7th Circuit Strikes Down Portions Of Indiana Vaping Law

Olivia Covington for www.theindianalawyer.com

A federal court has struck down portions of Indiana’s controversial vaping law, holding that the “astoundingly specific provisions” related to regulations of security, cleanliness and other physical requirements imposed on out-of-state manufacturers violates federal law and seems to imply a state attempt to create a monopoly for an Indiana security firm.

After Indiana lawmakers passed the Vapor Pens and E-Liquids Act in 2015, three out-of-state manufacturers – Legato Vapors, Rocky Mountain E Cigs and Derb E Cigs, sued members of the Indiana Alcohol and Tobacco Commission in the U.S. District Court for the Southern District of Indiana, seeking injunctive and declaratory relief against the out-of-state provisions. The act required out-of-state manufacturers to meet highly specific security standards, including the requirement that they contract with independent security firms, and imposed additional regulations related to cleanliness and audits.

The parties filed cross-motions for summary judgment, and district court Judge Sarah Evans Barker awarded summary judgment to the state. However, the 7th Circuit Court of Appeals reversed that decision Monday, holding that the 2015 legislation violated the dormant Commerce Clause of the U.S. Constitution, which prohibits extraterritorial state regulation of commerce.

Looking specifically at the act’s “remarkably specific” security requirements, Judge David Hamilton, writing for the unanimous panel, noted that only one company, “located not so coincidentally in Indiana,” met the criteria of the vaping legislation and would get the approval of the ATC.

According to Indianapolis Business Journal, the rules gave a single security company—Lafayette-based Mulhaupt’s—the ability to choose which firms could operate in Indiana. And the law change was championed by a Lafayette lawmaker, Sen. Ron Alting.

Further, before the provisions of the act, Hamilton wrote that 99 percent of e-liquid revenue in Indiana came from out-of-state production. But now, only six manufacturers meet the security requirements to sell in Indiana, with four of those manufacturers based in the Hoosier state.

“These circumstances raise obvious concerns about protectionist purposes and what looks very much like a legislative grant of a monopoly to one favored in-state company in the security business,” the judge wrote.

But looking beyond the potential of a state-created monopoly, Hamilton further wrote that
the state may not try to achieve its security and safety goals “by direct extraterritorial regulation of the manufacturing processes …”
Further, the 7th Circuit held that the “clean room” requirements in the 2015 vaping legislation, which regulates the environment for all mixing and bottling activity, also violate the Commerce Clause. The court noted the requirements “(go) so far as to order out-of-state e-liquid manufacturers to wash their equipment with specific cleansers in specific sinks.”

Finally, the appellate court ruled that requirements subjecting out-of-state manufacturers to random audits by the ATC “are invalid direct regulations of interstate commerce insofar as they relate to enforcement of Indiana’s requirements for facility design and production operations.”

ILAS Sees Red Ink Flow Into Budget

Marilyn Odenadahl for www.theindianalawyer.com

Even coming off a holiday fundraiser that pulled in just over $150,000, the Indianapolis Legal Aid Society is expecting the 2016 expenditures will throw its budget in the red for the first time in decades.

ILAS board chair Richard Young and executive director John Floreancig noted the organization has been broadening its donor base and reaching out to funders beyond the legal community. Still, replacing the loss of roughly $200,000 in annual support that has been lost over the past six years from United Way of Central Indiana has been difficult.

“This is the first time in my tenure that we’ve run a red budget,” said Floreancig, who has led the nonprofit since 1994. “From a personal standpoint, this is a hard pill for me to swallow but it’s getting to the point where there’re only just so many funders in this area.”

Each year, ILAS makes a push for donations through its holiday dollar campaign. Floreancig was not expecting much response from the 2016 fundraiser because ILAS had celebrated its 75th anniversary in the fall with a special event that bought about $140,000.

However, the holiday campaign tapped into a different set of contributors and reaped $150,395 with a few more donations possibly trickling in. The amount is in the neighborhood with what the ILAS has gotten in the past from its end-of-year fundraiser.

Floreancig said he is very appreciative of the lawyers in the community who support ILAS. The money from the holiday effort goes directly to client representation.

For the 2016 campaign, the ILAS used a redesigned cartoon dollar drawn by Indianapolis Star political cartoonist Gary Varvel. Also, the nonprofit asked donors to increase their annual gifts to $125, the amount that can help one client.

Young, partner at Kightlinger & Gray LLP, anticipated the state’s new pro bono reporting rule that allows attorneys to count contributions in place of handling a case for no charge would boost the holiday fundraiser.

He knows from his own experience in private practice that many law firm attorneys do not feel they have the competence to represent a civil legal aid client with a divorce, child custody or landlord-tenant issue. So he believed the contribution provision would give lawyers a way to participate but, in the end, he does not think the rule had much impact.

ILAS could find its 2016 budget out of balance by as much as $50,000 although a grant from the federal Victims of Crime Act’s Crime Victims Fund could lower the amount to $30,000.

The legal aid society can dip into its reserve of approximately $500,000 to make up for the deficit but Young and Floreancig said if the red ink flows in the coming years, the organization could be force to take drastic steps.

“If it continues, we’ll have to reduce some of our staff and provide fewer services,” Young said.

Currently, ILAS is handling about 6,000 cases per year.

Young wants the board to keep focused on getting more donors involved or at least aware of the need for civil legal aid. He knows many nonprofits need support but he said once people understand the importance of legal help, they are happy to give.