Morall v. Drug Enforcement Admin.

Citation412 F.3d 165
Decision Date24 June 2005
Docket NumberNo. 04-1367.,04-1367.
PartiesKathy A. MORALL, M.D., Petitioner v. DRUG ENFORCEMENT ADMINISTRATION, Respondent
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Joseph M. Hannon, Jr. argued the cause for petitioner. With him on the briefs was Robert N. Spencer.

Teresa A. Wallbaum, Senior Trial Attorney, U.S. Department of Justice, argued the cause and filed the brief for respondent.

Before: EDWARDS, HENDERSON, and TATEL, Circuit Judges.

HARRY T. EDWARDS, Circuit Judge.

Kathy A. Morall, M.D. petitions this court to review the Drug Enforcement Administration's ("DEA") decision to revoke her certificate of registration. On September 28, 2001, DEA issued an Order to Show Cause to Dr. Morall, proposing to revoke her DEA registration, which authorizes the dispensing of controlled substances, on the grounds that, inter alia, she had failed to maintain complete and accurate records of controlled substances. In June 2002, a hearing on these charges was held before an Administrative Law Judge ("ALJ"). After hearing testimony from Dr. Morall, Dr. Greenfield and Dr. Teich, who testified on behalf of Dr. Morall, and DEA Investigator Barnhill, the ALJ concluded "that a preponderance of the evidence [did] not establish that it would be inconsistent with the public interest to continue [Dr. Morall's] DEA registration." Opinion and Recommended Ruling, Findings of Fact, Conclusions of Law and Decision of the ALJ (Apr. 28, 2003) ("ALJ Decision") at 20, reprinted in App. tab B.

The ALJ made a number of credibility findings in Dr. Morall's favor and also noted that "[t]he Colorado Board of Medical Examiners [had] reviewed the DEA report of investigation but determined to take no disciplinary action against [Dr. Morall], and thus she is fully licensed in Colorado." Id. at 18. In sum, the ALJ found that, although Dr. Morall's violations of DEA record-keeping regulations were egregious, the violations "occurred over a fairly short period of time," Dr. Morall "appeared to regret" her errors, and "the record does not establish that [Dr. Morall] diverted any controlled substances." Id. at 20. The ALJ thus recommended that no action be taken against Dr. Morall. DEA filed no exceptions to the ALJ's decision.

Over a year later, the Deputy Administrator declined to adopt the ALJ's proposed findings of fact and law and revoked Dr. Morall's registration. The Deputy Administrator acknowledged that the record-keeping failures alone might not warrant revocation in light of compelling, extenuating circumstances in Dr. Morall's personal life. Kathy A. Morall, M.D., Revocation of Registration, 69 Fed.Reg. 59,956, 59,960 (Oct. 6, 2004). The Deputy Administrator determined, however, that Dr. Morall's registration should be revoked because "she lied to the investigators on numerous occasions." Id. The Deputy Administrator thus concluded that "[i]f [Dr. Morall's] only failures involved record-keeping, the Deputy Administrator might find it appropriate to impose a lesser sanction than revocation.... [Dr. Morall's] false and misleading statements, however, cannot be excused." Id.

In reaching this judgment, the Deputy Administrator relied almost exclusively on the testimony of the DEA Investigator, almost as if no other testimony or evidence was in the record. The Deputy Administrator's decision takes no account whatsoever of the ALJ's credibility findings, completely ignores the testimony of Dr. Greenfield and of Dr. Teich, and substantially fails to acknowledge the testimony given by Dr. Morall that explains or disputes the DEA Investigator's claims. The agency decision is, in short, stunningly one-sided in its focus and, thus, utterly arbitrary and capricious.

We hold that DEA's decision cannot withstand review, because it fails to consider contradictory record evidence where such evidence is precisely on point. Such a lapse of reasonable and fair decisionmaking is particularly acute where, as here, the decision entirely ignores the ALJ's credibility findings. Furthermore, DEA has failed to explain its departure from prior cases that have consistently declined to revoke a physician's registration in comparable circumstances and also in situations involving much more serious conduct. Therefore, even if DEA's decision were adequately supported, the penalty imposed would be unwarranted by law. Accordingly, we vacate the revocation of Dr. Morall's registration.

A. Factual Background

Kathy A. Morall, M.D. is a Colorado-licensed physician who, until the revocation of her DEA registration, was practicing psychiatry at the Jefferson Center for Mental Health ("Jefferson Center"). Dr. Morall, a graduate of Howard University School of Medicine, had practiced general and forensic psychiatry for over twenty years, and had qualified as an expert in both state and federal court.

In July 1997, Dr. Morall went to work for Joshua Holland, M.D. as a physician at the Holland Center for Family Health ("Holland clinic"), a weight-loss clinic located at 128 Steele Street, Suite 200, in Denver, Colorado. Dr. Holland resided in Phoenix, Arizona. Dr. Morall testified that she decided to work in a weight-loss clinic because obesity, "the number one health problem in the country," is "predominantly associated with psychological issues" and "has a domino effect on so many parts of one's life." Tr. of Proceedings Before the ALJ ("Tr.") at 292, reprinted in App. tab F. The Holland clinic focused on the "phen-fen" treatment, which combined phentermine and Pondimin, a brand name product containing fenfluramine hydrochloride.

The circumstances giving rise to this case occurred after the closure of the Holland clinic. This period was marked by a series of unfortunate events for Dr. Morall. She testified that she had begun to experience severe headaches, weight gain, high blood pressure, fatigue, hair loss, and depression, and that she was eventually diagnosed with a disorder created by an increase in hormones from the pituitary gland. During this same time period, Dr. Morall's father died of a brain tumor and she thought that she might have a brain tumor as well; her son had a seizure and was diagnosed with an illness similar to sickle cell anemia; and several close friends passed away, including one who committed suicide. One of the close friends who passed away was Mr. Carl Ousley, who Dr. Morall described as akin to a member of her family. Dr. Morall also explained that she had no support staff to assist her in her practice during most of the period after the closure of the Holland clinic.

1. Closure of the Holland Clinic

On September 15, 1997, Pondimin was withdrawn from the market after it was linked to a heart valve disorder and to a heart and lung disorder. According to Dr. Morall, in the wake of Pondimin's withdrawal, the Holland clinic suffered serious financial losses, and she and Dr. Holland discussed ways to maintain the clinic as a viable operation. Dr. Holland ultimately resolved to provide permanent cosmetics at the clinic, a decision with which Dr. Morall strongly disagreed. She believed it would be "[o]ffensive to [the] clients ... [who] came with serious weight problems who are now afraid that they may have a medical problem, problems with their heart, and our response was going to be but, by the way, do you want permanent makeup?" Tr. at 306. Dr. Holland nevertheless sent a letter, which included Dr. Morall's name, to all clinic patients informing them that permanent makeup would be offered. According to Dr. Morall, at this point her relationship with Dr. Holland began to deteriorate.

On Friday, November 7, 1997, Dr. Morall underwent minor surgery. She testified that while she was still at the hospital, the clinic office manager paged her to inform her that Dr. Holland had closed the clinic that day and instructed the locks to be changed. Dr. Morall stated that she went directly from the hospital to the Holland clinic and called the "medical board" to inquire about directives for closing a practice. She also wanted to notify the clinic's patients that, come Monday, they would not be able to reach anyone at the clinic number or address. That same day, she moved all of her possessions from the Holland clinic to Suite 202 in the same building and resolved to open her own practice where she could continue to treat patients with weight issues.

2. Dr. Morall's Relocation of Her Practice

In November 1998, Dr. Morall was evicted from her own practice in Suite 202 of the Steele Street building for failure to pay rent. At this point, Dr. Morall moved her practice to an office in her home. She testified that she "took care of patients from [her] home," but did not see them there, explaining that she maintained established patients, whom she only needed to see at three-month intervals, on weight-loss medication, and that she hoped to move back to another office location within the three-month time period. See Tr. at 351.

Dr. Morall testified that after she moved her practice to her home, her drug distributor notified her that controlled substances could only be delivered to her home if it was her DEA registered address. Accordingly, Dr. Morall called DEA to request that her registered location be changed from the Steele Street address to her home address. Dr. Morall spoke with Ms. Betty Garcia, a DEA registration technician.

According to a memorandum prepared by Ms. Garcia, Dr. Morall had informed Ms. Garcia that she saw patients at her home and that she had a safe there to store controlled substances. Dr. Morall disputes this account of her November 12, 1998 phone conversation with Ms. Garcia. She testified that she did not tell Ms. Garcia that she was "seeing" patients at her home: "I think I said I was taking care of patients in my home." Tr. at 354. She also attested to telling Ms. Garcia that she had a "safe place" to store controlled substances, rather than a safe. Dr. Morall...

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