U.S. v. Rx Depot, Inc.

• Decision Date: 22 February 2006
• Docket Number: No. 05-5003.,05-5003.
• Citation: 438 F.3d 1052
• Parties: UNITED STATES of America, Plaintiff-Counter-Defendant-Appellant, v. RX DEPOT, INC., corporation; Rx of Canada, LLC, corporation; Carl Moore, individual; David Peoples, individual, Defendants-Counter-Claimants-Appellees. Washington Legal Foundation, Amicus Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

438 F.3d 1052

UNITED STATES of America, Plaintiff-Counter-Defendant-Appellant, v. RX DEPOT, INC., corporation; Rx of Canada, LLC, corporation; Carl Moore, individual; David Peoples, individual, Defendants-Counter-Claimants-Appellees Washington Legal Foundation, Amicus Curiae.

No. 05-5003.

United States Court of Appeals, Tenth Circuit.

February 22, 2006.

Mark Reiling Freeman, Appellate Staff, Civil Division, U.S. Department of Justice (Peter D. Keisler, Assistant Attorney General, David E. O'Meilia, United States Attorney, Scott R. McIntosh, Appellate Staff, Civil Division, U.S. Department of Justice, Alex M. Azar II, General Counsel, Sheldon T. Bradshaw, Chief Counsel, Food and Drug Division, Gerald F. Masoudi, Acting Chief Counsel, Food and Drug Division, Eric M. Blumberg, Deputy Chief Counsel, Litigation, Michael M. Levy, Associate Chief Counsel for Enforcement, United States Department of Health and Human Services, Office of the General Counsel, Of Counsel, with him on the briefs), Washington, D.C., for Plaintiff-Counter-Defendant-Appellant.

Fred E. Stoops, Sr. (E. Diane Hinkle, with him on the brief), Tulsa, Oklahoma, for Defendants-Counter-Claimants-Appellees.

Daniel J. Popeo, Richard A. Samp, Counsel of Record, Washington Legal Foundation, Washington, D.C., filed an amicus curiae brief on behalf of Defendants-Counter-Claimants-Appellees.

Before HENRY, McWILLIAMS and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

I. Introduction

Appellees Rx Depot, Inc., Rx of Canada, LLC, Carl Moore, and David Peoples (collectively "Rx Depot") facilitated the sale of prescription drugs from Canada to customers in the United States. The United States brought suit against Rx Depot, alleging its business practices violated provisions of the Federal Food, Drug and Cosmetic Act ("FDCA"), 21 U.S.C. §§ 301-397. Rx Depot admitted to violating the Act and entered into a consent decree of permanent injunction. Subsequently, the United States sought disgorgement of Rx Depot's profits. The district court denied disgorgement, concluding it was not an available remedy under the FDCA as a matter of law. We exercise jurisdiction pursuant to 28 U.S.C. § 1291. Because the FDCA invokes courts' general equity jurisdiction and does not prohibit disgorgement by clear legislative command or necessary and inescapable inference, we reverse and remand.

II. Background

Rx Depot helped consumers in the United States obtain prescription drugs from Canada at reduced prices. A customer with a prescription from an American physician could download forms from Rx Depot's website or visit one of Rx Depot's storefront affiliates to order medications. Rx Depot then transmitted the customer's forms, prescription, and payment information to cooperating Canadian pharmacies. A Canadian physician would rewrite the prescription, which was then filled by a Canadian pharmacy and sent directly to the customer in the United States. Rx Depot received a ten to twelve percent commission for each sale they facilitated.

The United States filed a civil action alleging Rx Depot's activities violated provisions of the FDCA. Specifically, the Government alleged Rx Depot violated § 381(d)(1) by reimporting prescription drugs originally manufactured in the United States and § 355(a) by introducing new drugs into interstate commerce without FDA approval. The government sought a temporary and permanent injunction and other equitable relief. The district court entered a preliminary injunction ordering Rx Depot to discontinue its business activities. The parties then agreed to, and the district court approved, a consent decree of permanent injunction. In the consent decree, Rx Depot admitted to violating the FDCA and agreed not to resume its business operations. The consent decree left "to the discretion of [the district court] the issue of what, if any, equitable relief, including restitution and/or disgorgement, should be awarded to [the United States]."

Subsequently, the district court denied restitution, reasoning Rx Depot's customers did not lose money in their transactions because they purchased medications at reduced prices. The district court initially concluded disgorgement would be an appropriate remedy. Upon reconsideration, however, the district court determined disgorgement was not available under the FDCA as a matter of law. Although the FDCA invokes courts' equity jurisdiction, the district court determined the Act's express provision of other remedies and legislative history create a necessary and inescapable inference that Congress intended to restrict courts' power to order disgorgement. The United States appeals only the district court's denial of disgorgement.

III. Discussion

We review questions of statutory interpretation de novo. Employers Reinsurance Corp. v. Mid-Continent Cas. Co., 358 F.3d 757, 774 (10th Cir.2004). The FDCA provides, "[t]he district courts of the United States and the United States courts of the Territories shall have jurisdiction, for cause shown to restrain violations of [the FDCA]." 21 U.S.C. § 332(a). The issue before this court is whether this statutory grant of jurisdiction enables district courts to order disgorgement in appropriate cases.

In Porter v. Warner Holding Co., the Supreme Court held when Congress invokes the equity jurisdiction of courts in a statute, "all the inherent equitable powers of the [courts] are available for the proper and complete exercise of that jurisdiction," unless the statute, by "clear and valid legislative command" or "necessary and inescapable inference," restricts the forms of equitable relief authorized. 328 U.S. 395, 398, 66 S.Ct. 1086, 90 L.Ed. 1332 (1946). The Court in Porter was examining whether § 205(a) of the Emergency Price Control Act of 1942 ("EPCA")¹ permitted federal courts to order restitution of rents collected in excess of statutory maximums. Id. at 396, 66 S.Ct. 1086. The Court determined restitution was authorized by the statute because § 205(a) invoked courts' general equity jurisdiction and the statute did not expressly or impliedly preclude restitution. Id. at 397-98, 403, 66 S.Ct. 1086. Moreover, the Court noted because the suit involved the public interest and not merely a private controversy, courts' "equitable powers assume[d] an even broader and more flexible character." Id. at 398, 66 S.Ct. 1086.

Arguably, the Court's decision in Porter also relied in part on the broad language of § 205(a), which authorized "any . . . other order." See id. at 399, 66 S.Ct. 1086. The Court's subsequent decision in Mitchell v. Robert De Mario Jewelry, Inc., however, demonstrates that such inclusive language is not required. 361 U.S. 288, 291, 80 S.Ct. 332, 4 L.Ed.2d 323 (1960); see also Atchison, Topeka and Santa Fe Ry. Co. v. Lennen, 732 F.2d 1495, 1506 (10th Cir. 1984). In Mitchell, the Court determined the Fair Labor Standards Act ("FLSA") authorizes federal courts to order reimbursement of lost wages to employees who are discriminated against or unlawfully discharged for filing complaints under the Act. Id. at 296, 80 S.Ct. 332. The Court relied exclusively on language in the statute granting courts authority "for cause shown, to restrain violations of [the FLSA]." Id. at 289, 291, 80 S.Ct. 332. The Court observed that the absence of language in the statute affirmatively confirming the power of courts to order reimbursement did not preclude such relief in light of the statute's grant of general equity jurisdiction. Id. at 291, 80 S.Ct. 332. The Court explained, "[w]hen Congress entrusts to an equity court the enforcement of prohibitions contained in a regulatory enactment, it must be taken to have acted cognizant of the historic power of equity to provide complete relief in the light of statutory purposes." Id. at 291-92, 80 S.Ct. 332. Accordingly, under Porter and Mitchell, when a statute invokes general equity jurisdiction, courts are permitted to utilize any equitable remedy to further the purposes of the statute absent a clear legislative command or necessary and inescapable inference restricting the remedies available.

Amicus argues our analysis of the remedies available under the FDCA should be guided by Meghrig v. KFC Western, Inc. instead of Porter and Mitchell. Meghrig, 516 U.S. 479, 116 S.Ct. 1251, 134 L.Ed.2d 121 (1996). Meghrig held the grant of general equity jurisdiction in the Resource Conservation and Recovery Act's ("RCRA") citizen suit provision² does not authorize courts to order restitution of past cleanup costs. Id. at 487, 116 S.Ct. 1251. The plaintiff in Meghrig owned property contaminated with petroleum products. Id. at 481, 116 S.Ct. 1251. After having the waste removed and disposed of, the plaintiff brought suit against a former property owner seeking recovery of cleanup costs the plaintiff had expended. Id. at 481-82, 116 S.Ct. 1251. In concluding the remedy was not available under RCRA, the Court recognized, but did not overrule, Porter's and Mitchell's holding that a statutory grant of general equity jurisdiction authorizes courts to use all traditional equitable powers. Id. at 487, 116 S.Ct. 1251; see also United States v. Oakland Cannabis Buyers' Coop., 532 U.S. 483, 496, 121 S.Ct. 1711, 149 L.Ed.2d 722 (2001) (citing Porter in a case decided after Meghrig for the proposition that courts sitting in equity "have discretion unless a statute clearly provides otherwise"); Miller v. French, 530 U.S. 327, 340-41, 120 S.Ct. 2246, 147 L.Ed.2d 326 (2000) (same). Instead, the Court merely identified RCRA as a statute that fit into the exceptions recognized by Porter and Mitchell. Meghrig, 516 U.S. at 487, 116 S.Ct. 1251. In particular, the Court determined RCRA contained a clear legislative command and concluded Congress did not intend to permit recovery of past cleanup costs. Id. at 484-88, 116 S.Ct. 1251. The Court also determined the recovery of past cleanup costs was not consistent with the statutory purposes of RCRA. Id. at 483, 116 S.Ct....