Chevron Goes Up in Smoke: Did the Supreme Court Reward Gridlock Tactics in the Cigarette Decision?

James T. O'Reilly

James O'Reilly is a Visiting Professor of Law at the University of Cincinnati College of Law. Prof. O'Reilly received his undergraduate degree from Boston College and his J.D. from the University of Virginia.

[30 ELR 10574]

Environmental lawyers have much to learn from a close study of the March 2000 U.S. Supreme Court decision in Food & Drug Administration v. Brown & Williamson Tobacco Corp.¹ So much of the U.S. regulatory apparatus controlling environmental pollution is premised on administrative agency power to fill gaps in statutory language, that the 5-4 majority's dramatic slalom turn away from prior Supreme Court norms of deference² bears close attention.

This Dialogue suggests that the tobacco industry's successful tactic in defending cigarettes may be exhibited in future industrial challenges to U.S. Environmental Protection Agency (EPA) regulatory initiatives. Silence, disharmony, and desuetude by Congress prevailed in the Supreme Court tobacco case as a barrier to gap-filling regulations by administrative agencies. Gap filling is a classic pattern of regulatory response to the vagaries of congressional indecision. The March 2000 decision was not an about-face change from Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.,³ the landmark 1984 decision on judicial deference, but it can be described as a slalom turn that twists the "cigarette corollary" into anti-deference in some instances.

Classic Chevron Theory

The Supreme Court's 1984 Chevron decision favored a broad view of the powers of agencies to speak where Congress had not expressly declared a position. Administrative law scholars have devoted hundreds of pages to the nuances of judicial deference to the statutory interpretations made by agency managers. Under the now-dominant Chevron model of judicial review of agency action, Congress acts in one of two modes, either clearly articulating a command for agencies to follow, or leaving ambiguities in statutes and permitting agencies to fill the interstitial gaps with reasonable interpretations.

So until the cigarette decision, a two-step analytical model has been followed. At step one the Court asks, was the statutory text clear? If yes, then the agency must follow that text. If the language was ambiguous, the Court goes on to step two, where the Court would accept any reasonable interpretation made by the expert agency charged with administration of the statute. EPA and other environmental agencies have enjoyed the benefits of deference under these models for years as the complexity of the administrative state has expanded.

The Peculiar Institution

The political context of that "peculiar institution," the tobacco industry's dominance of Congress,⁴ is familiar to many readers. Any products liability or toxic torts student recognizes that cigarette risks have been treated quite differently. The well-focused and ably planned financial and political support of cigarette makers has effectively bought the legislative power that was needed to block federal or state statutory control of risks from cigarettes.⁵ A toothless but "distinct regulatory scheme for cigarettes"⁶ imposes no control on content, sale, dose, contaminants, or adulterating chemicals in cigarettes.⁷ Preemptive weight is given to rote package warnings whose impact on the product's potential customers is minimal.

Chevron's New Cigarette Corollary

The cigarette corollary can be stated as: "Agencies cannot receive deference, and indeed cannot adopt rules, where Congress has failed to enact regulatory controls, and where the agency had formerly opted not to assert jurisdiction." This corollary will be cited against EPA by industry as new rules are issued and challenged. In recent years, Congress has deadlocked on hazardous waste, air quality, water, medical waste, and municipal solid waste, and the list of unsettled issues or definitional gaps is lengthy. Because Congress [30 ELR 10575] debated about these issues and considered numerous bills, but did not decide to clarify or expand definitions, the tobacco case suggests that EPA therefore cannot fill the gap with new regulations on controversial interpretive points. Until Congress speaks, the regulators must be passive implementers. Gridlock on Capitol Hill wins—or does it?

The irony of using congressional indecision as a preclusion of regulatory control was not lost on the Court, especially not on the four Justices in the minority. Congress has adopted dozens of statutory risk assessment and risk control measures on consumer and chemical products, but could not bring itself to regulate the most assuredly fatal of the consumer products sold in this country. Congress repeatedly choked on bills to restrict, limit, or regulate cigarettes. When states threatened to impose label requirements, Congress strained to appease the tobacco industry's critics with mild label warning impositions on two occasions. Using its U.S. Commerce Clause jurisdiction, Congress preempted state label warnings. Yet the legislators feared the wrath of an extremely effective lobby if their power were to be employed beyond the imposition of these rote package statements.

The FDA Regulation

When the regulatory agency with the greatest historical record of receiving judicial deference,⁸ the Food and Drug Administration (FDA), adopted rules regulating cigarettes and chewing tobacco in 1996,⁹ the executive branch did what Congress had been unwilling to do. Teen smoking was addressed at great length as a societal health problem. Cigarette sales, ads, and promotional measures aimed at children were restricted. The executive branch did not alter the existing package warnings, leaving the statutory labels in place, and the FDA did not go as far as it could have gone in expanding information controls.

For conscious policy reasons, the FDA announced an interpretation on tobacco regulation combined with a self-denial of enforcement controls in which the potency of the available control measures was tempered.¹⁰ The FDA's potential power to ban medical devices and to forbid sales, on grounds of health risks, was addressed at great length, and this power was restrained in the agency's announcement of its controls. This set of regulations drew hostile fire from Washington's most powerful law firms in a spectacular "who's who" of lawyers supporting the tobacco industry.

Historical Patterns

The fact that Congress did not act on an issue historically had not been persuasive in the courts as a reason why a rule should be voided. Nonaction by legislators did not preclude the agency's subsequent action. In fact, in the Small Business Regulatory Enforcement Flexibility Act legislation, Congress created a mechanism to undo a regulation with which it disagreed, in the same year that the FDA adopted its cigarette rules.¹¹

The legislative patterns show that Congress has deadlocked and did not act on tobacco regulation bills, with very few exceptions. The stalemate ended when the FDA, an administrative agency with relevant health regulatory authority, reversed its prior views and held that it had jurisdiction to regulate children's access to cigarettes.¹² The reversal was a significant policy change. The Supreme Court's majority position infers¹³ that Congress made decisions about regulations that had been impacted by the prior posture of the FDA, suggesting that the majority of Justices felt that the FDA's views controlled what Congress would enact. The majority opinion suggests a form of equitable estoppel as to past congressional communications that would bar an agency from altering its prior interpretations once Congress had relied upon the agency and taken no affirmative legislative action.

Opponents of the FDA regulation said that congressional failure to expand the FDA's jurisdiction to expressly include tobacco precludes the FDA's administrative interpretation. Since the weak warning statements had been legislatively adopted during years when FDA had disclaimed regulatory authority, opponents argued that FDA was bound not to act until Congress chose to give FDA more clear jurisdiction. Advocates of regulatory control of cigarettes feared that if this cigarette corollary were adopted, the paralysis of Congress to control cigarette content, marketing, and additives would be spread to paralyze the agency as well.

The Majority Opinion

The Supreme Court split 5-4 in the cigarette decision. The five majority Justices distort the Chevron standard with a new twist that we may call "superseding anti-deference." The analysis that courts had applied after the Chevron decision first asked whether Congress had spoken clearly to an issue, and then went on to accept agency gap filling in the face of ambiguity. Here, the decisions Congress had not made regarding tobacco control strategies superseded and precluded FDA regulation, barring action in a type of anti-deference that supersedes the agency's ability to fill the gaps. The dissent vigorously protested this approach.¹⁴

There were several discrete segments to the majority opinion. The Court first acknowledged that the expert regulatory body (FDA) has stated that it does not intend to remove cigarettes from the market. Similar FDA expressions of intent had carried weight in the past.¹⁵ But the majority jumps over this statement of discretion, finds that Congress "has foreclosed the removal of tobacco products from the market," and states a remarkable conclusion: the agency would have been required to use its power to ban, and, therefore, [30 ELR 10576] the putative potential ban would have conflicted with congressional inaction. "The inescapable conclusion" of this unusual leap over deference "is that there is no room for tobacco products within the [Food, Drug, and Cosmetic Act's] regulatory scheme."¹⁶

In 1985, the Supreme Court upheld the FDA's discretion not to enforce its statutory authority on the equally controversial topic of the death penalty, barring courts from ordering the FDA to file charges where approved drugs had been used for legal executions.¹⁷ Under the cigarette decision's majority opinion, because (1) the regulator's clear statement of self-restraint cannot be believed, (2) its use of discretion cannot be relied upon by the courts, then a ban would inevitably follow, and because (3) Congress could have enacted a ban but did not, then the regulator cannot move ahead with its less-than-banning rules. To the majority, the FDA's less-than-ban rules "simply do not fit" what the statute means.¹⁸ This leaves in doubt the FDA's enforcement discretion not to enforce an equally harsh statutory term, which discretion had been assumed to exist since the Chaney v. Heckler¹⁹ decision. To the extent environmental agencies had used Chaney as a shield to fend off demands for enforcement suits, the value of that precedent is in doubt.

In the cigarette case, congressional failure to act is deemed as much a basis for decision as the text of an adopted statute would have been. The Justices explore what had been considered and what had not been adopted. Justice Scalia had been a long-time critic of the use of congressional history in interpreting the meaning of statutes, but he joined the majority's decision elevating indecision to the level of preclusive action.

The majority opinion does not reach the second, more frequently employed, step of the two-step Chevron test. Under that norm, agencies win if their interpretation of the ambiguous statute is one of the several reasonable interpretations. The cigarette case majority's choice to halt the deference analysis at Chevron step one was an odd twist, with a result that blocks the agency's interpretation. This rewards the decision not to act by making congressional inaction into the functional equivalent of a clear adverse congressional pronouncement. Unlike the Presentment Clause²⁰ cases voiding legislative veto,²¹ we now see the virtual veto of a substantive agency rule because of the failure of Congress to have reached a decision on that particular topic. The regulatory agency gap filling that has been the routine result of applying Chevron's second step is not reached in the cigarette case.

Environmental Analogies

A close reading of the cigarette case opens many possibilities for the litigation of challenges to environmental rules. Imagine that an existing pro-environment statute with sweeping, open-ended jurisdictional definitions, like "waste," "chemical substance," "source," etc., was left vague by congressional conference committees. Experience suggests that there are dozens of these definitional islands in the stream of past legislation. Assume that Congress was for various reasons imprecise as to the meaning of the terms in a controversial program area. Several years pass,²² and many congressional proposals to change or define the terms of these statutes are debated but few are adopted. Then assume that EPA adopts a rule in which the Agency pronounces its judgment that one vague statutory term has a particular meaning, but EPA disclaims in the preamble an intent to go to the extreme lengths of coverage that the vague term might have permitted. Does this sound familiar?

The challenger then petitions for review, arguing that EPA could later choose to reach too far²³ and that congressional failure to adopt the statutory language that delegates the power asserted in EPA's new interpretive norm is a preclusion of EPA's adoption of such a rule.

Under the new "cigarette corollary" to Chevron, the court looks at what Congress has done since 1972, 1976, 1984, 1990, or any other year in which our hypothetical environmental law was adopted. The court looks for a "fit"²⁴ of the new rule with the unadopted legislative bills, and finds a pattern of deadlock and indecision in Congress. Surely Congress could have adopted a standard, e.g., for treating mixed soils as hazardous waste, but it did not do so.

The typical analysis will find that the challenger can use the cigarette corollary to block the rules. In many cases, Congress has adopted laws that tinkered around the edges of the problem of regulating wastes, or effluents, or emissions. EPA is more aggressive than congressional consensus tends to be. If Congress did not act to address the issue that EPA's rule seeks to resolve, and the challenger cites the cigarette corollary to the first step of Chevron, then EPA loses the benefit of Chevron deference. Without deference, the rule is vulnerable and may be vacated.

Estoppel of Policy Changes

A second argument will sometimes be available to the opponents of a newly enacted agency rule. As the majority opinion appears to hold, federal agencies are estopped from changing policy positions that concern jurisdiction if Congress had relied on those positions in deciding not to act. Once the prior agency management's policy has been ratified by inactivity, estoppel of the newer managers bars a change in policy. The court need not go to the next step and examine what EPA policy arguments had been asserted in the past and how severe a change had been made.

To state this as a hypothetical, if EPA regarded the repair of power-generating equipment to not require a permit, and Congress did not change air law regarding repair issues, then the cigarette case suggests that EPA could not later alter its view of what are repairs, since Congress was lulled into [30 ELR 10577] inactivity on the Clean Air Act by reliance on the prior agency interpretation.²⁵ There may be more debate on this issue, but EPA has built its policies upon the presumption that they will receive judicial deference as to interpretation of vague statutory terms.

The reader should note the two issues are severable. Although the FDA's prior policies disclaiming "drug" status for cigarettes were used by the majority to impeach the FDA's 1996 regulations, this was a separate issue in the majority decision. The Chevron-twisting analysis in the cigarette case stands alone as a basis for decision. The considerations of deference were treated as a separate basis, apart from the majority's analysis of the allegations of FDA policy revisionism.

The View Favoring EPA

EPA rules will be challenged by litigants citing the cigarette decision. They will assert that EPA is precluded from issuing a substantive control regulation based on EPA's interpretation of an ambiguous rule where Congress debated but did not act. The rules do not enjoy Chevron deference and they must be vacated for lack of statutory authority under Chevron step one.

The best response from groups supporting EPA and from the regulators themselves is that the cigarette decision is fact-limited by the history of that "peculiar institution," the tobacco industry.²⁶ Air pollution of a different kind was touched on by Congress in 1972, 1990, and so on. It will be argued that efforts to block regulators from acting where Congress had not chosen to act should not succeed; EPA should continue to be creative where the Resource Conservation and Recovery Act, the Clean Water Act, the Safe Drinking Water Act, etc. had failed to address serious environmental issues. Tobacco, the political hot potato that the agency in the cigarette case is now forbidden to touch, is arguably differentiable from smog, ozone, suspended solids, infectious waste, etc., which are controversial but not so fatal to politicians' careers.

This argument builds on the cigarette decision majority's almost apologetic recognition of the unique status of cigarettes. Money, power, agricultural and marketing investments, etc. all were concentrated on preserving the legal status of one crop's end use function. The same cannot be said for oil refiners' industrial air emissions,²⁷ steelmakers' desire to avoid reporting under the Emergency Planning and Community Right-To-Know Act,²⁸ and ham processors' water effluent exceedances.²⁹ Opponents of the oil, steel, chemical, and other industries have been aware that their lobbyists took strong positions on environmental legislation. But even these strongest adversaries of environmental legislation were mild compared to tobacco lobbying efforts. The major Washington law firms and lobbying "consultants" whose prominent defense of tobacco multiplied their per-partner profits had enjoyed spending levels that far exceeded the defensive efforts of the industrial factory owners and refiners. A rule on Title V permits is not a bet-the-company issue for manufacturers, but the FDA regulation was a titanic struggle for tobacco marketers.

Contrary Reasoning

The arguments above are likely to be asserted against EPA, but the contrary argument can be lifted from part B of the majority opinion: this is "not a case of simple inaction by Congress that purportedly represents its acquiescence in an agency's position."³⁰ The action of Congress in debating the control devices, straining to produce a handful of statutory clauses with a tiny amount of label warning language, is construed in the cigarette majority opinion to preclude the FDA rule, because it is deemed to ratify former policy positions of the FDA regarding that agency's jurisdiction.

So an opponent of environmental rules who argues the cigarette corollary to Chevron may be compelled to show that Congress had been more than passively debating the topic. How much more is unclear; some statutory tinkering with the scheme is likely to suffice, since Congress achieved so very little with its legislative efforts, yet did enough to block regulatory agency activity. Critics will warn that if hundreds of thousands of deaths each year (the consequences of cigarette smoking) were to be experienced on one environmental topic, laws regarding that topic would be as carefully scrutinized as the majority's discussion in this decision. The majority examined the sparse statutes on cigarette label warnings³¹ that had provided the cigarette industry's successful shielding against state and local regulatory controls. The fact of Congress' having done something precludes the agencies from regulating in different directions on the same product category.

In recent environmental controversies in Congress, chemical and emission restrictive bills were introduced and a few were passed, but they hardly occupied the fields within which EPA wants to regulate. The administrative agency output of rules and standards far exceeded the legislative productivity. When considered as outputs of a control system, the safety related outputs of the congressional legislation on cigarettes have been very few.³² It takes very few such outputs to trigger the barrier to administrative rules that the cigarette case presents.

The Preemption Nuance

Congress rarely speaks with clarity when it adopts preemptive clauses barring states from acting. The 1996 Medtronic Inc. v. Lohr³³ decision analyzed the FDA's use of the kinds of medical device controls that the cigarette case had discussed, [30 ELR 10578] and the Supreme Court held that FDA notifications of changed products did not preempt state tort law "design defect" decisions where these tort verdicts were not "requirements" of state statutes or rules.

Products liability defendants who are regulated by the FDA might encounter a challenge related to the cigarette decision in those cases in which the FDA asserts preemption authority. The defense will move to dismiss on the basis that FDA rules preempt state tort remedies. Plaintiffs opposing preemption will use the cigarette case to argue that FDA pre-emption has been so often debated in Congress, yet so rarely applied, that the FDA now lacks authority to extend pre-emptive coverage by regulation absent a clear congressional decision. Similarly, state tort verdicts on pesticides and toxic chemical release reporting would prevail over an argument that the federal EPA regulation preempts them. The regulation is defeated by showing the cigarette case's line of reasoning; the failure to expressly preempt means an implicit denial of power to preempt by rules.

Conclusion

It's not easy being green, and green pro-environmental rulemaking never has been easy for EPA. The approach taken by advocates of tobacco in defeating FDA regulations has the same poisonous effect on deference that their products have on humans. It will be borrowed by advocates for the removal or restraint of environmental regulations promulgated by EPA, the U.S. Army Corps of Engineers, and other agencies and programs.

Rarely do divisions of opinion cleave as sharply as they did in the cigarette case. The 5-4 decision in the cigarette case offers the reader a set of diametrically opposed views of the administrative agency authority to fill interpretive gaps in environmental policy that had been debated but left unresolved by Congress. Those who care about the future of environmental rulemaking should consider carefully the haze that the cigarette decision leaves over the Chevron-based expansion of agency policies.

1. 120 S. Ct. 1291 (2000).

2. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 14 ELR 20507 (1984).

3. Id.

4. Tobacco has "its own unique political history," Brown & Williamson, 120 S. Ct. at 1296.

5. A history of tobacco's nonregulation is found in RICHARD KLUGER, ASHES TO ASHES: AMERICA'S HUNDRED-YEAR CIGARETTE WAR (1997) and in James O'Reilly, A Consistent Ethic of Regulation: Federal Regulation of Tobacco Products, 3 ADMIN. L.J. AM. U. 215 (1989).

6. The majority in Brown & Williamson, 120 S. Ct. at 1307, reviewed the several pieces of legislation that managed to pass, and the reader can observe how little effect the statutory provisions had on sales to minors, the target to which the Food and Drug Administration (FDA) had addressed its rules.

7. Standardized words on packages are required by 15 U.S.C. § 1333.

8. The FDA has received great deference to define its jurisdiction and its enforcement objectives. Weinberger v. Hynson Westcott & Dunning, 412 U.S. 609 (1973); Chaney v. Heckler, 470 U.S. 821 (1985); United States v. Rutherford, 442 U.S. 544 (1979).

9. Nicotine in Cigarettes and Smokeless Tobacco Is a Drug and These Products Are Nicotine Delivery Devices Under the Federal Food, Drug, and Cosmetic Act: Jurisdictional Determination, 61 Fed. Reg. 44619 (Aug. 28, 1996) [hereinafter Jurisdictional Determination].

10. Regulations Restricting the Sale and Distribution of Cigarettes and Smokeless Tobacco to Protect Children and Adolescents; Final Rule, 61 Fed. Reg. 44396, 44414 (Aug. 28, 1996) (the FDA expressly disclaimed the intent to ban tobacco products).

11. 5 U.S.C. §§ 801 et seq., added by Pub. L. No. 104-121, §§ 251-252, 110 Stat. 868-74 (1996).

12. Jurisdictional Determination, supra note 9, at 44619.

13. Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 120 S. Ct. 1291, 1311-13 (2000).

14. Id. at 1320 (Breyer, J., dissenting).

15. Chaney v. Heckler, 470 U.S. 821, 833-34 (1985) (weight accorded to the FDA's decision not to enforce conditions on the use of approved drugs).

16. Brown & Williamson, 120 S. Ct. at 1305.

17. Chaney, 470 U.S. at 821.

18. Scholars will be debating the "do not fit" norm for years, since "fit" is incapable of precise normative application. Perhaps the new test builds on the famous trial comment that: "If they don't fit, you must acquit," from the O.J. Simpson murder trial, People v. Simpson (Cal. Super. Ct. 1996) (acquittal without published opinion).

19. 470 U.S. 821, 833-34 (1985).

20. U.S. CONST. art. I, § 7, cl. 2.

21. INS v. Chadha, 462 U.S. 919 (1983).

22. In the case of drug regulatory authority, 62 years have passed. Federal Food, Drug & Cosmetic Act, 21 U.S.C. §§ 321 et seq., Pub. L. 75-717, 52 Stat. 1040 (1938).

23. Note that expressions about self-restraint by the agency of its future use of the powers asserted had gone to extraordinary lengths in the preamble and the jurisdictional statement accompanying the FDA rules, Jurisdictional Determination, supra note 9, at 44619.

24. Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 120 S. Ct. 1291, 1306 (2000).

25. This assumes that Congress needs any reason for inactivity, of course.

26. Indeed, the majority suggests in Brown & Williamson, 120 S. Ct. at 1314, that the Supreme Court need not follow Chevron where a case is deemed not "ordinary," and some environmental regulatory cases are so controversial that the non-ordinary status might depreciate the value of applying Chevron.

27. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 14 ELR 20507 (1984).

28. Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 28 ELR 20434 (1998).

29. Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Found., 484 U.S. 49, 18 ELR 20142 (1987).

30. Brown & Williamson, 120 S. Ct. at 1312.

31. 15 U.S.C. §§ 1331-1333.

32. For example, compare cigarette label warning, 15 U.S.C. §§ 1331-1333, with air quality regulations, 42 U.S.C. §§ 7408-7409, ELR STAT. CAA §§ 108-109, under the Clean Air Act.

33. 518 U.S. 470 (1996).