US v. Kasz Enterprises, Inc.

• Decision Date: 15 June 1994
• Docket Number: Civ. A. No. 93-0455 P.
• Citation: 855 F. Supp. 534
• Parties: UNITED STATES of America v. KASZ ENTERPRISES, INC. and James Kaszyk.
• Court: U.S. District Court — District of Rhode Island

855 F. Supp. 534

UNITED STATES of America v. KASZ ENTERPRISES, INC. and James Kaszyk.

Civ. A. No. 93-0455 P.

United States District Court, D. Rhode Island.

June 15, 1994.

Everett C. Sammartino, Asst. U.S. Atty., Providence, RI, Steven A. Keller, U.S. Dept. of Justice, Washington, DC, Cynthia Stofberg, U.S. Food & Drug Admin., Rockville, MD, for plaintiff.

Abraham Belilove, Arcaro, Belilove & Kolodney, Providence, RI, for defendant.

ORDER

PETTINE, Senior District Judge.

The Report and Recommendation of United States Magistrate Judge Robert W. Lovegreen filed on May 6, 1994 in the abovecaptioned matter is hereby accepted pursuant to 28 U.S.C. § 636(b)(1).

SO ORDERED:

REPORT AND RECOMMENDATION

LOVEGREEN, United States Magistrate Judge.

Before me is the plaintiff's, United States of America ("USA"), motion for summary judgment pursuant to F.R.Civ.P. 56 seeking a permanent injunction enjoining defendants, Kasz Enterprises, Inc. and James Kaszyk (collectively "Kasz"), from manufacturing, selling and distributing a product known as Solutions 109 and any other unapproved new drugs in interstate commerce in violation of the Federal Food, Drug and Cosmetic Act ("FDCA"), 21 U.S.C. § 301 et seq. This matter has been referred to me for preliminary review, findings and recommended disposition. 28 U.S.C. § 636(b)(1)(B). Based upon the following analysis, I recommend that USA's motion for summary judgment be granted.

Facts

Defendant James Kaszyk is the owner and president of Kasz Enterprises, Inc. Kasz sells and distributes two hair care products under the trade names "Solution 109 Herbal Shampoo" and "Solution 109 Herbal Cosmetic Scalp Cleanser" (collectively "Solutions 109"). USA considers Solutions 109 to be a drug under the FDCA and therefore subject to regulation by the U.S. Food and Drug Administration ("FDA"). USA contends that Solutions 109 have been and continue to be marketed by Kasz as hair growth products which are capable of stimulating hair growth on the human scalp or preventing hair loss. Products marketed for such use must receive prior FDA approval before they may be sold to the public or otherwise distributed in interstate commerce. FDA approval is obtained through a new drug application ("NDA") process which requires the applicant to establish that the drug product is safe and effective for its intended uses. Kasz has admitted in their answer that they market Solutions 109 without having sought or received FDA approval for such marketing.

Kasz states that the only claim made as to Solutions 109 is that they make hair fuller and thicker; that Kasz has never claimed that Solutions 109 can cure baldness or prevent hair loss; that Solutions 109 contains only ingredients that the FDA regards as safe for use in cosmetic formulations; that third parties have advised Kasz that Solutions 109 have promoted hair growth and prevented hair loss which information is included in promotional materials for Solutions 109; and that Solutions 109 are hair and scalp cleansers. It should be noted that Solutions 109 sell at retail for approximately $100.00.

The FDA inspected Kasz on February 12, 1991, September 9, 1992 and April 16, 1993. Each inspection resulted in a finding by the FDA that Kasz was distributing Solutions 109 in interstate commerce and promoting them for use as a hair growth and hair loss prevention system, despite numerous FDA warnings that such promotion and distribution violates the FDCA.

FDA initially inspected Kasz on February 12, 1991 and learned that Kasz was selling Solutions 109 in conjunction with advertising and promotional literature that made hair growth and hair loss prevention claims for the products. Kasz admitted that Solutions 109 were being distributed in interstate commerce. Kasz also admitted to the FDA investigator that they were responsible for developing the labeling and advertising for Solutions 109 and were responsible for marketing the products. The literature touted Solutions 109 as hair growth stimulants and hair loss preventors by incorporating opinions and testimonials supposedly obtained from third party users of Solutions 109.

These so-called "testimonials" from Kasz customers, claiming that Solutions 109 grow hair and prevent hair loss, were incorporated into a package of promotional materials that was supplied to persons inquiring about the products, to hair salons that sold the products, and to purchasers of the products. The package included a booklet entitled KASZ Enterprises, Inc.: SOLUTION 109; a newspaper article reprinted from the Middlesex News entitled Is this the Solution to hair loss problem?; and a memorandum entitled From the Office of the President.

The Solutions 109 booklet contains, among other things, the testimonial that, "With Solution 109, I've stopped losing my hair and its actually growing back, even in places that were totally bald before," and the claim that, "Usually in one to three months, most customers report their hair is regrowing and their hair loss has stopped." The newspaper article reprint explains Kasz' marketing strategy of promoting Solutions 109 as hair growth and hair loss prevention products by eliciting on-the-air testimonials from radio personalities who claim that these products grow hair. The memorandum entitled From the Office of the President reads, in part, "Thank you for your interest in Solution 109 by KASZ Enterprises. There are many products today claiming to help people with a hair loss problem. Only KASZ Enterprise gives you: 90% client satisfaction rate and proven results with local celebrities...."

In addition to this promotional package, Kasz has also advertised Solutions 109 on the radio, using copy written by defendant Kaszyk that included the statement: "There's a proven effective product that people are claiming regrows their hair. It's called Solution 109 by Kasz Enterprises. Kasz only claims to make hair fuller and thicker, the results confirm that Solution 109 far exceeds its claims."

After completing the inspection, the FDA investigator provided defendant Kasz with a copy of 21 C.F.R. § 310.527, an FDA regulation that classifies all over-the-counter ("OTC") hair growth and hair loss prevention products for external use as "new drugs" which require FDA premarket approval and explained that the distribution of Solutions 109 without such approval violated the FDCA. A few months later, on August 12, 1991, FDA sent a warning letter, explaining the violations and stating that if Kasz continued marketing Solutions 109 for hair growth and hair loss prevention, FDA might take enforcement action. In addition, the Boston District office of FDA met with defendant Kaszyk and his attorney and explained again that defendants' actions violated the law.

On September 9, 1992, FDA inspected Kasz a second time, because the FDA discovered a shipment of Solutions 109 and promotional material in Massachusetts which signalled a continuing distribution. The FDA confirmed that Kasz was still distributing Solutions 109 in interstate commerce with literature containing claims that the products grow hair and prevent hair loss. During the inspection, defendant Kaszyk again admitted that he developed the promotional material. The Solutions 109 booklet collected during the inspection contained, among other things, claims from various media personalities stating that with use of Solutions 109 "the hair loss has stopped and my hair is growing back in those thinning areas."

FDA inspected Kasz a third time on April 16, 1993, to determine whether it was still engaged in Solutions 109 distribution. At that time, defendant Kaszyk claimed to have revised his promotional material for Solutions 109. The "new" promotional pamphlet, which is entitled SOLUTION 109: The Herbal Aid for Thinning and Falling Hair and bears the Kasz name and logo, was prominently displayed in Kasz' reception area. The pamphlet states, among other things, that "Kasz Enterprises was founded ... by chemist Jim Kaszyk with a goal to offer the finest drug free products for any man or woman concerned about losing hair." The pamphlet also contains the statements: "Usually in one to three months, most clients report their hair is regrowing and their hair loss has stopped," and "Many ... also see their hair regrowing in areas that were once thinning or totally bald." Included in the pamphlet is a purported testimonial from a person identified only as a "professional hairdresser" claiming that after using Solutions 109 for six months, her mother "doubled" the amount of her hair despite having previously been diagnosed by doctors as having hereditary hair loss. Defendant Kaszyk admitted that he ships the literature to purchasers who request it.

After the April 16, 1993 inspection, an FDA investigator visited one of Kasz' hair salon distributors. A sign in the salon window stated "Solutions 109 Available Here." Delia Fox, of Delia's Salon in Hanover, Massachusetts, stated that she had been told by defendant Kaszyk to display the "new" literature in her salon. She stated, as had other hair salon distributors, that the literature is provided to customers at the "point of sale," and she had the literature prominently displayed with Solutions 109 in her salon. She sold kits of Solutions 109 for over one hundred dollars apiece.

Defendant Kaszyk admits that he is aware that FDA prohibits the sale of all hair products for external use that are claimed to be effective for stimulating hair growth or preventing hair loss without prior FDA premarket approval. Defendant Kaszyk also admits that he distributes Solutions 109 in interstate commerce and does not have FDA approval to market Solutions 109. However, Kasz denies that Solutions 109 are promoted as hair growth and hair loss prevention products; that Solutions 109 are a drug as defined by the FDCA, thereby requiring FDA premarket approval; or that Solutions 109 have endangered the public health or safety.

There is no...