[00:00:00] Speaker 00:
Case number 19-5252, Balian Spirits LLC and Shiguru Petty Technologies Private Limited Appellants versus United States of America et al.

[00:00:11] Speaker 00:
Mr. Emoret for the appellants, Mr. Overgold for the appellees.

[00:00:18] Speaker 01:
Good morning.

[00:00:20] Speaker 01:
Mr. Emoret, please proceed when you're ready.

[00:00:23] Speaker 04:
Thank you, Your Honor.

[00:00:23] Speaker 04:
May it please the court, Jonathan Emoret on behalf of the appellants,

[00:00:27] Speaker 04:
This case concerns alcohol and tobacco tax and trade bureau, TTB, censorship of two science-based health claims, one on the effect of an additive, NTX, on reducing alcohol-induced DNA damage, and the other on the additive's effect in protecting DNA from alcohol-induced damage.

[00:00:46] Speaker 04:
The science of record supports the claims.

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There is no science of record against them.

[00:00:52] Speaker 04:
In this situation, Henry RMJ applies because the claims are supported by scientific evidence.

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They are, by definition, not inherently misleading, so they are at worst potentially misleading.

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And the Supreme Court has made clear that disclaimers are the resort for the government in such a circumstance, not outright suppression.

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See also this court's decision in Pearson versus Shalala.

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I will focus on four reversible errors in the decision below involving one the violation of the First Amendment free speech and Fifth Amendment procedural due process rights to unlawful delegation of agency decision making power three false representations of the record below.

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And four, the court's error in defining the state's interest not to be what the TTB defined its interest to be.

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And fifth, the erroneous exclusion of extra record evidence.

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The court below erroneously gave TTB Chevron deference on the First Amendment claim and on the Fifth Amendment claim.

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De novo review is constitutionally required.

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See Peel, 496 U.S.

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at 108.

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Whether the inherent characteristics of a statement places it beyond the protection of the First Amendment is a question of law over which this court exercises de novo review.

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It's also the court's decision, this court's decision in Pearson versus Shalala.

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And then also an independent judicial review of the constitutional facts is required.

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See Hurley, 515 U.S.

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at 567.

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The reaches of the first- Can I ask you about the precedent?

[00:02:33] Speaker 01:
Yes.

[00:02:33] Speaker 01:
I want to make sure Judge Katzis is audible when he's asking his question, please.

[00:02:37] Speaker 01:
Can you hear me?

[00:02:38] Speaker 01:
Yes.

[00:02:38] Speaker 01:
Yes, Your Honor.

[00:02:39] Speaker 05:
Okay.

[00:02:41] Speaker 05:
So on the precedent,

[00:02:43] Speaker 05:
You make a very strong argument under Peale, but we have Palm Wonderful, which is a more recent case and which is pretty directly on point.

[00:03:01] Speaker 05:
So how do we assess early or Supreme Court opinion, which seems pretty strongly to help you?

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but at least one later DC Circuit opinion that seems almost on all fours against you.

[00:03:17] Speaker 04:
So Palm is readily distinguishable because it's the post-publication context and the court there assessed actual market evidence of deception as the FTC found it.

[00:03:28] Speaker 05:
On the specific question of the standard of review when an appellate court considers whether speech is or is not misleading.

[00:03:39] Speaker 04:
Well, in order to apply the Central Hudson standard, and I don't believe there's any basis for exception to that.

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In fact, in Reuben v. Coors at 482 note two, the court expressly said that commercial speech in the alcohol context could not be accepted from Central Hudson.

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When you apply Central Hudson, you have necessity

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under three of the four prongs must assess the facts de novo.

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There can be no ascertainment under the precedent that the harms recited are real.

[00:04:13] Speaker 01:
So can I ask for clarification just to make sure that we're all talking about the same thing?

[00:04:17] Speaker 01:
So there's potentially a distinction between the standard review for the factual findings about the scientific studies and then the standard by which we assess whether given those factual findings,

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The The standard of misleadingness is met.

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And I just want to make sure I understand which one you're talking about because palm wonderful speaks directly to the former question.

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about the standard review for factual findings and deems the standard review to be substantial evidence.

[00:04:50] Speaker 01:
There's also some language in the opinion about the ultimate question of whether the speech is misleading, but I wanna make sure I understand which one of those two aspects of the inquiry you're directing your argument to.

[00:05:05] Speaker 04:
I think it's particularly appropriate, and I hammer on this point,

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That palm deals in the post publication context.

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This case like Pearson deals in the prior restraint P pre publication context.

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That's critically important on a substantive basis because the court in palm has evidence of marketing.

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They have actual evidence of the

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reception of the speech and conclusions from an expert agency as to its deceptiveness.

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There's a long line of cases dating back to the origins in the progressive era of the FTC that the FTC would be carved out and given this unique degree of deference in light of its role in policing the market and prosecuting post-publication.

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This is quite different.

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This is in a pristine scientific environment.

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There hasn't been any marketing.

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So the court is looking at, as did the agency.

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the speech in issue directly and the science supportive of it, as opposed to anything that would relate to deceptiveness from the market.

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And in order to apply Central Hudson, as the court did in Pearson, it of necessity must look at the science.

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So it's not only a matter that constitutional laws assess, but for the court not to abdicate its essential responsibility to say what the law is under the constitution, given the Central Hudson standard,

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it must have necessity look at the actual facts.

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And that's what Pearson did.

[00:06:40] Speaker 01:
Judge Castles, were you trying to ask a question?

[00:06:41] Speaker 05:
I think sometimes when... I mean, suppose we disagree with you that the distinction between prior restraint and subsequent punishment or advisory opinions matters on this one question.

[00:07:00] Speaker 05:
We still have, and I was focused on

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the fact part of what the chief judge was talking about.

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We still have this decision, which seems to say that the factual assessment of whether or not particular speech is misleading just gets substantial evidence review and

[00:07:34] Speaker 05:
Seems a lot like what we have here.

[00:07:38] Speaker 04:
Well, in this situation, you end up with a horrible conundrum and that is that an agency that has a long history of censoring speech.

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including in cores directly on point by the Supreme Court, it would be in a conflictive situation because of course its prosecutorial interest is in defending itself and its judicial interest then merges with that.

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And in this case, note the facts create a crack in the government's case.

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If we take a look at J.A.

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1092 to 96, there the agency itself admits, even despite its bias against the claim, that the evidence was mixed.

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It says mixed is unfortunate because their term mixed doesn't mean any evidence against the claim.

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There is none.

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for NTX and protecting DNA from alcohol-induced damage with one study, Panda, representing 50 subjects showing a significant reduction in certain measures of DNA damage at some time points after administration of NTX.

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So the point is, this is not a situation where there is no evidence and the government even admits it in its own findings.

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That leads us then to necessarily a fulsome application

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of the central Hudson standard.

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I have six minutes.

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I might, with your indulgence, take a bit of a deviation to cover a matter of fact that I think is troubling in the government's brief.

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And I want to be sure that the court has an adequate appreciation of the significance.

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The government takes the position that the formula here was not defined.

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In fact, there are only two bases for the government's calling into question science.

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One, that the formula is undefined, and secondarily, that somehow the claim implies brain and liver treatment.

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With regard to the argument about the indeterminacy of the formula, if you look in the record, if you see JA-903-13, JA-752-7,

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On July 30, 2014, TTB was informed at a pre-petition meeting with Bellian that two studies that presented one human clinical and one animal used the Bellian vodka with NTX formula.

[00:09:59] Speaker 04:
Then if you look at the Pandit study itself, which was submitted with the original petition,

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before the TTB, it states that the study used NTX in the, quote, patented proportion, unquote, JA 932.

[00:10:13] Speaker 04:
Then if you look at additionally, TTB had evidence of the formula in the petition, JA 500, Petition 1, or Exhibit 1, the Stowe's Report, where it explains there expressly what the NTX patent

[00:10:27] Speaker 04:
That is what the formula is and gives the range of 0.5 to 3.0% for mannitol, 0.05 to 3.3% for glycyriazin in the liquid that was used.

[00:10:42] Speaker 04:
And TTB acknowledged that the NTX patent ranges were, that is that the patent was used in the denial letter at page 33, J1087.

[00:10:53] Speaker 04:
So that's to that point.

[00:10:58] Speaker 01:
Can I ask one question about this, kind of the overall context of what we're dealing with here.

[00:11:02] Speaker 01:
And I'm going to ask the government about this too.

[00:11:05] Speaker 01:
But this relates in some measure to your prior restraint argument, but it also relates to the central Hudson point, which is, as I understand procedurally what happened here, you asked for a letter ruling under 27 CFR 70.471 and you get a response from the agency.

[00:11:23] Speaker 01:
Does that response from the agency have any legal consequences for you?

[00:11:29] Speaker 01:
because it's not an enforcement action that, it's not an order that requires you to cease and desist from any conduct.

[00:11:36] Speaker 01:
It's not the labeling regime whereby you can't go forward without pre-approval because you didn't pursue that route.

[00:11:43] Speaker 01:
So what we're talking about is in the nature of an advisory letter that tells you the agency's views, but it's not apparent to me what the actual legal consequences of the ruling that you got from the agency.

[00:11:56] Speaker 04:
The agency has no set method for petitioning for a health claim.

[00:12:03] Speaker 04:
They don't have a means, even their COLA process online does not include an ability to accept the volume of science that supports a complex relationship such as this, the bite level doesn't allow it to be.

[00:12:15] Speaker 01:
No, I think I might be asking something a little different.

[00:12:17] Speaker 01:
So at least with the labeling, we know

[00:12:19] Speaker 01:
that the regulations require you to obtain pre-approval for labeling.

[00:12:24] Speaker 01:
And if you just proceed ahead and include something in your label without getting the pre-approval, well, that in itself is a violation, and the agency can take action against you because you didn't get the pre-approval.

[00:12:35] Speaker 01:
If we don't talk specifically about labeling, though, because this case isn't about the COLA process, at least not directly, this case is about this letter ruling process under the Reg 70.471, on that,

[00:12:50] Speaker 01:
What's the legal consequence of the 47 page determination you got from the agency?

[00:12:56] Speaker 01:
What is it?

[00:12:57] Speaker 04:
Actually, the consequence, if you read the TTB's actual order, it accepted as it told us to, to accept the COLA and the petition for the health claims are conjoined in that.

[00:13:15] Speaker 04:
For example, it says in the order, TTB views your petition

[00:13:20] Speaker 04:
As a request that TTB issue a ruling on whether use of the labeling and advertising statements set forth in the petition would violate TTB regulations.

[00:13:31] Speaker 01:
I know that that's true.

[00:13:32] Speaker 01:
And we can ask the government about this, but I don't read that to mean that if you went forward.

[00:13:38] Speaker 01:
With the label, let's say that the problem would be something about this particular ruling as opposed to just the general overarching Mandate that the agencies impose that you can't issue a label without pre approval.

[00:13:50] Speaker 01:
That's going to be a problem, no matter what.

[00:13:52] Speaker 01:
But with respect to advertisements, for example.

[00:13:54] Speaker 01:
What's the consequence of this?

[00:13:56] Speaker 01:
Because as I understand it, you don't need pre-approval to do an advertisement.

[00:14:00] Speaker 01:
You have a letter from the agency that tells you what they think about it.

[00:14:02] Speaker 01:
But if you just went forward and did advertisements, it's not apparent to me that this letter puts you in any worse a position than you would have been otherwise.

[00:14:10] Speaker 04:
Well, the statute would prohibit us from engaging in advertising that the agency prohibits for labeling.

[00:14:18] Speaker 04:
And it's very clear from the enforcement history of this agency and from what they have told us directly.

[00:14:25] Speaker 04:
that were we to proceed with the content that we're talking about here, it would be deemed a violation of their regulations and also they could invoke the criminal provisions of the act and prosecute us.

[00:14:39] Speaker 04:
It is simply not the case that they either interpreted this to be separate and to afford us an opportunity to advertise.

[00:14:47] Speaker 04:
They viewed both together in their order and they prohibited both together in their order.

[00:14:53] Speaker 04:
And we couldn't proceed in any event because of the decision, because it makes clear that were we to do so, we would be advertising content that was prohibited in the labeling context, even were we to view that as a limited context for labeling because of the criminal provisions of the act.

[00:15:18] Speaker 03:
Mr. Seymour, if I take you back for a moment to your use of the word conjoined.

[00:15:23] Speaker 03:
As I understand it here, you had filed your petition on April 13th in 2016.

[00:15:32] Speaker 03:
A few days later, Franklin, which you have a relationship, filed the COLA applications, correct?

[00:15:42] Speaker 04:
Yes, your honor.

[00:15:42] Speaker 03:
The agency treated those, I mean, you were complaining in a sense that there was no way to, at least in your brief, there was no way to submit the studies

[00:15:53] Speaker 03:
in conjunction with the petition, but you found what seems like a perfectly sensible way to do that.

[00:16:00] Speaker 03:
And the agency accepted and treated that as being your submission and support of the petition, correct?

[00:16:07] Speaker 04:
Yes, Your Honor.

[00:16:08] Speaker 03:
So is there any prejudice to you at all from the way in which this was handled?

[00:16:12] Speaker 04:
Yes, it's indicative of the reason why the extra record evidence should be included, which is that they have a superficial health claim process.

[00:16:25] Speaker 04:
That even suggests bias.

[00:16:27] Speaker 04:
They don't have in place a mechanism for receipt of a petition to review the health claims that makes any sense at all.

[00:16:35] Speaker 04:
You have the COLA system that you're required to use, and we did, and Franklin, our agent, used it and cross-referenced

[00:16:42] Speaker 04:
the petition.

[00:16:43] Speaker 04:
Likewise in the petition, we cross-referenced the COLA.

[00:16:46] Speaker 04:
But to get the actual studies before the agency, it wouldn't fit within their online COLA.

[00:16:53] Speaker 04:
And so we had to submit it through a separate means in conjunction with the agency.

[00:16:58] Speaker 03:
I just recounted that.

[00:16:59] Speaker 03:
And what's wrong with that?

[00:17:00] Speaker 03:
You got it before the agency.

[00:17:01] Speaker 03:
They accepted it as you intended to be in support of your petition.

[00:17:06] Speaker 04:
Yes, Your Honor.

[00:17:07] Speaker 04:
Thank you.

[00:17:08] Speaker 03:
So I don't see what you're complaining about in that respect.

[00:17:11] Speaker 04:
I agree, I agree.

[00:17:13] Speaker 04:
They dealt with this in a fulsome manner and we ought not have our First Amendment rights violated because this agency hasn't got its act together to tell you the truth.

[00:17:26] Speaker 05:
Can I ask you about the disclaimer process?

[00:17:33] Speaker 05:
So Pearson clearly requires

[00:17:41] Speaker 05:
the agency to accommodate speech at least in some circumstances with disclaimers.

[00:17:47] Speaker 05:
The disclaimer can make the speech non misleading.

[00:17:50] Speaker 05:
They have to accommodate rather than suppress.

[00:17:55] Speaker 05:
So how does that apply in the circumstance we have here where my understanding of what happens is the following, your client

[00:18:10] Speaker 05:
sought a declaratory ruling about a set of statements.

[00:18:16] Speaker 05:
Some of them were what they wanted to say, which was that this ingredient reduces DNA damage.

[00:18:24] Speaker 05:
And then they recommended a disclaimer, which talked about health risks of consuming alcohol.

[00:18:32] Speaker 05:
And then the agency's response is, that's not good enough.

[00:18:38] Speaker 05:
because the disclaimer doesn't address two concerns that we have.

[00:18:43] Speaker 05:
One is the degree of support for the studies and two is what they think is an implied claim about brain and liver damage.

[00:18:52] Speaker 05:
So what happens at that point?

[00:18:57] Speaker 05:
Is it your, can you be made to bear a burden to

[00:19:03] Speaker 05:
propose a new disclaimer in light of the agency's concerns, or is it their burden to anticipate every possible disclaimer that might work and compose it from scratch for you?

[00:19:21] Speaker 04:
They have the burden of proof under the First Amendment.

[00:19:25] Speaker 04:
They also have the unique knowledge of what their interest is.

[00:19:30] Speaker 04:
Here, the court violated Central Hudson by giving the agency an interest that didn't articulate, and that was consumer fraud.

[00:19:39] Speaker 04:
The agency's articulated interest was to reduce the consumption of alcohol, or in other words, it was a health interest.

[00:19:48] Speaker 04:
The question as to the disclaimer has arisen numerous times following Pearson and has been dealt with in this manner.

[00:19:56] Speaker 04:
The party that is the petitioner will suggest a disclaimer.

[00:20:00] Speaker 04:
And then as we did indicate we would accept any reasonable disclaimer, the agency wish to insert because the agency has defined defines its own interest.

[00:20:11] Speaker 04:
It necessarily, as a practical matter, is the agency's obligation consistent with the First Amendment burden to define a qualification and then to ascertain whether or not it is reasonable by determining the extent to which empirical evidence supports it.

[00:20:29] Speaker 04:
So for example, this agency has a history and Coors reveals it, 44 Liquor Mart reveals it on the state level too from its sister state agencies of engaging in speculation and conjecture in lieu of empirical data.

[00:20:45] Speaker 04:
So if the agency were to say, oh, as it has here, without any proof whatsoever that this information on the label would cause consumers to consume more alcohol,

[00:20:57] Speaker 04:
Well, it would necessarily have to have empirical evidence to support that, or at least some tangible evidence to show that that indeed happens.

[00:21:06] Speaker 04:
And that's what they don't have.

[00:21:07] Speaker 04:
They just dismissively dealt with the disclaimer requirement.

[00:21:11] Speaker 04:
They didn't honor the requirement under Pearson or any of the Supreme Court's cases from Henry RMJ all the way through Ibanez, did not deal with it fairly at all.

[00:21:22] Speaker 01:
Thank you.

[00:21:23] Speaker 01:
Let me make sure if my colleagues have any further questions.

[00:21:26] Speaker 01:
Oh, please.

[00:21:27] Speaker 03:
Thank you, Richard.

[00:21:29] Speaker 03:
Mr. Emart, I think you said the district court gave Chevron deference to the agency here.

[00:21:40] Speaker 04:
Yes.

[00:21:40] Speaker 03:
And Chevron doesn't appear in the district court opinion.

[00:21:43] Speaker 03:
What are you referring to?

[00:21:45] Speaker 04:
Well, the agents or the court in its substantive treatment gave broad deference to the agency's findings.

[00:21:52] Speaker 04:
In fact, it wouldn't allow.

[00:21:54] Speaker 03:
So did the agency say it's during that or is that your your reading of it?

[00:21:59] Speaker 04:
That's my reading of the decision.

[00:22:01] Speaker 03:
Second, you said there was no evidence against the client, correct?

[00:22:05] Speaker 04:
Correct.

[00:22:06] Speaker 03:
Nobel study found no effect on DNA.

[00:22:09] Speaker 03:
Why isn't that evidence?

[00:22:10] Speaker 04:
That's actually erroneous.

[00:22:12] Speaker 04:
And I want to point out something.

[00:22:14] Speaker 04:
that supports why they breached that erroneous decision in their correspondence, that is FDA's correspondence with TTB.

[00:22:21] Speaker 04:
They make this remarkable admission, and I quote it, we do not have expertise in this DNA technology or assay evaluation, unquote, JA 1134.

[00:22:34] Speaker 04:
They missed it on the Nobel study.

[00:22:35] Speaker 04:
The Nobel study actually did have a statistically significant positive result in this respect.

[00:22:42] Speaker 04:
The Nobel study was falsely represented as null, as Your Honor points out, but it used only the Comet assay as opposed to the other one.

[00:22:50] Speaker 04:
But nonetheless, it revealed a statistically significant protection of tail DNA at the two-hour interval, thus adding support for the claim as opposed to being a null event or certainly not being against the claim.

[00:23:08] Speaker 03:
Thank you.

[00:23:09] Speaker 01:
Thank you, Mr. Emore.

[00:23:10] Speaker 01:
Unless my colleagues have further questions, we'll give the government its time, and we'll hear from you on rebuttal.

[00:23:15] Speaker 04:
Thank you, Your Honor.

[00:23:18] Speaker 01:
Mr. Overwald.

[00:23:19] Speaker 02:
Morning.

[00:23:20] Speaker 02:
Life Overwald on behalf of the United States.

[00:23:23] Speaker 02:
I'd like to start just with your judgment on your question about the legal consequences of the ruling.

[00:23:31] Speaker 02:
We didn't make sort of a final agency action argument here.

[00:23:35] Speaker 02:
I'm not aware that there is a particular consequence of the denial of the ruling.

[00:23:42] Speaker 02:
The standard remains under the statute that misleading advertising would be barred and under the regs, that misleading and for specific health claims, claims that are not adequately substantiated.

[00:23:55] Speaker 02:
That would remain the standard.

[00:23:56] Speaker 02:
They were not required for the advertising claims in particular to go through this process.

[00:24:03] Speaker 01:
Right.

[00:24:03] Speaker 01:
So if they were required to go through it in the first place, and unless you tell me that if they issued an ad, there's some added consequence, some added penalty they could ensue by virtue of the fact that the agency issued this letter, then it's not clear to me why it is final agency action, because I don't know what the legal consequence is of the ruling.

[00:24:22] Speaker 01:
And just putting to the side the effect, if any, on the COLA, because I understand that there's an argument

[00:24:28] Speaker 01:
that that's been wrapped into this.

[00:24:29] Speaker 01:
I'm not sure about that, but I understand that the arguments there.

[00:24:31] Speaker 01:
But if we just put that to one side for a second and just isolate this question about the letter really vis-a-vis advertisements, it's not apparent to me at all why it is final agency action.

[00:24:42] Speaker 02:
I'm not aware of the consequences, but we did not make a final agency action argument.

[00:24:46] Speaker 02:
So we'd be happy to provide additional information.

[00:24:50] Speaker 01:
So let me ask you one other appendage to this, and it may require additional information, but just for purposes of arguments, as we have you here, even if you didn't make a final agency action argument and final agency action is non-jurisdictional and therefore can be forfeited, let's just assume that, some of our decisions wrap final agency action into rightness and make it an ingredient of the rightness inquiry and indicate that dispute can't be right if there's a final agency action problem.

[00:25:20] Speaker 01:
If that's true, then do you have a position on whether the dispute is ripe?

[00:25:25] Speaker 02:
I do not have a position right now.

[00:25:29] Speaker 02:
We do have here a TTP decision that considered the particular claims they were seeking to make and concluded that they could not be made consistent with the regulations and the statute.

[00:25:39] Speaker 02:
But I don't have a position on rightness.

[00:25:43] Speaker 01:
Okay, then can I ask you about just the piece that we put to one side for the moment, which is the cola piece.

[00:25:49] Speaker 01:
So it's true that the request

[00:25:52] Speaker 01:
asked for pre-approval for the labels.

[00:25:54] Speaker 01:
And it's also true that the ruling, at least in a couple of sentences, kind of wraps that in, both in the preview and in the conclusion.

[00:26:02] Speaker 01:
But I didn't read that to be a COLA determination.

[00:26:05] Speaker 01:
I just read it to be responding to what the letter asked the agency to do.

[00:26:10] Speaker 01:
And the COLA determination was sought by the other entity.

[00:26:13] Speaker 01:
I get that.

[00:26:14] Speaker 01:
But that entity is not before us.

[00:26:16] Speaker 01:
And so as I understand the procedural context,

[00:26:19] Speaker 01:
The COLA question, the COLA action isn't directly in this case.

[00:26:25] Speaker 01:
This is a letter ruling under the regulation 70.471.

[00:26:30] Speaker 01:
And that's how we should treat it.

[00:26:33] Speaker 01:
Is that consistent with the government's view?

[00:26:35] Speaker 02:
That is the case that separate coal application profiled by the separate entity that would actually bottle a lot of product.

[00:26:41] Speaker 02:
They are the ones who are who do have to file the coal application that is a separate, separate action that they filed.

[00:26:49] Speaker 01:
Then if all that's true, then am I right and understanding this.

[00:26:52] Speaker 01:
It's, it's a detailed 47 page determination.

[00:26:55] Speaker 01:
That's for sure.

[00:26:56] Speaker 01:
But am I right and understanding at the end of the day that it's essentially an advisory

[00:27:01] Speaker 01:
sort of an a priori advisory treatment, but it doesn't carry a legal consequence.

[00:27:07] Speaker 01:
It doesn't allow for an addition of a penalty if actions taken in contravention of it.

[00:27:12] Speaker 01:
It's the agency sort of giving its views on where it would likely end up if it were, say, to undertake an enforcement action.

[00:27:21] Speaker 02:
I'm not aware of a legal consequence, an additional legal consequence that would follow just with the caveat that we did not make a final agency action argument.

[00:27:29] Speaker 01:
Okay, thanks.

[00:27:31] Speaker 05:
The sort of merits of the go to standard of review for a second.

[00:27:38] Speaker 02:
Yes, your honor.

[00:27:38] Speaker 05:
Those Suppose we didn't have on wonderful for now.

[00:27:44] Speaker 05:
We just had peel.

[00:27:46] Speaker 05:
How would you distinguish that case.

[00:27:50] Speaker 02:
Sure.

[00:27:51] Speaker 02:
Appeal involved a sort of forward-looking general regulation, not what we have here, an agency's consideration of the particular claims sought to be made, a determination they were misleading, and this sort of impressionistic judgment akin to a factual judgment.

[00:28:08] Speaker 05:
Appeal traces back to, I'm sorry, palm traces back to a pre-Teal case

[00:28:16] Speaker 05:
in which we said Bose was just about defamation, right?

[00:28:23] Speaker 05:
And in Peel, Supreme Court says whether the inherent character of a statement places it beyond the protection of the First Amendment is a question of law over which we, the Supreme Court,

[00:28:38] Speaker 05:
should exercise de novo review, there's a CF site to Bose, and then there is an application of that principle to a question about whether the speech at issue was proscribable because it was misleading.

[00:28:58] Speaker 02:
In the 1985 case, Your Honor?

[00:29:00] Speaker 05:
In Peel.

[00:29:03] Speaker 02:
In Peel.

[00:29:05] Speaker 05:
It is true that the initial decision in this area after a Bose-Kohr distribution on that basis, there have been POM Wonderful other decisions from this court, a decision from- POM Wonderful cites back to a footnote in Novartis, which is post-peel, which simply cites back to the pre-peel decision, which says that Bose is just about defamation.

[00:29:34] Speaker 05:
We do have two post-peel cases which help you, but neither of them seem to have caught the point that the Supreme Court expressly extended Bose beyond defamation.

[00:29:50] Speaker 02:
It did extend it beyond defamation.

[00:29:52] Speaker 02:
One wonderful also cites favorably the Seventh Circuit's decision in Kraft, which does address the particular argument

[00:30:02] Speaker 02:
as to Peel, that because Peel involved not this sort of consideration of particular claims on the basis of an agency record and the agency's application of its expertise to conclude they're misleading, that remains a different context and we would not want to extend the

[00:30:23] Speaker 02:
the standard in the distinct PEO context to misleading advertising as viewed by the FTC in POM Wonderful and that line of cases, or in this case, a similar judgment made by the TTB.

[00:30:38] Speaker 02:
Again, that particular advertising, particular claims are misleading on the basis of the substantiation provided.

[00:30:47] Speaker 02:
And the Sixth Circuit has also considered this question, again, post appeal and adopted the same standard for the reasons given by the DC Circuit and the Seventh Circuit.

[00:30:59] Speaker 02:
Just on the merits of the ruling, this case involves Belliams' efforts to make claims that it's vodka product,

[00:31:07] Speaker 02:
is safer than other vodka products, the health risks associated with the consumption of alcohol.

[00:31:12] Speaker 02:
But those claims cannot be substantiated on the basis of the evidence in the record.

[00:31:17] Speaker 02:
There's clearly substantial evidence for the TTB's decision on the basis of the record.

[00:31:23] Speaker 02:
And for the two human clinical trials that were provided, none of them provide credible evidence for the DNA claims for three separate reasons.

[00:31:36] Speaker 02:
The first reason is that none of the studies include the dosage information that TTB reasonably considered would be necessary to evaluate their significance as evidence in support of the claims.

[00:31:51] Speaker 05:
Before we get into the weeds on the studies and how the law applies to this submission, can I just ask you what does

[00:32:03] Speaker 05:
The governing rule under the regs is adequately substantiated.

[00:32:08] Speaker 05:
What does that mean?

[00:32:11] Speaker 02:
It is adequately substantiated by scientific or medical evidence.

[00:32:16] Speaker 05:
Conclusively proven, proven by clear and convincing evidence, proven by a preponderance?

[00:32:25] Speaker 02:
As this decision reflects, it requires at least credible evidence of the type that

[00:32:33] Speaker 02:
in the scientific or medical context that you would look for.

[00:32:35] Speaker 02:
And we don't even have credible evidence here.

[00:32:38] Speaker 02:
So certainly as applied to the claims presented here, it requires more than that.

[00:32:44] Speaker 02:
It is a flexible standard that looks to the sort of evidence required to substantiate the claim to make them not misleading.

[00:32:53] Speaker 02:
This is again an area where as, as craft recognized judgments that a particular claim is misleading.

[00:33:01] Speaker 02:
That is an impressionistic judgments.

[00:33:04] Speaker 02:
The regulations provide additional clarity as to what sort of substantiation you need to make it not misleading.

[00:33:11] Speaker 02:
And the agency appropriately sort of clarified the standard here.

[00:33:17] Speaker 02:
Sufficient to conclude that these claims were not substantial.

[00:33:20] Speaker 02:
It didn't have an occasion to go beyond that.

[00:33:22] Speaker 05:
So anything that doesn't, any claim that doesn't rise to, isn't supported by relatively high standard of credible evidence is prescribable?

[00:33:40] Speaker 02:
Certainly it needs at least credible evidence in support of that.

[00:33:43] Speaker 02:
The particular amount of evidence

[00:33:46] Speaker 02:
a particular claim needs to not be misleading does depend on the claim, depends on the entire factual context of the studies.

[00:33:54] Speaker 05:
Because that does seem to start to bump into Pearson, where we said on this specific problem of claims that have some degree of support, but not a conclusive degree of support,

[00:34:12] Speaker 05:
We said that that is a circumstance in which the agency has to accommodate by disclaimer.

[00:34:21] Speaker 05:
And the disclaimer you would expect is something that says whatever, the studies are not conclusive or something like that.

[00:34:31] Speaker 02:
Well, Pearson obviously didn't confront a situation where there was no credible evidence in support of the claims.

[00:34:36] Speaker 02:
There was a question about what degree of scientific agreement was significant in the APA context.

[00:34:47] Speaker 05:
And you said pretty categorically that the agency has to accommodate unless

[00:34:56] Speaker 05:
And then there's a formulation at the end, whatever, the degree of support, the degree of evidence contradicting the claim outweighs the evidence supporting the claims.

[00:35:07] Speaker 05:
I mean, don't hold me to the exact formulation, but the general idea is accommodate in most cases subject to just some outer bound limit.

[00:35:18] Speaker 02:
It said that, just to take a step back, it said that in the context of nutritional supplements where there was no claim there that they caused any health risks or harm to health, whereas here it's undisputed that alcohol does create risk.

[00:35:34] Speaker 02:
And the claims we have here are claims that it will reduce the risk that you would otherwise might incur from consuming alcohol, which I think does put it at least closer to this court's case, and I apologize, Your Honor.

[00:35:48] Speaker 05:
No, I'm sorry.

[00:35:49] Speaker 05:
I'm interrupting you.

[00:35:50] Speaker 05:
I apologize.

[00:35:51] Speaker 05:
But perfectly fair distinction, but why wouldn't we account for it by giving the agency more latitude with regard to the disclaimer?

[00:36:03] Speaker 05:
Rather than just watering down the legal standard, we would say, of course you can put in the disclaimer whatever information you want about the health risks of alcohol and make them say that

[00:36:17] Speaker 05:
their statement about DNA doesn't mitigate all of the following serious risks.

[00:36:24] Speaker 02:
But as this court recognized in NicoCure, we can at least be more skeptical of the value of disclaimers when it is sort of claimed that a product everyone agrees is harmful is relatively less harmful, that there is a basis for being more skeptical of the value of disclaimers there.

[00:36:41] Speaker 02:
And then again, this is not a case where the agency refused to consider disclaimers at all.

[00:36:46] Speaker 02:
The problem is the claims just cannot be substantiated based on the studies and it is,

[00:36:52] Speaker 02:
you know, that no reasonable disclaimer has been proposed that gets around that problem that the disclaimer essentially would have to contradict the health claim to adequately capture its unsubstantiated nature.

[00:37:04] Speaker 05:
Whose burden is it to propose the disclaimer?

[00:37:12] Speaker 02:
It's certainly, you know, the underlying

[00:37:15] Speaker 02:
standard under the fourth prong, central Hudson, is not the least restrictive alternative and not more burdensome than necessary.

[00:37:23] Speaker 02:
When the agency does consider the disclaimer proposed, there's no other reasonable disclaimer that they refuse to consider that anyone's identified.

[00:37:33] Speaker 02:
It's certainly not the agency's burden to set out in the decision any conceivable disclaimer.

[00:37:40] Speaker 05:
That idea has a lot of intuitive force to it.

[00:37:46] Speaker 05:
No doubt, I'll grant you that.

[00:37:48] Speaker 05:
But the sequence that happened was they proposed a disclaimer.

[00:37:56] Speaker 05:
You said it wasn't good enough because it

[00:37:59] Speaker 05:
neither addressed the degree of support for the express claim, nor what you thought was the implied claim.

[00:38:06] Speaker 05:
It would seem like that shouldn't be the end of the process of accommodation.

[00:38:14] Speaker 05:
If that's as far as the analysis goes, there's a pretty obvious open question of, well, what about a more robust disclaimer that says,

[00:38:25] Speaker 05:
Number one, the degree of support for this claim is less than conclusive.

[00:38:30] Speaker 05:
And number two, we're not saying anything about brain and liver damage.

[00:38:35] Speaker 02:
Well, the problem in this case is, if you look, it's not just inconclusive evidence in support of the claim.

[00:38:41] Speaker 02:
It's two studies that have no dosage information.

[00:38:43] Speaker 05:
Don't fight me on the facts for a second.

[00:38:48] Speaker 05:
I'm just sort of, who bears the burden of taking the next step

[00:38:54] Speaker 05:
when the parties are at this intermediate position where they, you've said their disclaimer isn't good enough for two specific reasons, and then what?

[00:39:08] Speaker 02:
In a case, I'm not trying to fight the hypothetical, but in a case where the problem identified with the statement itself is it is unsubstantiated by the evidence presented, the agency can reasonably conclude no,

[00:39:23] Speaker 02:
there is no reasonable disclaimer that would essentially have to counter.

[00:39:28] Speaker 05:
Just hypothetically that the problem here about degree of support were curable through a robust enough disclaimer.

[00:39:42] Speaker 05:
Whose burden would it be on these facts?

[00:39:46] Speaker 05:
draft that and figure out what words are going to be strong enough in light of these particular studies?

[00:39:54] Speaker 02:
If the agency ignored a reasonable disclaimer, that could be a basis for concluding that that aspect of the decision was unreasonable.

[00:40:03] Speaker 02:
In the absence of any sort of disclaimer presented or that is sort of generated in the course of considering it, we have not

[00:40:16] Speaker 05:
which means your position on this particular point just rises or falls on what I just asked you to put aside, which is the fact question about whether the support here is, there's some support, but it's inconclusive as opposed to just there's no support or the evidence against is stronger than the evidence in favor.

[00:40:40] Speaker 02:
I think in this case, the agency has justified its judgment that there is not sort of a less speech-restrictive alternative that would satisfy their public health and consumer fraud concerns.

[00:40:52] Speaker 02:
You could imagine a different case in which that answer could be different, but here, that judgment is well justified.

[00:41:00] Speaker 01:
I have one question on disclaimer, and then just one quick question on prior restraint.

[00:41:05] Speaker 01:
But on disclaimer, just to wrap up Judge Casas' line of questioning, in a circumstance in which you have a perceived problem to be that there's just not substantiation, and you use the word credible at some point, and let's just say that there's not credible evidence, what you read the agency to be saying in terms of a disclaimer in that context is there's no disclaimer that can address that.

[00:41:26] Speaker 01:
Because even if you tried to have a disclaimer that says,

[00:41:29] Speaker 01:
oh, you know, there may not be credible evidence, but just you, the consuming public, we want you to know that the evidence may not be credible.

[00:41:36] Speaker 01:
But here's what we're saying about it anyway.

[00:41:37] Speaker 01:
Your point is, well, that's just not a disclaimer that really does any constructive work.

[00:41:41] Speaker 01:
And so there's never an onus under the First Amendment to allow an entity to use that kind of disclaimer as a means for engaging in the speech.

[00:41:50] Speaker 02:
That's right.

[00:41:50] Speaker 02:
And I would just say that's particularly true with the sort of alcohol products, which is distinct from the nutritional supplements that Pearson considered.

[00:41:57] Speaker 01:
Got it.

[00:41:58] Speaker 01:
And can I ask you just one quick question about prior restraint.

[00:42:00] Speaker 01:
So on the prior restraint part of the case, you've made the point in your briefs that there could be a prior restraint problem under the COLA.

[00:42:09] Speaker 01:
There could be a prior restraint claim made under the COLA procedures, but those procedures weren't

[00:42:14] Speaker 01:
Pursued by belly on as opposed to the other entity, but by belly on.

[00:42:20] Speaker 01:
And so that's a an impediment to making a prior restraint argument.

[00:42:25] Speaker 01:
But I didn't see in your brief that you necessarily tethered it to some legal doctrine.

[00:42:29] Speaker 01:
And I'm just wondering, is that does that ultimately become a standing argument or is there something what what doctrinal footing comes from the intuitive point

[00:42:40] Speaker 01:
that in order to make a prior restraint claim you have to pursue the process that could beget a prior restraint.

[00:42:46] Speaker 02:
I don't understand them to be challenging the COLA process in their prior restraint argument.

[00:42:52] Speaker 02:
So it is just looking at what the arguments they are raising.

[00:42:55] Speaker 02:
They are not challenging the COLA process as a prior restraint.

[00:42:59] Speaker 02:
And that makes sense because they did not, in fact, go through the COLA process.

[00:43:04] Speaker 02:
To the extent they are raising additional challenges about a procedure that is not governed in a situation in which preapproval is required,

[00:43:12] Speaker 02:
you know, the prior restraint argument does not work there because it is not actually a system in which pre-approval is required.

[00:43:18] Speaker 01:
So there's no restraint in other words.

[00:43:19] Speaker 01:
So in other words, on the part of the case that you think is before us, which is that, you know, it's that what we got, what we started off with, which is the kind of advisory letter ruling that that's not a restraint at all.

[00:43:29] Speaker 01:
And therefore it can't be a prior restraint.

[00:43:31] Speaker 02:
Yes.

[00:43:31] Speaker 02:
They did not use the one procedure that imposes any sort of pre-approval requirements.

[00:43:35] Speaker 02:
So there's no challenge to that.

[00:43:36] Speaker 02:
And the system they actually use does not impose a pre-approval.

[00:43:41] Speaker 02:
So there's no prior restraint challenge there.

[00:43:44] Speaker 01:
Okay.

[00:43:44] Speaker 01:
Thank you.

[00:43:45] Speaker 01:
Let me make sure that neither Judge Ginsburg nor Judge Katz assess for the questions.

[00:43:49] Speaker 01:
Oh, thank you.

[00:43:50] Speaker 01:
Okay.

[00:43:50] Speaker 01:
Thank you, Mr. Overvolt.

[00:43:52] Speaker 01:
Mr. Emore, we'll give you some rebuttal time.

[00:43:53] Speaker 01:
We'll give you three minutes.

[00:43:55] Speaker 04:
Thank you, Your Honor.

[00:43:58] Speaker 04:
It is, I think, false fundamentally, both on the facts and the law that we're not challenging the prior restraint in the COLA process.

[00:44:06] Speaker 04:
Frank Lynn is the agent of Bellion.

[00:44:10] Speaker 04:
Let's understand the relationships here.

[00:44:13] Speaker 04:
Franklin is the bottler, Bellion is the brand owner, and Chigarapati Technologies is the owner of the NTX ingredient.

[00:44:25] Speaker 04:
All of them are inextricably intertwined as was the petition with the COLA and the COLA with the petition.

[00:44:34] Speaker 04:
They cross-reference one another.

[00:44:37] Speaker 04:
It is only because they do not, the TTV lacks a process for this health claim petition in the COLA that we had to resort to the petition process.

[00:44:50] Speaker 04:
But their order addresses both.

[00:44:54] Speaker 04:
and it is this entire action of the agency which we are addressing in our pleading.

[00:45:01] Speaker 04:
It adversely affects us.

[00:45:03] Speaker 04:
It is present.

[00:45:05] Speaker 04:
There are criminal provisions that the agency has available.

[00:45:10] Speaker 04:
For example, the TTB regulations, if they were violated as to the COLA,

[00:45:15] Speaker 04:
the TTP regulations both as to labeling and advertising defines any advertisement not in compliance with TTP regulations as criminal, subject to fines and other sanctions under 27 USC sections 204E, 205F, and 207.

[00:45:34] Speaker 04:
In addition, as the lawyer who argued the Pearson case, I'm well aware of the argument made by the government in that case, apparent from the pleadings

[00:45:46] Speaker 04:
They did argue that the supplements would be harmful to people.

[00:45:51] Speaker 04:
In particular, on the folic acid supplement, they said that it would mask a vitamin B12 deficiency.

[00:45:58] Speaker 04:
It was the case that they argued that the use of the claims there an issue did pose a public health threat.

[00:46:06] Speaker 04:
And furthermore, as I pointed out before, Coors does not give an exemption on alcohol from the rigors of the central Hudson test.

[00:46:15] Speaker 04:
In addition,

[00:46:16] Speaker 04:
Erection of the anti-competitive regime here, which if the court were to decide it on a procedural basis creates a capable of repetition but evading review problem, is substantial because it creates a de facto anti-competitive regime.

[00:46:33] Speaker 04:
It prevents in perpetuity parties like this one from introducing into the marketplace an innovation that reduces the level of harm associated with alcohol.

[00:46:44] Speaker 04:
And so it locks this system into an archaic, Byzantine, ancient alcohol formulation that is always going to be harmful.

[00:46:54] Speaker 04:
The irony here is that this agency that says its interest is public health is acting in a way to ensure that the public health is harmed by not allowing the evidence.

[00:47:04] Speaker 04:
One last thing, Your Honor.

[00:47:06] Speaker 04:
There are 112 studies submitted in support of the claims.

[00:47:11] Speaker 04:
The FDA's process excluded 106 of those studies, all animal studies and all in vitro studies.

[00:47:20] Speaker 04:
The animal studies, the in vitro studies, all of the evidence and the human trials were considered by the experts that we hired.

[00:47:28] Speaker 04:
and they found them all to be consistently supportive of the claims, but the expert reports were also excluded by the FDA.

[00:47:36] Speaker 04:
So they have a truncated universe of evidence that they looked at, and that is a bias that ensures their foregone conclusion.

[00:47:44] Speaker 04:
It's not the case that there was no credible evidence, there was substantial evidence in support of this DNA protection and DNA risk reduction set of claims.

[00:47:58] Speaker 04:
Okay.

[00:47:59] Speaker 03:
Three more.

[00:48:01] Speaker 03:
Let me just take you back for a couple of sentences back onto your prior restraint argument.

[00:48:08] Speaker 03:
As I recall, the two important elements of that were whether the standard was too vague, adequate to support, and that there was no time limitation on the agency.

[00:48:24] Speaker 03:
Is that correct?

[00:48:26] Speaker 03:
Yes, your honor.

[00:48:29] Speaker 03:
I want to make sure I understand what's happening here on the time.

[00:48:35] Speaker 03:
Because as I think everyone agrees, the agency handled the COLA materials as supportive of the petition and treated them through through the process as being intertwined.

[00:48:51] Speaker 03:
And so the

[00:48:54] Speaker 03:
The COLA petition, the COLA was filed on April 18th and 90 days later, pardon me, 180 days, the additional evidence was supplied by, I guess by Franklin, I'm not sure by whom, but relevant to the COLA.

[00:49:20] Speaker 03:
the agency ultimately having extended itself to 180 days first, then receiving the additional evidence takes another 183 days.

[00:49:31] Speaker 03:
It gave you a deadline by which it would report of April 30th, I believe.

[00:49:38] Speaker 03:
And anyway, it reported on May, that would have been the last day and it reported on May 3rd.

[00:49:44] Speaker 03:
So there seems to have been a timeline throughout with a deadline that was reset only when you

[00:49:50] Speaker 03:
submitted additional information.

[00:49:53] Speaker 03:
Seems perfectly reasonable, I'm sure.

[00:49:55] Speaker 03:
And then they missed it by three days.

[00:49:58] Speaker 03:
So what happens to the argument that there's no time limitation?

[00:50:03] Speaker 04:
Well, they have a time limit associated with the COLA review, and they have no time limit associated with the health claim review.

[00:50:11] Speaker 03:
We've agreed that these two trains are moving along the track together.

[00:50:15] Speaker 04:
Yes, and as a consequence, the regulated class has not noticed

[00:50:20] Speaker 04:
as to what amount of time the agency will require for health claim petitions.

[00:50:25] Speaker 04:
It could have extended its own time limit indefinitely.

[00:50:28] Speaker 03:
And with regard to the adequate- Wait a minute, how is that possible?

[00:50:32] Speaker 03:
It gives itself 90 days extendable for another 90, not indefinitely.

[00:50:38] Speaker 03:
And then it started over when you supplied new information, which could hardly have been surprising.

[00:50:44] Speaker 03:
And again, limited itself to 90 and 90.

[00:50:47] Speaker 04:
The point I think that we're making,

[00:50:50] Speaker 04:
it's intertwined with the adequate substantiation argument too, is that there is no definition that they have given the regulated class as to the time period they would take for the assessment of a health claim petition.

[00:51:06] Speaker 04:
And as a result, there is no reliability.

[00:51:10] Speaker 04:
There's no predictability.

[00:51:11] Speaker 03:
They could have just- It's an IDJ and an IDJ extension.

[00:51:14] Speaker 03:
Do they appear in regulations?

[00:51:17] Speaker 04:
Pardon me?

[00:51:17] Speaker 03:
Do the 90 days and the extended 90 days appear in the regulations?

[00:51:22] Speaker 04:
Regulations define the COLA time period, but they have no time period defined for the assessment of a health claim petition.

[00:51:31] Speaker 03:
I understand that.

[00:51:32] Speaker 03:
And we also agreed that they're moving along together.

[00:51:34] Speaker 03:
So I don't know why you keep reiterating that.

[00:51:36] Speaker 04:
Well, I appreciate that point, Your Honor.

[00:51:40] Speaker 04:
If I may, speaking to the adequately substantiated lack of definition.

[00:51:48] Speaker 01:
Well, let me just, I think we have your submission on that.

[00:51:51] Speaker 01:
I just wanna make sure that my colleagues don't have further questions for you in your rebuttal time.

[00:51:57] Speaker 01:
No.

[00:51:57] Speaker 01:
Okay, I think we have your argument, Mr. Emore.

[00:52:01] Speaker 01:
Council, we appreciate both of your submissions today.

[00:52:03] Speaker 01:
The case is submitted.

[00:52:05] Speaker 04:
Thank you, your honor.