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PDK Labs Inc. v. Reno

January 16, 2001


The opinion of the court was delivered by: Henry H. Kennedy, Jr. United States District Judge


PDK Labs Inc. ( "PDK") is a New York corporation that manufactures over-the-counter pharmaceutical and vitamin products. Ephedrine is an ingredient that is used in the manufacture of these products. Unfortunately, ephedrine can also be used to produce illegal controlled substances, most notably methamphetamine, when extracted from lawful over-the-counter medicines. This process is known as "diversion." Because of this possibility, the government classifies ephedrine as a List I chemical and regulates its importation into the United States.

In October of the year just ended, Indace, Inc., a company registered with the Drug Enforcement Administration to import List I chemicals, notified DEA of its intention to import three metric tons of ephedrine from India and that PDK was the purchaser of the ephedrine. The Drug Enforcement Administration blocked the importation of the ephedrine and continues to do so, an action which PDK claims is unlawful and is causing it irreparable injury.

PDK brings this case *fn1 against the Attorney General of the United States and the Administrator of the Drug Enforcement Administration, in their official capacities, as well as against the United States Department of Justice and the Drug Enforcement Administration (collectively "defendants" or "DEA"), seeking injunctive and declaratory relief and a writ of mandamus. PDK maintains that DEA has (1) violated the Administrative Procedure Act (Counts I though IV); (2) deprived PDK of its property and liberty interests in violation of the Fifth Amendment's due process clause (Count V); and (3) failed to perform its statutory duties (Count VI). Presently before the court is PDK's motion for a preliminary injunction and defendant's motion to dismiss. Upon consideration of the motions, the respective oppositions thereto, the oral arguments of counsel at a hearing and the testimony presented at that hearing, and the record in this case, the court concludes that each motion should be granted in part.


A. Importation Approval Process

Pursuant to section 6053 of the Chemical Diversion and Trafficking Act ("CDTA"), Pub. L. 100-690, 102 Stat. 4181 (1988), codified as amended at 21 U.S.C. § 971 ("the statute" or "§ 971"), DEA regulates the importation of certain listed chemicals. Importers are required to notify DEA at least 15 days prior to the scheduled date of arrival of such chemicals. 21 U.S.C. § 971(a). Notification consists of the filing of an Import Declaration Form 486. 21 C.F.R. § 1313.12(b). Following notification, the statute and its implementing regulations permit DEA to issue a notice of suspension of importation based on evidence that the chemical may be diverted to the clandestine manufacture of controlled substances. A suspension order must contain the legal and factual basis for its issuance. 21 U.S.C. § 971(c)(1). After a suspension order has been issued the regulated person may not carry out the transaction. However, a regulated person to whom a suspension order applies has 30 days in which to request a hearing, and upon such request a hearing must be held within 45 days. 21 U.S.C. § 971(c)(2); 21 C.F.R. § 1313.52, 1313.54.

Several countries, of which India is one, will not permit the export of listed chemicals until they have received a letter-of-non-objection ("LONO") acknowledging that the importer's government does not object to the shipment. The LONO is as an outgrowth of a 1994 international initiative among several nations, including the United States, and the International Narcotics Control Board ("INCB"), a UN-based entity. Subsequently, in addition to the formal regulations concerning suspension orders, DEA created a process enabling those importers who need a LONO to obtain one. If an importer needs a LONO for a particular transaction it files a Form 486 importation request accompanied by a written request that a LONO issue.

Upon request for a LONO, DEA will either issue one, in which case the transaction continues normally, or will decline to do so because it perceives a threat of downstream diversion for illicit purposes. When a LONO is not issued, the importer is notified and provided three options. The importer can either (1) withdraw its request for a LONO and cancel its Form 486, or (2) take no action and in 30 days DEA will deem the request withdrawn, or ( 3) request in writing its desire to pursue the matter further, in which case a suspension order is issued. If the importer elects option three, and a suspension order is issued, only then will DEA allow the importer the opportunity to obtain a hearing as provided for in § 971(c)(2). DEA maintains that the LONO process is standardized and consistent with the law; however, both parties recognize that it is not explicitly authorized in any statute or regulation.

B. Factual Allegations

On October 18, 2000, Indace, Inc., submitted a Form 486 notifying DEA of its intention to import three metric tons of ephedrine on November 14. The completed Form 486 specifically identified PDK as the purchaser of the ephedrine. On October 25, DEA informed Indace that a LONO would not be issued because there were grounds to believe the shipment would be diverted downstream for illegal uses, and notified Indace of the three courses it could pursue. *fn2

Indace informed DEA on November 1, that PDK planned to elect option three and pursue the matter further. Thereafter, on November 10, PDK wrote to DEA indicating that it was awaiting the issuance of a formal order of suspension. Indace then notified DEA on November 14, that it was not withdrawing its request because it was aware that PDK had elected to persist in its effort to obtain the ephedrine. In a November 17 telephone call with PDK's counsel, and a subsequent November 22 letter, DEA expressed its position that under 21 U.S.C. § 971(c), PDK did not have standing to pursue this matter, and that therefore a suspension order could not be issued to PDK.

On December 4, PDK filed this case. In light of DEA's position, Indace notified DEA on December 5, that it regarded this matter as solely between "PDK and DEA," and that "Indace has no intent to exercise Option 3." As a result on December 11, DEA notified Indace that since 30 days had passed after the denial of the LONO with no action by Indace, DEA considered the request for importation to be withdrawn.


A. Defendants' Rule 12(b)(1) Motion to Dismiss

Defendants move to dismiss PDK's APA and Mandamus claims for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1). When deciding a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, "allegations of the complaint should be construed favorably to the pleader." Walker v. Jones, 733 F.2d 923, 925-26 (D.C. Cir. 1984) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). When necessary, however, the court may properly look beyond the complaint to the undisputed facts evidenced in the record, or may resolve disputed facts. See Herbert v. National Academy of Sciences, 974 F.2d 192, 197 (D.C. Cir. 1992).

1. Review by United States District Court

First, defendants assert that under 21 U.S.C. §§ 877 and 965, exclusive jurisdiction to review final determinations of the Attorney General under the CDTA rests with the D.C. Circuit. Section 877 states that "[a]ll final determinations, findings, and conclusions of the Attorney General under [subchapter I of the CDTA] shall be final . . . except that any person aggrieved by a final decision of the Attorney General may obtain review of the decision in the United States Court of Appeals for the District of Columbia or for the circuit in which his principal place of business is located." *fn3 Citing the plain terms of § 877, defendants maintain that this court is without jurisdiction to review the action which is the subject of this suit.

PDK responds that while pursuant to § 877 jurisdiction to review generally lies with the Court of Appeals, § 877 does not apply in this case. PDK argues that DEA, in effect, issued a "de facto suspension" without complying with the requirements of § 971. See Compl. ¶¶ 58, 65, 78. Far from constituting a final action under § 971, PDK alleges that DEA simply failed to follow § 971. Consequently, PDK argues, the LONO denial cannot constitute a final action of DEA subject to review only in the Court of Appeals. Rather, this action is properly before this court as a federal question under 28 U.S.C. § 1331.

Defendants counter that DEA's decision not to grant PDK a hearing was based on DEA's "final determination that PDK does not have standing under the clear language of sections 971(a) and (c)(2) to have an administrative hearing to contest DEA's denial of the LONO." Pl.'s Mem. at Ex. I, Letter from DEA to PDK's counsel, Nov. 22, 2000. DEA maintains that the conclusiveness and finality of its position are clear. Indeed, the letter itself states that it is DEA's "final determination" regarding PDK's right to a hearing. Defendant's position, however, cannot be sustained.

Although an agency's characterization of its own action is never conclusive, it does carry some weight. See American Portland Cement Alliance v. EPA, 101 F.3d 772, 776 (D.C. Cir. 1996) ("An agency's characterization of an administrative action, though not dispositive of reviewability, may provide guidance."). However, even if the court accepts the November 22 letter which DEA wrote to PDK's counsel as DEA's final statement regarding PDK's right to a hearing, that statement does not constitute a final determination, finding, or conclusion within the meaning of § 877. At best, DEA's letter is considered as its final interpretation of § 971(c), as opposed to a final action ...

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