*fn17,The opinion of the court was delivered by: Reggie B. Walton United States District Judge,HOLIDAY CVS, L.L.C., D/B/A CVS PHARMACY NOS. 219 AND 5195, PLAINTIFFS, v. ERIC H. HOLDER, JR., ET AL., DEFENDANTS." />

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Holiday Cvs, L.L.C., D/B/A Cvs Pharmacy Nos. 219 and 5195 v. Eric H. Holder

March 16, 2012 *fn17

HOLIDAY CVS, L.L.C., D/B/A CVS PHARMACY NOS. 219 AND 5195, PLAINTIFFS,
v.
ERIC H. HOLDER, JR., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Reggie B. Walton United States District Judge

MEMORANDUM OPINION

The plaintiffs,*fn1 Holiday CVS, L.L.C., doing business at two of its pharmacies as CVS Pharmacy Numbers 219 and 5195, bring this action under the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 551-706 (2006), challenging two Orders to Show Cause and Immediately Suspend Registrations issued by the Drug Enforcement Administration ("DEA") on February 2, 2012. Amended Complaint ("Am. Compl.") ¶ 1. The case came before the Court on March 13, 2012, on (1) the Plaintiffs' Motion to Strike or, in the Alternative to Cross Examine Affiant, and (2) the Plaintiffs' Motion for a Preliminary Injunction. Both motions were opposed by the government. After carefully considering the parties' submissions and the arguments made by counsel at the first hearing on the plaintiffs' motions on March 2, 2012, and the second hearing on March 13, 2012,*fn2 the Court denied the plaintiffs' motions at the March 13, 2012 hearing.

This memorandum opinion memorializes the oral rulings issued at that hearing and explains further the reasons for the Court's denial of the plaintiffs' motions.

I. Background

A. The Controlled Substances Act

The Controlled Substances Act ("CSA" or the "Act") and its implementing regulations create restrictions on the distribution of controlled substances. See 21 U.S.C. §§ 801-971 (2006); 21 C.F.R. §§ 1300-1321 (2009). The Act authorizes the DEA to establish a registration program for manufacturers, distributors, and dispensers of controlled substances designed to prevent the diversion of legally produced controlled substances into the illicit market. See 21 U.S.C. §§ 821, 822. Any entity that seeks to become involved in the production or chain of distributing controlled substances must first register with the DEA. 21 U.S.C. § 822; 21 C.F.R. § 1301.11.

Under the DEA's regulations, registered pharmacies must "provide effective controls and procedures to guard against theft and diversion of controlled substances." 21 C.F.R. § 1301.71(a). And while "[t]he responsibility for the proper prescribing and dispensing of controlled substances is upon the prescribing practitioner," a "corresponding responsibility rests with the pharmacist who fills the prescription." Id. § 1301.04(a). Pharmacies are therefore required to ensure that prescriptions for controlled substances are "issued for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice." Id.

The DEA has authority to revoke or suspend a registration it has issued for a variety of reasons, including on the grounds that a registrant "has committed such acts as would render his [or its] registration . . . inconsistent with the public interest." 21 U.S.C. § 824(a)(4). Generally, before suspending or revoking a registration, the DEA must issue an order to show cause containing its basis for the proceedings and provide an administrative hearing within 30 days. See id. § 824(c). DEA regulations direct that an "order to show cause shall . . . contain a statement of the legal basis for such hearing and for the denial, revocation, or suspension of registration and a summary of the matters of fact and law asserted." 21 C.F.R. § 1301.37(c).

In cases where the DEA has reason to believe that a registrant's continued operation would pose "an imminent danger to the public health or safety," it can suspend that party's registration immediately, prior to an administrative hearing, by issuing an immediate suspension order ("ISO"). See 21 U.S.C. § 824(d) ("The Attorney General [and the DEA Administrator by designation] may, in [her] discretion, suspend any registration simultaneously with the institution of proceedings under this section, in cases where [she] finds that there is an imminent danger to the public health or safety."). DEA regulations direct that "an order of immediate suspension . . . shall contain a statement of [the Administrator's] findings regarding the danger to public health or safety." 21 C.F.R. § 1301.36(e). An immediate suspension order under § 824(d) remains "in effect until the conclusion of such proceedings, including judicial review thereof, unless sooner withdrawn by the Attorney General or dissolved by a court of competent jurisdiction." 21 U.S.C. § 824(d).

B. Factual and Procedural Background

Plaintiff Holiday CVS, L.C.C. is a subsidiary of CVS Caremark Corporation, which is the largest pharmacy health care provider in the United States and is ranked twenty-first in the Fortune 500 list for 2011. Gov't's Opp'n at 30. At issue in this case are two CVS retail pharmacy stores located in Sanford, Florida ("CVS 219" and "CVS 5195"; collectively, the "CVS pharmacies"). Pls.' Mem. at 6. The CVS pharmacies are registered to dispense Schedule II-V controlled substances, as classified by the CSA. Id. Neither pharmacy has previously been the subject of disciplinary action for failing to comply with the controlled substance laws. Id.

The DEA's investigation of CVS 219 and CVS 5195 evolved from the agency's investigation of the pharmacies' main distributor, Cardinal Health, Inc. ("Cardinal").*fn3 Gov't's Opp'n at 8. This investigation revealed that from January 1, 2008, to October 31, 2011, Cardinal's distribution facility in Lakeland, Florida, sold over 12.8 million dosage units of oxycodone (a Schedule II drug) to its top four pharmacy customers. Id. Two of these top four customers were the CVS pharmacies. Id.

The DEA executed administrative inspection warrants at the CVS pharmacies on October 18, 2011. Pls.' Mem. at 7. The warrants sought documents relating to the dispensing practices and volumes of oxycodone sold at the two pharmacies. Id. The DEA then served administrative subpoenas on the two pharmacies on October 25, 2011, seeking additional documents regarding the prescribing physicians whose patients filled prescriptions at the two pharmacies. Id. The DEA also interviewed employees at both pharmacies, as well as individuals with supervisory responsibility over the pharmacies. Id.

After the DEA commenced its investigation, the plaintiffs took a number of remedial steps in response to the agency's concerns. First, in November 2011, the CVS pharmacies suspended filling Schedule II drug prescriptions of 22 physicians for whom the DEA had requested dispensing information from CVS. Id.; Gov't's Opp'n at 23. These 22 physicians accounted for a substantial majority of the oxycodone prescriptions dispensed by the pharmacies. Pls.' Mem. at 7. Second, CVS issued revised dispensing guidelines in January 2012 for filling pain management prescriptions, which have been implemented at CVS pharmacies nationwide. Id. at 8. Third, the CVS pharmacies limited the "geographic area for prescribers and patients for which they will fill prescriptions." Id. Fourth, they reviewed "with pharmacists the regulatory requirements relating to pharmacists' corresponding responsibility to fill prescriptions for a legitimate medical purpose." Id. And fifth, the pharmacies retained "a third party consultant to review recordkeeping and security at both pharmacies." Id. Since the DEA served the warrants in October 2011, dispensing volumes for oxycodone at the two CVS pharmacies have decreased by 86%. Id. at 9.

The DEA issued immediate suspension orders to the CVS pharmacies on February 2, 2012. See Pls.' Mem., Exhibits ("Exs.") A and B (Orders to Show Cause and Immediate Suspension of Registration issued to CVS 219 and CVS 5195 ("CVS 219 ISO" and "CVS 5195 ISO"; collectively, "ISOs")).*fn4 The allegations set forth in the ISOs are outlined in detail below. Briefly stated, they allege that between 2008 and 2011, the CVS pharmacies purchased enormous quantities of oxycodone that "considerably surpassed the amount of oxycodone ordinarily purchased by a retail pharmacy." ISOs ¶ 3. They further assert that since at least 2010, the pharmacies had dispensed controlled substances to customers "under circumstances indicating that the drugs" were illegally diverted. Id. ¶ 4. Finding that this conduct violated the CSA and that continued registration of the CVS pharmacies posed an imminent danger to the public health and safety, the DEA immediately suspended the pharmacies' registrations pursuant to 21 U.S.C. § 824(d). Id. at 2-3.

The plaintiffs filed a complaint and motion for temporary restraining order with this Court on February 6, 2012. Their complaint challenges the ISOs under the APA on the grounds that the orders (1) were issued without statutory authority (Count I), Compl. ¶¶ 43-49; (2) deprived the plaintiffs of their constitutional right to due process of law (Count II), id. ¶¶ 50-55; (3) were arbitrary and capricious (Count III), id. ¶¶ 56-60; and (4) contained inadequate findings to justify an immediate suspension (Count IV), id. ¶¶ 61-64.

After holding a hearing on the plaintiffs' motion for a temporary restraining order on February 7, 2012, and while the undersigned member of this Court was absent from the jurisdiction, Judge Amy Berman Jackson of this Court granted the plaintiffs' motion by order issued that same date. See February 7, 2012 Order, Holiday CVS, L.L.C. v. Holder, Civil Action No. 12-191 (RBW) (D.D.C.). The plaintiffs then moved for a preliminary injunction on February 17, 2012, seeking to enjoin enforcement of the ISOs pending resolution of the administrative proceedings before the DEA. With its opposition to the plaintiffs' preliminary injunction motion, the government submitted declarations of two DEA officials: Deputy Assistant Administrator Joseph Rannazzisi and Administrator Michele Leonhart (the "DEA declarations"). The government purportedly offered these declarations to "distill the voluminous evidence compiled in the course of DEA's investigation of CVS, and summarize for this Court what informed the Administrator's ultimate decision to issue the ISOs." Gov't's Opp'n at 25 n.8. The plaintiffs thereafter filed a motion on February 28, 2012, to strike the DEA declarations or, in the alternative, to cross examine Administrator Leonhart.

The Court will first address the plaintiffs' motion to strike, and then turn to their preliminary injunction motion.

II. The Plaintiffs' Motion to Strike or, in the Alternative, to Cross Examine Affiant The plaintiffs move to strike the DEA declarations on the following grounds. First, because the DEA regulations require that ISOs contain "a statement of [the Administrator's] findings regarding the danger to public health or safety," 21 C.F.R. § 1301.36(e), and because the ISOs themselves state that the Administrator's imminent danger findings are made "[u]nder the facts and circumstances described herein," the plaintiffs argue that the ISOs must stand or fall solely based upon the findings stated within the orders. See Pls.' Mot. to Strike Mem. at 4-7. Second, the plaintiffs maintain that the DEA declarations are impermissible post hoc rationalizations for the Administrator's decision to issue the ISOs. Id. at 8. Third, they argue that the DEA declarations include inadmissible hearsay and offer improper testimony regarding "ultimate issues" in this case. Id. at 8-10. In the alternative to striking the declarations, the plaintiffs request that they be permitted to cross examine Administrator Leonhart as an adverse witness at the hearing on the plaintiffs' preliminary injunction motion. Id. at 10-12.

The Court addressed these issues at the hearing on March 2, 2012, during which it expressed its reluctance to consider the DEA declarations without having the administrative record to confirm that the declarations comported with the materials that were before Administrator Leonhart at the time she issued the ISOs. The Court was also hesitant to assess the merits of the plaintiffs' APA claim based only upon the selective portions of the administrative record that the parties had submitted to the Court at that time. See Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 420 (1971) (judicial review under the APA generally must "be based on the full administrative record that was before the [agency] at the time [it] made [its] decision") (emphasis added)); Walter O. Boswell Mem. Hosp. v. Heckler, 749 F.2d 788, 792 (D.C. Cir. 1984) ("If a court is to review an agency's action fairly, it should have before it neither more nor less information than did the agency when it made its decision."). Accordingly, at the conclusion of the March 2, 2012 hearing, the Court remanded the case to the DEA "for compilation of an administrative record," March 5, 2012 Order, Holiday CVS, L.L.C. v. Holder, Civil Action No. 12-191 (RBW) (D.D.C.), which the DEA thereafter submitted to the Court on March 5, 2012. Then, at the hearing on March 13, 2012, the Court denied the plaintiffs' motion to strike. The following analysis memorializes the oral rulings issued at the March 13, 2012 hearing and explains further the reasons for the Court's denial of the plaintiffs' motion.

A. Consideration of Materials Outside the ISOs

As an initial matter, the Court rejects the plaintiffs' argument that the ISO must stand or fall solely based upon the findings stated therein. First, nothing in the DEA regulation requires the Administrator's imminent danger findings to be comprehensive; it only requires that the ISO contain "a statement of [the Administrator's] findings regarding the danger to public health or safety." 21 C.F.R. § 1301.36(e). Second, this Court already determined in Cardinal that the government's reading of § 1301.36(e) as requiring only a non-exhaustive summary of the factual and legal basis for the immediate suspension decision is entitled to deference, and it will adhere to that ruling here. See __ F. Supp. 2d at __, 2012 WL 718486, at *21-*22 (finding that the DEA's interpretation of its own ambiguous regulation, advanced in a legal brief, was entitled to deference under Auer v. Robbins, 519 U.S. 452, 461 (1997)). Third, while there is some boilerplate language in the ISOs suggesting that the Adminsitrator's findings of imminent danger are limited to the statements within the ISOs, other parts of the ISOs state that the findings are "non-exhaustive" and "include, but are not limited to" the circumstances stated therein. ISOs at 1, ¶ 4. As in Cardinal, the Court declines to interpret the boilerplate language in the ISOs relied upon by the plaintiffs "to restrict the Administrator's ability to offer further explanation regarding her findings of imminent danger." __ F. Supp. 2d at __, 2012 WL 718486, at *11 n.9.

The Court also rejects the plaintiffs' evidentiary objections to the DEA declarations. The Supreme Court has observed that the decision whether to grant a preliminary injunction is often based on "procedures that are less complete than a trial on the merits." Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981). Following this principle, courts generally permit consideration of hearsay evidence in connection with preliminary injunction motions. E.g., Mullins v. City of New York, 626 F.3d 47, 52 (2d Cir. 2010) (collecting cases from six other circuits). Furthermore, regarding the plaintiffs' request to strike "ultimate issue" testimony contained in Administrator Leonhart's declaration (e.g., Leonhart's statements that the ISOs' findings were "sufficient"), the Court accords no evidentiary value to these conclusory statements and thus disregards them for the purposes of adjudicating the plaintiffs' preliminary injunction motion.

The most substantial challenge raised by the plaintiffs is their claim that the DEA declarations contain impermissible post hoc rationalizations. Under the APA, "the focal point for judicial review must be the administrative record already in existence, not some new record made initially in the reviewing court." Camp v. Pitts, 411 U.S. 138, 142 (1973) (per curiam).

This rule therefore forbids "ex post supplementation of the record by either side." Walter O. Boswell Mem. Hosp., 749 F.2d at 793 (emphasis added); see IMS, P.C. v. Alvarez, 129 F.3d 618, 624 (D.C. Cir. 1997) (rejecting the plaintiff's attempt to submit litigation affidavits to supplement the agency record ex post); AT&T Info. Sys. Inc. v. Gen. Servs. Admin., 810 F.2d 1233, 1236 (D.C. Cir. 1987) (rejecting agency's attempt to submit litigation affidavit to provide post hoc rationalization of the agency's action).

Nevertheless, when faced with an inadequate administrative record, the "record may be supplemented to provide, for example, background information or evidence of whether all relevant factors were examined by an agency," but "the new material should be merely explanatory of the original record and should contain no new rationalizations.'" AT&T Info. Sys. Inc., 810 F.2d at 1236 (quoting Envtl. Defense Fund v. Costle, 657 F.2d 275, 285 (D.C. Cir. 1981)) (alteration in original); see also Consumer Fed'n of Am. & Pub. Citizen v. U.S. Dep't of Health & Human Servs., 83 F.3d 1497, 1507 (D.C. Cir. 1996) (noting that while the record may be supplemented with "additional background information about the agency's basic rationale," the agency may not submit affidavits offering an "entirely new theory"); Costle, 657 F.2d at 286 ("If anything, a judicial venture outside the record can only serve either as background information, or to determine the presence of the requisite fullness of the reasons given."). And when there is a "contemporaneous explanation of the agency decision . . . [that] indicate[s] the determinative reason for the final action taken[,] . . . [t]he validity of the [agency's] action must stand or fall on the propriety of that finding." Camp, 411 U.S. at 143.

Here, the ISOs plainly were "contemporaneous explanation[s]" for the Administrator's actions, and reveal the following factors that informed the Administrator's "imminent danger" finding: (1) the large and increasing amounts of oxycodone purchased by the CVS pharmacies, ISOs ¶¶ 2-3; (2) several physicians whose customers filled prescriptions at the CVS pharmacies were under investigation or subjected to disciplinary action for dispensing illegitimate prescriptions for controlled substances, id. ¶ 4(a); (3) the pharmacists in charge at both stores admitted to DEA investigators to dispensing controlled substances under circumstances where they knew or should have known that the substances were abused or diverted by the customer, id. ¶ 4(b); (5) the specific guidance provided to CVS by the DEA (that allegedly was disregarded), id. ¶ 5; and (6) the public information readily available regarding the oxycodone epidemic in Florida, id.

Upon close inspection, the Court finds that many of the statements in the DEA declarations are merely "explanatory" of and provide "background information" for the contemporaneous findings in the ISOs. The DEA declarations are also supported by the certified administrative record produced by the DEA,*fn5 thus corroborating the Administrator's sworn statement that the circumstances described in her declaration "formed the basis for [her] decision to issue the ISOs to CVS 5195 and CVS 219" on February 2, 2012. Gov't's Opp'n, Declaration of Michele M. Leonhart ("Leonhart Decl.") ¶ 12.*fn6 The Court thus deems it appropriate to consider these statements in assessing the likelihood of success of the plaintiffs' APA claims. The Court will, moreover, consider statements in the DEA declarations that provide "evidence of whether all relevant factors were examined by the agency," AT&T Info. Sys. Inc., 810 F.2d at 1236, particularly since the plaintiffs claim that the Administrator failed to adequately consider all such factors.*fn7 Accordingly, the plaintiffs' motion to strike the DEA declarations is denied.

B. The Plaintiffs' Alternative Request to Cross Examine Administrator Leonhart

The Court also denies the plaintiffs' alternative request to cross examine Administrator Leonhart because "such inquir[ies] into the mental processes of administrative decisionmakers [are] usually to be avoided," Overton Park, 401 U.S. at 420 (citing United States v. Morgan, 313 U.S. 409, 422 (1941)), and the plaintiffs have showed no reason to depart from that principle here. In addition, Local Civil Rule 65.1(d) reflects a policy disfavoring the presentation of live testimony at hearings on preliminary injunction motions, and gives the Court discretion in deciding whether to permit such testimony. See Local Civ. R. 65.1(d) (providing that "[t]he practice in this jurisdiction is to decide preliminary injunction motions without live testimony where possible," and granting the Court discretion "to decline to hear witnesses at the hearing where the need for live testimony is outweighed by considerations of undue delay, waste of time, or needless presentation of cumulative evidence."). For these policy reasons and the fact that the Court has determined that the representations in Administrator Leonhart's declaration are supported by the administrative record that existed when the ISOs were issued, cross-examination of the Administrator is unnecessary.

III. The Plaintiffs' Motion for a Preliminary Injunction "'A plaintiff seeking a preliminary injunction must establish [1] that [it] is likely to succeed on the merits, [2] that [it] is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in [its] favor, and [4] that an injunction is in the public interest.'" Sherley v. Sebelius, 644 F.3d 388, 392 (D.C. Cir. 2011) (quoting Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008)) (some alterations in original). Because it is "an extraordinary remedy," a preliminary injunction "should be granted only when the party seeking the ...


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