Michael Friedman v. Kathleen Sebelius

686 F.3d 813, 402 U.S. App. D.C. 15, 2012 WL 3055520, 2012 U.S. App. LEXIS 15530
Court of Appeals for the D.C. Circuit·Decided July 27, 2012·No. 15-1015·Published·Cited by 25 cases

Opinions

Opinion for the Court by Senior Circuit Judge GINSBURG.

[816]*816Opinion concurring in part, dissenting in part, and dissenting from the judgment filed by Chief Judge SENTELLE.

Opinion dissenting in part, concurring in part, and concurring in the judgment filed by Senior Circuit Judge WILLIAMS.

GINSBURG, Senior Circuit Judge:

Michael Friedman, Paul Goldenheim, and Howard Udell were executives at the Purdue Frederick Company when it misbranded a drug, to wit, the painkiller Oxy-Contin, a schedule II controlled substance. The Company was convicted of fraudulent misbranding, a felony, whilst the executives were convicted under the “responsible corporate officer” doctrine of the misdemeanor of misbranding a drug. Based upon their convictions, the Secretary of Health and Human Services later excluded the individuals from participation in Federal health care programs for 12 years, pursuant to 42 U.S.C. § 1320a-7(b). They sought review of the Secretary’s decision in the district court, arguing section 1320a-7(b) does not authorize their exclusion and, in any event, the Secretary’s decision was unsupported by substantial evidence and was arbitrary and capricious because she failed to give a reasoned explanation for the allegedly unprecedented length of their exclusions. The district court granted summary judgment for the Secretary.

We hold the statute authorized the Secretary’s exclusion of the three executives but her decision was arbitrary and capricious for want of a reasoned explanation for the length of their exclusions. We therefore reverse the judgment of the district court and direct it to remand the matter to the Secretary for further proceedings.

I. Background

The Appellants were senior corporate officers at Purdue when the Company developed and marketed OxyContin. According to the Information initiating the criminal cases against the Appellants and the Company, the “misbranding” occurred when unnamed employees at Purdue, “with the intent to defraud or mislead, marketed and promoted OxyContin as less addictive, less subject to abuse and diversion, and less likely to cause tolerance and withdrawal than other pain medications.” United States v. Purdue Frederick Co., 495 F.Supp.2d 569, 571 (W.D.Va.2007). Purdue pleaded guilty to felony misbranding, in violation of 21 U.S.C. § 331(a) and § 333(a)(2). Id. at 570. Pursuant to the plea agreement, the district court put the Company on probation for five years, fined it $500,000, and imposed other monetary sanctions totaling approximately $600 million, of which approximately $160 million was earmarked for restitution to Federal and State health care agencies, which had been large buyers of the misbranded drug. Id. at 572. At the same time, the Appellants pleaded guilty to misdemeanor misbranding, in violation of 21 U.S.C. § 331(a) and § 333(a)(1), for their admitted failure to prevent Purdue’s fraudulent marketing of OxyContin; each was sentenced to do 400 hours of community service, fined $5,000, and put on probation for three years. The sentencing court also ordered the Appellants to disgorge compensation they had received from Purdue totaling approximately $34.5 million.

Under the “responsible corporate officer” (RCO) doctrine, a “corporate agent, through whose act, default, or omission the corporation committed a crime” in violation of the Food, Drug, and Cosmetic Act may be held criminally liable for the wrongdoing of the corporation “whether or not the crime required ‘consciousness of wrongdoing’ ” by the agent. United States v. Park, 421 U.S. 658, 670, 95 S.Ct. 1903, 44 L.Ed.2d 489 (1975). Criminal liability under the RCO doctrine extends “not only [817]*817to those corporate agents who themselves committed the criminal act, but also to those who by virtue of their managerial positions or other similar relation to the actor could be deemed responsible for its commission.” Id. A corporate officer may therefore be guilty of misdemeanor misbranding without “knowledge of, or personal participation in,” the underlying fraudulent conduct. Id. The Appellants, as part of their plea agreements, admitted having “responsibility and authority either to prevent in the first instance or to promptly correct” the misrepresentations certain unnamed Purdue employees made regarding OxyContin and thereby, under the RCO doctrine, admitted being guilty of misdemeanor misbranding.

Several months after the Appellants had been convicted, the Office of the Inspector General (OIG) of the Department of Health and Human Services determined the Appellants should be excluded from participation in Federal health care programs for 20 years, pursuant to 42 U.S.C. § 1320a — 7(b)(1) and (3).

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Michael Friedman v. Kathleen Sebelius, 686 F.3d 813, 402 U.S. App. D.C. 15, 2012 WL 3055520, 2012 U.S. App. LEXIS 15530 (D.C. Cir. 2012).

686 F.3d 813 (Michael Friedman v. Kathleen Sebelius) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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