U.S. v. Century Clinic, Inc., No. CV-N-93-194-ECR(RAM).

CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Nevada
Writing for the CourtEdward C. Reed, Jr.
Citation75 F.Supp.2d 1127
Docket NumberNo. CV-N-93-194-ECR(RAM).
Decision Date23 March 1998
PartiesUNITED STATES of America, v. CENTURY CLINIC, INC., et al.
75 F.Supp.2d 1127
No. CV-N-93-194-ECR(RAM).
United States District Court, D. Nevada.
March 23, 1998.

Page 1128

Stuart Gerson, Eugene M. Thirolf, Drake Cutini, Asst. Attorney General, Office of Consumer Litigation, U.S. Dept. of Justice, Washington, DC, Paige Harrison, Office of General Counsel, U.S. Food & Drug Admin., Rockville, MD, for plaintiff.

Thomas C. Bradley, Reno, NV, Bradford Reynolds, Washington, DC, William H.

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Webster, Washington, DC, for defendants Century Clinic & Katrina Tang.


EDWARD C. REED, Jr., District Judge.


IT IS HEREBY ORDERED that Defendants' Objection (# 33), filed on March 6, 1998, to the Magistrate Judge's Report and Recommendation (# 31), entered on February 4, 1998, is OVERRULED and said Report and Recommendation is AFFIRMED and ADOPTED.

IT IS FURTHER ORDERED that Defendants' petition (# 4) for review of final agency action is DENIED.

IT IS FURTHER ORDERED that Defendants' request (# 24) for oral argument is DENIED.

IT IS FURTHER ORDERED that the Clerk shall enter judgment in favor of Plaintiff United States of America and against all Defendants in the sum of $400,000.

Defendants Century Clinic and Dr. Katrina Tang entered into a consent decree with the Food and Drug Administration ("FDA") in 1993, in which they agreed not to use the "LISTEN System" acupuncture screening device except for investigational purposes — i.e., for testing the device's efficacy — pursuant to an "investigational device exemption" ("IDE"). Admin. Record, Vol. VII, Ex. J, p. 2. The LISTEN System is apparently simply a ohmmeter: it measures electrical resistance, relative to some reference value, at various points on the human body, in aid of an acupuncturist's or homeopathic physician's diagnosis. It is undisputed that Defendants received approval to so use a LISTEN device pursuant to another firm's IDE. In 1994, however, the FDA sent an undercover investigator to the Century Clinic to determine whether Defendants were in compliance with the consent decree.

The Magistrate Judge carefully considered all arguments raised by Defendants, and correctly concluded that the investigator's report shows a use of the LISTEN System in a manner not permitted by the IDE protocol, and therefore not permitted by the consent decree. For example, Dr. Tang used the LISTEN device to diagnose an exposure to certain metals: "this indicator even told me you been exposed to a little copper and aluminum." Admin. Record, Vol. VIII, Ex. DD, p. 24. A few minutes later an employee of the Century Clinic (later identified as one Rosario Quintana) conferred with the investigator about the need for numerous expensive follow-up tests for, among other things, determining the level of aluminum in the investigator's body. Id. at p. 28.

This is merely one example of Defendants' use of the LISTEN device in a manner not permitted by the consent decree, specifically, diagnostically rather than investigationally. Defendants nonetheless raise a number of arguments, none of which help them. They argue that the LISTEN System was not actually "used," since it was eventually determined that the system did not work at all; this is immaterial, however, since Dr. Tang purported to use it, and it would make little sense to disallow actual use while allowing fraudulent or improper use of a proscribed medical device. Defendants further assert that the investigator's report is unreliable, unauthenticated hearsay; the Federal Rules of Evidence generally do not apply to administrative proceedings, however, as the United States correctly notes. Opp'n Br. at 39-40(# 20), and cases cited therein. Defendants present other arguments, but they are irrelevant to the question presented.

In short, the Magistrate Judge correctly concluded that the FDA Hearing Officer's finding of contempt was not arbitrary, capricious, contrary to law, or unsupported by substantial evidence. Defendants do not dispute the rather hefty size of the $400,000 civil contempt fine. Finally, oral argument would clearly not be helpful.

Page 1130


McQUAID, United States Magistrate Judge.

This Report and Recommendation is made to the Honorable Edward C. Reed, Jr., United States District Judge. This action was referred to the undersigned Magistrate Judge pursuant to 28 U.S.C. § 636(b)(1)(B) and the Local Rules of Practice, LR IB 1-4.

This matter is before the court on Petitioners' appeal, made pursuant to 42 U.S.C. § 405(g), for judicial review of the final administrative decision of the United States Food and Drug Administration ("FDA"). The decision found Petitioners in contempt of a March 23, 1993, Consent Decree entered by this court, and assessed monetary penalties in the amount of four hundred thousand dollars ($400,000.00) (Doc. # 13). Respondent has submitted an opposition to Petitioners' appeal (Doc. # 20), and Petitioners have replied (Doc. # 23).


On March 23, 1993, Petitioners entered into a Consent Decree of Permanent Injunction ("Consent Decree") with the FDA, whereby the parties stipulated to certain matters relating to the use of various medical screening devices and agreed to monetary disciplinary sanctions for any violations of said decree. The Consent Decree provides that if the FDA discovers Petitioners have violated its terms, Petitioners will be required to forfeit two hundred thousand dollars ($200,000.00), per violation to the FDA, after written notice of said violations and an opportunity by Petitioners to challenge that finding. The decree further establishes procedures for the resolution of any dispute regarding compliance with the decree. This procedure is triggered by the FDA finding Century Clinic has violated the decree. Once a violation is charged, Century Clinic may challenge that finding by submitting written materials and making an oral presentation before an FDA Hearing Officer ("ALJ"). If the decision of the FDA is affirmed by the ALJ, that determination may be further challenged in the District Court, through complete review of the administrative record under the arbitrary and capricious standard.

1. Consent Decree

The Consent Decree was entered into on March 23, 1993. Parties to the decree are Century Clinic, Katrina Tang, M.D., H.M.D., ("Dr.Tang") and Tiwen Tang, M.D.1, both employees of the Clinic, and the United States Department of Justice. The decree was signed in an attempt to resolve problems resulting from criminal allegations and subsequent investigations directed at Petitioners' use of an electroacupuncture device, known as the EAV Dermatron. The EAV Dermatron is a medical device, an ohmmeter, used to detect abnormal energy patterns in the human body. The FDA alleged that Petitioners were using the EAV Dermatron to fraudulently diagnose patients with various diseases, such as the Bubonic plague, "exposure to hepatitis," "Epstein Barr Syndrome," and "Nevada underground radiation." (Doc. # 20 at 1). The FDA further alleged that Petitioners would recommend that patients undergo expensive tests and treatments pursuant to such diagnosis'. (Id.).

The relevant provisions of the Consent Decree prohibit Petitioners from using electro-acupuncture screening devices, such as the EAV Dermatron and including specifically by name the LISTEN System device,

"unless and until: (1) there is in effect an approved application for premarket approval (PMA), pursuant to 21 U.S.C. § 360e, or an approved application for an investigational device exemption

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(IDE), pursuant to 21 U.S.C. § 360j(g), that authorizes the defendants' use of such product(s); and (2) other FDA approval of such products as required by the Act and implementing regulations has been obtained." (Consent Decree, Adm.R. Vol. VII Ex. J. at p. 2).

An IDE permits an untested and unapproved device to be utilized for investigational purposes only. FDA regulations require that the investigational study be implemented specifically as described in an FDA approved application or pursuant to an Investigational Relations Board ("IRB") approval that strictly follows IDE regulations. (See 21 C.F.R. Part 812). The purpose of an IDE is to protect the health and safety of human subjects exposed to unapproved medical devices. The IDE application calls for thorough and detailed information regarding the proposed investigatory study. The application process aids the FDA in ensuring that safety standards are maintained without unduly hampering the discovery and development of useful medical devices. If a device is used in any manner not specifically documented in the IDE, the device is not used with FDA approval. Because of the health risks involved in testing unapproved devices, FDA's regulations are explicit and approved testing, pursuant to an IDE, is monitored carefully. (See 21 C.F.R. § 812.46).

2. Biosource, Inc.

On August 6, 1993, Biosource Inc., ("Biosource") a private medical research company, filed an application for an IDE, pursuant to 21 U.S.C. § 360j(g). In the application, Biosource proposed to study a Life Information System Ten device, a machine used for electro-dermal screening. This device is commonly known as the LISTEN System device and is used for the limited purpose of detecting diabetes. The LISTEN System device operates in essentially the same manner as the EAV Dermatron, the device that prompted the consent decree. Both devices are used to detect and record energy imbalances by testing various conductance points associated with specific organs or systems in the human body. The major difference between the devices is that the LISTEN System is hooked up to a computer and the EAV Dermatron to a dial.

On September 10, 1993, the FDA conditionally approved Biosource's IDE application. The purpose of the Biosource study was to determine if the data collected from the LISTEN System device could...

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    ...reasonably satisfy [the court] that it is highly probable the ultimate fact at issue happened.” United States v. Century Clinic, Inc., 75 F.Supp.2d 1127, 1134-35 (D. Nev. 1998). III. FACTS STIPULATED TO BY THE PARTIES[5] 1. Plaintiff Oracle America, Inc. (“Oracle America”) is a Delaware cor......

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