State Vaping Law Survives Federal Challenge

State Vaping Law Survives Federal Challenge
Scott Olson , IBJ Staff

A federal judge on Thursday upheld as constitutional a controversial state law that regulates the manufacturing of vaping “e-liquids.”

The law, which is set to go into effect on Friday, withstood a challenge from a handful of vaping companies that had argued the statute is too restrictive and thus unconstitutional.

In her decision, Judge Sarah Evans Barker of the Southern District of Indiana, Indianapolis Division, sided with the state and denied the industry’s motions for summary judgment and preliminary injunction.

“As repeatedly made clear by this circuit and others, and as petitioners concede, there is no right to sell e-liquids in Indiana entirely free from regulation,” Barker wrote in her decision.

Her decision follows a similar one handed down on June 2 by Marion Superior Court Judge Cynthia Ayers, who ruled in a separate lawsuit brought by the same parties at the state level that the law can go into effect.

The 2015 state law regulates the mixing, bottling, packaging, distribution, sale, position and open use of certain e-liquids by requiring manufacturers to get a state permit from the Alcohol and Tobacco Commission.

But the most controversial part of the law is the requirement that manufacturers contract with a security firm to regulate and inspect their facilities to prevent tampering. According to e-liquid manufacturers, the law is written in such as way that it appears a private Lafayette security firm, Mulhaupt’s, is the only company that can meet its stringent requirements.

Under the new rules, just six e-liquid manufacturers so far have been approved by the state to move forward. They all have contracted with Mulhaupt’s.

IBJ reported June 18 that at least 30 national and local manufacturers tried to do business with Mulhaupt’s, but many were unsuccessful. The security firm said it was being choosy with whom it worked.

“The security requirements further the goal of preventing intentional tampering and sabotage, the clean room requirement furthers the goal of preventing contamination or adulteration, and the audit requirement ensures compliance with the manufacturing requirements,” Barker wrote. “Indiana’s manufacturing regulations pertaining to e-liquids sold in Indiana, although quite restrictive, are rationally related to the concerns to which the Act seeks to address.”

The law only regulates open-system vaping devices that produce more vapor than competing closed-system devices that resemble a traditional cigarette.

Open-vaping devices, typically sold by vape shops, command 60 percent of the e-liquid market. More than 200 vaping retailers exist in Indiana.

Overall, the industry generates $4.6 billion annually nationwide with estimates of projected earnings of $11.6 billion by 2020, according to the industry.

The federal suit was brought by Legato Vapors LLC, Jet Setter Juice LLC, Rocky Mountain Ecigs LLC and Derb E Cigs Indiana LLC.