McAdam v. United States Food and Drug Administration et al
Filing
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FINDINGS AND RECOMMENDATIONS that 3 MOTION to Dismiss Complaint filed by United States be GRANTED and the Complaint 1 be DISMISSED WITH PREJUDICE. Objections to F&R due by 10/18/2013. Signed by Magistrate Carolyn S Ostby on 9/30/2013. (NOB) Modified on 9/30/2013: mailed to McAdams and printed to CSO chambers. (NOB)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BILLINGS DIVISION
TOBY C. MCADAM,
CV 12-137-BLG-SEH-CSO
Plaintiff,
FINDINGS AND
RECOMMENDATION OF
UNITED STATES
MAGISTRATE JUDGE
vs.
UNITED STATES FOOD AND
DRUG ADMINISTRATION;
MARGARET A. HAMBURG,
COMMISSIONER OF FDA,
Defendants.
I.
Introduction
On February 25, 2013, Defendants filed a “Motion to Dismiss
Complaint.” ECF 3. Plaintiff Toby C. McAdam (“McAdam”) did not
timely respond to the motion, despite being granted extensions of time
in which to do so. See ECF 9, 15.
On September 25, 2013, as previously noticed (ECF 15), the Court
held a hearing on Defendants’ Motion. McAdam did not appear. The
Court heard argument from Defendants’ counsel and testimony from
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Lisa Lathar, Compliance Office in the Seattle District Office of the
United States Food and Drug Administration.
On September 26, 2013, McAdam filed a response (ECF 20) to
Defendants’ Motion to Dismiss and, incredibly, a request for hearing on
the Motion to Dismiss – despite his failure to appear at the hearing on
said motion the previous day.
II.
Background Facts
The evidence presented by Defendants indicates that McAdam
has been making and selling unapproved drugs for cancer and other
serious diseases for approximately eight years. See ECF 3 and
attachments; United States v. Toby Carl McAdam, Cause No. CV-10128-BLG-SEH-CSO. This evidence is summarized below.
In 2006, the FDA issued Greta Armstrong a Warning Letter that
Risingsun was advertising unapproved cancer remedies on the websites
www.risingsunhealth.com and www.bloodrootproducts.com, and
warned her that selling unapproved products for use in the cure,
mitigation, treatment, and prevention of disease violated the Federal
Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301-397 (the “Act”). The
FDA also advised that the products advertised on the website were
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misbranded under the Act and did not contain adequate directions for
usage. After receipt of that FDA Warning Letter, McAdam informed
the FDA by telephone that he was the owner of Risingsun and he would
remove the offending drug claims from the websites. McAdam followed
up with a letter to the FDA shortly thereafter stating that he would
remove the offending drug claims.
FDA investigators inspected Risingsun between November 27 and
29, 2007, and discovered that McAdam’s violations of the Act were
ongoing. McAdam wrote two more letters promising that he would
cease his illegal activity. Despite this, on April 4 and 10, 2009, FDA
investigators noted that Risingsun’s websites and many of their
product labels still contained illegal drug claims that its products could
cure, mitigate, treat, or prevent disease.
In May and June 2010, FDA made numerous undercover
purchases of Risingsun’s products and found that McAdam continued to
sell illegal unapproved new drugs which FDA had previously informed
McAdam was in violation of 21 U.S.C. §§ 352(f)(1) and 355(a). These
purchases were shipped from Montana to undercover investigators
located in Maryland, Arizona, and Washington State.
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On October 13, 2010, the United States filed a Complaint against
McAdam under the injunction provisions of the Act, 21 U.S.C. § 332(a)
(“Enforcement Case”). See United States v. Toby Carl McAdam, supra,
at ECF 1.
The Complaint alleged, among other things, that McAdam
regularly sold unapproved drugs in interstate commerce to treat
serious diseases such as cancer, anemia, asthma, ADD/ADHD,
arthritis, epilepsy, and intestinal parasites. Id. These drugs were
alleged to be “new drugs,” as defined by 21 U.S.C. § 321(p)(1), in that
they were not generally recognized, among experts qualified by
scientific training and experience to evaluate the safety and
effectiveness of drugs, as safe and effective for use under the conditions
prescribed, recommended, or suggested in their labeling. See CV-10128-BLG-SEH-CSO, ECF 1.
The Complaint alleged that McAdam violated 21 U.S.C. § 331(d)
by introducing or delivering for introduction into interstate commerce
such unapproved drugs in violation of 21 U.S.C. § 355. See CV-10-128BLG-SEH-CSO, ECF 1. The Complaint also alleged that McAdam sold
new animal drugs, as defined by 21 U.S.C. § 321(v)(1), that were
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unapproved by the FDA, and which were unsafe within the meaning of
21 U.S.C. § 360b(a) and adulterated within the meaning of 21 U.S.C. §
351(a)(5). See CV-10-128-BLG-SEH-CSO, ECF 1.
Furthermore, the Complaint alleged that McAdam’s drug
products were misbranded within the meaning of 21 U.S.C. § 353(b)(1)
because they were prescription drugs, the distribution of which without
a prescription resulted in the drug being misbranded while held for
sale, and within the meaning of 21 U.S.C. § 352(f)(1), because their
labeling failed to bear adequate directions for use. See CV-10-128-BLGSEH-CSO, ECF 1. The introduction of adulterated and misbranded
new animal drugs into interstate commerce is prohibited under 21
U.S.C. § 331(a).
Significant to these Findings and Recommendation the parties
were able to reach an agreement in the Enforcement Case and filed a
negotiated Consent Decree of Permanent Injunction (“Consent
Decree”). See CV-10-128-BLG-SEH-CSO, ECF 5. McAdam was
represented by counsel in his negotiations with Defendants.
The Consent Decree enjoined McAdam from: introducing into
interstate commerce, holding for sale after shipment in interstate
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commerce, and manufacturing, processing, packaging, labeling,
holding, selling, and distributing a broad range of products, including,
inter alia, (a) any topically-applied product for human or animal use
containing extracts or components of the Bloodroot or Graviola plants,
(b) any “new drug,” (c) any “new animal drug,” and (d) any dietary
supplement, unless and until (i) the FDA approves a new drug
application or abbreviated new drug application for the product
pursuant to 21 U.S.C. § 355, or (ii) the FDA approves an investigational
new drug application for the product pursuant to 21 U.S.C. § 355(i) and
21 C.F.R. 312, or (iii) the FDA approves a new animal drug application
or abbreviated new animal drug application for the product pursuant to
21 U.S.C. § 360b(b) or such product meets the requirements for the
investigational new animal drug exemption pursuant to 21 U.S.C. §
360b(j). See CV-10-128-BLG-SEH-CSO, ECF 5.
Second, the Consent Decree required that McAdam demonstrate
to the FDA that the new drug is the subject of a valid FDA approval
before manufacturing or distributing any new drug. Id.
Third, the Consent Decree required McAdam to retain a “labeling
expert.” Id.
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Fourth, the Consent Decree generally enjoined McAdam from
introducing unapproved, misbranded, and/or adulterated human and
animal drugs into interstate commerce, or causing the adulteration or
misbranding of such products held for sale after shipment in interstate
commerce. Id.
The Consent Decree specifically addresses future violations and
states that in the case of future violations of the Consent Decree, the
Act, or the FDA’s regulations, the “FDA may, as and when it deems
necessary in its sole discretion, direct [McAdam], in writing, and order
[McAdam] to take appropriate corrective action. . . .” Such corrective
action may include an order to “[c]ease manufacturing, processing,
packaging, labeling, holding, selling, and/or distributing any or all
drugs and/or dietary supplements,” or “any other corrective action(s) as
FDA deems necessary to protect the public health or to bring [McAdam]
and [his] products into compliance with the Act, applicable regulations,
and this [Consent] Decree.” Id.
In addition, the Consent Decree orders that McAdam will pay
monetary damages if they violate the Consent Decree, attorney’s fees in
a contempt action, and the costs of “all FDA inspections, investigations,
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supervision, reviews, examinations, and analyses specified in [the
Consent Decree] or that FDA deems necessary to evaluate [McAdam’s]
compliance” at the standard prevailing rates. Id.
The Consent Decree further provides that “[a]ll decisions specified
in this [Consent] Decree shall be vested in the discretion of FDA and
shall be final and [McAdam] shall abide by the decisions of FDA.” If
contested, the Consent Decree provides that the FDA’s decisions “shall
be reviewed by the Court under the arbitrary and capricious standard
set forth in 5 U.S.C. § 706(2)(A).” Id.
On September 15, 2011, the FDA notified McAdam that Risingsun
was in violation in the Consent Decree and ordered McAdam to cease
operations until he could demonstrate compliance with the Consent
Decree. From February 14 through February 16, 2012, the FDA
conducted an inspection at Risingsun. The FDA’s inspection revealed
that, notwithstanding the FDA’s September 15, 2011 notification of
non-compliance, McAdam continued to sell products in violation of the
Consent Decree.
Following the February 2012 inspection, McAdam faxed to the
FDA a letter dated March 5, 2012, which indicated that he would
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address the observed deficiencies in the near future. McAdam, however,
has not followed up on this assurance and has not submitted a
corrective action plan that was later requested by the FDA.
Furthermore, on March 29, 2012, the FDA sent an invoice of $1,524.39,
pursuant to Paragraph 12 of the Consent Decree, to reimburse the
Agency for the cost of the February 2012 inspection. McAdam has not
paid this invoice.
Following his receipt of the September 15, 2011 notice, and just
prior to the February inspection, McAdam filed a “Request to Set Aside
Consent Decree and Preliminary Injunction” on February 14, 2012. See
CV-10-128-BLG-RFC, ECF 8. McAdam’s request alleged that he had
been coerced and intimidated into signing the Consent Decree, that he
should not be required to hire a labeling expert because “there is no
criteria nor certification procedures for a person to become a label
specialist,” and that the Consent Decree violates his rights to equal
protection. On March 8, 2012, Judge Cebull denied McAdam’s motion
in full. See CV-10-128-BLG-RFC, ECF 12.
The FDA sent McAdam another letter on April 20, 2012, notifying
him that he was continuing to violate the Consent Decree, pointing out
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that the FDA had observed several additional violations of the Consent
Decree. McAdam did not respond. The FDA sent him yet another
letter on July 27, 2012, requesting that he pay liquidated damages in
the amount of $80,000 because of his ongoing violations of the Consent
Decree and the Act. McAdam did not pay the liquidated damages
request.
McAdam filed on September 11, 2012, a motion entitled “Request
for Hearing to Compel [Defendants] to Specify Criteria as to What is
Not a Medical Claim and to Clarify Criteria Standards Set for So
Called Label Specialist and For this Court to Review and Determine If
[McAdam] Has Infect (sic) Complied With Decree.” See CV-10-128BLG-RFC, ECF 13. Judge Cebull denied this request, noting that it
raised the exact arguments that this Court had previously rejected. Id.
at ECF 16.
On October 17, 2012, the FDA conducted an inspection of
Gesunheit! Nutrition Center in Bozeman, Montana, and found further
evidence that McAdam was in violation of the Consent Decree.
On October 19, 2012, McAdam filed the Complaint in the instant
matter, arguing that the Consent Decree violates his right to equal
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protection (Counts I, III & IV). He also invoked a “right of choice”
ostensibly provided by the Constitution (Count II), and alleged that the
FDA’s actions with respect to him have “put the health and safety of
the general public at risk.” (Count V). ECF 1.
On October 31, 2012, an attorney from the FDA’s Office of the
Chief Counsel informed McAdam via letter that his case had been
referred back to his office to consider whether to bring further court
proceedings, and that, in the absence of immediate compliance with the
Consent Decree, the FDA would refer this case back to the Department
of Justice to file a motion with the Court seeking an award of liquidated
damages under Paragraph 7 of the Consent Decree. In response,
McAdam filed a sworn affidavit dated November 8, 2012, stating that
he “will cease operations.” See CV-10-128-BLG-RFC, ECF 17.
On February 22, 2013, the United States filed a Petition in CV10-128-BLG-SEH-CSO, seeking an order to show cause why McAdam
should not be held in civil contempt for violating the terms of the
Consent Decree as well as a motion for liquidated damages. See CV-10128-BLG-RFC, ECF 18 & 19. On September 25, 2013, this Court
granted the motion for order to show cause, setting a hearing for
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McAdam to show cause on October 24, 2013, and ordering liquidated
damages in the amount of $80,000. See CV-10-128-BLG-RFC, ECF 34
& 35.
III. Standard of Review
To be sustained under Rule 12(b)(6), a complaint must plead
“enough facts to state a claim to relief that is plausible on its face.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim has “facial
plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for
the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009)
(citing Twombly, 550 U.S. at 556).
However, “a plaintiff's obligation to provide the ‘grounds’ of his
‘entitle[ment] to relief’ requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will not do.”
Twombly, 550 U.S. at 555 (citation omitted). A court need not accept
“legal conclusions” as true. Iqbal, 556 U.S. at 679.
Although the court is bound to pay certain deference to factual
allegations, it is not proper for the court to assume that “the [plaintiff]
can prove facts which [he or she] has not alleged.” Assoc. Gen.
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Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S.
519, 526 (1983). Nor must the court “accept as true allegations that
contradict matters properly subject to judicial notice or by exhibit” or
those which are “merely conclusory,” or require “unwarranted
deductions” or “unreasonable inferences.” Sprewell v. Golden State
Warriors, 266 F.3d 979, 988 (9th Cir. 2001) (citation omitted), amended
on other grounds, 275 F.3d 1187.
IV.
Analysis
The Complaint in this matter seeks primarily to amend the terms
of the Consent Decree in CV-10-128-BLG-RFC, on grounds that have
already been denied by Judge Cebull twice. See CV-10-128-BLG-RFC,
ECF 8 & 12.
McAdam’s attempt to modify the Consent Decree through this
independent action is prohibited and must be dismissed under Rule
12(b)(6). The Consent Decree specifically provides that any attempt to
modify its terms should be addressed in the context of the Enforcement
Case. Paragraph 20 of the Consent Decree specifically states: “This
Court retains jurisdiction of this action for the purpose of enforcing or
modifying this [Consent] Decree and for the purpose of granting such
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additional relief as may be necessary or appropriate.” See CV-10-128BLG-RFC, ECF 5.
In his Complaint, McAdam alleges in his prayer for relief that he
is entitled to damages against Defendants based on alleged violations
of his Constitutional rights. ECF 1. Specifically, he claims that he is
entitled to damages of $8,000 per month to compensate him for lost
revenue relating to a drug which he agreed in the Consent Decree he
would not manufacture or distribute, and $3,600 to compensate him for
having retained a “so called label expert.” ECF 1.
McAdam’s attempt to obtain damages against Defendants is an
impermissible collateral attack on the Consent Decree. It is
implausible that the United States could be subject to liability for
damages based on the judgment the Court entered in the Enforcement
Case because to award the damages sought by McAdam would
effectively be to vacate the Consent Decree. This Court has twice
already refused to modify or vacate the Consent Decree based on
identical arguments. See CV-10-128-BLG-RFC, ECF 8 & 12.
Furthermore, McAdam has failed to allege any exception to
sovereign immunity that provides a basis for damages against the
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United States, and this Court is therefore without jurisdiction over
McAdam’s claim for damages. The United States is a sovereign, and
may not be sued for money damages without its consent. United States
v. Testan, 424 U.S. 392, 399 (1976).
The United States has not waived its sovereign immunity for
actions seeking damages for constitutional violations. See Holloman v.
Watt, 708 F.2d 1399, 1401-02 (9th Cir. 1983) (sovereign immunity not
waived for claim under the Constitution for damages against the
United States); Arnsberg v. United States, 757 F.2d 971, 980 (9th
Cir.1984) (same). Counts I through IV of the Complaint are expressly
and solely premised on alleged violations of McAdam’s constitutional
rights, and his claims for damages should therefore be dismissed with
prejudice.
Finally, McAdam’s Complaint also is subject to dismissal because
it is barred by the res judicata doctrine. “Res judicata” refers to the
preclusive effect of prior litigation and falls into two categories: claim
preclusion and issue preclusion. Robi v. Five Platters, Inc., 838 F.2d
318 (9th Cir. 1988). “An action is barred under res judicata where (1)
the prior litigation involved the same parties or their privies, (2) the
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prior litigation was terminated by a final judgment on the merits, and
(3) the prior litigation involved the same ‘claim’ or ‘cause of action.’”
See Hydranautics, Inc. v. Filmtec Corp., 204 F.3d 880, 887-88 (9th Cir.
2000), citing Blonder-Tongue Labs. v. Univ. of Ill. Found., 402 U.S. 313,
323-24 (1971).
Here, the prerequisites for res judicata are satisfied. All of the
claims raised in the instant action could have been raised as defenses
in the Enforcement Case. Most of them were resolved by this Court
against McAdam through his two post-decree motions. See CV-10-128BLG-RFC, ECF 8 & 12.
V.
Conclusion
McAdam fails to plead any claim upon which relief may be
granted, and his claim for damages is without merit. Moreover,
sovereign immunity bars monetary damages against Defendants in this
case. McAdam’s claims should also be dismissed because they are
barred by the doctrine of res judicata.
Therefore, based upon the foregoing, IT IS RECOMMENDED that
Defendant’s Motion to Dismiss Complaint (ECF 3) be GRANTED and
the Complaint (ECF 1) be DISMISSED WITH PREJUDICE.
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NOW, THEREFORE, IT IS ORDERED that the Clerk shall serve
a copy of the Findings and Recommendation of United States
Magistrate Judge upon the parties. The parties are advised that
pursuant to 28 U.S.C. § 636, any objections to the findings and
recommendation must be filed with the Clerk of Court and copies
served on opposing counsel within fourteen (14) days after service
hereof, or objection is waived.
DATED this 30th day of September, 2013
/s/ Carolyn S. Ostby
United States Magistrate Judge
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