Neil Laboratories, Inc. v. Ashcroft, Civil Action No. 02-0428 (RMU).

CourtUnited States District Courts. United States District Court (Columbia)
Writing for the CourtUrbina
Citation217 F.Supp.2d 80
Docket NumberCivil Action No. 02-0428 (RMU).
Decision Date29 August 2002
PartiesNEIL LABORATORIES, INC., Plaintiff, v. John ASHCROFT, U.S. Attorney General, Defendants.
217 F.Supp.2d 80
NEIL LABORATORIES, INC., Plaintiff,
v.
John ASHCROFT, U.S. Attorney General, Defendants.
Civil Action No. 02-0428 (RMU).
United States District Court, District of Columbia.
August 29, 2002.

Page 81

John A. Gilbert Jr., Douglas B. Farquhar, Mary Kate Whalen, Hyman, Phelps & McNamara, P.C., Washington, DC, for Plaintiff.

Ori Lev, Trial Attorney, U.S. Department of Justice, Civil Division/Federal Programs Branch, Washington, DC, for Defendants.

MEMORANDUM OPINION

URBINA, District Judge.


GRANTING THE DEFENDANTS' CROSS-MOTION FOR SUMMARY JUDGMENT; DENYING THE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT1

I. INTRODUCTION

This agency-review matter is before the court on the plaintiff's and defendants'

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cross-motions for summary judgment pursuant to Federal Rule of Civil Procedure 56(c). Neil Laboratories ("Neil Labs" or "the plaintiff"), brought this suit alleging that John Ashcroft, acting in his official capacity as the U.S. Attorney General; the Department of Justice; Asa Hutchinson, acting in her official capacity as Administrator of the Drug Enforcement Agency; and the Drug Enforcement Agency (collectively, "the DEA" or "the defendants") wrongfully suspended Neil Labs' registration to sell List I chemicals under the Controlled Substances Act ("CSA"), 21 U.S.C. § 801 et seq. The plaintiff, in its motion for summary judgment, argues that the DEA's action violated the Administrative Procedure Act ("APA"), 5 U.S.C § 701 et. seq., the CSA, and the Fifth Amendment. For the reasons that follow, the court affirms the DEA's decision, grants the defendants' cross-motion for summary judgment, and denies the plaintiff's motion for summary judgment.

II. BACKGROUND

Neil Labs was a registered manufacturer and distributor of List I chemicals, including ephedrine and pseudoephedrine. Defs.' Material Facts ¶ 7. Between February 1999 and April 2001, the DEA issued 29 warning letters to Neil Labs identifying various instances in which pseudoephedrine tablets sold by Neil Labs had been diverted to illicit methamphetamine production.2 Id. ¶ 14. During this period the DEA also reviewed Neil Labs' customer list and discovered that the DEA had taken enforcement action against 18 out of the 45 distributors that Neil Labs served across the nation.3 Id. ¶ 18 (citing Suspension Order ¶¶ 8-12). Consequently, Neil Labs became a subject of the DEA's nationwide "Operation Mountain Express III," an investigation into the diversion of chemicals for the manufacture of methamphetamine. Id. ¶¶ 29, 32.

The DEA's investigation focused on Mantu Patel, a Neil Labs employee and the brother of Neil Labs' President and Chief Executive Officer, Bharat Patel. Id. ¶¶ 21, 32-41. In 2000, Neil Labs identified Mantu Patel as one of seven "key personnel." Id. ¶ 22. He was one of the four original incorporators of Neil Labs in 1990, was the company's fourth largest shareholder, and served as Neil Labs' Plant Manager. Id. ¶¶ 23-25. Mantu Patel was also the second highest paid employee after Bharat Patel's wife. Id. ¶ 26.

In January 2001, the DEA developed a confidential source ("CS") who provided important intelligence regarding Neil Labs' distribution practices. Id. ¶ 32. Also, after negotiated with the CS, Mantu Patel shipped listed chemicals to the CS by secreting the listed chemical in two shipments

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of non-controlled substances.4 Id. ¶ 37. Neil Labs does not dispute that Mantu Patel twice shipped listed chemicals to the CS in this manner. Pl.'s Resp. ¶ 37. In July 2001, the DEA intercepted a shipment from Neil Labs, in which a bag containing about four kilograms of a listed chemical was labeled as a non-listed chemical and secreted within the non-listed chemicals. Suspension Order ¶ 19; Defs.' Material Facts ¶ 37.

Between May and November 2001, the DEA received four requests to import shipments of listed products from several foreign companies on behalf of Neil Labs. Defs.' Material Facts ¶¶ 54-57. The DEA alleges that it approved these requests and delayed issuing a suspension order against Neil Labs in an attempt to advance its criminal investigation by further monitoring Neil Labs' distribution practices. Id. ¶ 58.

In early September 2001, the CS informed Bharat Patel that he planned to sell List I products to Mexican drug dealers, though the exact nature of this conversation is a bit unclear. Id. ¶ 38. Two weeks after this conversation, the DEA renewed Neil Labs' registration to manufacture and distribute List I chemicals, including ephedrine and pseudoephedrine. Id. ¶ 43; Compl. ¶ 22. On January 7, 2002, the CS held a final conversation with Bharat Patel to discuss the sale of pseudoephedrine. Defs.' Material Facts ¶ 39. During this conversation, Bharat Patel informed the CS that Mantu Patel would not be involved in the negotiations.5 Id. The DEA's investigation culminated on January 16, 2002 when the DEA issued an Order to Show Cause and Immediate Suspension of Registration ("Suspension Order"). Id. ¶ 59. The Suspension Order suspended Neil Labs' DEA registration to manufacture and distribute products containing ephedrine and pseudoephedrine, explaining that "Neil Labs' continued registration ... would constitute an imminent danger to public health and safety because of the substantial likelihood that Neil Labs will continue distributing ephedrine and pseudoephedrine ultimately to purchasers who use these products in the illicit manufacture of methamphetamine." Suspension Order at 6.

Neil Labs filed its complaint in this case on March 6, 2002 and on the following day filed a motion for a preliminary injunction. Subsequently, however, the parties agreed to consolidate the merits with the preliminary injunction issue. Order dated Mar. 22, 2002; Defs.' Mot. for Summ. J. at n. 1. Neil Labs now moves for summary judgment, asking the court to determine that in issuing the Suspension Order, the DEA violated the APA and the CSA. Pl.'s Opp'n at 10. The DEA filed a cross-motion for summary judgment, asking the court to rule that the Suspension Order is proper. Defs.' Mot. for Summ. J. at 1.

III. ANALYSIS

Preliminarily, the court must determine whether the Suspension Order meets the basic requirements set forth in the CSA. The CSA requires

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the Attorney General ... [to] serve upon the ... registrant an order to show cause why registration should not be denied, revoked or suspended.... The order to show cause shall contain a statement of the basis thereof and shall call upon the applicant or registrant to appear before the Attorney General at a time and place stated in the order....

21 U.S.C. § 824(c). The court holds that the suspension order meets these technical requirements. Next the court addresses the merits of the parties' arguments and determines that the DEA, in issuing the Suspension Order, violate neither the APA nor the CSA. Finally, as no material facts are in dispute, the court grants the defendants' cross-motion for summary judgment.

A. Legal Standard for Motions for Summary Judgment

Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED.R.CIV.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Diamond v. Atwood, 43 F.3d 1538, 1540 (D.C.Cir.1995). To determine which facts are "material," a court must look to the substantive law on which each claim rests. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A "genuine issue" is one whose resolution could establish an element of a claim or defense and, therefore, affect the outcome of the action. Celotex, 477 U.S. at 322, 106 S.Ct. 2548; Anderson, 477 U.S. at 248, 106 S.Ct. 2505.

In ruling on a motion for summary judgment, the court must draw all justifiable inferences in the nonmoving party's favor and accept the nonmoving party's evidence as true. Anderson, 477 U.S. at 255, 106 S.Ct. 2505. A nonmoving party, however, must establish more than "the mere existence of a scintilla of evidence" in support of its position. Id. at 252, 106 S.Ct. 2505. To prevail on a motion for summary judgment, the moving party must show that the nonmoving party "fail[ed] to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. 2548. By pointing to the absence of evidence proffered by the nonmoving party, a moving party may succeed on summary judgment. Id.

In addition, the nonmoving party may not rely solely on allegations or conclusory statements. Greene v. Dalton, 164 F.3d 671, 675 (D.C.Cir.1999); Harding v. Gray, 9 F.3d 150, 154 (D.C.Cir.1993). Rather, the nonmoving party must present specific facts that would enable a reasonable jury to find in its favor. Greene, 164 F.3d at 675. If the evidence "is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505 (internal citations omitted).

B. Legal Standard for Review of the DEA's Suspension Order Pursuant to the APA

The APA allows "a person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action ... [to be] entitled to judicial review thereof." 5 U.S.C. § 702.6

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The scope of judicial review under the APA is fairly limited. The agency action in review is "entitled to a presumption of regularity." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971), abrogated on...

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8 practice notes
  • Novelty Distributors, Inc. v. Leonhart, Civil Action No. 08-00635 (RMC).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • June 17, 2008
    ...a district court? The courts in Norman Bridge Drug Co. v. Banner, 529 F.2d 822 (5th Cir.1976) and Neil Laboratories, Inc. v. Ashcroft, 217 F.Supp.2d 80 (D.D.C.2002), rightly concluded that it is indeed the district court that has jurisdiction to hear a party's requests for relief, such as t......
  • Cardinal Health, Inc. v. Holder, Civil Action No. 12–185 (RBW).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • March 7, 2012
    ...and capricious standard in reviewing APA challenge to the DEA's issuance of immediate suspension order); Neil Labs., Inc. v. Ashcroft, 217 F.Supp.2d 80, 84–85 (D.D.C.2002) (Urbina, J.) (same); Keysource Medical, Inc. v. Holder, No. 11–cv–393, 2011 WL 3608097, at *6 (S.D.Ohio Aug. 16, 2011) ......
  • Holiday CVS, L.L.C. v. Holder, Civil Action No. 12–191 (RBW).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • March 16, 2012
    ...and capricious standard in reviewing APA challenge to the DEA's issuance of immediate suspension order); Neil Labs., Inc. v. Ashcroft, 217 F.Supp.2d 80, 84–85 (D.D.C.2002) (Urbina, J.) (same); Keysource Medical, Inc. v. Holder, No. 11–cv–393, 2011 WL 3608097, at *6 (S.D.Ohio Aug. 16, 2011) ......
  • Allied Home Mortg. Corp. v. Donovan, CIVIL ACTION H-11-3864
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • August 5, 2014
    ...in a civil fraud complaint being filed just seven days before the issuance of the suspensions. See Neil Laboratories, Inc. v. Ashcroft, 217 F. Supp. 2d 80, 87 (D.C. Cir. 2002) (noting "the DEA's six-month delay in issuing the suspension order to Neil Labs [was] justified by its ongoing crim......
  • Request a trial to view additional results
7 cases
  • Novelty Distributors, Inc. v. Leonhart, Civil Action No. 08-00635 (RMC).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • June 17, 2008
    ...a district court? The courts in Norman Bridge Drug Co. v. Banner, 529 F.2d 822 (5th Cir.1976) and Neil Laboratories, Inc. v. Ashcroft, 217 F.Supp.2d 80 (D.D.C.2002), rightly concluded that it is indeed the district court that has jurisdiction to hear a party's requests for relief, such as t......
  • Cardinal Health, Inc. v. Holder, Civil Action No. 12–185 (RBW).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • March 7, 2012
    ...and capricious standard in reviewing APA challenge to the DEA's issuance of immediate suspension order); Neil Labs., Inc. v. Ashcroft, 217 F.Supp.2d 80, 84–85 (D.D.C.2002) (Urbina, J.) (same); Keysource Medical, Inc. v. Holder, No. 11–cv–393, 2011 WL 3608097, at *6 (S.D.Ohio Aug. 16, 2011) ......
  • Holiday CVS, L.L.C. v. Holder, Civil Action No. 12–191 (RBW).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • March 16, 2012
    ...and capricious standard in reviewing APA challenge to the DEA's issuance of immediate suspension order); Neil Labs., Inc. v. Ashcroft, 217 F.Supp.2d 80, 84–85 (D.D.C.2002) (Urbina, J.) (same); Keysource Medical, Inc. v. Holder, No. 11–cv–393, 2011 WL 3608097, at *6 (S.D.Ohio Aug. 16, 2011) ......
  • Allied Home Mortg. Corp. v. Donovan, CIVIL ACTION H-11-3864
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • August 5, 2014
    ...in a civil fraud complaint being filed just seven days before the issuance of the suspensions. See Neil Laboratories, Inc. v. Ashcroft, 217 F. Supp. 2d 80, 87 (D.C. Cir. 2002) (noting "the DEA's six-month delay in issuing the suspension order to Neil Labs [was] justified by its ongoing crim......
  • Request a trial to view additional results
1 provisions
  • Applications, hearings, determinations, etc.: Indace, Inc.,
    • United States
    • Federal Register November 22, 2004
    • November 22, 2004
    ...had received 15 Warning Letters between them); CHM Suppliers, 67 FR 9985, (2002) (same). In Neil Laboratories, Inc. v. Ashcroft, 217 F. Supp.2d 80 (D.D.C. 2002), DEA had issued an immediate suspension of a List I manufacturer's registration under 21 U.S.C. 824(d). The registrant challenged ......

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