ANALYSIS

The Government seeks to prohibit Defendants from arguing that Abtox did not need to
file a 510(k) submission in order to market the modified sterilizer. The Government further
seeks to prohibit them from arguing that the marketed sterilizer was safe and effective or that
they had a reasonable belief that it was safe and effective. While the Government did not
differentiate its various arguments, we derived three distinct arguments from the Government’s
memorandum: (1) this evidence is precluded by the FDA’s determination that Defendants needed
to file a new 510(k) submission; (2) this evidence is not relevant; and (3) even if this evidence
were relevant, its probative value is substantially outweighed by the danger of confusing the
issues. We address each argument in turn.
I. Issue Preclusion

It is undisputed that the FDA concluded that Abtox needed to file a new 510(k)
submission in order to legally market the modified sterilizer. (R. 80, Defs.’ Opp’n, Ex. 7, FDA
Letter at 1, 24.) The Government asserts that issue preclusion relieves it of the burden of proving
at trial that a new 510(k) submission was required. Evidence or arguments that contradict a
factual determination made by an agency are precluded if: (1) the original action was properly
before the agency; (2) the same disputed issue of fact was before the agency as is before the
court; (3) the agency acted in a judicial capacity; and (4) the parties had an adequate opportunity
to litigate the issues before the agency. Meyer v. Rigdon, 36 F.3d 1375, 1379-80 (7th Cir. 1994).
Under this test, any arguments or evidence that Abtox did not need to file a new 510(k)
submission are not precluded by the FDA’s determination. The FDA did not act in a judicial

capacity when it determined that a new 510(k) submission was required. The FDA simply


I. Federal Rule of Evidence 403: Confusion of the Issues

Finally, we address the Government’s remaining argument that this evidence should be
excluded because its probative value is substantially outweighed by the danger of confusing the
issues before the jury. The Court expressly concludes in the exercise of its discretion under
Federal Rule of Evidence 403, for all the reasons contained herein, that any probative value of
the Defendants’ invalid good faith defense is substantially outweighed by the danger of confusing
the issues before the jury and unduly delaying the trial.

CONCLUSION

For the reasons provided above, we grant the Government’s motion in limine. (R. 75-1.)
We conclude that 21 C.F.R. § 807.81(a)(3) is not relevant because the FDA-cleared sterilizer was
never in commercial distribution. Accordingly, we definitively rule that Defendants cannot argue
that they did not need to file a premarket notification because the modified sterilizer was as safe
and effective as the FDA-cleared sterilizer. We also rule that they cannot argue that they had a
good faith belief that the modified sterilizer was as safe and effective as the FDA-cleared
sterilizer. This is a definitive ruling of law by the Court that will govern the trial as well as the
Court’s potential jury instructions. The Court’s ruling will only be revisited if Defendants can

establish that the FDA-cleared sterilizer was in commercial distribution.

ENTERED: EZ Y Sogo

Judge Ruben Castillo
United States District Court

Dated: March 11, 2004


Subsections 807.81(a)(1) and 807.81(a)(2) together explain when a 510(k) submission is required
for a device that is “being introduced into commercial distribution for the first time,” and
subsection 807.81(a)(3) explains when a 510(k) submission is required when a “device is one
that the person currently has in commercial distribution or is reintroducing into commercial
distribution, but that is about to be significantly changed or modified in design, components,
method of manufacture, or intended use.” 21 C.F.R. § 807.81(a).

It appears undisputed that the FDA-cleared sterilizer was never in commercial
distribution. This issue was previously addressed by the parties in their memoranda associated
with Defendants’ motion to dismiss. While Defendants did not explicitly state that the FDA-
cleared sterilizer was never in commercial distribution, they argued that it would be “grossly
unjust” to prosecute them because they, as well as the FDA, have consistently assumed that
subsection 807.81(a)(3) should apply. (R. 43, Defs.’ Reply at 8.) The Government
acknowledged that the FDA “acted under the assumption that [21 C.F.R. § 807.81(a)(3)] did
apply to Abtox.” (R. 33, Gov’t’s Resp. at 9.2.) Because Defendants addressed the

Government’s argument but did not deny its assertion that the FDA-cleared sterilizer was never

is about to be significantly changed or modified in design,
components, method of manufacture, or intended use. The following
constitute significant changes or modifications that require a
premarket notification:
(i) A change or modification in the device that could
significantly affect the safety or effectiveness of the device,
e.g., a Significant change or modification in design, material,
chemical composition, energy source, or manufacturing
process.

21 CFR. § 807.81.


reviewed Abtox’ 510(k) submissions and concluded that Abtox needed to file a new 510(k)
submission. Defendants, therefore, are not precluded from arguing that Abtox did not need to
file a new 510(k) submission in order to legally market the modified sterilizer.’
II. Federal Rule of Evidence 402: Relevance

The Government next argues that the safety and effectiveness of the marketed sterilizer
are not relevant because, among other reasons, the FDA-cleared sterilizer was never in
commercial distribution. Under 21 C.F.R. § 807.81, whether the FDA-cleared sterilizer was in

commercial distribution determines when a manufacturer is required to file a 510(k) submission.*

3 The parties argue extensively about whether Defendants could have legally challenged
the FDA’s determination. These arguments, however, concern the administrative doctrines of
exhaustion, finality, and ripeness and are not relevant to whether a criminal defendant is
precluded from making arguments that contradict an administrative finding.

4 The relevant text of 21 C.F.R. § 807.81 is provided due to the importance of this
regulation to the resolution of this issue.

§ 807.81 When a premarket notification submission is required.

(a) Except as provided in paragraph (b) of this section, each person who is
required to register his establishment pursuant to § 807.20 must submit a
premarket notification submission to the Food and Drug Administration at
least 90 days before he proposes to begin the introduction or delivery for
introduction into interstate commerce for commercial distribution ofa device
intended for human use which meets any of the following criteria:
(1) The device is being introduced into commercial distribution for
the first time; that is, the device is not of the same type as, or is not
substantially equivatent to, (i) a device in commercial distribution
before May 28, 1976, or (ii) a device introduced for commercial
distribution after May 28, 1976, that has subsequently been
reclassified into class I or II.
(2) The device is being introduced into commercial distribution for
the first time by a person required to register, whether or not the
device meets the criteria in paragraph (a)(1) of this section.
(3) The device is one that the person currently has in commercial
distribution or is reintroducing into commercial distribution, but that

5


1, 17 (1st Cir. 2001). Subsection 807.81(a)(3), however, is not applicable, so Defendants’
subjective belief that this subsection permitted them to market the modified sterilizer is not
relevant and does not constitute a valid good faith defense to the pending charges.

Defendants cannot argue that they had a valid good faith belief that subsection
807.81(a)(3) was applicable. First, it is not objectively reasonable for Defendants to interpret
subsection 807.81(a)(3) as permitting them to market the modified sterilizer when the FDA-
cleared sterilizer was never in commercial distribution. See United States v. Thurston, 358 F.3d
51 (1st Cir. 2004) (explaining that the Prigmore rule does not apply when there is “no material
question about ambiguity in the underlying legal requirements[,] no germane question about the
meaning of the law . . . [and] no issue of lack of fair notice of what the law requires . . .”).
Subsection 807.81(a)(3) unambiguously states that it only applies when a device is or has been in
commercial distribution. 21 C.F.R. § 807.81(a)(3). Such a defense would be the classic mistake
of law defense that has been uniformly rejected except in very narrow circumstances, such as tax
evasion. Cheek v. United States, 498 U.S. 192, 199 (1991) (“The general rule that ignorance of
the law or a mistake of law is no defense to criminal prosecution is deeply rooted in the
American legal system.”); United States v. Stockheimer, 157 F.3d 1082, 1088 (7th Cir. 1998)
(stating that “a defendant’s belief in the legality of his conduct is not a defense” to mail and bank
fraud). Nor can Defendants assert that their mistaken understanding was caused by the FDA or
any other government official, see, e.g., Ostrosky v. Alaska, 913 F.2d 590, 595 (9th Cir. 1990),
because they acknowledge that Abtox started marketing the modified sterilizer “based on its
understanding . . . that no new 510(k) was required” prior to filing a 510(k) submission with the

FDA. (R. 80, Defs.’ Opp’n at 10.)


Minute Order Form (06/97)

United States District Court, Northern District of Minois

Name of Assigned Judge Ruben Castillo Sitting Judge if Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 03 CR 126 - | and 2 DATE 3/11/2004
CASE USA vs. Ross A. Caputo and Robert M. Riley
TITLE

[In the following box (a) indicate the party filing the motion, e.g,, plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

of the motion being presented,}

ay

MOTION:
DOCKET ENTRY:
qd) o Filed motion of [ use listing in “Motion” box above.]
Q) oO Brief in support of motion due
(3) o Answer brief to motion due___. Reply to answer brief due____.
(4) oO Ruling/Hearingon___—_setfor__—_att
(5) oO Status hearing[held/continued to] [set for/re-set for]on__—_set for__—__ at.
(6) o Pretrial conference[held/continued to] [set for/re-set for]on__—_—setfor__—sat_—
(7) o Trial[set for/re-set for]on_ at
(8) oO [Bench/Jury trial] [Hearing] held/continuedto at
(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
COFRCP4(m) CiLocal Rule 41.1 OFRCP41(a)\(1) CFRCP41(a)(2).
ao) «of [Other docket entry] Enter Memorandum Opinion and Order. Government’s motion in limine

[75-1] is granted.

a [For further detail see order attached to the original minute order.]

No notices required, advised in open court.

No notices required.

rors of noices
Notices mailed by judge’s staff. a
Notified counsel by telephone. MAR 11 2004

Docketing to mail notices.
Mail AO 450 form.

docketing, A initials

Copy to judge/magistrate judge.

date mailed notice
courtroom - net

RO deputy’s
initials

Date/time received in
tral Clerk’s Office mailing deputy initials



in commercial distribution, we conclude that the FDA-cleared sterilizer was never in commercial
distribution.

Subsection 807.81(a)(3) only applies when a device is in commercial distribution or has
been in commercial distribution. “[C]ourts must presume that a legislature says in a statute what
it means and means in a statute what it says there. When the words ofa statute are unambiguous,
then, this first canon is also the last: “judicial inquiry is complete.” Conn. Nat'l Bank v.
Germain, 503 U.S. 249, 253-54 (1992) (citations omitted) (quoting Rubin v. United States, 449
USS. 424, 430 (1981)). Subsection 807.81(a)(3) is, therefore, not relevant because the FDA-
cleared sterilizer was never in commercial distribution.

Defendants assert that this subsection is relevant, nonetheless, because they had a good
faith belief that subsection 807.81(a)(3) permitted them to market the modified sterilizer without
filing a new 510(k) submission. Defendants claim that their good faith belief negates an essential
element of the fraud counts: intent to defraud.’ See United States v. Morris, 80 F.3d 1151, 1165
(7th Cir. 1996). If the FDA-cleared sterilizer had been in commercial distribution, Defendants’
good faith belief that subsection 807.81(a)(3) permitted them to market the modified sterilizer
would be a defense fo the fraud counts because Defendants are “entitled to have their intent
assessed in light of the interpretation of the underlying filing requirements that is most congenial

to their case theory and yet also objectively reasonable.” See United States v. Prigmore, 243 F.3d

> “Intent to defraud requires a willful act by the defendant with the specific intent to
deceive or cheat, usually for the purpose of getting financial gain for one’s self or causing
financial loss to another.” United States v. Owens, 301 F.3d 521, 528 (7th Cir. 2002). But when
a defendant is charged with conspiracy to defraud under 18 U.S.C. § 371, intent to defraud
includes both intending to cause the government property or pecuniary loss and intending to
interfere with or obstruct a lawful government function. United States v. FJ. Vollmer & Co.,
1 F.3d 1511, 1519 (7th Cir.1993).


the market. (R. 84, Gov’t’s Reply, Ex. 1, FDA Letter.) After marketing the modified sterilizer,
Abtox filed at least four 510(k) submissions seeking premarket clearance to market that sterilizer.
(R. 80, Defs.’ Opp’n at 10; R. 84, Gov’t Reply, Exs. 3-6.) In these 510(k) submissions, Abtox
described the modifications to the FDA-cleared sterilizer as minor. (R. 80, Defs.’ Opp’n, Ex. 7,
FDA Letter at 1.) The FDA found each submission deficient and informed Abtox that it
“considers the design modifications significant requiring a new 510(k) submission” and that it
could not market the modified sterilizer without FDA approval. (/d. at 1, 24.) Defendants
continued to market the modified sterilizer, but allege that they did so pursuant to a FDA policy
that permits manufacturers to market modified devices pending the resolution of any
modification issues. (/d., Ex. 4, Seizure Approval Letter at 3.)
LEGAL STANDARDS
The Court’s power to exclude evidence in limine derives from the Court’s authority to

manage trials. Luce v. United States, 469 U.S. 38, 41 n. 4 (1984). A motion in limine should
only be granted where the evidence is clearly inadmissible for any purpose. Basile v. Ondrato,
No. 02-C-3795, 2003 WL 22953340, at *1 (N.D. Ill. Dec. 12, 2003). “Unless evidence meets
this high standard, evidentiary rulings should be deferred until trial so that questions of
foundation, relevancy and potential prejudice may be resolved in proper context.” Hawthorne
Partners v. AT & T Tech., Inc., 831 F. Supp. 1398, 1400 (N.D. Ill. 1993). Ifthe Court grants a
motion in /imine we should specify whether the ruling is conditional or definitive, Wilson v.
, Williams, 182 F.3d 562, 567 (7th Cir. 1999), but the Court may nonetheless, in the exercise of

sound judicial discretion, amend an in limine ruling if warranted, Luce, 49 U.S. at 41-42.


Government’s motion in Jimine. (R. 75-1.) We definitively rule that Defendants cannot argue
that they did not need to file a premarket notification because the modified sterilizer was as safe
and effective as the FDA-cleared sterilizer. We also rule that they cannot argue that they had a
good faith belief that the modified sterilizer was as safe and effective as the FDA-cleared
sterilizer.
RELEVANT FACTS

Defendants were directors of Abtox, Inc.: Caputo was President and Chief Executive
Officer and Riley was Vice-President of Regulatory Affairs. Abtox manufactured a medical
device, the Plazlyte Sterilization System, that sterilized medical devices at low temperatures in a
gas plasma. Under the Federal Food, Drug, and Cosmetic Act (“FDCA”), 21 U.S.C. §§ 301-97,
a medical device manufacturer must obtain premarket approval or premarket clearance from the
FDA before marketing a medical device. A manufacturer must file a 510(k) submission with the
FDA to obtain premarket clearance, and the FDA will grant premarket clearance if it determines
that the device is substantially equivalent to a device that is currently on the market. Finally, a
manufacturer needs to file an additional 510(k) submission in order to market a modified version
of a medical device that is or has been in commercial distribution if the modifications “could
significantly affect the safety or effectiveness of the device.” 21 C.F.R. § 807.81(a)(3).”

The FDA granted Abtox premarket clearance to market the Plazlyte sterilizer after

determining that it was substantially equivalent to ethylene oxide sterilizers that were already on

? Under the FDCA, “the burden is on the manufacturer to determine whether a premarket
notification should be submitted for a change or modification in a device . . . [because] the
manufacturer is the person best qualified to make this determination.” Establishment
Registration and Premarket Notification, 42 Fed. Reg. 42520, 164-65 (August 23, 1977).

2


UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

UNITED STATES OF AMERICA
No. 03 CR 0126
Vv.
Judge Ruben Castillo
ROSS A. CAPUTO and
-ROBERT M. RILEY.

MEMORANDUM OPINION AND ORDER

This is the third opinion we have issued in this pending criminal case. In our earlier
opinions we denied pretrial efforts to dismiss the indictment and to obtain a bill of particulars.
See United States vy. Caputo, 288 F. Supp. 2d 923 (N.D. Ill. 2003) (addressing the bill of
particulars); United States v. Caputo, 288 F. Supp 2d 912 (N.D. Ill. 2003) (addressing the motion
to dismiss). The facts surrounding these charges are adequately summarized in our earlier
opinion addressing the motion to dismiss and will not be needlessly repeated herein.

This opinion addresses the Government’s motion in limine presently before the Court.
(R. 75-1.) The Government seeks to prohibit Defendants Ross Caputo and Robert Riley
(“Defendants”) from arguing that they did not need to file a premarket notification, known as a
510(k) submission, with the Food and Drug Administration (“FDA”) in order to market a
modified version of a FDA-cleared sterilizer.' The Government further seeks to prohibit
Defendants from arguing that the marketed sterilizer was safe and effective or that they had a

reasonable belief that it was safe and effective. For the reasons provided below, we grant the

1 The Government asserts that the marketed sterilizer is a different, rather than a
modified, sterilizer. Whether the marketed sterilizer is a modified or different sterilizer is a fact
question that the Court cannot resolve. We use the term modified sterilizer only for convenience
and consistency.

gq