United States v. 3963 BOTTLES, MORE OR LESS, ETC.

• Decision Date: 31 March 1959
• Docket Number: No. 12514.,12514.
• Citation: 265 F.2d 332
• Parties: UNITED STATES of America, Libelant-Appellee, v. 3963 BOTTLES, MORE OR LESS, of an article of drug labeled in part: "* * * ENERJOL DOUBLE STRENGTH * * *," Owen Laboratories, Inc., Claimant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

265 F.2d 332 (1959)

UNITED STATES of America, Libelant-Appellee, v. 3963 BOTTLES, MORE OR LESS, of an article of drug labeled in part: "* * * ENERJOL DOUBLE STRENGTH * * *," Owen Laboratories, Inc., Claimant-Appellant.

No. 12514.

United States Court of Appeals Seventh Circuit.

March 31, 1959.

Milton A. Bass, New York City, Morton J. Harris, Chicago, Ill., Solomon H. Friend, New York City, for appellant.

Robert Tieken, U. S. Atty., Chicago, Ill., Alvin L. Gottlieb, Atty., Department of Health, Education, and Welfare, Washington, D. C., Malcolm Anderson, Asst. Atty. Gen., John Peter Lulinski, Asst. U. S. Atty., Richard C. Bleloch, Asst. U. S. Atty., Chicago, Ill., for appellee.

Before DUFFY, Chief Judge, and HASTINGS and KNOCH, Circuit Judges.

HASTINGS, Circuit Judge.

The Government, libelant-appellee, brought this action under the provisions of the Federal Food, Drug and Cosmetics Act, 21 U.S.C.A. § 301 et seq., for the condemnation and seizure of a drug called "Enerjol." The corporate claimant, Owen Laboratories, Inc., refused to answer the libelant's interrogatories on the ground of self-incrimination and the district court thereupon entered a default decree of condemnation. This appeal is taken from that decree and from an order of the district court denying claimant's motion for dismissal of the libel and for summary judgment.

The instant suit was commenced in December of 1957. The amended libel charged that the drug, "Enerjol," was misbranded while held for sale after shipment in interstate commerce within the meaning of 21 U.S.C.A. § 352(a), and also alleged that the drug was a "new drug" which was introduced into interstate commerce without an effective new drug application as provided in 21 U.S.C. A. § 355(a) and (b).

Prior to this action, in September of 1957, the Post Office Department had issued a fraud complaint against Owen Laboratories, Inc., charging it with having obtained money through the mails by means of fraudulent representations regarding the nature of and benefits to be obtained from the so-called "Enerjol Capsules." In order to avoid having a fraud order entered against it, Owen Laboratories filed an "Affidavit of Agreement" in which it consented to cease making the representations charged to be fraudulent in the Post Office complaint.

Claimant moved for a dismissal of the instant suit and for summary judgment, on the ground that the agreement with the Post Office, entered into after initiation of the mail fraud proceeding, was, in effect, an adjudication¹ with respect to the identical product, the identical literature and identical issues involved in this libel; and that the agreement "constitutes a bar to the present action and is in effect akin to the legal principle of res adjudicata." The district court denied this motion setting forth its reasoning in a brief memorandum opinion which indicates that it fully understood and rejected claimant's arguments made before that court and renewed in this appeal. We hold that the district court committed no error in denying this motion.

The mail fraud proceeding could not possibly be a bar to the instant action. In the first place, the agreement executed by claimant in connection with the mail fraud proceeding is, by its own express terms and contrary to claimant's contentions, not an approval or ratification of any business conducted or to be conducted by claimant. The agreement further states expressly that "its filing will not act as a defense or relieve the undersigned claimant's president of responsibility for violation of any other statute * * *."

Further, when stripped of its refinements, claimant's position appears to be that the Postmaster General, with his limited authority under the mail fraud statutes, could and should have somehow effectively enforced the provisions of the Federal Food, Drug and Cosmetics Act; and that, since he did take some action, as evidenced by the agreement, the Government is now barred from enforcing that Act against the offending product.

Viewing claimant's contentions in this light merely points up the fact that the proceeding under the mail fraud statute and the instant one differ not only as to issues involved, but also as to purpose and effect. The Postmaster General has only the limited authority to prohibit the fraudulent use of the mails, and the sole purpose of a mail fraud proceeding is to enjoin the continuation of conduct found fraudulent. Donaldson v. Read Magazine, Inc., 1948, 333 U.S. 178, 191, 68 S.Ct. 591, 92 L.Ed. 628. There must be proof of a fraudulent purpose, an actual intent to deceive, on the part of the alleged violator. Reilly v. Pinkus, 1949, 338 U.S. 269, 276, 70 S.Ct. 110, 94 L.Ed. 63.

On the other hand, the present suit under the Food, Drug and Cosmetics Act has as its purpose the seizure and actual removal of the allegedly offending articles from the channels of trade. Under this Act, no proof of wrongful or fraudulent intent is required either in criminal proceedings brought under its provisions, United States v. Dotterweich, 1943, 320 U.S. 277, 281, 284-285, 64 S.Ct. 134, 88 L.Ed. 48, or in seizure cases such as the instant one. Research Laboratories v. United States, 9 Cir., 1948, 167 F.2d 410, 420-421; United States v. Five Cases, etc., 2 Cir., 1946, 156 F.2d 493, 495. The Supreme Court in Dotterweich pointed out that by this Act, as amended in 1938:

"* * * Congress extended the range of its control over illicit and noxious articles * * *. The purposes of this legislation thus touch phases of the lives and health of people which, in the circumstances of modern industrialism, are largely beyond self protection. * * * In the interest of the larger good it puts the burden of acting at hazard upon a person otherwise innocent but standing in responsible relation to a public danger." United States v. Dotterweich, supra, 320 U.S. at pages 280-281, 64 S.Ct. at page 136.

In the libel in this case the drug is alleged to be subject to seizure not only as misbranded (falsely labeled) but also as a new drug introduced into interstate commerce without an effective new drug application to establish its safety as is required by law. The proceeding and resulting agreement under the mail fraud act could be no bar to this suit.

Reliance by claimant on United States v. Willard Tablet Co., 7 Cir., 1944, 141 F. 2d 141, 152 A.L.R. 1194 is misplaced. In that case, a prior decision by the Federal Trade Commission had approved statements used by an alleged violator and ruled that the statements were not false representations. We held that a subsequent condemnation proceeding, under the Federal Food, Drug and Cosmetics Act based on identical statements as to the same product was barred, on principles of res adjudicata, because the same issues and elements of proof were involved in both proceedings. The case of George H. Lee Co. v. Federal Trade Commission, 8 Cir., 1940, 113 F.2d 583 also cited by claimant is to the same effect.

Claimant also relied heavily, in its brief, on the case of United States v. Radio Corporation of America and National Broadcasting Company, Inc., D.C. E.D.Pa.1958, 158 F.Supp. 333. In that case the district court decided that approval by the Federal Communications Commission of a proposed exchange of radio and television stations, precluded a subsequent suit in which the Government sought to upset the transaction as violative of the anti-trust laws. However, just prior to oral argument in the present case, the Supreme Court of the United States, having noted probable jurisdiction at 357 U.S. 918, 78 S.Ct. 1359, 2 L.Ed. 1362 (1958), unanimously reversed the district court. United States v. Radio Corporation of America and National Broadcasting Company, Inc., 1959, 79 S.Ct. 457.² The Supreme Court held that the Federal Communications Commission had no power to decide antitrust issues as such and that, consequently, its determination that the "public interest, convenience, and necessity" would be served by the proposed exchange of radio and television stations did not bar the subsequent anti-trust suit. In so doing the Court found res judicata principles inapplicable since, as in the instant case, different issues were involved. Id., 79 S.Ct. at page 468. In our view, this holding alone would be completely dispositive of claimant's contention.

It is next contended that the district court erred in entering the default decree of condemnation upon claimant's failure to answer libelant's interrogatories. The refusal of the corporation to answer was based on an assertion of a claim of privilege against self-incrimination. However, it is settled beyond possible doubt that a corporation has no such privilege to assert. United States v. White, 1944, 322 U.S. 694, 64 S.Ct. 1248, 88 L.Ed. 1542. In the White case, the Supreme Court stated clearly and unequivocally:

"The constitutional privilege against self-incrimination is essentially a personal one,

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