Case 4:18-cv-00028-ALM-KPJ Document 40 Filed 06/05/18 Page 1 of 8 PageID #: 1303

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,

v. Civil Action No. 4:18-cv-00028-ALM-KPJ

UNITED STATES FOOD AND DRUG

ADMINISTRATION, et al.,

Defendants.

DEFENDANTS’ OBJECTIONS TO THE MAGISTRATE JUDGE’S

ORDER DENYING DEFENDANTS’ MOTION TO TRANSFER

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INTRODUCTION

Plaintiffs urge the Court to decide claims virtually identical to those brought in Cigar Association

of America v. FDA, No. 16-1460 (D.D.C.)—a suit brought nearly two years earlier by the same attorneys

on behalf of closely affiliated parties. To avoid wasteful and duplicative litigation, and avert the pos-

sibility of inconsistent judgments, Defendants moved under the first-to-file rule to transfer this case

to the U.S. District Court for the District of Columbia, where it can be consolidated with its prede-

cessor. See Defs.’ Br. (ECF No. 18); Defs.’ Reply (ECF No. 24).

On May 22, 2018, the Magistrate Judge denied Defendants’ motion to transfer, concluding

that “the issues in Cigar Association and the issues in this lawsuit do not substantially overlap.” Order

at 6 (ECF No. 35). Defendants respectfully submit that, in reaching this result, the Magistrate Judge

erred in three respects. First, the Magistrate Judge mistakenly gave “little, if any, weight” to Defend-

ants’ showing that there is an “overlap of counsel and parties.” Id. at 5. Second, the Magistrate Judge

improperly looked “only to Judge Mehta’s opinion” in Cigar Association to conclude that there is an

insufficient overlap of issues, id. at 6, rather than to the full set of claims raised in the complaint.

Third, even taking Judge Mehta’s opinion in isolation, the Magistrate Judge erred in concluding that

“[o]nly the first issue” there is “remotely similar” to the claims raised here. Id. at 7. For any or all of

these reasons, the Court should set aside the Magistrate Judge’s order and transfer this case to the U.S.

District Court for the District of Columbia under the first-to-file rule. See 28 U.S.C. § 636(b)(1)(A);

Fed. R. Civ. P. 72(a); Local Rule CV-72(b).

LEGAL STANDARDS

The “Fifth Circuit adheres to the general rule that the court in which an action is first filed is

the appropriate court to determine whether subsequently filed cases involving substantially similar

issues should proceed.” 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

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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 Mfrg. Inc. v. Hortex, 439 F.2d 403, 407 (5th Cir. 1971) (emphasis

added). 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 dis-

missed, stayed, or transferred and consolidated,” Sutter Corp., 125 F.3d at 920.

A “second-filed court plays a limited role when presented with a motion to transfer or stay

based on the first-to-file rule.” Platt v. Nash, No. 16-294, 2016 WL 6037856, at *1 (E.D. Tex. Oct. 14,

2016) (Mazzant, J.). That role is to decide whether the movant has shown a “likelihood of substantial

overlap” between the two suits. Mann, 439 F.2d at 408 (emphasis added); accord Cadle Co. v. Whataburger

of Alice, Inc., 174 F.3d 599, 606 (5th Cir. 1999) (second-filed court should determine whether “the

issues might substantially overlap”) (emphasis added). If the movant makes this showing, then “the

second-filed court allows the first-filed court to ‘resolve the question of whether both [cases] should

be allowed to proceed.’” Platt, 2016 WL 6037856, at *1 (citation omitted).

ARGUMENT

There is at least a “likelihood of substantial overlap” between this case and Cigar Association,

Mann, 439 F.2d at 408 (emphasis added), and the Magistrate Judge erred in concluding otherwise.

1. To begin, the Magistrate erred in characterizing “Defendants’ first two arguments—

overlap of counsel and parties”—as “lacking in any meaningful explanation or support,” and thus

giving them “little, if any, weight.” Order at 5. To be sure, “[c]omplete identity of parties is not

required” under the first-to-file rule, which may be applied “even though [the second-filed action]

involved” entirely “different plaintiffs than the first-filed action.” Save Power, 121 F.3d at 951. But

courts applying the first-to-file rule routinely consider the degree to which the parties overlap, see id.;

Defs.’ Br. 10–11—and here, the close affiliation between the plaintiffs in the two cases weighs heavily

in favor of transfer.

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The organizational Plaintiff here, the Texas Cigar Merchants Association (TCMA), is the offi-

cial “State Association” of the International Premium Cigar and Pipe Retailers Association (IPCPR),

a plaintiff in Cigar Association. Defs.’ Br. at 6. IPCPR defines TCMA’s eligibility requirements, requir-

ing all TCMA members to be IPCPR members. Id. IPCPR requires state associations to “formally

. . . incorporate as a 501(c)(6)” and even provides draft bylaws and articles of incorporation. Id. And

IPCPR pays for up to 70% of TCMA’s lobbying activities. Id. The other two Plaintiffs here, En

Fuego Tobacco Shop and El Cubano Cigars, were listed on IPCPR’s “member” website at the time

this lawsuit was filed. Defs.’ Br. at 6. While they claim their memberships “lapsed” at the end of

2017, they do not deny that they were members of IPCPR in 2016 and 2017, when Cigar Association

was filed, briefed, and argued. And, of course, Plaintiffs’ counsel here are the same as IPCPR’s counsel

in Cigar Association. These factors merit weight in the analysis, and they point in favor of transfer—

particularly since IPCPR explicitly brought suit on behalf of its members in Cigar Association.

2. Moreover, in concluding that issues in the two cases do not sufficiently overlap, the

Magistrate Judge improperly looked “only to Judge Mehta’s [recent] opinion” in Cigar Association, id.

at 6, rather than to the full set of claims raised in the complaint. In fact, each of the five claims brought

in Plaintiffs’ original complaint here was either raised in the Cigar Association complaint or nevertheless

briefed by the parties. See Defs.’ Br. at 6–7 (comparing complaints and briefs).

To be sure, the Cigar Association court did not conclusively resolve all of these claims in its

recent decision. Although the court declined to carve out an exception to the health warning require-

ments for premium cigars, for example, it explained that this was not because such a claim had not

been raised. Rather, it was because the plaintiffs themselves had asked the court to defer resolution of

it. See Cigar Ass’n slip op. at 48 (“Plaintiffs agreed to defer litigating their claim under the APA that

the FDA’s decision not to adopt . . . the option that would have excluded premium cigars from regu-

lation, was itself arbitrary and capricious.”). Regardless, the court ultimately directed the parties to

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confer to propose a schedule for further proceedings on such “remaining, unresolved claims,” id. at

70—proceedings with which this Court is now poised to conflict.1

3. Finally, even taking Judge Mehta’s opinion in isolation, the Magistrate Judge erred in

concluding that “[o]nly the first issue”—concerning health warnings—was “remotely similar” to the

claims raised here. Id. at 7. On the contrary, the Cigar Association court rejected four claims that

Plaintiffs raise here, at least in part.

First, the court rejected the claim that the FDA promulgated the health warning requirements

for cigars without first making the findings required by the Tobacco Control Act. See En Fuego Am.

Compl. ¶¶ 108–114 (Count V). As the court explained, it “is plain on the record” that the “agency

did make the required statutory findings.” Cigar Ass’n slip op. at 19, 21.

Second, the court rejected the claim that the warning requirements violate the First Amendment

because they impermissibly compel speech. See En Fuego Am. Compl. ¶¶ 86–96 (Count III). Given

the “ample record evidence” of “widespread misperceptions regarding the true health hazards of ci-

gars,” the court held that “the warning statements readily pass muster” under the applicable test for

commercial disclosures. Cigar Ass’n slip op. at 33–34, 39.

Third, the court rejected the related First Amendment claim that the warning requirements

impermissibly restrict speech. See En Fuego Am. Compl. ¶¶ 73–85 (Count II). Because manufacturers

“can still effectively communicate their desired message . . . on the remaining 70 percent of cigar

packaging and 80 percent of cigar advertisements,” the disclosures are “not so lengthy or cumber-

some” as to amount to a “restriction on speech.” Cigar Ass’n slip op. at 30–31, 40–43.

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Likewise, while the Cigar Association plaintiffs’ prior restraint argument had been fully briefed, see
Defs.’ Br. at 7, the court concluded that the plaintiffs “failed to raise it in their complaint” and, “despite
the court’s suggestion at oral argument, have not filed a motion to amend the [c]omplaint to add a
prior restraint claim,” Cigar Ass’n slip op. at 44.

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Fourth, the court rejected several arguments repeated by Plaintiffs here in support of the claim

that the health warning requirements are arbitrary and capricious in violation of the Administrative

Procedure Act (APA). For example, it concluded that it was “perfectly reasonable” for the FDA to

rely on evidence that larger warnings are more effective, rather than simply “adopting the [Federal

Trade Commission] scheme already in place” for portions of the cigar industry. Cigar Ass’n slip op. at

23–25; cf. En Fuego Am. Compl. ¶¶ 122–23. It explained that there was “no requirement, statutory or

otherwise, that compelled the FDA to undertake [further scientific] studies” before issuing the deem-

ing rule. Cigar Ass’n slip op. at 22–23; cf. En Fuego Am. Compl. ¶¶ 121. And it concluded that a recently

published Advance Notice of Proposed Rulemaking (ANPRM) concerning premium cigars “does not

concede, or even hint, that the [deeming] rulemaking was deficient in any respect.” Cigar Ass’n slip

op. at 48; cf. En Fuego Am. Compl. ¶ 124. Thus, even standing alone, the Cigar Association decision

establishes substantial overlap.

CONCLUSION

Premium cigars have been a key part of Cigar Association for the past two years, and will un-

doubtedly continue to be. After argument, IPCPR declared: “[T]he premium cigar industry finally

had its day in court.” Defs.’ Reply at 7. The court’s decision refers to “premium cigars” more than

40 times. Its holding that the warning requirements are fully consistent with both the Tobacco Control

Act and the First Amendment applies to all cigars, including premium cigars, see Cigar Ass’n slip op. at

48 (“The court already has rejected [p]laintiffs’ statutory and constitutional challenges to the warning

requirements, so the court has found no violation to be remedied.”), presenting an acute risk of in-

consistent judgments here. And one of the remaining claims seeks to exempt premium cigars not just

from the warning requirements, but from the rest of the deeming rule as well. Cigar Ass’n slip op. at

48. There is at least a “likelihood of substantial overlap” here, Mann, 439 F.2d at 408 (emphasis added),

and this case should be transferred for consolidation with Cigar Association.

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Dated: June 5, 2018 Respectfully submitted,

Of counsel: BRETT A. SHUMATE

Deputy Assistant Attorney General
ROBERT P. CHARROW
General Counsel JOEL McELVAIN
Office of General Counsel Assistant Director
U.S. Dep’t of Health and Human Services
/s/ Eric Beckenhauer .
REBECCA K. WOOD ERIC B. BECKENHAUER
Chief Counsel Cal. Bar No. 237526
Food and Drug Administration Trial Attorney
Associate General Counsel U.S. Department of Justice
Food and Drug Division Civil Division, Federal Programs Branch
20 Massachusetts Ave. NW
PERHAM GORJI Washington, DC 20530
Deputy Chief Counsel for Litigation Tel: (202) 514-3338
Fax: (202) 616-8470
WENDY S. VICENTE E-mail: Eric.Beckenhauer@usdoj.gov
Senior Counsel
Counsel for Defendants
ANNA K. THOMPSON
Associate Chief Counsel
Office of the Chief Counsel
Food and Drug Administration
10903 New Hampshire Avenue
White Oak 31, Room 4562
Silver Spring, MD 20993-0002

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CERTIFICATE OF SERVICE

I certify that on June 5, 2018, I filed the foregoing document with the Clerk of Court via the
CM/ECF system, causing it to be served electronically on Plaintiffs’ counsel of record.

/s/ Eric Beckenhauer .

ERIC B. BECKENHAUER