Case 4:18-cv-00028-ALM-KPJ Document 60 Filed 07/30/18 Page 1 of 8 PageID #: 1557

United States District Court

EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

EN FUEGO TOBACCO SHOP LLC d/b/a §

EN FUEGO TOBACCO SHOP, ET AL., §
§
Plaintiffs, §
§
v. § Case No. 4:18-cv-00028
§ Judge Mazzant/Judge Johnson
UNITED STATES FOOD AND DRUG §
ADMINISTRATION, ET AL., §
§
Defendant. §

ORDER DENYING DEFENDANTS’ “EMERGENCY APPEAL”

On July 2, 2018, United States Magistrate Judge Kimberly Priest Johnson issued an Order

(the “July 2 Order”) (Dkt. #55), sua sponte withdrawing her Order issued on May 22, 2018 (the

“May 22 Order”) (Dkt. #35) and granting Defendants’ Motion to Transfer (Dkt. #18). The May 22

Order had denied Defendants’ Motion to Transfer (Dkt. #18), which sought to transfer this case

to the United Stated District Court for the District of Columbia for consolidation with Cigar

Ass’n of Am. v. FDA, Case No. 1:15-cv-1460 (D.D.C.). The Motion to Transfer argued that

Plaintiffs’ claims in the present lawsuit are identical to those presented in Cigar Association. See

Dkt. #18 at 1-2. On July 5, 2018, Plaintiffs filed “Plaintiffs’ Emergency Appeal of the Magistrate

Judge’s July 2, 2018 Order Sua Sponte Reversing the Denial of Transfer” (the “Appeal”) (Dkt.

#56), to which Defendants filed a response (Dkt. #59).

In the July 2 Order, the Magistrate Judge concluded that because the present lawsuit and

Cigar Association both concern the FDA’s failure to treat premium cigars differently from other

cigars and to exempt premium cigars from the FDA’s warnings requirement, the two cases involve

common subject matter and core issues that substantially overlap. See Dkt. #55 at 6 (citing Tex.
Case 4:18-cv-00028-ALM-KPJ Document 60 Filed 07/30/18 Page 2 of 8 PageID #: 1558

Instruments v. Micron Semiconductor, Inc., 815 F. Supp. 994, 997 (E.D. Tex. 1993). The July 2

Order explains that in light of the arguments asserted in Defendants’ objections to the May 22

Order (Dkt. #40), and upon further review of the entire record in Cigar Association, the Magistrate

Judge determined that the May 22 Order denying transfer should be withdrawn and transfer should

be granted. See Dkt. #55.

I. BACKGROUND

On May 10, 2016, 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 “Tobacco Control Act”). 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

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. §

2
Case 4:18-cv-00028-ALM-KPJ Document 60 Filed 07/30/18 Page 3 of 8 PageID #: 1559

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).4

Plaintiffs’ complaint alleges that the warning requirements set forth in the Deeming Rule

violate Plaintiffs’ First Amendment rights under the Constitution, as well as the Tobacco Control

Act 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

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

Motion to transfer. See Dkt. 18at 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.

II. LEGAL STANDARD

Federal law affords a Magistrate Judge broad discretion in the resolution of nondispositive

pretrial matters, such as a motion to transfer. See FED. R. CIV. P. 72(a); 28 U.S.C. § 636(b)(1)(A).

Under Rule 72(a), “[w]hen a pretrial matter not dispositive of a party’s claim or defense is referred

to a magistrate judge to hear and decide, the magistrate judge must promptly conduct the required

proceedings and, when appropriate, issue a written order stating the decision.” The Court may

modify or set aside a Magistrate Judge’s order only if it is clearly erroneous or contrary to law.

Castillo v. Frank, 70 F.3d 382, 385 (5th Cir. 1995). “A 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.” United States v. U.S. Gypsum

Co., 333 U.S. 364, 395 (1948).

3
Case 4:18-cv-00028-ALM-KPJ Document 60 Filed 07/30/18 Page 4 of 8 PageID #: 1560

III. DISCUSSION

A. TIMING OF THE JULY 2 ORDER

Plaintiffs’ primary complaint involves the timing of the July 2 Order. As explained above,

the Magistrate Judge initially denied Defendants’ Motion to Transfer (see Dkt. #35), and then on

July 2, 2018, sua ponte withdrew that Order and issued the Order (Dkt. #55) to which Plaintiffs

now object. In the July 2 Order, the Magistrate Judge makes clear that her reversal was based on

arguments presented in Defendants’ objections, along with additional developments in Cigar

Association. See Dkt. #55.

Plaintiffs argue that the timing of the decision to grant Defendants’ Motion to Transfer is

contrary to the interests of justice because it substantively denies Plaintiffs’ request for an

injunction before regulation becomes effective on August 10, 2018. However, Plaintiffs fail to

explain how the July 2 Order is clearly erroneous and cite no case law or other legal authority

articulating a “timing” exception to the first-to-file rule.

Unlike the venue statute, which permits transfers for “the convenience of parties and

witnesses, in the interest of justice,” 28 U.S.C. § 1404(a), the “first-to-file rule is grounded in

principles of comity and sound judicial administration.” Save Power Ltd. v. Syntek Finance Corp.,

121 F.3d 947, 948 (5th Cir. 1997). Under the first-to-file rule, “[o]nce the likelihood of substantial

overlap between the two suits ha[s] been demonstrated, it [i]s no longer up to the [second-filed

court] to resolve the question of whether both should be allowed to proceed.” Mann Mfg. Inc. v.

Hortex, 439 F.2d 403, 407 (5th Cir. 1971). Rather, “the ultimate determination of whether there

actually [i]s a substantial overlap . . . belong[s] to the [first-filed court],” id., which “may decide

whether the second suit filed must be dismissed, stayed, or transferred and consolidated.” Sutter

Corp. v. P&P Indus., Inc., 125 F.3d 914, 920 (5th Cir. 1997). Furthermore, the cases need not be

4
Case 4:18-cv-00028-ALM-KPJ Document 60 Filed 07/30/18 Page 5 of 8 PageID #: 1561

identical to be duplicative. See Superior Sav. Ass’n v. Bank of Dallas, 705 F. Supp. 326, 329 (N.D.

Tex. 1989) (quoting Mann, 439 F .2d at 407, 408 n. 6). It is enough that the “overall content of

each suit is not very capable of independent development, and will be likely ‘to overlap to a

substantial degree.’” Id. at 409.

In Mann, the Fifth Circuit vacated a temporary injunction and ordered dismissal or transfer

of the case, requiring the plaintiff to instead seek relief in the first-filed court, id. at 405, explaining

that “the court initially seized of a controversy should be the one to decide whether it will try the

case.” Id. at 408. Similar to Mann, the Court here was confronted with evidence indicating the

likelihood that the issues in the present lawsuit and in Cigar Association would substantially

overlap. Id. Based on the foregoing, and in the absence of any countervailing authority from

Plaintiffs, the Court is persuaded that it is the “likelihood of substantial overlap” between the suits,

not the timing of the transfer decision, that controls. See Mann Mfg., Inc. v. Hortex, Inc., 439 F.2d

403, 408 (5th Cir. 1971).

In any event, intervening developments in Cigar Association have effectively resolved

Plaintiffs’ timing concerns. On July 5, 2018, that court entered an injunction pending appeal of its

May 15, 2017, decision upholding the warning requirements, noting that the plaintiffs had raised

“serious legal questions.” The District of Columbia court “enjoined [the FDA] from enforcing the

health warnings requirements for cigars and pipe tobacco set forth in 21 C.F.R. §§ 1143.3 and

1143.5”—the same provisions challenged here—“until 60 days after final disposition of

[p]laintiffs’ appeal” to the D.C. Circuit. Id. at *5. Thus, Plaintiffs face no imminent, irreparable

harm here, which is a mandatory requirement for the issuance of an injunction.

5
Case 4:18-cv-00028-ALM-KPJ Document 60 Filed 07/30/18 Page 6 of 8 PageID #: 1562

B. APPLICATION OF THE FIRST-TO-FILE RULE

Plaintiffs also argue that the Magistrate Judge “misapplied” the first-to-file rule. See Dkt.

#56 at 4. Focusing on the Magistrate Judge’s reliance on Count V in Cigar Association, Plaintiffs

argue that the present case challenges a separate regulatory decision (i.e., the FDA’s decision to

impose warnings on several tobacco products, including premium cigars), while Count V in Cigar

Association focuses on the overarching deeming decision. See Dkt. #46 at 3-5. Plaintiffs also argue

that the Magistrate Judge “misunderstands” the structure of the Tobacco Control Act and the

regulatory action challenged in Count V of Cigar Association. As explained below, the Court finds

Plaintiffs’ arguments unpersuasive.

Under the first-to-file rule, it is not any particular claim but “the overall content of each

suit” that controls, Mann, 439 F.2d at 407, requiring review of the full set of claims raised in the

complaint. First, Counts VI and VII in Cigar Association—now on appeal—deal specifically with

the warning requirements. See Dkt. #55 at 6. Furthermore, Count V in Cigar Association subsumes

Plaintiffs’ challenge to the warning requirements with respect to premium cigars because if

premium cigars were not properly deemed, they could not be subject to any regulation under the

Tobacco Control Act, including the warning requirements. See 21 U.S.C. § 387a(b). And although

the court in Cigar Association declined to carve out an exception to the health warning

requirements for premium cigars (as Plaintiffs here likewise request), the Magistrate Judge noted

in the July 2 Order that this was not because such a claim had not been raised, but rather, it was

because the plaintiffs themselves had asked the court to defer resolution of the issue. See Dkt. #55

at 5–6.

Plaintiffs also contend that because they assert a first amendment claim—a claim not raised

in Cigar Association—that distinction is sufficient to support a finding that the two cases are not

6
Case 4:18-cv-00028-ALM-KPJ Document 60 Filed 07/30/18 Page 7 of 8 PageID #: 1563

substantially similar. The Magistrate Judge concluded otherwise, and Plaintiffs fail to make a

credible argument that this conclusion was clearly erroneous or contrary to law.

Plaintiffs also lament that the transfer will double the effort of the federal court system,

because the Cigar Association court “will need to start from the beginning” to become familiar

with Plaintiffs’ first amendment claims. See Dkt. #56 at 4. However, it is unlikely that the Cigar

Association court will need to start from the beginning, since Plaintiffs’ first amendment claim

will be evaluated using the same body of evidence as the other claims in Cigar Association,

particularly the voluminous administrative record, and such claims typically do not present any

novel or unique issues. It is also notable that, in evaluating the Cigar Association plaintiffs’

likelihood of success on the merits of their request for injunctive relief, Judge Amit P. Mehta

concluded that the Supreme Court's recent decision in National Institute of Family and Life

Advocates v. Becerra, ––– U.S. ––––, 2018 WL 3116336 (2018), “only adds to the substantiality

of the issues Plaintiffs intend to raise on appeal” and “makes clear that Plaintiffs’ appeal raises

serious legal questions.” Cigar Association, No. 1:16-CV-01460, 2018 WL 3304627, at *4. The

fact that Plaintiffs here have also asserted Becerra in support of their first amendment arguments

(see, e.g., Dkt. #56 at 4) further supports the propriety of granting a transfer.

Based on the foregoing, the Court finds no error in the Magistrate Judge’s conclusion that

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—is squarely before the court

in Cigar Association” (Dkt. #55 at 6), and thus, the two cases are likely to overlap to a substantial

degree.

7
Case 4:18-cv-00028-ALM-KPJ Document 60 Filed 07/30/18 Page 8 of 8 PageID #: 1564

IV. CONCLUSION

Having considered Plaintiffs’ Emergency Appeal of the Magistrate Judge’s July 2 Order

Sua Ponte Reversing the Denial of Transfer (Dkt. #56), the Court finds that the Magistrate

. Judge’s Order is not clearly erroneous or contrary to law. FED. R. CIV. P. 72(a).

Accordingly, the July 2 Order (Dkt. #55) is AFFIRMED, and this case

is hereby TRANSFERRED to the United States District Court for the District of Columbia.

IT IS SO ORDERED.
SIGNED this 30th day of July, 2018.

___________________________________
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE