U.S. v. Caputo

• Decision Date: 21 October 2003
• Docket Number: No. 03 CR 0126.,03 CR 0126.
• Parties: UNITED STATES of America v. Ross A. CAPUTO, Robert M. Riley, Mark E. Schmitt, and Marilyn M. Lynch
• Court: U.S. District Court — Northern District of Illinois

288 F.Supp.2d 912

UNITED STATES of America v. Ross A. CAPUTO, Robert M. Riley, Mark E. Schmitt, and Marilyn M. Lynch

No. 03 CR 0126.

United States District Court, N.D. Illinois, Eastern Division.

October 21, 2003.

COPYRIGHT MATERIAL OMITTED

James M Cole, Bryan, Cave, McPheeters & McRoberts, Washington, DC, for Ross A. Caputo.

Jenny Louise Johnson, Jonathan S. Feld, BeLinda Irene Mathie, Katten Muchin Zavis Rosenman, Chicago, IL, for Robert M. Riley.

Theodore Thomas Poulos, Tyson K Harper, Cotsirilos, Stephenson, Tighe & Streicker, Chicago, IL, for Marilyn M Lynch.

Gillum Ferguson, United States Attorney's Office, Chicago, for U.S. Attorneys.

MEMORANDUM OPINION AND ORDER

CASTILLO, District Judge.

Presently before this Court is Defendants' motion to dismiss the indictment. (R. 24-1, Defs.' Mot. to Dismiss.) Defendants' motion to dismiss raises four arguments: (1) the Food and Drug Administration's ("FDA") regulatory scheme violates the Due Process Clause because it is too ambiguous to afford proper notice of prohibited conduct; (2) the conspiracy count is duplicitous; (3) FDA prohibitions on manufacturer promotion of off-label uses violates the First Amendment; and (4) the false-statement count is based on fundamentally ambiguous questions. For the reasons provided below, we deny Defendants' motion to dismiss in its entirety.

RELEVANT FACTS

On February 4, 2003, the Government brought a nineteen-count indictment against Ross A. Caputo, Robert M. Riley, Mark E. Schmitt, and Marilyn M. Lynch. (R. 1, Indictment.) The nineteen counts were: conspiracy (count one); fraud (count two); mail fraud (counts three through five); wire fraud (counts six through nine); false statement (counts ten through twelve); and the introduction of an adulterated or misbranded device into interstate commerce (counts thirteen through nineteen).

Under the Federal Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. §§ 301-97 (2003), and the corresponding FDA regulations, medical devices are sorted into three regulatory classifications: class one devices are subject to limited regulation, class two devices are subject to moderate regulation, and class three devices are highly regulated. The FDA must approve or clear a class three device before the manufacturer can market it. To obtain FDA approval, a manufacturer must submit a premarket approval application to the FDA. The FDA will approve a device if the premarket approval application provides the FDA with reasonable assurance that the device is safe and effective when used according to its labeling. To obtain FDA clearance, a manufacturer must submit to the FDA a premarket notification ninety days before introducing the device into interstate commerce. The FDA will clear a device if the premarket notification demonstrates that the device is substantially equivalent to a legally marketed device. A device is considered adulterated and misbranded if it is neither approved nor cleared by the FDA. Additionally, in order to modify an approved or cleared device, the manufacturer must submit a premarket notification to the FDA if the modification could significantly affect the safety or the effectiveness of the device. (Id. at 2-4.)

According to the indictment, Defendants are directors of AbTox, Inc.: Caputo was the President and Chief Executive Officer, Riley was Vice-President of Regulatory Affairs, Schmitt was Director of Marketing and Vice-President of Sales, and Lynch was Director of Clinical Services. AbTox was located in Mundelein, Illinois, and manufactured the Plazlyte sterilizer system. The Plazlyte system sterilized medical devices at low temperature in a gas plasma. The FDA cleared the Plazlyte sterilizer after finding that it was substantially equivalent to ethylene oxide sterilizers. The FDA cleared the sterilizer for use with stainless steel surgical instruments that did not have hinges or lumens. The Government alleges that AbTox never marketed, sold, nor intended to market or sell the FDA-approved sterilizer. Instead, AbTox marketed and sold a modified sterilizer without submitting a premarket notification. The Government alleges that the modified sterilizer was adulterated, as the FDA did not approve a premarket approval application, and misbranded, as AbTox did not submit a premarket notification. (Id. at 4-6.)

Defendants, according to the indictment, agreed, combined, and conspired to defraud the United States by impeding the lawful function of the FDA to protect the health and safety of the public and by selling an adulterated and misbranded device to the Department of Veteran Affairs, the Department of Defense, the Bureau of Indian Affairs, and other U.S. government agencies. The conspiracy included the following overt acts committed in the Northern District of Illinois: flying out of O'Hare Airport in Chicago; approving the sale of five modified sterilizers; traveling to a Veteran Affairs hospital in St. Louis, Missouri; and meeting with an FDA investigator. (Id. at 7-16.)

Additionally, Defendants, according to the indictment, devised a scheme to defraud by selling the modified sterilizer and representing that it had been cleared by the FDA, (id. at 17-18); committed mail fraud by mailing a U.S. Treasury check, a price increase announcement, and an acceptance letter, (id. at 19-21); committed wire fraud by faxing a price quotation, a purchase order, and a service agreement, (id. at 22-24); and introduced an adulterated and misbranded medical device, the modified sterilizer, into interstate commerce, (id. at 28-34). Finally, the indictment alleges that Defendant Riley made false statements to an FDA investigator. (Id. at 25.)

On May 7, 2003, Defendants Caputo and Riley ("Defendants") filed the present motion to dismiss the indictment. (R. 24, Mot. to Dismiss.) Defendants raised four arguments in their motion: (1) counts one through nine and thirteen through nineteen violate the Due Process Clause because the FDA's regulatory scheme failed to give them fair notice of prohibited conduct; (2) the conspiracy count is duplicitous; (3) wire fraud counts eight and nine fail to allege use of the wires; and (4) false-statement count ten is based on fundamentally ambiguous questions. (R. 25, Defs.' Mem.) On July 29, 2003, the Government responded to Defendants' motion to dismiss and conceded that counts seven through nine should be dismissed. (R. 32, Gov.'s Resp. at 33.) Two weeks later, on August 12, 2003, the Government filed a superceding indictment with the following eighteen counts: conspiracy (count one); fraud (count two); mail fraud (counts three through five); wire fraud (counts six through eight); false statement (counts nine through eleven); and the introduction of an adulterated or misbranded device into interstate commerce (counts twelve through eighteen). (R. 35, Superceding Indictment.) The superceding indictment included updated wire fraud counts which properly allege use of the wires.

LEGAL STANDARDS

The Federal Rules of Criminal Procedure permit a defendant to "raise by pretrial motion any defenses, objection, or request that the court can determine without a trial of the general issues." Fed. R.Crim.P. 12(b)(2). When considering a motion to dismiss an indictment, a court assumes all facts in the indictment are true and must "view all facts in the light most favorable to the government." United States v. Yashar, 166 F.3d 873, 880 (7th Cir.1999); see also United States v. Pitt-Des Moines, Inc. 970 F.Supp. 1346, 1349 (N.D.Ill.1997) (comparing a motion to dismiss an indictment to a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss); United States v. Andrews, 749 F.Supp. 1520, 1521 (N.D.Ill.1990). A court can decide all questions of law raised in a motion to dismiss and can make necessary preliminary findings of fact as long as the court does not invade the province of the jury. The jury is the fact-finder, so any arguments raised in a motion to dismiss that rely on disputed facts should be denied. United States v. Shriver, 989 F.2d 898, 906 (7th Cir.1992).

ANALYSIS

I. Vagueness

Defendants assert that counts one through six and thirteen through nineteen should be dismissed because the FDA regulatory scheme violates the Due Process Clause in that it is too ambiguous to afford proper notice of prohibited conduct. (R. 25, Defs.' Mem. at 15.) In particular they assert that 21 C.F.R. § 807.81 is unconstitutionally vague. (Id. at 16.) This regulation provides that the manufacturer of a medical device "must submit a premarket notification submission to the Food and Drug Administration" if the medical device is "about to be significantly changed or modified" and defines a significant change or modification as "[a] change or modification in the device that could significantly affect the safety or effectiveness of the device." 21 C.F.R. § 807.81 (2003).

The Seventh Circuit has clearly explained how to determine if a statute or regulation, which does not implicate First Amendment interests, is unconstitutionally vague:

[w]hen ... a statute or regulation does not implicate the First Amendment rights of a defendant, its vagueness is determined on an "as applied" basis.... Therefore, based on the specific facts of this case, if a reasonable person in [the defendant's] position would have been on notice that its conduct was at risk, and enforceable guidelines exist, the due process concerns are overcome.

Pitt-Des Moines, 168 F.3d at 986-87 (internal citations omitted). Because 21 C.F.R. § 807.81 does not implicate First Amendment interests, it can only be reviewed on an "as-applied" basis. "As-applied" review requires a court to review the specific facts in the case to determine if a reasonable person in Defendants' position would have been on notice that their conduct was at risk.¹ These types of factual determinations are not appropriately determined by a court in a pretrial motion. Accordingly, Defendants' motion to dismiss on these grounds is denied as...