By Timothy S. Donahue
Top Takeaways:
- Refund lawsuit: Nine premium cigar companies are seeking more than $10 million in refunds and interest for FDA user fees paid from 2016 to 2023.
- Court victory builds: The suit follows the cigar industry’s victory in the FDA Deeming Rule case, which removed premium cigars from FDA regulation.
- Broader implications: The case could determine whether additional premium cigar companies and importers pursue refunds, with government estimates exceeding $100 million.
Nine premium cigar manufacturers have filed suit against the U.S. government, seeking refunds of user fees paid to the U.S. Food and Drug Administration from 2016 to 2023. They argue the agency improperly collected those fees on products that were ultimately found to fall outside its regulatory authority.
The lawsuit, filed in the United States Court of Federal Claims, seeks at least $10 million in refunded user fees, plus interest. The plaintiffs include Arturo Fuente, Ashton Distributors, CLE Cigar Co., J.C. Newman Cigar Company, Oliva Cigar Co., La Flor Dominicana, My Father Cigars, Padrón Cigars and Rocky Patel Premium Cigars.
The action follows the industry’s successful challenge to the FDA’s 2016 Deeming Rule. Earlier this year, litigation brought by the Cigar Association of America and other industry groups concluded with premium cigars being exempted from FDA regulation after the government declined to appeal the court’s ruling.
Although premium cigars were ultimately excluded from FDA oversight, manufacturers continued paying tobacco user fees for several years while the litigation proceeded. The new lawsuit argues that those payments should be returned because the products should not have been regulated in the first place.
The FDA stopped assessing user fees on premium cigars following a key court ruling in July 2023. However, companies had already paid fees covering multiple years under the agency’s tobacco user fee program, as first reported by the cigar blog Halfwheel.
The tobacco user fee system funds the FDA’s Center for Tobacco Products and is financed by manufacturers and importers rather than general taxpayer revenues. Congress sets the annual tobacco user fee total—currently about $712 million—which is allocated among six tobacco product categories according to federal excise tax collections.
Unlike many other tobacco manufacturers, some premium cigar brands do not act as their own importers. Instead, third-party importers often pay the FDA user fees on their behalf, raising an additional legal question about who may ultimately seek reimbursement if refunds are awarded.
Court filings in related litigation previously indicated that the federal government believed premium cigar refunds could exceed $100 million. The newly filed lawsuit does not specify the amount each company seeks, only that the total claim exceeds $10 million, including interest.
The companies are represented by Morgan, Lewis & Bockius LLP. The firm’s legal team includes Michael Edney, who served as lead counsel in much of the successful litigation challenging the FDA’s regulation of premium cigars.
