In re Specialty Fulfillment Ctr. (Dba Ac Fillers) 3 17TH Ave. S.

• Decision Date: 08 February 2018
• Docket Number: Case No. 1:17-mc-09979-CWD
• Parties: In the Matter of the Search of: Specialty Fulfillment Center (dba AC Fillers) 3 17th Ave. S., Nampa, ID
• Court: U.S. District Court — District of Idaho

In the Matter of the Search of: Specialty Fulfillment Center (dba AC Fillers) 3 17^th Ave. S., Nampa, ID

Case No. 1:17-mc-09979-CWD

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF IDAHO

February 8, 2018

MEMORANDUM DECISION AND ORDER

INTRODUCTION

Nordic Clinical, Inc. filed a motion under Fed. R. Crim. P. 41(g) for return of property seized by the Government at the premises of Specialty Fulfillment Center, located at 3 17th Avenue South, Nampa, Idaho, on September 26, 2017, pursuant to a search warrant. Nordic contends some of the property seized was not within the scope of the search warrant, and is not contraband. Nordic alleges it will incur irreparable business losses if the property is not returned for distribution to its customers.

The Court conducted a hearing on the motion on December 11, 2017, at which the parties appeared and provided oral argument. During the hearing, the Court requested

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supplementation of the record, and the parties filed their respective declarations and responses pursuant to the Court's order. The matter is now ripe for consideration. After carefully reviewing the parties' submissions and the record before the Court,¹ the Court will deny the motion as explained below.

FACTS

The Government applied for a search warrant on September 25, 2017, in connection with an ongoing criminal investigation being conducted for violations of 18 U.S.C. § 371—conspiracy to commit offense or defraud the United States; 21 U.S.C. § 331(a), (c), and (d)—introduction or delivery for introduction into interstate commerce of any adulterated or misbranded drug or device; and other violations of the Food, Drug and Cosmetics Act. The search warrant was executed at the premises of Specialty Fulfillment Center where several items containing products and packaging materials were seized.

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On or about October 4, 2016, affiant EF,² a special agent with the United States FDA's Office of Criminal Investigation, began an investigation of the Specialty Fulfillment Center in Nampa. EF received information from a medical professional that Specialty Fulfillment was distributing products to customers that included injectable botulinum toxin and dermal fillers, as well as dietary supplements labeled as intended to mitigate or relieve the symptoms of arthritis and bone and joint pain, to block collagen breakdown in cartilage and connective tissues, and suppress inflammation that underlines pain. EF testified the pain products were unapproved new drugs under the FDCA, because of their labeling. Additionally, EF discovered topical creams were being marketed as products intended to relieve arthritis and joint pain, with a "unique transdermal delivery" via a "cetylated fatty acid complex," which made the product an unapproved new drug under the FDCA.

EF provided detailed information about the pain relief products Specialty Fulfillment Center was shipping from its Nampa, Idaho warehouse on behalf of Nordic. EF indicated that, on September 8, 2017, he was made aware of an FDA investigation concerning the sale and distribution of Nordic's products, labeled as dietary supplements and/or topical creams. Two such products were identified by name as Neurocet and

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ActaFLEX4. EF mentioned a third product, BloodBoost, was being distributed on behalf of Nordic as well. On May 17, 2017, an undercover agent received a package containing BloodBoost, ActaFLEX4 cream, and Neurocet. The flyer accompanying the order listed an address for Nordic at 3 17th Avenue South, Nampa, Idaho - Specialty Fulfillment Center's address (and the same premises the Government sought to search).

Attachment B to the application and to the search warrant indicated the property to be seized included:

Evidence, instrumentalities and records relating to violations of 21 U.S.C. § 331 and 18 U.S.C. § 371; involving the Specialty Fulfillment Center and occurring after November 1, 2016, including:
a. The following products:
1. Any adulterated and/or Misbranded medical devices labeled as "Acquafiller" and "Nordic Clinical " dermal fillers, as well as any other misbranded and/or adulterated medical devices;
2. All unapproved new drugs, including but not limited to products labeled as botulinum toxin or similar, intended for injection into humans;
b. All records and information....

(Ex. A, Dkt. No. 4-3, p. 6-10) (emphasis added).

During the execution of the warrant, law enforcement officers seized, among other items, approximately 3500 bottles of various products labeled as "dietary supplements" and approximately 2800 packages of products labeled as "Actaflex" pain creams. Id. at p. 4-6. It is these products, the labeling for various products, and two folders labeled "Nordic" that are the subject of Nordic's motion. (Dkt. 4-1, p. 2-3.)

The specific items Nordic identified from the Inventory of Evidence for which it demands return are:

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• Item #1 - 36 Actaflex 4x pain relief cream OTC
• Item #2 - 6 bottles of Neuroblock Technology, Neurocet, 30 capsules pain relief
• Item #3 - 85 bottles of Neuroblock Technology, Neurocet, 30 capsules pain relief
• Item #4 - 62 bottles of Neuroblock Technology, Neurocet, 30 capsules pain relief
• Item #6 - Neuroblock Technology, Neurocet, 30 capsules labels
• Item #9 - Insert Labels KS Nordic VZ
• Item #10 - Inserts Labeled "Actaflex - TY"
• Item #11 - Neurocet Kitted Inserts
• Item #13 - Inserts labeled "Neuro-TY"
• Item #14 - Brain NRG Kitted Inserts
• Item #15 - GSH-3 Kitted Inserts
• Item #16 - Medical Insert labeled "No Blood-P"
• Item #17 - Medical Insert labeled "Neuro-P"
• Item #28 - Flyers De Se silva - Nurdic
• Item #29 - 2 folders Nordic
• Item #31 - 1949 Total Bottles of blood boost
• Item #32 - 1544 bottles of Neuroblock Technology, Neurocet, 30 capsules labels
• Item #34 - 2799 Actaflex Pain Cream 20 oz.
• Item #35 - Receiving Invoices for Nordic Clinical

(Dkt. No. 17.)

Per the Court's request, the Government identified the following items seized during the execution of the search warrant with expiration dates that were either expiring imminently, or close to expiring:³

Item; No.	Inventory of Evidence Description	Lot No.	Expiration	Exhibit; No.
1	Approx. 2751 Actaflex4x 2oz. tubes, NDC; 65643-406 on label	5723	7/15/2018	1
2	6 bottles Neuroblock Technology, Neurocet, 30; capsules (some of which have labels partially; removed or overlapping labels)			4
3	1 box, approx. 85 bottles Neuroblock Technology,; Neurocet, 30 capsules (some of which have labels; removed/scraped off or overlapping labels)	0491F6	07/2018	5

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4	Approx. 62 bottles Neuroblock Technology,; Neurocet, 30 capsules (some of which appear to; have overlapping labels)	0491F6	07/2018	6
31	5 boxes, approx. 1949 bottles Blood Boost, 60; capsules	0484D7	05/2019	7
32	3 boxes, approx.1544 bottles Neuroblock; Technology, Neurocet, 30 capsules	0356A7	07/2018	8
34	37 boxes, Actaflex4x Pain Cream:
	33 boxes ActaFlex4x 2oz. tubes, NDC 65643-406; on label	5723	7/15/2018	2
	4 boxes ActaFlex4x 3.4oz. tubes, no NDC number on label, mixed lot numbers, as; follows:
	Approx. 143 ActaFlex4x 3.4oz. tubes	5257	10/2017	3
	Approx. 15 ActaFlex4x 3.4oz. tubes	5258	10/2017	3
	Approx. 165 ActaFlex4x 3.4oz. tubes	5259	10/2017	3

According to Nordic, the products seized (Neurocet, Blood Boost, GSH-3,⁴ and ActaFLEX4x) were manufactured by Vitaquest International, LLC ("Vitaquest"), located in Fairfield, New Jersey. Vitaquest promotes itself as: "a fully compliant GMP manufacturing and packaging facility. We are duly licensed and are regularly inspected for Good Manufacturing Practices (GMP) by State and Federal health authorities." Vitaquest's Certificates of Analysis for the GSH-3, NO Blood Boost, and Neurocet indicate that the products were shipped to Nordic Clinical. The ActaFLEX4x product was ordered by Nordic through TriPharma, LLC, located in Laguna Beach, California. The product was manufactured by LifeTech Resources, LLC, which is a registered drug establishment, FDA Establishment No. 3003003565.

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Nordic contends its contract with Specialty Fulfillment Center ensures title to, or ownership of, the products in Specialty Fulfillment's warehouse does not pass from Nordic to Specialty Fulfillment. Decl. of Lustigman, ¶ 17, Ex. I. (Dkt. 18-9). It appears the Specialty Fulfilment Center handles inventory management, order processing, and distribution of products on Nordic's behalf. Id. Customers wishing to purchase Nordic's products may order them on-line at Amazon.com, where the products are offered by Nordic. Decl. of Lustigman, ¶ 18, Ex. J. (Dkt. 18.)

DISCUSSION

1. Applicable Standard Under Rule 41

Under Federal Rule of Criminal Procedure 41(g), "[a] person aggrieved by an unlawful search and seizure of property or by the deprivation of property may move for the property's return." Rule 41(g) directs the Court to receive evidence on any factual issue necessary to decide the motion. If the Court grants the motion, the government must return the property to the movant, but the Court "may impose reasonable conditions to protect access to the property and its use in later proceedings."

When there are no criminal proceedings pending against the movant, Rule 41(g) motions are treated as civil proceedings invoking the court's equitable powers. Ramsden v. U.S., 2 F.3d 322, 324 (9th Cir. 1993) (A Rule 41(g) motion is "treated as [a] civil equitable proceeding[]".).⁵ The Ramsden court articulated four factors the Court must

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consider in determining whether to entertain a Rule 41(g) motion made prior to initiation of criminal proceedings:

(1) whether the Government displayed a callous disregard for the constitutional rights of the movant;
(2) whether the movant has an individual interest in and need for the property he wants returned;
(3) whether the movant would be irreparably injured by denying return of the property; and
(4) whether the movant has an adequate remedy at law for the

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