United States v. Articles of Drug

825 F.2d 1238, 8 Fed. R. Serv. 3d 656
CourtCourt of Appeals for the Eighth Circuit
DecidedAugust 4, 1987
DocketNo. 86-1438
StatusPublished
Cited by18 cases

This text of 825 F.2d 1238 (United States v. Articles of Drug) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. Articles of Drug, 825 F.2d 1238, 8 Fed. R. Serv. 3d 656 (8th Cir. 1987).

Opinion

McMILLIAN, Circuit Judge.

Midwest Pharmaceuticals, Inc., Steven F. Sommers and Robert S. Leibert (collectively referred to as Midwest) appeal from a final judgment entered in the District Court for the District of Nebraska condemning as “misbranded” certain drug products seized from Midwest in April 1984. The district court held that the Midwest drugs were imitations of other drugs in violation of 21 U.S.C. §§ 331(b), 352(i)(2)1 and enjoined Midwest under 21 U.S.C. § 332(a)2 from selling or marketing any drug product similar in appearance and in effect to drugs seized in April 1984 by the Food and Drug Administration (FDA or the government). United States v. Articles of Drugs, 633 F.Supp. 316 (D.Neb.1986) (Articles II).

For reversal, Midwest argues that (1) 21 U.S.C. § 352(i)(2) is unconstitutional because the term “imitation” is vague, (2) the district court applied the wrong standard in determining Midwest’s liability for the alleged “passing off” of its drugs, (3) the government failed to prove that a “substantial” amount of each of the seized drugs had been passed off, (4) the injunction is overly broad and lacks specificity, (5) the district court’s pretrial orders and erroneous trial rulings, taken as a whole, deprived Midwest of due process, and (6) the district court erred in dismissing Midwest’s counterclaim. For the reasons discussed below, we affirm in part, reverse in part and remand for further proceedings consistent with this opinion.

BACKGROUND

Midwest, an Iowa corporation,3 does business as Midwest Pharmaceuticals, B & S Distributors and U.S.A. Drugs. Appellant Sommers was president of Midwest at the time of trial and had been president since January 1984. Appellant Liebert was the former president. Since January 1, 1984, Sommers and members of his household have been the sole stockholders and owners of Midwest. Sommers has no formal training in pharmacy or pharmacology.

Midwest is both a wholesale and retail distributor of generic, over-the-counter drug products containing caffeine, ephedrine (a bronchial dilator commonly used in the treatment of asthma), and phenylpropa-nolamine. Midwest also sells powdery and sticky substances, which Midwest markets as “incense.”

Midwest buys 98 percent of its drug products from Gemini Pharmaceuticals in New York, and, in turn, usually sells its products in bulk containers of 1,000 dosage units (caplets or tablets).4 The drugs are shipped by mail in response to mail or telephone orders and payment is usually C.O.D. According to the government, Midwest sold over 245 million dosage units during 1984. Midwest presented evidence that in 1984 it had 35,000 customers, and in 1986 it had over 60,000 customers. Midwest advertises its drug products in print media that the government characterizes as “subculture,” “porno,” “drug,” and “biker” magazines, such as Stag, subtitled [1242]*1242Hard Core For '84; Triple Pom Review; Partner, subtitled King of the Skin Mags; High Times; and Hustler. Midwest in advertisements describes its drug products as “legal body stimulants” and “sleep aids.” The advertisements contain pictures or photographs of the drugs, but contain no information about the ingredients or indications or contraindications, and describe the drug products by names such as “357 Magnum,” “20/20,” “30/30,” “White Mole," “Mini-White” and “Incense.” Some of these names are “street names” for various illegal drugs. Midwest does not list its products in trade publications, nor is Midwest listed in the directory of wholesale drug dealers, which is used by many pharmacists in the United States.

On April 5,1984, the FDA seized approximately 15 tons of drug products from Midwest. Of the 40 different types of products seized, most were single ingredient drug products containing caffeine. The drugs, however, differed in dosage, size and color. The FDA also seized 15 pounds of white powder that Midwest marketed as “incense.”

On the day of the seizure, the FDA filed a complaint alleging that Midwest drug products were “misbranded” because they were “imitations” of other drugs in violation of 21 U.S.C. § 352(i)(2) and were thus subject to in rem seizure under 21 U.S.C. § 334. The FDA also sought an order enjoining Midwest and its president, Som-mers, under 21 U.S.C. § 332(a), from selling or marketing the same or similar products in the future. Midwest filed a claim for the return of the seized drug products, an answer, and a counterclaim, alleging harassment, abuse of process and negligence on the part of the FDA. The two actions were consolidated on August 21, 1984, for pretrial discovery and trial.

The government moved to dismiss the counterclaim on the ground that the seizure was a discretionary function and thus the FDA was exempt from liability under the Federal Tort Claims Act (FTCA), 28 U.S.C. § 2680(a). Midwest sought summary judgment in both actions, alleging that 21 U.S.C. § 352(i)(2) (which had been in effect since 1938) was unconstitutionally vague. Midwest also argued that the term “imitation” in 28 U.S.C. § 862(i)(2) means “counterfeit” and that the drugs seized were not counterfeit because of the difference in markings.

The case was referred to a magistrate for findings and recommendations. The magistrate recommended that Midwest’s motion for summary judgment be denied because 21 U.S.C. § 352(i)(2) is not unconstitutionally vague and the term “imitation” is not equivalent to “counterfeit” for purposes of this provision. The magistrate concluded that “imitation” referred to the practice of passing off one substance as another, while “counterfeit” refers to the practice of using another’s identifying mark without the permission of the other person or entity.

The district court rejected Midwest’s objections to the magistrate’s report and held that manufacturers and distributors may be held contributorily liable for alleged violations of 21 U.S.C. § 352(i)(2) if they intentionally induce another to commit violations of § 352(i)(2) or if they knew or reasonably could have anticipated that a substantial portion of their products would be passed off as controlled substances in the chain of distribution. United States v. Articles of Drugs, 601 F.Supp. 392, 397-98 (D.Neb.1984) (Articles I), The district court denied Midwest's motion for summary judgment and granted the FDA’s motion to dismiss the counterclaim. Id.

The case was tried in February 1986.

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Cite This Page — Counsel Stack

Bluebook (online)
825 F.2d 1238, 8 Fed. R. Serv. 3d 656, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-articles-of-drug-ca8-1987.