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Victory for the Right to be Smoke-Free Coalition and E-Vapor Industry in Indiana

The U.S. Seventh Circuit Court of Appeals ruled in favor of the Right to be Smoke-Free Coalition holding that portions of Indiana's E-Liquid Law are unconstitutional as applied to out-of-state manufacturers

On January 30, 2017, the U.S. Court of Appeals for the Seventh Circuit issued its decision in Legato Vapors LLC et al. v. David Cook et al., No. 16-3071, striking as unconstitutional portions of Indiana's Vapor Pens and E-Liquid Act (the Act) as it applies to out-of-state manufacturers.

Among other things, the Act prohibited the sale of "unpermitted" e-liquid products used in refillable open-system e-vapor devices starting June 30, 2016. Actually obtaining a manufacturing permit from the Indiana Alcohol and Tobacco Commission (ATC), however, was effectively impossible for out-of-state companies for several reasons; most critically, e-liquid manufacturers were required to (1) build facilities compliant with the Indiana Commercial Kitchen Code and (2) contract with a qualified third-party security firm to provide certain specific services (such as 24/7 video surveillance). For a security firm to qualify under the law, however, it must have a certified Rolling Steel Fire Door Technician and an Architectural Hardware Consultant under its employ - certifications not common in the security industry. Moreover, those certified employees had to be hired by July 2015, preventing future security companies from ever being able to comply. Indeed, the ATC determined that only one security firm in the country, located in Lafayette, Indiana, qualified under the law.

In September 2015, the Right to be Smoke-Free Coalition (the Coalition), a trade association of e-vapor companies  intervened in a lawsuit challenging the Act. Among other things, the Coalition argued that the Act violated the dormant Commerce Clause of the United States Constitution, which prohibits extraterritorial legislation, by regulating e-liquid manufacturing activities that occur completely outside of Indiana. After their motions for preliminary injunction and summary judgment were denied by the Southern District of Indiana, the Coalition and co-petitioners Legato Vapors LLC et al. appealed to the Seventh Circuit. Oral arguments were heard in Chicago on December 8, 2016 and the decision issued on January 30, 2017.

Ruling in the Coalition's favor, the appellate Court declared that the "unprecedented" application of the Act's security provisions, clean room (kitchen code) requirements, and audit provisions as they relate to facility design and production processes to out-of-state manufacturers was clearly extraterritorial and a violation of the dormant Commerce Clause. Indeed, the Court stated that "with almost two hundred years of precedents to consider, our review of prior dormant Commerce Clause decisions has not revealed a single appellate case permitting any direct regulation of out-of-state manufacturing processes and facilities comparable to the Indiana Act." The Court also noted that the Act directly regulates production facilities and processes of out-of-state manufacturers and "thus wholly out-of-state transactions." It also "poses the clear risk of multiple and inconsistent regulations that would unduly burden interstate commerce."

The Circuit Court reversed the district court's grant of summary judgment to Indiana and remanded the case to the district court to declare the challenged provisions unenforceable against out-of-state manufacturers and to enjoin their enforcement against the Coalition and co-petitioners.

Co-petitioners Legato Vapors, Rocky Mountain E Cigs and Derb E Cigs were represented by D. Epstein and James A. Tanford of Epstein Cohen Seif & Porter LLP, and J. Gregory Troutman of Troutman Law Office PLLC.

© 2019 Keller and Heckman LLP

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About this Author

Eric Gotting, Keller Heckman, ligation attorney, appeals lawyer, personal injury
Partner

Eric Gotting joined Keller and Heckman in 2011. He serves as a partner in the firm's litigation and environmental practice groups specializing in complex civil and appellate matters, with a focus on toxic tort, environmental, and corporate litigation.

Litigation and Environmental Experience

Mr. Gotting has handled cases across the country, having tried matters to verdict and argued appeals before federal and state appellate courts. His experience includes class actions, mass tort litigation, and...

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Azim Chowdhury, Keller Heckman, ECigarette Research lawyer, FDA Regulatory Compliance Attorney
Partner

Azim Chowdhury joined Keller and Heckman in 2010 and practices in the area of food, drug, and tobacco law. 

Mr. Chowdhury advises domestic and foreign corporations in matters of FDA and international regulatory compliance. In particular, he assists corporations in establishing clearances for food and drug additives in the U.S., Canada, and the European Union, with an emphasis on indirect additives used in food-contact materials.  Mr. Chowdhury has also developed expertise in tobacco and e-vapor product regulation relating to the implementation of the Family Smoking Prevention and Tobacco Control Act, and spearheaded the FDA Tobacco and Electronic Cigarette practice at Keller and Heckman.  Specifically, Mr. Chowdhury has experience representing tobacco, e-cigarette and e-liquid manufacturers, suppliers and trade associations in matters of FDA regulatory and corporate compliance.

Mr. Chowdhury is also a frequent contributor to the Food and Drug Law Institute's (FDLI) Update Magazine, has served on the Editorial Advisory Board of the Food and Drug Law Journal, and has authored and edited numerous articles and publications, including Tobacco Regulation and Compliance: An Essential Resource, FDA Regulation of Tobacco: A Comprehensive Guide – An FDLI Primer and Tobacco and Nicotine Delivery: Regulation and Compliance, 2nd Edition. He frequently speaks at industry conferences and events, was featured in U.S. News and World Reports Best Lawyers Edition(2016) and was named one of “10 Names to Know in the Vape World” in the October 2015 issue of Vape Magazine

Mr. Chowdhury also has an active pro bono practice through Keller and Heckman’s Pro Bono Program and has been featured in the Baltimore Sun for successfully obtaining asylum in the United States for a family who fled their home country of El Salvador because of violence they faced from an international gang.

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