Federal Court Declares FDA’s Civil Monetary Penalty Provisions For Tobacco Products Unconstitutional

Late last week, the U.S. District Court for the Northern District of Texas ruled that FDA’s civil monetary penalty (CMP) provision for tobacco products contained at 21 U.S.C. § 333(f)(9) is unconstitutional.  Relying on the Supreme Court’s recent decision in SEC v. Jarkesy, 603 U.S. 109 (2024), the Court held that the CMP provision violates the Seventh Amendment’s right to a jury trial.

By way of background, in Jarkesy, the Supreme Court ruled that the SEC could not use its administrative authority to impose civil penalties for securities fraud through an administrative law judge proceeding on the grounds that these proceedings violate the Seventh Amendment’s right to a jury trial for all suits in common law.  We posted on the Jarkesy decision and predicted that litigants would similarly challenge the FD&C Act’s CMP provisions.  (We’ve also written about Jarkesy’s impact on DEA ALJ proceedings and the proposed Preserve Access to Affordable Generics and Biosimilars Act).

In Wulferic, LLC v. FDA, No. 4:24-cv-1183-O (N.D. Tex. Aug. 1, 2025), Plaintiff Vapor Lab—a business that makes and sells tobacco products—challenged a CMP administrative proceeding brought by FDA seeking a monetary penalty against Vapor Lab for selling e-liquid products that had not been authorized for sale by FDA.  The case was pending before an HHS ALJ, and Vapor Lab argued that the CMP provision for tobacco products was unconstitutional because the administrative proceeding violated its Seventh Amendment right to a jury trial.

The Court agreed, explaining that the Seventh Amendment’s right to a jury trial in suits at common law applies to cases traditionally decided in English law courts, as opposed to cases tried in courts of equity or admiralty.  Id. at 20.  While the Court did not find any “common law analogues” to the FD&C Act’s CMP provision for tobacco products, it noted that the remedy is the “more important” consideration.  Id. (citing Jarkesy, 603 U.S. at 123).  Here, the Court found that the CMP provision’s penalties were a type of remedy that could only be enforced in courts of law, particularly because the penalty was designed to punish and deter, included enhanced penalties for intentional violations, and was not intended to “restore the status quo” by ordering restitution to victims.  Id. at 20-21.  Thus, the Court held that the Seventh Amendment applied and that Vapor Labs had a right to a jury trial unless the public rights exception applied.  Id. at 21.

The public rights exception is a recognized departure from Article III judicial power, acknowledging that Congress may assign certain matters to an agency for decision without a jury consistent with the Seventh Amendment.  Id. at 22.  FDA argued that the public rights exception applied because the FD&C Act serves a “public-health purpose” that has been assigned to the Executive Branch.  Id. at 24-25.  The Court rejected that any such public health exception existed as a public rights exception for the federal government, reasoning instead that “the power to promote public health is a police power retained by the states, through the Tenth Amendment, and has never been a distinctive prerogative of the federal government.”  Id. at 26.

Because it found that no public rights exception existed, the Court declared the CMP provision for tobacco products—and FDA’s proceeding against Vapor Lab—to be unconstitutional.  The Court further enjoined the government to dismiss with prejudice the administrative complaint against Vapor Lab and from adjudicating civil monetary penalties against Vapor Lab in an administrative proceeding.  The Court, however, rejected Vapor Lab’s request for a nationwide injunction.

The Wulferic decision is the first case to find that the FD&C Act’s CMP provision for tobacco products is unconstitutional — but the catch is that it didn’t actually order FDA to stop carrying on as usual with respect to anybody else.  Wulferic threatens to significantly dismantle FDA’s arsenal of actions to enforce compliance with the FD&C Act’s tobacco provisions, and we expect many more similar challenges to follow if FDA stays on its current course.

Indeed, for those keeping tabs, a prior District Court challenge that we reported on was rejected for lack of subject matter jurisdiction, as was one other, Vape Central Grp., LLC v. FDA, No. 1:24-cv-3354-RDM (D.D.C. Feb. 27, 2025).  One more is awaiting a decision from a different judge in the same District, The Vaping Dragon LLC v. FDA, No. 25-cv-81-H (N.D. Tex.)).  And there’s more still: at least two other cases are looking to tee up this same issue in the Circuit Courts of Appeals right now.  In Texas Tobacco Barn, LLC v. HHS, No. 25-60200 (5th Cir.), and D and A Business Investments, LLC v. FDA, No. 25-1074 (D.C. Cir), the petitioners directly challenge FDA’s imposition of $19,000 CMPs under Jarkesy, among other things.

It remains unclear whether FDA will appeal the Wulferic decision under the current administration, and what it will do with its current CMP docket in light of it.  Close eyes will now go to The Vaping Dragon in particular: whether and how that case gets decided in FDA’s appeal window could make a big difference. We will be closing monitoring the fallout from this case and other challenges to FDA’s CMP statutory provisions in this post-Jarkesy world.