Case 4:18-cv-00028-ALM-KPJ Document 35 Filed 05/22/18 Page 1 of 8 PageID #: 1279

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

EN FUEGO TOBACCO SHOP LLC d/b/a §

EN FUEGO TOBACCO SHOP, ET AL., §
§
Plaintiffs, §
§ Civil Action No.: 4:18-cv-00028
v. §
§
UNITED STATES FOOD AND DRUG §
ADMINISTRATION, ET AL., §
§
Defendants.
§

ORDER

This case was referred to the undersigned pursuant to 28 U.S.C. § 636, the Local Rules of

Court for the Assignment of Duties to United States Magistrate Judges, and the applicable Referral

Order, for all pretrial proceedings. Pending before the Court are the following motions:

1. Defendants’ Motion to Transfer (the “Motion to Transfer”) (Dkt. 18) filed on March

19, 2018. Plaintiffs filed a response (Dkt. 23) on April 2, 2018; Defendants filed a reply

(Dkt. 24) on April 9, 2018; and Plaintiffs filed a sur-reply (Dkt. 27) on April 16, 2018.

2. Plaintiffs’ Motion for Partial Summary Judgment or, in the Alternative, for a

Preliminary Injunction (the “Motion for Partial Summary Judgment”) (Dkt. 22) filed

on March 27, 2018. As explained below, Defendants’ deadline to respond to Plaintiffs’

Motion for Partial Summary Judgment was stayed pending the resolution of

Defendants’ Motion to Stay Briefing (Dkt. 28).

3. Defendants’ (1) Motion to Stay Briefing and Consideration of Plaintiffs’ Motion for

Partial Summary Judgment or, in the Alternative, for a Preliminary Injunction (the

“Motion to Stay Briefing”) and (2) Motion for Expedited Briefing and Consideration

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(the “Motion for Expedited Briefing”) (Dkt. 28) filed on April 16, 2018. On April 20,

2018, the Court issued an Order bifurcating the Motion to Stay Briefing from the

Motion for Expedited Briefing and denying the Motion for Expedited Briefing. See

Dkt. 31. Accordingly, only the Motion to Stay Briefing remains pending before the

Court. Plaintiffs filed a response (Dkt. 32) on April 23, 2018; and Defendants filed a

reply (Dkt. 33) on April 30, 2018.

Upon review of the relevant pleadings, as well as the entire record in this case, the Court

finds: (1) the Motion to Transfer (Dkt. 18) should be DENIED; (2) the Motion to Stay Briefing

(Dkt. 28) should be DENIED; and (3) responsive briefing as to Plaintiffs’ Motion for Partial

Summary Judgment (Dkt. 22) shall proceed as set forth below.

I. BACKGROUND

On May 10, 2016, the U.S. Food and Drug Administration (the “FDA”) published a final

rule “deeming” cigars, pipe tobacco, and certain other products (e.g., e-cigarettes) subject to the

federal Food, Drug, and Cosmetic Act (the “FD&C Act”), 21 U.S.C. §§ 301, et seq., as amended

by the Family Smoking Prevention and Tobacco Control Act of 2009 (the “TCA”). Known as the

“Deeming Rule,” the FDA’s action subjects these newly “deemed” products to comparable

statutory and regulatory requirements already imposed on cigarettes, cigarette tobacco, roll-your-

own tobacco, and smokeless tobacco. See 81 Fed. Reg. 28,974, 28,976 (May 10, 2016) (codified

at 21 C.F.R. pts. 1100, 1140, 1143).

The Deeming Rule sets out comprehensive warning statement requirements, for both cigar

product packaging and advertisements. By August 10, 2018, cigar product packages must display

one of six health warning statements on a rotating basis. The Deeming Rule also specifies the

placement and size of the required health warnings. With respect to packaging, each warning

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statement must “appear directly on the package” and must be “located in a conspicuous and

prominent place on the two principal display panels of the package,” comprising “at least 30

percent of each of the principal display panels.” Id. § 1143.5(a)(2). For cigars that are sold

individually and not in a product package, the health warning statements must be posted at the

retailer’s point-of-sale on an 8.5 by 11-inch “clear, legible, and conspicuous” sign. Id. §

1143.5(a)(3). As to print and other visual advertisements, the warning statement must be located

in the “upper portion of the area of the advertisement” and occupy “at least 20 percent of the area

of the advertisement.” Id. § 1143.5(b).

It is these warning requirements that are at issue in the present lawsuit filed on January 11,

2018. See Dkt. 1. Plaintiff En Fuego Tobacco Shop LLC (“En Fuego”) is a premium cigar retailer

(id. at ¶ 16); Plaintiff Cuba Libre Enterprises LLC, (“Cuba Libre”) is a manufacturer of handmade

premium cigars (id at ¶ 18); and Plaintiff Texas Cigar Merchants Association ( “TCMA”) is a

Texas not-for-profit association representing premium cigar manufacturers and retailers in the state

of Texas. En Fuego, Cuba Libre, and TCMA are referred to hereinafter as “Plaintiffs.” Plaintiffs’

complaint (the “Complaint”) alleges that the Deeming Rule violates Plaintiffs’ First Amendment

rights under the Constitution, as well as the FSPTCA and the Administrative Procedures Act (the

“APA”). Plaintiffs seek declaratory and injunctive relief to prevent implementation and

enforcement of the Deeming Rule. See Dkt. 1.

Defendants seek to transfer this case to the United Stated District Court for the District of

Columbia for consolidation with its “predecessor,” Cigar Ass’n of Am. v. FDA, Case No. 1:15-cv-

-1460 (D.D.C.). See Dkt. 18. Defendants argue the cases are “essentially duplicative,” and

Plaintiff’s claims here are identical to those presented in Cigar Association. See Dkt. 18 at 1-2. At

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the time Defendants filed their Motion to Transfer, cross motions for partial summary judgment

were pending in Cigar Association. Id. at 5.

Defendants point to the “first-to-file” rule and the potential for inconsistent judgments as

the basis for their motion. Id. at 9-12. Plaintiffs counter that the first-to-file rule is inapplicable in

this case, and even it were to apply, Defendants have not shown that the cases are substantially

similar. See generally Dkt. 23. As discussed further below, the cross motions for partial summary

judgment in Cigar Association have now been decided, and District Judge Amit P. Mehta’s

detailed 70-page opinion does little to bolster Defendants’ position that the present case and Cigar

Association have substantially overlapping issues. See generally Cigar Association, 1:16-cv-

01460, Dkt. 94.

II. DISCUSSION

Under the first-to-file rule, “when related cases are pending before two federal courts, the

court in which the case was last filed may refuse to hear it if the issues raised by the cases

substantially overlap.” Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 603 (5th Cir. 1999)

(internal citations omitted). The rule rests on “principles of comity and sound judicial

administration.” Save Power Ltd. v. Syntek Fin. Corp., 121 F.3d 947, 950 (5th Cir. 1997). The

first-to-file rule not only determines which court may decide the merits of substantially similar

issues, but also establishes which court may decide whether the second suit must be dismissed,

stayed, or transferred and consolidated. See Cadle, 174 F.3d at 606. Accordingly, the second-filed

court limits its analysis to whether there is a likelihood of substantial overlap between the two

cases, and if so, whether to dismiss, stay, or transfer the second case. See Universal Prot. Servs. v.

Thornburg, 2016 WL 4523905, at *2 (N.D. Tex. 2016). Absent “compelling circumstances,” the

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court that initially obtains the controversy should decide how or whether to try substantially similar

issues. See Goldstein v. Dickinson, 1999 WL 47240, at *2 (N.D. Tex.).

The first-to-file rule, however, “is not a rigid or inflexible rule to be mechanically applied.”

Tex. Instruments v. Micron Semiconductor, Inc., 815 F. Supp. 994, 997 (E.D. Tex. 1993). If

compelling or special circumstances are present, the court in which a lawsuit was filed second may

ignore the first to file rule and retain the case. Id. (citing Mann Mfg., Inc. v. Hortex, Inc., 439 F.2d

403, 407 (5th Cir. 1971)). The decision of whether to apply the first-to-file rule is discretionary,

and involves determinations concerning “[w]ise judicial administration, giving regard to

conservation of judicial resources and comprehensive disposition of litigation.” Kerotest Mfg. Co.

v. C–O–Two Fire Equipment Co., 342 U.S. 180, 183 (1952).

Although the Deeming Rule is at issue in both cases, the parties disagree regarding the

extent to which the issues in this lawsuit and the issues in Cigar Association substantially overlap.

Defendants argue the case should be transferred because Plaintiffs here: (1) are all members or

affiliates of International Premium Cigar and Pipe Retailers Association (“IPCPR”), a plaintiff in

Cigar Association; (2) are represented by the same attorneys who represented IPCPR in Cigar

Association, and (3) present claims identical to those currently pending in Cigar Association. See

Dkt. 18 at 6-8. As an initial matter, Defendants’ first two arguments—overlap of counsel and

parties—are lacking in any meaningful explanation or support, and the Court finds these two

factors carry little, if any, weight in the Court’s analysis. Fifth Circuit case law instructs that the

two actions must involve closely related questions, common subject matter, or core issues that

substantially overlap. See, e.g., Texas Instruments, 815 F. Supp. at 997. As to the third argument,

Defendants have failed to establish the requisite commonality of questions, subject matter, and

core issues. See id.

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The primary issue in the present lawsuit is the FDA’s handling of the warning requirements

with respect to the premium cigar industry. See generally Dkt. 1. In advance of the health warnings

requirement’s effective date of August 10, 2018, the FDA issued an Advance Notice of Proposed

Rulemaking (“ANPRM”), “seeking comments, data, results or other information that may inform

regulatory actions FDA might take with respect to premium cigars.” 83 Fed. Reg. at 12,901. Some

of the information the ANPRM seeks directly concerns the health warnings mandate. For example,

the ANPRM asks for “[s]tudies or information on the required warning statements, . . . which will

be required to appear on cigar packaging and advertising in the near future.” Id. at 12,904. The

agency also seeks studies or information regarding “consumer perceptions of the health risks of

premium cigars when compared to other tobacco products, including cigars,” and “consumer

perceptions of the addictiveness of premium cigars, especially compared and contrasted with

perceptions for other cigars.” Id. In total, the ANPRM seeks no less than two dozen categories of

comments, data, or other information concerning the definition, usage patterns, and public health

implications of premium cigars. See Cigar Association, 1:16-cv-01460, Dkt. 94 at 1254.

The Court need only look to Judge Mehta’s opinion to conclude that the issues in Cigar

Association and the issues in this lawsuit do not substantially overlap. The issues before the court

in Cigar Association on the parties’ cross motions for partial summary judgment were:

1. the imposition of health warning requirements for cigar packaging and advertisements;

2. the assessment of user fees on cigar and pipe tobacco products, but not on another newly

deemed product, e-cigarettes;

3. the treatment of retailers who blend pipe tobacco in-store as “manufacturers” subject to

the regulatory requirements of 21 U.S.C. § 387e; and

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4. the classification of pipes as “components” of tobacco products, thereby subjecting pipe

makers to regulation.

Id. at 1210.

Only the first issue is remotely similar. However, the crux of the present lawsuit—the

FDA’s failure to treat premium cigars differently from other cigars and to exempt premium cigars

from the warnings requirement—was not an issue before the court in Cigar Association. In fact,

Judge Mehta specifically noted that the FDA’s rulemaking concerning premium cigars was not

before the court. Id. at 1254-55. Although Judge Mehta observed that staying the warnings

requirement as to premium cigars might present a more “prudent course” in light of “the sheer

breadth of the ANPRM,” he made it clear that the court could do nothing more than express its

displeasure because the issue was not presently before the court. Id. at 1255. As such, the decision

in Cigar Association leaves open a primary issue in the present case—whether the premium cigar

industry should be forced to comply with the warnings requirements (at great expense) while the

FDA continues to study whether the premium cigar industry should even be subject to the

regulations at all.

III. CONCLUSION

Based on the foregoing, the Court concludes that transfer is not warranted in this case.

Furthermore, having concluded that the case should remain with this Court, and in light of the

August 10, 2018, effective date of the warning requirements, the Court finds this case should

proceed, and the briefing schedule set forth below shall apply to Plaintiffs’ pending Motion for

Partial Summary Judgment (Dkt. 22).

IT IS THEREFORE ORDERED that Defendants’ Motion to Transfer (Dkt. 18) is

DENIED.

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IT IS FURTHER ORDERED that Defendants’ Motion to Stay Briefing (Dkt. 28) is

DENIED.

IT IS FURTHER ORDERED that Plaintiffs’ Motion for Partial Summary Judgment

(Dkt. 22) is set for oral argument before the undersigned on Tuesday, June 26, 2018, at 9:30 a.m.,

in Courtroom 108 of the United States Courthouse, 7940 Preston Road, Plano, Texas, 75024.

IT IS FINALLY ORDERED that the parties shall meet and confer and submit to the

Court no later than May 29, 2018, at 12:00 p.m., a joint status report and proposed scheduling

order. The joint status report and proposed scheduling order should be specifically tailored to

include proposed responsive briefing deadlines for Plaintiffs’ pending Motion for Partial Summary

Judgment (Dkt. 22), as well as any other issues needing the Court’s immediate attention. To the
.
extent the parties disagree regarding deadlines or other relevant matters pertaining to Plaintiffs’

pening Motion for Partial Summary Judgment, the parties should note such disagreement in the

joint status report and proposed scheduling order.

IT IS SO ORDERED.

SIGNED this 22nd day of May, 2018.

____________________________________
KIMBERLY C. PRIEST JOHNSON
UNITED STATES MAGISTRATE JUDGE