U.S. v. Articles of Drug

Decision Date04 August 1987
Docket NumberNo. 86-1438,86-1438
Citation825 F.2d 1238
PartiesUNITED STATES of America, Appellee, v. ARTICLES OF DRUG, et al., Midwest Pharmaceuticals, Inc., Appellant. UNITED STATES of America, Appellee, v. MIDWEST PHARMACEUTICALS, INC., a/k/a B & S Distributors, Robert S. Liebert, and Steven F. Sommers, Appellants.
CourtU.S. Court of Appeals — Eighth Circuit

John M. O'Connor, New York City, for appellant.

Paul J. Johns, Omaha, Neb., and Robert Spiller, Jr., Rockville, Md., for appellee.

Before McMILLIAN, Circuit Judge, BRIGHT, Senior Circuit Judge, and BOWMAN, Circuit Judge.

McMILLIAN, Circuit Judge.

Midwest Pharmaceuticals, Inc., Steven F. Sommers and Robert S. Leibert (collectively referred to as Midwest) appeal from a final judgment entered in the District Court for the District of Nebraska condemning as "misbranded" certain drug products seized from Midwest in April 1984. The district court held that the Midwest drugs were imitations of other drugs in violation of 21 U.S.C. Secs. 331(b), 352(i)(2) 1 and enjoined Midwest under 21 U.S.C. Sec. 332(a) 2 from selling or marketing any drug product similar in appearance and in effect to drugs seized in April 1984 by the Food and Drug Administration (FDA or the government). United States v. Articles of Drugs, 633 F.Supp. 316 (D.Neb.1986) (Articles II ).

For reversal, Midwest argues that (1) 21 U.S.C. Sec. 352(i)(2) is unconstitutional because the term "imitation" is vague, (2) the district court applied the wrong standard in determining Midwest's liability for the alleged "passing off" of its drugs, (3) the government failed to prove that a "substantial" amount of each of the seized drugs had been passed off, (4) the injunction is overly broad and lacks specificity, (5) the district court's pretrial orders and erroneous trial rulings, taken as a whole, deprived Midwest of due process, and (6) the district court erred in dismissing Midwest's counterclaim. For the reasons discussed below, we affirm in part, reverse in part and remand for further proceedings consistent with this opinion.

BACKGROUND

Midwest, an Iowa corporation, 3 does business as Midwest Pharmaceuticals, B & S Distributors and U.S.A. Drugs. Appellant Sommers was president of Midwest at the time of trial and had been president since January 1984. Appellant Liebert was the former president. Since January 1, 1984, Sommers and members of his household have been the sole stockholders and owners of Midwest. Sommers has no formal training in pharmacy or pharmacology.

Midwest is both a wholesale and retail distributor of generic, over-the-counter drug products containing caffeine, ephedrine (a bronchial dilator commonly used in the treatment of asthma), and phenylpropanolamine. Midwest also sells powdery and sticky substances, which Midwest markets as "incense."

Midwest buys 98 percent of its drug products from Gemini Pharmaceuticals in New York, and, in turn, usually sells its products in bulk containers of 1,000 dosage units (caplets or tablets). 4 The drugs are shipped by mail in response to mail or telephone orders and payment is usually C.O.D. According to the government, Midwest sold over 245 million dosage units during 1984. Midwest presented evidence that in 1984 it had 35,000 customers, and in 1986 it had over 60,000 customers. Midwest advertises its drug products in print media that the government characterizes as "subculture," "porno," "drug," and "biker" magazines, such as Stag, subtitled On April 5, 1984, the FDA seized approximately 15 tons of drug products from Midwest. Of the 40 different types of products seized, most were single ingredient drug products containing caffeine. The drugs, however, differed in dosage, size and color. The FDA also seized 15 pounds of white powder that Midwest marketed as "incense."

                Hard Core For '84;  Triple Porn Review;  Partner, subtitled King of the Skin Mags;  High Times; and Hustler.    Midwest in advertisements describes its drug products as "legal body stimulants" and "sleep aids."    The advertisements contain pictures or photographs of the drugs, but contain no information about the ingredients or indications or contraindications, and describe the drug products by names such as "357 Magnum," "20/20," "30/30," "White Mole," "Mini-White" and "Incense."    Some of these names are "street names" for various illegal drugs.  Midwest does not list its products in trade publications, nor is Midwest listed in the directory of wholesale drug dealers, which is used by many pharmacists in the United States
                

On the day of the seizure, the FDA filed a complaint alleging that Midwest drug products were "misbranded" because they were "imitations" of other drugs in violation of 21 U.S.C. Sec. 352(i)(2) and were thus subject to in rem seizure under 21 U.S.C. Sec. 334. The FDA also sought an order enjoining Midwest and its president, Sommers, under 21 U.S.C. Sec. 332(a), from selling or marketing the same or similar products in the future. Midwest filed a claim for the return of the seized drug products, an answer, and a counterclaim, alleging harassment, abuse of process and negligence on the part of the FDA. The two actions were consolidated on August 21, 1984, for pretrial discovery and trial.

The government moved to dismiss the counterclaim on the ground that the seizure was a discretionary function and thus the FDA was exempt from liability under the Federal Tort Claims Act (FTCA), 28 U.S.C. Sec. 2680(a). Midwest sought summary judgment in both actions, alleging that 21 U.S.C. Sec. 352(i)(2) (which had been in effect since 1938) was unconstitutionally vague. Midwest also argued that the term "imitation" in 28 U.S.C. Sec. 352(i)(2) means "counterfeit" and that the drugs seized were not counterfeit because of the difference in markings.

The case was referred to a magistrate for findings and recommendations. The magistrate recommended that Midwest's motion for summary judgment be denied because 21 U.S.C. Sec. 352(i)(2) is not unconstitutionally vague and the term "imitation" is not equivalent to "counterfeit" for purposes of this provision. The magistrate concluded that "imitation" referred to the practice of passing off one substance as another, while "counterfeit" refers to the practice of using another's identifying mark without the permission of the other person or entity.

The district court rejected Midwest's objections to the magistrate's report and held that manufacturers and distributors may be held contributorily liable for alleged violations of 21 U.S.C. Sec. 352(i)(2) if they intentionally induce another to commit violations of Sec. 352(i)(2) or if they knew or reasonably could have anticipated that a substantial portion of their products would be passed off as controlled substances in the chain of distribution. United States v. Articles of Drugs, 601 F.Supp. 392, 397-98 (D.Neb.1984) (Articles I ). The district court denied Midwest's motion for summary judgment and granted the FDA's motion to dismiss the counterclaim. Id.

The case was tried in February 1986. The government sought to show that Midwest intentionally induced its customers to pass off its drug products as controlled substances to others or knew or had reason to know that its customers were passing off the drug products as controlled substances to others. The government introduced evidence that Midwest's drug products were purchased in bulk, then repackaged without any information about the ingredients, and sold as "real drugs" to "youthful and unsophisticated" junior high and high school students at "real drug" prices. Midwest "dealers" thus realized a Ken Maschmeier, a former Midwest customer and government witness, testified that in 1980, Sommers and Liebert encouraged him to sell Midwest's drugs by passing them off as controlled substances. Maschmeier further testified that he purchased a white powdery substance from Midwest in 1984 for $100 per ounce and resold it as cocaine for $80 per gram. Daniel Bengtson, another Midwest customer, testified that he also sold the white powder, that he had purchased from Midwest, as cocaine. Bengtson stated that he told Sommers and Liebert that he had misrepresented and sold Midwest drug products as controlled substances.

tremendous profit, approximately 20 times the actual cost of the drugs.

The government also presented evidence that Midwest markets only drug products that are similar in appearance and effect to controlled substances and that the many different shapes, sizes and colors of Midwest drugs are non-functional. The president of Gemini Pharmaceuticals, Midwest's supplier, testified that Midwest supplied black capsules, often used for controlled substances, to Gemini when Gemini was unable to secure an adequate supply to fill Midwest's order for drugs in black capsules.

Midwest made two primary arguments at trial: (1) Midwest was not responsible for any "passing off" by persons further down the distribution chain, and (2) its drug products were not illegal and Midwest had a legitimate market for its drug products. Midwest introduced evidence that its products were sold in retail stores and were purchased by individuals such as truck drivers and students, who wish to stay awake.

The district court held that the Midwest drugs, which had been seized in April 1984, were imitations of other drugs and enjoined Midwest from selling or marketing any drug similar in appearance and in effect to those seized. Articles II, 633 F.Supp. at 329. This appeal followed.

DEFINITION OF "IMITATION" (21 U.S.C. Sec. 352(i)(2))

Initially, Midwest argues that the failure to define the term "imitation" in the statute, legislative history, regulation, or prior case law renders 21 U.S.C. Sec. 352(i)(2) unconstitutionally vague. According to Midwest, the term "imitation" fails to give fair notice as to the behavior which is prohibited and fails to provide any explicit standards for officials...

To continue reading

Request your trial
25 cases
  • Butler v. Dowd
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • November 11, 1992
    ...relief, however, must be carefully tailored to remedy the alleged specific harm to the parties involved. See United States v. Articles of Drug, 825 F.2d 1238, 1247-48 (8th Cir.1987); see also Orantes-Hernandez v. Thornburgh, 919 F.2d 549 (9th Cir.1990); Brown v. Trustees of Boston Univ., 89......
  • U.S. v. Coleman
    • United States
    • United States District Courts. 6th Circuit. United States District Courts. 6th Circuit. Southern District of Ohio
    • May 24, 2005
    ...need not prove knowledge or awareness that the drugs are misbranded or an intent to deceive or defraud." United States v. Articles of Drug, 825 F.2d 1238, 1246 (8th Cir.1987); see also Rheinecker v. Forest Laboratories, Inc., 813 F.Supp. 1307, 1311 (S.D.Ohio 1993) (explaining violations of ......
  • U.S. v. Rx Depot, Inc.
    • United States
    • United States District Courts. 10th Circuit. Northern District of Oklahoma
    • November 6, 2003
    ...have no vested interest in an illegal business activity. Diapulse, 457 F.2d at 29 (citations omitted); see also U.S. v. Articles of Drug, 825 F.2d 1238, 1248 (8th Cir.1987) (a defendant may not successfully defend against the issuance of an injunction by assertions that the injunction would......
  • US v. Real Property in Mecklenburg County, NC
    • United States
    • United States District Courts. 4th Circuit. Western District of North Carolina
    • January 21, 1993
    ...and thereby barred by 28 U.S.C. § 2680(a). United States v. Articles of Drug, 601 F.Supp. 392, 398 (D.Neb.1984), aff'd, 825 F.2d 1238, 1248-49 (8th Cir.1987). Marsh's continued assertions of these counterclaims has been frivolous, especially after the United States filed a memorandum showin......
  • Request a trial to view additional results
1 books & journal articles

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT