[00:00:01] Speaker 03: Good morning and welcome to the Ninth Circuit. [00:00:03] Speaker 03: It's fine to sit, thank you. [00:00:05] Speaker 03: I'm Michelle Friedland and Judge Bybee, Judge Miller and I are very happy to be sitting in Alaska this week. [00:00:12] Speaker 03: Thank you all for coming this morning. [00:00:14] Speaker 03: We have several cases submitted on the briefs. [00:00:16] Speaker 03: United States versus Curial 22-30189 is submitted. [00:00:21] Speaker 03: United States versus Long, 23-30022 is submitted. [00:00:27] Speaker 03: United States versus Terry Lee Keen the second, 23-30031 is submitted. [00:00:35] Speaker 03: United States versus Williams, 22-30155 is submitted. [00:00:40] Speaker 03: Crackert versus Watchtower Bible, 23-35329 and 23-35330 are submitted. [00:00:49] Speaker 03: And we have one case on calendar, which is Grand River Enterprises versus Knudsen, 23-35494. [00:00:55] Speaker 03: Each side will have 15 minutes. [00:01:02] Speaker 04: May I proceed, Your Honor? [00:01:03] Speaker 03: Yes, thank you. [00:01:05] Speaker 04: I may please the Court. [00:01:05] Speaker 04: I'd like to reserve three minutes for rebuttal, if I'm permitted. [00:01:09] Speaker 04: The district erred in denying a preliminary injunction in this case. [00:01:13] Speaker 04: Grand River has a likelihood of success on its federal claims, and the remainder of the preliminary injunction factors tip in Grand River's favor. [00:01:22] Speaker 04: So I'd like to begin with federal preemption, Your Honor. [00:01:25] Speaker 04: Under 21 USC Section 337, the federal government is vested with exclusive authority to enforce the Food, Drug and Cosmetic Act. [00:01:35] Speaker 04: This court's cases have interpreted Section 337 to bar state law claims wherein a violation of the FDCA is a critical element. [00:01:44] Speaker 04: So most recently in this court's decision in Nexus, the plaintiff asserted a claim saying that the [00:01:49] Speaker 04: defendant violated state law because the defendant was distributing a drug that wasn't FDA approved and the court held no, even though that is nominally a state law claim, it still hinges on a federal violation and is therefore federally preempted. [00:02:03] Speaker 04: We think that this case falls within the four corners of this court's precedence in this area. [00:02:07] Speaker 04: What Montana said was that because Grand River had allegedly violated federal law, which of course we dispute, but because Grand River had allegedly violated federal law, therefore [00:02:18] Speaker 04: it would take this enforcement action against us. [00:02:20] Speaker 04: And that is a paradigmatic case of enforcement of the FDCA. [00:02:23] Speaker 01: What if the agreement had said, if any of your products are deemed adulterated, then they may not be sold or distributed in Montana. [00:02:37] Speaker 01: They won't be listed. [00:02:39] Speaker 01: It would just depend then on the status of the product. [00:02:43] Speaker 04: So I still think that would probably be federally preempted because it would require, although I think it's a more difficult case than this one, but my first line answer is I still think it would be. [00:02:52] Speaker 04: So the legal standard in Nexus is that if a state law claim hinges on a purported violation of the FDCA that the FDA did not itself find, the claim is preempted. [00:03:02] Speaker 01: And it seems to me that in your hypothetical... They're just depending on a finding of the FDA. [00:03:06] Speaker 01: It's just the status of the drug. [00:03:08] Speaker 01: If the drug has been deemed, that's the statutory language, adulterated and misbranded, then you may not do X. And this would have been in the AVC, so this would have been a matter of contract law. [00:03:22] Speaker 04: So I still think that would be preempted, but then I want to distinguish your hypothetical. [00:03:25] Speaker 04: So my first line answer, I'd point the court towards the Perez case from 2013, where there was no doubt that the product was not FDA. [00:03:32] Speaker 04: So the holding there was that a fraud claim [00:03:35] Speaker 04: hinged on the failure to disclose the lack of FDA approval was preempted. [00:03:39] Speaker 04: So there's no doubt on the facts of that case that the product wasn't FDA approved. [00:03:42] Speaker 04: The record actually showed that the manufacturer received warning letters from the FDA. [00:03:46] Speaker 04: But nonetheless, the court held that because a critical input into the state law claim was a lack of FDA approval, the federal government had exclusive enforcement authority. [00:03:55] Speaker 04: And I think that's the case in Your Honor's hypothetical as well, even though I understand it just depends on the status of adulterated and not the actual federal law violation. [00:04:03] Speaker 04: Still an input into that claim is the fact that it's deemed adulterated under federal law. [00:04:08] Speaker 04: I think a lot of the policy justifications for preemption still apply in that hypothetical too. [00:04:13] Speaker 04: right, one of the concerns in a case like Buckman is that you don't want parties, you know, submitting information to the FDA that it doesn't want, litigating cases to the bitter end, and I think that would still apply. [00:04:23] Speaker 04: But I just want to distinguish Your Honor's hypothetical, because even if Your Honor believes that that wouldn't be preempted, this case is different. [00:04:29] Speaker 04: It's quite explicit in the letter that Montana sent to Grand River that it actually found a violation of federal law. [00:04:36] Speaker 04: It says that quite clearly. [00:04:37] Speaker 04: You'll see that on the amended excerpt of record, page 99, like the [00:04:41] Speaker 04: Attorney General just goes right ahead and says, you violated federal law and therefore you violated the ABC. [00:04:46] Speaker 04: And again, I think that just a paradigmatic case of the state enforcing federal law, even though the federal government has itself not done that. [00:04:55] Speaker 04: I'm sorry, do you have a question? [00:04:56] Speaker 03: I do actually have a question. [00:04:57] Speaker 03: So you did reference that you disagree with the idea that you were violating federal law, but I was having trouble figuring this out because it seems like the provisions that you're relying on for that have to do with products that were first introduced into the market between February 15th, 2007 and March 22nd, 2011. [00:05:16] Speaker 03: And I couldn't find anything in the record that said whether your products were. [00:05:19] Speaker 04: They were, yes. [00:05:21] Speaker 03: So how can we find that? [00:05:22] Speaker 03: How do we know that that's true? [00:05:24] Speaker 04: I don't think that's disputed. [00:05:26] Speaker 04: I'm happy to submit a letter to the court with a particular place where that's the record, but I don't think that's disputed in this case. [00:05:32] Speaker 04: We were waiting for almost a decade for the FDA to approve these. [00:05:35] Speaker 04: The substantial equivalence applications were just on ice for many, many years, and finally we decided we weren't selling the product anymore and we withdrew it. [00:05:43] Speaker 04: But I'm happy to send a letter to the court. [00:05:45] Speaker 04: But yeah, I don't think it's disputed that that's satisfied in this case. [00:05:48] Speaker 03: Well, I guess I can ask the other side. [00:05:51] Speaker 03: Yeah, the fact that it was... The idea that you were selling these products that weren't really provisionally approved and so, how is that not disputed? [00:05:58] Speaker 04: Isn't that part of what... No, I don't think it's disputed that we submitted... I don't think it's disputed that we were selling these products before that 2011 date, okay? [00:06:06] Speaker 04: As far as I know, that's never been disputed. [00:06:08] Speaker 04: And then we submitted these substantial equivalence applications. [00:06:11] Speaker 04: Now, it is... The FDA didn't act on those, we just submitted them. [00:06:14] Speaker 04: All right, so that part of the case, I think it's common ground. [00:06:17] Speaker 04: And then we were waiting and waiting and waiting. [00:06:19] Speaker 04: And then it's also common ground, I think, that while we were waiting and waiting and waiting, we were allowed to continue distributing and manufacturing the cigarettes. [00:06:26] Speaker 04: Okay, so that, or at least I don't construe Montana to have ever disputed that piece of it. [00:06:30] Speaker 04: The dispute arose when we withdrew those certifications, right? [00:06:34] Speaker 04: We voluntarily withdrew it. [00:06:35] Speaker 04: The reason why basically is we were waiting for years. [00:06:38] Speaker 04: We weren't even really selling these cigarettes anymore. [00:06:40] Speaker 04: The record shows we sold like 600 total cigarettes from all these brands after we withdrew the certifications. [00:06:45] Speaker 04: And so when that happened, after we did that, we didn't do any of the things that the statute forbids. [00:06:54] Speaker 04: We didn't manufacture, we didn't deliver, we received. [00:06:57] Speaker 04: All we did, the asserted violation is simply keeping these brand families or the brand styles on the certification. [00:07:05] Speaker 04: So there's two brand families, Couture and Seneca. [00:07:08] Speaker 04: We kept them both on there and we had withdrawn all of our Couture [00:07:11] Speaker 04: substantial equivalence applications. [00:07:13] Speaker 04: That's the violation, merely putting it on that form. [00:07:16] Speaker 04: And the reason we did that is that the retailers and the wholesalers still had a very small amount left. [00:07:22] Speaker 04: We just wanted to make sure they could sell their inventory. [00:07:24] Speaker 04: But like the fact, I don't think that just putting it on the form violates any specific provision of the FDCA. [00:07:29] Speaker 04: And in fact, I don't think the attorney general has ever told us which of those we are alleged to have violated. [00:07:36] Speaker 04: So we strongly disagree that there's any federal violation here. [00:07:39] Speaker 04: Even if there is, our position is that the fact that the FDA hasn't ever reached that conclusion is sufficient. [00:07:45] Speaker 01: If you're not selling the cigarettes, you're not going to manufacture them any longer, you're not seeking approval from the FDA, why are we here? [00:07:52] Speaker 04: Well, we're here because we've been banned from selling all cigarettes in Montana, Your Honor. [00:07:56] Speaker 04: We've completely been wiped out of Montana. [00:07:58] Speaker 04: So what the Attorney General did is it said that we violated the ABC, and therefore we can't sell anything. [00:08:03] Speaker 04: We're completely off the shelf. [00:08:04] Speaker 04: So it's like the corporate death penalty has been inflicted on Grand River. [00:08:08] Speaker 04: That's why we're here, Your Honor. [00:08:09] Speaker 04: We don't care about these eight brand styles. [00:08:11] Speaker 04: We stopped manufacturing them years ago. [00:08:13] Speaker 04: But we have other products that we sell that have been completely banned in the state. [00:08:17] Speaker 02: And is that? [00:08:17] Speaker 02: So this letter from the attorney general was last June, I believe? [00:08:23] Speaker 02: Yes. [00:08:23] Speaker 02: And you didn't get a TRO or a PI, so you are presently not selling anything in Montana? [00:08:29] Speaker 04: Correct. [00:08:29] Speaker 04: We're just completely banned from all Montana shelves. [00:08:31] Speaker 04: That's right. [00:08:34] Speaker 03: Why did you bring two suits, one in state court and one in federal court, instead of making all of these claims in one place? [00:08:40] Speaker 04: Okay, well, I think we have a good reason for that. [00:08:43] Speaker 04: So we didn't bring the state law claim in federal court because there's a potential Pennhurst problem. [00:08:47] Speaker 04: We can't get injunctive relief under state law if we bring a state law claim in federal court. [00:08:52] Speaker 04: So we brought our state law claim in state court, but we brought our federal claim in federal court because we wanted a federal forum for our preemption claims and our due process claim. [00:09:00] Speaker 04: So that's basically the reason we did what we did. [00:09:03] Speaker 04: I don't think there's any rule against that. [00:09:05] Speaker 04: I think we're allowed to do that. [00:09:06] Speaker 03: I mean, they haven't raised claim preclusion, but I wondered why they didn't because it seems like this could have been all brought in state court. [00:09:13] Speaker 04: Theoretically, so I don't think, there's no final judgment in the state court. [00:09:16] Speaker 04: There's like a preliminary injunction denial, but the claim is still going. [00:09:19] Speaker 04: So you wouldn't even get the preclusion until there's a final judgment in any court. [00:09:23] Speaker 04: And we'd still dispute their claim of preclusion even in that case. [00:09:25] Speaker 04: But here, it's not even argued. [00:09:26] Speaker 04: I don't think it's even arguably claimed preclusion when there's just an interlocutory order in the state court that's currently on appeal in the state Supreme Court. [00:09:34] Speaker 04: And anyway, that was not raised by Montana. [00:09:36] Speaker 04: It's not in their answer. [00:09:36] Speaker 04: It's not in the brief. [00:09:38] Speaker 04: And it's certainly a waivable argument, even if it had merit. [00:09:40] Speaker 04: And we don't think it does. [00:09:42] Speaker 01: Can I turn to the due process claim? [00:09:46] Speaker 01: If you were to get a hearing, what would be an issue? [00:09:50] Speaker 04: Well, I think we'd say we'd never violated federal law, so we didn't do anything wrong. [00:09:53] Speaker 04: I mean, of course, we think that our primary, our lead argument is federal preemption. [00:09:57] Speaker 04: They can't do this anyway. [00:09:58] Speaker 04: But if we're wrong on that, we would argue that we didn't do anything wrong by putting this on the certification. [00:10:02] Speaker 04: But we never got that hearing. [00:10:03] Speaker 04: We were just stripped straight off the list. [00:10:07] Speaker 04: The sequence of events was in 2022 we got this letter from the Attorney General, and it did tell us that we shouldn't have included couture and the Seneca styles on the certifications from 20 and 21. [00:10:18] Speaker 04: But you know from our perspective we didn't care because we were happy to take it off we had stopped selling these cigarettes in the state anyway, and the letter you'll see in. [00:10:26] Speaker 04: it's on amended excerpts of record 80 so the letter references an existing administrative process for these 20 and 21 hearings but we had taken it off in 2022 and so the letter says in the 2022 certification did not include the adulterated brand style so we didn't really need a hearing for that we were perfectly fine with that right like we didn't care anymore [00:10:47] Speaker 04: And then the attorney general accepted our 2022 certification, no problem from our perspective. [00:10:53] Speaker 04: So we kept selling in the state. [00:10:55] Speaker 04: And then in 23, we got this thunderbolt from the attorney general saying, hey, we've concluded you violated the ABC. [00:11:00] Speaker 04: So like you're banned forever, apparently. [00:11:02] Speaker 04: And there was never a hearing for that. [00:11:03] Speaker 04: So we would like to have a hearing where we can raise our defense, which I think is legitimate defense, which is we don't think we violated state law either. [00:11:10] Speaker 04: We don't think we did anything wrong here. [00:11:12] Speaker 04: And we certainly don't think we violated federal law. [00:11:14] Speaker 04: And that's the argument we would make, Your Honor. [00:11:16] Speaker 02: And why does due process require a pre-deprivation hearing? [00:11:19] Speaker 02: Why isn't it satisfied by the opportunity to challenge it after the fact in state court? [00:11:24] Speaker 04: Well, I mean, I think that here a pre-deprivation hearing is certainly practicable. [00:11:30] Speaker 04: I don't think that the attorney general has argued that that's all the due process you get. [00:11:34] Speaker 04: I think the attorney general's argument is we've just wiped out all due process because of the ABC. [00:11:39] Speaker 04: I mean, we would say that we've been banned from the shelves for a year without any notice or opportunity for a hearing. [00:11:45] Speaker 04: I understand there's some cases in which a post deprivation hearing is enough, but [00:11:49] Speaker 04: You know, in this case, the state hasn't certainly argued that that is the appropriate doctrinal framework. [00:11:55] Speaker 04: And I just think the standard rule that you get noticed in a hearing before the corporate death penalty is inflicted on you should be applied in this case. [00:12:02] Speaker 02: If we were to agree with you on the preemption theory, is there any reason for us to consider the due process? [00:12:08] Speaker 04: No, I don't think so. [00:12:09] Speaker 04: I think the court couldn't disregard that and just go straight to the other preliminary injunction factors. [00:12:13] Speaker 04: I'll just speak for a minute because my time is shortly expiring. [00:12:17] Speaker 04: The reputable harm here is that we've been banned from selling our products and we can never get the money back. [00:12:21] Speaker 04: The state has sovereign immunity. [00:12:23] Speaker 04: I mean, it's true that in cases with private parties, losing money might not be reputable harm because you can get a money judgment at the end of the case. [00:12:30] Speaker 04: We can't do that here because of sovereign immunity, so we'll never get the money back. [00:12:33] Speaker 04: We also have a declaration in the record saying we're losing money. [00:12:36] Speaker 04: Goodwill, which is kind of, I think, obvious when your products are banned from the shelves, people switch to other products. [00:12:41] Speaker 04: But just the most straightforward ground to find reputable harm is that we're just losing money every day, which we'll never get back. [00:12:47] Speaker 04: And I think the balance of equities favor us. [00:12:51] Speaker 04: I mean, these products have not been sold for years in the state. [00:12:53] Speaker 04: There's no risk to public safety. [00:12:54] Speaker 04: There's no allegation that our current products are a risk to public safety. [00:12:57] Speaker 04: They're all FDA approved. [00:12:58] Speaker 04: So I think the equities really tip in Grand River's favor in this case. [00:13:04] Speaker 04: Unless the panel has other questions, I'll reserve my time. [00:13:16] Speaker 00: Thank you. [00:13:17] Speaker 00: And may it please the court. [00:13:18] Speaker 00: The district court's denial of GRE's request for a preliminary injunction should be upheld because GRE cannot meet the preliminary injunction factors. [00:13:27] Speaker 00: I think it's important to start with a history between GRE and the Montana Attorney General's office. [00:13:33] Speaker 00: So from 2000 to 2002, GRE's tobacco products were sold in Montana. [00:13:39] Speaker 00: However, when GRE did not make the proper escrow payments, the state brought suit against GRE. [00:13:46] Speaker 00: In 2003, the AG received a default judgment and GRE was enjoined from selling its products in Montana. [00:13:54] Speaker 00: Also in 2003, Montana codified the requirement that a tobacco product manufacturer and its products must be listed on the directory in order for its products to be sold, distributed, and marketed in Montana. [00:14:08] Speaker 00: It's a privilege, not a right, to be listed on the directory as there are requirements and an analysis that has to be performed every year. [00:14:15] Speaker 00: In order to be listed on the directory, a company must submit an accurate certification. [00:14:22] Speaker 00: In its certification, the tobacco product manufacturer certifies, among other things, that all information included is accurate, that all products are intended for sale, and that it will immediately notify the AG of any changes in the status of its products. [00:14:40] Speaker 00: In 2012, GRE and the AG entered into the ABC. [00:14:46] Speaker 00: This allowed GRE to come into compliance with Montana law as well under strict circumstances. [00:14:53] Speaker 00: The ABC is a bargain for agreement that was negotiated between the parties with attorneys without which GRE would not be selling its products in Montana. [00:15:03] Speaker 00: The ABC requires compliance with local state and federal laws and allows immediate removal from the directory. [00:15:11] Speaker 02: It's that last part that is potentially a problem for you because I mean reading the the Attorney General's statement, the [00:15:20] Speaker 02: Removal here was predicated on the attorney general's determination that there had been a violation of federal law. [00:15:27] Speaker 02: And why is that not sort of squarely within what we said in nexus pharmaceuticals is the sort of claim where state law makes a violation of the FDCA a predicate that's preempted. [00:15:41] Speaker 00: Jiri was not removed from the directory because it received a letter from the FDA. [00:15:46] Speaker 00: They were removed because they didn't inform the AG of the implications of that letter. [00:15:52] Speaker 00: As stated under the certification, they have to tell us immediately of any change in the status. [00:15:59] Speaker 02: That's not quite what the attorney general said. [00:16:02] Speaker 02: The attorney general said, [00:16:04] Speaker 02: You marketed and promoted misprinted cigarettes in violation of federal law. [00:16:08] Speaker 02: So it seemed like he thought that the problem was that they were violating the FDCA. [00:16:13] Speaker 00: Well, the AG certainly believes that the FDA letter was enforcement of the FDCA by the FDA. [00:16:22] Speaker 00: And it informed GRE in bold lettering not to continue selling. [00:16:26] Speaker 00: So the AG does believe that [00:16:29] Speaker 00: GRE violated that FDA letter by continuing to sell those products or at least offer them for sale by listing them on the directory. [00:16:38] Speaker 01: Is GR offering them for sale itself? [00:16:41] Speaker 01: My understanding was that these were others who had purchased their products and still had them on as inventory and that that is permitted under FDA rules. [00:16:51] Speaker 00: Correct. [00:16:52] Speaker 00: But listing them on the directory allowed GRE to sell them should they choose to do so. [00:16:56] Speaker 01: What's the violation of federal law? [00:16:58] Speaker 01: What have they done that's violated federal law? [00:17:00] Speaker 01: Having it a project that has the status of being adulterated and misbranded is not itself a violation of law. [00:17:08] Speaker 01: It's simply a categorization. [00:17:11] Speaker 01: If GRE were selling those products, that would be a violation of federal law that would be enforceable by the FDA. [00:17:18] Speaker 01: But they're not selling them themselves, and the FDA does not require them to recall the products from others who have previously purchased them and are holding them as inventory. [00:17:27] Speaker 01: So where's the violation of federal law? [00:17:30] Speaker 00: The violation of federal law is listing on the directory. [00:17:33] Speaker 01: Just because they- Wait, listing on what directory? [00:17:35] Speaker 01: On Montana's directory? [00:17:36] Speaker 01: And that violates federal law? [00:17:38] Speaker 01: What federal law is violated by having it listed on a Montana directory? [00:17:42] Speaker 01: It might be a violation of state law. [00:17:44] Speaker 01: That's not a violation of federal law. [00:17:47] Speaker 00: Well, the violation of federal law is in the FDA letter, which again is the FDA- FDA hasn't said you violated federal law. [00:17:55] Speaker 01: They've said this is the status of your product. [00:17:58] Speaker 00: Correct. [00:17:58] Speaker 00: And at the bottom of the letter, it states that GRE must cease selling those products. [00:18:04] Speaker 03: But then it didn't sell those products. [00:18:06] Speaker 00: Correct. [00:18:06] Speaker 00: But it had the opportunity to do so for two years because it was listed on the directory. [00:18:12] Speaker 00: It could have sold it. [00:18:14] Speaker 00: GRE claims that it didn't have the market to do so or the market demand to do so. [00:18:20] Speaker 00: But that doesn't mean they couldn't have for two years. [00:18:23] Speaker 01: Do you have a particular provision of the federal code that you think that they're violating? [00:18:28] Speaker 00: My code is the FDA letter that tells them, which is again FDA letters enforcement of the FDCA saying stop selling. [00:18:39] Speaker 01: The FDA has to have some kind of statutory or regulatory authorization in order to find a violation. [00:18:44] Speaker 01: What's the FDA's authority for that? [00:18:47] Speaker 00: I believe it's listed in the bold lettering at the bottom of the FDA letter that says under this statute stop selling. [00:18:56] Speaker 01: And do you have any evidence the GRE itself was selling these products in Montana? [00:19:02] Speaker 00: Other than? [00:19:02] Speaker 01: Products were being sold. [00:19:03] Speaker 01: That's a passive voice. [00:19:04] Speaker 01: That doesn't mean the GRE is selling them. [00:19:08] Speaker 00: We don't have evidence of GRE selling those products. [00:19:12] Speaker 01: That would be the violation of federal law. [00:19:13] Speaker 01: That would be a violation of federal law, wouldn't it? [00:19:16] Speaker 01: Correct, absolutely. [00:19:16] Speaker 01: Enforceable by the FDA? [00:19:18] Speaker 00: Yes. [00:19:19] Speaker 01: Okay, and that would raise a different question of preemption, which you have no evidence that GRE is selling those products in Montana. [00:19:26] Speaker 01: So where's the violation of federal law? [00:19:29] Speaker 00: Again, I'll go back to the violation of federal law is their ability to sell them by listing them on the directory. [00:19:39] Speaker 01: But you don't have any evidence that GRE is actually selling them? [00:19:43] Speaker 00: They didn't actually sell them, correct? [00:19:44] Speaker 02: So it's your view that federal law prohibits not just selling them, but doing something that would make it possible for you to sell them, even if you don't actually sell them? [00:19:54] Speaker 00: Absolutely, yes. [00:19:55] Speaker 02: And what provision of Title 21, or is there a regulation that tells us that, or a case? [00:20:05] Speaker 02: What's the authority for that? [00:20:07] Speaker 00: that the ability to sell them? [00:20:09] Speaker 02: The ability to sell, even if you're not actually selling, violates federal law. [00:20:14] Speaker 00: Well, included, again, at the bottom of that FDA letter, is selling, but also marketing and promoting those cigarettes. [00:20:22] Speaker 00: Putting them on the directory is marketing and promoting them as sellable products. [00:20:27] Speaker 00: So even despite the fact that GRE didn't actually sell, they did actually market and promote those cigarettes and tobacco products by putting them on the directory. [00:20:39] Speaker 02: I mean, the directory is something filed with this. [00:20:44] Speaker 02: I mean, the state maintains this directory. [00:20:47] Speaker 02: Is there a website that you can go and see what's on there? [00:20:49] Speaker 00: Correct. [00:20:50] Speaker 00: There's a website that the state maintains that lists all tobacco product manufacturers and tobacco products that are available for sale in the state of Montana. [00:21:01] Speaker 02: Submitting something to a state governmental agency that maintains a list of people who have submitted things to the state doesn't fit very naturally within the ordinary meaning of marketing or promoting, does it? [00:21:15] Speaker 00: We believe it does, because if it's not listed on that list, you can't market or promote it, and you're not offering it for sale. [00:21:25] Speaker 00: You're not saying that it can be sold in the state of Montana. [00:21:28] Speaker 02: But I mean, somebody can't go to the Montana, I assume you can't go to the Montana directory website and buy from the website, right? [00:21:38] Speaker 02: Correct. [00:21:38] Speaker 02: So, okay. [00:21:44] Speaker 00: So up. [00:21:45] Speaker 01: What if we went to the FDA and said does this violate, do you think the GRE is violating federal law and the FDA said no? [00:21:55] Speaker 00: Well then the Montana. [00:21:56] Speaker 01: Would Montana be bound by that? [00:21:59] Speaker 00: Would they be bound by that? [00:22:00] Speaker 00: Yeah. [00:22:00] Speaker 00: Yes. [00:22:02] Speaker 00: If the FDA said we don't believe that GRE is violating the FDCA, I believe Montana would be bound by that. [00:22:08] Speaker 01: But we don't have anything, any evidence that suggests that the FDA thinks that they are violating it. [00:22:14] Speaker 00: other than their instruction to stop sales, marketing, and promoting. [00:22:17] Speaker 00: No. [00:22:17] Speaker 01: Yeah. [00:22:18] Speaker 01: But that's not a, that's not a, that doesn't say we've, we've found that you violated the law, but please stop. [00:22:24] Speaker 00: It doesn't, it doesn't say that they violated law past tense. [00:22:28] Speaker 00: It does inform them how they can violate the law in the future. [00:22:30] Speaker 01: But that would have been in the statute. [00:22:31] Speaker 01: They could have read the statute for themselves and would have known that. [00:22:34] Speaker 01: They didn't need the FDA to tell them that. [00:22:36] Speaker 00: True. [00:22:38] Speaker 02: Going back to that, I think the first question I asked, if we agreed with you that there is a violation of federal law here, how can the state take enforcement action based on its determination that there's been a violation of federal law? [00:23:00] Speaker 02: Doesn't Nexus, among other cases, say that you can't do that? [00:23:05] Speaker 00: In addition to the federal law, Montana has strongly argued that GERI has also violated state law, which we can take action under, as well as the AVC, which again requires compliance with state and federal law. [00:23:19] Speaker 02: Okay, but I don't think that's quite an answer to the question. [00:23:22] Speaker 02: I mean, do you agree that you cannot take action based on a determination of a violation of federal law? [00:23:30] Speaker 02: I mean, maybe you can take action for some other reason, but can you take action against them based on your determination that they violated federal law? [00:23:38] Speaker 00: Well, I believe that the FDA is the one who told them that they would be violating federal law. [00:23:45] Speaker 00: So I don't think the AG made that determination. [00:23:47] Speaker 00: I think the FDA did. [00:23:49] Speaker 03: Well, the FDA never said listing this on a certification or in the directory is a violation of federal law. [00:23:57] Speaker 00: Correct, they did not specifically say listing it on the directory is a violation of federal law. [00:24:03] Speaker 00: But listing it on the directory is a violation of promoting and marketing the product, which is a violation of the federal law and the FDA letter. [00:24:14] Speaker 01: Well, it might or might not be, depending on what the FDA thought. [00:24:18] Speaker 00: If the FDA chose to weigh in, yes. [00:24:22] Speaker 03: But doesn't federal law give the FDA the discretion to be the one to decide whether that should be enforced or not? [00:24:29] Speaker 00: Well, I believe they had the discretion. [00:24:31] Speaker 00: That's why they sent the letter. [00:24:33] Speaker 00: But if they chose to take further enforcement action against GRE, yes, we would defer to whatever decision they made there. [00:24:43] Speaker 03: But why shouldn't we understand what happened here as you not deferring but taking more action than the FDA had taken, which federal law says states aren't supposed to do? [00:24:53] Speaker 00: because the letter was enforcement action. [00:24:56] Speaker 00: Just because they didn't take further enforcement action doesn't mean that GRE wasn't on notice that it could violate the FDCA by doing the very specific thing that it did. [00:25:12] Speaker 00: In addition, I will state that GRE has not proven irreparable harm in this matter. [00:25:21] Speaker 00: The current federal district court case is scheduled for hearing on summary judgment on June 21st or June 17th. [00:25:32] Speaker 03: So they are currently prohibited from selling the approved products, which means they're losing money and they can't ever get that money back from you, right? [00:25:39] Speaker 03: Correct. [00:25:40] Speaker 03: So why is that not irreparable harm? [00:25:43] Speaker 00: The irreparable harm is [00:25:47] Speaker 00: Well, number one, Jiri hasn't come forth with any evidence other than its own statement that we're being harmed. [00:25:54] Speaker 02: Do you dispute that they are losing money every day that they can't sell the approved products? [00:26:00] Speaker 02: Is there really any question about that? [00:26:03] Speaker 00: GRE is a nationwide company across the United States and Canada. [00:26:07] Speaker 00: It's making money off of the other states and countries, as well as maintaining its goodwill in those other states. [00:26:15] Speaker 00: Any loss it may have in Montana is minimal compared to their overall market, as well as [00:26:22] Speaker 00: what Mr. Unikowsky stated that they don't have a large presence in Montana. [00:26:27] Speaker 00: They only sold 600 packs or 600 cartons, I believe, of those eight brand styles. [00:26:34] Speaker 00: So their market value that they're losing is minimal. [00:26:39] Speaker 03: There might be a small amount of irreparable harm, but it's still some. [00:26:44] Speaker 00: But we have an impending decision on the merits, either on summary judgment next month or a bench trial the month after that. [00:26:55] Speaker 00: So even if this court were to decide that GRE deserves a preliminary injunction, which we don't think they do, that preliminary injunction would only be there for weeks, if not days. [00:27:09] Speaker 03: I'm confused why the state [00:27:11] Speaker 03: is trying to do this. [00:27:12] Speaker 03: Why does the state care about these products that are approved? [00:27:16] Speaker 03: Why is the penalty here stop selling the products that are approved? [00:27:21] Speaker 00: Again, it goes back to the past and the history that the state has with GRE. [00:27:28] Speaker 00: We had a relationship with GRE from 2000 to 2002 and then GRE violated Montana statute and they weren't allowed to sell anymore. [00:27:37] Speaker 00: So they're a second chance company that we allowed to sell back in Montana again based on their agreeance to the AVC. [00:27:46] Speaker 00: Now they violated Montana statute and potentially, or we believe very possibly federal law, that's a lot for the AG to swallow when it comes to that relationship. [00:27:58] Speaker 00: which is why after all of these scenarios, after all of these incidences by GRE, we issued a notice of intent to remove. [00:28:06] Speaker 03: It seems like there was this change, changing of minds though, because I don't understand why after 2022, it seemed like they could keep selling the products. [00:28:15] Speaker 03: But then after 2023, they couldn't. [00:28:17] Speaker 03: I mean, the AG had all the information it had for a while and let them keep selling the other products. [00:28:22] Speaker 03: And then all of a sudden they couldn't. [00:28:24] Speaker 03: Is there an explanation for that change? [00:28:26] Speaker 00: Well, the AG was not informed of the FDA letter until 2022. [00:28:30] Speaker 03: Even after 2022, they were allowed to keep selling the approved products for a while, and then it's not until 2023 that all of a sudden they can't. [00:28:38] Speaker 03: What changed? [00:28:40] Speaker 00: What changed was the administrative hearing that is also involving GRE. [00:28:47] Speaker 00: They had certification denials that were denied that were working through the process. [00:28:53] Speaker 00: tried to come up with information regarding what had happened. [00:28:57] Speaker 00: There was a lot of analysis that had to occur before Montana could say, okay, you did actually violate all of these things. [00:29:07] Speaker 00: Does that answer your question? [00:29:09] Speaker 03: Not really, because I don't understand how the 2020 and 2021, I guess I understand that Jerry to say that the 2020 and 2021 issues are not the same as these issues. [00:29:22] Speaker 03: Is that your understanding too? [00:29:24] Speaker 03: Correct. [00:29:24] Speaker 03: They're additional issues, yes. [00:29:26] Speaker 03: But we don't really know what those are in our record here. [00:29:31] Speaker 03: Correct. [00:29:31] Speaker 03: They're not briefed, yes. [00:29:32] Speaker 03: But I guess what you're saying is you got so mad at them about those issues that that's the change in these issues? [00:29:39] Speaker 00: I think those issues, it was just a buildup of issues. [00:29:44] Speaker 00: And so the AG determined that the FDA was the cherry on top. [00:29:50] Speaker 00: That was the last straw for Jerry violating Montana statute and the ABC. [00:29:58] Speaker 01: Why didn't you give them a hearing? [00:30:01] Speaker 00: because under the ABC, they waived any due process hearing and they have a right to come to court as they have to adjudicate it if they believe it's inaccurate or improper. [00:30:16] Speaker 03: We've taken you over your time. [00:30:17] Speaker 03: Thank you for your argument. [00:30:18] Speaker 03: I think we have three minutes for rebuttal. [00:30:19] Speaker 00: Thank you. [00:30:25] Speaker 04: Thank you, Your Honor. [00:30:25] Speaker 04: Just a couple of small things. [00:30:28] Speaker 04: First of all, Your Honor is correct that the 2020 and 2021 hearings are on a totally unrelated issue. [00:30:33] Speaker 04: It's like the amount of the escrow payment and how we calculated that has nothing to do with this. [00:30:37] Speaker 04: So I just wanted to confirm that was correct. [00:30:40] Speaker 03: Those issues that tipped this over somehow, like there's some interaction. [00:30:45] Speaker 04: I can't really read the AG's mind. [00:30:46] Speaker 04: All we know is we got this letter in 2022, which didn't say anything about banning us statewide. [00:30:51] Speaker 04: And then the AG accepted our certification in 22. [00:30:54] Speaker 04: And then the first part of 23, we were fine. [00:30:55] Speaker 04: And then we got this letter. [00:30:57] Speaker 04: So why the AG changes mind, we don't know. [00:30:59] Speaker 04: It's not in the record, Your Honor. [00:31:01] Speaker 04: I just want also one other comment that my colleague made about the fact we always sold 600 cigarettes. [00:31:07] Speaker 04: It was actually only 600 of those now of those brand styles that we withdrew. [00:31:12] Speaker 04: We sold more than that of the other non-withdrawn brand styles. [00:31:15] Speaker 04: So I just wanted to clarify that point. [00:31:17] Speaker 03: Do you have an approximate amount of money that's being lost? [00:31:20] Speaker 04: That's not in the record, Your Honor. [00:31:22] Speaker 04: In terms of the total amount we would hypothetically be selling if we were permitted to sell, I don't think that's in the record, Your Honor. [00:31:26] Speaker 04: I'm sorry. [00:31:29] Speaker 04: And if I could just make one other point about the case schedule, because that was referenced by my colleague. [00:31:33] Speaker 04: It is the case that, she's correct, that there's a summary judgment hearing on June 17th. [00:31:39] Speaker 04: And we are a little concerned that the court will render a summary judgment ruling, which would possibly moot this appeal. [00:31:45] Speaker 04: So then we have to wait another year and a half. [00:31:47] Speaker 04: So if the panel, we would appreciate it possible a ruling before that would happen. [00:31:53] Speaker 04: We would appreciate if the panel would be willing to consider doing that. [00:31:58] Speaker 02: Do you have a minute left? [00:32:01] Speaker 02: Can I just ask, you know, historically there's been some tobacco production in Southern Ontario. [00:32:08] Speaker 02: Does Grand River actually grow the tobacco on the reserve or are they purchasing it from somewhere else? [00:32:14] Speaker 04: I wish I could answer that, Your Honor. [00:32:15] Speaker 04: I don't know. [00:32:16] Speaker 04: I'm sorry. [00:32:22] Speaker 03: We don't have other questions, I don't think. [00:32:24] Speaker 03: Thank you both sides for the helpful arguments. [00:32:25] Speaker 03: This case is submitted and we're adjourned.