United States v. Cole

• Decision Date: 05 February 2015
• Docket Number: Case No. 3:13–cv–01606–SI.
• Citation: 84 F.Supp.3d 1159
• Parties: UNITED STATES of America, Plaintiff, v. James G. COLE, an individual, James G. Cole, Inc., a corporation, and Julie D. Graves, an individual, Defendants.
• Court: U.S. District Court — District of Oregon

84 F.Supp.3d 1159

UNITED STATES of America, Plaintiff

v.James G. COLE, an individual, James G. Cole, Inc., a corporation, and Julie D. Graves, an individual, Defendants.

Case No. 3:13–cv–01606–SI.

United States District Court, D. Oregon.

Signed Feb. 5, 2015.

S. Amanda Marshall, United States Attorney, Ronald K. Silver, Assistant United States Attorney, United States Attorney's Office, Portland, OR, Joyce R. Branda, Acting Assistant Attorney General, Jonathan F. Olin, Deputy Assistant Attorney General, Michael S. Blume, Director, Jeffrey I. Steger, Assistant Director, Ann F. Entwistle, Trial Attorney, Consumer Protection Branch, Washington, D.C., for Plaintiff.

John J.E. Markham, II, Markham & Read, Boston, MA, Krista Shipsey, Law Office of Krista M. Shipsey, Portland, OR, for Defendants.

Opinion

MICHAEL H. SIMON, District Judge.

The Government brings claims against Defendants (“Maxam” or “JGCI”)¹ under the Federal Food, Drug, and Cosmetic Act² (“FDCA”). The gravamen of the Government's claims is that Defendants distribute in interstate commerce certain articles that are both unapproved new drugs and adulterated dietary supplements. The products are new drugs, the Government argues, because they are distributed with the intent that they be used to treat diseases, including Alzheimer's, HIV, and autism

. And they are adulterated dietary supplements, according to the Government, because Maxam lacks the controls over its manufacturing processes mandated by the FDA's Current Good Manufacturing Practice (“cGMP”) regulations³ for dietary supplements. The Government seeks summary judgment and a permanent injunction against Defendants to prevent further violations of the FDCA. For the reasons below, the Government's motion is granted.

STANDARDS

A party is entitled to summary judgment if the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court must view the evidence in the light most favorable to the non-movant and draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir.2001). Although “[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge,” the “mere existence of a scintilla of evidence in support of the [non-movant's] position [is] insufficient” to avoid summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation and quotation marks omitted).

BACKGROUND

On October 12, 2010, the FDA sent Defendants a letter warning them that their websites were making “disease claims”—claims that their products could be used to diagnose, cure, mitigate, treat, or prevent a disease. By making such claims, the FDA warned, Maxam was selling unapproved new drugs. Some (but not all) of the claims being made were in the form of testimonials from consumers. For example:

• “Try our oral chelation therapy

called clathration for autism, Alzheimers, allergies, heavy metal detox and more.” Ex. D–3⁴ at 1 (non-testimonial).

• “Shown effective against latent residual viruses from old inoculations, measles

, mumps, small pox, as well as HPV, EBV, CMV, HIV, etc.” Ex. D–3 at 3 (non-testimonial).

• “I am happy to report that after only ten days of being on your product, I am seeing changes in the amount of facial paralysis.” Ex. D–3 at 4 (testimonial).

On November 2, 2010, Defendants responded that they had believed that third-party testimonials were not proscribed disease claims, but that they had now removed all disease claims from their website.

In March 2012, the FDA inspected Maxam's manufacturing facility for compliance with cGMP regulations. The FDA discovered not only several cGMP violations, but also that Defendants continued to make several disease claims on their websites. The twelve cGMP-related findings were provided to Defendants at the end of the inspection in an FDA Inspectional Observations Form 483 (“Form 483”), and the disease claims were pointed out in person during the inspection. On April 19, 2012, Defendants responded to the FDA's findings, assuring the FDA that all disease claims had been removed from their websites and outlining the steps that they would take to come into cGMP compliance.

On September 28, 2012, the FDA sent Defendants another letter warning them that the steps they had proposed were inadequate to bring them into cGMP compliance and that failure to come into compliance could result in an enforcement action. Defendant Cole responded personally on October 19, 2012, asserting with little explanation that Defendants' manufacturing processes had been brought into complete compliance.

From the end of January through early February 2013, the FDA again inspected Defendants' facility. This time, the FDA found sixteen violations of cGMP regulations, as well as, again, several websites making disease claims. Indeed, one such website had been taken offline after the previous inspection and then reinstated with the same disease claims after only a few months. After this inspection, Defendant Cole once again represented that all disease claims would be taken down and that the manufacturing processes would be brought into cGMP compliance.

As of August 19, 2014, however—almost a year after the Government filed this action in September 2013—Maxam's Facebook page still contained the claim that one of Defendants' products was effective to treat “environmentally induced cases of Alzheimer's, Autism

, Fibromyalgia, and more.” Ex. D–7⁵ at 7. Indeed, as late as November 19, 2014, after Defendants filed their brief in opposition to this motion for summary judgment, their website contained claims that their products could “eliminate the toxins produced by unhealthy bacteria” and “counteract even overdose of otherwise lethal drugs.” Dkt. 36 Ex. A.⁶ And the depositions of Defendants Cole and Graves, taken in early 2014, revealed that Maxam's manufacturing still had not been brought into cGMP compliance.

DISCUSSION

The Government's primary claims are that Maxam has introduced into interstate commerce unapproved new drugs, adulterated dietary supplements, and misbranded drugs. See 21 U.S.C. §§ 331(d) & 355(a) (unapproved new drugs); § 331(a) (adulterated dietary supplements and misbranded drugs). Defendants do not contest that they have introduced their products into interstate commerce. The remainder of this Opinion addresses each claim in turn before addressing the Government's request for permanent injunctive relief.

A. Unapproved New Drugs

A product is a “drug” if it is “intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals.” 21 U.S.C. § 321(g)(1)(B). “The vendor's intent is the key element in this statutory definition.” United States v. Storage Spaces Designated Nos. 8 & 49 Located at 277 E. Douglas, Visalia, Cal., 777 F.2d 1363, 1366 (9th Cir.1985). The vendor's intent can be evinced by “labeling claims, advertising matter, or oral or written statements by such persons or their representatives” or other “circumstances surrounding the distribution of the article.” 21 C.F.R. § 201.128. In general, express or implied claims that a product can be used to diagnose, cure, mitigate, treat, or prevent a disease are evidence of a vendor's intent that the product be used for such purposes.

A drug is a “new drug” if it “is not generally recognized ... as safe and effective for use.” 21 U.S.C. § 321(p)(1). A new drug may not be introduced into interstate commerce without the approval of the FDA. §§ 331(d), 355(a). Defendants do not argue that their products have been approved by the FDA or are eligible for any exception to FDA approval. See, e.g., § 321(p)(1). Therefore, if Defendants' products are drugs, they are unapproved new drugs.

Consistent with the Government's evidence, Defendants concede that they have in the past made claims that a product can be used to diagnose or treat a disease.⁷ Additionally, however, Defendants have marketed their products using “monographs” and “testimonials.” “Monographs” list the ingredients purportedly contained in a Maxam product and then republish abstracts of studies claiming that those ingredients might be effective to treat certain conditions. “Testimonials” are allegedly sincere claims from customers that a product successfully treated some condition.⁸ Defendants now argue that monographs are permitted under a statutory safe harbor, that testimonials are protected speech under the First Amendment, and that they no longer make any other sort of disease claim.

1. Monographs

Defendants argue that their monographs are permitted under 21 U.S.C. § 343(r)(6) as statements that “describe[ ] the role of a nutrient or dietary ingredient intended to affect the structure or function in humans, [or] characterize[ ] the documented mechanism by which a nutrient or dietary ingredient acts to maintain such structure or function.” § 343(r)(6)(A). Such statements, known as “structure-function claims,” do not by themselves convert a product into a drug. See § 321(g)(1)(D).

Section 343(r)(6), however, establishes three additional requirements that a structure—function claim must meet to qualify for its safe harbor. First, “the manufacturer of the dietary supplement [must have] substantiation that such statement is truthful and not misleading,” § 343(r)(6)(B) ; second, a form disclaimer must be prominently displayed with...