Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-04-01432/USCOURTS-caDC-04-01432-0/pdf.json

Parties Involved:
Drug Enforcement Administration
Respondent
PDK Laboratories Inc.
Petitioner

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 10, 2006 Decided February 24, 2006

No. 04-1432

PDK LABORATORIES INC.,

PETITIONER

v.

UNITED STATES DRUG ENFORCEMENT ADMINISTRATION,

RESPONDENT

On Petition for Review of an Order of the

United States Drug Enforcement Agency

Saul Pilchen argued the cause for petitioner. With him on

the briefs were Joseph L. Barloon and David E. Carney.

Teresa A. Wallbaum, Appellate Counsel, U.S. Department

of Justice, argued the cause for respondent. With her on the

brief were Kenneth L. Wainstein, U.S. Attorney, and Stephen A.

Sola, Trial Attorney.

Before: TATEL and GARLAND, Circuit Judges, and

EDWARDS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge TATEL.

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TATEL, Circuit Judge: Pursuant to the Chemical Diversion

and Trafficking Act of 1988, the Drug Enforcement Agency

(DEA) “may order the suspension of any importation or

exportation of a listed chemical . . . on the ground that the

chemical may be diverted to the clandestine manufacture

of a controlled substance.” Petitioner, a pharmaceutical

manufacturer, does not dispute that some of its products contain

ephedrine and pseudoephedrine, both “listed chemicals” and

both critical in the manufacture of methamphetamine, a

“controlled substance.” Nor does petitioner dispute that its

ephedrine- and pseudoephedrine-containing products have been

and will continue to be “diverted” to illicit methamphetamine

labs. Instead, petitioner argues that when DEA suspends

shipments of listed chemicals—in this case, the agency

suspended two such shipments—it may act only on the basis of

evidence that the raw listed chemical, not the finished product

containing the listed chemical, “may be diverted.”

Alternatively, petitioner argues that even if DEA may act on the

basis of evidence that the finished product may be diverted, the

suspension orders in this case were unsupported by substantial

evidence. We disagree on both counts and deny the petition for

review. DEA, acting on the basis of its law enforcement

experience and expertise, reasonably interpreted the phrase

“listed chemical” to include ephedrine and pseudoephedrine

contained in finished drug products. Moreover, a series of

letters from DEA warning petitioner that thousands of bottles of

its products had been found in some 140 methamphetamine labs

in at least eighteen states provides more than enough evidence

to support the suspension orders.

I.

A powerful and highly addictive synthetic stimulant,

methamphetamine is a growing problem for law-enforcement

and public-health officials across the country, particularly in

western states. “Chronic methamphetamine abuse can lead to

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psychotic behavior including intense paranoia, visual and

auditory hallucinations, and out-of-control rages that can result

in violent episodes.” Office of Nat’l Drug Control Policy,

Methamphetamine Fact Sheet 1 (2003). Rooting out the illegal

manufacture and distribution of the drug has proven especially

difficult because it “can be made in a portable cooler with

ingredients bought at the corner drugstore.” Timothy Egan,

Meth Building Its Hell’s Kitchen in Rural America, N.Y. Times,

Feb. 6, 2002, at A14.

Congress’s first major effort to arm the federal government

with adequate authority to stamp out homemade

methamphetamine production came in the Chemical Diversion

and Trafficking Act of 1988 (CDTA), Pub. L. No. 100-690, tit.

VI, subtit. A, 102 Stat. 4312. To discourage the diversion of

“listed chemicals”—including two critical methamphetamine

ingredients, ephedrine and pseudoephedrine, id. § 6054(3)

(codified as amended at 21 U.S.C. § 802(34)(C), (K))—the

CDTA requires companies to report transactions in such

chemicals to DEA, see id. § 6052(a) (codified at 21 U.S.C.

§ 830(b)), and imposes criminal liability on individuals who

import a listed chemical “knowing, or having reasonable cause

to believe, that [it] will be used to manufacture a controlled

substance,” see id. § 6053(c) (codified as amended at 21 U.S.C.

§ 960(d)(2)). Using language central to the issue before us, one

section of the Act, now codified at 21 U.S.C. section 971(c)(1),

also provides that DEA “may order the suspension of any

importation or exportation of a listed chemical . . . on the ground

that the chemical may be diverted to the clandestine

manufacture of a controlled substance.” Id. § 6053(a) (codified

as amended at 21 U.S.C. § 971(c)(1)).

As the CDTA tightened the screws on access to raw listed

chemicals, illicit methamphetamine manufacturers shifted to

extracting ephedrine and pseudoephedrine from common overUSCA Case #04-1432 Document #951355 Filed: 02/24/2006 Page 3 of 25
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the-counter medications, including Sudafed and some types of

Primatene. Since the two listed chemicals are present in such

medications in a chemically unchanged form, the extraction

process is relatively simple. Congress sought to counter this

trend with the Domestic Chemical Diversion Control Act of

1993, which (for the first time) required companies to report all

transactions in FDA-approved drug products containing listed

chemicals. Pub. L. No. 103-200 § 2(a)(6)(C), 107 Stat. 2333,

2333-34 (codified as amended at 21 U.S.C. § 802(39)(A)(iv)).

Still dissatisfied, Congress enacted the Methamphetamine AntiProliferation Act of 2000, Pub. L. No. 106-310, tit. XXXVI, 114

Stat. 1227, which allocated significant funding to combating

methamphetamine production, id. §§ 3623(c), 3624(b)(1),

3625(c), and imposed stiffer penalties on the operators of

methamphetamine laboratories, id. § 3612.

Petitioner PDK Laboratories, Inc., a large manufacturer of

generic drugs containing ephedrine and pseudoephedrine, has

long known that its products have been diverted to clandestine

methamphetamine labs. In March 1998, DEA sent PDK a

“warning letter” documenting the appearance of the company’s

products at fifty-one methamphetamine labs in various states

over an eight-month period. Two years later, another DEA

warning letter informed PDK that its products had been found

at forty-nine additional methamphetamine labs. And over the

subsequent eleven months, DEA sent twenty-one additional

warning letters informing the company that its ephedrine- and

pseudoephedrine-containing products were still showing up at

illicit drug labs across the country. In total, DEA alerted PDK

to the diversion of “thousands of bottles of its previously

imported [listed] chemicals to approximately 140 illicit

methamphetamine laboratory-related sites located in at least 18

states.” See Indace, Inc., Suspension of Shipments, 69 Fed. Reg.

67,951, 67,959 (Nov. 22, 2004).

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By January 2001, DEA had had enough. Relying on the

string of warning letters, as well as on PDK’s failure to report

several “regulated transactions,” DEA flexed its section

971(c)(1) authority and issued suspension orders to two foreign

manufacturers preparing to ship 6,000 kilograms of raw

ephedrine to PDK. PDK challenged the suspension orders, and

an administrative law judge (ALJ), siding with the company,

concluded that the orders lacked adequate legal and factual

support. In her analysis, the ALJ construed DEA’s authority to

suspend importations of “listed chemicals” to extend only to

cases in which the agency has evidence that bulk listed

chemicals like raw ephedrine—and not finished over-thecounter drug products that contain listed chemicals—may be

diverted to clandestine drug manufacturers.

On appeal, DEA’s Deputy Administrator disagreed with the

ALJ. Indace, Inc., Suspension of Shipments, 67 Fed. Reg.

77,805 (Dec. 19, 2002). Reading section 971(c)(1) to permit

suspension if DEA finds that finished drug products containing

listed chemicals “may be diverted,” the Deputy Administrator

held that DEA could properly rely on the diversion of PDK

products to justify suspending the ephedrine shipments. Id. at

77,806. Considering the “totality of the circumstances,”

including both the warning letters and the reporting violations,

the Deputy Administrator concluded that substantial evidence

supported the suspension orders. Id. at 77,807.

PDK filed a petition for review in this court. In considering

this first appeal, we saw ambiguity as to “whether, as the

suspension orders assume, [the phrase] ‘the chemical may be

diverted’ [from section 971(c)(1)] includes the prospect that

PDK’s ephedrine-containing pills in retail stores will be sold to,

or shoplifted by, people who then use the pills to produce

methamphetamine.” PDK Labs., Inc. v. DEA, 362 F.3d 786, 794

(D.C. Cir. 2004) (“PDK I”). Reasoning that the Deputy

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Administrator had therefore improperly concluded that section

971(c)(1) compelled a result that it did not in fact compel, we

vacated and remanded to DEA to “fill in the gap” by “bring[ing]

its experience and expertise to bear in light of competing

interests at stake.” Id. at 797-98. Although then-Judge Roberts

disagreed on this point, he joined in the majority’s alternative

reason for vacating the Deputy Administrator’s order, id. at 799

(Roberts, J., concurring in part and concurring in the judgment),

namely, that it failed to address DEA’s own relevant precedent

in finding that PDK violated the CDTA’s reporting

requirements. See id. at 798-99 (providing the majority’s

reasoning).

On remand, a new Deputy Administrator explained that, in

her view, “the totality of [Congress’s] progressive enactments”

reflected its “intent to provide DEA the regulatory means to

monitor the domestic production, manufacture and distribution

of [listed] chemicals and prevent their illicit use in

manufacturing methamphetamine.” 69 Fed. Reg. at 67,955.

Therefore, while acknowledging that these chemicals are often

found in products that have “legitimate therapeutic uses,” id. at

67,954, the Deputy Administrator held that section 971(c)(1)

permits suspension of imports of listed chemicals based on

evidence that finished drug products containing such chemicals

“may be diverted,” id. at 67,957. Because “[s]ection 971(c)(1)

is considered by DEA to be a significant component of the

regulatory arsenal given it by Congress to combat this immense

and growing problem,” and because “using precursor

chemicals[] obtained by theft or purchase of listed chemical

products” poses an acute law-enforcement challenge, id. at

67,956, the Deputy Administrator concluded that a narrow

interpretation of the statute would unnecessarily hamper the

agency’s efforts to prevent the diversion of listed chemicals. Id.

at 67,595-96.

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Defending her interpretation of section 971(c)(1), the

Deputy Administrator asserted that her approach comported

with the statute’s text, reasoning that “[i]f Congress wanted to

make an express distinction between a bulk listed chemical and

a finished product . . . it could have done so.” Id. at 67,955. She

further explained that “listed chemical . . . should be construed

broadly in light of that term’s use in other parts of the same

statute . . . enacted by Congress in 1988,” id. at 67,954, and

pointed out that the Ninth Circuit had already interpreted “listed

chemical” as used in one of the CDTA’s criminal provisions to

cover the ephedrine and pseudoephedrine in finished drug

products, id. (citing United States v. Daas, 198 F.3d 1167, 1175

(9th Cir. 1999)). The Deputy Administrator also believed that

a narrow interpretation would “create an arbitrary dual

standard,” for if DEA could suspend shipments only if raw

ephedrine were at risk of diversion, then even when DEA “had

facts to show that an importer had reasonable cause to believe

that a listed chemical was to be imported, tableted, and

distributed to a clandestine laboratory,” it could do nothing to

suspend the shipment. Id. at 67,955. Such a result, she

concluded, “is certainly inconsistent with the criminal penalty

provisions of the law involving imports,” which would allow for

the imposition of lengthy prison terms on the importer. Id.

Turning to the second issue—whether substantial evidence

supported the suspension orders—the Deputy Administrator

again looked to the totality of the circumstances. Examining

three categories of evidence—the warning letters and two types

of reporting violations—she concluded that the orders were

adequately supported, emphasizing that “the evidence of

diversion reflected in the series of Warning Letters provides a

sufficient independent basis” for sustaining the suspension

orders. Id. at 67,961 n.9. In reaching this conclusion, the

Deputy Administrator rejected PDK’s argument that DEA’s

failure to compare the rate of diversion of other companies’

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products to PDK’s diversion rate rendered the suspension orders

invalid. She explained:

DEA recognizes that it and other law enforcement

agencies are aware of and able to take action against

only a small number of the total clandestine

methamphetamine laboratories and dump sites in this

country. Accordingly, the specific universe of PDK

product diverted, vis a vis, all other manufacturers’

products, is a number which cannot be established with

any specificity. . . .

Given the quantities and diverse locations of PDK

listed chemical products discovered at illicit sites

reflected in the Warning Letters, DEA is able to draw a

reasonable inference regarding the likelihood that the

instant shipments may be diverted and to exercise its

discretion as to the need to prohibit their import.

Id. at 67,959. The Deputy Administrator also pointed out that

she had considered warning letters to be adequate grounds for

taking adverse action against other drug manufacturers, and that

in one case she had sustained a suspension order based on fewer

warning letters than DEA had sent to PDK. Id.

Before addressing the two types of reporting violations

(neither of which is relevant to our disposition of this case), the

Deputy Administrator noted “[a]s a collateral matter” that

Michael Lulkin, PDK’s former in-house counsel “responsible

for implementing PDK’s operating procedures for responding to

DEA Warning Letters,” had been convicted of four counts of

felony fraud, one of which involved PDK. Id. Yet after his

conviction, Lulkin remained at PDK, “where his duties include

overseeing the company’s regulatory compliance.” Id. The

Deputy Administrator also observed that PDK’s former

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president, Michael Krasnoff, had been convicted of similar

charges, yet “continued to serve as a consultant to the

company,” id.—despite his statement that “it’s none of my

business if someone gets high off of this stuff,” id. at 67,960 n.7.

“Neither of these personnel decisions,” she concluded, “but

particularly the retention of Mr. Lulkin as a key overseer of

regulatory matters . . . , generates confidence on the part of the

Deputy Administrator that PDK is sufficiently committed to

complying with the myriad of regulatory requirements designed

to prevent diversion of listed chemicals.” Id. at 67,959.

PDK again petitions for review, challenging the Deputy

Administrator’s interpretation of section 971(c)(1) and arguing

that insufficient evidence supports the suspension orders. We

address each contention in turn.

II.

When considering the legitimacy of an agency’s

interpretation of a statute it is charged with enforcing, we first

ask “whether Congress has directly spoken to the precise

question at issue.” Chevron U.S.A. Inc. v. Natural Res. Def.

Council, Inc., 467 U.S. 837, 842-43 (1984). In this case, PDK I

has already answered this question in the negative: it concluded

that section 971(c)(1) is ambiguous as to whether DEA can issue

suspension orders based on the diversion of finished drug

products that contain listed chemicals. See PDK I, 362 F.3d at

797 (“we do not agree that the meaning of § 971(c)(1) is as plain

as DEA says it is”). This leaves us with the task of resolving at

Chevron’s second step whether the Deputy Administrator’s

resolution of that ambiguity “is based on a permissible

construction of the statute,” Chevron, 467 U.S. at 843, keeping

in mind that “[a] court may not substitute its own construction

of a statutory provision for a reasonable interpretation made by

the administrator of an agency,” id. at 844.

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Even at Chevron’s second step, we begin with the statute’s

language. Abbott Labs. v. Young, 920 F.2d 984, 988 (D.C. Cir.

1990) (“The ‘reasonableness’ of an agency’s construction

depends on the construction’s ‘fit’ with the statutory language

as well as its conformity to statutory purposes.”). Recall that

section 971(c)(1) provides that DEA “may order the suspension

of any importation or exportation of a listed chemical . . . on the

ground that the chemical may be diverted to the clandestine

manufacture of a controlled substance.” 21 U.S.C. § 971(c)(1).

According to PDK, section 971(c)(1) does not “vest DEA with

the authority to suspend an import based on misuse of a finished

product.” Pet’r’s Br. 23. But nothing in the statute’s spare

language supports that contention. Section 971(c)(1) simply

authorizes DEA to suspend an importation when it finds that a

“listed chemical” may be diverted. While it’s true that under the

Deputy Administrator’s interpretation, the listed chemical

subject to diversion may be part of a finished drug, section

971(c)(1) in no way precludes her view that a listed chemical

remains a listed chemical when, without any change in its

chemical structure, it is incorporated into pills or tablets. As

then-Judge Roberts explained in his PDK I separate opinion, the

Deputy Administrator’s

interpretation comports with common sense. If a

methamphetamine manufacturer steals, for the purpose

of making methamphetamine, a bottle containing pure

ephedrine, or pure ephedrine dissolved in water, or a

bottle containing 50 ephedrine pills and 50 guaifenesin

pills [guaifenesin is another compound present in some

of PDK’s products], we would not hear an argument that

he did not divert a listed chemical because he also

diverted a bottle, some water, or some guaifenesin. The

presence of packaging materials or other extraneous

items does not vitiate the existence of the listed

chemical. Here, a bottle of PDK Mini Two-Way Action

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contains pills each consisting of 25 mg of ephedrine and

200 mg of guaifenesin and binders. For purposes of

Section 971(c), the decongestant and the binders are

extraneous materials, no more relevant to the analysis

than the bottles and boxes in which the pills are

packaged.

PDK I, 362 F.3d at 801 (Roberts, J., concurring in part and

concurring in the judgment). 

Absent anything in section 971(c)(1)’s language suggesting

that the Deputy Administrator’s interpretation is impermissible,

PDK resorts to the assertion that Congress, committed to

ensuring that popular cold medications remain readily available,

could never have intended to give DEA authority to “shutter the

industry.” Although citing nothing in the CDTA’s legislative

history to support this contention, PDK explains that:

Given that some misuse [of ephedrine drug products]

concededly is endemic to the industry, the Deputy

Administrator’s interpretation . . . would allow DEA to

shutter the entire [listed chemicals] industry by using

Section 971 to suspend imports to any and every

manufacturer whose finished goods are misused in some

amount—that is, every manufacturer in the United

States.

Pet’r’s Br. 24-25. Invoking PDK I’s statement that “no one

doubts that Congress did not intend to ban, or to give DEA the

authority to ban, all sales of ephedrine-containing drugs in retail

stores,” PDK I, 362 F.3d at 797 (emphasis added), PDK

contends that the Deputy Administrator’s interpretation must

therefore be unreasonable. We disagree.

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For starters, the Deputy Administrator has never suggested

that section 971(c)(1) permits DEA to ban drug sales in retail

stores. Nor has she claimed authority “to suspend imports to

any and every manufacturer . . . in the United States.” She has

concluded only that in deciding whether to suspend a particular

shipment of raw ephedrine, DEA may consider evidence that

ephedrine-containing drug products are being diverted. If, as

PDK asserts, DEA can readily amass evidence of diversion

sufficient to warrant suspending any ephedrine shipment, that

attests to the rampant nature of the diversion problem and—

critically for our purposes—to section 971(c)(1)’s breadth, not

to whether the Deputy Administrator’s interpretation is

unreasonable. As we have explained, “the Supreme Court has

consistently instructed that statutes written in broad, sweeping

language should be given broad, sweeping application.”

Consumer Elecs. Ass’n v. FCC, 347 F.3d 291, 298 (D.C. Cir.

2003).

Even under PDK’s narrow interpretation, moreover, DEA

would still have authority, at least in principle, to “shutter the

industry.” After all, there is a risk that every shipment of raw

ephedrine could be diverted before delivery, just as there is a

risk that finished drug products containing ephedrine could be

diverted after delivery. If DEA could amass substantial

evidence to support the inference that all raw ephedrine

shipments “may be diverted”—a big if, of course—then no one

doubts it would have the authority to suspend those shipments,

thus “shuttering the industry.” When even a narrow

interpretation of section 971(c)(1) would authorize DEA to

“shutter the industry,” a more expansive interpretation could

hardly be considered unreasonable on that basis. The relative

ease with which DEA can document diversion of ephedrine- and

pseudoephedrine-containing drugs goes to the quantum of

evidence necessary to justify the inference that a shipment “may

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be diverted” (a question we shall turn to shortly), but it has little

relevance to the interpretation of “listed chemical.”

Nor do we see any merit to PDK’s charge that the Deputy

Administrator failed to consider the “competing interests at

stake,” as PDK I instructs. PDK I, 362 F.3d at 797-78.

Contrary to PDK’s insistence, nothing in PDK I requires the

Deputy Administrator to weigh the risk that her interpretation

could potentially “shutter the industry” against DEA’s statutory

charge to prevent ephedrine diversion. PDK I merely gives the

boilerplate instruction that the Deputy Administrator, when

interpreting section 971(c)(1), must “bring [her] experience and

expertise to bear in light of competing interests at stake.” Id.

Moreover, as PDK I directs, the Deputy Administrator did

interpret section 971(c)(1) in light of her experience and

expertise. See Cont’l Air Lines, Inc. v. DOT, 843 F.2d 1450,

1452 (D.C. Cir. 1988) (an agency must provide “a reasonable

explanation for its conclusion that the interpretation serves the

statutory objectives” (internal quotation marks and alterations

omitted)). She emphasized not only that DEA considers the

suspension provision a critical weapon in its antimethamphetamine arsenal, but also that PDK’s narrow reading

would severely hamper the provision’s usefulness. 69 Fed. Reg.

at 67,956. She reasoned that PDK’s interpretation would lead

to an “arbitrary dual standard,” i.e., an importer who delivered

ephedrine knowing that it would be diverted after being

processed into finished products could be held criminally liable,

yet DEA would lack authority to suspend the shipment itself.

Id. at 67,955. And drawing on DEA’s experience with the

growing problem of homemade methamphetamine, she

concluded that the statute “should be construed broadly to

effectuate its purpose” of protecting the public. Id. at 67,956.

Far from being a case in which an agency has failed to explain

its interpretive decision, see Republican Nat’l Comm. v. FEC, 76

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F.3d 400, 407 (D.C. Cir. 1996) (“[W]e might determine that

although not barred by statute, an agency’s action is arbitrary

and capricious because the agency has not considered certain

relevant factors or articulated any rationale for its choice.”), the

Deputy Administrator’s reasoning provides a more-thanadequate justification for her resolution of section 971(c)(1)’s

ambiguity, see Ariz. Pub. Serv. Co. v. EPA, 211 F.3d 1280, 1287

(D.C. Cir. 2000) (“As long as the agency stays within Congress’

delegation, it is free to make policy choices in interpreting the

statute, and such interpretations are entitled to deference.”

(internal quotation marks and alterations omitted)).

In reaching this conclusion, we acknowledge that DEA

could someday abuse its broad section 971(c)(1) authority to

reach an outcome Congress would not have approved. Yet all

congressional delegations of discretionary authority—

particularly broad delegations like this one—carry such a risk.

Without more, the theoretical possibility that an agency might

someday abuse its authority is of limited relevance in

determining whether the agency’s interpretation of a

congressional delegation is reasonable. Should DEA one day

opt to “shutter the industry,” as PDK fears, the courts remain

open to consider a challenge to that action pursuant to the

Administrative Procedure Act.

PDK’s remaining arguments likewise lack merit. The

company rightly points out that PDK I criticizes the Deputy

Administrator for relying on post-CDTA legislative enactments

to explicate what the CDTA plainly meant, reasoning that “the

views of a subsequent Congress form a hazardous basis for

inferring the intent of an earlier one.” PDK I, 362 F.3d at 794

(quoting United States v. Price, 361 U.S. 304, 313 (1960)). But

here, the Deputy Administrator used post-enactment legislative

action for a very different purpose, namely, to help her choose

among several plausible constructions of a statute Congress

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charged her agency with administering. We see nothing

inappropriate about this. In exercising delegated authority to

resolve statutory ambiguities, agencies can and should consider

policy input from a wide variety of sources, including the views

of private citizens, industry groups, non-governmental

organizations, legal commentators, and, most certainly,

Congress. Our case law supports this. For example, while we

cautioned in Southern California Edison Co. v. FERC, 116 F.3d

507 (D.C. Cir. 1997), against relying on subsequent legislative

history to divine an earlier Congress’s intent, id. at 514, we

nonetheless observed that “[w]ith respect to Congress’s current

policy goals, as distinguished from retrospective legislative

history, we find the [subsequent] committee reports . . . quite

illuminating,” id. at 516; cf. McCreary v. Offner, 172 F.3d 76,

82 (D.C. Cir. 1999) (“[T]o determine whether [a statute] is

reasonably susceptible to more than one meaning . . .

post-enactment legislative commentary offering a plausible

interpretation is certainly relevant, much like plausible

interpretations from litigants, other courts, law review articles,

or any other source would be.”). Indeed, it would be quite

peculiar to bar an agency seeking to fill a statutory gap from

considering strong indications of Congress’s developing

preferences. Here, for example, subsequent congressional action

reflects the severity of the diversion problem, as well as

Congress’s commitment to addressing it aggressively, both of

which clearly support the Deputy Administrator’s broad

interpretation of her statutory authority. 

PDK next points to our observation in PDK I that the 1993

Domestic Chemical Diversion Control Act (DCDCA) “drew a

distinction between, on the one hand, the finished product and,

on the other hand, the listed chemical.” PDK I, 362 F.3d at 795.

According to PDK, this “tends to indicate that Congress

intended Section 971 to address diversion of raw, bulk listed

chemicals from their intended destination.” Pet’r’s Br. 28.

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Even setting aside the hypocrisy of this claim when juxtaposed

with PDK’s previous one—either later congressional enactments

are relevant to interpreting section 971(c)(1) or they’re not—the

argument is without merit. True, the DCDCA does speak of

“drugs” and “drug products” as distinct from “listed chemicals,”

see DCDCA § 2(b)(1) (codified at 21 U.S.C. § 814(a), (e)),

leading us to have reasoned in PDK I that “[o]ne might say . . .

that in the view of a later Congress it is PDK’s ‘drug’ or ‘drug

product,’ not the ‘listed chemical’ mentioned in § 971(c)(1), that

is being diverted,” PDK I, 362 F.3d at 795 (emphasis added).

But the DCDCA’s distinction could just as easily demonstrate

that when Congress wishes to distinguish between “drugs” and

“listed chemicals,” it does so. Indeed, the Deputy Administrator

took just this position, 69 Fed. Reg. at 67,955 (“If Congress

wanted to make an express distinction between a bulk listed

chemical and a finished product in section 971(c), it could have

done so.”), and we have no license to substitute PDK’s preferred

interpretation for the agency’s reasonable one, see Serono Labs.,

Inc. v. Shalala, 158 F.3d 1313, 1321 (D.C. Cir. 1998) (“[U]nder

Chevron, courts are bound to uphold an agency interpretation as

long as it is reasonable—regardless whether there may be other

reasonable, or even more reasonable, views.”).

Finally, PDK argues that the Deputy Administrator

inappropriately relied on the Ninth Circuit’s decision in United

States v. Daas, 198 F.3d at 1175, which held that the phrase

“listed chemical” in one of the CDTA’s criminal provisions

encompasses listed chemicals found in drug products.

Disinclined to read the same phrase in the same act to mean

different things, the Deputy Administrator explained that she

would resolve section 971(c)(1)’s ambiguity to comport with the

Ninth Circuit’s broad interpretation. See 69 Fed. Reg. at 67,954.

Given this explanation, we see no basis for PDK’s assertion that

the “Deputy Administrator did not explain [Daas’s] application

. . . to Section 971,” Pet’r’s Br. 28-29. Nor do we see anything

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unreasonable about the Deputy Administrator’s adoption of an

approach that we previously found to have “logic” to it. PDK I,

362 F.3d at 796. 

In short, as directed in PDK I, the Deputy Administrator

brought her “expertise and experience” to bear in filling the gap

left by Congress when it drafted section 971(c)(1). Finding her

interpretation consistent with the provision’s text, as well as

with its manifest purpose of preventing the diversion of

chemicals used in the illegal manufacture of a controlled

substance, we shall defer to her reasonable, well-considered

interpretation. See Chevron, 467 U.S. at 843.

III.

This leaves us with the question whether substantial

evidence supports the suspension orders. Although the parties

lock horns over all three categories of evidence upon which

DEA rested its suspension orders—the warning letters and the

two types of reporting violations—the Deputy Administrator

made clear that “the evidence of diversion reflected in the series

of Warning Letters provides a sufficient independent basis” for

sustaining the suspension orders. 69 Fed. Reg. at 67,961 n.9.

We agree and shall affirm on that basis. But before explaining

why the warning letters suffice, we must address PDK’s

contention that the Deputy Administrator’s use of a totality-ofthe-circumstances test to decide whether substantial evidence

exists to suspend a shipment is so formless that her conclusion

is “purely results-driven.” Pet’r’s Br. 31.

The Totality-of-the-Circumstances Test

Although we take PDK’s point that, “[i]n the absence of an

explanation, the ‘totality of the circumstances’ can become

simply a cloak for agency whim—or worse,” LeMoyne-Owen

Coll. v. NLRB, 357 F.3d 55, 61 (D.C. Cir. 2004), we disagree

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that an agency’s use of the test is necessarily arbitrary and

capricious. Agencies routinely employ multi-factor standards

when discharging their statutory duties, and we have never

hesitated to uphold their decisions when adequately explained.

See, e.g., Ark Las Vegas Rest. Corp. v. NLRB, 334 F.3d 99, 105-

106 (D.C. Cir. 2003); ExxonMobil Gas Mktg. Co. v. FERC, 297

F.3d 1071, 1081, 1084-88 (D.C. Cir. 2002). Indeed, we

ourselves use a totality test to make a variety of fact-intensive

determinations. See, e.g., United States v. Moore, 394 F.3d 925,

930 (D.C. Cir. 2005) (whether reasonable suspicion exists for

making a Terry stop); Kingman Park Civic Ass’n v. Williams,

348 F.3d 1033, 1040 (D.C. Cir. 2003) (whether state political

processes “are not equally open to participation by members of

a class of [protected] citizens” under the Voting Right Act). Nor

is this a case, as PDK alleges, where the agency has failed to

explain the basis for its decision or the relative significance of

the evidence before it. See LeMoyne-Owen, 357 F.3d at 61

(“[A] thorough, careful, and consistent application of a

multi-factor test is important to allow relevant distinctions

between different factual configurations to emerge, and . . .

appellate courts depend on it for the performance of their

assigned task of review.” (internal citations, quotation marks,

and alterations omitted)). Quite to the contrary, the Deputy

Administrator explained that the warning-letter evidence was by

itself sufficient to justify suspending the shipments. What better

way for the Deputy Administrator to have acknowledged the

warning letters’ relative importance to her decision?

To support its challenge to the Deputy Administrator’s

application of a totality test, PDK relies on Pearson v. Shalala,

164 F.3d 650 (D.C. Cir. 1999), and Chippewa & Flambeau

Improvement Co. v. FERC, 325 F.3d 353 (D.C. Cir. 2003).

According to PDK, Pearson stands for the proposition that “an

unarticulated standard does not comport with . . . the APA.”

Pet’r’s Br. 33. But that case holds only that an agency

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proceeding on a case-by-case basis must pour “some definitional

content” into a vague statutory term by “defining the criteria it

is applying.” See Pearson, 164 F.3d at 660. In upholding the

suspension orders on the strength of the warning-letter evidence,

the Deputy Administrator did just that, giving “some definitional

content” to the phrase “may be diverted”: in her view, a string

of warning letters documenting the diversion of thousands of

pills to dozens of illicit methamphetamine labs is sufficient to

warrant a finding that a drug “may be diverted.” Although PDK

is correct that this falls short of an exhaustive definition,

Pearson itself acknowledges that an agency is not “necessarily

required to define [an open-ended] term in its initial general

regulation—or indeed . . . obliged to issue a comprehensive

definition all at once.” Id. at 661. Rather, in fleshing out the

contours of vague statutory terms, agencies are “entitled to

proceed case by case,” id., precisely as DEA did here, see 69

Fed. Reg. at 67,597 (“DEA need not issue an array of

regulations to anticipate every situation where a [listed]

chemical may be diverted. . . . The statute clearly envisions

permitting the agency to proceed by adjudication.”).

Worse still for PDK, Chippewa actually supports the

Deputy Administrator’s decision. That case touched on the

Federal Energy Regulatory Commission’s (FERC) statutory

authorization to require a reservoir operator to procure a license

whenever “necessary or appropriate in the maintenance and

operation” of downstream power plants. 16 U.S.C. § 796(11).

Although FERC considers the totality of the circumstances when

deciding whether a license is “necessary or appropriate,” over

time the agency has identified “a series of relevant factors” that

it “balanc[es] . . . in light of the facts of the [particular] case,”

the most important of which is the percentage by which the

reservoir increases the power generation of downstream plants.

Chippewa, 325 F.3d at 358. Rejecting a reservoir operator’s

claim that this standard’s flexibility doomed a FERC order

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requiring the operator to obtain a license, we observed that the

reservoir at issue increased downstream power generation more

than other reservoirs FERC had also required to have licenses.

Id. Because “the increase was clearly above the line of

demarcation [at which FERC requires a reservoir to get a

license], wherever it may lie,” id. at 359, we upheld the

order—even though FERC had never articulated the threshold

above which licensing would be required.

Like FERC, DEA applied an all-things-considered standard

to implement a statute that confers broad discretionary authority.

Also like FERC, in applying that standard, DEA relied on its

precedent, namely, Mediplas Innovations, 67 Fed. Reg. 41,256

(June 17, 2002), which upheld a suspension order based on less

evidence of product diversion than DEA amassed against PDK.

See 69 Fed. Reg. at 67,959. And also like FERC, DEA provided

no clear “line of demarcation” to define an open-ended term,

Chippewa, 325 F.3d at 359, instead choosing to establish the

term’s contours through a series of adjudications. Just as we

upheld FERC’s reasonable exercise of its discretion in

Chippewa, so too must we uphold the Deputy Administrator’s

here.

The Warning Letters

This brings us to the question whether the warning-letter

evidence supports DEA’s inference that the ephedrine shipments

“may be diverted.” PDK argues that before suspending the two

ephedrine shipments, the Deputy Administrator should have

compared the percentage of PDK products documented in the

warning letters with the percentage of other companies’ products

that had been diverted. Although never contesting that its

products have been diverted to many illicit methamphetamine

labs, PDK argues that “[t]he Deputy Administrator’s failure to

compare PDK to other companies in the industry . . . prevents

this Court from . . . assess[ing] . . . whether DEA is treating

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similarly situated parties similarly.” Pet’r’s Br. 35. In other

words, PDK seems to think that DEA may not suspend its

shipments unless the agency also suspends shipments to other

companies whose products are diverted in equal or greater rates.

PDK’s argument lacks merit. Section 971(c)(1) offers no

hint that DEA must undertake a comparative analysis before

issuing a suspension order. Instead, it says that DEA may

suspend “any importation . . . of a listed chemical” based on a

finding that “the chemical may be diverted.” 21 U.S.C.

§ 971(c)(1). The rate at which other companies’ products are

diverted has no bearing on whether PDK’s products “may be

diverted.” As the government nicely puts it, moreover, “[a] law

enforcement agency is not limited to investigating only those

companies or persons who have committed comparatively more

crimes than others. In the law enforcement context, absolute

amounts matter.” Resp’t’s Br. 42. And the “absolute amounts”

of diverted PDK products—thousands of bottles to roughly 140

illicit labs in at least eighteen states, see 69 Fed. Reg. at

67,959—serve as a more-than-adequate foundation for the

Deputy Administrator’s inference that PDK’s two ephedrine

shipments “may be diverted” somewhere down the line. “[A]n

agency’s predictive judgments about areas that are within the

agency’s field of discretion and expertise,” we have held, “are

entitled to particularly deferential review, so long as they are

reasonable.” Milk Indus. Found. v. Glickman, 132 F.3d 1467,

1478 (D.C. Cir. 1998) (internal quotation marks omitted).

PDK challenges the Deputy Administrator’s finding that

“substantial amounts” of PDK products have been diverted. 69

Fed. Reg. at 67,959. According to PDK, the warning letters

document only a “minuscule percentage” of its total distributed

products. Pet’r’s Br. 34. That may be so, but PDK is a large

company, and a minuscule percentage of its products is a large

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amount—thousands of bottles, according to the warning

letters—and absolute amounts matter.

Moreover, we think that PDK’s dubious personnel decisions

reinforce the Deputy Administrator’s conclusion that the

warning letters support DEA’s finding that the two ephedrine

shipments “may be diverted.” 69 Fed. Reg. at 67,959. Hiring

Krasnoff, a convicted felon who believes “it’s none of my

business if someone gets high off of this stuff,” surely

demonstrates “a cavalier approach toward complying with DEA

regulations.” Id. at 67,960 n.7. And retaining Lulkin, who had

been convicted for fraud against PDK itself, as “a key overseer

of regulatory matters,” hardly demonstrates PDK’s

“commit[ment] to complying with the myriad of regulatory

requirements designed to prevent diversion of listed chemicals.”

Id. at 67,959.

PDK objects to the Deputy Administrator’s consideration

of a DEA employee’s statement that “PDK products were

number one in terms of being seized at methamphetamine labs.”

Id. Although PDK did refer to the employee’s statement as

“hearsay” in the fact section of its opening brief, it waited until

its reply to argue that the Deputy Administrator should have

disregarded it. This is too late, of course, and we will not

consider the claim. See City of Nephi, Utah v. FERC, 147 F.3d

929, 933 n.9 (D.C. Cir. 1998) (“By merely informing the court

in the statement of facts in its opening brief [of the factual basis

for a claim] . . . [petitioner] failed properly to raise this

argument.”); Rollins Envtl. Servs. v. EPA, 937 F.2d 649, 653 n.2

(D.C. Cir. 1991) (“Issues may not be raised for the first time in

a reply brief.”).

In a footnote, PDK argues that the Deputy Administrator

improperly ignored factual inaccuracies that the ALJ identified

in the warning letters. In support, however, PDK cites a portion

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of the ALJ’s opinion that has nothing to do with factual errors.

To be sure, elsewhere the opinion does contain a vague

reference to some errors in a small number of warning letters.

See In re Indace, Inc., Nos. 01-12, 01-13, slip op. at 38-39 (Apr.

5, 2002) (included at J.A. 59-60). But judging from the

citations, at most six (and probably only four) letters contained

any such errors. We agree with the government that “[a]ny

factual inaccuracies identified by the ALJ, even if true, are de

minimis.” Resp’t’s Br. 41 n.11; see Braniff Airways, Inc. v.

Civil Aeronautics Bd., 379 F.2d 453, 466 (D.C. Cir. 1967) (“A

court will not reject an agency finding that is supported by

substantial evidence merely because the agency also incidentally

mentions incompetent or irrelevant material.”). The Deputy

Administrator’s lapse, if any, thus provides no basis for setting

aside the suspension orders. See 5 U.S.C. § 706 (instructing

courts to take “due account . . . of the rule of prejudicial error”);

Mass. Trs. v. United States, 377 U.S. 235, 248 (1964) (finding

reversal unwarranted “when a mistake of the administrative

body is one that clearly had no bearing on . . . the substance of

decision reached”); Fed. Express Corp. v. Mineta, 373 F.3d 112,

118 (D.C. Cir. 2004) (“No principle of administrative law or

common sense requires us to remand a case in quest of a perfect

opinion unless there is reason to think that the remand might

lead to a different result.”).

In a similar vein, PDK argues that the Deputy Administrator

“failed to address the numerous infirmities in the warning letters

that led the ALJ to conclude ‘it is difficult to determine what, if

any, inference can be drawn from these warning-letter figures.’”

Pet’r’s Br. 32. Viewed in context, however, the ALJ’s statement

makes clear that the only infirmity she had in mind was DEA’s

failure to undertake a comparative analysis, and we have already

explained why we think the Deputy Administrator’s articulated

position that DEA has no obligation to do so is perfectly

reasonable.

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Finally, PDK alleges that, factual inaccuracies aside, the

Deputy Administrator’s reliance on the warning letters was itself

arbitrary because, according to the company, in deciding

whether to send the letters, DEA “followed no rules, regulations,

or even the most basic informal internal guidelines.” Id. at 37.

PDK explains that

[t]he pertinent point here is not that it was unfair of DEA

to document discoveries of PDK products in warning

letters while ignoring discoveries of competitors’

products. The point is that the inconsistent treatment

regarding the preparation of warning letters shows that

the Deputy Administrator’s reliance on them . . . is

arbitrary and capricious—largely because the record

demonstrates that the decision to document a discovery

of misused product, in a warning letter, is itself arbitrary

and capricious.

Id. at 38. We disagree. Even assuming the standards for issuing

warning letters are arbitrary, that does not automatically

invalidate the suspension orders. To succeed on such a claim,

PDK must identify exactly how defects in the standards for

issuing warning letters tainted the suspension orders. See 5

U.S.C. § 706. A hypothetical shows why. Suppose it were

DEA’s policy, upon discovering a company’s drug product at a

methamphetamine lab, to send warning letters only if a coin toss

came up heads. The arbitrariness of that policy would do

nothing to undermine the evidence that the company’s product

had been diverted to clandestine methamphetamine labs.

Likewise, because PDK nowhere argues that DEA’s allegedly

arbitrary issuance of warning letters impeaches the evidence of

rampant product diversion—indeed, PDK acknowledges the

diversion—any possible arbitrariness in the process for sending

warning letters is of no moment.

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IV.

In sum, we find the Deputy Administrator’s construction of

“listed chemical” reasonable and her conclusion that the two

ephedrine shipments “may be diverted” supported by substantial

evidence. We realize the interpretation of section 971(c)(1) we

validate gives DEA significant authority over shipments of listed

chemicals, but the provision’s undemanding language invites

such a result. Facing a persistent threat to public health and a

challenging law-enforcement problem, Congress armed DEA

with broad suspension authority, and only Congress, not this

court, can take it away. We deny the petition for review.

So ordered.

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