Texas Tobacco Barn, L.L.C. v. United States Department of Health and Human Services

The Fifth Circuit held that the Food and Drug Administration violated a vape manufacturer's Seventh Amendment right to a jury trial by imposing civil penalties through an administrative proceeding. The court granted the petition and vacated the agency's decision to levy a nineteen thousand one hundred ninety-two dollar penalty.

Background

Texas Tobacco Barn, operating as TXVapeBarn, applied for FDA authorization to sell over two thousand two hundred vape products. The FDA denied authorization for several products, including a variant called Barn Brewed Beetle Juice, and later discovered the company was selling the unauthorized e-liquid. The Department of Health and Human Services initiated an administrative proceeding to impose a civil penalty of nineteen thousand one hundred ninety-two dollars. The administrative law judge and the Departmental Appeals Board affirmed the penalty, rejecting the company’s Seventh Amendment defense on the grounds that the agency lacked jurisdiction to decide constitutional claims.

The court’s reasoning

The court analyzed whether the civil penalty imposed by the FDA constituted a legal remedy at common law. It concluded that the penalty was designed to punish and deter rather than to remedy harm to victims, making it a common law remedy that requires a jury trial under the Seventh Amendment. The court further determined that the public rights exception did not apply because the enforcement action was not historically determined exclusively by the executive or legislative branches. The court distinguished the case from public health precedents, noting that the FDCA’s pre-market authorization regime was a novel statutory scheme unknown to the common law, but the substance of the enforcement action—penalizing the sale of adulterated goods—resembled common law actions for fraud and trespass.

We conclude that this process denied TTB its rights under the Seventh Amendment.

Opinion at 1

The dissent

I would hold that the public rights exception applies to the violation of the FDCA pre-sale authorization requirements at issue here.

Dana M. Douglas

What it means going forward

The decision requires the FDA to bring enforcement actions seeking civil penalties for unauthorized vape sales in federal district court with a jury trial, rather than through administrative proceedings. This shifts the burden of proof and procedural requirements for the government in similar cases involving civil monetary penalties for tobacco product violations.