[00:00:00] Speaker 00: Phase number 25-1074, DNA Business Investments LLC, doing business as THC Smokes Petitioner, Persistence United State Food and Drug Administration. [00:00:12] Speaker 00: Mr. Nabar for the petitioner, Mr. Peters for the respondent. [00:00:16] Speaker 06: Good morning, Your Honors. [00:00:17] Speaker 06: Jared Nabar for the petitioner DNA Business Investments. [00:00:23] Speaker 06: So after Jarxy, it's clear that the FDA cannot adjudicate the civil money penalties and its administrative system under the Tobacco Control Act statutes regarding tobacco product violations. [00:00:40] Speaker 06: And I think the most important point to this argument is [00:00:43] Speaker 06: The Jarxy decisions references to earlier decisions reflecting that the most important consideration here is the remedy in determining not only whether the Seventh Amendment applies in the first instance, which FDA has conceded, but also I think it controls the entire outcome of this case on the Seventh Amendment claim. [00:01:06] Speaker 04: You're raising some really important questions about the public rights doctrine, [00:01:13] Speaker 04: the interplay between Jarkusy and Atlas Rue thing. [00:01:19] Speaker 04: The Blueberry doesn't address any of this. [00:01:24] Speaker 04: You don't cite Jarkusy, you don't cite Atlas, you don't cite the public rights doctrine. [00:01:30] Speaker 04: You just apply the first half of a two-part test, which is the easy part for you. [00:01:40] Speaker 04: How can we [00:01:42] Speaker 04: do something very substantial on your request when you haven't given us anything to work with. [00:01:51] Speaker 06: Well, Your Honor, my reading of Jarxy is that Jarxy very clearly said that [00:01:56] Speaker 06: that the public rights doctrine is an exception. [00:02:00] Speaker 06: It's a narrow extra textual exception to this Seventh Amendment guarantee of a jury trial right for legal legal claims. [00:02:09] Speaker 06: And so it was the FDA's duty to raise that objection if they're going to assert it, if they're going to rely upon it. [00:02:15] Speaker 06: And we did, in fact, address the issue that I think decides this whole issue. [00:02:21] Speaker 04: Again, not only the issue of... The analysis is clearly under Jarkusy, under Tull, and Grenfranciera before it has two parts. [00:02:36] Speaker 04: One, they say, is the Seventh Amendment implicated? [00:02:39] Speaker 04: And number two, does the public rights doctrine [00:02:45] Speaker 04: allow Congress to assign an otherwise legal claim to an agency, right? [00:02:52] Speaker 04: And you do cite jarkacy, but only on this first point, this tall point about the remedy is punitive and therefore the Seventh Amendment is implicated. [00:03:09] Speaker 06: Well, I guess just let me I'll I'll move on beyond my first point in response, your honor but but again, the first point is and the FDA hasn't disputed this. [00:03:17] Speaker 06: My reading of JARC is that because this is a very narrow exception to this presumptively applicable doctrine, that's what JARC says. [00:03:24] Speaker 06: It's presumptively the right to a jury trial in this context. [00:03:29] Speaker 06: Um it was the if the FDA wants to make an argument that there's this narrow exception that applies, then that's their duty and they [00:03:38] Speaker 06: disputed my view of that issue in their briefing. [00:03:41] Speaker 03: I think they have in their briefing. [00:03:43] Speaker 03: They've talked about, I mean, even where the Seventh Amendment would apply were the case filed in federal court, if it's a public right, [00:03:54] Speaker 03: So you only go so far as part of the Seventh Amendment analysis. [00:03:58] Speaker 03: You don't address the public rights question. [00:04:01] Speaker 03: And I suppose you think that works because if you think that everything subject to the Seventh Amendment is not a public right, but they've taken the position, and I think that's the better reading of Jarkozy, that there is a category [00:04:17] Speaker 03: of public rights that might, were they filed in federal court, be entitled under the Seventh Amendment to a jury trial, but that may nonetheless be assigned without a jury to initial adjudication in an agency. [00:04:34] Speaker 03: They have taken that position quite clearly. [00:04:37] Speaker 03: And I don't see you to be really responding and consistent with what Jarkas did. [00:04:43] Speaker 03: Jarkas doesn't overturn Atlas Roofing, for example, which seems [00:04:48] Speaker 03: you're not accounting for that. [00:04:50] Speaker 06: Well, okay. [00:04:51] Speaker 06: First of all, I want to be clear. [00:04:52] Speaker 06: We have very clearly responded to the public rights argument, which they raised in their response brief. [00:04:58] Speaker 06: One of the issues here is that under the limited judicial review that's allowed under this administrative review system that we're in, there was no litigation of this issue below except us and [00:05:13] Speaker 04: And that puts us in a weird situation. [00:05:16] Speaker 04: I take your point. [00:05:18] Speaker 04: this language about presumption of private rights. [00:05:25] Speaker 04: And if you think of this as a burden of production in an evidentiary sense, yeah, maybe it's the government's burden to raise public rights because it's an exception. [00:05:40] Speaker 04: I get that. [00:05:42] Speaker 04: And it wasn't raised. [00:05:44] Speaker 04: Wasn't litigated below because the agency said we can't deal with this. [00:05:48] Speaker 04: But on the other hand, you're, you're the appellant and you have to. [00:05:52] Speaker 04: Fairly T up the issue for us in your opening brief and. [00:05:56] Speaker 04: I don't know, it's just very hard to get our arms around this with. [00:06:03] Speaker 04: no help from you on that point? [00:06:05] Speaker 06: Well, again, I think because of the nature of this as a narrow exception and the weird procedural posture that we're in, I mean, essentially, our opening brief was the first time that we could fully address this issue. [00:06:19] Speaker 06: We raised it below and the judge and the administrative judge refused to consider it in the Departmental Appeals Board. [00:06:26] Speaker 06: That's correct. [00:06:26] Speaker 06: So our opening brief was the first time that we had the opportunity to really put this issue into the court. [00:06:33] Speaker 04: And you don't think a fair development of that issue would have included, I don't know, citing the public rights doctrine, distinguishing it, arguing that nothing is left of it? [00:06:48] Speaker 04: After Jarkzai, whatever position you want to take? [00:06:51] Speaker 06: Well, we don't take the position that nothing's left of it. [00:06:54] Speaker 06: But I think what's left out of the government's argument here is that the public rights exception, especially under Jarkzai, I realize there's been confusion. [00:07:02] Speaker 06: And then the Supreme Court hasn't spoken clearly about what exactly is the scope of this doctrine. [00:07:08] Speaker 06: That's clear. [00:07:09] Speaker 06: Lots of the circuit courts coming after Jarkzai have also noted that. [00:07:12] Speaker 03: You say in your reply brief that the public rights exception is reserved for claims with an historical pedigree of adjudication in the political branches. [00:07:24] Speaker 03: If I read Jarkissi also to ask whether and to what extent the claim underlying the enforcement action [00:07:36] Speaker 03: resembles a pre-existing legal claim. [00:07:38] Speaker 03: In other words, if it wasn't of a category that historically was adjudicated initially by the political branches, Jarkozy itself goes through and says, look, here we have something that's an analog of common law fraud. [00:07:56] Speaker 03: They don't say securities cases were not historically treated [00:08:05] Speaker 03: as public rights. [00:08:07] Speaker 03: They go through this other historical context question of whether it resembles a pre-existing legal claim. [00:08:17] Speaker 03: So if that's the right way to read jargazee, what is the pre-existing common law claim that resembles the FDA's enforcement action here? [00:08:28] Speaker 06: Well, I think, with respect to your honor, I think that the question conflates two separate issues. [00:08:37] Speaker 06: Because one is, so there's an alternative holding in JARXE, or there's two parts to the analysis of how do you get to whether the Seventh Amendment applies, which again, FDA's conceded. [00:08:46] Speaker 06: They're not arguing the Seventh Amendment is not implicated here. [00:08:49] Speaker 03: I'm talking about the public rights analysis. [00:08:51] Speaker 06: OK, so with regard to public rights, to finish my point earlier, [00:08:56] Speaker 06: And this is part of the reason why Judge Katz says we didn't raise it affirmatively ourselves in the opening brief, because it is a narrow exception. [00:09:06] Speaker 06: And the way that JARCSE discusses it, it's limited to, there has to be an historical antecedent of a type of dispute that's adjudicated in the non-judicial branches and the executive of the legislative branch. [00:09:20] Speaker 06: You look at the tribal adjudications, maritime admiralty law, immigration system stuff, tariffs. [00:09:31] Speaker 06: Those are all the examples that are listed in the JARCSE opinion. [00:09:34] Speaker 06: This is a new statutory claim that was only enacted in 2009 and then applied to this industry in 2016. [00:09:43] Speaker 06: This clearly does not fall with any of the historical antecedents. [00:09:48] Speaker 01: To follow up, and I'll let you finish your point, but before we get too far into it, although you're not stating this expressly, but what it seems to me is there's a dispute between you and the government here. [00:10:06] Speaker 01: And the dispute is, whose burden is it? [00:10:09] Speaker 01: In order to invoke the public rights exception, is it the burden of the government to show that the cause of action or whatever the controversy here is traditionally within equity or within some area where [00:10:28] Speaker 01: juries were not required. [00:10:30] Speaker 01: That's one way of looking at it, and that's your way of looking at it. [00:10:35] Speaker 01: But on the other hand, the government may be saying that you have to show that on the public rights issue, you have to show that the cause of action here or the controversy is traditional within the common law course of 1789 in England. [00:10:54] Speaker 01: And so it's a burden question that is separating you from the other side. [00:11:01] Speaker 01: And I'm looking at your reply brief right now where you discuss this and you make this point in short, the FDA has not cited a single case evidencing the type of historical antecedent required to support its position. [00:11:17] Speaker 01: And like I said, that's an assumption on your part that it was their burden to show that. [00:11:24] Speaker 06: Well, I think the clearest answer I can give you, Judge Randolph, is that another quote from Jarxy at page 134, where they said, quoting Tull, a far older case, they said, quote, civil penalties are a punitive remedy that the Supreme Court has recognized could only be enforced in courts of law. [00:11:43] Speaker 06: That's Jarxy quoting from Tull from 1987. [00:11:46] Speaker 06: Yeah. [00:11:47] Speaker 06: And here we're talking about a new statutory claim. [00:11:50] Speaker 01: I don't understand this public rights thing because if you're in a common law court because it's a civil penalty, you're in a common law court and now you have to prove that you should be in a common law court. [00:12:05] Speaker 01: I don't get it. [00:12:07] Speaker 01: But anyway, let me ask you, although you didn't address this, it seems to me that an action for misbranding, which is what your client got charged with, is analogous to a common law court fraud action. [00:12:25] Speaker 01: If I buy a product in England in 1780 and it's misbranded, don't I have a right to sue and to get compensated for being misled? [00:12:38] Speaker 01: I think it sounds to me like it's squarely within fraud. [00:12:43] Speaker 06: Well, I think that's true. [00:12:46] Speaker 06: I would agree with that. [00:12:46] Speaker 06: And I think Amiki cites some cases to that effect. [00:12:49] Speaker 01: Actually, there are state cases to that effect. [00:12:53] Speaker 06: Well, right. [00:12:54] Speaker 06: And so, you know, I agree with that, your honor, and we didn't spend a lot of time on it in our reply because, again, that was dealt with, I think, pretty ably by Amiki. [00:13:03] Speaker 06: But also, under Jarxy, it's not the most important point. [00:13:07] Speaker 06: And I think it's so clear that the quote I just read is dispositive of this issue. [00:13:12] Speaker 06: This is a civil penalty that the government is seeking. [00:13:14] Speaker 06: It's entirely punitive. [00:13:16] Speaker 06: There's nothing restorative about it. [00:13:17] Speaker 01: How does Judge Gorsuch stance that once you show that it's [00:13:22] Speaker 01: within the common law or legal remedy, that's the end of it. [00:13:27] Speaker 01: And that's what he said, but he only got Justice Thomas to agree with it. [00:13:32] Speaker 06: Well, and the recent Fifth Circuit decision in the AT&T case comes down the same way. [00:13:38] Speaker 06: They did find in that case it's a Communications Act penalty claim, and they did find that it's somewhat analogous to a common law claim, but... Analogous to negligence because the governing regulation required reasonable efforts or something like that. [00:13:56] Speaker 06: Correct. [00:13:56] Speaker 06: But then they went on to say, just like Jarcy said, it echoed the Jarcy statement that the more important and all but dispositive is the question of the remedy. [00:14:06] Speaker 06: And the quote from Toll. [00:14:08] Speaker 03: That's for purposes of the Seventh Amendment, not for purposes of public right. [00:14:13] Speaker 06: Well, public rights is part of the Seventh Amendment argument here. [00:14:20] Speaker 06: OK, I see. [00:14:21] Speaker 03: But you can have a claim that if it's brought in federal court, [00:14:27] Speaker 03: requires a jury. [00:14:29] Speaker 03: But if it's a public right, that same claim may, consistent with Article III, be brought before an agency. [00:14:38] Speaker 03: And that's the part that I think you're reading out of Darcus. [00:14:40] Speaker 06: OK, I see. [00:14:41] Speaker 06: Now I understand your question, and I'll answer that. [00:14:43] Speaker 06: So this does get us to the second point about all the, and I would point out, all the cases that the government cites here, Houston versus St. [00:14:52] Speaker 06: Louis, Wyeth, Crowell, [00:14:58] Speaker 06: None of them do the work that they want to do here. [00:15:00] Speaker 06: They're arguing that there's this line of so-called public health cases that create an exception to the Seventh Amendment jury trial, right? [00:15:12] Speaker 06: Those cases don't at all apply in this context because they're all dealing with licensing issues essentially. [00:15:19] Speaker 06: None of those cases involve [00:15:21] Speaker 06: a government seeking a civil penalty, a punitive penalty against a market participant as here. [00:15:27] Speaker 06: And again, back to the statement in jarcy, it's the nature of the penalty, it's the nature, it's the substance of the remedy that is all but dispositive. [00:15:35] Speaker 01: The Supreme Court's opinion [00:15:38] Speaker 01: And you didn't reply this way, but in Grand Finnicera, it seems to support your analysis because the court said that there's a two-part inquiry, and the first is [00:15:52] Speaker 01: deals with whether the statutory action is analogous to something that was in the courts of England in the 18th century. [00:16:03] Speaker 01: And the second is the remedy. [00:16:05] Speaker 01: And so you're focusing on the remedy, but the court also said that the second inquiry is the most important. [00:16:14] Speaker 01: Well, the second, the first is the public rights, but the second is the remedy. [00:16:19] Speaker 01: And the court did say in Finnicero, that's the most important part. [00:16:23] Speaker 06: And I just, I know I'm out of time just to address the final point, Your Honor. [00:16:28] Speaker 06: Yes. [00:16:29] Speaker 06: And I think the [00:16:32] Speaker 06: The toll case itself directly repudiates the government's argument here because that was a Clean Water Act case. [00:16:40] Speaker 06: You could argue that was a public health, quote unquote, case as well. [00:16:44] Speaker 06: And nonetheless, the dispositive issue was the remedy being sought was a civil penalty. [00:16:50] Speaker 06: And the final point, well, I can address it. [00:16:54] Speaker 06: I know my time's up. [00:16:54] Speaker 06: I have time for rebuttal unless there's another question. [00:17:00] Speaker 04: I'm past forfeiture and burden now. [00:17:03] Speaker 04: I just want to ask about your view on the merits of public rights. [00:17:10] Speaker 04: One difficulty with your view is that if we look at all these cases in the public rights area, [00:17:25] Speaker 04: It's fine to say it's a narrow, rare exception, but you look at these cases and they talk about tariffs, Indians, public lands from Jarkisi itself, all the way back to Crowell versus Benson, foreign commerce, public lands, public health. [00:17:46] Speaker 04: It seems like there are a lot of public rights that cut across different areas and cut across different governmental powers, including the Commerce Clause. [00:18:02] Speaker 04: Well, Your Honor, I think... And one way of understanding all of these cases is general rule. [00:18:12] Speaker 04: If the government as sovereign, Congress gives the government as sovereign the right to seek the penalty, that's a public right. [00:18:23] Speaker 04: And jarkacy qualifies that by saying, but not if that right tracks a common law claim. [00:18:35] Speaker 04: Well, I would and that leads us to I think the conclusion you win if and only if. [00:18:47] Speaker 04: this claim is analogous enough to a pre-existing common law claim? [00:18:54] Speaker 06: I would strongly disagree with that characterization, Your Honor, because our position is, in fact, Jarcy says the opposite, that Congress can create all the new [00:19:07] Speaker 06: you know, so-called public rights enforcement mechanisms at once, or regulated, whatever area wants, if the remedy being sought in the matter is a punitive civil money penalty, then under Jarx and under Tull, that cannot be siphoned away from Article III courts. [00:19:26] Speaker 03: So you disagree with the notion that you win only if you can show that this is analogous [00:19:33] Speaker 03: to some common law claim akin to the way the court in Jarkozy found that the securities fraud claim was analogous to common law fraud. [00:19:43] Speaker 03: You don't need to point to any such thing, and you haven't pointed to any such analog historically, because you're looking at this as the historical categories that you claim this doesn't fall into. [00:19:54] Speaker 03: They haven't shown that this kind of claim at common law would have been dealt with [00:20:04] Speaker 03: administratively? [00:20:05] Speaker 06: Well, I guess two answers. [00:20:07] Speaker 06: First is, and I hate to repeat myself, but I think this, it seems there's continuing sort of confusion on this point. [00:20:17] Speaker 06: We are saying that the claim has a common law analog, and it's the same one that Tull in 1987 and Jarkzee said cannot be siphoned away. [00:20:25] Speaker 03: It's a civil remedy, a punitive remedy. [00:20:28] Speaker 03: That's the analog you're talking about. [00:20:30] Speaker 03: So in terms of the [00:20:31] Speaker 03: claim as opposed to the remedy. [00:20:34] Speaker 03: And I know you cited the part of the 7th Amendment analysis that talks about the remedy being the dominant factor. [00:20:39] Speaker 03: But assume we don't think that it is the dominant factor for purposes of the Article III analysis, the public rights analysis. [00:20:47] Speaker 03: And we're asking not the penalty, whether it has a common law analog, but whether the claim. [00:20:52] Speaker 03: And you mentioned licensing. [00:20:53] Speaker 03: I mean, to me, the claim here seems like unlicensed sale. [00:20:57] Speaker 03: And I thought you conceded that licensing was the kind of thing that would be dealt with in the political branches back in the day. [00:21:05] Speaker 06: Well, I'm referring to the kind of cases like Houston versus St. [00:21:09] Speaker 06: Louis, which was a sausage manufacturer challenging a food marketing licensing scheme. [00:21:16] Speaker 02: Right. [00:21:17] Speaker 06: The question whether the government can, and this is what the government is, all those cases stand for the same point. [00:21:23] Speaker 06: They just merely reflect the government's power to regulate interstate commerce. [00:21:28] Speaker 06: Or in some cases like Crowell, it's admiralty jurisdiction. [00:21:31] Speaker 06: It's disputes on the navigable waters of the United States. [00:21:35] Speaker 06: But the fact that in the sausage case, the fact that the government can regulate an area in a certain industry under the interstate commerce power, which is what we're talking about here as well, does not mean that the government can siphon away civil remedy, civil money penalties. [00:21:52] Speaker 06: under those schemes, under JARCASY. [00:21:54] Speaker 03: So that's a different issue, and that's something we'll ask the government about, whether this sort of sector-wide way of looking at public rights is really consistent with JARCASY. [00:22:05] Speaker 03: So I hear you having that argument, and they'll be ready to respond to that. [00:22:09] Speaker 03: But just in terms of the analysis that was conducted in JARCASY on the public rights question, which it was saying, OK, here the claim is a claim of fraud, of securities fraud. [00:22:21] Speaker 03: Let's look back to the common law at the time of the founding. [00:22:24] Speaker 03: We see that actually fraud claims were very common and they were not done. [00:22:32] Speaker 03: in agencies, they were done in courts. [00:22:34] Speaker 03: And so the question is, do you have a similar form of argument? [00:22:37] Speaker 03: And I take it that you don't, but I just want to confirm that you don't have a kind of claim that you're looking at here. [00:22:43] Speaker 03: A claim, I shouldn't have to get a license, or I have an entitlement to, unless I'm aware that something that's sold to me is unlicensed, I have an entitlement to sell it on. [00:23:00] Speaker 03: anything that's more about the actual claim that you're bringing. [00:23:04] Speaker 06: Right and maybe it helps let me clarify we are not taking the position that [00:23:10] Speaker 06: the government may not place adjudications of licensing, whether a license should be granted. [00:23:17] Speaker 06: For example, whether a broadcast license should be granted to a media company, whether a license to sell pharmaceuticals or here tobacco products. [00:23:25] Speaker 06: The question of whether a license should be granted and the application process, all of that, I'm not taking the position that that requires jury trials for any of those disputes. [00:23:36] Speaker 06: But what I'm relying on is the, [00:23:39] Speaker 06: What the government here is seeking is a punitive monetary penalty. [00:23:43] Speaker 03: Great. [00:23:43] Speaker 03: That's very helpful. [00:23:45] Speaker 04: So your primary analogy is the civil penalty, the action on a debt, I think was how Cole described it. [00:23:59] Speaker 06: And that's correct, your honor. [00:24:01] Speaker 06: And I think to get to your point, I think the reason that I'm not saying that all civil penalties have to fall under the Seventh Amendment as well. [00:24:12] Speaker 06: But if there's a historical, there has to be an historical antecedent to the, let's say the civil money penalty procedure like there was in the Hoboken case where the government was seeking to get back its money that was collected by a treasury official. [00:24:27] Speaker 06: That, the court said, that's the prime example, and that's the kind of antecedent you need here. [00:24:32] Speaker 01: That's not a civil penalty case. [00:24:34] Speaker 01: Right, that's not a civil penalty, but it's the kind of thing that was... You think you could give me a hypothetical of a civil penalty meted out by an administrative agency that wouldn't come under your rule? [00:24:45] Speaker 01: It seems to me that every civil penalty action in an administrative state would have to require a jury trial. [00:24:55] Speaker 06: Well, and I think that's exactly what Tull and Jarcy say. [00:24:59] Speaker 06: But I'm not saying, given the breadth of federal activity today, is there something that the government hasn't thought of that it could, I don't know, resurrect that was done before the Second Amendment was adopted. [00:25:13] Speaker 04: Can you distinguish the sort of novel, [00:25:21] Speaker 04: public health sort of claim created here from the claim at issue in Atlas Roofing? [00:25:32] Speaker 04: Or is your position just Atlas Roofing is overruled? [00:25:40] Speaker 04: Well, my position would be... Seems like the claim here and the claim in Atlas Roofing are [00:25:48] Speaker 04: you know, very new and sort of comes back to Judge Randolph's framing. [00:25:55] Speaker 04: That might mean you win. [00:25:57] Speaker 04: It might mean you lose. [00:25:58] Speaker 04: If we think Atlas is still good law, I think you lose. [00:26:07] Speaker 06: Well, and I realize that's [00:26:12] Speaker 06: Well, that's discussed directly by JARC-C itself. [00:26:16] Speaker 04: And JARC-C casts a dark cloud over... Reserves the question whether Atlas survives. [00:26:23] Speaker 06: Well, right. [00:26:23] Speaker 06: They didn't have to decide it there. [00:26:25] Speaker 06: That's correct. [00:26:26] Speaker 06: But it casts a very dark cloud over Atlas Roofing. [00:26:29] Speaker 04: If the Supreme Court has a precedent and then reserves whether it's overruled or not, I would think we have to apply it. [00:26:37] Speaker 06: Well, but I would argue again, I would refer to the Toll case, which was a Clean Water Act case, an entirely new statutory scheme. [00:26:44] Speaker 06: That is not, that is not positive. [00:26:47] Speaker 01: Well, there's another difference. [00:26:50] Speaker 01: In Jarsky, I'm probably mispronouncing it, the court said that the 10b-5 action by the SEC against the company was in the nature of a common law action because it regulated [00:27:11] Speaker 01: transactions between individuals in a pre-existing market. [00:27:16] Speaker 01: I'm quoting, I don't have in front of me, but I think that's it. [00:27:20] Speaker 01: The same is true here. [00:27:23] Speaker 01: The misbranding is regulating a transaction between consumers in a pre-existing market. [00:27:32] Speaker 01: That was not true in Atlas. [00:27:37] Speaker 01: The regulation that was going on is not between consumers and a buyer and a seller in a pre-existing market. [00:27:48] Speaker 06: That's correct as well. [00:27:50] Speaker 06: I'd agree with that. [00:27:50] Speaker 06: And I also would point out, just final point, that the government has not relied on Atlas Roofing whatsoever here. [00:27:56] Speaker 06: There's a passing reference to the Exalta Third Circuit case in their brief, which is almost a throwaway reference. [00:28:02] Speaker 06: But I think they step away from relying too heavily on Exalta because they, I think the analysis is clearly wrong, as I've said in our brief. [00:28:10] Speaker 06: But one reason is that they rely on the Atlas Roofing [00:28:15] Speaker 06: uh manner of analysis without without looking at the historical antecedent question. [00:28:23] Speaker 04: Judge Randolph just gave you a possible distinction of Atlas which is a good bit less aggressive than your earlier answer to me which is there is there is no distinction but you still win because the law has moved on. [00:28:40] Speaker 06: Well I that's correct I think both are true I think yeah [00:28:46] Speaker 06: Thank you, Your Honor. [00:28:47] Speaker 06: So reserve time for rebuttal. [00:29:01] Speaker 05: Good morning and may it please the court, David Peters from the United States of America. [00:29:04] Speaker 05: I'd like to start with the public rights analysis. [00:29:07] Speaker 05: I think that the petitioner has confused the two steps of dark you see and saying that just because a civil monetary penalty is being assessed by an administration, that means the seventh amendment not only is implicated, but precludes the agency from doing so. [00:29:22] Speaker 05: And that's inconsistent with dark to see and the Supreme Court's precedent. [00:29:25] Speaker 05: And the entire second half of Dracoste's opinion wouldn't exist if all that mattered was whether the penalty was a monetary penalty. [00:29:33] Speaker 05: And it's also inconsistent with prior Supreme Court decisions that have held or upheld the application of a monetary penalty in the context of an administrative proceeding. [00:29:42] Speaker 05: And I would point to the Oceanic Navigation Services case, which Dracoste cites approvingly. [00:29:46] Speaker 05: And that's a case in which there was a monetary penalty being assessed and was upheld because it was in the context of a public rights scheme. [00:29:52] Speaker 04: What's the government's position on how much Atlas roofing? [00:29:58] Speaker 04: survives. [00:29:59] Speaker 04: I've given your friend a little bit of trouble on his briefing. [00:30:02] Speaker 04: I'm going to give you a little bit of trouble on yours. [00:30:04] Speaker 04: I mean, you don't cite Atlas Roofing, which is the latest best case for the government's position. [00:30:12] Speaker 04: You cite a Third Circuit case applying Atlas Roofing. [00:30:15] Speaker 04: So you're sort of trying to get the benefit of it without embracing it. [00:30:20] Speaker 04: How much of Atlas do you think survives? [00:30:23] Speaker 05: Certainly the holding. [00:30:24] Speaker 05: May I just take a step back? [00:30:26] Speaker 05: I think this court can rule in our favor and find this a public rights scheme based on the precedents that we cite, predominantly the Houston case. [00:30:34] Speaker 05: I think this court can rule in the government's favor and find this to be a public rights scheme based on the precedents that we cite in our briefing, predominantly Houston and Crowell, I think, decide this case. [00:30:43] Speaker 04: That's a stretch. [00:30:47] Speaker 04: Houston is about the substantive validity of a legislative rule. [00:30:53] Speaker 05: I don't think that's right, Your Honor. [00:30:54] Speaker 04: If you look at the regulatory scheme at issue in Houston, that was a regulatory scheme that allowed the Secretary of Agriculture, yes, to issue... Agency action being challenged was promulgation of a reg that would have... [00:31:08] Speaker 04: excluded the Challenger's cereal or whatever it is from, or the sausage. [00:31:15] Speaker 05: It couldn't sell its products. [00:31:16] Speaker 05: I think it was sausage. [00:31:18] Speaker 05: Certainly, Your Honor, that case involved a prospective regulation. [00:31:21] Speaker 05: But it also involved, and I would encourage to go back and look at the relief that was being sought there, was that the statutory scheme allowed the Secretary of Agriculture not only to promulgate prospective regulations, but then also to make determinations about whether the products were healthful and then to [00:31:37] Speaker 05: It was a process of inspection and passing the sausages. [00:31:41] Speaker 05: And if they didn't do that, then the sausages could not be shipped in interstate commerce. [00:31:45] Speaker 05: And that is a factual determination that the Secretary of Agriculture could make only because it was a public rights scheme. [00:31:53] Speaker 05: In Stern v. Marshall, the Supreme Court says that if a claim involves a private right, even mundane factual disputes must be adjudicated by an Article III court. [00:32:02] Speaker 05: And so the ability of the Secretary in the St. [00:32:04] Speaker 04: Louis case [00:32:07] Speaker 04: Fair enough, the scheme might have contemplated administrative adjudication, and you have that sentence from Kroll on administrative adjudication with that long string site, which includes Houston. [00:32:24] Speaker 04: The key is it's [00:32:28] Speaker 05: If there's factual determinations, I mean, there, the Secretary of Agriculture was precluding the shipment of a good and interstate commerce, and it was based on a factual determination. [00:32:37] Speaker 04: Through a regulation that said if your sausage contains more than X percent of whatever it was, you can't call it sausage. [00:32:47] Speaker 04: It was a pre-APA, I assume in district court, [00:32:54] Speaker 04: presumably on something like mandamus, I don't know. [00:32:59] Speaker 04: It doesn't involve administrative adjudication at all. [00:33:01] Speaker 05: Your honor, it did. [00:33:02] Speaker 05: And I would point to page 44 of the opinion in which the Supreme Court is talking about the secretary's making- What was the citation? [00:33:10] Speaker 05: Sorry, it is 249 U.S. [00:33:11] Speaker 05: 484. [00:33:11] Speaker 05: And your honor, I'm happy to rely on Houston to explain why I think that supports our opinion. [00:33:18] Speaker 05: I think we win on other grounds as well, but just to explain it. [00:33:23] Speaker 05: it was a, whether the sausage is a false and deceptive is a question of fact. [00:33:28] Speaker 05: And it was a determination that the secretary of agriculture was making as to the specific product that was being shipped. [00:33:34] Speaker 05: And if you go to the earlier part of the opinion, now I'm at 481. [00:33:41] Speaker 05: The upshot of the determination not to pass the sausage was that the sausage could not be shipped in interstate commerce and was excluded. [00:33:48] Speaker 05: And my point is that is a factual determination. [00:33:51] Speaker 05: It's not the imposition of monetary penalty, but it's a factual determination specific to that party. [00:33:57] Speaker 05: And those kind of factual determinations can only be made in the context of a public rights scheme by the Secretary of Agriculture. [00:34:03] Speaker 05: Right, if it's a public rights scheme. [00:34:05] Speaker 05: If this was a private right, that would have to be adjudicated by an Article 3-4. [00:34:09] Speaker 05: And that's when you look at Crowell, who Crowell is specifically citing Houston for, is the proposition that these are familiar. [00:34:15] Speaker 04: Crowell seems to treat Houston as if it's about adjudication. [00:34:19] Speaker 04: I'll give you that. [00:34:22] Speaker 05: Crowell itself says, Houston is an example in which there is a secretary and the agency is making factual determinations in the context of a public rights scheme. [00:34:32] Speaker 05: And so I think those all point in the same direction that this is a, your earlier question was whether we have to rely on Atlas roofing. [00:34:43] Speaker 05: And my point is, I think this is another indication of Supreme Court precedent dating to 1919 that has treated regulatory programs like this as public rights schemes. [00:34:54] Speaker 04: I mean, it's a data point, but it's not a legal theory. [00:35:00] Speaker 04: The legal theory really comes from Atlas, which talks about data points of. [00:35:08] Speaker 05: public health, see Houston. [00:35:13] Speaker 05: But Thomas as well, your honor. [00:35:14] Speaker 05: Thomas is another case in which I think that there is several factors here that all point in the same direction of this being a public rights scheme. [00:35:22] Speaker 05: One, this is Congress exercising its right over the over hazardous food and drugs that are shipped in interstate commerce. [00:35:30] Speaker 05: It is clearly serving a public sovereign interest [00:35:33] Speaker 05: right? [00:35:34] Speaker 05: This is the kind of thing that the Supreme Court in Krall has pointed to as an example of a public rights scheme. [00:35:40] Speaker 05: And there is no comparator at common law to the specific claim that's being asserted here, which is that [00:35:48] Speaker 05: The tobacco product that was deemed adulterated and misbranded was adulterated and misbranded because it did not go through the pre-market authorization process of the Tobacco Control Act. [00:36:00] Speaker 05: And that is, as the Supreme Court said in Wyeth, a substantial innovation on the common law. [00:36:06] Speaker 05: Tischner has not cited any examples. [00:36:08] Speaker 01: So a consumer would be misled. [00:36:12] Speaker 01: you know, by buying this product because the assumption would be, assuming it was a reasonable consumer aware of all the relevant facts, the assumption would be that every product that was put out for sale containing tobacco had been approved by the FDA. [00:36:31] Speaker 05: The statutory violation is not going through the P-Market authorization process, which is the same process that exists in the FDCA for new drugs. [00:36:39] Speaker 05: The United States here isn't placing itself in the position of an aggrieved consumer. [00:36:43] Speaker 01: Can you tell me how you distinguish this quotation from Jareckowski? [00:36:50] Speaker 01: What matters is the substance in the suit, not where it's brought, who brings it, or how it's labeled. [00:36:57] Speaker 01: The object of the SEC is to regulate transactions between private individuals interacting in a pre-existing market. [00:37:06] Speaker 01: the government's created claims whose causes of action are modeled on common law fraud and provide a type of remedy available only in the law courts. [00:37:18] Speaker 01: Is this a regulation of transactions between private individuals? [00:37:22] Speaker 05: No, Your Honor. [00:37:23] Speaker 05: I mean, the statutory violation here is not going through the... [00:37:26] Speaker 01: You can't have a transaction with this product unless you've got the FDA approved. [00:37:35] Speaker 01: That's regulating a transaction, isn't it? [00:37:37] Speaker 05: It's not between private individuals in the context of a market. [00:37:40] Speaker 01: It's between the seller and the buyer. [00:37:42] Speaker 05: The statutory violation here is the petitioner receiving... They didn't sell any of this. [00:37:47] Speaker 01: Would that be a violation? [00:37:49] Speaker 05: The violation, they have to receive an interstate commerce. [00:37:53] Speaker 05: The violation is 21 U.S.C. [00:37:54] Speaker 05: 33C. [00:37:55] Speaker 05: It's the receipt in interstate commerce and offering it for sale or passing it along. [00:38:01] Speaker 01: Is that a pre-existing market? [00:38:04] Speaker 05: For tobacco products? [00:38:06] Speaker 05: Yeah. [00:38:07] Speaker 05: I think it is, Your Honor. [00:38:08] Speaker 05: I don't think that any time. [00:38:10] Speaker 01: Is this a type of remedy available only in the law courts? [00:38:14] Speaker 03: I thought the statute required any new tobacco product to be subject to pre-clearance. [00:38:19] Speaker 03: And there was a kind of delay in enforcement against e-cigarettes. [00:38:25] Speaker 03: But that doesn't mean that it was a pre-existing market that was leaked. [00:38:29] Speaker 05: That may be right, Your Honor. [00:38:30] Speaker 05: I may be misspoke. [00:38:32] Speaker 05: Of course, tobacco products have been sold before. [00:38:34] Speaker 05: But this is a new regulation in that there had not been prior to this a requirement, common law or anywhere else, to have a pre-market authorization for tobacco products. [00:38:43] Speaker 05: I mean, again, this is very similar to the FDCA and other provisions that are regulating drugs or hazardous foods that are shipped in interstate commerce. [00:38:55] Speaker 05: And again, there isn't any analog that the petitioner decided to or that we're aware of, of the same kind of pre-market authorization requirement to ship such goods or to receive such goods and then offer them for sale in interstate commerce. [00:39:06] Speaker 04: Do you have a historical analog [00:39:11] Speaker 04: suggesting that this kind of controversy could have been resolved administratively. [00:39:22] Speaker 05: The examples that we have are the ones we provided, Your Honor. [00:39:26] Speaker 05: I don't have one. [00:39:27] Speaker 04: I don't have a historic... Just remind me, like, what's your best? [00:39:30] Speaker 05: I think the best examples are the Houston case. [00:39:32] Speaker 05: I think the Crowell's announcement of the Houston case, and then... No, no, no. [00:39:35] Speaker 04: History on [00:39:39] Speaker 04: Oh, I see, you're citing, okay. [00:39:42] Speaker 04: And I would say, and then. [00:39:44] Speaker 04: Citing Houston for history, not for precedent, for purposes of this. [00:39:47] Speaker 04: I think so, I think as an example. [00:39:49] Speaker 01: How do you, your argument leads to the proposition that Article III court, this doesn't have to be adjudicated by an Article III court. [00:39:58] Speaker 01: That's our position. [00:39:59] Speaker 01: And it's within the province of the legislature, right? [00:40:04] Speaker 05: Congress exercising its sovereign authority authorized. [00:40:08] Speaker 01: Suppose that there were no judicial review. [00:40:12] Speaker 01: Would your argument still stand as exclusive within the administrative agency? [00:40:18] Speaker 05: I was going to modify my answer to your original question, Judge Randolph, which I think is it can be assigned to the agency in the first instance. [00:40:24] Speaker 05: Whether there was no judicial review at all might be a separate due process problem. [00:40:28] Speaker 05: That's obviously not the problem here. [00:40:30] Speaker 01: What would be the argument that there must be judicial review? [00:40:34] Speaker 01: Where does that come from? [00:40:35] Speaker 05: Your Honor, whether the due process clause creates a separate independent requirement for eventual judicial review, I think what's been clear from Dirkacy and its prior precedents is that Congress may authorize an agency in the first instance. [00:40:48] Speaker 01: All precedents are prior, I think. [00:40:49] Speaker 05: I would say, I would look at the Thomas case, Your Honor, the Union Carbide case, where that was a scheme in which there was adjudication between private parties that was assigned to an administrator with limited judicial review, and the Supreme Court there upheld that. [00:41:04] Speaker 05: And again, [00:41:05] Speaker 05: I think that's another instance in which that was clearly a statutory scheme that had a licensing element that was enacted pursuant to this Congress's interstate commerce power. [00:41:14] Speaker 05: And yet the Supreme Court there and subsequent decisions never suggested that just because Congress is acting pursuant to its commerce authority means necessarily that there can't be a public rights scheme. [00:41:28] Speaker 05: And that can't be squared with the Thomas case. [00:41:31] Speaker 01: I want to get back to your point. [00:41:34] Speaker 01: This is more of a commentary than a question. [00:41:37] Speaker 01: It seems to me Justice Gorsuch had a different take on this because he dealt not only with separation of powers and whatever, but he also said that the due process clause applied [00:41:55] Speaker 01: to require an Article III court. [00:41:59] Speaker 01: And your response, well, on judicial review, is that would be an Article III question. [00:42:06] Speaker 01: So which is consistent with, whether that upholds the statute or not is another question, but that's consistent with Justice Gorsuch's statement. [00:42:16] Speaker 05: I think it's telling in Jorkezi that the majority opinion was very expressed and that it was not reporting to address once and for all and in all time what counts as a public right. [00:42:26] Speaker 05: It didn't take a categorical approach and we're not advocating for one here. [00:42:29] Speaker 05: We think this court can hold kind of [00:42:32] Speaker 05: that this statutory scheme concerning the shipment of hazardous goods and interstate commerce is the kind of public rights scheme that can be assigned to an agency for adjudication in the first instance. [00:42:48] Speaker 05: I don't think that's breaking. [00:42:48] Speaker 03: So what's your task? [00:42:50] Speaker 03: Because I read your brief to do a pretty broad job and talk about public health. [00:42:56] Speaker 03: And I'm not sure that [00:42:59] Speaker 03: Jarkozy really countenances a decision that would say there's a public health carve out. [00:43:09] Speaker 03: Maybe, but not asking for that. [00:43:12] Speaker 05: We're not advocating for a general public health carve out. [00:43:15] Speaker 05: In part, I just don't think that kind of wide scale, kind of carving out huge chunks of Congress powers necessarily in line with [00:43:26] Speaker 05: the way in which Darkeese said that you have to do careful analysis for every invocation of a public rights scheme. [00:43:32] Speaker 05: And so I think it's fine for this court to say that like the FDCA's treatment of new drugs, like the Meat Inspection Act that was an issue in the Houston case, where Congress has exercised its authority to regulate the hazardous food or drugs that are shipped in interstate commerce, that is a public rights scheme that may be a sign [00:43:54] Speaker 05: to adjudication to an Article III, sorry, to an agency without first going in front of a jury, so long as it doesn't codify a common law claim and that's not the case here. [00:44:04] Speaker 04: Why is that not a broad public health carve out? [00:44:09] Speaker 04: You're extrapolating from a case about sausage to a case about cigarettes and both involve interstate commerce clause. [00:44:19] Speaker 04: What's the limiting principle? [00:44:21] Speaker 04: If you're unwilling to say public health, [00:44:24] Speaker 04: I see my time's up. [00:44:25] Speaker 05: I think in this context, more than most, it's difficult to draw very firm lines. [00:44:34] Speaker 05: That's, again, another lesson of jerksy that the public rights exception is something that requires careful analysis of specific things, specific invocations of it. [00:44:43] Speaker 05: And I think this court can [00:44:45] Speaker 05: rule that the Tobacco Control Act, right, and maybe recognizing that it's very similar to something like the FDCA, is a public rights scheme. [00:44:53] Speaker 05: This particular type of claim where, you know, a tobacco product has been shipped in interstate commerce or received in interstate commerce that is misbranded and adulterated because it didn't go through the pre-market authorization requirement is sufficient to say that this is a public rights scheme and it can be assigned to the agency. [00:45:11] Speaker 03: Are you agreeing with Mr. Najjar about the analysis in his reply brief? [00:45:20] Speaker 03: He seems to say that you need to consider whether there's historical pedigree of adjudication of this class of cases in the political branches. [00:45:33] Speaker 03: There's an alternative reading of jarkasy, which says it either has to have a historical pedigree [00:45:40] Speaker 03: of adjudication of political branches, or it has to be a new right that doesn't codify a traditional common law claim. [00:45:51] Speaker 03: And the way you just put it, I thought you were actually stacking those on top of one another, are those two separate ways that a government scheme of regulation can be determined to be a [00:46:07] Speaker 05: I don't think there's an obligation on the government to point to a historical precedent dating back to the founding for an instance in which an agency, the adjudication of a type of claim has been assigned to an agency. [00:46:19] Speaker 05: And the reason for that is because as you earlier mentioned, even when something is a public right, Congress can, if it so chooses, assign it to the judiciary for resolution. [00:46:31] Speaker 05: I don't think the inference that may have been the case in the past is a strong indication that it couldn't have assigned it to an agency. [00:46:39] Speaker 04: Do you need any sort of historical grounding? [00:46:42] Speaker 05: I think historical [00:46:45] Speaker 05: historical examples of Congress signing matters like this to an agency, I think is a good indication that this is the kind of thing that is a public right. [00:46:55] Speaker 01: That's not the history that they're talking about. [00:46:57] Speaker 01: The history they're talking about is 1789, 18th century, not what went on in the last 100 years. [00:47:04] Speaker 05: I think there's a different, another historical analysis, which is that [00:47:07] Speaker 05: Is this the kind of claim that it's a private right? [00:47:10] Speaker 05: And that's because it was is or was like in Jersey. [00:47:13] Speaker 05: So so much like a common law claim that it's a private right that has to be assigned to an article three court. [00:47:19] Speaker 05: I think here to that history points in our direction because there isn't anything common law. [00:47:25] Speaker 05: that does look like a pre-market authorization environment, like the one in the FDCA and the Tobacco Control Act. [00:47:31] Speaker 05: So I think all of those factors all point in the same direction here. [00:47:34] Speaker 05: This is a novel regulatory scheme that isn't building on the common law, it's not premised on the same principles, and it's something that Congress enacted to address a uniquely sovereign interest in addressing the widespread crisis caused by widespread tobacco use, especially among the nation's youth. [00:47:55] Speaker 04: When the SEC sues administratively to enforce Rule 10b-5, which is the scheme in JARCA say, I assume they have to show deception, but they do not have to show injury to any investor, correct? [00:48:15] Speaker 04: I think that's correct, John. [00:48:16] Speaker 04: Okay. [00:48:16] Speaker 04: So that's an instance where [00:48:20] Speaker 04: Congress takes a pre-existing tort, which requires injury almost, right, by definition, strips out the injury requirement and, you know, injury-free misconduct. [00:48:36] Speaker 04: Like, that's somewhat different. [00:48:37] Speaker 04: And the court said close enough. [00:48:40] Speaker 04: You're right. [00:48:41] Speaker 04: It's close enough. [00:48:41] Speaker 04: So why can't we think of this? [00:48:43] Speaker 04: To me, this feels like [00:48:48] Speaker 04: Injury an injury free scheme of strict liability for. [00:48:54] Speaker 04: Unreasonably dangerous or defective products. [00:48:58] Speaker 04: I guess two things, right? [00:49:00] Speaker 05: One, Your Honor, you're right. [00:49:01] Speaker 05: Injuracy, it had to be a closed analog. [00:49:03] Speaker 05: It doesn't have to be exactly the same. [00:49:04] Speaker 05: But it's telling that injuracy, the Supreme Court says, look, when we've evaluated these fraud claims in the context of the Securities Act, we looked at common law fraud. [00:49:11] Speaker 05: Those are the kind of like the principles in which Congress is borrowing from. [00:49:15] Speaker 05: It took soil with it. [00:49:16] Speaker 05: It would do this court no good to look to see the common law, whether this product was [00:49:21] Speaker 05: uh, misbranded or adulterated because whether it's misbranded or adulterated is defined by a statutory scheme that had no analog at common law. [00:49:28] Speaker 05: I mean, again, I point to wife, the Supreme court there said, you know, in a different context admittedly, but it said, you know, the pre-market authorization process that has existed in the FDCA since the 1930s and now this is in tobacco control act was a substantial innovation on the common law. [00:49:44] Speaker 05: It just didn't have any analog. [00:49:46] Speaker 05: So [00:49:46] Speaker 05: You're right, Your Honor. [00:49:47] Speaker 05: I think there are situations where there may be hard cases about whether this is sufficiently like a common law claim, even if it has some differences. [00:49:54] Speaker 04: The whole history of the Tobacco Control Act and why Congress thought tort liability was inadequate, they were applying concepts of unreasonably dangerous product, and they were upset that [00:50:15] Speaker 04: Tort claims were failing because cigarettes might be unreasonably dangerous, but they're not defectively designed. [00:50:24] Speaker 05: But that was true in the FDCA as well. [00:50:26] Speaker 05: And what they did was, again, point away, they didn't adopt existing state law regulations. [00:50:31] Speaker 05: They didn't adopt analogs to the common law. [00:50:35] Speaker 05: And they adapted this pre-market authorization process that is very distinct and doesn't have any analog in the common law. [00:50:42] Speaker 01: And you keep mentioning that. [00:50:44] Speaker 01: I'm curious, what does it take to get the FDA? [00:50:49] Speaker 01: What would it have taken the FDA to approve this product? [00:50:53] Speaker 01: What would the manufacturer have to show? [00:50:56] Speaker 05: Yeah, we cite this a little bit in our brief, and I'm happy to point you to it. [00:50:59] Speaker 05: I mean, there's a few different ways in which a tobacco product can be approved. [00:51:05] Speaker 05: The most common is a pre-market tobacco product application, which is a little bit of a mouthful. [00:51:11] Speaker 05: But it requires, and here I'm quoting from the Wages case, among other things, information about a product's components and additives, the method by which it is manufactured, any proposal being an assessment of its health risks. [00:51:22] Speaker 01: Well, that's the information they have to require. [00:51:25] Speaker 01: What's the standard for whether it's going to be approved by the FDA? [00:51:30] Speaker 05: The FDA must deny such an application, quote, unless it is shown that the product will be appropriate for the protection of the public health. [00:51:35] Speaker 03: And again, that is that's the novel standard is all the information goes to whether it's appropriate for the protection of the public health and it uses a. Particular historical moment in time as the benchmark for that precisely if it was looked at without that benchmark, then no cigarette would be sold because none of them are appropriate to the public health. [00:51:53] Speaker 03: So it's looking whether it's an improvement over. [00:51:56] Speaker 03: The market, 2014 or something like 2015, I believe. [00:52:00] Speaker 05: Yes, that's correct. [00:52:01] Speaker 05: Then looks and say, is this an improvement in public upon public health at the time of 2015 when when when the benchmark for the tobacco control act? [00:52:10] Speaker 03: No common law analog and I take it that. [00:52:14] Speaker 03: Mr. Najvar hasn't claimed that there's any common-law analog to that standard. [00:52:18] Speaker 05: No. [00:52:19] Speaker 05: No, he hasn't identified any. [00:52:22] Speaker 04: We're not aware of any that has a common-law analog to that type of standard, which, again... I gave you strict liability as one possibility. [00:52:32] Speaker 04: What do you think of Judge Randolph's fraud analog on Miss Branding? [00:52:38] Speaker 05: I don't think it's a fraud claim, Your Honor, or something like that. [00:52:42] Speaker 05: There isn't a... Fraud-like. [00:52:45] Speaker 05: Yeah, I understand. [00:52:46] Speaker 05: It's not a deception that's being addressed here. [00:52:51] Speaker 05: It's that there is this requirement to proceed through what is like a licensing regime and what Dishonored failed to do. [00:53:00] Speaker 05: Or is take receipt of a product and offer for sale that didn't go through that licensing like process. [00:53:08] Speaker 05: That just doesn't look a lot like fraud to me or strict liability or any other common term of art. [00:53:15] Speaker 03: It's a kind of capacious. [00:53:17] Speaker 03: I mean, it doesn't actually mean that the labeling is the problem. [00:53:21] Speaker 05: Yes, Your Honor. [00:53:22] Speaker 05: I mean, if you look at the statutory definitions of adulterated and misbranded that we cite, you know, it's telling that it's not, those aren't defined in any way. [00:53:30] Speaker 05: Like you would think of a fraud or you would think of like an adulterated product. [00:53:34] Speaker 05: I mean, I'm looking at 21 USC 387B6. [00:53:38] Speaker 05: So this is the provision for why this product was. [00:53:42] Speaker 05: Yeah, sorry. [00:53:43] Speaker 05: 21 USC 387B6. [00:53:48] Speaker 05: and a tobacco product shall be deemed to be adulterated if it is required by Section 387JA, which is the provision that requires pre-market authorization of this title to have pre-market review and does not have an order in effect under that provision. [00:54:01] Speaker 01: It's common in everyone's experience when you listen to advertisements on the media and television, radio, that some products are advertised and at the end they say this product has not been approved by the FDA and is not intended to cure any particular disease. [00:54:22] Speaker 01: That's a disclaimer. [00:54:24] Speaker 01: So that the consumer does not believe [00:54:28] Speaker 01: that was not led to believe that this is a product that the FDA has approved. [00:54:32] Speaker 01: Is that a requirement under the Food and Drug Act that the disclaimers of that sort be accompanied products? [00:54:41] Speaker 05: Yeah, I'm not sure. [00:54:43] Speaker 05: I understand the line of questioning to be maybe there are. [00:54:47] Speaker 01: But it is so common that it would seem to me that it's perfectly rational to say that if a product does not have FDA approval and it's out on the shelves and there's no disclaimer on it that it's something for consumption that necessarily follows it's been approved by the FDA and that's misbranding. [00:55:10] Speaker 05: I guess my point is there may be certain forms of misbranding or adulteration of products that aren't the ones at issue here that might look more like a common law claim, maybe a fraud or strict liability. [00:55:20] Speaker 05: That's not this though. [00:55:22] Speaker 05: This is the reason the product is adulterated and misbranded is because it failed to go through the pre-market authorization requirement required by the Tobacco Control Act. [00:55:32] Speaker 05: And just to be clear, this is [00:55:36] Speaker 05: Sorry, yes. [00:55:37] Speaker 05: And that is the reason why it's adulterated, Ms. [00:55:39] Speaker 05: Franden, and it's also the reason why there isn't a kind of common law analog, because that requirement to go through the process didn't exist at common law. [00:55:51] Speaker 04: Back to jocacy for a minute. [00:55:55] Speaker 04: Different parts of the opinion cut in different directions. [00:56:00] Speaker 04: We look at the [00:56:02] Speaker 04: Distinction of Atlas Roofing, there's some language that's helpful for you in 2B5. [00:56:08] Speaker 04: But I want you to focus on 2B1, which is the court's affirmative discussion of public rights doctrine. [00:56:21] Speaker 04: We've just gone through step one of the analysis, which they say is the Seventh Amendment implicated. [00:56:29] Speaker 04: That's the prior question. [00:56:33] Speaker 04: answer is clearly yes, and you haven't even contested that. [00:56:36] Speaker 05: We're not, we're not, we're not. [00:56:38] Speaker 04: So then they say if a suit is in the nature of an action at common law, right, which is just that first half of the analysis, which we've answered. [00:56:48] Speaker 04: Yes. [00:56:50] Speaker 04: Then the matter presumptively concerns private rights and adjudication by an article three court is mandatory. [00:57:01] Speaker 04: What do you do with that? [00:57:03] Speaker 04: It's a pretty strong statement. [00:57:06] Speaker 05: I guess, for one, it's presumptively, right? [00:57:07] Speaker 05: There has to be a way to robot that with the public rights. [00:57:11] Speaker 04: With a strong showing of history. [00:57:15] Speaker 05: I don't think it's a strong showing of history, right? [00:57:17] Speaker 05: I mean, it's a little bit hard because on the next page, or what is my printout of the next page, but I believe is 129, they then cite Oceanic Steam Navigation Company, right? [00:57:26] Speaker 05: And that's a case in which [00:57:28] Speaker 05: there was money penalties being assessed in which that was a public rate scheme. [00:57:33] Speaker 04: The data points are, they cut across different areas and different governmental powers. [00:57:44] Speaker 04: This real statement is what it is. [00:57:48] Speaker 03: I thought your answer to that was, [00:57:52] Speaker 03: that this isn't in the nature of an action at common law because it's new and because unlike in Jarkozy where, yes, the SEC Act is new, but when you're answering the question, is this a violation, you're asking a very familiar common law fraud question. [00:58:11] Speaker 03: Whereas here, when you're answering the question, [00:58:14] Speaker 03: Is this misbranded? [00:58:15] Speaker 03: You're looking at, well, does this advance the public health? [00:58:20] Speaker 05: It's the... [00:58:24] Speaker 05: And the reason I think the ocean steam navigation question case is helpful, Your Honor, is because it's certainly the case that in the first part of the jerk-easy analysis, what's being asked is, is this of a claim that's like common law? [00:58:39] Speaker 05: Is a money penalty the kind of thing that might implicate the Senate amendment? [00:58:43] Speaker 04: Is the claim sufficiently like one? [00:58:49] Speaker 04: heard in the law courts, considering both the cause of action and the remedy. [00:58:54] Speaker 05: But the second part of the analysis is mostly on the fraud element, Your Honor, right? [00:58:58] Speaker 05: And that's the big, I think that's a takeaway from trikese. [00:59:01] Speaker 05: It's the reason why they say Grand Finanserita controls, right? [00:59:04] Speaker 05: Because the fact that fraud and that the Securities Act more or less just adopted and codified a commonwealth fraud claim was the reason why the court concluded it implicated [00:59:15] Speaker 05: private rights. [00:59:16] Speaker 05: And our point is that there isn't an analog to the fraud piece of the jarkisi analysis, because the thing that's being asserted here, which is that the product is adulterated, misbranded, isn't something that exists a common law. [00:59:29] Speaker 05: And so [00:59:31] Speaker 05: I think the analysis is tricky, but I take the first part to mostly be focused on, is this the kind of thing that is implicated on the Seventh Amendment? [00:59:40] Speaker 05: And the answer to that question in Jorkezi was yes, because it was a sole monetary penalty. [00:59:43] Speaker 05: We're not contesting that element of the analysis here. [00:59:46] Speaker 05: The second part of the analysis, I think, is about, is this a private right? [00:59:50] Speaker 05: Because it is the kind of thing at common law. [00:59:53] Speaker 04: Part of that threshold analysis, the remedy is, [00:59:58] Speaker 04: very strong for the challengers on monetary, and you haven't contested that. [01:00:03] Speaker 04: The cause of action piece, if you go back to toll, that cuts against you as well. [01:00:12] Speaker 04: I don't think so, Your Honor. [01:00:13] Speaker 05: I mean, I think that is only if you treat both the cause of action and the remedy as both a civil monetary penalty assessment. [01:00:23] Speaker 04: I mean, the government drew an analogy to nuisance, the challengers to an action on a debt. [01:00:31] Speaker 05: But then, Your Honor, in Jorkezi's whole analysis of the fraud provision, that has to fit in the analysis. [01:00:37] Speaker 05: I mean, that's the reason why this is a private right in Jorkezi, at least. [01:00:41] Speaker 05: It's because the Securities Act fraud provision just built on common law fraud principles. [01:00:47] Speaker 05: And our point is, that's plainly not the case here. [01:00:52] Speaker 05: I think the way to read Jarkisi is to say, once the civil monetary penalties, if there's a civil monetary being assessed, which implicates the seventh amendment, then you have to look to see, is this the kind of thing that was decided at common law? [01:01:04] Speaker 05: And the analysis there is about the fraud provisions. [01:01:07] Speaker 05: And our point here is what's being used. [01:01:09] Speaker 04: I mean, that creates a weird near total overlap between the [01:01:17] Speaker 04: Is the 7th amendment implicated question and does the public rights exception apply question. [01:01:25] Speaker 04: I don't think so. [01:01:25] Speaker 04: I mean, I think if you the implication question has a cause of action dimension and a remedy dimension measuring the statutory scheme relative to the common law. [01:01:38] Speaker 04: And maybe, I think, I'm not sure I'm fully following. [01:01:43] Speaker 05: I'm sorry. [01:01:43] Speaker 05: I might be talking shorthand too much. [01:01:46] Speaker 05: I think that it's right that if all that mattered was it's a civil monetary penalty being assessed, then the first and second steps of the analysis would almost always converge. [01:01:55] Speaker 05: Because civil monetary penalty is something that implicates the seventh amendment. [01:01:59] Speaker 04: You think the threshold applicability question [01:02:04] Speaker 04: is largely or more importantly about the remedy and the public rights exception question is centrally about the cause of action. [01:02:17] Speaker 05: Yes, your honor, I think that's right. [01:02:19] Speaker 05: But I just want to be very clear when I say that that I think it's possible to look at it as if the cause of action is a self monetary penalty. [01:02:28] Speaker 05: That's a little bit how the first part of the analysis is conducted. [01:02:31] Speaker 05: And [01:02:32] Speaker 05: The second part of the analysis clearly that... [01:02:35] Speaker 05: It's really about the fraud provision, right? [01:02:37] Speaker 05: I mean, that's the way the court says that Atlas roofing is still good law. [01:02:41] Speaker 05: It's because I didn't have any parallel in the common law, but of course there was a civil monetary penalty being assessed there. [01:02:45] Speaker 05: So if all that mattered was whether it's a civil monetary penalty, I think both Atlas roofing would have to be overturned. [01:02:52] Speaker 05: I think ocean navigation services would also be wrong. [01:02:57] Speaker 05: And so I think that all indicates that the analysis at the second step in the public rights piece is, [01:03:04] Speaker 05: I don't have the right framing for it, but is the substance of the claim something that existed at common law? [01:03:10] Speaker 05: In Jarkisi, that was yes, because fraud, the Securities Act provisions built on common law fraud. [01:03:16] Speaker 05: And here, the answer to that question is no, because the enforcement of the adultery and misbranding provisions that are at issue here don't have any parallel at the common law. [01:03:26] Speaker 04: My last question for me is about the Fifth Circuit opinion, AT&T. [01:03:34] Speaker 04: Judge Duncan, in that case, ruling against the government, drew a somewhat – you know what the right word is – creative analogy to negligence. [01:03:45] Speaker 04: He said the analogy in that case to negligence was [01:03:51] Speaker 04: a good bit less obvious than the analogy and jarkacy to fraud. [01:03:57] Speaker 04: You all petitioned for serve in that case, but you did not contest that point. [01:04:04] Speaker 04: You contested only the de novo, whether de novo review of the NAL solves the Seventh Amendment problem. [01:04:14] Speaker 04: So has the government accepted [01:04:19] Speaker 04: the Fifth Circuit ruling that the analogy in that in that case was close enough? [01:04:27] Speaker 05: Your honor, as you know, it decisions about the government, what to appeal, what to seek serve on. [01:04:32] Speaker 04: Understood. [01:04:35] Speaker 04: Tell me the government has no position. [01:04:37] Speaker 04: I will accept that. [01:04:38] Speaker 04: But I thought it was odd that you did not take that up. [01:04:42] Speaker 05: I will say just to take a step back, though, I would say [01:04:46] Speaker 05: You know, in Atlas Roofing as well, you could have analogized those to some kind of premises liability or some other kind of negligence claims there. [01:04:55] Speaker 05: Or in some instances, you could even also analogize them to some form of strict liability claims. [01:05:01] Speaker 05: And that wasn't a sufficient connection, at least for the Supreme Court and JARCA-C to say that Atlas also concerned private rights. [01:05:09] Speaker 05: And so I think that [01:05:12] Speaker 05: The indication from Dirkessie is same basic principles. [01:05:16] Speaker 05: You look to the common law to determine how to analyze this. [01:05:20] Speaker 05: And there may be difficulty about how far that goes. [01:05:24] Speaker 04: AT&T might be close enough, this case is. [01:05:27] Speaker 04: Yes, exactly. [01:05:28] Speaker 04: Thank you. [01:05:30] Speaker 05: If there are no other questions. [01:05:32] Speaker 03: I just wonder if you have any, you haven't taken up EXALTA [01:05:39] Speaker 03: Is there any further, do you have any reflections on how you would decide this case differently or whether you embrace the analysis in that case? [01:05:47] Speaker 05: In Exalta? [01:05:48] Speaker 05: Yeah. [01:05:50] Speaker 05: We think Exalta was decided correctly. [01:05:53] Speaker 05: There, the court principally relied on atlas roofing. [01:05:56] Speaker 05: I think the analysis here could look to a richer history about regulation in this area as it concerns [01:06:05] Speaker 05: hazardous foods and drugs, both in terms of Houston as we've already discussed, but also I think the long history of the FDCA having almost the exact same set of provisions here. [01:06:16] Speaker 05: And no one has ever suggested that the FDCA is a private rights scheme. [01:06:21] Speaker 05: And so I think all those things taken together point in the same direction. [01:06:26] Speaker 05: And again, not all those principles were present in the exalted case. [01:06:34] Speaker 02: Anything more, right? [01:06:50] Speaker 06: So with respect to the um analyses in I just wanna call the court's attention cuz I went back and looked and that so um it's pretty clear in the way they discuss this. [01:07:02] Speaker 06: These are alternative holdings or or alternative reasons for um holding that the claim implicates the seventh amendment uh because they say on 123 um in this case, the remedy is all but as positive. [01:07:17] Speaker 06: Then, they go on to discuss the remedy. [01:07:21] Speaker 06: Beginning at 125, they say, in sum, the civil penalties in this case are designed to punish and deter, not to compensate, therefore, quote, the type of remedy at common law that could only be enforced in the courts of law, period. [01:07:35] Speaker 06: That's a quote from Tall. [01:07:37] Speaker 06: Then they transition to their discussion of whether the fraud claim is analogous to the common law cause of action. [01:07:47] Speaker 06: But the way they lead into that discussion, they say the close relationship between these causes of actions, in this case in common law fraud claims, confirms the conclusion we've already made that the Seventh Amendment applies. [01:07:58] Speaker 06: And I would submit to the court that [01:08:01] Speaker 06: I mean, as you know, the Supreme Court engages in alternative holdings. [01:08:04] Speaker 06: They're both binding. [01:08:05] Speaker 06: If the court gives alternative reasons for a ruling, as a matter of Supreme Court law, both of those are effective. [01:08:12] Speaker 06: It doesn't matter which one they discuss first or second. [01:08:16] Speaker 06: And also, the [01:08:23] Speaker 06: toll was decided after atlas roofing and toll was the government seeking a penalty for violation of a novel statutory scheme toll came after atlas roofing and supports our position. [01:08:39] Speaker 06: And the last thing I want to say is just to call attention to the radicality of the FDA's position here. [01:08:44] Speaker 06: If the government can essentially create a new licensing scheme or marketing scheme over a certain industry and say, because this is a novel statutory scheme, we can siphon all of the disputes under it, including for civil money penalties away from Article III courts, that's a very radical position. [01:09:01] Speaker 06: That's not what the case law supports. [01:09:02] Speaker 03: I think they're saying that they may be public rights [01:09:08] Speaker 03: They're novel, so long as the claims are not closely akin to a common law claim. [01:09:16] Speaker 03: So it's less radical than the way you just described it. [01:09:20] Speaker 06: And my response, Your Honor, would be that the way that JARC-C discusses toll says that means that the claim you refer to as the civil penalty is a type of claim that demands Article III court. [01:09:36] Speaker 03: Thank you in case it's submitted. [01:09:38] Speaker 06: Thank you, Your Honor.