By John Schwartz
Washington Post Staff Writer
Saturday, August 15, 1998; Page A01

A federal appeals court panel ruled yesterday that the Food and Drug Administration has no authority to regulate cigarettes, a major blow to the Clinton administration's attempts to curb youth smoking.

The three-judge panel of the 4th U.S. Circuit Court of Appeals voted 2 to 1 to reverse a lower court ruling that had upheld the FDA's unprecedented attempt to gain jurisdiction over tobacco products. The appeals court ruled that the agency, which proposed its youth smoking rules in 1995, could not assert jurisdiction that Congress had not granted it.

"This case is about who has the power to make this type of major policy decision," wrote Judge Emory H. Widener Jr. in an often blistering opinion joined by Judge James Michael. "Neither federal agencies nor the courts can substitute their policy judgments for those of Congress." One judge, Kenneth K. Hall, wrote a dissent.

The majority decision, which the Clinton administration said it will appeal, brings the nation's struggle over tobacco essentially back to square one. Facing the prospect of FDA regulation and a new wave of anti-tobacco lawsuits, the nation's largest tobacco companies last year reached a proposed settlement with state attorneys general and private attorneys to submit to advertising and marketing restrictions in return for a measure of protection from suits. But legislation based on that proposal failed in Congress after the tobacco manufacturers declared that the settlement had grown too expensive and offered too little in return.

The industry hailed yesterday's decision. "We are pleased with the ruling that the FDA does not have the authority to regulate tobacco products, and that the agency's 1996 tobacco regulations are invalid," major companies said in a joint statement.

The administration is taking its appeal to all the judges of the 4th Circuit Court of Appeals. "I am firmly committed to the FDA's rule and its role in protecting our children from tobacco," President Clinton said in a statement. "If the leadership in Congress would act responsibly, it would enact bipartisan comprehensive tobacco legislation to confirm the FDA's authority and take this matter out of the courtroom."

Using its newly declared authority over tobacco, the original FDA plan was the broadest government effort ever attempted to reduce smoking, which has been called the greatest preventable cause of premature death.

The FDA plan would have required anyone who appeared to be younger than 26 to prove their age to buy cigarettes, would have required that tobacco products be placed behind sales counters to prevent youngsters from shoplifting them, would have barred cigarette vending machines from many public places, and would have banned cigarette billboards within 1,000 feet of schools and playgrounds. Tobacco ads in magazines with significant underage readership would have been restricted to black-and-white text, and name-brand sponsorship of sporting events and product-logo giveaways would have been banned.

Very little of the plan, however, had gone into effect. The lower court ruling by U.S. District Judge William L. Osteen Sr. had struck down the agency's proposed advertising and marketing restrictions, leaving little more than the age checks in place. It was unclear yesterday whether that program could continue during the appeals process. State and local initiatives to regulate tobacco sales and marketing are not affected by the court decision.

Anti-smoking activists were disappointed but not dissuaded by yesterday's ruling.

"The fact is that nicotine is an addictive drug. Nothing in this opinion changes that fact," said former food and drug commissioner David A. Kessler, who spearheaded the FDA move. Kessler said that he and his colleagues knew from the start that the process would involve reversals and a series of appeals through the judicial system. "These are chapters. We're in this for the long haul," he said.

"The decision goes beyond the FDA and this case," said Matthew L. Myers of the National Center for Tobacco-Free Kids. "The decision effectively emasculates the power of any federal agency to exercise its discretion to address new problems and confront new factual situations."

In yesterday's opinion, the two appellate judges ruled that Osteen had erred in accepting FDA's authority over tobacco products. The judges said Osteen suffered under a "fundamental misconception" in asking whether Congress had expressly prohibited the FDA from asserting authority over tobacco products; Osteen instead should have asked "whether Congress intended to delegate" the jurisdiction, the judges wrote.

They ruled that the FDA stretched its regulations too far in trying to cover tobacco products. They noted that cigarettes might indeed fit within the FDA's broad definition of a drug, which includes substances that "alter a structure or function of the body." But the agency had to prove that manufacturers intended to sell the products for their drug effects, and the court did not accept the agency's argument that it could prove intent through the companies' actions and consumer behavior.

The court stated that the agency, which is charged with ensuring that drugs are safe and effec tive, could not square that obligation with regulating a substance as hazardous as tobacco. The agency had argued that it could do so under looser regulations covering medical devices, but the court rejected such arguments as "obvious sophistry."

But the notion that companies would have to explicitly market their products for their drug effects to fall under FDA authority rankled Judge Hall. "It strikes me as patently absurd to contend that cigarettes and smokeless tobacco, products that are (under the assumed facts) actually designed to exert powerful and quintessentially drug-like effects on the users, should escape FDA regulation because the products are marketed as essential accoutrements of a more exciting or more sophisticated lifestyle," Hall wrote in his dissent.

The lower court opinion had relied largely on a key case in regulatory law, the 1984 Chevron USA Inc. v. Natural Resources Defense Council decision. In that, the Supreme Court granted broad deference to regulatory agencies to determine the scope of their governing statutes where Congress has not spoken clearly on the issue. But the 4th Circuit panel said there was no such ambiguity in the FDA case; Congress had repeatedly failed to pass bills that would have granted such authority, the judges wrote, and before Kessler moved to regulate tobacco products, the agency for decades had denied that it could assert such authority.

"We do not dispute in this case that Congress has charged the FDA with protecting the public health and that tobacco products present serious health risks for the public," Widener wrote. However, he said, the agency could not go farther than Congress allowed.

The court "gave tobacco the very best decision they could possibly have gotten," said Lewis A. Grossman, a law professor at American University.

The court's reasoning might not hold up under scrutiny, however, he said. "The court's decision may be defensible, but the way it went about reaching it is not." The decision is not binding on other federal circuit courts of appeal, but if it were, Grossman said, it would reverse a line of cases "giving Congress the authority to delegate power to agencies in very broad terms, and giving power to agencies to interpret those terms in any manner that they find reasonable."

Staff writer Saundra Torry contributed to this report.

FDA's Struggle for Authority

An appeals court's decision brings the FDA's effort to regulate tobacco back to square one.

August 1996: FDA publishes final rule asserting its authority over tobacco after generally opting not to for more than 50 years.

April 1997: U.S. District Judge William Osteen lets stand FDA's crackdown on tobacco sales to minors and regulation of vending machine sales but blocks plans to institute restrictions on adertising and promotional activities.

August 1997: Fourth U.S. Circuit Court hears appeal of Osteen's decision. One member of the court, Judge Donald Stewart Russell, 92, dies before court could issue an opinion.

June 1998: Fourth Circuit re-hears appeal.

Yesterday: Court votes 2 to 1 to reverse Osteen's ruling.

From the Fourth Circuit ruling:

"This transparent action by the FDA, obvious sophistry, taken in order to avoid the new drug provisions of the Act, reinforces the conclusion that regulation of tobacco products under the Act was not intended by Congress."

"This is not a case about whether additional or different regulations are needed to address legitimate concerns about the serious health problems related to tobacco use, and particularly youth tobacco use, in this country. At its core, this case is about who has the power to make this type of major policy decision. . . . Neither federal agencies nor the courts can substitute their policy judgments for those of Congress.