U.S. v. Hodges X-Ray, Inc.

• Decision Date: 18 April 1985
• Docket Number: X-RA,No. 84-5316,INC,84-5316
• Citation: 759 F.2d 557
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. HODGES, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 557

759 F.2d 557

UNITED STATES of America, Plaintiff-Appellee, v. HODGES X-RAY, INC., et al., Defendants-Appellants.

No. 84-5316.

United States Court of Appeals Sixth Circuit.

Decided April 18, 1985.

Argued Feb. 13, 1985.

Robert L. Ackerson (argued), W. David Kiser, Ackerson, Ackerson & Blandford, Louisville, Ky., for defendants-appellants.

Ronald E. Meredith, U.S. Atty., Louisville, Ky., Michael Spalding, Anita Johnson (argued), David Grise, Office of Consumer Litigation, Civil Div., U.S. Dept. of Justice, Washington, D.C., Arthur Y. Tsien, Asst. Chief Counsel for Enforcement U.S. Food and Drug Admin., Rockville, Md., for plaintiff-appellee.

Before JONES and KRUPANSKY, Circuit Judges, and BROWN, Senior Circuit Judge.

KRUPANSKY, Circuit Judge.

Defendants Hodges X-Ray, Inc. and James J. Hodges appealed from the grant of summary judgment in favor of the United States, wherein the court assessed $20,500 in civil penalties against each defendant for violations of certain Food and Drug Administration (FDA) regulations. The assessments were predicated upon the finding of the court below that x-ray equipment manufactured by the defendants ¹ failed to comply with 21 C.F.R. Sec. 1020.31(a)(1), which requires a display of exposure time on the control panel in seconds, and 21 C.F.R. Sec. 1020.31(a)(2), which mandates that each machine terminate exposure at a preset time.

Hodges commenced manufacturing its "Trace-Ray III" x-ray units in 1976. The control panel calibrated exposure time in "pulses" rather than the traditional increments of seconds. According to industry standards, one "pulse" is equivalent to 1/120 of a second. The equipment was distributed to dentists, chiropractors and veterinarians throughout the United States.

In a telegram transmitted on March 17, 1977, the FDA notified Hodges of the failure of some units to terminate exposure at the present time interval. In a follow-up letter to Hodges on April 25, 1977, the FDA asserted a defect in the failure of the units to (1) correctly terminate exposure and (2) to indicate exposure time in increments of seconds. These violations are the subject of the instant appeal.

In further correspondence to Hodges dated July 5, 1977, the FDA recommended certain corrective procedures to alleviate the asserted violations, namely, the failure of the units to display exposure time in seconds. The FDA requested that Hodges supply each Trace Ray III purchaser with a self-adhesive label on the unit, which would explain that one pulse was equal to 1/120 of a second, with instructions to the purchaser to attach the label to the control panel of each unit in a prominent place.

On August 5, 1977, Hodges informed the FDA that notice by certified mail had been forwarded to each owner of a Trace-Ray III x-ray unit. Each recipient was provided with the FDA sanctioned self-adhesive label with instructions to affix the labels to the unit in a prominent place. Hodges further notified the FDA that it was "in the process" of checking the equipment for noncompliance with the exposure termination regulation, 21 C.F.R. Sec. 1020.31(a)(2).

On September 20, 1977, the FDA conditionally approved the corrective action, provided that Hodges X-ray, Inc. or its designated representatives, and not only the users, examined all units for the labeling and exposure deficiencies.

In October, 1977, Hodges, X-ray, Inc. was sold to Western States, but James Hodges was retained as "consultant" to the new owners. ² In this capacity, Hodges notified the FDA that the corrective procedures had come to fruition. According to the declaration submitted by Robert G. Britain, the deputy director of the Office of Medical Devices in the FDA's National Center for Devices and Radiological Health, however, the corrections were not made to the FDA's satisfaction. Britain further explained that the FDA notified Hodges in August, 1979, of its intent to take regulatory action unless Hodges undertook additional corrective measures. Hodges responded by stating that the firm's assets had been sold and thus it could not carry out the corrective modifications.

In September, 1979, the FDA decided to initiate more stringent action because, according to Britain, "in conjunction with the danger to health, some units were being redistributed or considered for export, while others were being repaired inadequately or without adequate supervision." Thus, the FDA instituted seizure proceedings against all known Trace-Ray III machines, including about 115 manufactured by Hodges X-ray, Inc. Britain also averred that "[a]lmost all of the Traceray [sic] III machines have been condemned, and either released for reconditioning under FDA's approval or destroyed. Those seizures are one of the largest multiple seizures in FDA's history and required a major commitment of agency resources."

As a result of the foregoing, the government filed its complaint for civil penalties on October 7, 1981. The complaint alleged that Hodges violated the Radiation Control for Health and Safety Act of 1968 (RCHSA) by: (1) introducing into interstate commerce sixty-six diagnostic X-ray machines that failed to comply with two applicable performance standards promulgated pursuant to RCHSA, 42 U.S.C. Sec. 263j(a)(1); and (2) certifying that the machines complied with all performance standards when in fact the machines did not comply, 42 U.S.C. Sec. 263j(a)(5). In accordance with 42 U.S.C. Sec. 263k(b)(1), the government sought the maximum statutory fine, i.e. $66,000 in penalties from the corporation and $66,000 from James J. Hodges, for sixty-six alleged violations of the RCHSA committed by each defendant.

The government subsequently moved for summary judgment with respect to forty defective machines. ³ Hodges cross-motioned for summary judgment as to all of the violations, and asserted the nonliability of James J. Hodges in his individual capacity. On December 6, 1983, the district court granted summary judgment to the government on all of the violations incorporated in its motion and entered judgment against both defendants. United States v. Hodges X-Ray, Inc., 582 F.Supp. 35 (W.D.Ky.1983). The court referred the determination of the amount of civil penalties to FDA. On February 4, 1984, the court amended its judgment to assess civil penalties of $20,500 against the corporation and $20,500 against James J. Hodges individually.

Hodges presented five allegations of error in this appeal, and argued that material issues of fact remained which made summary judgment inappropriate.

As a threshold issue, Hodges urged that he could not be held individually liable for the statutory violations asserted in the government's complaint. More specifically, Hodges argued that he was not a "manufacturer" within the meaning of 42 U.S.C. Sec. 263j. ⁴ However, this argument is not persuasive for several reasons.

First, 42 U.S.C. Sec. 263c(3) defines the term "manufacturer" as "any person engaged in the business of manufacturing, assembling, or importing of electronic products." (emphasis added). Since Hodges was the major shareholder and president of Hodges X-ray, Inc., the conclusion that he was included in this definition is self-evident.

Secondly, in an analogous situation litigated under the Federal Food, Drug & Cosmetic Act (FDCA), the Supreme Court decided that corporate officers could be held individually liable for violations of public health legislation. United States v. Park, 421 U.S. 658, 95 S.Ct. 1903, 44 L.Ed.2d 489 (1975); United States v. Dotterweich 20 U.S. 277, 64 S.Ct. 134, 88 L.Ed. 48 (1943).

Although the Park and Dotterweich cases were premised upon the FDCA, the RCHSA is undeniably in the same class of public welfare statutes and thus the conclusions of those cases are equally applicable here.

Hodges attempted to distinguish Park and Dotterweich with the argument that they applied to criminal, rather than civil liability. However, the rationale for holding corporate officers criminally responsible for acts of the corporation, which could lead to incarceration, is even more persuasive where only civil liability is involved, which at most would result in a monetary penalty. The fact that a corporate officer could be subjected to criminal punishment upon a showing of a responsible relationship to the acts of a corporation that violate health and safety statutes renders civil liability appropriate as well. Therefore, the district court's determination that Hodges could be held individually liable for RCHSA violations should not be disturbed on appeal.

A second error of law which Hodges charged against the court below was its reliance upon allegedly improper evidence presented in the form of 45 sworn declarations of FDA inspectors which detailed the defects in the Trace-Ray III machines revealed by their tests. Hodges argued that since certain other collateral "documents" were attached to these declarations by agency personnel other than the declarants, the provisions of Fed.R.Civ.P. 56(e) were violated which demand that sworn affidavits submitted for summary judgment purposes should have been within the personal knowledge of the affiant. This argument has little merit.

The sworn statements of the FDA inspectors as to the condition of the twenty-three Hodges' machines were clearly within their personal knowledge, since these inspectors personally tested the machines. Therefore, the statements provided an adequate basis for the grant of summary judgment. As the defendant observed, some of the sworn statements had attachments that were supplementary and contained purely background information on FDA's regulatory plan and its execution. However, the background information did not nullify the personal cognizance of the specific machines' short-comings as outlined in the inspectors' sworn statements. "The rule is settled that on a motion for summary judgment a court will disregard only the inadmissible portions of a challenged affidavit...