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7th Circuit opinion shapes overhaul of vaping law

March 8, 2017

Guidance from the 7th Circuit Court of Appeals was the driving force behind an overhaul of Indiana’s controversial vaping law, which is now before the House of Representatives in a significantly amended form.

head-randy-mug.jpg Head

After a panel of the 7th Circuit in January struck down several of Indiana’s “astoundingly specific” regulations on out-of-state e-liquids manufacturing — including 24-hour video monitoring, clean room requirements and an audit provision — on the basis of a violation of the dormant Commerce Clause in the U.S. Constitution, Sen. Randy Head, R-Logansport, said the General Assembly was forced to start over on its planned revamp of the state’s vaping law.

Soon after its passage in 2015, the Vapor Pens and E-Liquid Act quickly fell prey to widespread controversy, particularly with regard to its stringent security requirements. According to the 7th Circuit and public opinion, the security requirements seemed to be designed to favor one particular security firm — Lafayette-based Mulhaupt’s, the only firm that could meet the requirements.

Legislators were already working on amending the law to ease those concerns when the 7th Circuit opinion came down, timing that Head said was unusual but ideal.

“We still had time to make it right,” he said.

In its current form, Senate Bill 1 strips most of the security provisions and instead leaves in place requirements for ingredient labeling, child-proof caps, tamper resistant/evident packaging and lot numbers that can trace where e-liquids products were manufactured if they are found to be adulterated. Additionally, the bill provides that current manufacturers permitted to work in Indiana — seven in all — can continue their operations.

Provisions such as specific labels would remain permissible under the circuit court opinion because they represent only “minor changes” to the manufacturing process, Head said. In its opinion, the 7th Circuit pointed to cases such as National Electrical Manufacturers Association v. Sorrell, 272 F.3d 104 (2d Cir. 2001) and International Dairy Foods Association v. Boggs, 622 F.3d 628, 647-49 (6th Cir. 2010) as precedent for that part of its ruling.

But by stripping out the other requirements called into question by the public, vape shop owners and the 7th Circuit, Head said the General Assembly is attempting to create a level playing field for both in-state and out-of-state manufacturers.

Under the 7th Circuit’s opinion, Indiana would be permitted to impose its stringent regulations on in-state manufacturers, but not on out-of-state companies that would ship their products to be sold in Indiana. However, imposing the strict regulations only in the Hoosier state would create a two-tier system in which manufacturers would be tempted to produce e-liquids out-of-state while still selling them in Indiana, thus hindering the Hoosier economy by driving away jobs, Head said.

That’s similar to what happened with Cool Breeze Vapors, an Evansville-based operation that was forced to move into Kentucky because Mulhaupt’s would not give it a license. Chris Brown, owner of Cool Breeze Vapors, said under the new language of the law, he and his employees can now return to Evansville to continue their work.

But Mike Leppert, a lobbyist with Krieg DeVault LLP who lobbies on behalf of Turning Point Brands, formerly the National Tobacco Co., said there was no reason for Indiana to pass a law that would have driven out Brown’s business in the first place.

eliquids-table“I look at the market as an American market, not 50 separate markets,” Leppert said. “Cool Breeze has a presence in three states. It’s an Indiana company, an Indiana family, and there’s no reason for their company to have to treat Indiana as if it’s some sort of black hole.”

When asked if he thought the repeal of many of the requirements, such as the clean room and security specifications, was unfair to the seven current Indiana permittees who had invested their resources into meeting those specifications, Head said he thought the vaping laws in Indiana had been unfair to all parties at one time or another.

“We could keep those rules just if you exist in the state of Indiana, and all the other manufacturers could just go right across the border and still be allowed to manufacture,” he said. “So we’ve got to deal with this court ruling as it exists.”

taylor-greg-mug.jpg Taylor

Senate Bill 1 found overwhelming support at both the committee and Senate floor level with one exception — Sen. Greg Taylor, D-Indianapolis. While Taylor agreed with stripping out the security company requirements, he expressed concern about the lack of regulation on where e-liquid products can be manufactured throughout Indiana.

A former vaper himself, Taylor said he would often buy e-cigarettes from corner shops, but didn’t realize that the liquids used in the e-cigarette could be manufactured in-house by those shop owners. But as he learned more about the e-liquids manufacturing process, Taylor said he became concerned about the lack of regulation.

While provisions such as child-proof caps and tamper-evident packaging are positive safeguards once a vaping product has been made and sold, Taylor said even those requirements would not be enough to protect a vaper if the process of manufacturing the e-liquids was not properly monitored. Until the federal government comes out with more specific requirements for the e-liquids industry, he said he would be in favor of stronger regulations of who can sell vaping products in Indiana.

But Leppert said such concerns are largely fiction and noted that no regulatory scheme would deter a person who is intentionally seeking to adulterate e-liquids products.

“The bill that was passed in 2015 and modified in 2016 was not a panacea for safety, and those who claim that it is are just misleading the public,” Leppert said.

Leppert further noted that because he has a client base of both out-of-state manufacturers and those who plan to open Indiana e-liquids facilities, he was pleased to see the 7th Circuit opinion differentiate the laws applying to those different types of manufacturers. However, like Head, Leppert said the ruling creates an “awkward situation with the law” that leaves the state vulnerable to the two-tier system.

The House Committee on Public Policy had not set a hearing on SB 1 by IL deadline.•

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