Supreme Court Rulings Signal New Era for Federal Regulatory Power: Implications for the Premium Cigar Industry

By: Mike Copperman, Executive Director of Cigar Rights of America

In the final days of its blockbuster 2024 term, the Supreme Court released two significant decisions on Executive Agencies’ regulatory power: Loper Bright v. Raimondo and Corner Post v. Board of Governors of the Federal Reserve System. While Loper has certainly received the lion’s share of the attention in the media, Loper and Corner Post, when viewed together,  have the potential to fundamentally transform the balance of power between the American branches of government and empower individuals and private companies more latitude to push back against federal regulators. 

The full impact and scope of these rulings will likely not be understood for years, as courts, litigants, Congress, and Agencies adjust and shift their strategies. While CRA continues to carefully review the rulings and to work with our legal and regulatory experts to understand what changes and opportunities this might bring for our industry it is important for those who enjoy premium cigars to understand the potential impact these cases will have.

The Cases

Loper Bright v. Raimondo struck down Chevron Deference, a principle that required federal judges to grant broad deference to federal agencies when interpreting vague statutes. When a law involving an agency was written ambiguously, judges were required to accept the agencies’ interpretation of the law and its views on their own scope of power in most cases. Chief Justice John Roberts found, instead, that courts have ultimate authority in reading the statutes that authorize Federal regulation – and must consider all the relevant facts neutrally. Moving forward, in cases where the law is unclear, agencies will be required to make persuasive arguments, rather than receiving broad deference, leveling the playing field between regulated parties, and government agencies advocating for different readings of federal law.

Corner Post v. Board of Governors of the Federal Reserve System, facially a more technical matter, allows new companies to challenge regulations whose statute of limitations expired before the company entered the market. While apparently reasonable, it has a significant potential unintended consequence. Typically, entities affected by a regulation have a maximum of six years to file suit challenging it after it comes into effect (as CRA did in the successful case leading to the Mehta Decision). In Corner Post, the court ruled that the six-year statute of limitations to challenge an agency regulation begins when a party is first harmed by the regulation. That change greatly extends the window in which agencies might expect a challenge to their regulations, as they are no longer ‘safe’ after six years. More significantly, the ruling appears to imply that an extant corporation could create a nominally separate entity designed to be ‘harmed’ by a regulation they otherwise could no longer challenge.  

Broad Potential Implications

While these rulings are significant, it is crucial not to overstate the scope of these opinions. Loper does not allow challenges to all agency actions, only their interpretation of vague statutory language. These statutes will now be evaluated under the new deference standard, which has significant case law. Judges are not required to reject agency opinions, and many may remain deferential.

Depending on how Loper and Corner Post are interpreted and applied, their effects could be far-reaching. Chevron, the most-cited precedent in history, expanded the Administrative State. Its demise takes a great deal of power from the Congress and president and shifts it to the courts. In this new environment, there are many crucial questions that will need to be answered including:

Which regulations are newly subject to challenge?

How aggressive will courts be in striking down regulatory actions?

Will Congress write more detailed laws?

How much weight will courts give to agency expertise?

How much effort will agencies dedicate to defending or updating older regulations?

The decision in Loper does not automatically overturn any other agency rules than those at issue. Furthermore, it keeps previous cases resolved under Chevron intact but opens many regulations to new challenges under the new standard. In other words, it is currently unknown whether these decisions will cause many regulations to be struck down. We expect that some judges will likely take these actions as a green light to do just that, while other courts will disagree. Ultimately, it will be up to the Supreme Court to decide what the new standards for regulations will be – and those standards are not spelled out in these decisions. For now, there are a few key takeaways that are likely to result:

Dramatic increases in litigation against Federal regulation

More conservative regulatory action from agencies

An increase in workload on agencies

While it is still too early to predict, we believe that it is likely that Loper and Corner Post puts CRA on firmer ground should FDA attempt to regulate premium cigars, which will now be subject to more judicial oversight. It will be critical, however – perhaps even more critical than it has ever been – for us to marshall our strongest arguments against overburdensome regulation and to engage with Congress proactively, to give us the strongest arguments possible.

Next Steps for CRA

As the reality of these decisions set in, CRA will need to aggressively challenge FDA future actions through proactive lobbying for premium cigar protections, and defensive lobbying against big tobacco’s overreach. The FDA’s regulatory actions on premium cigars and other tobacco products, once unassailable under Chevron, may now be challenged in court and more effectively addressed by Congress. 

It’s important to note that the foundation of our arguments against regulation will always be that premium, hand-rolled cigars should be exempt from regulations. They differ significantly from other tobacco products as evidence shows that their health risks are substantially lower than those of other tobacco products. These findings are backed by studies by the National Cancer Institute and the National Academy of Science, Engineering, & Medicine (NASEM) and others that indicate a reduced impact on public health, particularly in terms of inhalation, addiction, and mortality.

The issue of youth access and appeal to premium cigars, often cited as a reason to regulate, are not statistically significant concerns, as shown by these same studies. 

Further, as Congress will be required to draft more detailed legislation, CRA has the opportunity to influence the language to favor premium cigars. However, there is also a risk that larger tobacco interests will push for unfavorable legislation. CRA must be prepared to address these challenges.

Additionally, the FDA will face an increased workload at the rule-making level without Chevron deference, leading to more cautious and robust rulemaking processes. This may delay current and future rules, benefiting premium cigars by lowering their priority. Early signs indicate a more accommodating tone from agency personnel and a shift in judicial deference post-Loper.

The future looks promising for CRA if we leverage these changes effectively, supported by your continued backing.

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