Virtus Pharmaceuticals, LLC v. Garland

• Court: District Court, District of Columbia
• Decided: September 22, 2021
• Docket: Civil Action No. 2021-2308
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

VIRTUS PHARMACEUTICALS, LLC, Plaintiff, v. Civil Action No. 21-2308 (CKK)

MERRICK GARLAND, et al., Defendants.

MEMORANDUM OPINION (September 22, 2021)

Virtus Pharmaceuticals, LLC (“Virtus”) is a “virtual” drug manufacturer. As part of its

business model, Virtus owns the technical applications necessary to produce various

pharmaceuticals regulated under the Controlled Substances Act. But because Virtus is not itself

registered with the United States Drug Enforcement Agency (“DEA”) to handle controlled

substances, the company outsources its manufacturing and distribution operations to third parties

that are registered with the DEA. As relevant here, Virtus contracts with a logistics company

called Woodfield Distribution, LLC (“Woodfield”) for the storage and distribution of Virtus’s

pharmaceutical products through Woodfield’s facilities in both Sugar Land, Texas and Boca

Raton, Florida.

On August 11, 2021, the DEA served Woodfield with an order that immediately suspended

Woodfield’s registrations to import and distribute controlled substances from its Sugar Land

facility. The DEA based this suspension on Woodfield’s alleged compliance failures, which

facilitated the illicit diversion of controlled substances and threatened public health. In

conjunction with that suspension order, the DEA placed all controlled substances at Woodfield’s

Sugar Land facility under seal, including the pharmaceutical products Woodfield was storing for

1 Virtus. According to the DEA, Virtus’s drugs currently remain under seal at undisclosed DEA

facilities for safekeeping. While these drugs remain under seal with the DEA, Virtus is unable to

send them to market and the company now contends that this supply shortage is causing it

significant financial harm.

To address this alleged harm, Virtus has filed a [2] Motion for a Temporary Restraining

Order (“TRO”) against the DEA. Therein, Virtus requests a court order compelling the DEA to

release Virtus’s drug supply to a new third-party distributor, so that that Virtus can resume its sale

operations for those drugs. Upon consideration of the pleadings, the relevant legal authorities, and

the record as a whole, 1 the Court will DENY Virtus’s [2] Motion for a Temporary Restraining

Order.

I. BACKGROUND

A. Controlled Substances Act

In 1970, Congress passed the Comprehensive Drug Abuse Prevention and Control Act,

Pub. L. No. 91–513, 84 Stat. 1236, (the “Controlled Substances Act” or “CSA”), with the goal of

regulating the manufacture, importation, possession, and distribution of certain controlled

substances. 21 U.S.C. § 801 et seq.; see also Gonzales v. Oregon, 546 U.S. 243, 250 (2006)

(discussing the legislative history of the CSA). “A central feature of the CSA is its ‘closed system’

of distribution in which all persons in the ‘legitimate distribution chain’ of controlled substances

1 This Memorandum Opinion focuses on the following documents: • Compl., ECF No. 1; • Pl.’s Mem. of P. & A. in Supp. of its Appl. for a Temp. Restraining Order (“Pl.’s Mot.”), ECF No. 2-1; • Def.’s Mem. of Law in Opp’n to Pl.’s Mot. (“Def.’s Opp’n”), ECF No. 9-1; • Pl.’s Reply Mem. of P. & A. in Supp. of Pl.’s Mot. (“Pl.’s Reply”), ECF No. 11; and, • Admin. Record (cited as “DEA at __”), ECF No. 13-3. In an exercise of its discretion, the Court finds that holding oral argument in this action would not be of assistance in rendering a decision. See LCvR 7(f).

2 must register with [the] DEA.” Wedgewood Vill. Pharmacy v. DEA, 509 F.3d 541, 542 (D.C. Cir.

2007); see also 21 U.S.C. §§ 821, 822; 21 C.F.R. § 1301.11. Entities not properly registered with

the DEA under the CSA may not manufacture, distribute, or dispense controlled substances. 21

U.S.C. §§ 822, 823. To carry out and enforce this regulatory regime, the DEA has authority to

“promulgate rules and regulations and to charge reasonable fees relating to the registration and

control of the manufacture, distribution, and dispensing of controlled substances . . . ” 21 U.S.C.

§ 821; see also 28 C.F.R. § 0.100(b) (delegating authority under the CSA from the Attorney

General to the DEA Administrator).

The DEA “closely observes [registrants] to ensure that their operations are ‘consistent with

the public interest.’” Masters Pharm., Inc. v. DEA, 861 F.3d 206, 212 (D.C. Cir. 2017) (quoting

21 U.S.C. § 824(a)(4)). In the case of registered distributors and manufacturers, for example, the

DEA determines whether the registrant maintains “effective control[s] against diversion of

particular controlled substances.” 21 U.S.C. § 823(a)(1), (b)(1). The DEA also considers whether

the registrant complies with state and local laws or has any prior criminal convictions related to

the possession of controlled substances. Id. at § 823(a)(2)–(4), (b)(2)–(3). More generally, the

CSA directs the DEA to take into account “such other factors as may be relevant to and consistent

with the public health and safety.” Id. § 823(a)(6), (b)(5). Relatedly, the CSA’s implementing

regulations also set forth compliance requirements for DEA registrants. For example, registrants

must “design and operate a system to disclose . . . suspicious orders of controlled substances,” 21

C.F.R. § 1301.74(b), report instances of theft to the DEA, id. at § 1301.74(c), and maintain certain

physical security conditions at their facilities, see id. at §§ 1301.72–73.

Where such safety and security conditions are not met, the CSA authorizes the DEA to

suspend or revoke the registration of a non-compliant entity. See 21 U.S.C. § 824(a); 21 C.F.R. §

3 1301.36(a). For example, the DEA may revoke or suspend registration where a registrant has

“committed such acts as would render [its] registration . . . inconsistent with the public interest.”

21 U.S.C. § 824(a)(4). Before revoking or suspending an entity’s registration, however, the DEA

must serve the impacted registrant with “an order to show cause why [its] registration should not

be denied, revoked, or suspended.” Id. at § 824(c)(1). The impacted registrant is then entitled to

an administrative hearing before the DEA, for the purpose of submitting evidence regarding the

issues involved in the proposed revocation or suspension. See id. at § 824(c); 21 C.F.R. §§

1301.36(d), 1301.42.

But where a registrant poses “an imminent danger to public health or safety,” the CSA

authorizes the immediate suspension of that entity’s registration. 21 U.S.C. § 824(d)(1). Such an

“imminent threat to public health and safety” exists where a registrant’s conduct presents “a

substantial likelihood of an immediate threat that death, serious bodily harm, or abuse of a

controlled substance will occur in the absence of an immediate suspension of the registration.” Id.

at § 824(d)(2). If the DEA effectuates an immediate suspension, it shall include with the show

cause order served upon the registrant “an order of immediate suspension which . . . contain[s] a

statement of [the DEA’s] findings regarding the danger to public health or safety.” 21 C.F.R. §

1301.36(e). The DEA possesses the authority to withdraw an immediate suspension order, 21

U.S.C. § 824(d)(1), and it also “may limit revocation or suspension of a registration to the

particular controlled substance . . . with respect to which grounds for revocation or suspension

exist,” id. § 824(b).

Importantly, the CSA and its implementing regulations also govern how the DEA may treat

the controlled substances affected by a registrant’s suspension or revocation. In the event of a

suspension or revocation, the DEA may either (1) direct the impacted registrant to “[d]eliver all

4 controlled substances in [the registrant’s] possession to the nearest office of the Administration or

to authorized agents of the Administration,” or (2) “[p]lace all controlled substances in [the

registrant’s] possession under seal.” 21 C.F.R. § 1301.36(f)(1)–(2); see also 21 U.S.C. § 824(f).

But in such cases, “[n]o disposition may be made of any controlled substances . . . under seal until

the time for taking an appeal [of the suspension or revocation] has elapsed or until all appeals have

been concluded, except that a court . . . may at any time order the sale of perishable controlled

substances.” 21 U.S.C. § 824(f). Where an entity’s “registration has expired,” however, or where

the entity “has ceased to practice or do business in the manner contemplated by [its] registration,”

the DEA may either place that entity’s controlled substances under seal or, alternatively, “seize”

the controlled substances. Id. at § 824(g).

B. Virtus Pharmaceuticals

As described in its complaint, Virtus Pharmaceuticals, LLC (“Virtus”) is “a small, privately

held . . . specialty pharmaceutical company that markets safe and effective products by specializing

in underserved markets, offering its customers a niche product portfolio covering a range of

therapeutic areas.” Compl. ¶ 1. Of note, Virtus is the owner of the Abbreviated New Drug

Application (“ANDA”) for levorphanol tartrate 2 mg tablets (“levorphanol”). Id. ¶ 2. Levorphanol

is a Schedule II opioid under the CSA, used primarily for patients who are in extreme pain and

resistant to other opioid pain medications. Smith Decl., ECF No. 3-2, at ¶¶ 5, 12–14.

Virtus is also the owner of the ANDA for “phendimetrazine 35 mg immediate release

tablets,” as well as a New Drug Application (“NDA”) for phendimetrazine 105 mg extended

release capsules (collectively, “phendimetrazine”). Compl. ¶ 2; see also Smith Decl., ECF No. 3-

5 2, at ¶ 4. Phendimetrazine is a Schedule III controlled substance “indicated for the management

of exogenous obesity as a short term adjunct . . . in a regimen of weight reduction based on caloric

restriction” in certain high-risk patients “who have not responded to appropriate weight reducing

regimen (diet and/or exercise) alone.” Compl. ¶ 24; see also Smith Decl., ECF No. 3-2, at ¶ 24.

Virtus, however, does not possess its own DEA registration to manufacture or distribute

controlled substances. Compl. ¶ 25; see also 21 U.S.C. § 822(a)(1). Accordingly, Virtus itself

does not physically or directly handle its pharmaceutical products, including its levorphanol or

phendimetrazine. Compl. ¶ 25. Instead, Virtus is a “virtual” drug manufacturer that contracts with

third parties for the manufacture and distribution of its drugs. For manufacturing, Virtus currently

contracts with Halo Pharmaceutical, Inc. in New Jersey for the production of its levorphanol, see

Smith Decl., ECF No. 3-2, at ¶ 11, and Epic Pharma in New York for the production of its

phendimetrazine, id. at ¶ 23. Beyond manufacturing, Virtus outsources all packaging,

warehousing, and distribution activities to third-party vendors that are also DEA registrants. Id.

at ¶ 3.

One such third-party contractor for Virtus is a logistics company called Woodfield

Distribution, LLC (“Woodfield”). Woodfield is currently registered with the DEA as a distributor

of Schedule II through Schedule V controlled substances under the CSA. See Besser Decl., ECF

No. 10-2, at ¶ 4. Virtus contracts with Woodfield to provide inventory management and

distribution services for Virtus’s drugs, including its levorphanol and phendimetrazine, at facilities

6 in Sugar Land, Texas and Boca Raton, Florida. Smith Decl., ECF No. 3-2, at ¶¶ 7–8; see also 3PL

Services Agreement, ECF No. 10-1 (Ex. A), at § 1.1 (describing services provided by Woodfield).

Virtus allegedly retains title over all of its product while stored at Woodfield’s facilities. Smith

Decl., ECF No. 3-2, at ¶ 8. And while Woodfield stores Virtus’s product, Woodfield is

contractually obligated to “comply with all applicable federal and state laws, regulation, and

rules,” and maintain all “necessary permits, licenses, and other federal . . . authorizations” required

to discharge its contractual services for Virtus. 3PL Services Agreement, ECF No. 10-1 (Ex. A),

at § 1.3. The Virtus-Woodfield service agreement further requires Woodfield to “indemnify and

hold [Virtus] harmless” for damages caused by Woodfield’s “negligence” or shortcomings in

Woodfield’s “regulatory activities and compliance.” Id. at § 6.1.

C. DEA Enforcement Action

Beginning in at least 2020, the DEA launched an administrative investigation into

Woodfield. See DEA at 2–11. The DEA’s investigation focused on Woodfield’s controls against

the illicit diversion of controlled substances, including the company’s recordkeeping and theft

reporting systems. See id. As part of this administrative investigation into Woodfield, the DEA

became aware that Virtus was one of the customers for whom Woodfield acted as a third-party

logistics provider. Mills Decl., ECF No. 10-1, at ¶ 3. Consequently, the DEA’s Houston Field

Division issued an administrative subpoena to Virtus on April 1, 2021, for the purpose of obtaining

additional evidence from Virtus to support the administrative investigation into Woodfield. Id. at

¶ 4. Between March 29, 2021 and July 7, 2021, DEA personnel were also in contact with counsel

for Virtus regarding the subpoena and the DEA’s investigation into Woodfield. Id. at ¶ 5.

On August 4, 2021, the DEA issued an Order to Show Cause and an Immediate Suspension

Order against Woodfield. See id. at ¶ 7; DEA at 1. Therein, the DEA set forth its preliminary

7 investigative findings, which concluded, among other things, that Woodfield (1) failed to maintain

effective controls against the diversion of controlled substances, (2) maintained inadequate records

of its inventory of controlled substances, (3) failed to report instances of theft and suspicious

orders, and (4) maintained inadequate physical security, as evidenced by multiple observed

security lapses. See DEA at 2–11. Additionally, the DEA’s order concluded that one of

Woodfield’s commonly owned affiliates (“Woodfield Pharma”) has alleged connections to a

suspected drug trafficking organization and allegedly supplied that organization with illicit drugs

in exchange for compensation. Id. at 12–13.

In light of these findings, the DEA initiated an administrative proceeding regarding the

potential revocation of Woodfield’s DEA registrations for its Sugar Land, Texas facility. See id.

at 1. On September 10, 2021, Woodfield requested an administrative hearing regarding the

grounds for revocation set forth in the DEA’s Order to Show Cause. See Jt. Notice, ECF No. 14,

at 1. This administrative action currently remains pending before the DEA, and, on September 13,

2021, an administrative law judge set an initial disclosure schedule for the hearing and a pre-

hearing conference for October 14, 2021. See Order, ECF No. 14-2, at 1–4. But while Woodfield’s

revocation matter remains pending, the DEA has also immediately suspended Woodfield’s

registrations based on a determination that Woodfield’s continued operation of its Sugar Land

facility represents an “imminent danger to the public health and safety.” DEA at 14 (quoting 21

U.S.C. § 824(d)). Specifically, the DEA suspended the distributor registration (Registration No.

) and the importer registration (Registration No. ) associated with

Woodfield’s Sugar Land facility. See DEA at 2, 14.

In conjunction with this these suspensions, the DEA placed all of the controlled substances

in Woodfield’s Sugar Land facility under seal “by directing Woodfield to deliver those controlled

8 substances to authorized agents of DEA.” Mills Decl., ECF No. 10-1, at ¶ 8; see also Besser Decl.,

ECF No. 10-2, at ¶ 39 (“Upon serving the OTSC/ISO on Woodfield, DEA sealed all of the

controlled substances in Woodfield’s possession . . . by directing Woodfield to deliver those

controlled substances to DEA and removing those controlled substances for safekeeping.”). In the

DEA’s suspension order for Woodfield, the agency cited to § 824(f) of the CSA as authority for

its decision to place the drugs stored by Woodfield under seal. See DEA at 14. The DEA is now

storing these controlled substances—approximately 200 million dosage units in total—under seal

in four undisclosed DEA facilities. See Mills Decl., ECF No. 10-1, at ¶¶ 9–10.

D. Impact on Virtus

Virtus estimates that approximately bottles of the company’s phendimetrazine and

levorphanol were being stored at Woodfield’s Sugar Land facility and are now being held under

seal by the DEA. See Bass Decl., ECF No. 12-3, at ¶ 21. Virtus asserts that these drugs have a

collective market value Smith Decl., ECF No. 3-2, at ¶ 10.

According to the DEA, Virtus’s supply of levorphanol and phendimetrazine is now being stored

across three different DEA facilities and is packaged in multiple pallets alongside other controlled

substances not at issue in this case. Mills Decl., ECF No. 10-1, at ¶ 18.

On August 12, 2021, counsel for Virtus learned of the DEA’s enforcement action against

Woodfield and the DEA’s decision to place Virtus’s pharmaceutical products under seal. See, e.g.,

Schumacher Decl., ECF No. 2-5, at ¶ 2. In response, counsel for Virtus initiated a dialogue with

DEA personnel regarding the status of Virtus’s levorphanol and phendimetrazine. See id. at ¶¶ 3–

4. Counsel for Virtus specifically requested that the DEA limit the scope of the Woodfield

suspension order to exclude Virtus’s levorphanol and phendimetrazine and then release those

drugs to a third-party DEA distributor. See LaMagna Decl., ECF No. 2-7, at ¶ 8. On August 26,

9 2021, however, the DEA refused Virtus’s request, expressing its belief that “that the controlled

substances possessed by Woodfield at the time of the suspension were properly placed under seal

and that a release of these controlled substances by [the] DEA is not appropriate at this time.”

Email Chain (Ex. C), ECF No. 2-10, at 2; see also Schumacher Decl., ECF No. 2-5, at ¶ 7.

Virtus now contends that the DEA’s decision to retain its levorphanol and phendimetrazine

under seal will cause a serious supply shortage. With regards to levorphanol, Virtus allegedly

Smith Decl., ECF No. 3-2, at ¶ 15. Moreover,

Bass Decl., ECF No. 12-3, at ¶ 18. The DEA’s enforcement action against Woodfield

has also impacted Virtus’s supply of phendimetrazine. Virtus allegedly suffered a two-week stock

out of phendimetrazine in August, and is now able

Smith Decl., ECF No. 3-2, at ¶¶ 27–28. Virtus further asserts that it is likely to face a

Id. at ¶ 29.

According to Virtus, this supply shortage threatens the company’s financial viability and

See id. at ¶¶ 32–42. Separately, Virtus asserts that its supply

In particular, Virtus anticipates that the

10 See id. at ¶ 18. Virtus contends that this shortfall

will permanently damage the business of those local pharmacies, see id., and cause serious harm

to patients who rely on consistent levorphanol regimens to treat their pain, see Bass Decl., ECF

No. 12-3, at ¶¶ 19–20.

On August 31, 2021, Virtus filed its present civil action against the DEA. Therein, Virtus

asserted two claims against the DEA: (1) a claim under the Administrative Procedure Act (“APA”)

arguing that the DEA’s decision to place and retain Virtus’s levorphanol and phendimetrazine

under seal was arbitrary and capricious, and (2) a claim that the DEA’s seizure and retention of

those drugs violated Virtus’s procedural due process rights under the Fifth Amendment. Compl.

¶¶ 67–75. That same day, Virtus filed a motion for a temporary restraining order, requesting this

Court to issue an order compelling the DEA to “immediately release Virtus’s levorphanol and

phendimetrazine to a DEA-registered distributor.” Pl.’s Proposed Order, ECF No. 2-11, at 2. 2

The Court held an initial hearing on September 2, 2021 and set an expedited briefing schedule. By

September 6, 2021, the parties completed briefing on Virtus’s motion for a temporary restraining

order. On September 7, 2021, the DEA filed the relevant administrative record on the docket. See

Admin. Record, ECF No. 13-3, at DEA 1–266. Accordingly, Virtus’s motion for a temporary

restraining order is now ripe for this Court’s review.

II. LEGAL STANDARD

A temporary restraining order “is an extraordinary remedy that should be granted only

when the party seeking the relief, by a clear showing, carries the burden of persuasion.” Postal

Police Officers Ass’n v. United States Postal Serv., 502 F. Supp. 3d 411, 418 (D.D.C. 2020)

2 Virtus requests functionally the same relief in its complaint. See Compl. at Request for Relief. Accordingly, during the September 2, 2021 hearing, the Court asked if the parties would prefer to proceed with briefing on the full merits, as opposed to Virtus’s temporary restraining order alone. The parties, however, elected to proceed with briefing on only Virtus’s temporary restraining order.

11 (quoting Cobell v. Norton, 391 F.3d 251, 258 (D.C. Cir. 2004)). An application for a TRO is

analyzed using the same factors applicable to a request for preliminary injunctive relief. See, e.g.,

Gordon v. Holder, 632 F.3d 722, 723–24 (D.C. Cir. 2011) (applying preliminary injunction

standard to district court decision denying motion for TRO and preliminary injunction); Sibley v.

Obama, 810 F. Supp. 2d 309, 310 (D.D.C. 2011) (articulating TRO elements based on preliminary

injunction case law).

Preliminary injunctive relief is “an extraordinary remedy that may only be awarded upon

a clear showing that the plaintiff is entitled to such relief.” Sherley v. Sebelius, 644 F.3d 388, 392

(D.C. Cir. 2011) (quoting Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 22 (2008)); see also

Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam) (“[A] preliminary injunction is an

extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear

showing, carries the burden of persuasion.” (internal quotation marks omitted)). A plaintiff

seeking preliminary injunctive relief “must establish [1] that he is likely to succeed on the merits,

[2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the

balance of equities tips in his favor, and [4] that an injunction is in the public interest.” Aamer v.

Obama, 742 F.3d 1023, 1038 (D.C. Cir. 2014) (quoting Sherley, 644 F.3d at 392 (internal

quotation marks omitted)). When seeking such relief, “the movant has the burden to show that all

four factors, taken together, weigh in favor of the injunction.” Abdullah v. Obama, 753 F.3d 193,

197 (D.C. Cir. 2014) (quoting Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1292 (D.C.

Cir. 2009)) (internal quotation marks omitted). “The four factors have typically been evaluated on

a ‘sliding scale.’” Davis, 571 F.3d at 1291. Under this sliding-scale framework, “[i]f the movant

makes an unusually strong showing on one of the factors, then it does not necessarily have to make

as strong a showing on another factor.” Id. at 1291–92.

12 It is unclear whether the United States Court of Appeals for the District of Columbia

Circuit’s (“D.C. Circuit”) sliding-scale approach to assessing the four preliminary injunction

factors survives the Supreme Court’s decision in Winter. See Save Jobs USA v. U.S. Dep't of

Homeland Sec., 105 F. Supp. 3d 108, 112 (D.D.C. 2015). Several judges on the D.C. Circuit have

“read Winter at least to suggest if not to hold ‘that a likelihood of success is an independent, free-

standing requirement for a preliminary injunction.’” Sherley, 644 F.3d at 393 (quoting Davis,

571 F.3d at 1296 (Kavanaugh, J., concurring)). However, the D.C. Circuit has yet to hold

definitively that Winter has displaced the sliding-scale analysis. See id.; see also Save Jobs USA,

105 F. Supp. 3d at 112. In light of this ambiguity, the Court shall consider each of the preliminary

injunction factors and shall only evaluate the proper weight to accord the likelihood of success if

the Court finds that its relative weight would affect the outcome.

III. DISCUSSION

For the reasons set forth below, the Court concludes that Virtus has not carried its burden

of demonstrating a likelihood of success on the merits, a certainty of irreparable harm, or that the

balance of the equities and the public interest tilt in its favor. Accordingly, the Court will DENY

Virtus’s motion for a temporary restraining order.

A. Likelihood of Success on the Merits

First, in order to receive a TRO, the moving “party must show, among other things, ‘a

substantial likelihood of success on the merits.’” Food & Water Watch, Inc. v. Vilsack, 808 F.3d

905, 913 (D.C. Cir. 2015) (quoting Mills v. District of Columbia, 571 F.3d 1304, 1308 (D.C. Cir.

2009)). The D.C. Circuit has identified a “likelihood of success on the merits” as the “most

important factor” for courts to consider when contemplating a motion for preliminary injunctive

relief. Aamer v. Obama, 742 F.3d 1023, 1038 (D.C. Cir. 2014).

13 In its motion for a TRO, Virtus advances three substantive claims. First, Virtus argues that

the DEA violated the APA by arbitrarily declining to exclude Virtus’s levorphanol and

phendimetrazine from the suspension order issued to Woodfield. Second, Virtus claims that the

DEA impermissibly “seized” Virtus’s levorphanol and phendimetrazine from Woodfield’s Sugar

Land facility. And third, Virtus contends that the DEA’s alleged seizure and refusal to release

Virtus’s drugs violates the company’s procedural due process rights. See Pl.’s Mot. at 17–22. At

this early stage of the litigation, the Court finds that Virtus has not shown a likelihood that any of

these three claims will succeed on the merits.

1. The Scope of the DEA’s Administrative Order Against Woodfield

Virtus’s first substantive claim against the DEA falls under the APA. Virtus, however,

does not directly challenge the DEA’s immediate suspension order against Woodfield or the

DEA’s proposed revocation of Woodfield’s registrations. See Pl.’s Mot. at Pl.’s Mot. at 5–6; DEA

at 1–14. Instead, Virtus argues that the DEA’s decision to place and retain Virtus’s levorphanol

and phendimetrazine under seal, as a result of the DEA’s administrative action against Woodfield,

was arbitrary and capricious. 3 See Pl.’s Mot. at 17–18. To support this argument, Virtus asserts

that the “DEA indicated that Woodfield’s [immediate suspension order] did not involve Virtus’s .

. . actions,” nor did it reflect any “concern [regarding Virtus’s] levorphanol or phendimetrazine

product at Woodfield’s [Sugar Land] facility.” Pl.’s Mot. at 15. Accordingly, because

Woodfield’s suspension order from the DEA apparently does “not concern Virtus[’s] conduct or

3 In its opposition brief, the DEA contends that its decision not to exclude Virtus’s drugs from the Woodfield suspension order, and its corresponding decision to retain those drugs under seal, is not a “final” agency action subject to APA review. See Def.’s Opp’n at 10 (citing 5 U.S.C. § 704 & Bennett v. Spear, 520 U.S. 154, 178 (1997)). This Court too has reservations about the “finality” of the agency action challenged by Virtus in this case. Nonetheless, to address Virtus’s pending motion for a temporary restraining order, the Court need not resolve this question of APA finality. Instead, the Court finds below that the agency action at issue is committed to the DEA’s discretion and, in any event, does not appear to be arbitrary and capricious on the present record. For these independent reasons, Virtus is not “likely” to succeed on the merits of its APA claim.

14 the sale of [its] products to its customers,” Virtus claims that the DEA should have limited the

scope of the Woodfield suspension order to exclude Virtus’s drugs. Id. at 18.

This claim does not support Virtus’s request for a TRO. At this early stage of the

proceedings, Virtus has not established that its challenge to the scope of the DEA’s suspension

order is subject to judicial review. Under the APA, “matters committed to agency discretion are

not subject to judicial review.” CREW v. FEC, 993 F.3d 880, 888 (D.C. Cir. 2021) (citing 5 U.S.C.

§ 701(a)(2)). This exclusion applies “where statutes are drawn in such broad terms that in a given

case there is no law to apply” and “when the statute is drawn so that a court would have no

meaningful standard against which to judge the agency’s exercise of discretion.” Sierra Club v.

Jackson, 648 F.3d 848, 855 (D.C. Cir. 2011) (internal citations and quotations omitted). “Agency

actions in these circumstances are unreviewable because the courts have no legal norms pursuant

to which to evaluate the challenged action, and thus no concrete limitations to impose on the

agency’s exercise of discretion.” Id. “To determine whether a matter has been committed to

agency discretion, [courts] consider both the nature of the administrative action at issue and the

language and structure of the statute that supplies the applicable legal standards for reviewing that

action.” Id.

As noted above, Virtus is not challenging the DEA’s decision to suspend Woodfield’s

registration. See, e.g., Pl.’s Mot. at 5–6; cf. Cardinal Health, Inc. v. Holder, 846 F. Supp. 2d 213,

220–28 (D.D.C. 2012) (addressing direct challenge by a DEA registrant to an immediate

suspension order). Rather, Virtus is challenging the DEA’s decision not to limit the scope

Woodfield’s suspension order, by excluding Virtus’s levorphanol and phendimetrazine from the

drugs placed under seal as a result of that order. See Pl.’s Mot. at 17–18. To support this argument,

Virtus points to § 824(b) of the CSA, which states that the DEA “may limit revocation or

15 suspension of a registration to the particular controlled substance or list I chemical with respect to

which grounds for revocation or suspension exist.” (Emphasis added). But this statutory language

is precatory on its face. Indeed, Congress provided no statutory conditions or factors in § 824(b)

governing when or how the DEA should limit suspension orders thereunder. Moreover, Congress

could have easily mandated that the DEA limit suspension orders “to the particular controlled

substance” at issue by simply substituting the word “shall” for “may” in § 824(b). Congress,

however, included permissive language in § 824(b). This statutory language strongly suggests that

the decision to limit a suspension order is committed to the DEA’s discretion and is not susceptible

to a meaningful standard of judicial review. See 5 U.S.C. § 701(a)(2); Sierra Club, 648 F.3d at

855.

In its reply brief, Virtus argues that the decision to limit a suspension order is not committed

purely to agency discretion because clear judicial standards do apply to the DEA’s authority under

§ 824(b) of the CSA. See Pl.’s Reply at 6–12. Here, Virtus contends that the standards in § 824(a)

and § 824(d) of the CSA should be read into § 824(b). The Court is not persuaded by this reading

of § 824. Section 824(a) provides the DEA with five factors to consider when making the

foundational decision of whether to suspend or revoke a registration in the first place. See, e.g.,

21 U.S.C. § 824(a)(4) (a registration may be suspended where the registrant “committed such acts

as would render his registration . . . inconsistent with the public interest”). Similarly, § 824(d) sets

forth the standard governing the DEA’s decision to issue an immediate suspension order. Yet,

there is no indication in § 824(b) that the standards from § 824(a) or § 824(d) apply to the DEA’s

secondary decision of whether to limit a suspension order to a particular controlled substance. As

noted above, Congress could have provided such constraining factors under § 824(b) or, instead,

included mandatory language therein. To the contrary, § 824(b) simply states that: “The Attorney

16 General may limit revocation or suspension of a registration to the particular controlled substance

or list I chemical with respect to which grounds for revocation or suspension exist.” (Emphasis

added). This language is discretionary and constraining this discretion through an application of

the factors in § 824(a) or § 824(d) appears to stretch § 824(b) beyond its plain meaning.

For the reasons set forth above, Virtus has not established a likelihood of success on its

APA claim because it has challenged a DEA action committed to agency discretion. But even if

the DEA’s discretionary decision not to limit Woodfield’s suspension order was reviewable under

the APA, Virtus has not shown that this action was arbitrary and capricious. See 5 U.S.C. §

706(2)(A); Pl.’s Mot. at 18. “The scope of review under the ‘arbitrary and capricious’ standard is

narrow and a court is not to substitute its judgment for that of the agency.” Motor Veh. Mfrs. Ass’n

v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). Under arbitrary and capricious review,

courts will “uphold an agency’s action where [the agency] has considered the relevant factors and

articulated a rational connection between the facts found and the choice made.” Nat’l Ass’n of

Clean Air Agencies v. EPA, 489 F.3d 1221, 1228 (D.C. Cir. 2007) (citations omitted).

In this case, the DEA issued a thorough administrative order on August 4, 2021, setting

forth its findings that Woodfield’s Sugar Land facility had failed to maintain effective controls to

prevent the diversion of controlled substances. See DEA at 2–11. In particular, the DEA’s order

explains that Woodfield’s recordkeeping and inventory system was unable to account for “tens of

millions of dosage units.” Id. at 4. The DEA’s order further states that Woodfield failed to report

at least 32 missing shipments of controlled substances, comprising “tens of thousands of dosage

units,” id. at 5, and also failed to maintain an adequate system to report suspicious orders, id. at 6–

8. Finally, the DEA’s order indicates that one of Woodfield’s commonly owned affiliates

(“Woodfield Pharma”) has potential connections to a suspected drug trafficking organization and

17 allegedly supplied that organization with illicit drugs in exchange for compensation. Id. at 12–13.

Based on these findings, the DEA immediately suspended Woodfield’s registrations at its Sugar

Land facility because the company’s compliance failings posed an imminent danger to public

health and safety. Id. at 14 (citing 21 U.S.C. § 824(d)). The DEA then ordered its agents to place

under seal and remove for safekeeping “all controlled substances” that Woodfield possessed at its

Sugar Land facility under the suspended registrations. Id.

The Court cannot find, at this early stage of the proceedings, that the DEA’s decision to

place all of Woodfield’s controlled substances under seal (including Virtus’s) was arbitrary and

capricious. To begin, the CSA expressly authorizes the DEA to place “all” controlled substances

“possessed by [a] registrant pursuant to [a suspended] registration” under seal. 21 U.S.C. § 824(f)

(stating that where the DEA suspends a registration “all controlled substances . . . owned or

possessed by the [suspended] registrant pursuant to such registration at the time of suspension . . .

, as the case may be, may, in the discretion of the [DEA], be placed under seal.”). Moreover, the

DEA’s order clearly articulates public safety concerns associated with Woodfield’s failure to

effectively prevent the diversion of controlled substances, including alleged connections to a drug

trafficking organization. See DEA at 2–13. Such systemic concerns are reasonably related to

Woodfield’s possession of any controlled substance, rather than a defect in one particular drug.

Therefore, the Court cannot find that it was irrational for the DEA to place all of the controlled

substances possessed by Woodfield (including Virtus’s levorphanol and phendimetrazine) under

seal for safekeeping. The reasonableness of this agency action is further augmented by the

discretionary authority that Congress conferred upon the DEA to prevent imminent danger to

public health and safety. See Cardinal Health, 846 F. Supp. 2d at 225 (“[G]iven the degree of

discretion vested with the Administrator as well as the summary and urgent nature of an ISO, the

18 Court’s review ‘must be correspondingly relaxed.’”) (quoting Nat’l Cable Tele. Ass’n v. Copyright

Royalty Tribunal, 724 F.2d 176, 181 (D.C. Cir. 1983)). Accordingly, the Court cannot find that

the DEA’s decision to include Virtus’s drugs within the scope of the Woodfield suspension order

was arbitrary and capricious.

As a final matter, Virtus also argues that the DEA’s continued retention of its levorphanol

and phendimetrazine is arbitrary and capricious. See Pl.’s Mot. at 18. But this argument is

similarly unpersuasive. To start, § 824(f) of the CSA expressly states that “[n]o disposition may

be made of any controlled substances . . . under seal until the time for taking an appeal has elapsed

or until all appeals have been concluded.” (Emphasis added). Put otherwise, the CSA

affirmatively deprives the DEA of its ability to dispose of any controlled substance placed under

seal subject to the suspension of Woodfield’s registration, until after Woodfield has concluded its

administrative appeals. See also 21 U.S.C. § 842(a)(7). Virtus does not argue in its TRO briefing

that Woodfield’s administrative appeals in this matter have concluded, such that the DEA may

now “dispose” of the controlled substances from Woodfield’s facility currently held under seal.

In fact, the parties jointly notified the Court on September 13, 2021, that Woodfield’s

administrative appeal of the DEA’s proposed registration revocations remains pending through at

least October 2021. See Jt. Notice, ECF No. 14, at 1–2. Accordingly, it appears on the present

record that the DEA does not even have the statutory authority to release Virtus’s levorphanol and

phendimetrazine, as Virtus now requests.

Moreover, the decision to place drugs under seal after the suspension of a registrant’s CSA

registration is expressly committed to the DEA’s discretion. 21 U.S.C. § 824(f) (stating that where

the DEA suspends a registration “all controlled substances . . . owned or possessed by the

[suspended] registrant pursuant to such registration at the time of suspension . . . , as the case may

19 be, may, in the discretion of the [DEA], be placed under seal.”). Consequently, the attendant

decision to retain such drugs under seal during the pendency of an administrative proceeding

would also appear to fall within the ambit of the DEA’s express discretion—an action, therefore,

excluded from judicial review under the APA. See Sierra Club v. Jackson, 648 F.3d 848, 855

(D.C. Cir. 2011). Virtus has not adequately addressed these issues at the TRO stage of this

proceeding. Consequently, the Court cannot find that Virtus is likely to succeed on a claim that

the DEA’s continued retention of its levorphanol and phendimetrazine is “arbitrary, capricious, an

abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A).

****

For the reason set forth above, Virtus has not demonstrated that it is likely to succeed on

the merits of its APA claim challenging the DEA’s decision to place and retain its levorphanol and

phendimetrazine under seal, as a result of the Woodfield suspension order.

2. The DEA’s Alleged “Seizure” of Virtus’s Drugs

Virtus’s second substantive claim is that the DEA impermissibly “seized” the controlled

substances taken from Woodfield’s facilities, including Virtus’s levorphanol and phendimetrazine.

Pl.’s Mot. at 19–20. Here, Virtus argues that the CSA allows the DEA to “seal” controlled

substances, but not to “seize” them, where a distributor or manufacturer’s registration has been

suspended under § 824. Id. Accordingly, Virtus contends that the DEA’s “seizure” of drugs from

Woodfield’s Sugar Land facility was unlawful and in excess of the agency’s statutory authority,

i.e., ultra vires. Id.

The Court agrees with Virtus’s general interpretation of the DEA’s “seizure” authority

under the CSA. Section 824 of the CSA only authorizes the “seizure” of controlled substances

“owned or possessed by a registrant whose registration has expired or who has ceased to practice

20 or do business in the manner contemplated by his registration.” 21 U.S.C. § 824(g). But where

the DEA is enforcing a suspension or revocation order under § 824, the CSA only authorizes the

agency to place the impacted controlled substances “under seal,” pursuant to § 824(f). In turn, the

plain language of § 824(f) does not authorize the DEA to “seize” controlled substances where a

distributor or manufacturer’s registration has been suspended or revoked. 4 And in this case, the

DEA’s suspension order against Woodfield explicitly relied on § 824(f) when it authorized its

agents to “place under seal and remove for safekeeping all controlled substances that Woodfield

possesse[d] pursuant to the [suspended] registrations.” DEA at 14.

The problem for Virtus, however, is that the present record indicates that the DEA

complied with § 824(f) and properly placed the controlled substances at Woodfield’s Sugar Land

facility “under seal.” In particular, the DEA appears to have directly followed its implementing

regulations setting forth how it may place controlled substances under seal. Those regulations

state that upon the service of a suspension or revocation order, the DEA may instruct the affected

registrant: (1) to deliver all controlled substances in its possession to the nearest DEA office or to

authorized DEA agents, or (2) to place all controlled substances in its possession under seal. 21

C.F.R. § 1301.36(f). In executing the enforcement action against Woodfield, the DEA “direct[ed]

Woodfield to deliver [the impacted] controlled substances to authorized agents of the DEA.” Mills

Decl., ECF No. 10-1, at ¶ 8. The DEA then sealed the controlled substances at undisclosed DEA

facilities for safekeeping. See id. at ¶ 9; Besser Decl., ECF No. 10-2, at ¶ 39. These actions

4 Where the DEA “suspends or revokes a registration” to import or export controlled substances, “all controlled substances . . . owned or possessed by the registrant pursuant to such registration at the time of suspension or the effective date of the revocation order, as the case may be, may, in the discretion of the [DEA], be seized or placed under seal.” 21 U.S.C. § 958(d)(6) (emphasis added). It is notable, that Congress included seizure authority for the suspension of an importer/exporter registration under § 958(d)(6), but omitted such authority for the suspension of a manufacturer/distributor registration under § 824(f). This distinction reinforces the conclusion that the DEA does not have seizure authority under § 824(f).

21 comport with the process set forth in § 1301.36(f), and Virtus does not bring any challenge to the

validity of this regulation itself. For these reasons, Virtus has not established that it is likely to

succeed on its claim that the DEA unlawfully “seized” controlled substances from Woodfield’s

storage and distribution facility. 5

3. Procedural Due Process

Virtus’s final substantive claim is one of procedural due process. Here, Virtus asserts that

the DEA’s decision to place and retain Virtus’s levorphanol and phendimetrazine under seal

deprived the company of a clear property interest. See Pl.’s Mot. at 20–22. Furthermore, Virtus

contends that the DEA afforded the company inadequate process, attendant to this alleged property

deprivation. Id. In this way, Virtus claims that the DEA’s actions violated the company’s

constitutional right to procedural due process. Id.; see also Pl.’s Reply at 14–18.

“A procedural due process violation under the Fifth Amendment occurs when a

government official deprives a person of property without appropriate procedural protections.” N.

Am. Butterfly Ass’n v. Wolf, 977 F.3d 1244, 1265 (D.C. Cir. 2020). When evaluating a procedural

due process claim, courts first consider “whether the plaintiff has been deprived of a protected

interest in ‘liberty’ or ‘property.’” Gen. Elec. Co. v. Jackson, 610 F.3d 110, 117 (D.C. Cir. 2010).

If so, courts then determine whether the government’s attendant procedures comport with

principles of due process. Id. This latter inquiry turns on the familiar three-factor balancing test

set forth in Mathews v. Eldridge, 424 U.S. 319 (1976), which considers: (1) “the private interest

that will be affected by the official action,” (2) “the risk of an erroneous deprivation of such interest

through the procedures used, and the probable value, if any, of additional or substitute procedural

safeguards,” and (3) “the Government’s interest, including the function involved and the fiscal and

5 Virtus appears to concede this point by omitting any discussion of this claim from its reply brief.

22 administrative burdens that the additional or substitute procedural requirement would entail.” Id.

at 335. “There is no one-size-fits-all procedure to protect against the unconstitutional deprivation

of property.” Statewide Bonding, Inc. v. DHS, 980 F.3d 109, 118 (D.C. Cir. 2020). Instead, the

concept of due process is ultimately “‘flexible and calls for such procedural protections as the

particular situation demands.’” Id. (quoting Mathews, 424 U.S. at 334).

At this early stage of the proceedings, Virtus has not shown that it is likely to succeed on

the merits of its procedural process claim. To begin, Virtus has not demonstrated that its private

property interest outweighs the strong governmental interest at play in this case. Virtus certainly

appears to maintain a property interest in its levorphanol and phendimetrazine. See Smith Decl.,

ECF No. 3-2, at ¶ 8; Waiver of Rights and Interests (Ex. A), ECF No. 2-3. But the contours of

this particular property interest are somewhat unclear. Unlike traditional real or personal property,

Virtus is prohibited by law from exercising direct possession over its levorphanol or

phendimetrazine because it is not registered with the DEA to handle these controlled substances.

See 21 U.S.C. § 822. Instead, Virtus relies on third-party DEA registrants, like Woodfield, to store

its levorphanol and phendimetrazine until the point of sale. See Smith Decl., ECF No. 3-2, at ¶ 7.

As such, the scope of Virtus’s private interest in its levorphanol and phendimetrazine is not

connected to the possession of those drugs, but rather to its ability to sell the drugs through third-

party intermediaries.

Conversely, the government (here, the DEA) has a substantial interest in regulating the

flow of controlled substances and preventing the illicit diversion of those drugs in a timely manner.

See Cardinal Health, Inc. v. Holder, 846 F. Supp. 2d 203, 230 (D.D.C. 2012) (“The government

has a strong interest in enforcing the CSA and ensuring that pharmaceutical drugs are not

improperly diverted . . . ”); Besser Decl., ECF No. 10-2, at ¶¶ 10–15. Indeed, Congress codified

23 this governmental interest through the CSA and conferred the DEA with authority to place

controlled substances under seal in furtherance of public health and safety. See, e.g., 21 U.S.C. §

824(d), (f). And in this case, the DEA placed Virtus’s levorphanol and phendimetrazine under

seal specifically in furtherance of this public health and safety concern. See DEA at 14. Given

the DEA’s important governmental interest, it is not clear that Virtus’s uniquely circumscribed

property interest merits additional process in this particular case.

Furthermore, Virtus has not demonstrated how additional process would protect its

purported property interest. Mathews, 424 U.S. at 335. In fact, Virtus does not specify in its TRO

papers what additional procedures should be required to ensure that it receives adequate process

before the DEA. See Pl.’s Mot. at 21–22; Pl.’s Reply at 14–18. In any event, it is not clear that

granting Virtus additional process would reduce the risk of erroneous deprivation. As described

above, Virtus’s potential “deprivation” is tied to the company’s inability to sell its drugs through

a third-party registrant (i.e., Woodfield), while the DEA holds those drugs under seal pending that

registrant’s administrative appeal. See DEA at 14; 21 U.S.C. § 824(d), (f). Thus, the risk of an

erroneous deprivation that Virtus faces derives directly from the DEA’s predicate decision to

initiate suspension or revocation proceedings against the DEA registrant holding its drugs. See id.

The CSA and its implementing regulations, however, already require that the DEA provide

these registrants, like Woodfield, with notice of a suspension or revocation proceeding and a

subsequent opportunity to challenge the suspension or revocation at an administrative hearing. See

21 U.S.C. § 824(c); 21 C.F.R. § 1301.36(d), (h). And as the target of the suspension or revocation

order in question, the impacted registrant is best situated to challenge the suspension or revocation

order issued by the DEA. It is unclear, therefore, how providing additional process to interested

parties like Virtus would facilitate a more accurate hearing process that reduces the risk of an

24 erroneous suspension or revocation and, by extension, an erroneous sealing of the impacted

registrant’s drugs. See 21 U.S.C. § 824(f). Conversely, opening a registrant’s suspension hearing

to third parties that are not themselves the target of the DEA’s enforcement action would impose

a significant administrative burden on the agency and its attempt to efficiently regulate the flow of

controlled substances. See Mathews, 424 U.S. at 335. On balance, therefore, the Court is not

persuaded that the Mathews factor weigh in favor of Virtus’s somewhat ambiguous request for

additional process in this case.

For the reasons set forth above, the Court cannot find that Virtus has met its burden of

demonstrating a likelihood of success on the merits of its procedural due process claim. 6

4. Redressability

As explained in the foregoing pages, Virtus has not established that either its procedural

due process or its APA claims are likely to succeed on the merits. It bears mention, however, that

Virtus’s substantive claims also encounter a more structural impediment, given the specific relief

Virtus requests in this case. In both its complaint and its motion for a TRO, Virtus asks the Court

to order the DEA to immediately release its levorphanol and phendimetrazine to another DEA-

registered distributor. See Pl.’s Proposed Order, ECF No. 2-11, at 2; Compl., at Request for Relief.

It is not clear that this requested relief is, in fact, appropriately subject to judicial redress.

First, Virtus’s requested relief would place the Court in conflict with the legislative scheme

Congress enacted through the Controlled Substances Act. The DEA is holding Virtus’s

6 In its reply brief, Virtus raises for the first time a passing argument about the “vagueness” of the DEA’s regulations. See Pl.’s Reply at 18. Virtus raises this point within the context of its procedural due process claim and, accordingly, the Court reads Virtus’s vagueness argument in support thereof. But to the extent Virtus now attempts to raise a distinct “void for vagueness” challenge, the Court will not consider such a claim raised in a single paragraph, for the first time in Virtus’s reply brief. See, e.g., Lucas v. District of Columbia, 214 F. Supp. 3d 7, 10 (D.D.C. 2016) (refusing to consider new legal arguments raised in a reply brief) (collecting cases).

25 levorphanol and phendimetrazine under seal pursuant to § 824(f) of the CSA, and in conjunction

with the proposed revocation of Woodfield’s DEA registrations. See Mills Decl., ECF No. 10-1,

at ¶ 18; DEA at 14. Woodfield’s administrative appeal of the DEA’s proposed revocation currently

remains pending through at least October 2021. See Jt. Notice, ECF No. 14, at 1–2. But to satisfy

Virtus’s request for relief, the Court would need to issue an order immediately compelling the

DEA to transfer Virtus’s drugs to another third-party registrant, while Woodfield’s administrative

proceeding remained pending. See Pl.’s Proposed Order, ECF No. 2-11, at 2. Such an order would

contradict the language of § 824(f), which prohibits the DEA from disposing of controlled

substances under seal until all administrative appeals have concluded. 21 U.S.C. § 824(f); see also

id. at § 842(a)(7) (making it unlawful for any person “to remove . . . a seal placed upon controlled

substances pursuant to section 824(f)”). As the DEA notes in its opposition brief, this Court cannot

simply “ignore the judgment of Congress, deliberately expressed in legislation.” United States v.

Oakland Cannabis Buyers’ Co-op., 532 U.S. 483, 497 (2001) (quoting Virginian R. Co. v. Railway

Employees, 300 U.S. 515, 551 (1937)). Put otherwise, the relief Virtus now requests would place

this Court in conflict with the very statute governing this case.

The relief requested by Virtus also raises separation of powers concerns. Virtus is not

asking the Court to simply review the DEA’s suspension order against Woodfield. Instead, Virtus

essentially asks the Court to intervene in the DEA’s pending enforcement action against

Woodfield, by instructing the agency on how to dispose of certain controlled substances the agency

is currently holding under seal for safekeeping. Such an insertion into the execution of an agency

enforcement action conflicts with this Court’s obligation to “keep[] the Judiciary’s power within

its proper constitutional sphere.” Raines v. Byrd, 521 U.S. 811, 820 (1997). At bottom, it is the

constitutional prerogative of the Executive Branch, here, acting through the DEA, to make

26 administrative decisions regarding the enforcement of the Controlled Substances Act. See Const.,

Art. II, § 3; Colonial BancGroup, Inc. v. PricewaterhouseCoopers LLP, 110 F. Supp. 3d 37, 44

(D.D.C. 2015) (explaining that in furtherance of the “separation of powers” courts should “not

unduly intrude into the operations of executive branch administrative agencies”). In turn, Article

III courts, like this one, are traditionally limited by “the equitable principles governing judicial

action,” Ford Motor Co. v. NLRB, 305 U.S. 364, 373 (1939), including the precept that courts

should not substitute their own judgment in “essentially administrative functions” subject to an

agency’s technical expertise, Federal Power Commission v. Idaho Power Co., 344 U.S. 17, 21

(1952). Granting Virtus the injunctive relief it now seeks would be in tension with these prudential

considerations surrounding this Court’s constitutionally circumscribed role.

Altogether, these structural concerns further impede Virtus’s attempt to show a likelihood

of success on the merits and weigh against this Court granting Virtus the immediate injunctive

relief it now seeks.

B. Irreparable Harm

The Court next considers whether Virtus has demonstrated “irreparable harm.” CityFed

Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 747 (D.C. Cir. 1995). To constitute

“irreparable harm,” the injury alleged must be “both certain and great, actual and not theoretical,

beyond remediation, and of such imminence that there is a clear and present need for equitable

relief.” Mexichem Specialty Resins, Inc. v. EPA, 787 F.3d 544, 555 (D.C. Cir. 2015) (quotation

omitted). And “[p]laintiffs seeking preliminary relief [must] demonstrate that irreparable injury is

likely in the absence of an injunction.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 22 (2008)

(emphasis in original) (internal citations omitted). “[P]ossibility of irreparable harm” is not

enough. Id. “[P]roving ‘irreparable’ injury is a considerable burden, requiring proof that the

27 movant’s injury is ‘certain, great and actual—not theoretical—and imminent, creating a clear and

present need for extraordinary equitable relief to prevent harm.’” Power Mobility Coal. v. Leavitt,

404 F. Supp. 2d 190, 204 (D.D.C. 2005) (quoting Wis. Gas Co. v. FERC, 758 F.2d 669, 674 (D.C.

Cir. 1985)).

Virtus’s case for irreparable harm is primarily financial. According to Virtus, the

levorphanol and phendimetrazine products taken from Woodfield’s Sugar Land facility by the

DEA account for approximately Smith Decl., ECF No.

3-2, at ¶ 33. And while the DEA retains these drugs under seal, Virtus claims that it is unable to

meet its service level commitments on active supply contracts with its customers. Id. at ¶ 34.

Virtus estimates that these

Id. Virtus separately estimates that its

Id. at ¶ 38.

Relatedly, Virtus’s Director explains that “[i]f the levorphanol stock out situation is not

imminently resolved,

Id. at ¶ 39. Altogether, Virtus contends that its present

supply shortage places the company in and threatens to

permanently damage the company’s reputation with customers. See id. at ¶¶ 37–42. Virtus

Id. at ¶ 42.

In the normal course, such a claim of “economic loss does not, in and of itself, constitute

irreparable harm.” Wis. Gas Co., 758 F.2d at 674. Instead, to establish irreparable harm, a

28 company like Virtus must make “a strong showing that the economic loss would significantly

damage its business above and beyond a simple diminution in profits, or demonstrate[] that the

loss would cause extreme hardship to the business, or even threaten destruction of the business.”

Air Transp. Ass’n of Am., Inc. v. Exp.-Imp. Bank of the U.S., 840 F. Supp. 2d 327, 336 (D.D.C.

2012) (internal citations and quotations omitted). “For economic harm to constitute irreparable

injury” under this framework, the moving party “must ‘adequately describe and quantify the level

of harm it . . . face[s].” Id. (quoting Nat’l Ass’n of Mortgage Brokers v. Bd. of Governors of the

Federal Reserve System, 773 F. Supp. 2d 151, 181 (D.D.C. 2011)). On the present record, Virtus’s

attempt to show such financial harm, while colorable, does not rise to the level of “irreparability”

necessary to secure a TRO. Mexichem, 787 F.3d at 555.

Despite Virtus’s claims of financial hardship, see disc. supra at 28, the record also reflects

countervailing factors which make it less certain whether Virtus’s current supply shortage will

cause irreversible damage to the company. First, the full scope of Virtus’s supply shortage is not

clear. For example, Virtus’s Director notes that the company has continued at least partial sales

of its phendimetrazine product. Smith Decl., ECF No. 3-2, at ¶ 28. And while Virtus claims a

complete , id. at ¶ 38, it also asserts that its levorphanol

manufacturer requested additional API on August 5, 2021, so that it can resume levorphanol

production, id. at ¶ 21. Furthermore, the DEA has submitted contradictory record evidence

indicating

See Harper-Avilla Decl.,

ECF No. 9-2, at ¶ 24. This conflicting record evidence calls into question the full scope and

duration of Virtus’s supply shortage. Consequently, absent more comprehensive financial data

from Virtus—such as Virtus’s quarterly or annual financial projections—it is difficult for the Court

29 to find with “certainty” that Virtus’s interim losses will severely damage its business, to the point

of collapse. See, e.g., ConverDyn v. Moniz, 68 F. Supp. 3d 34, 47 (D.D.C. 2014); Mott

Thoroughbred Stables, Inc. v. Rodriguez, 87 F. Supp. 3d 237, 246 (D.D.C. 2015) (explaining that

the absence of “additional financial information, such as operating costs” impeded a finding of

irreparable business harm). Even Virtus’s Director couches his financial predictions in qualifying

language, noting that Virtus Smith Decl., ECF No. 3-2, at ¶ 42

(emphasis added).

Beyond this fiscal ambiguity, Virtus’s case for irreparable harm is further weakened by its

ability to seek compensatory damages directly from Woodfield. In this Circuit, “[t]he possibility

that adequate compensatory or other corrective relief will be available at a later date, in the

ordinary course of litigation weighs heavily against a claim of irreparable harm.” Chaplaincy of

Full Gospel Churches v. England, 454 F.3d 290, 297–98 (D.C. Cir. 2006) (citation omitted). Here,

Virtus contracted with Woodfield for the handling and distribution of its levorphanol and

phendimetrazine at Woodfield’s facilities. See 3PL Services Agreement, ECF No. 10-1 (Ex. A),

at § 1.1. An express term of the Virtus-Woodfield service agreement requires Woodfield to

“maintain all licenses and otherwise comply with all applicable federal . . . laws, regulations, and

rules necessary to perform [its] services.” Id. at § 1.3. Woodfield further represented to Virtus

that it would comply with applicable regulations, so as not to interfere with Virtus’s ability to

“pursue . . . its commercial and business purposes.” Id. at § 5.1. And crucially, the Virtus-

Woodfield service agreement requires Woodfield to “indemnify and hold [Virtus] harmless” for

damages caused by Woodfield’s “negligence,” breach of a representation or warranty, or

Woodfield’s “regulatory activities and compliance.” Id. at § 6.1 (emphasis added). In this way,

Virtus anticipated the potential for Woodfield to cause it damage through regulatory failings and

30 included a specific contractual remedy to guard against exactly such harm. As such, Virtus’s

ability to recover its financial losses through a breach of contract action against Woodfield weighs

directly against its claim of irreparable harm. See Taylor v. Resolution Trust Corp., 56 F.3d 1497,

1507 (D.C. Cir. 1995) (“[R]ecoverable economic losses are not considered irreparable.”)

As a final matter, Virtus also attempts to show irreparable harm through the hardship

suffered by downstream pharmacies and their prescription-holders. For example, Virtus contends

that its inability to supply local pharmacies could cause those pharmacies to lose patients. See

Pl.’s Mot. at 24; Smith Decl., ECF No. 3-2, at ¶ 18. Virtus also emphasizes that levorphanol is a

unique pain relief medication that should be taken consistently by patients. See Pl.’s Reply at 19;

Bass Decl., ECF No. 12-3, at ¶ 19. Accordingly, Virtus argues that many prescription-holders will

face medical hardship due to the current market shortage of Virtus’s levorphanol. See Pl.’s Reply

at 19; Bass Decl., ECF No. 12-3, at ¶ 10. But these arguments ultimately fall short. While the

impact of the DEA’s action on third parties like local pharmacies and prescription-holders is not

irrelevant, it does not establish that Virtus (the sole plaintiff and movant in this case) suffered

irreparable harm. See Alcresta Therapeutics, Inc. v. Azar, 318 F. Supp. 3d 321, 326 (D.D.C. 2018)

(“In addition, to the extent Plaintiffs now invoke this theory as to ‘patients’ other than Flath,

injuries to third parties are not a basis to find irreparable harm.”); Cardinal Health, Inc. v. Holder,

846 F. Supp. 2d 203, 213 (D.D.C. 2012) (holding argument about irreparable harm to consumers

“fails because it shows irreparable harm not to [plaintiff], but to third parties”). The third-party

considerations presented by Virtus are best considered under the ambit of the “public interest,”

which the Court does below.

31 For the reasons set forth above, the Court finds that Virtus has not carried its burden of

establishing certain irreparable harm, absent injunctive relief from this Court.

C. Balance of Harms and Public Interest

“The final two factors the Court must consider when deciding whether to grant a

[temporary restraining order] are the balance of harms and the public interest.” Sierra Club v.

United States Army Corps of Engineers, 990 F. Supp. 2d 9, 41 (D.D.C. 2013). Where, as here, the

government is a party to the litigation, these two factors merge and are “one and the same, because

the government’s interest is the public interest.” Pursuing Am.’s Greatness v. Fed. Election

Comm’n, 831 F.3d 500, 511 (D.C. Cir. 2016). “Although allowing challenged conduct to persist

certainly may be harmful to a plaintiff and the public, harm can also flow from enjoining an

activity, and the public may benefit most from permitting it to continue.” Sierra Club, 990 F.

Supp. 2d at 41. Therefore, when “balanc[ing] the competing claims of injury,” the Court must

“consider the effect on each party of the granting or withholding of the requested relief.” Winter,

555 U.S. at 24.

To begin, both parties face plausible sources of hardship. Virtus, as explained above, has

a direct financial interest in the levorphanol and phendimetrazine currently held under seal by the

DEA. See disc. supra at 28. These drugs account for a sizeable portion of the company’s revenue

and, so long as they remain under seal, Virtus will be unable to send them to market. This

constitutes a tangible financial hardship for the company. But ordering the release of Virtus’s

levorphanol and phendimetrazine would also impose a countervailing hardship on the DEA. The

DEA is presently storing Virtus’s levorphanol and phendimetrazine at three undisclosed facilities.

See Mills Decl., ECF No. 10-1, at ¶ 18. Transporting Virtus’s drugs from these DEA facilities to

a third-party registrant would impose a substantial operational and pecuniary burden on the DEA,

32 as the agency would be required to ensure the security of the drugs while also complying with all

attendant regulations. See id. at ¶¶ 12–20. Moreover, such a transfer would threaten to disclose

the location of the DEA’s storage facilities, which is “sensitive law enforcement information.” Id.

at ¶ 13. Given these offsetting concerns, the balance of the hardships does not clearly tip in Virtus’s

favor.

Next, Virtus raises public interest concerns related to the downstream effects the DEA’s

enforcement action will have on local pharmacies and prescription-holders. Specifically, Virtus

contends that the local pharmacies it supplies may lose business as their pharmaceutical inventory

of levorphanol is not replenished. See Smith Decl., ECF No. 3-2, at ¶ 18. Virtus also asserts that

the DEA’s decision to hold its levorphanol 2 mg under seal will deprive

See id. at ¶ 12. And in turn, this shortage could threaten

the well-being of prescription-holders who rely on a consistent source of levorphanol for their

clinical treatment. See Bass Decl., ECF No. 12-3, at ¶¶ 6–11. The Court is appreciative of such

concerns, particularly the need for prescription-holders to readily access drugs for clinical

purposes.

The DEA, however, has presented conflicting evidence on these points.

33 This evidence calls into question

whether a levorphanol supply shortage exists and what effect, if any, it will have on local

pharmacies and prescription-holders down the supply chain. Accordingly, the Court finds that

such public interest concerns stand in equipoise, given the present record.

Finally, the DEA raises public interest concerns regarding public health and safety that tip

the scales in the government’s favor. Both the DEA and the public have a strong interest in

preventing the illicit diversion of controlled substances. Prescription drug abuse has occurred with

concerning prevalence in recent years and opioid abuse has been central to this public health crisis.

See Besser Decl., ECF No. 10-2, at ¶¶ 10–11. Tragically, such drug abuse has also caused

numerous overdose deaths. See id. at ¶12. To this end, enforcement of the security requirements

set forth in the Controlled Substances Act provides the DEA with a meaningful tool to combat the

drug diversion exacerbating this prescription drug abuse. See id. at ¶¶ 30–37. And in this case,

the DEA made an investigative determination that Woodfield failed to comply with multiple

recordkeeping and security requirements under the CSA. See DEA at 2–11. The DEA further

found that one of Woodfield’s affiliates has potential connections to a suspected drug trafficking

organization. Id. at 12–13. Given such findings, the DEA’s decision to hold controlled substances

from Woodfield’s non-compliant facility under seal and prevent their diversion furthers a clear

public health and safety interest. See id. at ¶¶ 10–15; Cardinal Health, Inc. v. Holder, 846 F. Supp.

2d 203, 230 (D.D.C. 2012) (“The government has a strong interest in enforcing the CSA and

ensuring that pharmaceutical drugs are not improperly diverted . . . ”).

34 Overall, and for the reasons as set forth above, the Court finds that the balance of the harms

and the public interest tip slightly in favor of the DEA. As such, Virtus has not demonstrated that

these factors weigh in favor of its requested TRO.

IV. CONCLUSION

For the reasons set forth in this Memorandum Opinion, the Court concludes that Virtus has

failed to satisfy its burden of demonstrating a likelihood of success on the merits, a certainty of

irreparable harm, or that the balance of hardships and the public interest weigh in Virtus’s favor.

Accordingly, the Court will DENY Virtus’s [2] Motion for a Temporary Restraining Order.

An appropriate Order accompanies this Memorandum Opinion.

Dated: September 22, 2021

/s/ COLLEEN KOLLAR-KOTELLY United States District Judge