Il. Plaintiff's Claims Are Not Reviewable By This Court
A. Court Lacks Jurisdiction To Enjoin FDA Enforcement Action

In Count IH of the Complaint, Plaintiffs seek an order “prohibiting the FDA from
continuing to seize drugs which meet the importation method described in paragraphs 21 and
22 of this Count” as well as an order requiring the FDA to return the drugs that were seized
pursuant to the July 9, 2003 criminal search warrant. Plaintiffs thus seek pre-enforcement
review as to whether the FDA can proceed against Plaintiffs or the products they wish to
import.

We find that granting the requested relief would not only impair and impede an
ongoing criminal investigation but would also prevent the government from enforcing the
FDCA against Plaintiffs’ products in a civil seizure action pursuant to 21 U.S.C. § 334. This
relief cannot be granted for the law is well-settled that the district courts lack jurisdiction to
enjoin enforcement proceedings brought pursuant to the FDCA. See Ewing v. Mytinger &
Casselberry, Inc., 339 U.S. 594 (1950).

In Ewing, the Supreme Court held that district courts do not have jurisdiction to review
the FDA’s determination that there is probable cause to believe that a product violates the
FDCA because Congress, in enacting the FDCA, did not intend to permit pre-enforcement
judicial review:

Judicial review of this preliminary phase of the administrative procedure does

not fit the statutory scheme nor serve the policy of the [FDCA]. Congress

made numerous administrative determinations under the Act reviewable by the

courts. But it did not place the finding of probable cause under [21 U.S.C.

§ 334] in that category.

Id. at 600-01.


a

CRL also contends that the subsequent seizure action instituted by the FDA

amounts to final agency action. The court disagrees. Such actions are not final

agency determinations that the articles seized violate provisions of the FDCA;

they are merely determinations that there is reason to aver that a violation has

occurred. The judicial investigation and resolution initiated by a seizure action,

together with an ongoing administrative investigation by the FDA, are only part

of the process through which the FDA reaches a final determination regarding

the challenged articles. Such seizures, especially when based upon agency

positions that are themselves not final, do not constitute final action.

Id, at 1504.

Thus, just as the issuance of an administrative complaint merely commences an
administrative proceeding by which legal rights and obligations will be defined and does not
constitute final agency action, so too does the institution of a civil seizure action simply initiate
a process whereby the legal status of the products at issue will be determined. Unlike a
promulgated regulation or an administrative order, the FDA's filing of a forfeiture complaint
does not consummate the agency’s decision-making process or definitively determine the status
of the products seized, but merely indicates that the agency has reason to believe a violation
has occurred.

Moreover, the seizure action itself provides a forum within which Plaintiffs can litigate
the very issues it seeks preemptively to raise here. Simply put, parties may not “file
preemptive suits for declaratory or injunctive relief in order to avoid what they perceive as
unfavorable agency positions before the agency has had an opportunity to reach a final
determination on the merits of the issue.” Clinical Reference Laboratory, 791 F. Supp. at
1504. See also Reliable, 324 F.3d at 732 (if government brings enforcement proceeding,
parties may defend on ground that agency lacks jurisdiction but may not preemptively

challenge jurisdiction before government has taken action to enforce law against them).

9


”

B. Court Lacks Jurisdiction Over Plaintiffs’ Declaratory Claims

As noted above, Plaintiffs seek a declaration from this Court that its proposed
importation and re-packing scheme is permissible under the FDCA (Count J) and that the
drugs seized pursuant to the criminal search warrant were not subject to seizure (Count IJ).
Defendants argue that Plaintiffs’ preemptive suit is improperly filed because there has been no
final agency action regarding Plaintiffs’ re-packing scheme, making Plaintiffs’ action unripe.

The APA permits judicial review of “final agency action for which there is no other
adequate remedy in a court.” 5 U.S.C. § 704. “Final agency action” is both a critical
prerequisite to Article III justiciability, namely ripeness, and a necessary element of a cause of
action under the APA. See, e.g., 5 U.S.C. § 704; Dalton y. Specter, 511 U.S. 462, 469
(1994); Abbs v. Sullivan, 963 F.2d 918, 925-26 (7" Cir. 1992).

As the Supreme Court has explained, two conditions must be satisfied for agency action
to be final: “First, the action must mark the ‘consummation’ of the agency’s decisionmaking
process-it must not be of a merely tentative or interlocutory nature. And second, the action
must be one by which ‘rights or obligations have been determined’ or from which ‘legal
consequences will flow.” Bennett v. Spear, 520 U.S. 154, 177-78 (1997) (citations omitted).
The Seventh Circuit has observed that ordinarily that “means a final order imposing some sort
of sanction.” Abbs, 963 F.2d at 926. A formally promulgated regulation of industry-wide
application can likewise constitute final agency action. See Abbott, 387 U.S. at 151.
However, nothing remotely comparable to any such events has occurred in this case to date,
nor does Plaintiffs’ Complaint purport to identify any action on the part of the FDA that would
even arguably rise to the level of “final agency action” under the APA.

6


The Supreme Court pointed out that there would be ample opportunity for a claimant to
litigate any constitutional, statutory, or factual claims in the seizure action itself, noting that
“it has never been held that the hand of government must be stayed until the courts bave an
opportunity to determine whether the government is justified in instituting suit in the courts ...
It is sufficient, where only property rights are concerned, that there is at some stage an
opportunity for a hearing and a judicial determination.” Jd. at 598-99.

The policy behind the Supreme Court’s view is that the speedy protection afforded the
public by civil seizure actions would be impaired if district courts could intercede and enjoin
FDA officials from initiating enforcement proceedings. Id. at 601. The Ewing decision has
been “consistently and strictly observed” by the lower courts, which have interpreted the
decision to “preclude[) judicial interference with the FDA’s decision to institute enforcement
actions, whatever the precise context.” United States v. Alcon Labs. v. United States, 636
F.2d 876, 881-82 (1" Cir.), cert. denied, 451 U.S. 1017 (1981), See also Premo Pharm.
Labs. v. United States, 629 F.2d 795, 801 (2d Cir. 1980) (“well-settled” that federal courts
“Jack jurisdiction to enjoin seizure actions instituted by the FDA”); Southeastern Minerals v.
Harris, 622 F.2d 758, 763-64 & n. 10 (5" Cir. 1980).

Therefore, in accord with Ewing and its progeny, we find that we lack jurisdiction to
make a determination that the FDA cannot initiate seizures or other enforcement actions under
the FDCA against Plaintiffs or their products. Rather, as Ewing makes clear, the appropriate

forum for reviewing the decision to bring a seizure action is in defense of the seizure itself.


a

(no final agency action when investigation has not even reached administrative complaint
stage).

Statements of lower-level agency officials likewise do not rise to the level of final
agency action-even when they are contained in warning letters or other official regulatory
correspondence. See, e.g., Western Ill. Home Health Care v. Herman, 150 F.3d 659, 662 (7"
Cir. 1998); Schering Corp. v. Heckler, 779 F.2d 683, 686 n. 18 (D.C. Cir. 1985); Biotics
Research Corp. v. Heckler, 710 F.2d 1375, 1378 (9" Cir. 1983); Clinical Reference
Laboratory, Inc. v. Sullivan, 791 F. Supp. 1499, 1503-04 (D. Kan 1992).

Therefore, whatever negotiations or discussions Plaintiffs and their attorneys may have
had with the government in the context of the ongoing criminal investigation and the execution
of the July 9, 2003 search warrant, such activities do not amount to the creation of an
“unpromulgated rule” as Plaintiffs suggest. Likewise, the allegations fall short of anything
approaching final agency action sufficient to support a cause of action under the APA or
otherwise invoke the jurisdiction of this Court.

Finally, the government’s recent institution of a civil in rem seizure does not alter this
conclusion. In a case very similar to the instant case, Clinical Reference Laboratory, Inc. v.
Sullivan, 791 F. Supp. 1499 (D. Kan. 1992), the government brought a seizure action against
certain of the plaintiff CRL’s products two months after CRL had filed an action for
declaratory and injunctive relief against the FDA. Despite the initiation of seizure
proceedings, the court concluded that final agency action had not occurred and dismissed

CRL’s claims as unripe:


Mbvate Ondgs Form (297)
¢ \Biites States District Court, Northern District of Hlinois

Nameet Mmetseee | Wayne R Andersen {Signin

CASE BER 3C 5861 DATE 12/23/2003
CASE . Genendo Pharmaceuticial et al vs. Tommy Thompson et al
TITLE

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

MOTION: of the motion being presented.]

DOCKET ENTRY:

qd) im} Filed motion of [ use listing in “Motion” box above.]

(2) a) Brief in support of motion due

(3) o Answer brief to motion due___. Reply to answer briefdue__.

(4) o Ruling/Hearing on setfor at

(5) oO Status hearing(held/continued to] [set for/re-set for]on__——ssetfor at

(6) o Pretrial conference[held/continued to] [set for/re-set for]on____——ssetfor__ at.

(7) 0 Trial[set for/re-set for] on__at

(8) o [Bench/Jury trial] [Hearing] held/continued to__at

(9) QO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OOFRCP4(m) OLocal Rule 41.1 CIFRCP4i(a)(1) [J FRCP41(a)(2).

qo) oi [Other docket entry] Enter MEMORANDUM, OPINION AND ORDER: For the foregoing
reasons, we grant the motion [19-1] of the defendant, Tommy Thompson in his capacity as
Secretary of the United States Department of Health and Human Services and Mark McClelland
in his capacity as Commissioner of the Food and Drug Administration to dismiss Plaintiffs’
complaint pursuant to FRCP 12(b)(1). This case is hereby terminated. This is a final and
appealable order.

(11) +@ [For further detail see order attached to the original minute order.)

No notices required, advised in open court. a Document
No notices required. umber of aotices 2 me
Notices mailed by judge's staff. DEC 29 2003

Notified counsel by telephone. date dockets

ov | Docketing to mail notices. L

a/ | Mail AO 450 form. iynoa Jo}uisia ‘sn
Yad

Copy to judge/magistrate judge.

date mailed notice

courtroom 2:8 Rd 82 930 £0

TSA deputy’s
initials —=
= 0 De getian es (4 mtg py



Finally, Plaintiffs have failed to avail themselves of several different avenues through
which they can obtain judicial review of their claims with respect to their proposed importation
and re-packing scheme and also the return of the drugs seized. First, Plaintiffs could have
sought a formal administrative ruling from the FDA on the legality of its proposed importation
by filing either a citizen petition or a request for an advisory opinion with the agency. See 21
C.F.R. §§ 10.25, 10.30, 10.85. The agency’s response to such a petition or request
constitutes inal agency action and is subject to immediate judicial review. 21 C..F.R.

§ 10.45(d). Second, as noted above, Plaintiffs can litigate the legality of their conduct in the
seizure action recently filed by the government.

For all of these reasons, we find that Plaintiffs’ claims for declaratory and injuntive
Telief are not ripe, and we grant Defendant’s motion to dismiss for lack of subject matter
jurisdiction.

INCLUSION

For the foregoing reasons, we grant the motion of the defendants, Tommy Thompson
in his capacity as Secretary of the United States Department of Health and Human Services
and Mark McClelland in his capacity as Commissioner of the Food and Drug Administration
to dismiss Plaintiffs’ Complaint pursuant to Fed.R.Civ.P. 12(b)(1). This case is hereby

terminated. This is a final and appealable order.

OD
Dated: Lownhy, 43 | Ao

It is so ordered.

United States District Judge

10


o

Instead, Plaintiffs’ Complaint refers only to unspecified statements assertedly made by
government attorneys and investigators, which Plaintiffs ascribe as the FDA’s “position.”
Thus, in Count I, Plaintiffs describe the importation scheme it proposes to carry out and
alleges that it “proposed this to the FDA through the United States Attorneys office in the
Northern District of Illinois and through Special Agent Lawrence E. Dennelly of the FDA,
Office of Criminal Investigation.” Based on nothing more than these alleged discussions with
federal prosecutors and an FDA agent, Count I of Plaintiffs’ Complaint repeatedly refers to the
FDA’s supposed “position” or “stance” and asserts that the FDA has thereby “created an
uncodified, unreasonable, and unpromulgated rule.” Count II describes the July 9, 2003
execution of a search warrant at the premises of Local Repack which resulted in the seizure of
the drugs. The Complaint then alleges that the FDA has “refused to release and return” the
drugs despite negotiations between the parties.

We find that Genendo’s allegations of negotiations and discussions with various federal
agents and attorneys are insufficient to demonstrate final agency action on the part of the
FDA. We cannot characterize the “positions” that Plaintiffs ascribe to the FDA as final
agency action. Rather than describing the consummation of the agency’s decisionmaking
Process as one by which rights have been determined and legal consequences will flow,
Plaintiffs’ Complaint describes, at most, the statements of subordinate agency officials in the
course of conducting routine, preliminary investigative activity. It is well-settled, however,
that an agency’s investigatory activity does not constitute final agency action. See, e.g.,
Reliable Automatic Sprinkler Co., Inc. v. CPSC, 324 F.3d 726, 731-32 (D.C. Cir. 2003)
(actions which are merely investigatory are not final agency action); Abbs, 963 F.2d at 926-27

7


On September 19, 2003, Plaintiff Phil and Kathy’s filed a Statement of Interest regarding the
seized articles and, a week later, moved to dismiss the forfeiture complaint and quash the
seizure warrant.
DISCUSSION

Federal Rule of Civil Procedure 12(b)(1) provides for dismissal of claims over which a
federal court lacks subject matter jurisdiction. In assessing a motion to dismiss, the court
accepts allegations in the complaint as true to the extent that they are uncontroverted by
submitted affidavits. In reviewing a 12(b)(1) motion to dismiss, a court may look beyond the
complaint and view any extraneous evidence submitted by the parties to determine whether
subject matter jurisdiction exists. United Transp. Union v. Gateway Western Ry. Co., 78 F.3d
1208, 1210 (7" Cir. 1996). The plaintiff bears the burden of establishing that the
jurisdictional requirements have been met. Kontos v. United States Dep't of Labor, 826 F.2d
573, 576 (7TM Cir. 1987).

1. Sovereign Immunity

Defendants first argue that Plaintiffs’ Complaint is subject to dismissal because the
Government did not waive sovereign immunity and, therefore, cannot be sued. We reject this
argument because, in their brief, Plaintiffs claim that Defendants violated the Administrative
Procedures Act (“APA”). The APA contains an explicit waiver of sovereign immunity. 5

U.S.C. § 704. Therefore, we deny the motion to dismiss on this basis.


enjoin the Food and Drug Administration (“FDA”) from taking enforcement action against
them.

Plaintiff Genendo purchases world wide prescription drugs directly from wholly-owned
subsidiaries or authorized distributors of the manufacturer. Genendo imports some of the
drugs it purchases to FDA-licensed re-packaging and re-labeling companies in the United
States for sale inside or outside the United States. Plaintiff Phil and Kathy’s, Inc. is the parent
corporation of Alliance Wholesale Distributors and Local Repack, Inc. Local Repack is
Ttegistered with the FDA as a drug re-packer/re-labeler. Local Repack re-packs and re-labels
drugs to bring the packaging and labeling of the packages into compliance with the Act and
applicable regulations.

On July 9, 2003, federal agents executed a criminal search warrant at the premises of
Local Repack, in Richton Park, Illinois, and seized a quantity of prescription drugs. At that
time, neither Plaintiff challenged the search warrant or sought return of the seized drugs
pursuant to Fed.R.Crim.P. 41(g). Instead, on August 20, 2003, Plaintiffs filed this action for
declaratory judgment and injunctive relief against the Defendants.

In a separate action, on September 15, 2003, the United States filed a complaint for
forfeiture and initiated an in rem seizure of certain articles in the possession of Local Repack.
The government’s complaint alleges that the articles are in violation of the new drug,
adulteration, and misbranding provision of the Food, Drug, and Cosmetic Act (“FDCA”), 21
U.S.C. §§ 355(a), 351(a)(2)(B), 352(c), and 352(f){1). The government alleges that Local
Repack failed to comply with the FDA's good manufacturing practice (“GMP”) regulations,
21C.F.R. Part 211, regarding the unlawful importation and repacking of foreign label drugs.

2


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

GENENDO PHARMACEUTICAL
N.V., a Netherlands Antilles company,
and PHIL AND KATHY’S, INC., an
Tinois corporation,

PACKETED
pec 2 9 2003

No. 03 C 5861
Plaintiff, .
Wayne R. Andersen
v. District Judge
TOMMY THOMPSON, in his official
capacity of Secretary, United States
Department of Health and Human
Services, and MARK B.
McCLELLAND, M_D., Ph.D., in his
capacity as Commissioner of Food and
Drugs,

we Se HS HY ee ewww

Defendants.
MEMORAND OPINION (0)

This case is before the Court on the motion of the defendants, Tommy Thompson in his
capacity as Secretary of the United States Department of Health and Human Services, and
Mark McClelland in his capacity as Commissioner of the Food and Drug Administration
(“Defendants”) to dismiss plaintiffs’ Genendo Pharmaceutical and Phil and Kathy’s Inc.
(“Plaintiffs”) complaint pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6). For the following
Teasons, we grant the motion to dismiss.

BACKGROUND

Plaintiffs filed this action for declaratory and injunctive relief, asking this Court to

declare that certain methods of importing drugs are legal and demanding the return of drug

products that were seized pursuant to a criminal search warrant. Plaintiffs further seek to

eb