Court Ruling Undermines FDA Civil Penalty Power

By David Graham

Last month, the U.S. District Court for the Northern District of Texas issued a decision that could significantly reshape the FDA’s enforcement powers. In Wulferic, LLC v. FDA (N.D. Tex. Aug. 1, 2025), the court held that the Food, Drug, and Cosmetic Act’s civil monetary penalty (CMP) provision for tobacco products, 21 U.S.C. § 333(f)(9), is unconstitutional. The ruling relied on the U.S. Supreme Court’s recent decision in SEC v. Jarkesy, which restricted the ability of federal agencies to impose monetary penalties through administrative proceedings.

Background: The Jarkesy Decision

In Jarkesy, the Supreme Court determined that the Securities and Exchange Commission could not levy civil penalties for securities fraud using its in-house administrative process. The Court found that such actions implicated the Seventh Amendment right to a jury trial for civil cases because civil monetary penalties are a form of common-law damages. As a result, claims of this type must be brought in federal court before a jury, not before an agency administrative law judge (ALJ).

Legal commentators quickly predicted that Jarkesy would have ripple effects across federal agencies, especially those that rely heavily on administrative proceedings. The decision is a potential springboard for challenges to the FDA’s authority under various provisions of the FD&C Act, including tobacco-specific CMPs.

The Wulferic Case

The plaintiff, Vapor Lab, manufactures and sells e-liquid tobacco products. The FDA sought to impose a civil penalty for sales of products that had not received premarket authorization. That action was pending before an HHS administrative law judge when Vapor Lab challenged the proceeding, arguing that the CMP framework itself was unconstitutional.

The Texas court agreed. Echoing the reasoning in Jarkesy, it ruled that the FDA’s tobacco CMP process violated the Seventh Amendment because it subjected companies to monetary penalties without the benefit of a jury trial. The court emphasized that monetary sanctions, whether imposed for securities violations or unauthorized tobacco sales, fall within the category of “suits at common law,” where jury trials are constitutionally required.

Why This Matters

Although the Wulferic decision is limited to FDA’s tobacco CMP authority, the reasoning applies broadly. The FDA’s ability to impose civil monetary penalties through administrative proceedings exists in several areas, including drugs, devices, and clinical research. Defendants facing such actions are now more likely to challenge FDA’s authority on Seventh Amendment grounds. 

“As these constitutional challenges gain traction, the FDA may need to rethink not just its enforcement tactics, but how it structures compliance expectations across industries. For companies, this creates both opportunity and uncertainty, the chance to assert new defenses, but also the risk of being a test case in unsettled law.”
David Graham, Senior Counsel, Gardner Law

If appellate courts uphold this ruling, the FDA could face a number of new constraints that reshape enforcement strategy well beyond tobacco.

1. Shift to Federal Court: The FDA may be forced to pursue civil penalties in Article III courts rather than through its administrative process. This change would lengthen proceedings, increase litigation costs, and subject FDA enforcement actions to jury determinations.
2. Greater Leverage for Industry: Companies targeted for CMPs could gain stronger procedural protections and negotiating leverage, knowing the FDA must convince a federal jury rather than an agency judge.
3. Uncertainty Across the Board: Until appellate courts or Congress clarify the law, the FDA’s enforcement toolkit will remain in flux. The agency may hesitate to pursue CMPs aggressively while litigation over their constitutionality plays out.

What Clients Should Do

This decision is immediately relevant not just for tobacco manufacturers, importers, and retailers, but also for food, drug, and device companies facing pending CMP proceedings. Even companies that have already paid penalties might seek to challenge the FDA’s authority.

For medical device, pharmaceutical, and biotech companies, the ruling is a signpost of potential changes ahead. If other courts extend Jarkesy and Wulferic to FDA’s broader CMP provisions, the agency’s enforcement posture could shift significantly. Companies under investigation should consider how the evolving landscape might affect their strategy, risk exposure, and settlement options.

Conclusion

The Wulferic decision represents another step in the judicial re-examination of agency adjudication following Jarkesy. While the case is certain to be appealed, its reasoning has the potential to reshape how the FDA enforces compliance across industries, not just tobacco. Companies should monitor developments closely and be prepared to adjust their compliance and litigation strategies.

Contact Gardner Law

Our attorneys have decades of experience navigating FDA enforcement. We can help you assess the risks posed by these constitutional challenges, evaluate your current compliance posture, and develop strategies to respond to government investigations. Contact our team for practical, tailored advice.