U.S. v. Gonsalves

• Decision Date: 20 January 2006
• Docket Number: No. 04-2316.,04-2316.
• Citation: 435 F.3d 64
• Parties: UNITED STATES of America, Appellee, v. Wallace E. GONSALVES, Jr., Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

435 F.3d 64

UNITED STATES of America, Appellee, v. Wallace E. GONSALVES, Jr., Defendant, Appellant.

No. 04-2316.

United States Court of Appeals, First Circuit.

Heard November 7, 2005.

Decided January 20, 2006.

Anthony M. Traini with whom Richard M. Egbert was on brief for appellant.

Donald C. Lockhart, Assistant United States Attorney, with whom Robert Clark Corrente, United States Attorney, Luis M. Matos and Lisa Dinerman, Assistant United States Attorneys, were on brief for appellee.

Before BOUDIN, Chief Judge, STAHL, Senior Circuit Judge, and LYNCH, Circuit Judge.

BOUDIN, Chief Judge.

Wallace Gonsalves, Jr., an osteopathic doctor, conducted a solo medical practice in Cranston, Rhode Island. In 1971, he was certified as a "civil surgeon" with the former Immigration and Naturalization Service ("INS"), performing blood tests and administering immunizations to immigrants seeking permanent residence in the United States. Gonsalves, like most doctors, kept drugs in his office premises, including vaccines needed for immunizations.

In June 2002, Catherine Cordy, Chief of the Board of Pharmacy of the Rhode Island Department of Health ("DOH"), received an anonymous complaint about Gonsalves' medical practice, later determined to have come from Kelly Walsh. Walsh, a former employee, reported that Gonsalves was engaged in workers' compensation fraud and was illegally selling drug samples to a local pharmacist. Cordy referred this complaint to the Attorney General and the DOH's Board of Medical Licensure, and Walsh was interviewed on July 8, 2002.

Walsh told investigators that Gonsalves had instructed employees to immunize immigrant patients with diluted vaccines and to administer to those patients only a half-dose of the already-diluted vaccines. She also reported that Gonsalves was falsely certifying to the INS that patients had been tested for various diseases when no such tests had been performed and requiring payments of $150-$300 in cash (which he did not record in his books) for the INS examination, even though the examinations were covered by the patients' insurance.

On August 16, 2002, the Rhode Island Attorney General's office executed a search warrant in Gonsalves' office for general patient and business records, the DOH executed an administrative subpoena for twelve specific patient records, and Cordy, relying on her statutory authority to inspect without a warrant locations where drugs are held, R.I. Gen. Laws § 21-31-21 (2004), conducted an inspection for misbranded or adulterated drugs. Cordy seized various drugs as misbranded or adulterated — evaluations later confirmed in testing by the Food and Drug Administration.

In due course, Gonsalves was indicted in federal court for drug adulteration and tampering, 18 U.S.C. § 1365(a) (2000) and 21 U.S.C. §§ 331(k), 333(a)(2) (2000), making false statements to the government, 18 U.S.C. § 1001 (2000), and tax violations, 26 U.S.C. §§ 7201, 7206(1) (2000). At trial, the government's evidence permitted a jury to conclude that Gonsalves was criminally responsible for, among other things, the dilution and improper storage of vaccines, false certifications to the INS that patients had been tested for HIV and syphilis, falsely reporting that patients had been properly immunized, and the failure to report over $400,000 in income. The jury convicted Gonsalves on all submitted counts.

For these offenses, the district court sentenced Gonsalves to ten years in prison and fined him heavily. In the appeal now before us, Gonsalves does not dispute the adequacy of the evidence (save in one limited respect discussed below) but contests the refusal of the district court to suppress evidence against him, certain of the jury instructions, and alleged errors in his sentencing. The principal assault is on Cordy's search of Gonsalves' office and her seizure of vaccine samples, which provided much of the evidence against Gonsalves.

Prior to trial, Gonsalves moved to suppress the drugs thus seized on the basis that Cordy had conducted the search and seizure without a warrant. The district court denied the motion on the ground that the search and seizure fell within the "administrative exception" to the warrant requirement. Such an exception to the normal requirement — a warrant based on probable cause — applies where certain conditions are met. New York v. Burger, 482 U.S. 691, 702-03, 107 S.Ct. 2636, 96 L.Ed.2d 601 (1987). See also United States v. Biswell, 406 U.S. 311, 317, 92 S.Ct. 1593, 32 L.Ed.2d 87 (1972); Colonnade Catering Corp. v. United States, 397 U.S. 72, 76-77, 90 S.Ct. 774, 25 L.Ed.2d 60 (1970).

Ordinarily, administrative searches are permitted in highly regulated industries where authorized by a statutory scheme and where, in addition, the scheme furthers a substantial government interest, warrantless inspections are necessary to further this interest, and the scheme provides a constitutionally adequate substitute for a warrant in terms of notice to those regulated and restrictions on the administrator's discretion. Burger, 482 U.S. at 702-03, 107 S.Ct. 2636. In simplest terms, a pharmaceutical factory need not be treated as if it were someone's home.

Gonsalves' first objection to Cordy's administrative search of his office is that the medical profession should not be treated as a highly regulated enterprise. Whatever the status of the profession in the abstract, the statute in this case permits administrative searches of "establishments" where drugs are manufactured or stored, R.I. Gen. Laws § 21-31-21, and the seizure at issue is solely of drugs reasonably believed to have been misbranded or adulterated. Our focus, therefore, is on the regulation of drugs — not the practice of medicine in general.

In Rhode Island, as under federal law and in other states, drugs are heavily regulated in storage and dispensation and have been for many years. Mann v. Cannon, 731 F.2d 54, 59-60 (1st Cir.1984); see also United States ex rel. Terraciano v. Montanye, 493 F.2d 682 (2d Cir.) (Friendly, J.), cert. denied, 419 U.S. 875, 95 S.Ct. 137, 42 L.Ed.2d 114 (1974) (pharmacy operations in New York). Rhode Island's Food, Drugs, and Cosmetics Act has been in effect for a half-century, 1956 R.I. Pub. Laws ch. 56 § 1 (codified at R.I. Gen. Laws §§ 21-31-1 to -23), and the pertinent provisions are numerous, longstanding and pervasive.¹ The scheme readily passes the "closely regulated" test of Burger. 482 U.S. at 701, 107 S.Ct. 2636.

Whether the practice of medicine in general meets this test is a different question that we need not decide. Compare Tucson Woman's Clinic v. Eden, 379 F.3d 531, 549-51 (9th Cir.2004). Nor are we concerned on this appeal with patient records; Cordy's search and seizure was solely directed to misbranded and adulterated drugs held at large in Gonsalves' office. Given the variations in fact patterns and the sensitivity of the subject area, there is good reason to keep our focus narrow and, for the time being, to let the law develop case by case.

The other three conditions for an administrative search are that the scheme serve a substantial government interest, that administrative (warrantless) searches be "necessary," and that the scheme impose alternative safeguards. Burger, 482 U.S. at 702-03, 107 S.Ct. 2636. The first is obviously satisfied and the second is adequately covered by case law explaining the need for random and surprise inspections, United States v. Maldonado, 356 F.3d 130, 135-36 (1st Cir.2004). Gonsalves does not make a frontal attack on either of these two conditions.

Instead, Gonsalves claims that the third condition — the "constitutionally adequate substitute for a warrant," Burger, 482 U.S. at 703, 107 S.Ct. 2636 — is not satisfied because neither the statute nor regulations under it (there are none) limit Cordy's discretion as to such searches. This overstates the matter: Cordy's authority was limited to entry "at all reasonable hours" to determine whether "any of the provisions of this chapter are being violated," and to "secure samples or specimens." R.I. Gen. Laws § 21-31-21. These are adequately specific limits on the timing and scope of the activity. Compare Burger, 482 U.S. at 711, 107 S.Ct. 2636 ("during regular and usual business hours"); Biswell, 406 U.S. at 312 n. 1, 92 S.Ct. 1593 ("at all reasonable times").

Of course, the statute does not impose a probable cause or even a reasonable suspicion test as to when such inspections should be undertaken. As it happens, Walsh's complaint and follow-up interview arguably provided ample cause for the search. But the broader point is that administrative searches are allowed without probable cause precisely because of the character of the activity being regulated and the need for randomness and surprise to make such schemes effective. See Burger, 482 U.S. at 710, 107 S.Ct. 2636; Maldonado, 356 F.3d at 135-36.

Ironically, Gonsalves' other main attack on Cordy's search and seizure of the vaccines stems from the fact that this search was not random but grew out of a specific charge of misconduct and was coordinated as to timing with the Attorney General's search.

Patently, the Attorney General did not use Cordy as a proxy to conduct his own warrantless search; the Attorney General secured a warrant and had probable cause. That Cordy coordinated the timing of her search with law enforcement authorities, so that neither side tipped off Gonsalves by acting alone, was not an evasion of the limits on either of them.

The question, then, is whether Cordy should be prevented from making a warrantless search because in this case it was not random and because she in fact had good cause to suppose a violation. To us the answer is self-evident: Gonsalves already had notice from the statute that his office was subject to administrative search for misbranded or adulterated drugs; and Cordy's administrative search was not more intrusive, or less justifiable, because she actually had...