Reported / Citable
Background
Texas Tobacco Barn (TTB) operates a laboratory and retail space in Lubbock, Texas where it manufactures and sells vape products. In September 2020, TTB applied to the FDA for authorization to sell over 2,200 different vape products, including e-liquids branded “Barn Brewed Beetle Juice.” The FDA denied authorization and warned TTB that the products were “adulterated” and “misbranded” under the Food, Drug, and Cosmetic Act (FDCA). Despite warnings and assurances that it would cease production, TTB continued manufacturing and selling the unauthorized e-liquid variant. In May 2023, an FDA inspection discovered TTB was still selling the prohibited products.
Three months after the inspection, the Department of Health and Human Services (HHS) brought an administrative enforcement proceeding against TTB, seeking a civil penalty of $19,192 for selling unauthorized tobacco products. An HHS administrative law judge (ALJ) conducted a hearing without a jury, considered FDA’s photographic evidence and inspector testimony, and found by a preponderance of the evidence that TTB violated the FDCA. The ALJ rejected TTB’s Seventh Amendment jury-trial claim, finding she lacked jurisdiction to decide constitutional defenses. HHS’s Departmental Appeals Board affirmed the ALJ’s decision.
TTB petitioned for review in the Fifth Circuit, reasserting three challenges: that the FDA’s deeming authority over vape products was an unconstitutional delegation; that the HHS administrative proceeding violated the Seventh Amendment guarantee of jury trial; and that the decision lacked substantial evidentiary support.
The Court’s Holding
The Fifth Circuit, in an opinion by Judge Stuart Kyle Duncan, granted TTB’s petition and vacated HHS’s decision. The court held that TTB was entitled to a jury trial in an Article III court for the alleged FDCA violations. The court rejected TTB’s nondelegation challenge, finding that prior Fifth Circuit precedent in Big Times Vapes, Inc. v. FDA had already determined that Congress properly delegated the deeming authority to the FDA with sufficient intelligible principles. TTB’s relabeling of its nondelegation argument as a “major questions doctrine” challenge also failed for the same reason.
On the Seventh Amendment issue, the court reasoned that civil monetary penalties are the “prototypical common law remedy” designed to punish or deter wrongdoing rather than provide restitution to victims. The court found the cause of action closely analogous to common law actions against sellers of unwholesome or adulterated food and wine, which historically were subject to jury trial and could include fine assessments. The FDCA’s definition of “adulterated” products echoed the common law concept of “unwholesome” goods, and the misbranding provisions paralleled common law fraud actions. Because the Seventh Amendment applied to this civil penalty action, the court next examined whether Congress could assign the adjudication to an agency under the “public rights exception.”
The court held that the public rights exception did not apply. The exception permits agencies to adjudicate only matters that “historically could have been determined exclusively by the executive and legislative branches.” HHS failed to show that adjudication of FDCA violations had any historical pedigree outside Article III courts. The court rejected HHS’s reliance on Crowell v. Benson‘s passing reference to “public health” as insufficient, noting that Crowell was dicta the Court did not elaborate and that the case concerned admiralty jurisdiction, which has a distinct public rights tradition. The court emphasized that merely invoking Congress’s power over public health or interstate commerce could not sweep away Seventh Amendment protections, and that novel regulatory schemes do not escape Seventh Amendment application. The court distinguished the case from FCC v. AT&T (decided shortly before this opinion), which had allowed agency adjudication because the underlying statute provided a trial de novo in district court upon non-payment, unlike the FDCA which barred judicial review of the penalty.
Key Takeaways
- Civil monetary penalties in FDCA enforcement actions are classic common law remedies that trigger the Seventh Amendment right to jury trial.
- The “public rights exception” to Article III jurisdiction is narrowly confined to matters with a historical pedigree of exclusive executive-legislative determination; invocation of “public health” or “interstate commerce” alone cannot invoke it.
- Novel or comprehensive regulatory schemes do not escape Seventh Amendment protections merely because Congress assigns them to agencies; the substance of the action, not its statutory designation, determines whether jury-trial rights apply.
- Congress cannot “siphon” adjudication of statutory civil penalty actions away from Article III courts without satisfying the strict historical requirements of the public rights exception.
Why It Matters
This decision significantly constrains the federal government’s ability to pursue civil penalty enforcement actions against regulated entities through agency adjudication without juries. The Fifth Circuit’s reasoning—grounded in the Supreme Court’s 2024 decision in SEC v. Jarkesy—applies Seventh Amendment protections broadly to statutory enforcement regimes that impose monetary penalties, even when those regimes are modern and comprehensive. The holding directly impacts the FDA’s enforcement authority over tobacco products, vapes, and potentially other products subject to the FDCA. It signals that agency adjudication processes for civil penalties must either preserve jury-trial rights or face constitutional invalidation, likely forcing the government to pursue such actions in federal district court instead.
The decision also clarifies post-Jarkesy doctrine on the public rights exception, rejecting arguments that broad delegations of power over matters deemed important to public policy can automatically authorize agency adjudication without juries. Judge Douglas’s dissent (disagreeing only on the Seventh Amendment issue) highlighted the tension between this narrow reading of public rights and precedents like Thomas v. Union Carbide involving comprehensive regulatory schemes for public health. The split foreshadows potential further litigation and possible Supreme Court review of how narrowly the public rights exception now applies in the administrative state.