Roxsan Pharmacy, Inc. et al v. Virginia Herold et al

Filing 26

ORDER DENYING PLAINTIFFS EX PARTE APPLICATION FOR A TEMPORARY RESTRAININGORDER 22 by Judge Otis D. Wright, II (lc)

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United States District Court
Central District of California

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SHAHLA KEYVANFAR MELAMED,

Case № 2:15-cv-05524-ODW (JEM)

Plaintiffs,

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v.

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ORDER DENYING PLAINTIFF’S

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VIRGINIA HEROLD; CALIFORNIA

EX PARTE APPLICATION FOR A

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BOARD OF PHARMACY; and DOES 1-

TEMPORARY RESTRAINING

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50,

ORDER [22]

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Defendants.

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I.

INTRODUCTION

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On November 3, 2015, Plaintiff Shahla Keyvanfar Melamed applied ex parte

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for a temporary restraining order enjoining Defendants Virginia Herold and California

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Board of Pharmacy (“Board”) from revoking her pharmacist license. Defendants

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timely opposed. For the reasons discussed below, the Court DENIES Melamed’s

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application. (ECF No. 22.)

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II.

FACTUAL BACKGROUND

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This action arises from an administrative proceeding instituted by the Board

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against Melamud and Roxsan Pharmacy, Inc. (“Roxsan”), a pharmacy that Melamud

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owned at the time. In February 2014, the Board filed an Accusation against Roxsan

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and Melamed, which the Board subsequently amended in April 2015.

In those

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Accusations, the Board alleged that Roxsan and Melamed: (1) stored expired

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ingredients for use in compounding drugs; (2) compounded and dispensed 452

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misbranded prescriptions containing drugs not approved for use in the United States;

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(3) shipped thousands of prescriptions, including controlled substances, to states

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where the pharmacy was not licensed to dispense; (4) failed to end-test compounded

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drugs for sterility and bacterial toxins; (5) falsified a controlled substance inventory;

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and (6) handwrote false information on a physician’s order during a Board inspection.

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(Decl. Melamed, Ex. A.)

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In July 2014, Melamed proposed to settle the Accusation by selling Roxsan to

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Parallax Health Services, Inc. (“Parallax”), after which Melamed would voluntarily

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surrender her license to the Board. (First Am. Compl. (FAC) ¶ 30.) The Board

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appeared to generally agree with the proposal, although there was a dispute over

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exactly when Melamed would surrender her license. (Id. ¶ 32.)

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A few months later, Parallax filed a permit application in anticipation of

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purchasing Roxsan. (Id. ¶ 34.) However, the Board informed Melamed and Parallax

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that it would not approve Parallax’s application until Roxsan’s current permit and

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Melamed’s license were surrendered. (Id. ¶ 36.) This left the parties in a pickle—

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Parallax did not want to go through with the sale unless they were assured that their

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permit would be approved, but the Board would not approve the permit until Roxsan’s

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current permit and Melamed’s license were surrendered, which Melamed did not want

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to do until after the sale was consummated. In February 2015, the Board denied

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Parallax’s permit application “based upon the pending administrative case against

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Roxsan Pharmacy, Inc.” (Id. ¶ 40.)

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Over the next five months, Melamed alleges that Defendants engaged in

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conduct intended to delay resolution of the Accusation and prevent the sale of Roxsan

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to Parallax. (Id. ¶¶ 44–75.) On July 21, 2015, Melamed filed this action, alleging that

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Defendants violated her substantive due process rights, procedural due process rights,

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and her rights under the Equal Protection Clause. (ECF No. 1.) This apparently

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prompted the Board to resolve the Accusation against Melamed. On July 29, 2015,

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Roxsan and Melamed executed a settlement agreement, wherein they agreed to

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(among other things) surrender their respective pharmacy permit and license on

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November 6, 2015. (Decl. Melamed, Ex. A.) The next day, the Board approved

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Parallax’s permit application. (FAC ¶ 77.)

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However, by this point, Parallax was having difficulty securing the funds

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needed to purchase Roxsan. (Id. ¶ 80.) This forced Melamed to forgo a substantial

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upfront payment for periodic payments made from the profits that Roxsan would

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generate under Parallax’s management.

(Id. ¶¶ 80–81.)

However, Parallax was

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apparently also unable to secure the funding needed to run the pharmacy, which of

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course would negatively affect Parallax’s ability to pay Melamed from the pharmacy’s

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profits. (Id. ¶ 82.) On October 15, 2015, Melamed filed a lawsuit against Parallax in

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the Los Angeles Superior Court seeking to rescind the sale of the pharmacy, alleging

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that Parallax misrepresented (among other things) their ability to secure adequate

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funding to either purchase Roxsan outright or run the pharmacy after purchasing it.

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(Req. for Judicial Notice, Ex. A.)

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On October 6, 2015, Melamed filed a First Amended Complaint in this action,

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which seeks to enjoin Defendants from taking her license. (Id. ¶¶ 124–33.) On

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November 3, 2015, Melamed applied ex parte for a temporary restraining order

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enjoining the Board from forcing her to surrender her pharmacy license. (ECF No.

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22.) Defendants timely opposed. (ECF No. 23.) Melamed’s application is now

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before the Court for consideration.

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III.

LEGAL STANDARD

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“The standard for issuing a temporary restraining order is identical to the

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standard for issuing a preliminary injunction.” Lockheed Missile & Space Co. v.

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Hughes Aircraft Co., 887 F. Supp. 1320, 1323 (N.D. Cal. 1995). A court may only

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grant such relief “upon a clear showing that the plaintiff is entitled to such relief.”

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Winter v. Nat’l Res. Def. Council, Inc., 555 U.S. 7, 22 (2008). To prevail, the moving

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party must show: (1) a likelihood of success on the merits; (2) a likelihood that the

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moving party will suffer irreparable harm absent preliminary injunctive relief; (3) that

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the balance of equities tips in the moving party’s favor; and (4) that preliminary

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injunctive relief is in the public interest (the “Winter factors”). Id. at 20. “Under

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Winter, plaintiffs must establish that irreparable harm is likely, not just possible, in

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order to obtain a preliminary injunction.” Alliance for the Wild Rockies v. Cottrell,

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632 F.3d 1127, 1132 (9th Cir. 2011) (original emphasis).

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“‘serious questions going to the merits’ and a hardship balance that tips sharply

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toward the plaintiff can [also] support issuance of an injunction, assuming the other

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two elements of the Winter test are also met.” Id. at 1132, 1135 (holding that the

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“sliding scale” test remains viable “so long as the plaintiff also shows that there is a

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likelihood of irreparable injury and that the injunction is in the public interest”).

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IV.

In the Ninth Circuit,

DISCUSSION

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The parties tussle over whether Melamed has satisfied the Winter factors.

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Melamed argues that she has shown a likelihood of success on her constitutional

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claims, that she would be irreparably harmed if her license was revoked due to the

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onerous license reinstatement process, and that the equities favor her because of

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Defendants’ extreme delay in resolving the Accusation against her. (ECF No. 22.)

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Defendants argue that several affirmative defenses prevent Melamed from prevailing

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in this action, and that the allegations against Melamed show that the equities and

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public interest weighs against her. (ECF No. 23.) The Court agrees with Defendants

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that Melamed has not satisfied the Winter factors.

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A.

Likelihood of Success on the Merits

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There is a laundry list of reasons why Melamed is unlikely to succeed on the

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merits of her claims. Thus, the Court finds that Melamed has not satisfied this prong

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of the Winter test.

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First, in order to proceed against Herold under § 1983, Melamed must show that

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Herold was personally involved in the conduct that led to the constitutional

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deprivation. Barren v. Harrington, 152 F.3d 1193, 1194 (9th Cir. 1998). Moreover,

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“[a] plaintiff must allege facts, not simply conclusions, that show that an individual

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was personally involved in the deprivation of his civil rights.” Id. The allegations

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against Herold are limited to a few instances where she declined to return requests for

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status updates from Melamed’s attorney, and one instance where she referred

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Melamed’s attorney to other persons in her office. This does not appear to amount to

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a deprivation of either Due Process or Equal Protection. The remaining allegations

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against Herold are boilerplate accusations that she oversaw and directed the scheme to

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delay resolution of the Accusation and thwart the sale of Roxsan to Parallax.

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However, Herold cannot be held responsible for a subordinates’ allegedly

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unconstitutional conduct simply because she is the “executive officer” of the Board.

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See, e.g., Hansen v. Black, 885 F.2d 642, 646 (9th Cir. 1989) (police chief not liable

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under § 1983 where he was not personally involved in the incident).

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Second, as Defendants point out, “agency officials performing certain functions

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analogous to those of a prosecutor should be able to claim absolute immunity with

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respect to such acts.” Butz v. Economou, 438 U.S. 478, 515 (1978). The conduct

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alleged here—Herold’s delay in resolving the Accusation, hindering the sale of

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Roxsan, and procuring the settlement under duress—appears to fall squarely within

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this immunity.

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Third, the Board is an arm of the State of California, and thus is not a “person”

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subject to suit under § 1983. Will v. Michigan Dep’t of State Police, 491 U.S. 58, 71

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(1989) (“[N]either a State nor its officials acting in their official capacities are

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‘persons’ under § 1983.”).

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Fourth, there is at least a substantial question over whether or not the Court can

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grant relief to Melamed under the Younger abstention doctrine. “‘Younger abstention

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is required if the state proceedings are (1) ongoing, (2) implicate important state

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interests, and (3) provide the plaintiff an adequate opportunity to litigate federal

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claims.’ When the case is one in which the Younger doctrine applies, the case must be

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dismissed.” H.C. ex rel. Gordon v. Koppel, 203 F.3d 610, 613 (9th Cir. 2000)

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(citation omitted). Here, Melamed still has a request for reconsideration pending

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before the Board, and thus it would appear that the administrative proceeding against

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her is still ongoing. The proceeding also implicates the important state interest of

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regulating the dispensation of prescription medication. Finally, Melamed appears to

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have an adequate opportunity to litigate her federal claims through the writ petition

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process. Cal. Code Civ. Proc. § 1094.5.

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Fifth, Melamed has not shown any likelihood of prevailing on her parallel state

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lawsuit against Parallax to rescind the purchase agreement. As discussed more fully

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below, Melamed is not currently conducting any business that requires her to have a

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pharmacy license, and the only reason she claims she needs a pharmacy license is in

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the event that the state court grants rescission of sale of Roxsan to Parallax. Thus,

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without any showing that she is likely to prevail on that claim, there is no reason to

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enjoin Defendants from taking her license.

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Sixth, notwithstanding all of the foregoing affirmative defenses, the Court is

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skeptical that Melamed could make even a prima facie case on her constitutional

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claims.

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resolving the Accusation and approving Parallax’s permit application; they do not go

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to the settlement reached between the Board and Melamed wherein she agreed to

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surrender her license. While the two issues have some factual overlap, any theories of

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liability or recovery for each would be distinct. For example, how does Melamed

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have a substantive due process right to her license? How was she deprived of equal

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protection when she agreed to surrender her license? And while Melamed does

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indeed have a right to a fair hearing on the Accusations against her, she—like every

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litigant or criminal defendant—can waive those rights by reaching a settlement with

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the opposing side.

The constitutional deprivations alleged all go to the Board’s delay in

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Rather, Melamed’s claim is more appropriately one for rescission of the

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settlement with the Board based on economic duress, not for a violation of her

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constitutional rights. But even then, the Court also sees no substantial evidence at this

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point that Melamed was unduly bullied into surrendering her license. Every person

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facing an administrative investigation is under some amount of economic pressure,

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and every settlement in those circumstances would be all but unenforceable if that

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pressure was a basis on which to rescind the agreement. She was also represented by

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and given the advice of counsel during the entire proceeding, including with respect to

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the signing of the settlement. This seems more like a case of buyer’s remorse. Suffice

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to say, Melamed has clearly not shown a likelihood of success on the merits.

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B.

Irreparable Harm

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Melamed has also not shown any likelihood of suffering irreparable harm

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absent an injunction. She concedes that she “is not acting as a pharmacist or in any

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form of a regulated capacity,” and that the only reason she would need her license is if

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she prevails in her lawsuit to rescind the sale of her pharmacy to Parallax. (App. at 9–

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10.)

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prevailing on her lawsuit against Parallax for rescission. Melamed does not do this,

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and thus there is no reason why she needs her license right now. Moreover, while she

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claims that the license reinstatement process is onerous, nowhere does she claim that it

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is impossible for it to be reinstated, and thus the harm facing her is clearly not

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irreparable. This factor is also not satisfied.

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C.

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As noted above, Melamed would therefore need to show a likelihood of

Equities
The Court also finds that the equities tip in favor of Defendants.

In the

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Stipulated Surrender, Melamed essentially concedes the factual basis of the

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Accusation, which contains some shocking allegations. (Decl. Melamed, Ex. A.)

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Nonetheless, the Board allowed Melamed to sell her pharmacy and simply surrender

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her license, which is not a harsh punishment at all given her alleged conduct. Now,

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Melamed is trying to completely undo her deal with the Board—she wants to retain

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her license, rescind the sale of Roxsan to Parallax (as opposed to seeking damages),

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and apparently continue running the pharmacy. Allowing Melamed to do this would

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not only be inequitable, but potentially harmful to the public.

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This is not to say that Defendants are without blame. Defendants delayed

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resolution of the Accusation to the point where Melamed’s sale of the pharmacy was

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severely jeopardized, despite ample warning from Melamed of the severe economic

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problems that the delay was creating. If Defendants did not agree with the proposed

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plan, they should have rejected it outright instead of stringing Melamed along and

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leading her to think that the sale could ultimately go through as proposed.

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Given that three of the four Winter factors weigh against issuing a TRO, the
Court finds it unnecessary to address the public interest prong.

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V.

CONCLUSION

For the reasons discussed above, the Court DENIES Melamed’s Ex Parte
Application for a Temporary Restraining Order. (ECF No. 22.)
IT IS SO ORDERED.

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November 6, 2015

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____________________________________
OTIS D. WRIGHT, II
UNITED STATES DISTRICT JUDGE

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