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IVY Sports Medicine, LLC v. Burwell

United States District Court, District of Columbia

March 31, 2016

SYLVIA M. BURWELL, et al., Defendants.



Denying Plaintiff’s Motion for Attorneys’ Fees and Expenses


Plaintiff Ivy Sports Medicine, LLC[1] (“Ivy”) successfully demonstrated in this case that the Food and Drug Administration (“FDA”) had unlawfully rescinded a decision to clear Ivy’s medical device for market. Ivy now seeks an award of attorneys’ fees and expenses incurred in litigating its claims under the Administrative Procedure Act (“APA”), see 5 U.S.C. §§ 500 et seq. Ivy claims that it is entitled to reasonable fees and expenses pursuant to the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412(d)(1)(A), because it was the “prevailing party” in this litigation and because the government’s position was not “substantially justified.” Because the Court concludes that the government’s position was substantially justified, the Court will deny Ivy’s motion.


This Court and the D.C. Circuit have both explained the factual and regulatory background surrounding this case in detail. See Ivy Sports Med., LLC v. Burwell, 767 F.3d 81, 83-86 (D.C. Cir. 2014); Ivy Sports Med., LLC v. Sebelius, 938 F.Supp.2d 47, 49-54 (D.D.C. 2013); see also ECF No. 75. The Court assumes familiarity with those prior opinions, and will confine its own discussion to the facts and regulatory provisions most relevant to the present motion.

In 1976, Congress passed the Medical Device Amendments to the Federal Food, Drug, and Cosmetic Act (“FDCA”) in order to provide for the regulation of medical devices that are intended for human use. See Medical Device Amendments of 1976, Pub. L. No. 94-295, 90 Stat. 539; see also 21 U.S.C. § 301 et seq. The amendments divided medical devices into three categories, Class I, Class II, or Class III, “according to the degree of regulation thought necessary to provide reasonable assurance of each device’s ‘safety and effectiveness.’” Contact Lens Mfrs. Ass’n v. FDA, 766 F.2d 592, 594 (D.C. Cir. 1985). As relevant here, the amendments classify a device not introduced into interstate commerce before May 28, 1976 (what the FDA refers to as a “post-amendment device”), by default, into Class III. See 21 U.S.C. § 360c(f)(1). A Class III device is the most heavily regulated, and cannot “be sold to the general public until, through a costly and time-consuming process, it had gained the FDA’s ‘premarket approval.’” Contact Lens Mfrs., 766 F.2d at 594.

Alternative routes to market are available for some post-amendment devices, however. For example, a post-amendment device may be classified as a Class I or Class II device if the device is “substantially equivalent to another device” that has already been classified in those classes. See 21 U.S.C. § 360c(f)(1)(A). A device is considered “substantially equivalent” to a preexisting device if the device “has the same intended use as the predicate device” and either “has the same technological characteristics as the predicate device” or has “different technological characteristics” but nevertheless has been shown to be as safe and effective as that predicate device. Id. § 360c(i)(1)(A). A device manufacturer may seek “substantial equivalence” status by submitting a “premarket notification, ” or what the agency refers to as a section 510(k) application or clearance, which triggers an FDA review. See 21 U.S.C. § 360(k); see also Ivy Sports Med., 767 F.3d at 83. If the FDA determines that the device is substantially equivalent to an existing device, the agency issues a classification order “declaring the device to be substantially equivalent to a legally marketed predicate device, ” 21 C.F.R. § 807.100(a)(1), which “allow[s] the device to be marketed subject to appropriate restrictions, ” Ivy Sports Med., 767 F.3d at 83.

In 2005 and 2006, ReGen Biologics (“ReGen”) twice submitted premarket notifications for the Collagen Scaffold (“CS”), a device which Ivy describes as intended “to reinforce damaged or weakened meniscal soft tissue in the knee and to provide a resorbable scaffold for replacement by a patient’s own soft tissue.” See Compl. ¶ 19; see also A.R. 559. Although the premarket notifications asserted that the CS was substantially equivalent to previously approved surgical meshes, and sought a Class II classification, see A.R. 559, 1279, the FDA rejected each notification, see A.R. 1207, 2426. In December 2007, several months after the FDA rejected the second notification, members of New Jersey’s congressional delegation (where ReGen was based), wrote to the FDA concerning the agency’s review of the CS. See A.R. 2431. Both the FDA Commissioner and the then-director of the FDA’s Center of Devices and Radiological Health, Dr. Daniel Schultz, thereafter met with ReGen representatives. See A.R. 2627. The officials took no further action on ReGen’s previously denied applications, but ReGen was informed that it could submit a new, revised pre-market notification. Id.

In July 2008, ReGen did submit a third premarket notification. As with the first two notifications, the FDA reviewers recommended that the CS be found not substantially equivalent. See A.R. 2836. But instead of issuing a final decision, Dr. Schultz sought additional input from a special Orthopedic Advisory Panel, which concluded that the CS was “as safe and effective as the predicate devices.” See A.R. 2976. On that basis, among others, Dr. Schultz issued a letter to ReGen informing it that the CS had been found to be substantially equivalent to the existing devices and classified the CS as a Class II device. See A.R. 3240-42.

After the CS was cleared for market, however, the Wall Street Journal published an article claiming that the CS’s approval process had been colored by political pressures, several other members of Congress raised their own concerns with the FDA, and a group of FDA employees wrote to President Obama alleging that Dr. Schultz and the FDA’s Commissioner had improperly influenced the agency’s review of the CS. See Ivy Sports Med., 767 F.3d at 85. These allegations led the FDA to conduct an internal investigation and issue a report, which found that “over the 17 year review history of the CS device, multiple departures from processes, procedures, and practices occurred, ” and recommended that “a focused scientific reevaluation of the decision to clear the CS device [was] warranted.” A.R. 3487-88. Ultimately, Dr. Jeffrey Shuren, who had replaced Dr. Schultz as the Director of the Center for Devices and Radiological Health, notified ReGen in October 2010 that the agency’s clearance of the CS had been “in error” and that the FDA was rescinding its determination that the CS was substantially equivalent to predicate devices. See A.R. 5458. The agency issued a formal rescission notification in March 2011. See A.R. 7342-43. Because the CS was designated as a Class II device solely on the basis of its equivalency to a predicate device, the agency’s rescission order “in turn, meant that the Collagen Scaffold would be in Class III and have to go through the extensive pre-market approval process to be marketed again.” Ivy Sports Med., 767 F.3d at 85; see also A.R. 7342.

As relevant to this case, the FDA did not make use of notice and comment to rescind its substantial equivalency determination. The FDCA includes a provision that allows the FDA to change the classification it has given to a device. During the time period relevant in this case, 21 U.S.C. § 360c(e) stated in relevant part that: “[b]ased on new information respecting a device, the Secretary may, upon his own initiative or upon petition of an interested person, by regulation (A) change such device’s classification, and (B) revoke, because of the change in classification, any regulation or requirement in effect . . . with respect to such device.” 21 U.S.C. § 360c(e). Instead of using notice and comment to change the CS’s classification, the FDA simply rescinded its underlying substantial equivalency determination, which had the de facto effect of changing the device’s classification to Class III.

Two months after the agency issued the rescission order, ReGen filed this lawsuit challenging the rescission order under the APA as contrary to the FDCA and arbitrary and capricious. See Compl. ¶¶ 68-69. ReGen had filed for bankruptcy, and while this lawsuit was pending Ivy was substituted as plaintiff. See note 1, supra. In its motion for summary judgment, Ivy argued that the FDA’s rescission order was invalid on several grounds. Of most relevance to this motion, Ivy claimed that the FDA’s rescission order was invalid because the agency could not lawfully reclassify the CS through a process other than a rulemaking under section 360c(e). See Pl.’s Mem. P. & A. Supp. Mot. Summ. J. at 30-36 (“Pl.’s Mem. Supp. Summ. J.”), ECF No. 23-1.

Generally, “administrative agencies are assumed to possess at least some inherent authority to revisit their prior decisions, at least if done in a timely fashion.” Ivy Sports Med., 767 F.3d at 86. In American Methyl Corp. v. EPA, however, the D.C. Circuit held that “when Congress has provided a mechanism capable of rectifying mistaken actions, ” it is “not reasonable” for a court to infer that the agency retains inherent authority to reconsider its actions. 749 F.2d 826, 835 (D.C. Cir. 1984). In that case, the EPA had issued a waiver under the Clean Air Act to allow the American Methyl Corporation to introduce a new methanol/gasoline fuel blend into commerce for the first time, but later proposed to revoke that waiver based on a new study that had come to the agency’s attention. See Id. at 828-31. Despite the fact that a particular section of the Clean Air Act, section 211(c), imposed “a number of substantive and procedural requirements the agency must satisfy before controlling or prohibiting a fuel or fuel additive, ” id. at 830 (citing 42 U.S.C. § 7545(c)), the EPA simply proposed to rescind the waiver it had granted. The Circuit concluded that, while the Clean Air Act’s waiver provision “does not state whether waivers granted . . . may be reconsidered and revoked, ” the legislative history made clear that “Congress contemplated regulation of fuels and fuel additives so waived into commerce only through proceedings under section 211(c).” Id. at 834. The Court determined that Congress “provided a mechanism sufficient to this task, ” and “further understood this mechanism ...

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