Rite Aid Corp. v. Bd. of Pharmacy of State of NJ

Decision Date14 September 1976
Docket NumberCiv. A. No. 74-1628.
Citation421 F. Supp. 1161
CourtU.S. District Court — District of New Jersey
PartiesRITE AID CORPORATION, a corporation of the State of Delaware, et al., Plaintiffs, v. The BOARD OF PHARMACY OF the STATE OF NEW JERSEY et al., Defendants.

Robinson, Wayne & Greenberg by Donald A. Robinson, Ronald J. Riccio, Newark, N. J., for plaintiffs.

William F. Hyland, Atty. Gen. of New Jersey by Bertram P. Goltz, Jr., J. Paul Dizzia, Deputy Attys. Gen., Trenton, N. J., for defendants.

Before GARTH, Circuit Judge, and LACEY and STERN, District Judges.

OPINION

GARTH, Circuit Judge.

Plaintiffs, Rite Aid Corporation, Rite Aid Pharmacy of Bergenfield, Inc., and Milton H. Silver seek to declare unconstitutional and to enjoin the enforcement of certain New Jersey statutes which regulate the practice of pharmacy. The statutes challenged are N.J.S.A. 45:14-1, 3, 12, and 35 of the New Jersey Pharmacy Act and N.J.S.A. 52:14B-10(c) of the New Jersey Administrative Procedure Act. After a plenary trial on the merits before a three-judge district court convened pursuant to 28 U.S.C. § 2281 et seq., we have concluded that it would be inappropriate to abstain from exercising federal jurisdiction and that the plaintiffs have failed to carry their burden of establishing the unconstitutionality of the challenged statutes.

I.

The retail pharmacy industry in New Jersey distributes pharmaceuticals through both independently owned pharmacies and corporations owning several pharmacies (chain stores).1 Of the approximate 1,560 retail pharmacies in New Jersey, 168 or 10.8% are owned and operated as chain stores. Rite Aid2 is the largest pharmacy chain store system in New Jersey. Since 1966, when Rite Aid opened its first store in New Jersey, it has grown in number to 51 stores located throughout the state. In addition to prescription items, Rite Aid sells health and beauty aids at discounts of 15 to 35%. Rite Aid's prescription prices are 15 to 20% lower than the average price charged by an independently owned pharmacy.

The practice of pharmacy in New Jersey is regulated by the Board of Pharmacy of the State of New Jersey (Board) which is composed of five registered pharmacists "actively engaged in conducting a pharmacy" (N.J.S.A. 45:14-1), one lay "public member" representing the interests of the public (N.J.S.A. 45:1-2.2(b)) and one lay state executive official (N.J.S.A. 45:1-2.2(c)). In appointing the five pharmacist board members, the Governor gives consideration to the recommendations submitted by the New Jersey Pharmaceutical Association. See N.J.S.A. 45:1-2.2(a); Campbell dep. at 96-98. At the time this action was brought, all the pharmacist Board members owned independent retail pharmacies.3

On April 6, 1973 Paul Pumpian, the Secretary to the Board, received two letters complaining that Rite Aid's store in Bergenfield, New Jersey (Rite Aid of Bergenfield, Inc.) was improperly filling prescriptions. Pumpian, at the request of the Board, referred the letters to the Enforcement Bureau of the Division of Consumer Affairs. The Enforcement Bureau is that organization of New Jersey state government charged with conducting investigations and inspections for the nineteen professional or occupational licensing boards within the Division of Consumer Affairs. From April to July, 1973, the Enforcement Bureau conducted an investigation of the Bergenfield pharmacy.4

On August 27, 1973 the Enforcement Bureau forwarded the written report of its investigation to the Board. On the basis of that report the Board members concluded that there was sufficient cause to believe that Rite Aid of Bergenfield had filled and refilled prescriptions without authorization, and that it had sold and distributed an adulterated pharmaceutical. The Board forwarded the report to the Attorney General's office for the institution of disciplinary proceedings. Thereafter, a complaint was served charging Rite Aid of Bergenfield and Milton Silver and David Carter, pharmacists at Bergenfield, with unlawfully dispensing and selling prescription drugs in violation of N.J.S.A. 45:14-26.1 (filling or refilling prescriptions without authorization); N.J.S.A. 45:14-15 (recording of prescriptions); and N.J.S.A. 45:14-16 (failure to strictly follow prescription).

The Board determined that a hearing officer should be appointed under a procedure whereby his findings would be reviewed and the scope of disciplinary action, if any, would be established by the Board. The Attorney General of New Jersey provided the Board at its request, with a list of available hearing officers. The list was composed of retired judges of the New Jersey Superior Court. From this list the Board chose Judge Nelson K. Mintz.

On July 29 and 30, 1974, Judge Mintz as hearing officer held hearings regarding the alleged Rite Aid violations. Thereafter, on September 24, 1974, his report issued, finding that Rite Aid of Bergenfield had filled and refilled prescriptions without authorization, dispensed a prescription in adulterated form, failed to affix a proper label on a prescription, and failed to properly record the name of the dispensing pharmacist. As to Milton Silver, Judge Mintz concluded that he dispensed a prescription drug without authorization and without affixing a label to the container. Carter was not found to have violated any provision of the pharmacy laws. Judge Mintz recommended that Rite Aid of Bergenfield's pharmacy permit be suspended for thirty days and that Silver's license be suspended for seven days. No monetary fine was recommended.

Rite Aid5 filed exceptions with the Board. However, on December 6, 1974 the Board issued its Decision and Order which adopted the entire report of its hearing officers, but increased the suspension of Rite Aid of Bergenfield's pharmacy permit to ninety days.6 The Board also modified the hearing officer's recommendation as to Silver. Silver's license was not suspended, but in lieu thereof, the Board assessed a civil penalty of $325.00 which was suspended.

Thereafter, Rite Aid applied to a single judge of the district court for a preliminary injunction staying the operation of the Board's order pending a decision on these proceedings. The Board consented to a stay of its order pending the outcome of this litigation.

On January 17, 1975 Rite Aid filed its Second Amended Complaint and Request for Convocation of Three Judge Court.7 The Complaint named the Board, its secretary, the five pharmacist Board members and the Governor and Attorney General of New Jersey as defendants.

The First and Second Counts of the Complaint allege that N.J.S.A. 45:14-18 requires the majority of the Board's membership to be composed solely of competing independent pharmacists and therefore is unconstitutional on its face and as applied to Rite Aid because such Board members have a personal interest and bias in regulating and adjudicating cases involving Rite Aid. The First Count also alleges that the present Board has manifested its bias against Rite Aid by obstructing new Rite Aid license applications, discriminatorily enforcing the pharmacy laws against Rite Aid and attempting to assess discriminatory penalties.

The Third Count alleges that the Board's investigation, prosecution and adjudication of complaints pursuant to N.J.S.A. 45:14-3, 12 and 35 is unconstitutional.9

The Fourth Count alleges that the designation of a hearing officer pursuant to N.J. S.A. 52:14B-10(c)10 was unauthorized and unconstitutional as the statute fails to delineate standards for the selection of a hearing officer.

The Fifth Count alleges that the Board has enforced the pharmacy statutes against Rite Aid in an unequal, arbitrary and discriminatory manner.

The Complaint seeks the convening of a three judge district court pursuant to 28 U.S.C. § 2281, a declaratory judgment holding N.J.S.A. 45:14-1, 3, 12, 35 and N.J.S.A. 52:14B-10(c) unconstitutional on their face and as applied, injunctive relief restraining the enforcement of these statutes and an order declaring the Board's Decision and Order as to Rite Aid null and void and enjoining its enforcement.11

On January 30, 1975 an order constituting a three judge district court was filed. After discovery each party moved for summary judgment on all counts of the complaint. We denied both motions on January 6, 1976. A full plenary trial followed.

II.

The defendants have argued that the doctrine of equitable restraint requires us to abstain, leaving the plaintiffs to their state remedies. In support of this contention, we are referred to Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971) and in particular Huffman v. Pursue, 420 U.S. 592, 95 S.Ct. 1200, 43 L.Ed.2d 482 reh. denied, 421 U.S. 971, 95 S.Ct. 1969, 44 L.Ed.2d 463 (1975).

Younger involved the enjoining of a state criminal proceeding with which we are not concerned here. Huffman extended the Younger doctrine to a "state proceeding which in important respects is more akin to a criminal prosecution than are most civil cases." 420 U.S. at 604, 95 S.Ct. at 1208. In Huffman, a sheriff and a prosecuting attorney in Ohio sought to close a theatre specializing in the display of allegedly pornographic films which had been adjudged obscene after adversary hearings. The proceeding was brought under a state statute which provided that the exhibition of obscene films constituted a nuisance. The state court determined that the theatre had exhibited obscene films and ordered it closed for a year. Rather than appealing that state court order, an action in federal district court was filed based on 42 U.S.C. § 1983. The plaintiff there sought injunctive relief and a declaration that the Ohio statute was unconstitutional. The district court reached the merits of the controversy and enjoined the theatre's closing. The United States Supreme Court vacated the district court order and remanded for its consideration of Younger abstention.

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