The U.S. Sixth Circuit Court of Appeals has issued a decision upholding the rule issued by the federal Alcohol, Tobacco Tax and Trade Bureau (TTB) in September of 2010, which classified retail operators of commercial roll-your-own (RYO) cigarette machines as tobacco product manufacturers under federal law, the National Association of Tobacco Outlets (NATO) reported.
When the TTB issued the rule in September 2010, RYO Machine LLC and a retailer filed a federal lawsuit against the TTB and obtained a temporary restraining order and then a preliminary injunction against the enforcement of the TTB rule. After the preliminary injunction was issued, the TTB appealed the decision to the Sixth Circuit Court of Appeals.
In the yesterday’s (Aug. 20) decision, the Sixth Circuit Court judges noted that while the appeal was pending, Congress passed and the President signed into law the Moving Ahead for Progress in the 21st Century Act, which funded highway projects, but also included a provision that retailers who operate commercial roll-your-own cigarette machines fall within the federal classification of a tobacco product manufacturer.
In the court’s reasoning, the passage of this federal highway funding bill achieved the same result as the initial TTB rule issued in the fall of 2010. Since the highway funding law went into effect on July 6, 2012, the appeals court had to decide the impact of the preliminary injunction both and after the July 6, 2012 effective date of the law passed by Congress.
The appeals court judges found that the highway funding act took away or “mooted” the legal controversy between the plaintiffs in the lawsuit and the TTB after the July 6, 2012 effective date. Moreover, the appeals court found that the federal court— which granted the preliminary injunction against the TTB rule in 2010—did not have proper jurisdiction to do so and, for that reason, the preliminary injunction was vacated or cancelled in its entirety dating back to September of 2010 when the rule was first issued. In other words, the appeals court decision means that the TTB rule has been in force and effect since it was first issued.
On July 25, 2012, the TTB posted a notice on its Website, noting that due to the initial preliminary injunction, the agency was not processing any applications by RYO retailers to obtain a manufacturer permit or enforcing the RYO provision of the highway bill that went into effect last month on July 6.
Following the Aug. 20 decision from the Sixth Circuit Court of Appeals, the cancellation of the injunction means that the TTB may now begin enforcing the rule and the federal law that retail operators of commercial roll your own machines are tobacco product manufacturers and are required to obtain a federal manufacturer’s permit, post an appropriate bond, and pay the federal cigarette tax on cigarettes rolled by a machine.