A federal appeals court on Monday struck down part of a 2015 Indiana law governing the manufacture and sale of vapor pens and other liquids used in e-cigarettes.
The 7th U.S. Circuit Court of Appeals said Indiana went too far by subjecting out-of-state manufacturers to detailed rules for such things as sinks, cleaning equipment and even contracts with outside security firms, and could not enforce those rules against them.
Writing for a three-judge panel, Circuit Judge David Hamilton said the state's Vapor Pens and E-Liquid Act has an "extraterritorial reach that is unprecedented," violating the "dormant" Commerce Clause of the U.S. Constitution.
Hamilton said Indiana could impose reasonable and "even-handed" rules to ensure the safety of vaping products.
But he said some of its rules were "remarkably specific," and that "only one company in the entire United States, located not so coincidentally in Indiana," met them.
"These circumstances raise obvious concerns about protectionist purposes and what looks very much like a legislative grant of monopoly," he wrote.
The decision by the Chicago-based appeals court overturned a June 30 ruling by U.S. District Judge Sarah Evans Barker in Indianapolis.
That ruling had been appealed by out-of-state e-cigarette makers Legato Vapors, Rocky Mountain E Cigs and Derb E Cigs, supported by the Right to be Smoke-Free Coalition trade group.
"We're very happy," Robert Epstein, a lawyer for the out-of-state companies, said in an interview. He said the law "essentially foreclosed" them from delivering e-cigarettes to Indiana retailers and consumers.
The office of former Indiana Attorney General Greg Zoeller had defended the law in court.
A spokesman for Zoeller's successor, Curtis Hill, did not immediately respond to requests for comment.
In court papers, the out-of-state manufacturers said the Indiana law drove costs higher and subjected them to potentially inconsistent regulations, "as other states decide how best to regulate e-vapor products and enact their own e-vapor laws."
The case is Legato Vapors LLC et al v Cook et al, 7th U.S. Circuit Court of Appeals, No. 15-00761.
(Reporting by Jonathan Stempel in New York; Editing by Cynthia Osterman)