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The Fight Over Flavored E-Cigarettes · Bloomberg Law

0:03
Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
0:10
Speaker 2: About one point six million school children currently use e cigarettes.
0:15
Speaker 2: Flavored vapes with colorful names that evoke candy and sweets
0:20
Speaker 2: are particularly appealing to young people, which has prompted the
0:23
Speaker 2: Food and Drug Administration to curb access to the products.
0:28
Speaker 2: The FDA turned down two companies' applications to market e
0:32
Speaker 2: cigarettes with names like Jimmy the Juiceman, Peachy Strawberry, and
0:37
Speaker 2: Suicide Bunny, Mother's Milk and Cookies. The agency's attorney, Curtis Gannin,
0:43
Speaker 2: defended its position at the Supreme Court.
0:46
Speaker 1: Research has long shown that flavors increased youth appeal of
0:50
Speaker 1: tobacco products, and evidence accumulates further confirming that youth are
0:54
Speaker 1: particularly attracted to flavored ends products. The concern would be
0:59
Speaker 1: that their getting addicted to tobacco at a time when
1:02
Speaker 1: when tobacco to a nicotine, at a time when nicotine
1:06
Speaker 1: is dangerous to their developing brains, and may be, you know,
1:10
Speaker 1: sensing them to a long life of needing to satisfy
1:15
Speaker 1: that addiction.
1:16
Speaker 2: The vaping companies say the FDA changed its standards with
1:21
Speaker 2: little warning as it blocked the sale of more than
1:23
Speaker 2: a million new flavored products. But just as Elena Kagan
1:28
Speaker 2: said that the FDA's position has been clear, do.
1:31
Speaker 3: You know that FDA thinks that flavors? I mean, FDA
1:35
Speaker 3: has been completely upfront about this, and I think that
1:38
Speaker 3: the point you know that flavors you give people blueberry vapes.
1:44
Speaker 3: The difficulty with that, and FDA I think has tried
1:48
Speaker 3: to document this is that blueberry vapes are very appealing
1:52
Speaker 3: to sixteen year olds, not to forty year olds.
1:55
Speaker 2: Aside from legalities, the practical question is what's the remedy
1:59
Speaker 2: even if the court rules for the vaping companies, because,
2:02
Speaker 2: as just as Brett Kavanaugh pointed out to the company's attorney,
2:06
Speaker 2: Eric Higher, the companies can always reapply to the FDA
2:10
Speaker 2: for sales authorization.
2:12
Speaker 4: And while they won this case, they can reapply.
2:16
Speaker 1: Yes, if they won this case or if they lose
2:18
Speaker 1: this case, they will be able to reapply.
2:20
Speaker 4: That's my question about what the relief really accomplishes here
2:25
Speaker 4: that is being sought as a practical matter. I understand
2:28
Speaker 4: the legal point the FDA acted arbitraining capriciously, but either way,
2:32
Speaker 4: it's going to be that they can reapply and hope
2:36
Speaker 4: to succeed.
2:38
Speaker 2: This case is an appeal from the conservative Fifth Circuit's
2:41
Speaker 2: decision finding that the agency unfairly shifted its standards for
2:46
Speaker 2: approving the vaping products while deciding on applications from the
2:50
Speaker 2: two companies. Joining me is Sean Collins, a partner at
2:53
Speaker 2: Straddling Yoguck, Carlson and Rauth give us some background on
2:58
Speaker 2: the FDA and these flavors eat cigarettes.
3:01
Speaker 5: Let's start with what the FDA's mandate is. The FDA's
3:05
Speaker 5: mandate is to look out for the health and well
3:07
Speaker 5: being of the general American public, meaning they are supposed
3:10
Speaker 5: to certify all foods and drugs and certify that they
3:13
Speaker 5: are healthy and beneficial for the well being of the
3:17
Speaker 5: citizens of the United States of America. And so what
3:20
Speaker 5: we have going on between the FDA and the e
3:23
Speaker 5: cigarette companies right now, I call it a bit of
3:26
Speaker 5: the game of whack a mole. And so it's like anything.
3:30
Speaker 5: You know, if you regulate one product and you're successful
3:32
Speaker 5: in getting a certain product regulated, another product is going
3:35
Speaker 5: to pop up. And so you know, the FDA spent
3:39
Speaker 5: fifty years or more trying to get people to stop
3:43
Speaker 5: smoking cigarettes, right, and they were pretty successful at doing that.
3:47
Speaker 5: When you look at the statistics of how many people
3:49
Speaker 5: actually smoke cigarettes. You know, I remember growing up in
3:52
Speaker 5: the eighties and everybody smoked. You know, people smoked indoors,
3:56
Speaker 5: people smoked in offices, and everybody smoked. Nowadays, you know,
4:00
Speaker 5: I live in California, so it's probably more skew than
4:03
Speaker 5: anywhere else. But you can't smoke anywhere. I don't see
4:06
Speaker 5: anybody smoking. And you know, you look at the statistics,
4:09
Speaker 5: I think they say two percent of America smoke cigarettes now,
4:12
Speaker 5: which is negligible. That's pretty much nobody smokes cigarettes. So
4:16
Speaker 5: obviously the people that still do smoke cigarettes. You know,
4:20
Speaker 5: business and enterprise are always wanting to come up with
4:22
Speaker 5: an alternative, so they came up with the e cigarette.
4:26
Speaker 5: And so the e cigarette was designed as a mechanism
4:29
Speaker 5: to help wean adults who are otherwise addicted to cigarettes,
4:33
Speaker 5: that try to help them stop smoking cigarettes and smoke
4:36
Speaker 5: something that would be a better alternative for them. Now,
4:39
Speaker 5: like any business, e cigarette companies, they want to advertise
4:42
Speaker 5: and market their products and make it look cool. So
4:45
Speaker 5: think the Marlboro Man. You know, I used to always
4:47
Speaker 5: think when I would drive a billboard, look at their
4:50
Speaker 5: cowboy It looks really cool with the cigarette and mouth,
4:53
Speaker 5: and that attracts a lot of people that want to
4:55
Speaker 5: smoke cigarettes. So e cigarette companies obviously came up with
4:59
Speaker 5: creative ways to advertising market their e cigarette fronduct. Now
5:03
Speaker 5: that's all well and good, and the FDA probably wouldn't
5:06
Speaker 5: have cared if their marketing was being successful with adults.
5:10
Speaker 5: The problem is is e cigarettes became cool amongst younger
5:14
Speaker 5: demographics and particular teenagers, and so what you saw is
5:18
Speaker 5: a spike in teams using e cigarette. So it was
5:22
Speaker 5: one of those situations. The reason why I said whack
5:24
Speaker 5: the mo mole was because you whacked one problem and
5:26
Speaker 5: were able to successfully pretty much negate that problem, and
5:30
Speaker 5: then another problem popped up over on the right, which
5:32
Speaker 5: as teenagers are now really into e cigarette and explain.
5:36
Speaker 2: The issue in the case the Supreme Court heard this week.
5:39
Speaker 5: So the issue that you currently have before the Supreme Court,
5:43
Speaker 5: it's more of what is the authority of the FDA.
5:47
Speaker 5: That's the actual legal question the Supreme Court is looking at.
5:50
Speaker 5: But I will say that one of the balancing tests
5:53
Speaker 5: that the Supreme Court is having to deal with is well, okay,
5:57
Speaker 5: I understand that the FDA is trying to regulate, you know,
6:02
Speaker 5: the advertising and marketing of cigarettes. Two teams. But the
6:05
Speaker 5: question becomes, one, do they have the authority to do that?
6:09
Speaker 5: And whether or not they have the authority to do
6:11
Speaker 5: that is more of a great question, because I think
6:14
Speaker 5: the Supreme Court is looking at it as well. What
6:17
Speaker 5: they're doing is coming from a good place. They're trying
6:20
Speaker 5: to protect the help of the future generation. And so
6:22
Speaker 5: I think that's the particular that the Supreme Court is
6:25
Speaker 5: grappling with right now, which is why when you listen
6:28
Speaker 5: to the oral argument, the oral argument, even you know,
6:31
Speaker 5: everybody said, oh, it's the conservative court. They're probably going
6:34
Speaker 5: to side with big business. They're going to side with
6:38
Speaker 5: the e cigarette companies. And what you heard oral argument
6:41
Speaker 5: is it sounded like the Supreme Court was kind of
6:45
Speaker 5: deferring to the regulatory authority of the SPA.
6:49
Speaker 2: Yeah, that was surprising. Just as Kagan said, I guess
6:53
Speaker 2: I'm not really seeing what the surprise is here or
6:56
Speaker 2: what the change is here, because basically everyone knew the
7:00
Speaker 2: FDA's position on e cigarettes. So the question that Ret.
7:06
Speaker 2: Kavanaugh brought up as well, what's the relief here? Even
7:09
Speaker 2: if you win the cigarette.
7:10
Speaker 5: Companies exactly, And that's the big question, and that's usually
7:15
Speaker 5: the biggest problem. You know, It's funny everybody spends all
7:18
Speaker 5: their time in law school thinking about the big legal
7:21
Speaker 5: arguments of why I'm right on a particular issue, but
7:23
Speaker 5: nobody ever thinks, okay, well what if I win? What's
7:26
Speaker 5: the remedy? Which is why when I talked to the young
7:29
Speaker 5: law students, I always tell them, probably the most important
7:32
Speaker 5: class you will take while you're in law school is remedy.
7:35
Speaker 5: And they look at me confused, like nities, like what
7:37
Speaker 5: are you talking about? That's like what happens after the
7:40
Speaker 5: case is over? And it's like, yeah, I know, but
7:43
Speaker 5: think about it. You can spend ten million dollars arguing
7:45
Speaker 5: that you're right, and then the court days you're right,
7:47
Speaker 5: and then they ask you, well, what do you want?
7:49
Speaker 5: And so that's the issue here is you know, for
7:52
Speaker 5: the e cigarette companies, it's like, okay, well, even if
7:55
Speaker 5: you are correct in saying that the laws that the
8:00
Speaker 5: isn't imposing here are arbitrary and capricious, which is the
8:04
Speaker 5: core legal argument that the e cigarette companies are making,
8:06
Speaker 5: which is a good legal argument. They're basically saying you're
8:09
Speaker 5: making up rules and regulations that are effectively a moving target.
8:13
Speaker 5: So me as a company, I can't even craft policy
8:16
Speaker 5: to address your concerns because every month you're moving the
8:19
Speaker 5: goalpost on me. And so the Supreme Court has it
8:22
Speaker 5: technically said, Okay, let's say that we do tell the
8:26
Speaker 5: FDA that they need to be more definitive with their
8:29
Speaker 5: rule making and say these are the laws and regulations
8:31
Speaker 5: that governing the advertising and marketing and the regulation and
8:35
Speaker 5: e cigarettes. How does that help you?
8:38
Speaker 2: Are the e cigarette companies just looking for more time
8:42
Speaker 2: to start the process over again or do they not
8:46
Speaker 2: want to start the process over again?
8:47
Speaker 5: I think timing is definitely of concern because, if you
8:51
Speaker 5: think about it right now, one of the biggest things
8:54
Speaker 5: and nobody really talks about it when it comes to
8:56
Speaker 5: businesses and advertising and marketing. But they currently have has
9:00
Speaker 5: the attention of a generation, so they have captivated a
9:03
Speaker 5: particular generation. So when you look at cigarette companies, cigarette
9:07
Speaker 5: companies effectively capture the imagination of the baby boomers, and
9:11
Speaker 5: that's a very large demographic. So if you're selling a
9:14
Speaker 5: product and you have a captive audience and a whole
9:17
Speaker 5: generation of you know, so for e cigarette companies. I
9:21
Speaker 5: guess you would call it gen Z. The other day
9:23
Speaker 5: I heard that the granted the gen A.
9:25
Speaker 6: Now I've lost track of the gen So gen Z.
9:30
Speaker 5: I believe is effectively sixteen year old to young professionals.
9:34
Speaker 5: So let's go sixteen to thirty right now. That is
9:38
Speaker 5: the demographic that is very captivated by e cigarette And
9:42
Speaker 5: I think the sense of urgency from the e cigarette
9:45
Speaker 5: generation right now is that they are now being prohibited
9:50
Speaker 5: from advertising and marketing to gen Z, which could be
9:54
Speaker 5: a very lucrative demographic because the thing about especially products
9:59
Speaker 5: like this, if you develop brand loyalty right now, this
10:03
Speaker 5: is the type of product that they will use throughout
10:05
Speaker 5: their lives. It's not like a toy or a video
10:08
Speaker 5: game where a person may grow out of it or
10:10
Speaker 5: phase out of it. You know, if you're an e
10:12
Speaker 5: cigarette person, you may be using the e cigarettes for
10:14
Speaker 5: the next thirty forty fifty years.
10:17
Speaker 2: Do vaping companies have problems getting regular e cigarettes approved
10:23
Speaker 2: or is it just about the flavored e cigarettes.
10:26
Speaker 5: For this particular case, And that's a very important question.
10:30
Speaker 5: For this particular case, you're talking about the flavored e
10:33
Speaker 5: cigarette because that's what the FDA is saying. They're saying,
10:37
Speaker 5: the E cigarette companies with the flavored cigarette, you're no
10:41
Speaker 5: longer targeting the forty year old who is trying to
10:45
Speaker 5: win themselves off a cigarette. You were targeting the thirteen,
10:48
Speaker 5: fourteen to fifteen year old to try to entice them
10:51
Speaker 5: and to hook them on e cigarette so that you
10:54
Speaker 5: have them for a generation, so that you have them
10:56
Speaker 5: for the next forty to fifty years.
10:58
Speaker 2: Now.
10:59
Speaker 5: E cigarette company will probably deny that, but that's absolutely
11:02
Speaker 5: what they're trying to do, and I'm not saying that
11:04
Speaker 5: there's anything wrong with it. That's smart marketing and business strategy.
11:08
Speaker 5: The focus of this particular case that before Supreme Court
11:12
Speaker 5: is the flavored e cigarettes, and the reason why it's
11:15
Speaker 5: the focus of the court is because the FDA is arguing,
11:20
Speaker 5: you are advertising and marketing these flavored cigarettes in a
11:23
Speaker 5: manner whereby you are trying to make them incredibly attractive
11:27
Speaker 5: to gen Z thirteen, fourteen, fifteen, sixteen, seventeen, eighteen year old,
11:32
Speaker 5: and by doing that, you are compromising their health now
11:37
Speaker 5: and for a future generation. E cigarette companies are arguing, well,
11:41
Speaker 5: you can't create an arbitrary and capricious rule that says
11:46
Speaker 5: you as an e cigarette company can advertise and market
11:49
Speaker 5: your e cigarettes, you just can't do it in this manner.
11:52
Speaker 5: You can't have flavors.
11:53
Speaker 2: Coming up next on the Bloomberg Law Show, I'll continue
11:56
Speaker 2: this conversation with Sean Collins. How the President elect's name
11:59
Speaker 2: came up in the oral arguments over flavored east cigarettes.
12:04
Speaker 2: This is Bloomberg. Supreme Court justices seemed skeptical that they
12:08
Speaker 2: could give any relief to companies whose applications to sell
12:12
Speaker 2: flavored e cigarettes were denied by the Food and Drug Administration.
12:17
Speaker 2: Several of the justices pointed out that even if the
12:20
Speaker 2: companies reapplied, the FDA would continue to deny the applications.
12:26
Speaker 2: Perhaps the vaping company's best hope is the incoming Trump administration.
12:32
Speaker 2: Here's the attorney for the vaping companies, Eric Higher.
12:36
Speaker 7: And Frankly, we don't know what FD is, HOWFT is
12:38
Speaker 7: going to approach it on remand we have a new
12:40
Speaker 7: administration coming in. The President elect is on record saying
12:44
Speaker 7: I'm going to say flavored vapes. We don't know exactly
12:47
Speaker 7: what that's going to look like. It maybe that the
12:48
Speaker 7: approach the agency takes is much more aligned with the
12:51
Speaker 7: statute and looks at all the risks and benefits.
12:54
Speaker 2: I've been talking to Sean Collins, a partner at Straddling.
12:57
Speaker 2: So this is an appeal from the ultra conservative Fifth Circuit.
13:02
Speaker 2: There is a circuit split. The second, third, fourth, fifth, sixth, seventh, ninth, tenth,
13:08
Speaker 2: and DC circuits have sided with the FDA and denied
13:12
Speaker 2: the petitions or requests to stay the agency's marketing denial
13:18
Speaker 2: orders for flavored e cigarettes. So the Supreme Court almost
13:21
Speaker 2: had to take this case to straighten it out, even
13:24
Speaker 2: though more than one of the justices said there was
13:27
Speaker 2: no real relief to be had here.
13:29
Speaker 5: That sounds like what's happening here. I was surprised that
13:33
Speaker 5: the Fifth Circuit was the lone wolf here for lack
13:35
Speaker 5: of a better word. You know, it's not the type
13:38
Speaker 5: of ruling that I would have expected out of the
13:40
Speaker 5: Fifth Circuit. But yeah, now, I mean, that's that's what
13:42
Speaker 5: the Supreme Court is up against right now, the effectively
13:45
Speaker 5: overruling the Fifth Circuit.
13:46
Speaker 2: Is it surprising that the justices seemed to be crediting
13:51
Speaker 2: the FDA's expertise here. I mean, this is a court
13:55
Speaker 2: that has been skeptical of the power of federal regulators,
13:59
Speaker 2: including by striking down the Chevron doctrine that had judges
14:04
Speaker 2: deferring to agencies and interpretations of the law.
14:07
Speaker 5: I personally don't think this is kind of outside of
14:11
Speaker 5: what's to be expected from this particular court. I think
14:14
Speaker 5: that this court is very fixated on not necessarily tearing
14:19
Speaker 5: down the authority of a particular agency, but making sure,
14:23
Speaker 5: especially with this particular Supreme Court, they are very focused
14:27
Speaker 5: on making sure that a particular agency does not exceed
14:30
Speaker 5: the authority that was originally granted to it. And so,
14:33
Speaker 5: for instance, I use the FTC as an example. Obviously
14:36
Speaker 5: we're talking about the FDA with this particular case, but
14:39
Speaker 5: and you know those probably I think it was three
14:41
Speaker 5: or four years ago now, there was a ruling that
14:43
Speaker 5: effectively said, hey, the FTC has gone lead beyond the
14:47
Speaker 5: bounds of what the authority that was originally given to
14:50
Speaker 5: them by commas. You know, in the military, you called
14:54
Speaker 5: a mission increase and you set out for objective A,
14:57
Speaker 5: and then the next thing you know you're going after
14:59
Speaker 5: be F and it's like, you know, before you know it,
15:03
Speaker 5: everybody started asking the question of all, right, well, when
15:06
Speaker 5: did the FTC get into the business of going after
15:09
Speaker 5: these types of cases, and so with this particular issue,
15:14
Speaker 5: I think the Supreme Court is looking at it and saying, again,
15:17
Speaker 5: this is kind of how I started my comments was, well,
15:20
Speaker 5: at a very high level, why did we create the FDA? Well,
15:24
Speaker 5: the FDA was created because back in the eighteen hundred
15:27
Speaker 5: there was a severe problem with the quality of food
15:30
Speaker 5: and there were effectively snake oil salves and out there
15:33
Speaker 5: selling drugs that were doing series armed particulars. And so
15:37
Speaker 5: as a society, we decided we should probably have an
15:40
Speaker 5: agency that's responsible for regulating the food and the drugs
15:45
Speaker 5: that are sold and marketed in the United States of America.
15:49
Speaker 5: And when we cut to the red tape of that,
15:51
Speaker 5: what does that mean? How do we keep Americans safe?
15:54
Speaker 5: And so when you look at what the FDA is
15:56
Speaker 5: doing here, they're saying, we are creating these oles because
16:00
Speaker 5: when you're trying to keep teenagers safe, you know, we
16:04
Speaker 5: have eighty years worth of literature and research that pretty
16:08
Speaker 5: convincingly proved that smoking is bad for you. It's really
16:13
Speaker 5: bad for your lungs. It causes lung cancer. And I
16:16
Speaker 5: don't think there's anybody that disagrees with that. And these cigarettes,
16:20
Speaker 5: while they are a better alternative, it's still not great
16:23
Speaker 5: for your health. And the FDA has presented some pretty
16:26
Speaker 5: convincing evidence again that kind of goes beyond whatever your
16:31
Speaker 5: political views may be, and it's kind of unequivocal that
16:35
Speaker 5: e cigarettes are probably not good for the lungs of teenagers.
16:38
Speaker 5: And so the Supine Court is looking at this and saying, well,
16:42
Speaker 5: the FDA has been tasked with keeping teenagers safe, and
16:45
Speaker 5: they are now passing involves in regulations that are very
16:48
Speaker 5: focused on keeping teenagers safe. Kind of straightforward, you know,
16:53
Speaker 5: even in this concern, Supreme Court has to look at
16:55
Speaker 5: it and say, the job, FDA, you're doing.
16:58
Speaker 2: Your job is Joining his campaign, Trump said that he
17:01
Speaker 2: was going to save vaping basically, and during the oral arguments,
17:06
Speaker 2: the attorney for the companies pointed to that, so, what's
17:10
Speaker 2: the effect of a new administration? Can the FDA just
17:14
Speaker 2: do a one to eighty on E flavored cigarettes?
17:18
Speaker 5: Obviously, whenever there's a new administration, there's always every federal
17:24
Speaker 5: agency there's going to be a significant shift in policy.
17:27
Speaker 5: So whoever takes over the FDA is going to be
17:30
Speaker 5: a Donald Trump appoint to e and they are going
17:33
Speaker 5: to execute me. What the wishes of President Trump. Now,
17:37
Speaker 5: I will say that when President Trump says, you know,
17:40
Speaker 5: I'm going to support e cigarette, he can do that
17:44
Speaker 5: and still kind of ad yere to what the Supreme
17:47
Speaker 5: Court is talking about here, because keep in mind, thinking
17:49
Speaker 5: about who did he appoint as his head of Department
17:52
Speaker 5: of Health and Human Service Arekji, And they've already talked
17:55
Speaker 5: about saying, all right, we're going to, you know, use
17:58
Speaker 5: a lot of scrutiny with respect to the drugs that
18:01
Speaker 5: we are administering to the American public. So when you
18:04
Speaker 5: look at what's going on here, let me say this
18:06
Speaker 5: because I want to be quit. I am by no
18:08
Speaker 5: means beaten up on the e cigarette industry at all.
18:12
Speaker 5: What's that state here is the fact that the SBA
18:15
Speaker 5: believes that the e cigarette company are advertising and marketing
18:19
Speaker 5: their products to people who are not legally authorized to
18:23
Speaker 5: buy their products. I probably should have started with that.
18:26
Speaker 5: And so what the FDA is saying here is, hey,
18:29
Speaker 5: e cigarette companies, if you want to put billboards up
18:32
Speaker 5: on every single billboard along every major freeware in the
18:35
Speaker 5: United States to say, if you are eighteen and up,
18:38
Speaker 5: you should really buy my product, knock yourself out but
18:42
Speaker 5: the problem is is the data suggests that the flavored
18:46
Speaker 5: products that you are marketing, more fourteen, fifteen and sixteen
18:50
Speaker 5: year olds are buying your product than eighteen and ups.
18:53
Speaker 5: And we think that is very intentional on your part,
18:56
Speaker 5: and that you are aware of the fact that you're
18:58
Speaker 5: advertising in marketing is targeting and being more effective with
19:03
Speaker 5: people who are not even legally authorized to buy your product.
19:06
Speaker 5: That's what they're taking issues with. And I think that
19:08
Speaker 5: handedly when you look at who President Trump depicted for
19:11
Speaker 5: his Department of Health and Human Services are As K. Junior,
19:15
Speaker 5: and then his other mandate of I will support e
19:18
Speaker 5: cigarette companies, I don't really I think he can achieve
19:21
Speaker 5: both of those objectives. He's effectively saying, hey, e cigarette companies,
19:25
Speaker 5: if you want to increase your profits themselves to the
19:28
Speaker 5: eighteen and up, so be it. As long as you
19:30
Speaker 5: don't break any laws, go forward, but you can't market
19:33
Speaker 5: your products at thirteen, fourteen, fifteen year old.
19:35
Speaker 2: Thanks so much, Sean. That's Sean Collins, a partner at
19:38
Speaker 2: Straddling Yoga, Carlson and Ralth And for those who are
19:42
Speaker 2: counting on President elect Trump to change the rules for
19:47
Speaker 2: flavored e cigarettes, so let's take a look at his
19:50
Speaker 2: various positions. During his first administration. In twenty nineteen, Trump
19:56
Speaker 2: threatened to ban most flavored East cigarettes from the market
20:00
Speaker 2: due to concerns over the appeal to children. He later
20:03
Speaker 2: backed off the ban after it was met with industry resistance.
20:07
Speaker 2: In twenty twenty, his ban on certain East cigarette pods
20:10
Speaker 2: made by companies like Jewel Labs prohibited flavored e liquids,
20:15
Speaker 2: but allowed menthol and tobacco products on the market. He
20:19
Speaker 2: also signed a law that raised the federal legal age
20:22
Speaker 2: for purchasing tobacco from eighteen to twenty one, which vaping
20:26
Speaker 2: proponents say lowered youth vaping numbers. So stay tuned. Coming
20:31
Speaker 2: up next on the Bloomberg Law Show, The Justice has
20:34
Speaker 2: once again faced a question over the role that US
20:38
Speaker 2: court should play in returning properties stolen from Holocaust survivors
20:43
Speaker 2: by foreign countries during World War II. I'm June Grosso
20:47
Speaker 2: and you're listening to Bloomberg. The Supreme Court once again
20:52
Speaker 2: struggle with the role that US courts should play in
20:55
Speaker 2: returning properties stolen by foreign countries during World War two
21:00
Speaker 2: to its original owners. In several cases brought by Holocaust survivors,
21:04
Speaker 2: against foreign nations. The justices have wrestled with how to
21:08
Speaker 2: balance the international friction that can result from hauling sovereign
21:13
Speaker 2: nations into US courts, while at the same time fulfilling
21:17
Speaker 2: Congress's intent to allow suits in some cases. In a
21:21
Speaker 2: case the Justice is heard on Tuesday, Holocaust survivors and
21:25
Speaker 2: their families say Hungary and its National Railroad stole property
21:29
Speaker 2: from Jews while transporting them to concentration camps. The question
21:34
Speaker 2: is whether the US is the proper place to resolve
21:37
Speaker 2: the legal dispute. Joining me is mc Sanaila, a partner
21:40
Speaker 2: at Complex Appellate Litigation Group. So MC, we have seen
21:44
Speaker 2: similar cases before. In fact, we've seen this case at
21:48
Speaker 2: the Supreme Court before.
21:49
Speaker 6: You know, this isn't an art case. This is the
21:52
Speaker 6: really all kinds of property case. Most of these cases
21:57
Speaker 6: are involved in some kind of Holocaust art. But this
22:00
Speaker 6: is yes, we sent the people off to the camp,
22:04
Speaker 6: and we also took all of their property and transported
22:09
Speaker 6: that on the rail line. So they've been trying to,
22:13
Speaker 6: you know, make this claim and have been really, like
22:16
Speaker 6: many of these Holocaust claims, really bouncing back and forth
22:21
Speaker 6: between the Supreme Court, the Federal Court of appeal the
22:25
Speaker 6: district court on some very threshold issues which often come
22:31
Speaker 6: up in these cases involving sovereign immunity. You know, under
22:35
Speaker 6: the foreign Sovereign mediac can you do the Hungarian government
22:39
Speaker 6: or some other countries government for these activities.
22:45
Speaker 2: We've talked about this so many times. I'm surprised this
22:48
Speaker 2: issue isn't more settled.
22:50
Speaker 6: Yeah, I mean, I was just looking back at some
22:53
Speaker 6: of the sovereign immunity questions that have come up in
22:56
Speaker 6: the Holocaust context, and really one of the last, you know,
23:00
Speaker 6: ultimately successful ones was Altman back in two thousand and four,
23:04
Speaker 6: where the question there was just whether the Foreign Sovereign
23:07
Speaker 6: Immunity that applied retroactively or not and therefore allowed Maria
23:13
Speaker 6: Altman to bring her claim against Austria for her paintings
23:20
Speaker 6: that Austria had taken. And in that case, of course, yes,
23:24
Speaker 6: you know, Foreign Sovereignity Act applies retroactively and therefore property
23:29
Speaker 6: taken in violation of international law, which her case qualified for. Yes, Okay,
23:36
Speaker 6: that's the standards and it can you can see governments
23:40
Speaker 6: for that. But since then it's been this case and
23:44
Speaker 6: others have really dealt with Okay, now that we know
23:48
Speaker 6: that it applies retroactively. What are the you know, sort
23:52
Speaker 6: of exceptions within that statute that allow these kinds of
23:57
Speaker 6: claims to be brought? And how do all of those
24:00
Speaker 6: various exceptions you know, kind of worked out and end
24:04
Speaker 6: up applying. And so here this expropriation exception. And really
24:11
Speaker 6: it seems like the DC Circuit has been trying very
24:14
Speaker 6: hard to find a way to allow these clients to
24:17
Speaker 6: be brought. Right, it's all various aspects of expropriation that
24:24
Speaker 6: they've been hanging their hat on to say, no, no, no,
24:26
Speaker 6: you really need to look at this more carefully, just
24:28
Speaker 6: a court or there's a possibility here, you know that
24:32
Speaker 6: a claim could be brought. We need to we need
24:34
Speaker 6: to look at that again. And each time it's been
24:37
Speaker 6: sent back on the particular theory that the that the
24:41
Speaker 6: Circuit may have relied on. But the Spring Court has
24:44
Speaker 6: even opened up other avenues for consideration. And so that's
24:47
Speaker 6: why it keeps coming back, is you think we haven't
24:51
Speaker 6: solved these problems already, we haven't figured out the scope
24:56
Speaker 6: of sovereign immunity, and it seems like here is this
25:01
Speaker 6: effort to make sure we have turned over every rock,
25:05
Speaker 6: you know, to make sure that we have fully investigated
25:07
Speaker 6: every potential for acclaim against Hungary. It keeps coming back
25:12
Speaker 6: for that reason.
25:13
Speaker 2: The cases we've discussed before involved artworks, particular artworks that
25:18
Speaker 2: were stolen. This case involves property. And it's unclear to
25:23
Speaker 2: me what kind of property that the Hungarian government stole
25:27
Speaker 2: and then liquidated and the money went into the national
25:31
Speaker 2: treasury and then that fund was used to issue bonds
25:34
Speaker 2: in the US. But how would they trace the stolen
25:38
Speaker 2: property to the bonds?
25:40
Speaker 6: Well, that's the question, and I think that was the
25:42
Speaker 6: concern that really animated or argument really on both sides.
25:46
Speaker 6: Some of the justices suggested, well, this question of commingling
25:52
Speaker 6: and the proof of commingling and what percentage of the
25:56
Speaker 6: money here in the US needs to be either theoretically
26:00
Speaker 6: or you know, potentially traceable to this nationalized property that
26:05
Speaker 6: had been taken from Jewish families. And that was really
26:10
Speaker 6: kind of the rub right of the petition of what
26:13
Speaker 6: level of proof and who needs to prove it? And
26:17
Speaker 6: the justices were kind of scratching their heads saying, well,
26:21
Speaker 6: on the one hand, were concerned that you as a
26:25
Speaker 6: claimant could almost make any claim right, sure, there's still
26:28
Speaker 6: must be some trace element of co mingling, or there
26:31
Speaker 6: could be and as a result of there could be
26:34
Speaker 6: even a small amount that now you can make a
26:37
Speaker 6: claim against another country in US courts. That seemed concerning
26:42
Speaker 6: because this is an exception to the Sovereign Community Act,
26:46
Speaker 6: the General Provision saying you cannot do countries in US courts.
26:51
Speaker 6: And on the other hand, there were the concerns raised, well,
26:56
Speaker 6: if you don't have some kind of allow some kind
26:59
Speaker 6: of claims for co mingling and giving some kind of
27:03
Speaker 6: laxity for that definition, then any bad actor could just go, oh, well,
27:09
Speaker 6: I'm going to I'm going to take this property and
27:12
Speaker 6: then the next thing I'm going to do is I'm
27:13
Speaker 6: going to co mingle it with something. I'm going to
27:15
Speaker 6: put it somewhere else, and then that will immunize me
27:18
Speaker 6: from this exception to have clean spot against me. And
27:23
Speaker 6: so there's also that concern that, like, well, if you
27:25
Speaker 6: make it too easy for someone to kind of hide
27:29
Speaker 6: the ball and get themselves outside of this exception, then
27:32
Speaker 6: what's the point of having the exception. So those both
27:35
Speaker 6: of those concerns concerned about going too far and concerned
27:39
Speaker 6: about you know, letting letting folks who are violating international
27:45
Speaker 6: law off off the hook more easily. Those were the tensions.
27:49
Speaker 6: But the members of the Court identified.
27:53
Speaker 2: I feel like I've heard these same concerns from the
27:57
Speaker 2: justices about, you know, the risk of reciprocal actions by
28:02
Speaker 2: other countries and it's a big deal to haul a
28:05
Speaker 2: foreign country into US court. I mean, those are the
28:08
Speaker 2: same things they've been saying for years.
28:11
Speaker 6: Yeah, exactly, it's the same. It's the same because it's
28:15
Speaker 6: the same concerns and policies animating US foreign policy and
28:21
Speaker 6: the State Department's view on these things. And also they're
28:25
Speaker 6: looking at the Foreign Sovereign I Meanity Act and the
28:28
Speaker 6: various things that they congressated in enacting those. So yes,
28:34
Speaker 6: they come up with the same concerns because they're looking
28:38
Speaker 6: at various aspects of the same statues and so the
28:43
Speaker 6: same policy concerns.
28:45
Speaker 2: Could you tell it all from the oral arguments which
28:48
Speaker 2: way it was going. It seemed to me like the
28:51
Speaker 2: justices were all over the place.
28:53
Speaker 6: I mean, I think it's hard. I think it's harder
28:56
Speaker 6: to tell here. But if you look at their overarching
29:00
Speaker 6: concerns that you mentioned before, which is, we don't want
29:03
Speaker 6: to open the door to everyone to bring their concerns
29:07
Speaker 6: to US courts, and maybe somebody could do this to us,
29:11
Speaker 6: and we want to be careful about that too, of
29:13
Speaker 6: being called into other courts. That that is the general,
29:17
Speaker 6: you know, conservative sort of reaction to this is to say,
29:21
Speaker 6: we don't want to do anything that would make that easier.
29:24
Speaker 6: We want to be very cautious about that. And so
29:28
Speaker 6: you'd say, oh, well, if you want to go with
29:31
Speaker 6: where the court ends up going normally or typically in
29:34
Speaker 6: these cases, they typically end up being, you know, very
29:38
Speaker 6: narrowly construing the exceptions to the Foreign Common Community Act.
29:43
Speaker 6: But on the other hand, every once in a while
29:45
Speaker 6: you have a case like Altman where they said, okay,
29:48
Speaker 6: you know, we're opening this, we're opening this up, we're
29:50
Speaker 6: applying the Act retroactively and you know, allowing this claim
29:55
Speaker 6: to be brought. So it's possible, but those concerns are
30:01
Speaker 6: still animating the court, and so it's possible, but most
30:06
Speaker 6: likely that they will close the door to this one too.
30:10
Speaker 2: And the Altman Court, I don't know what justices were
30:13
Speaker 2: on the court at that point, but most of them
30:15
Speaker 2: are certainly not on the court now.
30:18
Speaker 6: A completely different court. I mean that's two thousand and four,
30:21
Speaker 6: so we're talking, you know, twenty years ago.
30:24
Speaker 2: It doesn't seem like they're split ideologically.
30:27
Speaker 6: No, No, that's a good point, June. You can't say, oh, well,
30:31
Speaker 6: you know, the conservatives are this way and the more
30:35
Speaker 6: liberal folks are spar to lean another way on these issues.
30:39
Speaker 6: That's really this larger concern about their role, the Court's role,
30:44
Speaker 6: the executive branch's role in sovereign immunity. So it's not
30:49
Speaker 6: an ideological question, but it is a question that across
30:54
Speaker 6: you know, multiple iterations of the Court that they've had
30:57
Speaker 6: this concern they want to make sure that they are
31:01
Speaker 6: executing on what Congress has legislated and that they're not
31:05
Speaker 6: going any further than that.
31:07
Speaker 2: It seems like they might have taken the case to
31:10
Speaker 2: reverse the DC's circuit. Is that your conclusion that they're
31:14
Speaker 2: going to end up reversing the DC circuit in some
31:17
Speaker 2: way through some argument.
31:19
Speaker 6: Yeah, it's possible. Although in the past they've opened up
31:22
Speaker 6: you know, they've closed one door and opened another one
31:25
Speaker 6: or for this case, which is why it keeps coming
31:27
Speaker 6: back too, so you know, perhaps that will happen again,
31:30
Speaker 6: that one door gets closed another door is you know,
31:33
Speaker 6: at least slightly a jar, and then the case continues.
31:37
Speaker 6: It's because the DC Circuit at least seems very interested
31:40
Speaker 6: in making sure that they have explored every potential avenue
31:43
Speaker 6: before they they say, absolutely, you should not be bringing
31:46
Speaker 6: your claims here, and before I let you.
31:48
Speaker 2: Go, tell me about your big win yesterday at the
31:51
Speaker 2: Ninth Circuit.
31:52
Speaker 6: So my case yesterday was another long running piece of
31:56
Speaker 6: litigation for the city of Costanisa, and I've worked on
32:01
Speaker 6: various appeals for them involving challenges to their sober living
32:05
Speaker 6: home ordinances. So they have they allow sober living homes
32:09
Speaker 6: in their city, but they have certain permitting requirements for
32:14
Speaker 6: them that are you know, allowing requiring certain distances. So
32:20
Speaker 6: in other words, you can't have a residential street with
32:24
Speaker 6: you know, multiple of these homes or sober living homes
32:28
Speaker 6: on them, because that would be a bad thing not
32:31
Speaker 6: only for the residential environment, but for the residents who
32:35
Speaker 6: are there, who are trying to be integrated back into
32:41
Speaker 6: a traditional living arrangements after they've been in recovery. So
32:49
Speaker 6: so this has been challenged as you know, violating various
32:53
Speaker 6: their housing federal and states, their housing laws and harming
32:58
Speaker 6: the disabled and to day or yesterday, the Ninth Circuit
33:02
Speaker 6: agreed with the City of Costa Mesa that just there
33:05
Speaker 6: was no discrimination. Oh various, whether it's spacially discriminatory, whether
33:10
Speaker 6: it's dispread treatment there, you know, there's just there was
33:15
Speaker 6: no discrimination. And in fact, these ordinances were designed to
33:22
Speaker 6: benefit uh, the residents, the disabled residents of these towns.
33:27
Speaker 6: It's a really wonderful result for a city that has
33:31
Speaker 6: been standing up, you know, for its ordinances for for
33:35
Speaker 6: many years, and helpful to other cities and counties and
33:41
Speaker 6: local governments who want to have similar kind of land
33:45
Speaker 6: use regulations that help all of their sort of balance
33:49
Speaker 6: the interests of all of their residents, including those who
33:52
Speaker 6: live in these homes.
33:53
Speaker 2: It's great to talk to you as always.
33:55
Speaker 5: MC.
33:55
Speaker 2: That's MC san Gila, a partner at Complex Appellate Litigation Group.
34:00
Speaker 2: And that's it for this edition of the Bloomberg Law Show.
34:03
Speaker 2: Remember you can always get the latest legal news on
34:05
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34:09
Speaker 2: Spotify and at www dot Bloomberg dot com, Slash podcast
34:14
Speaker 2: Slash Law. I'm June Grosso and you're listening to Bloomberg