing.