By Timothy S. Donahue
Top Takeaways:
- Penalty vacated: The Fifth Circuit set aside a $19,192 civil monetary penalty imposed on Texas Tobacco Barn for alleged sales of unauthorized vaping products.
- Jury right: A divided appeals panel ruled that HHS violated the retailer’s Seventh Amendment rights by seeking a punitive monetary penalty in an administrative proceeding without a jury.
- Enforcement impact: The decision could significantly restrict the FDA’s use of its administrative civil-money-penalty process against tobacco and vape retailers in the Fifth Circuit.
The U.S. Food and Drug Administration cannot use its in-house administrative process to impose punitive tobacco fines without providing the accused company with a jury trial, a federal appeals court has ruled.
On June 30, the U.S. Court of Appeals for the Fifth Circuit vacated a $19,192 civil monetary penalty imposed on Texas retailer Texas Tobacco Barn, ruling that the Department of Health and Human Services’ administrative enforcement proceeding violated the company’s Seventh Amendment right to a jury trial.
The case, Texas Tobacco Barn v. U.S. Department of Health and Human Services, arose after the FDA alleged that the retailer sold unauthorized vaping products, including one identified in court records as “Barn Brewed Beetle Juice.”
HHS pursued the penalty through an internal administrative process rather than filing an enforcement action in federal court. Texas Tobacco Barn challenged that process, arguing that the government sought a punitive monetary remedy traditionally imposed by courts of law and that the company was therefore entitled to have the allegations decided by a jury.
In a divided decision, the Fifth Circuit agreed. “The penalty was levied by the Department of Health & Human Services following an agency proceeding that lacked a jury,” Circuit Judge Stuart Kyle Duncan wrote for the majority. “We conclude that this process denied TTB its Seventh Amendment right to a jury trial.”
The court concluded that the government’s civil monetary penalty was legal in nature because it was intended to punish and deter violations rather than to compensate the government for a loss. The Seventh Amendment preserves the right to a jury trial in certain civil actions involving legal rights and remedies.
The majority relied heavily on the U.S. Supreme Court’s 2024 decision in SEC v. Jarkesy, which held that defendants facing civil penalties for securities fraud were entitled to a jury trial and that the Securities and Exchange Commission could not adjudicate those claims exclusively through its administrative process.
Applying that reasoning to tobacco enforcement, the Fifth Circuit held that the FDA-related penalty implicated the same constitutional protection.
The government argued that enforcing the Tobacco Control Act involved “public rights” that Congress could assign to an administrative agency without a jury trial. The majority rejected that argument, concluding that the penalty action was sufficiently similar to traditional legal actions seeking punitive monetary remedies.
The ruling does not invalidate the underlying federal requirements governing authorized tobacco products, nor does it determine whether Texas Tobacco Barn sold products in violation of federal law. Instead, it addresses where and how the government may pursue monetary penalties for alleged violations.
The court vacated HHS’s decision imposing the penalty.
The ruling could have broader implications for the FDA’s tobacco enforcement. The agency’s Center for Tobacco Products has used administrative civil monetary penalty proceedings against retailers for tobacco-related violations since 2012. Following the Supreme Court’s Jarkesy decision, several vaping businesses have challenged the constitutionality of these proceedings.
Federal district courts in Texas had previously reached similar conclusions in cases involving vape businesses, but those decisions generally provided relief only to the individual companies involved. The Fifth Circuit’s precedential ruling carries broader authority across Texas, Louisiana, and Mississippi, the three states covered by the circuit.
The decision does not prevent the FDA or the Department of Justice from pursuing alleged tobacco violations in federal court, where defendants may exercise their constitutional right to request a jury trial. However, requiring court proceedings could make monetary enforcement more resource-intensive than the agency’s existing administrative process.
The ruling may be particularly significant as the FDA intensifies enforcement against retailers accused of selling unauthorized vaping products. The agency has frequently used civil monetary penalties as one tool, alongside warning letters, injunctions, product seizures, and other enforcement actions.
