U.S. v. Articles of Drug Consisting of 203 Paper Bags

• Decision Date: 04 May 1987
• Docket Number: No. 86-1726,86-1726
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. ARTICLES OF DRUG CONSISTING OF 203 PAPER BAGS, etc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 569

818 F.2d 569

UNITED STATES of America, Plaintiff-Appellant, v. ARTICLES OF DRUG CONSISTING OF 203 PAPER BAGS, etc.,

Defendants-Appellees.

No. 86-1726.

United States Court of Appeals, Seventh Circuit.

Argued Nov. 5, 1986.

Decided May 4, 1987.

Richard E. Geyer, Food and Drug Admin., Rockville, Md., for plaintiff-appellant.

Alan I. Becker, Burditt, Bowles & Radzius, Ltd., Chicago, Ill., for defendants-appellees.

Before POSNER, COFFEY, and EASTERBROOK, Circuit Judges.

POSNER, Circuit Judge.

The United States appeals from an order by the district court (reported at 634 F.Supp. 435 (N.D.Ill.1986)) allowing Amexchem--which had imported certain new animal drugs into the United States in alleged violation of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. Secs. 301 et seq.--to re-export the drugs. The Food and Drug Administration had seized them pursuant to 21 U.S.C. Sec. 334, and wanted to destroy them. Because the order allowing the drugs to be re-exported wasn't stayed, Amexchem went ahead and re-exported them before the appeal was heard. In its brief the United States urged us to dismiss the appeal (its appeal) from the order allowing re-exportation as moot--since, right or wrong, the drugs had been re-exported--and to vacate the district court's decision and order, which we must do when a district court decision becomes moot pending appeal, see Great Western Sugar Co. v. Nelson, 442 U.S. 92, 99 S.Ct. 2149, 60 L.Ed.2d 735 (1979) (per curiam); United States v. Munsingwear, Inc., 340 U.S. 36, 71 S.Ct. 104, 95 L.Ed. 36 (1950); Gjertsen v. Board of Election Comm'rs, 751 F.2d 199, 202 (7th Cir.1984). At argument, however, the government changed its mind and urged us to reach the merits and reverse. We think it was right the first time.

The case involves 12 lots of new animal drugs in bulk form which Amexchem imported into the United States in 1983 and 1984 and which the FDA seized in 1984 from the warehouses in which Amexchem had stored them pending sale to American companies. The ground of the seizure was that the drugs were misbranded, adulterated, or both. These are words of art under the statute. Ten of the lots were "misbranded" because the directions for use on their labels were inadequate and three of these also because the labels were in a foreign language. See 21 U.S.C. Sec. 352. All twelve of the lots were "adulterated" (in the FDA's view) because Amexchem did not have a firm order from firms licensed to use the drugs. See 21 U.S.C. Secs. 351(a)(5), 360b. There is no dispute about the misbranding, so let us focus on the two lots that were adulterated but not misbranded. Both were lots of oxytetracycline. At least two companies in the United States have licenses to use oxytetracycline to make finished drugs that are mixed with animal feed, and these were the companies that Amexchem hoped to sell the oxytetracycline to. But the FDA takes the position that the statutory provisions that deem an animal drug adulterated "unless ... there is in effect an approval of an application ... with respect to ... such drug," 21 U.S.C. Secs. 351(a)(5), 360b(a)(1)(A), require that Amexchem, which did not itself have a license to use the drug, have firm orders from the licensees to whom it intended to sell it. Amexchem did not have any firm orders for the oxytetracycline; all it had was its hopes that licensees would buy the drug from it. The FDA's concern is that if an importer such as Amexchem stores drugs in a warehouse for a substantial period of time while looking for an authorized purchaser, the FDA may lose track of them and they may be put to some unauthorized use that might endanger the safety of the animals fed the drugs and of the people who eat the meat of those animals.

When imported items are condemned under the food and drug act, the district court "may permit the article to be delivered to the owner for exportation in lieu of destruction," provided that the importer "had no cause for believing that it was adulterated, misbranded, or in violation before it was released from customs custody." 21 U.S.C. Sec. 334(d)(1). The district court found that Amexchem had had no actual notice that the misbranded lots did not comply with the various misbranding regulations; for example, some of the misbranding resulted from manufacturers' shipping drugs to Amexchem contrary to Amexchem's orders. As for adulteration, the court found that Amexchem had neither actual nor constructive notice of the FDA's "firm order" policy. The policy is not contained in any published regulation, and in the court's view is not so straightforward an interpretation of the statute that it can lawfully be imposed on an importer without notice-and-comment rulemaking. Hence the court exercised its discretion to permit Amexchem to re-export the 12 lots (worth in the aggregate about a half million dollars) rather than suffer their destruction.

For purposes of this appeal the government does not contest the court's findings with regard either to misbranding or to Amexchem's lack of actual notice of the FDA's "firm order" policy. But it strongly disagrees that it must undergo the delay and expense of notice-and-comment rulemaking, or for that matter any other form of rulemaking, in order to effectuate the "firm order" policy. The FDA analogizes its position to that of the Labor Board when adopting a new interpretation of the National Labor Relations Act in an unfair labor practice proceeding, or that of the Federal Trade Commission when discovering a new form of unfair competition in an adjudicative proceeding under the Federal Trade Commission Act. Cf. Mosey Mfg. Co. v. NLRB, 701 F.2d 610, 612 (7th Cir.1983) (en banc). It has withdrawn its suggestion of mootness because of the enormous impact that the district court's decision could, if followed by other courts, have on the control of imports of new animal drugs, and because of the uncertainty into which the decision has plunged importers of those drugs.

This is, or at least began as, an in rem case, which is to say a case nominally against a thing rather than a person. The res, which consists of the drugs that the government seized but that Amexchem was later permitted to re-export, is no longer within the jurisdiction of the court. No res, no case. United States v. 3 Unlabeled 25-Pound Bags Dried Mushrooms, 157 F.2d 722 (7th Cir.1946). The government, however, claims to have personal jurisdiction over Amexchem, and Amexchem does not contest the claim. The action is therefore in personam as well as in rem. United States v. An Article of Drug Consisting of 4,680 Pails, 725 F.2d 976, 982-84 (5th Cir.1984). So the disappearance of the res does not resolve the issue of mootness.

That issue is complicated by a fundamental ambiguity in the district court's opinion. The only issue before the court was whether to permit Amexchem to re-export the 12 lots--for having failed, in fact, to find customers for them, Amexchem did not want to continue holding them in its U.S. warehouses. The court's opinion could be read to mean that: the "firm order" policy is not sufficiently obvious for an importer to be charged with notice of it; therefore Amexchem had no cause to believe that merely because it had no firm orders for the drugs it couldn't lawfully import them; therefore it can be permitted, under 21 U.S.C. Sec. 334(d)(1), to re-export them. If this is all the court meant, the case is clearly moot. Whether or not Amexchem had actual notice of the "firm order" policy back in 1983 when it imported these drugs, it has such notice now. So it could not now import additional drugs for which it had no firm orders, and hope to stave off their destruction; therefore, overturning the district court's decision would not affect Amexchem's behavior. Granted, the FDA might gain something from a reversal of the decision--might gain a useful precedent to brandish in disputes with other importers. But that kind of advantage cannot prevent a case from becoming moot. No federal court may issue an opinion that, while it might provide guidance for the resolution of disputes not before the court, would not resolve an existing, living dispute before the court, either because there is no such dispute or because the dispute has been resolved by other means. If, by re-exporting the drugs in circumstances where it cannot possibly re-import them (or import other drugs) without inviting their destruction, Amexchem has ended its dispute with the FDA, any decision we rendered would be just such an "advisory" opinion, useful only in resolving disputes that have not yet become the subject of a lawsuit.

We add, irrelevant though it may strictly be, that the FDA has little to fear from the precedential effect of a district court decision vacated because the dispute has become moot. It is true that vacating a decision because of supervening mootness does not destroy its precedential effect. The purpose of setting aside a decision on that ground is only to prevent the decision from having res judicata or collateral estoppel effect in future cases. See, e.g., United States v. Munsingwear, supra; Commodity Futures Trading Comm'n v. Board of Trade of City of Chicago, 701 F.2d 653, 656-57 (7th Cir.1983). The district court's decision, when made, was within the court's power to make, because the case wasn't moot then. Its later becoming moot prevents appellate review and by doing so deprives the decision of the additional precedential force that it would have had if it had been affirmed by a higher court, but it does not eliminate whatever precedential force an unreviewed and unreviewable lower-court decision has. A single district court decision, however (especially one that cannot be appealed), has little precedential effect. It is not binding on the circuit, or even on other district judges in the same district. Colby v. J.C. Penney Co., 811 F.2d 1119, 1124 (7th Cir.1987).

This case may seem to fit the exception to the...