U.S. v. Food, 2,998 Cases

Decision Date26 September 1995
Docket NumberNo. 94-30389,94-30389
Citation64 F.3d 984
Parties, 64 USLW 2216 UNITED STATES of America, Plaintiff-Appellant, v. FOOD, 2,998 CASES, etc., Defendant. First Phoenix Group, Ltd., Claimant-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Peter R. Maier, Douglas N. Letter, Appellate Lit. Counsel, U.S. Dept. of Justice, Washington, DC, Patricia J. Kaeding, Asst. Chief Counsel, U.S. Food & Drug Admin., Rockville, MD, for appellant.

John J. Broders, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, LA, Barry J. Reingold, Leonard E. Santos, Kara M. Sacilotto, Perkins, Coie, Washington, DC, for appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before WOOD, Jr., * JOLLY and DeMOSS, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

This appeal presents complex, difficult, and close questions. It is, however, a case that is unlikely to arouse widespread passion.

The case begins with an import alert for mushrooms canned in China and falsely bearing the labels of certain Taiwanese manufacturers. Based on the alert, the Food and Drug Administration (the "FDA") detained two shipments of mushrooms owned by appellee First Phoenix Group Limited, Inc. ("First Phoenix"). The question that drives this appeal is what is to be done with these mushrooms now that they have been detained by the Customs Service at the port of entry; First Phoenix argues that it is entitled to "reexport" 1 them, and the FDA argues that it has the authority to destroy them. The FDA filed a complaint in the United States District Court for the Eastern District of Louisiana, asserting authority to destroy the mushrooms under 21 U.S.C. Sec. 334 of the Federal Food, Drug, and Cosmetic Act (the "FDCA"). First Phoenix argued that when imported goods are detained at the port of entry, the FDA could invoke only the administrative procedures under 21 U.S.C. Sec. 381 of the FDCA to refuse entry of the goods into the United States and then allow First Phoenix ninety days to "reexport" the mushrooms before the FDA could destroy them. The district court agreed and dismissed the FDA's complaint. The resolution of whether the district court erred in dismissing the complaint depends upon whether the mushrooms were ever "introduced into interstate commerce" within the expansive definition contained in the FDCA; and, second, upon whether, in the statutory scheme, Congress intended that Sec. 334 judicial proceedings could be invoked only after the goods had been released from the Customs Service.

We conclude, given the broad statutory definition of interstate commerce, that the mushrooms were in interstate commerce and that neither the plain words of the statute nor congressional intent behind the statute bars FDA's proceeding under Sec. 334 in this case.

I

In October 1989, the Food and Drug Administration (the "FDA") issued an "import alert" 2 for all canned mushrooms processed in China in response to a food-borne illness caused by staphylococcal enterotoxin found in canned mushrooms produced in nine China factories. Appellee First Phoenix Group Limited, Inc. ("First Phoenix"), an importer of food products, purchased several orders of canned mushrooms supposedly packaged at Hwa Chen Industrial Corporation ("Hwa Chen") in Taiwan. In late spring 1992, First Phoenix attempted to enter two shipments of mushrooms--3,000 cases and 6,000 cases--into the United States. The 3,000-case shipment was unloaded at Savannah, Georgia, transported under a United States Customs Service transit bond to a bonded warehouse in Tampa, Florida, and offered for entry on May 26, 1992. The United States Customs Service (the "Customs Service") conditionally released these mushrooms under bond pending review by the FDA. The mushrooms then were shipped to a bonded warehouse in New Orleans, Louisiana, the destination city for each shipment, and have remained in this warehouse since this time. The 6,000-case shipment was unloaded at Long Beach, California, in early July 1992, transported under a Customs Service transit bond to a bonded warehouse in New Orleans, and offered for entry on behalf of First Phoenix by Transoceanic Shipping.

On July 10, 1992, the FDA issued a second import alert advising its field offices to detain shipments of canned mushrooms from specified Taiwanese manufactures, including Hwa Chen. The FDA issued this import alert because mushrooms labelled as packaged and produced from these specified manufacturers actually were processed and packaged in an unknown factory in China. Because of this import alert, the FDA issued Notices of Detention and Hearing for the 3,000-case shipment on July 29, and for the 6,000-case shipment on December 14. 3 In these notices, the FDA indicated that it was acting under its power in Sec. 381(a) of the Federal Food, Drug, and Cosmetic Act (the "FDCA"), 21 U.S.C. Secs. 301 et seq. Based on an examination of cans from both shipments 4 and additional information provided by Hwa Chen, the FDA determined that the mushrooms were not processed or packaged in Taiwan. The FDA thus concluded that an unknown factory in China used Hwa Chen's can codes in a deliberate attempt to circumvent the broad import alert on canned mushrooms originating in China. The FDA then advised First Phoenix that it would likely refuse admission of the mushrooms and allow reexport only under very strict conditions. The FDA, however, issued no formal notice of refusal of admission. The FDA then conducted additional testing of a separate lot of mushrooms ostensibly packaged at Hwa Chen and shipped into the United States by First Phoenix, but not at issue in this appeal. Based on staphyloccal enterotoxin found in these mushrooms, the FDA informed First Phoenix of its decision to destroy the mushrooms, rather than allow reexport. Thus, the FDA decided to proceed under the authority provided in 21 U.S.C. Sec. 334, instead of proceeding under 21 U.S.C. Sec. 381.

Accordingly, on November 3, 1993, the government filed a complaint in the United States District Court for the Eastern District of Louisiana seeking seizure and condemnation of both shipments of mushrooms as adulterated and misbranded goods in interstate commerce under its authority in 21 U.S.C. Sec. 334(a) of the FDCA. Under the district court's warrant for the arrest of both shipments, the United States Marshals Service seized and attached the shipments at the New Orleans warehouse where they were stored upon entry into New Orleans and continue to be held at the present time. On April 19, 1994, the district court granted summary judgment in favor of First Phoenix and dismissed the government's case. The district court held that the mushrooms had never entered interstate commerce as required for an action under Sec. 334(a) because they had continually remained under Customs Service transit bonds. The district court thus determined that the Customs Service remained in control of the mushrooms since their import into the United States. Finally, the court concluded that Sec. 381(a) was the government's exclusive authority with respect to the mushrooms and gave First Phoenix the opportunity to reexport the two shipments before being destroyed by the FDA. Thereafter, the district court denied the government's motion for reconsideration and granted its motion for a stay of the judgment pending appeal.

On appeal, the government argues that because the mushroom shipments fall within the statutory definition of "interstate commerce," it had the authority to bring a Sec. 334 seizure and condemnation action in the district court. The government further contends that its authority to act under this statute is unaffected by the fact that the administrative remedy in Sec. 381 is also available to it in this case. The government thus concludes that the district court erred in granting summary judgment in favor of First Phoenix on the basis that Sec. 381 restricted the government's authority under Sec. 334 to situations when the goods at issue were in "interstate commerce."

II

In this appeal, we must consider whether the district court erred in granting summary judgment in favor of First Phoenix and dismissing the government's complaint on the grounds that the facts here failed to demonstrate a claim under Sec. 334. 5 To resolve this question, first, we must determine whether imported goods, which never are released from Customs Service upon arrival in the United States satisfy the interstate commerce requirement, as defined in the FDCA. Second, we must determine whether a Sec. 334 judicial proceeding may be brought with respect to goods seized at the port of entry and never released by the Customs Service or whether in these circumstances, the FDA is limited to the administrative procedures under Sec. 381. We hold that the interstate commerce requirement has been satisfied in this case and that goods seized at the port of entry may be the proper subject of an action under Sec. 334. We therefore reverse the judgment of the district court and remand for further proceedings not inconsistent with this opinion.

III
A

We first examine whether the mushrooms in this case were introduced into "interstate commerce," as required to initiate a seizure and condemnation action under Sec. 334. In relevant part, 21 U.S.C Sec. 334(a)(1) provides:

Any article of food, drug, or cosmetic that is adulterated or misbranded when introduced into or while in interstate commerce or while held for sale ... after shipment in interstate commerce ... shall be liable to be proceeded against while in interstate commerce, or at any time thereafter, on liable of information and condemned in any district court of the United States ... within the jurisdiction in which the article is found.

21 U.S.C. Sec. 334(a)(1) (1972 & Supp.1995). Thus, to initiate an action for seizure and condemnation, the FDA must prove only that the goods have been introduced into interstate commerce,...

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