The Cigar Industry Takes the Fight to Federal Court — Again
The premium cigar world has never been a passive participant in its own regulation. For the better part of a decade, some of the most recognizable names in the business have spent enormous resources battling the federal government over whether handmade, unflavored cigars should fall under the authority of the U.S. Food and Drug Administration at all. That fight, long and expensive, finally reached something resembling a conclusion in the spring of 2026 — but the industry's lawyers were barely done celebrating before a new lawsuit landed in a federal courthouse. This time, the goal is money.
Nine premium cigar manufacturers filed a lawsuit in the U.S. Court of Federal Claims seeking at least $10 million plus interest in refunds of FDA user fees paid between 2016 and 2023. The case, formally titled Rocky Patel Premium Cigars, Inc. et al. v. United States of America, represents the most direct financial reckoning the industry has yet pursued against the government — and it could be just the opening shot in a much larger battle over more than a hundred million dollars in disputed payments.
The Nine Plaintiffs: A Who's Who of the Humidor
The companies that signed onto this lawsuit are not obscure names. They represent some of the most influential players in premium tobacco, the kind found behind glass in walk-in humidors at serious cigar shops from Miami to Las Vegas. Arturo Fuente, Ashton, CLE Cigar, J.C. Newman, Oliva, La Flor Dominicana, My Father Cigars, Padrón, and Rocky Patel contend they paid the fees despite premium cigars being excluded from most FDA requirements and are now seeking reimbursement after the FDA stopped collecting user fees on premium cigars following a key 2023 court ruling.
Eight of the nine — all but CLE — are members of the Cigar Rights of America board, the trade organization that helped pay for a previous lawsuit that made this new lawsuit possible. CLE's inclusion in the suit is notable given its board non-membership status; it suggests the financial grievance is broad enough to unite companies beyond the inner circle of trade organization politics. Every one of these brands carries enormous weight with American cigar enthusiasts, and the argument they are making is straightforward: if the FDA never had the right to regulate their products, then the fees collected to fund that regulation should come back.
Understanding FDA Tobacco User Fees: How the System Works
To understand what is at stake, it helps to understand how the user fee system was structured in the first place. The user fees are calculated by splitting a year's worth of payments into six different categories for different types of tobacco products: cigarettes, cigars, roll-your-own tobacco, pipe tobacco, snuff, and chewing tobacco. Those user fees are used to fund the FDA's Center for Tobacco Products, i.e., the regulators. The fundamental premise is that regulated industries pay for their own oversight — the general public, the logic goes, should not foot the bill for policing tobacco companies.
From 2009 to 2018, the total user fee amount increased each year, though since 2019, it has been stuck at $712 million per year. Each category is assessed a total user fee payment for a given year, calculated using the amount of excise taxes — not user fees — that products in that category paid in the previous year. Because of the different variables in how the user fees are calculated, it's possible that a company could sell fewer cigars in its current year, but owe more user fees, or vice versa.
For premium cigar companies, the fees operated on a per-stick basis. In its most basic form, cigar companies were charged a nominal fee, roughly equivalent to 5-10 cents per cigar depending on the specific year. That number sounds modest until you multiply it across millions of cigars per year, over seven-plus years, across dozens of companies. Rocky Patel provided a deposition in which he estimated that the user fees paid by premium cigar companies were between $15-20 million annually. At that rate, the cumulative total across the industry becomes substantial fast.
The Vaping Exemption Problem
One of the enduring frustrations for cigar companies and for the FDA itself has been the question of e-cigarettes. The total amount of tobacco user fees for a given year is set by Congress, meaning that the FDA has very little ability to make adjustments to how the process works. Most notably, e-cigarette and vaping companies have not been charged user fees, something that the FDA has said it would like to adjust, but is something Congress must change. The absurdity was not lost on the cigar industry: handcrafted, long-filler premium cigars — products with a centuries-old tradition — were being assessed fees meant to fund regulators, while a billion-dollar vaping industry was paying nothing. That imbalance has never been resolved, and it underscores the argument that the FDA's regulatory framework, as applied to premium cigars, was built on a flawed foundation from the beginning.
The Decade-Long Legal War That Made This Lawsuit Possible
The current lawsuit is the direct offspring of one of the longest regulatory legal battles in American tobacco history. The parent case is Cigar Association of America et al. v. United States Food and Drug Administration et al., a federal lawsuit filed in July 2016 by the Cigar Association of America (CAA), Cigar Rights of America (CRA), and Premium Cigar Association (PCA). The central argument was that the FDA, in crafting its 2016 "deeming regulations" that extended its authority to all tobacco products, acted arbitrarily and capriciously by failing to properly evaluate whether premium cigars — a fundamentally different product from cigarettes or mass-market cigars — warranted the same treatment.
In July 2022, Judge Mehta found that the FDA erred when introducing the deeming regulations in 2016. Specifically, he found that the agency violated the Administrative Procedure Act's requirements for the agency to evaluate comments submitted to it as part of the rulemaking process. The industry had submitted evidence through Cigar Rights of America citing FDA-affiliated researchers, and the agency responded by pretending the evidence didn't exist. That procedural failure proved fatal to the FDA's case.
For remedy, Mehta sided with the cigar industry and found that the rule should be vacated for "premium cigars," meaning that the FDA's deeming regulations do not apply to "premium cigars." The FDA had asked Mehta to simply allow them to fix the error by evaluating the comment and responding to it, but Mehta ruled that if the FDA wants to regulate "premium cigars," it must start an entirely new rulemaking process. The government appealed, and the government's appeal of a lower court decision was affirmed in January 2025. The appeals court sent the case back to Mehta for one narrow purpose: settling the precise definition of a "premium cigar."
The "Premium Cigar" Definition — What It Means and Why It Matters
In the end, Judge Amit P. Mehta upheld the same definition used since 2020. That means most handmade cigars that do not have added flavoring are not subject to the FDA's deeming regulations, which include product approval, user fees, and other restrictions. The definition that has now been permanently adopted requires that a cigar contain at least 50 percent long filler tobacco by weight, be handmade or hand-rolled without machinery, have no filter or nontobacco mouthpiece, carry no characterizing flavor other than tobacco, and contain only tobacco, water, and vegetable gum. In short, any non-flavored cigar found sold in a humidor in the U.S. should qualify. There will be some exceptions, but the vast majority of large, non-flavored cigars will qualify.
Mehta's ruling does not mean that handmade, unflavored cigars are permanently exempt from FDA's regulations. At any point, the agency could decide to restart the rulemaking process and correct the errors that led to his 2023 decision. However, given the current regulatory approach of the Trump administration, that does not appear likely in the immediate future.
The Money Question: Over $100 Million in Disputed Fees
Even as the primary deeming regulation lawsuit ground toward its conclusion, the financial question — what happens to all the money already paid — remained unanswered. By the time the court found that the FDA lacked the authority to regulate "premium cigars," companies had paid more than $100 million in user fees for "premium cigars" during the seven-year period when the FDA was regulating these cigars. Cigar companies are very interested in getting this money back; however, both the attorneys and judges in that case were non-committal as to how this process would go.
In September 2024, a court filing revealed that the government believed there would be "over $100 million in refunds of past-year fees." That acknowledgment from the government itself gave the industry its clearest signal yet that the refund question was real, not hypothetical — and that the dollar amounts at stake were enormous. There's a question of whether FDA would then go after companies in the other product categories to make up the difference or if the money would come from somewhere else. Neither the FDA nor the Department of Justice has offered a clean answer to that structural puzzle.
The complication of how fees were actually paid adds yet another wrinkle. Many cigar companies that paid user fees did not pay those fees directly to the government. The user fees are only assessed to companies that are either importers or domestic manufacturers of these products. Many cigar companies, including some of the largest handmade cigar companies and those with some of the largest handmade cigar factories, do not always serve as their own importer. This creates a potential added layer of intrigue for the refund process because it is ultimately up to the company that paid the government to go through the legal process of getting refunds. It is quite possible that a cigar company might want a user fee refund, but the importer opts against going through the process.
The New Lawsuit and the Court of Federal Claims
One part of the regulations that premium cigar companies had to comply with was user fees, the subject of the new lawsuit — Rocky Patel Premium Cigars, Inc. et al. v. United States of America. It has been filed in the U.S. Court of Federal Claims, a specific court that deals with lawsuits that seek money from the federal government. The choice of venue is significant. The Court of Federal Claims exists precisely for situations like this one: when a party believes the federal government owes them money and standard federal district courts are not the appropriate forum. It is a court built for financial accountability, and the cigar companies are betting it is the right arena for recovering what they say was wrongfully collected.
The lawsuit follows the cigar industry's victory in a separate legal challenge that resulted in premium cigars being exempted from FDA regulation, with the companies arguing they should not have been required to pay user fees on products the agency ultimately lacked authority to regulate. The argument is elegant in its logic: regulation requires legal authority, user fees fund that regulation, and if the authority was never valid, then the fees were never owed. The thinking in favor of a refund is that if the FDA shouldn't have been regulating these products to begin with, these companies shouldn't have had to pay this money and therefore it should be refunded.
The Government's Counterargument
The government's resistance to refunds has been consistent and pointed. The FDA's own correspondence made its position clear: the FDA does not intend to refund past premium cigar user fee payments, citing the U.S. Court of Appeals' language that the district court's relief applies "only prospectively, without requiring an unwinding of past transactions." That phrase — "past transactions" — became the government's shield. The appeals court itself had written language that seemed to foreclose retrospective relief, with Judge Randolph writing that "the district court did not abuse its discretion in vacating the FDA's Rule as applied to premium cigars, provided that the relief does not permit refunding past user fee payments."
Courts generally disfavor the remedy of vacatur if it requires an agency to revise previous "settled transactions" like user fees. The D.C. Circuit determined that there were no such concerns with the district court's order because the decision only prospectively prohibits the collection of user fees on "premium cigars" and would not require FDA to recalculate and reallocate prior user fee payments. The government's reading of those rulings is that they constitute a clean bar against refunds. The cigar companies' lawyers disagree — and they're using a different court to make that case.
The distinction the plaintiffs are likely to argue is critical: the deeming regulation lawsuit was fought in federal district court under administrative law principles. The refund claim is a separate, independent monetary cause of action filed in a court specifically empowered to adjudicate financial claims against the United States. Michael Edney — the longtime lead attorney for the CRA and PCA plaintiffs in the original lawsuit — had previously suggested that the user fee refund issue was for a different court to decide. That "different court" appears to have arrived in the form of the Court of Federal Claims.
What $10 Million Really Means — and What It Could Grow Into
The $10 million figure cited in the lawsuit should be understood as a floor, not a ceiling. In September 2024, a court filing revealed that the government believed there would be "over $100 million in refunds of past-year fees." The new Rocky Patel lawsuit doesn't shed any light on how much money is at stake beyond the fact that it is at least $10 million, which includes interest payments. Only nine companies have joined the current action, but they represent some of the largest names in premium cigars. If this lawsuit succeeds, it would almost certainly open the door for dozens more companies — and possibly importers who paid on their behalf — to file similar claims.
There is also the question of what "interest" means in this context. User fees paid in 2016 or 2017 have been held by the government for nearly a decade. If the Court of Federal Claims agrees that those fees were improperly collected, the interest accumulation on those sums could be substantial in its own right. The companies are not asking merely for a return of principal; they want compensation for the time value of money taken from them by a regulatory regime a federal court later ruled was legally defective.
Broader Industry Implications
The ramifications of this case extend well beyond the nine plaintiffs currently listed. Winning the original lawsuit meant that "premium cigars" have not been subject to most of the regulations introduced by the deeming regulations, including FDA product approval, warning labels, advertising restrictions, a ban on free samples, and, more recently, user fees. But the financial recovery piece has always been the one left unresolved — a loose thread that the industry has been pulling at since the first court victories began to accumulate.
For the companies themselves, a successful outcome would represent more than a financial windfall. It would set a precedent that federal agencies cannot collect fees to fund regulatory activity over industries they lack the legal authority to regulate, and that regulated parties retain the right to seek financial redress when that authority is successfully challenged. That principle, if established in the Court of Federal Claims, could influence how similar cases are approached in other regulated industries where fee structures are contested.
There is also the structural question of what the FDA does if it loses. It's unclear how a refund process would work, as it would apparently mean that the Center for Tobacco Products would need to refund more than $100 million paid from 2016-2023. There's a question of whether the FDA would then go after companies in the other product categories to make up the difference or if the money would come from somewhere else. The agency's budget and operations are built around a fixed $712 million annual user fee structure set by Congress, and a nine-figure refund obligation would require either Congressional action or some form of creative financial maneuvering within the existing appropriations framework.
The Vaping Industry's Shadow Over Everything
It is impossible to discuss this lawsuit without noting the bitter irony that hovers over it. While premium cigar makers — an industry defined by artisanship, small family operations, and handcrafted products with no meaningful youth appeal — spent years fighting fees and regulations, the vaping industry has operated almost entirely outside the user fee system. Since 2016, the FDA has been unable to assess user fees to e-cigarettes and vaping companies despite the fact that these are likely the largest drain on Center for Tobacco Products manpower. The legislative fix remains stalled, and the inequity remains glaring. For cigar enthusiasts and industry veterans alike, the fight for a refund is inseparable from this broader narrative of a regulatory system that punished the wrong products while the real public health concerns went financially unaccountable.
What Happens Next
The case now sits in the U.S. Court of Federal Claims, and the government will have the opportunity to respond. Given the FDA's documented position that it does not intend to issue refunds, and the DOJ's history of vigorous opposition throughout the decade-long deeming regulations battle, a settlement seems unlikely in the near term. The government will almost certainly argue that the appellate court's language about prospective relief forecloses any monetary recovery, while the plaintiffs will argue that the Court of Federal Claims is an entirely separate forum operating under entirely separate legal authority.
The outcome could hinge on whether the court views the user fee payments as "taxes" collected without lawful authority — a category of claim that has historically received sympathetic treatment in the Court of Federal Claims — or as regulatory fees that, once paid, are treated as finalized transactions regardless of what later happens to the underlying regulatory authority. Legal scholars and tobacco law practitioners will be watching closely, because the precedent set here could reshape how future regulatory fee disputes are handled across a wide range of industries.
For the cigar community — the shop owners, the aficionados who keep walk-in humidors stocked, the weekend smokers who treat a well-constructed Padrón or Arturo Fuente as one of life's legitimate pleasures — this lawsuit represents the culmination of a decade spent watching their favorite brands fight for the right to exist outside a regulatory framework that was never designed with them in mind. The legal battle has always been about principle as much as money, but nine figures in disputed user fees has a way of sharpening the focus. The premium cigar industry won the war over regulation. Now it wants its bill paid back.
