Case Name: UNITED STATES of America v. USPLABS, LLC (01), Jacobo Geissler (02), Jonathan Doyle (03), Matthew Hebert (04), Kenneth Miles (05), S.K. Laboratories, Inc. (06), Sitesh Patel (07), Cyril Willson (08)
Court: United States District Court for the Northern District of Texas
Jurisdiction: United States
Decision Date: 2018-10-05
Citations: 338 F. Supp. 3d 547
Docket Number: Criminal No. 3:15-CR-496-L
Parties: UNITED STATES of America
v.
USPLABS, LLC (01), Jacobo Geissler (02), Jonathan Doyle (03), Matthew Hebert (04), Kenneth Miles (05), S.K. Laboratories, Inc. (06), Sitesh Patel (07), Cyril Willson (08)
Judges: 
Reporter: Federal Supplement 3d
Volume: 338
Pages: 547–586

Head Matter:
UNITED STATES of America
v.
USPLABS, LLC (01), Jacobo Geissler (02), Jonathan Doyle (03), Matthew Hebert (04), Kenneth Miles (05), S.K. Laboratories, Inc. (06), Sitesh Patel (07), Cyril Willson (08)
Criminal No. 3:15-CR-496-L
United States District Court, N.D. Texas, Dallas Division.
Signed October 5, 2018
Errin Martin, John J. de la Garza, III, Lea A. Carlisle, Mark Joseph Tindall, U.S. Attorney's Office, Dallas, TX, David O'Donald Sullivan, Patrick Raymond Runkle, US Department of Justice, Washington, DC, for United States of America.
Michael John Uhl, Fitzpatrick Jacks Smith & Uhl, Michael P. Gibson, Carl D. Medders, Burleson Pate & Gibson LLP, Richard B. Roper, III, Andrew Christian Cookingham, Jasmine Selia Wynton, Jennifer Rudenick Ecklund, Thompson & Knight LLP, S. Cass Weiland, Squire Patton Boggs (US) LLP, Joseph L. Shearin, Law Offices of Joe Shearin, Robert L. Webster, Law Office of Robert L. Webster, Dallas, TX, David B. Smith, David B. Smith, PLLC, Alexandria, VA, Arwa BenOmran, David Fragale, Galen Kast, Patrick Linehan, Reid Weingarten, Steptoe & Johnson LLP, Washington, DC, Christopher Niewoehner, Francis Sohn, Steptoe & Johnson LLP, Chicago, IL, Joseph Mark McMullen, Law Offices of Joseph M. McMullen, Patrick Quinn Hall, Law Offices of Patrick Q. Hall, San Diego, CA, for USPlabs, LLC (01), Jacobo Geissler (02), Jonathan Doyle (03), Matthew Hebert (04), Kenneth Miles (05), S.K. Laboratories, Inc. (06), Sitesh Patel (07), Cyril Willson (08).
MEMORANDUM OPINION AND ORDER ACCEPTING IN PART AND REJECTING IN PART FINDINGS AND RECOMMENDATIONS OF THE MAGISTRATE JUDGE

Opinion:
Sam A. Lindsay, United States District Judge
Before the court are:
1. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, Matthew Hebert, Kenneth Miles, S.K. Laboratories, Inc., and Sitesh Patel's Motion to Dismiss Count Ten (Doc. 220);
2. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Kenneth Miles' Motion to Dismiss Counts Nine and Ten for Unconstitutional Vagueness (Doc. 221);
3. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motion to Dismiss Counts Two Through Four of the First Superseding Indictment as Untimely (Doc. 293);
4. Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Cyril Willson's Motion to Dismiss Count 7 (Doc. 379);
5. Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Kenneth Miles' Joint Motion to Dismiss Counts 5, 8, and 9 (Doc. 383);
6. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motion to Dismiss Count 6 (Doc. 387);
7. Defendant Kenneth Miles' Motion to Dismiss Count Nine and Ten (Doc. 392); and
8. Defendant Cyril Willson's Motion to Dismiss Count 5 and Motion to Adopt In-Part Codefendants' Motion to Dismiss Counts 5, 8, 9 (Doc. 394).
(sometimes collectively, "Defendants' Motions to Dismiss"). Pursuant to 28 U.S.C. § 636 (b)(1)(B), the court referred Defendants' Motions to Dismiss to United States Magistrate Judge Renée Harris Toliver for findings and recommendation. See Order of Reference (Doc. 343); Order of Reference (Doc. 436). On June 13, 2018, Magistrate Judge Toliver submitted her Amended Findings, Conclusions, and Recommendation of the United States Magistrate Judge (Doc. 477) ("Report"). Defendants and the Government have filed objections to the Report. See Docs. 478, 480, 482, 483, 485, and 488. After careful consideration of the objections, record, and applicable law, and having conducted a de novo review of those portions of the Report to which objections were made, the court, for the reasons that follow, overrules Defendants' objections, sustains the Government's objection, and accepts in part and rejects in part the Report.
I. Factual Background
A. The Defendants
Defendants are USPlabs, LLC ("USPlabs"), a dietary supplement own-label distributor based in Dallas, Texas; S.K. Laboratories, Inc. ("S.K. Labs"), a California corporation that manufactured USPlabs' supplements and consulted on supplement formulation; Jacobo Geissler ("Geissler"), a co-founder, co-owner, and chief executive officer of USPlabs; Jonathan Doyle ("Doyle"), a co-founder, co-owner, and president of USPlabs; Matthew Hebert ("Hebert"), a co-owner of USPlabs responsible for product packaging design; Cyril Willson ("Willson"), also known as "Erik White," a consultant to USPlabs, formerly a co-owner; Kenneth Miles ("Miles"), USPlabs' compliance officer; and Sitesh Patel ("Patel"), a vice-president and employee of S.K. Labs.
B. The Indictment
On January 5, 2016, the Government filed an 11-Count Superseding Indictment ("the Indictment") (Doc. 95) against Defendants. The charges in the Indictment stem from Defendant USPlabs' sale of dietary/weight loss supplements, which were manufactured by Defendant S.K. Labs. Doc. 95 at 5-6. The Indictment generally alleges that Defendants conspired to import and sell synthetic dietary supplements, but falsely marketed the products as plant-based under the theory that federal regulatory agencies would be less likely to question the importation of plant extracts, and retailers would be more likely to sell such products. Doc. 95 at 6. The Indictment further alleges that, during the conspiracy, certain Defendants created false documentation to import a synthetic substance-1, 3-dimethylamylamine, known as DMAA-which they represented was a geranium plant extract. According to the Indictment, certain Defendants then used the DMAA in some of their supplements, which thereafter became best-selling products. Doc. 95 at 7, 14-15.
It is further alleged that when DMAA became the subject of controversy in the dietary supplement industry, USPlabs, through Defendant Geissler, began importing other chemicals under false labels to determine if they could be used in new dietary supplements. Doc. 95 at 9. Two such ingredients were aegeline, a synthetic version of an extract from a tree native to India, and the pulverized roots of a Chinese herb, cynanchum auriculatum ("CA"), both of which USPlabs is alleged to have purchased from China using fake certificates of analysis ("COA"). The first aegeline-containing version of one of Defendants' supplements was OxyElite Pro "New Formula" ("OEP-NF"). Doc. 95 at 9-10. The second version of the supplement contained both aegeline and CA and was called OxyElite Pro "Advanced Formula" ("OEP-AF"). Doc. 95 at 10.
As alleged in the Indictment, in the fall of 2013, an outbreak of injuries was reported to be associated with USPlabs' aegeline-based products after numerous consumers in Hawaii experienced liver-related symptoms, including liver failure. Doc. 95 at 11. Following an inspection by the United States Food and Drug Administration ("FDA"), USPlabs agreed to cease distributing the OEP products, but is alleged to have instead pushed sales as fast as possible. Doc. 95 at 11. The Indictment also alleges that USPlabs issued a press release falsely stating that the ingredients in OEP had been researched and showed no negative liver effects, even though Defendants Geissler and Willson knew that a study had shown such negative side effects. Doc. 95 at 11. Eventually, Geissler instructed that both aegeline and CA be removed from the product going forward. Doc. 95 at 11.
The Indictment contains the following charges :
Count 1 - Conspiracy to Commit Wire Fraud (as to all Defendants except Miles), 18 U.S.C. § 1343, 1349 ; Doc. 95 at 12-17. This count involves Defendants' alleged use of false shipping labels, false COAs, and false shipping documentation to support misleading product labeling in relation to statements that the respective supplements contained "natural" DMAA derived from geranium and CA "extract" (as opposed to CA "root").
Counts 2-5 - Wire Fraud , 18 U.S.C. § 1343 (as to all Defendants except Miles); Doc. 95 at 18-19. These counts involve Defendants' alleged transmission in interstate commerce, by means of wire communications and writing, of false and fraudulent COAs, instructions to create false documents, and other fraudulent statements contained in e-mails.
Count 6 - Obstruction of an Agency Proceeding (as to Defendants USPlabs, Geissler, Doyle, and Hebert only), 18 U.S.C. § 2, 1505 ; Doc. 95 at 20-21. This count charges that, during the FDA investigation regarding whether an outbreak of liver injuries was associated with USPlabs' products containing aegeline, Defendants USPlabs, Geissler, Doyle, and Hebert continued to distribute OEP products despite representing to the FDA that they would cease distribution, and attempted to impede the FDA's investigation by failing to provide material information about OEP, the anticipated shipments of OEP, and promotional activities for OEP.
Count 7 - Conspiracy to Introduce Misbranded Food into Interstate Commerce with an Intent to Defraud and Mislead , 18 U.S.C. § 371 ; 21 U.S.C. § 331(a), 333(a)(2) (as to all Defendants except Miles); Doc. 95 at 22-24. This count alleges that certain Defendants conspired to avoid law enforcement attention and match imported substances with false product labeling by instructing Chinese chemical sellers to falsely label numerous chemical powders they sent to USP, including "geranium flower powder extract" and CA root "extract."
Count 8 - Introduction of Adulterated Food into Interstate Commerce with an Intent to Defraud and Mislead (as to Defendants USPlabs and Geissler only), 21 U.S.C. § 331(a), 333(a)(2) ; 18 U.S.C. § 2 ; Doc. 95 at 25. This count alleges that Defendants USPlabs and Geissler, aiding and abetting each other, with the intent to defraud and mislead, caused the shipment of misbranded OEP-AF in interstate commerce by using a label falsely declaring that CA "extract" was an ingredient, even though it was not contained in the product.
Count 9 - Introduction of Misbranded Food into Interstate Commerce (as to Defendants Doyle, Hebert, Miles, S.K. Labs, and Patel only), 21 U.S.C. § 331(a), 333(a)(2) ; Doc. 95 at 26. This count alleges that Defendants Doyle, Hebert, Miles, S.K. Labs, and Patel caused the shipment of misbranded OEP-AF in interstate commerce when the food was misbranded under the Food Drug and Cosmetic Act ("FDCA") by using a false label declaring that CA "extract" was an ingredient, even though it was not contained in the product.
Count 10 - Introduction of Adulterated Dietary Supplement into Interstate Commerce , 21 U.S.C. § 331(a), 333(a)(1), and 342(f)(1)(A)(I) (as to all Defendants except Willson); Doc 95 at 27. This count alleges that Defendants caused the shipment of adulterated OEP-NF in interstate commerce, as the supplement "presented a significant or unreasonable risk of illness or injury under conditions of use recommended or suggested in labeling."
Count 11 - Conspiracy to Commit Money Laundering (as to Defendants USPlabs, Geissler, Doyle, and Hebert only), 18 U.S.C. § 1956(h) ; Doc. 95 at 28-29. This count alleges that Defendants USPlabs, Geissler, Doyle, and Hebert conspired to transfer over $230,000,000 of proceeds obtained through wire fraud and conspiracy in a manner designed to conceal the true source and nature of the criminally derived funds.
C. Defendants' Motions to Dismiss Referred to Magistrate Judge Toliver
Responding to the Indictment, Defendants filed Defendants' Motions to Dismiss. See Docs. 220, 221, 293, 379, 383, 387, 392, and 394. As previously explained, the court referred Defendants' Motions to Dismiss to Magistrate Judge Toliver for findings and recommendation. On May 10, 2018, she held a hearing on Defendants' Motions to Dismiss. On June 13, 2018, she submitted her Report in which she recommends that all pending Motions to Dismiss be denied, with the exception of Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Cyril Willson's Motion to Dismiss Count 7, which she recommends granting.
D. Objections to Magistrate Judge Toliver's Report
On June 25, 2018, Defendants filed the following objections to Magistrate Judge Toliver's Report: Defendants' Joint Objection to the Magistrate Judge's Order on Motion to Dismiss Count 6 (Doc. 480); Defendants' Objections to the Amended Findings, Conclusions, and Recommendation of the United States Magistrate Judge Related to Defendants' Motion to Dismiss Counts Two Through Four (Doc. 482); Defendants' Joint Objection to Magistrate Judge Toliver's Order Denying Defendants' Motion to Dismiss Counts 9 and 10 of the Superseding Indictment (Doc. 483); and Defendants' Objection to Magistrate Judge's Order with Respect to Defendants' Motion to Dismiss Count Ten (Doc. 485). On June 27, 2018, Defendants filed Defendants' Objections to the Magistrate Judge's Amended Findings, Conclusions, and Recommendation with Respect to Defendants' Motions to Dismiss Counts 5, 8, and 9 (Doc. 488). On July 16, 2018, the Government filed responses to Defendants' objections to Magistrate Judge Toliver's Report. See Docs. 496, 497, 499, 500, 502.
On June 25, 2018, the Government filed its objection to Magistrate Toliver's Report insofar as she recommending granting Defendants' motion to dismiss Count 7. See Doc. 478. On July 16, 2018, Defendants filed their response to the Government's objection. See Doc. 504.
II. Legal Standard
Pursuant to Federal Rule of Criminal Procedure 59(b) and 28 U.S.C. § 636(b)(1), a district court, on its own motion, may refer a pending dispositive matter to a United States Magistrate Judge for findings of fact and recommendation. Fed. R. Crim. P. 59(b)(1) ; 28 U.S.C. § 636(b)(1). The non-prevailing party may contest the magistrate judge's findings and recommendation by filing written objections within fourteen days of being served with a copy of the findings and recommendation. Fed. R. Crim. P. 59(b)(2). The objections must specifically identify those findings or recommendations the party wishes to have a district court consider. Id. A district court must "make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1). It may then "accept, reject, or modify the recommendation, receive further evidence, or resubmit the matter to the magistrate judge with instructions." Fed. R. Crim. P. 59(b)(3) ; see also 28 U.S.C. § 636(b)(1). Failure of a party to file written objections to the magistrate judge's proposed findings and recommendation within fourteen days, or such other time set by the district judge, waives that party's right to judicial review. Fed. R. Crim. P. 59(b)(2).
As Defendants and the Government have filed their objections in a timely manner, the court will review de novo the portions of Magistrate Judge Toliver's Report to which the parties have objected. Because the parties are only entitled to a de novo review of those portions of the Report to which objection is made, the court will review the remainder of the Report under a clearly erroneous standard of review.
III. Analysis
A. Legal Principles Pertaining to Indictments
Defendants' Motions to Dismiss include challenges to the specificity and sufficiency of the Indictment as it relates to several of the 11 counts. Accordingly, prior to addressing the Magistrate Judge's Report and the parties' objections and responses to the objections, the court reviews the relevant legal principles.
The United States Constitution states that a criminal defendant cannot "be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury," U.S. Const. amend. V, and that he has "the right . to be informed of the nature and cause of the accusation[.]" U.S. Const. amend. VI. In keeping with these constitutional principles, Federal Rule of Criminal Procedure 7(c)(1) provides that an indictment "must be a plain, concise, and definite written statement of the essential facts constituting the offense charged and must be signed by an attorney for the government." In each count, the indictment "must give the official or customary citation of the statute, rule, regulation, or other provision of law that the defendant is alleged to have violated." Id. "A count may allege that the means by which the defendant committed the offense are unknown or that the defendant committed it by one or more specified means." Id. When applying this standard, common sense should prevail over technicalities. See 1 The Late Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 123, at 522-23 (4th ed. 2008).
"The purpose of an indictment is 'to allege each essential element of the offense charged so as to enable the accused to prepare his defense and to allow the accused to invoke the double jeopardy clause in any subsequent proceeding.' " United States v. Lawrence , 727 F.3d 386, 397 (5th Cir. 2013) (quoting United States v. Morrow , 177 F.3d 272, 296 (5th Cir. 1999) ). "Thus, an indictment is sufficient if it 'contains the elements of the offense charged and fairly informs the defendant of the charge against which he must defend.' " Id. (citation omitted). "It is not necessary for an indictment to go further and to allege in detail the factual proof that will be relied upon to support the charges." United States v. Crippen , 579 F.2d 340, 342 (5th Cir. 1978) (citations omitted). "Generally, an indictment [that] follows the language of the statute under which it is brought is sufficient to give a defendant notice of the crime of which he is charged." United States v. Thomas , 348 F.3d 78, 82 (5th Cir. 2003) (internal quotation marks and citations omitted); see also United States v. Massey , 849 F.3d 262, 264 (5th Cir. 2017) (same).
When the court decides a motion to dismiss the indictment for failure to state an offense, it is required to " 'take the allegations of the indictment as true and to determine whether an offense has been stated.' " United States v. Kay , 359 F.3d 738, 742 (5th Cir. 2004) (quoting United States v. Hogue , 132 F.3d 1087, 1089 (5th Cir. 1998) ). A court must deny a motion to dismiss if the motion relies on disputed facts. See, e.g. , United States v. Covington , 395 U.S. 57, 60, 89 S.Ct. 1559, 23 L.Ed.2d 94 (1969) (holding that a court can resolve a pretrial motion to dismiss the indictment only when "trial of the facts surrounding the commission of the alleged offense would be of no assistance in determining the validity of the defense"); United States v. Fontenot , 665 F.3d 640, 644 (5th Cir. 2011) ("The propriety of granting a motion to dismiss an indictment . by pretrial motion is by-and-large contingent upon whether the infirmity in the prosecution is essentially one of law or involves determinations of fact.... If a question of law is involved, then consideration of the motion is generally proper.") (citation omitted).
B. The Parties' Objections
As previously stated, in her Report, Magistrate Judge Toliver recommended that all pending Motions to Dismiss be denied, with the exception of Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Cyril Willson's Motion to Dismiss Count 7, which she recommended granting. The parties filed their objections and responses to those objections. The court first addresses Defendants' objections to the Report.
1. Defendants' Objections to the Magistrate Judge's Recommendation that the Court Deny the Motions to Dismiss Counts 2, 3, 4, 5, 6, 8, 9, and 10
In accordance with 28 U.S.C. § 636(b)(1), the court has conducted a de novo review of the Report, audio transcript of the May 10, 2018 hearing before Magistrate Judge Toliver, underlying motions, responses, and replies, as well as the Defendants' objections and the Government's responses to Defendants' objections, and applied the pertinent legal principles governing sufficiency of indictments previously discussed. For the most part, Defendants' Motions to Dismiss address the specificity and sufficiency of the Indictment as it relates to Counts 2 though 10. In addition, Defendants challenge several counts of the Indictment as unconstitutionally vague and challenge Counts 2 through 4 as untimely. With respect to Counts 2, 3, 4, 5, 6, 8, 9, and 10, in recommending that the court deny Defendants' Motions to Dismiss, Magistrate Judge Toliver has provided the court with a thorough analysis of all of the issues raised by Defendants. As Defendants' objections essentially reassert the same arguments made in their underlying motions and replies, and each is addressed by Magistrate Judge Toliver in her well-reasoned thirty-five page Report, the court concludes that Magistrate Judge Toliver's legal analysis is correct with respect to recommending that the court deny Defendants' Motions to Dismiss Counts 2, 3, 4, 5, 6, 8, 9, and 10, and incorporates by reference her legal analysis with respect to these Counts as if fully set forth herein verbatim. Accordingly, the court overrules Defendants' Objections to the Magistrate Judge's Report insofar as she recommended denial of Defendants' Motions to Dismiss Counts 2, 3, 4, 5, 6, 8, 9, and 10 of the Indictment.
2. The Government's Objection to the Magistrate Judge's Report Recommending that the Court Grant Defendants' Motion to Dismiss Count 7
The Government has filed an objection to the Magistrate Judge's Report insofar as she recommends that the court grant Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Cyril Willson's Motion to Dismiss Count 7. After conducting a de novo review of the Report, audio transcript of the May 10, 2018 hearing before Magistrate Judge Toliver, underlying motions, responses, and replies, as well as the Government's objection, and Defendants' response to the objection, in accordance with the pertinent legal principles governing sufficiency of indictments previously discussed, the court sustains the Government's objection.
Count 7 of the Indictment charges all Defendants except Miles with Conspiracy to Introduce Misbranded Food into Interstate Commerce with an Intent to Defraud and Mislead in violation of 21 U.S.C. § 331(a) and 377(a)(2). See Doc. 95 at 22-24; see also 21 U.S.C. § 331(a) (prohibiting the introduction of or delivery for introduction into interstate commerce of any misbranded food) and 333(a)(1) (imposing felony-level punishment for violations of § 331(a) when done "with intent to defraud or mislead"). The Indictment alleges the following overt acts committed in furtherance of that object:
61. On or about September 28, 2010, Sitesh Patel and S.K. Laboratories received documentation for a shipment of 1,000 kilograms of "Geranium Flower (HG) Powder Extract" that was scheduled to arrive at S.K. Laboratories in California after having shipped from Texas. Sitesh Patel and S.K. Laboratories knew that the labeling of the shipment was false because the substance in the shipment was not Geranium Flower Powder Extract, but was instead DMAA, a synthetic stimulant.
62. On or about December 8, 2011, Jacobo Geissler instructed a Chinese chemical seller via email to misbrand a shipment of nine different chemicals [ ] sent from China to USP Labs in Texas by writing: "Please send as Green coffee samples and send them all together.... And don't label the individual bags. Label as green coffee sample 1, 2, 3 etc."
63. On or about June 15, 2013, Jacobo Geissler agreed with a Chinese chemical seller to have two metric tons of ground cynanchum auriculatum root powder shipped internationally to S.K. Laboratories in California, for inclusion in USP Labs' products, using the false name "cynanchum auriculatum root extract."
Doc. 95 at 23-24. Further, as alleged in the Indictment, the false documents included: false COAs, upon which dietary supplement retailers and wholesalers rely to verify product ingredients (id. at 4, 5, 7, 9-11); and false "labels" identifying ingredients as "green coffee samples." Id. at 9.
Defendants contend that Count 7 of the Indictment should be dismissed because: (1) the documents at issue do not fall within the definition of "labeling"; (2) the Indictment does not allege facts establishing that the allegedly false and misleading "labeling" was material (argued in the alternative); and (3) the FDCA's definition of "labeling" is unconstitutionally vague (also argued in the alternative). Magistrate Judge Toliver did not reach Defendants' two alternative arguments, as she agreed in large part with their first argument, which she made the basis of her recommendation that the court dismiss Count 7 of the Indictment.
a. Labeling Under the FDCA
In support of their argument that Count 7 should be dismissed, Defendants argue that the term "labeling" only applies to those written materials that provide information about the product to the ultimate consumers whom the FDCA is designed to protect. They contend that they did not violate the statute because the documents supporting Count 7 were not directed to the ultimate consumer but instead to USPlabs and S.K. Labs. Second, Defendants urge that the written materials at issue did not constitute labels because they did not provide "substantial information" about the ingredients as articulated by this court and as affirmed by the Fifth Circuit. See United States v. Hanafy , 124 F.Supp.2d 1016, 1018 (N.D. Tex. 2000), aff'd , 302 F.3d 485, 490 (5th Cir. 2002).
i. End-User Restriction
Magistrate Judge Toliver rejected Defendants' argument for an end-user restriction on labeling, reasoning:
The purpose of the FDCA is "to safeguard the consumer by applying [it] to articles from the moment of their introduction into interstate commerce all the way to the moment of their delivery to the ultimate consumer." United States v. Sullivan , 332 U.S. 689, 696 [68 S.Ct. 331, 92 L.Ed. 297] (1948). The Indictment alleges that the false documentation that accompanied the shipments of the supplement ingredients constituted labels. Doc. 95 at 23-24. Section 321(m) plainly states that the term "labeling" includes "all labels and other written, printed, or graphic matter (1) upon any article or any of its containers or wrappers, or (2) accompanying such article ." 21 U.S.C. § 321(m) (emphasis added). Thus, putting aside the definition of the term "label," section 321 also prohibits "other [false] written, printed, or graphic matter" from accompanying food "articles." Count 7 alleges that falsified documents accompanied the three shipments in question. Such documentation is "labeling" within the meaning of the FDCA.
Report at 27. Neither party has filed an objection to Magistrate Judge Toliver's rejection of Defendants' argument for an end-user restriction on the definition of "labeling." The court agrees with Magistrate Judge Toliver. Defendants' attempt to impose an end-user restriction on labeling would lead to results that are at odds with the FDCA's "overriding purpose to protect the public health." United States v. Article of Drug . Bacto-Unidisk ., 394 U.S. 784, 798, 89 S.Ct. 1410, 22 L.Ed.2d 726 (1969). As noted by the Government: "Under the defendants' interpretation, a person would be permitted to label sawdust as 'wheat flower' and sell it to a bakery for bread production with no fear of being in violation of the FDCA for distributing food with false labeling." Gov't's Resp. to Defs.' Mot. to Dismiss 4 (Doc. 404).
ii. "Substantial Information"
Notwithstanding her rejection of Defendants' proposed end-user restriction on "labeling," Magistrate Judge Toliver went on to agree with Defendants' backup argument, namely, that the written materials at issue do not constitute labels because they did not provide "substantial information" about the ingredients:
Nevertheless, the documentation also must "provide substantial information about the use or benefits of the article," United States v. Hanafy , 302 F.3d 485, 490 (5th Cir. 2002), and thereby constitute "an essential supplement to the label attached to the package," Kordel v. United States , 335 U.S. 345, 348 [69 S.Ct. 106, 93 L.Ed. 52] (1948). In that light, the Hanafy court held that documentation which merely identified the contents of a shipping tray with no more information than that which was already on the articles themselves did not "explain" or provide "substantial information" rising to the level of "labeling." 302 F.3d at 490. While the Government argues that the labels accompanying the food articles at issue constituted "substantial information" to government regulators about the articles, there is no suggestion in the record that the allegedly substantial information explained the use of or benefits of the article as required by Hanafy or that Defendants conspired to have it do so.
Rather, it appears from the language of Count 7 that the "labeling" in question constituted Defendants' identifying the articles sent "with no more information than that which [was] already upon the articles themselves." Merely putting a "label" on something - albeit an allegedly false label - that does not "explain" or provide "substantial information" is insufficient and does not rise to the level of "labeling" as contemplated by Kordel and Hanafy .
Report at 27-28.
The Government objects to this portion of Magistrate Judge Toliver's Report, contending that Count 7 of the Indictment "sufficiently tracks the statutory language, so the question of whether the documents at issue in this case are 'labeling' is a factual one for the jury." Gov't's Obj. 2-3 (Doc. 478). The Government further argues that "even if [it] were required to allege facts in the indictment establishing that the defendants used false 'labeling,' [it] has done that here consistent with Fifth Circuit and Supreme Court precedent."Id. at 3. For the reasons that follow, the court will sustain the Government's objection.
Count 7 charges a conspiracy to introduce misbranded food into interstate commerce with an intent to defraud and mislead in violation of the FDCA, closely tracking the statutory charging language, stating specifically that the Defendants conspired to use false and misleading labeling to deliberately misidentify a variety of FDA-regulated chemicals introduced into interstate commerce. Dkt. 95 at 22-24. The Indictment alleges several overt acts in furtherance of the conspiracy and that the object of the conspiracy was "to avoid law enforcement attention." Id. at 22-23.
Under the FDCA, a food is misbranded if "its labeling is false or misleading in any particular...." 21 U.S.C. § 343(a)(1). The term "food" means "articles used for food or drink for man or other animals, . and [ ] articles used for components of any such article." Id. § 321(f). With certain exceptions not relevant to the analysis, "a dietary supplement shall be deemed to be a food [for purposes of the FDCA]." Id. § 321(ff). The FDCA defines "labeling" as "all labels and other written, printed, or graphic matter (1) upon any article or any of its containers or wrappers, or (2) accompanying such article." Id. § 321(m). "Label" is defined as "a display of written, printed, or graphic matter upon the immediate container of any article...." Id. § 321(k). Thus, a "label" is a subset of "labeling." In addition, the statute plainly defines "labeling" to encompass written materials accompanying food ingredients, as Magistrate Judge Toliver correctly noted. See Report at 27.
The language in the Indictment is sufficient to charge that the food ingredients were misbranded because their labeling was false or misleading. Count 7 alleges that Defendants shipped ingredients to be used as components of dietary supplements-meaning that they shipped "articles" to be used as "components" of "food"-which the FDCA expressly defines as "food." See Doc. 95 at 22-23; 21 U.S.C. § 321(f). The Indictment further alleges that those ingredients were shipped "with false labeling." Doc. 95 at 22-23. This means that the "food" Defendants shipped and caused to be shipped had "labeling" that was "false," which rendered it misbranded under 21 U.S.C. § 343(a)(1).
The court concludes that Count 7, a conspiracy charge, is sufficient because it contains the elements of the offense charged and fairly informs the defendants of the charge against which they must defend. See generally Lawrence , 727 F.3d at 397 ("Thus, an indictment is sufficient if it contains the elements of the offense charged and fairly informs the defendant of the charge against which he must defend.") (citation and internal citation marks omitted); Thomas , 348 F.3d at 82 ("Generally, an indictment which follows the language of the statute under which it is brought is sufficient to give a defendant notice of the crime of which he is charged.") (internal quotation marks and citations omitted); Fed. R. Crim. P. 7(c)(1).
Moreover, even were the Government required to allege facts in the Indictment establishing that Defendants used false "labeling," as suggested by Magistrate Judge Toliver, contrary to her Report, Count 7 of the Indictment includes specific examples of materials that, if proved, meet the standard for "labeling" in the Fifth Circuit. See United States v. Hanafy , 124 F.Supp.2d 1016 (N.D. Tex. 2000) (Lindsay, J.) (" Hanafy I "), aff'd , United States v. Hanafy , 302 F.3d 485 (5th Cir. 2002) (" Hanafy II "). In Hanafy II , the Fifth Circuit affirmed this court's holding that shipping trays used to hold baby formula containers did not constitute labeling under the FDCA. Hanafy II , 302 F.3d at 490. The defendants in that case consolidated genuine cans of baby formula from the manufacturer into shipping trays that were designed to extend upward only a few inches so that the genuine cans would remain visible. Id. at 486. The Government in that case argued that the shipping trays used by defendants constituted labeling for the baby formula that was false or misleading and offered evidence that the shipping trays resembled the manufacturers' trays but failed to reveal that the baby formula containers were repackaged into the defendants' trays. Id. The Fifth Circuit, affirming this court, explained that the trays were not labeling because they did not "explain" or "provide" "substantial information" about the use or benefits of the baby formula beyond the correct, visible labels on the baby formula containers themselves. Id. at 490 ; see also Hanafy I , 124 F.Supp.2d at 1027 ("[T]he only information that apparently would be gleaned from the shipping trays would be that the product had been repacked.") (original emphasis).
Unlike the shipping trays in Hanafy that did not "explain" or "provide" "substantial information" beyond "that which [was] already upon the articles themselves," Hanafy II , 302 F.3d at 490, the Indictment in this case alleges that labeling-including labels on the articles themselves-fraudulently misidentified contained ingredients. Also unlike the Indictment in Hanafy , in which the Government alleged that the misbranded material duplicated a lawful label or simply failed to reveal additional information, here, the Indictment alleges that Defendants conspired to use affirmatively false "labels" and other affirmatively false "labeling" that, among other things, misidentified the actual articles of food. Doc. 95 at 6-11. For example, the Government has alleged that Geissler instructed a Chinese chemical seller to hide the names of chemicals to be shipped from China to Texas "by writing: 'Please send as Green coffee samples and send them all together.... And don't label the individual bags. Label as green coffee sample 1, 2, 3 etc.' " Id. at 15. The Indictment also alleges that "USP Labs sent false labels listing 'cynanchum auriculatum (root) extract' as an ingredient in OxyElite Pro Advanced Formula to retailers and wholesalers, even though that ingredient was not present in the product." Id. False labels bearing the wrong product name are "labeling" under the FDCA because they convey substantial information about the contents of the container. As the Government persuasively argued in its objection to the Report: "Accepting the recommendation to dismiss Count 7 would mean that, for instance, Viagra labeled as Tylenol would not be misbranded under the FDCA. Hanafy did not hold or even suggest that dangerous substances can be fraudulently labeled as safe substances with no consequences." Gov't's Obj. 6 (Doc. 478).
In addition to actual labels on the products themselves, the court agrees with the Government that the COAs referred to in the Indictment also explain and convey "substantial information" about the product. Paragraph 16 of the Indictment alleges that a COA provides information to a manufacturer "certifying that the ingredient listed in the COA ha[s] been tested or otherwise evaluated, . [is] what it purport[s] to be . and [does] not contain dangerous levels of mercury or other toxic substances." Doc. 95 at 4. Paragraph 18 of the Indictment alleges that retailers rely on representations contained in "product labeling and in COAs" to determine that products are lawful to sell and contain what they purport to contain. Id. at 5. Paragraph 24 of the Indictment alleges that one COA at issue falsely portrayed a chemical it imported as "having been extracted from 'geranium flower powder' . using a 'hydro-alcoholic' extraction process at a 200-to-1 ratio." Id. at 7. These COAs "supplement[ ] or explain[ ]" the product, as they undoubtedly inform the customer about the quality and purity of an ingredient. See Kordel v. United States , 335 U.S. 345, 348, 350, 69 S.Ct. 106, 93 L.Ed. 52 (1948) (literature "supplement[ing] or explain[ing]" the use of drugs, even when shipped separately, constituted "labeling" under the FDCA ( id. at 350, 69 S.Ct. 106 ); the drugs and literature were "interdependent," having a "common origin and common destination," and the literature "constituted an essential supplement to the label attached to the package" ( id. at 348, 69 S.Ct. 106 ) ). Finally, Count 7 alleges that the false labeling included such COAs as well as other false labeling. Doc. 95 at 22-24. The court concludes that these labels and COAs are what the recommendation to dismiss Count 7 erroneously states are missing from the Indictment.
In sum, to the extent Magistrate Judge Toliver required the Government to provide further factual support in the Indictment concerning "labeling," the court sustains the Government's objection and rejects her Report and its recommendation that Count 7 be dismissed on this basis. Whether the written materials the Government might present at trial in support of Count 7 qualify as "labeling" is a factual determination, and not an appropriate inquiry at the motion-to-dismiss stage. See Fontenot , 665 F.3d at 644 ("The propriety of granting a motion to dismiss an indictment . by pretrial motion is by-and-large contingent upon whether the infirmity in the prosecution is essentially one of law or involves determinations of fact.... If a question of law is involved, then consideration of the motion is generally proper.") (citation omitted). Also buttressing the court's conclusion is that Count 7 is a conspiracy charge. See Lawrence , 727 F.3d at 397 ("It is well established that in an indictment for conspiring to commit an offense-in which the conspiracy is the gist of the crime-it is not necessary to allege with technical precision all the elements essential to the commission of the offense [that] is the object of the conspiracy.") (internal quotation marks and citation omitted). Further, even were the Government required to detail in the Indictment how the written materials at issue constituted "labels" and "labeling," the Government has done so here with its allegations of actual false labels on the products themselves and COAs, both of which were allegedly intended to explain and provide "substantial information" about the products. See Kordel , supra ; Hanafy II , supra .
b. Defendants' Alternative Arguments in Support of Their Motion to Dismiss Count 7 of the Indictment
Magistrate Judge Toliver's recommendation that the court grant Defendants' motion to dismiss Count 7 was based on her acceptance of Defendants' first argument in support of dismissal, obviating the need for her to consider Defendants' two alternative arguments in support of their motion to dismiss Count 7, namely, that the Indictment does not allege facts establishing that the allegedly false and misleading "labeling" was material; and that the FDCA's definition of "labeling" is unconstitutionally vague. As this court has sustained the Government's objection to Magistrate Judge Toliver's Report with respect to Count 7, Defendants' alternative arguments in support of their motion to dismiss Count 7 must now be addressed for the first time.
i. "Materiality"
Count 7 of the Indictment alleges that Defendants conspired to introduce misbranded food into interstate commerce "with the intent to defraud and mislead." Doc. 95 at 22. In support of their motion to dismiss Count 7, Defendants argue that the Government cannot prove they had the intent to defraud or mislead because it has not shown that the false or misleading labeling was material. The Government counters that, even assuming a materiality requirement applies to the FDCA-and not just mail, wire, and bank fraud statutes-the Indictment is sufficient to permit an inference of materiality.
A fraud indictment need not specifically state that a lie or misrepresentation was material, as long as the facts alleged permit an inference of materiality. United States v. Caldwell , 302 F.3d 399, 409 (5th Cir. 2002) ("If the facts alleged in the indictment warrant an inference of materiality, the indictment is not fatally insufficient for its failure to allege materiality in haec verba."); United States v. Bieganowski , 313 F.3d 264, 286 (5th Cir. 2002) (same); United States v. McGough , 510 F.2d 598, 603 (5th Cir. 1975) (same).
First, the court assumes, without finding, that the Government must prove "materiality" to establish an intent to violate the FDCA with the "intent to defraud or mislead." But see supra note 3. The court need not decide this issue, however, as it finds that the Indictment supplies all the elements required to state a substantive offense in Count 7. Among other things, the Indictment alleges that Defendants attempted to mislead government agencies by using false labeling to import ingredients, and that they also used the false ingredient labeling to match label claims on the finished products. Doc. 95 at 22-23. The allegations in the Indictment are more than sufficient for the court to infer that the mislabeling of ingredients for shipment was material to FDA examiners. See Gov't's Resp. 7-8 ( "[I]t is obvious that when a party purposefully imports an ingredient using the wrong name, then lies about the identity of the ingredient in the finished product, these lies would have the natural effect of influencing, for example, FDA import examiners and consumer purchasers."); Neder v. United States , 527 U.S. 1, 16, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999) (statement is material "if it has a natural tendency to influence, or is capable of influencing, the decision of the decision-making body to which it was addressed.").
Accordingly, the court rejects Defendants' motion to dismiss Count 7 on this basis.
ii. Vagueness Challenge
Defendants alternatively argue that the FDCA's definition of "labeling" is vague and ambiguous in violation of the Fifth Amendment's Due Process Clause. Defendants contend they "were not given prior fair notice that ordering compounds from an overseas supplier under inaccurate Customs-related import documentation could trigger criminal liability for misbranding." Defs.' Mot. to Dismiss Count 7 10 (Doc. 379). According to Defendants, "the FDCA's definition of labeling, after almost 70 years of jurisprudence, should be construed to exclude the type of documentation at issue in Count 7." Id. at 10-11. The Government counters that "there is nothing ambiguous or constitutionally vague about the statutory terms or the charges in the Indictment." Gov't's Resp. 9 (Doc. 404).
When a defendant challenges a criminal statute as vague, courts consider the challenge under the rubric of the Fifth Amendment's due process clause. Johnson v. United States , - U.S. -, 135 S.Ct. 2551, 2556-57, 192 L.Ed.2d 569 (2015). The Government violates due process by taking away an individual's "life, liberty, or property under a criminal law so vague that it fails to give ordinary people fair notice of the conduct it punishes, or so standardless that it invites arbitrary enforcement." Id. at 2556 (citation omitted). A statutory provision is facially vague when it is plagued with such "hopeless indeterminacy" that it precludes "fair notice of the conduct it punishes." Id. at 2556-58. A facially vague provision is "so standardless that it invites arbitrary enforcement." City of El Cenizo, Texas v. Texas , 890 F.3d 164, 190 (5th Cir. 2018) (quoting Johnson , 135 S.Ct. at 2556 ); see also id. (citing Coates v. City of Cincinnati , 402 U.S. 611, 616, 91 S.Ct. 1686, 29 L.Ed.2d 214 (1971) (finding an ordinance facially vague because it proscribed "annoying" conduct) ). Defendants have not established that "labeling" is facially vague under this exacting standard.
As pointed out by the Government, the Seventh Circuit rejected this exact vagueness challenge in the case of a medical device vendor who argued that he could not have known that the documents he forged would be considered "labeling." United States v. Walton , 36 F.3d 32, 35 (7th Cir. 1994). The appellate court found that "[t]he statute is not vague, and, in fact, it is more easily comprehended than many others." Id. The court agrees with the Seventh Circuit's reasoning and, accordingly, rejects Defendants' vagueness challenge. A person of reasonable intelligence, considering the statutory language, see supra , would readily understand that changing the labels of food and food ingredient shipments, and creating false COAs (see supra note 1), with an intent to defraud or mislead the Government (or anyone else), is illegal under the FDCA.
Also in this vein, the court rejects Defendants' subsidiary argument that it should invoke the "rule of lenity" to resolve ambiguity in the term "labeling." "[T]he rule of lenity only applies if, after considering text, structure, history, and purpose, there remains a grievous ambiguity or uncertainty in the statute such that the Court must simply guess as to what Congress intended." Maracich v. Spears , 570 U.S. 48, 76, 133 S.Ct. 2191, 186 L.Ed.2d 275 (2013) ; see also Muscarello v. United States , 524 U.S. 125, 138, 118 S.Ct. 1911, 141 L.Ed.2d 111 (1998) ("The simple existence of some statutory ambiguity, however, is not sufficient to warrant application of [the rule of lenity], for most statutes are ambiguous to some degree."). Defendants have not established a "grievous ambiguity or uncertainty" requiring the court to guess what Congress intended. Absent this type of ambiguity, application of the rule of lenity is unwarranted.
Accordingly, the court will deny Defendants' motion to dismiss Count 7 on this basis.
IV. Conclusion
For the reasons herein stated, it is hereby ordered that Defendants' Objections to Magistrate Judge Toliver's Report (see Docs. 480, 482, 483, 485, and 488) are overruled in their entirety, and the Government's Objection to Magistrate Judge Toliver's Report is sustained . Accordingly, the court hereby accepts in part and rejects in part Magistrate Judge Toliver's Report as the Opinion and Order of this court. The court accepts Magistrate Judge Toliver's Report insofar as she recommends that the court deny Defendants' Motion to Dismiss Counts 2, 3, 4, 5, 6, 9, and 10 (see Docs. 220, 221, 293, 383, 387, 392, 394), and rejects her Report insofar as she recommends that the court grant Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Cyril Willson's Motion to Dismiss Count 7 (see Doc. 379). The court, therefore, denies the following motions:
1. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, Matthew Hebert, Kenneth Miles, S.K. Laboratories, Inc., and Sitesh Patel's Motion to Dismiss Count Ten (Doc. 220);
2 Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Kenneth Miles' Motion to Dismiss Counts Nine and Ten for Unconstitutional Vagueness (Doc. 221);
3. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motion to Dismiss Counts Two Through Four of the First Superseding Indictment as Untimely (Doc. 293);
4. Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Cyril Willson's Motion to Dismiss Count 7 (Doc. 379);
5. Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Kenneth Miles' Joint Motion to Dismiss Counts 5, 8, and 9 (Doc. 383);
6. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motion to Dismiss Count 6 (Doc. 387);
7. Defendant Kenneth Miles' Motion to Dismiss Count Nine and Ten (Doc. 392); and
8. Defendant Cyril Willson's Motion to Dismiss Count 5 and Motion to Adopt In-Part Codefendants' Motion to Dismiss Counts 5, 8, 9 (Doc. 394).
It is so ordered this 5th day of October, 2018.
AMENDED FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
RENÉE HARRIS TOLIVER, UNITED STATES MAGISTRATE JUDGE
Pursuant to the referrals of District Judge Sam A. Lindsay, the following motions are before the Court for a recommended disposition:
1. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Kenneth Miles' Motion to Dismiss Counts Nine and Ten for Unconstitutional Vagueness , Doc. 221;
2. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, Matthew Hebert, Kenneth Miles, S.K. Laboratories, Inc., and Sitesh Patel's Motion to Dismiss Count Ten , Doc. 220;
3. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motion to Dismiss Counts Two Through Four of the First Superseding Indictment as Untimely , Doc. 293;
4. Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel and Cyril Willson's Motion to Dismiss Count 7 , Doc. 379;
5. Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel and Kenneth Miles' Joint Motion to Dismiss Counts 5, 8, and 9 , Doc. 383;
6. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motion to Dismiss Count 6 , Doc. 387;
7. Defendant Kenneth Miles' Motion to Dismiss Count Nine and Ten , Doc. 392;
8. Defendant Cyril Willson's Motion to Dismiss Count 5 and Motion to Adopt In-Part Codefendants' Motion to Dismiss Counts 5, 8, 9 , Doc. 394;
The Court's findings and recommendations are set forth infra .
A. Factual Background
These charges stem from Defendant USPlabs, LLC's ("USP") sale of dietary/weight loss supplements, which were manufactured by Defendant S.K. Laboratories ("S.K. Labs"). Doc. 95 at 5-6. The First Superseding Indictment (the "Indictment") generally alleges that Defendants conspired to import and sell synthetic dietary supplements, but falsely marketed the products as plant-based under the theory that federal regulatory agencies would be less likely to question the importation of plant extracts, and retailers would be more likely to sell such products. Doc. 95 at 6. It is alleged that, during the conspiracy, certain Defendants created false documentation to import a synthetic substance, known as DMAA, which they represented was a geranium plant extract; Defendants then used the DMAA in certain of their supplements, which thereafter became bestselling products. Doc. 95 at 7, 14-15.
It is further alleged that when DMAA became the subject of controversy in the dietary supplement industry, USP, through Defendant Jacobo Geissler, began importing other chemicals under false labels to determine if they could be used in new dietary supplements. Doc. 95 at 9. Two such ingredients were aegeline, which is a synthetic version of an extract from a tree native to India, and the pulverized roots of a Chinese herb called cynanchum auriculatum ("CA"), both of which USP is alleged to have purchased from China using fake certificates of analysis. The first aegeline-containing version of one of Defendants' supplements was OxyElite Pro "New Formula" ("OEP-NF"). Doc. 95 at 9-10. The second version of the supplement contained both aegeline and CA and was called OxyElite Pro "Advanced Formula" ("OEP-AF"). Doc. 95 at 10.
As alleged in the Indictment, in the fall of 2013, an outbreak of injuries was reported to be associated with USP's aegeline-based products after numerous consumers experienced liver-related symptoms, including liver failure. Doc. 95 at 11. Following an inspection by the Food and Drug Administration ("FDA"), USP agreed to cease distributing the OEP products, but is alleged to have instead pushed sales as fast as possible. Doc. 95 at 11. The Indictment also alleges that USP issued a press release falsely stating that the ingredients in OEP had been researched and showed no negative liver effects, even though Geissler and Defendant Cyril Willson knew that a study had shown such negative side effects. Doc. 95 at 11. Eventually, Geissler instructed that both aegeline and CA be removed from the product going forward. Doc. 95 at 11.
B. The Charges
As relevant here, the Indictment contains the following charges:
Count 1 - Conspiracy to Commit Wire Fraud , 18 U.S.C. § 1343, 1349 ; Doc. 95 at 12-17. This count involves certain Defendants' alleged use of false shipping labels, false certificates of analysis ("COAs") , and false shipping documentation to support misleading product labeling in relation to statements that the respective supplements contained "natural" DMAA derived from geranium and CA "extract" (as opposed to CA "root").
Counts 2-5 - Wire Fraud , 18 U.S.C. § 1343 ; Doc. 95 at 18-19. These counts involve certain Defendants' alleged transmission in interstate commerce of false and fraudulent COAs, instructions to create false documents, and other fraudulent statements contained in emails.
Count 6 - Obstruction of an Agency Proceeding , 18 U.S.C. § 2, 1505 ; Doc. 95 at 20-21. This count charges that, during the FDA investigation regarding whether an outbreak of liver injuries was associated with USP products containing aegeline, certain Defendants continued to distribute OEP products despite representing to the FDA that they would cease distribution, and attempted to impede the FDA's investigation by failing to provide material information about OEP, the anticipated shipments thereof, and promotional activities therefore.
Count 7 - Conspiracy to Introduce Misbranded Food Into Interstate Commerce with an Intent to Defraud and Mislead , 18 U.S.C. § 371 ; 21 U.S.C. § 331(a), 333(a)(2) ; Doc. 95 at 22-24. This count alleges that certain Defendants conspired to avoid law enforcement attention and match imported substances with false product labeling by instructing Chinese chemical sellers to falsely label numerous chemical powders they sent to USP, including "geranium flower powder extract" and CA root "extract."
Count 8 - Introduction of Adulterated Food into Interstate Commerce with an Intent to Defraud and Mislead , 21 U.S.C. § 331(a), 333(a)(2) ; 18 U.S.C. § 2 ; Doc. 95 at 25. This count alleges that certain Defendants, aided and abetted each other, caused the shipment of OEP-AF in interstate commerce when the label falsely declared that CA "extract" was an ingredient.
Count 9 - Introduction of Misbranded Food into Interstate Commerce , 21 U.S.C. § 331(a), 333(a)(2) ; Doc. 95 at 26. This count alleges that certain Defendants caused the shipment of OEP-AF in interstate commerce when the food was misbranded under the Food Drug and Cosmetic Act ("FDCA") in that its label falsely declared that CA "extract" was an ingredient.
Count 10 - Introduction of Adulterated Dietary Supplement into Interstate Commerce , 21 U.S.C. § 331(a), 333(a)(1) ; Doc 95 at 27. This count alleges that certain Defendants caused the shipment of OEP-NF in interstate commerce even though the supplement "presented a significant or unreasonable risk of illness or injury under conditions of use recommended or suggested in labeling."
C. The Motions to Dismiss
1. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Kenneth Miles's Motion to Dismiss Counts Nine and Ten for Unconstitutional Vagueness , Doc. 221
a. Facial Vagueness of Section 21 U.S.C. § 333
These Defendants first argue that section 333(a)(1) is essentially a strict liability offense and does not require the Government to prove that a defendant acted with an intent to defraud or mislead.
Doc. 221 at 9-10. Instead, they note, the Supreme Court has interpreted section 333(a)(1) to allow a defendant to be convicted of an adulteration or misbranding misdemeanor if he "had, by reason of his position in the corporation, responsibility and authority either to prevent in the first instance, or promptly to correct, the violation complained of, [but] failed to do so." United States v. Park , 421 U.S. 658, 673-74, 95 S.Ct. 1903, 44 L.Ed.2d 489 (1975) (also holding that the FDCA does not "make criminal liability turn on 'awareness of some wrongdoing' or 'conscious fraud.' ") (quotation marks and citations omitted). Defendants assert that, notwithstanding Park , which did not address the constitutionality of section 333(a)(1), Counts 9 and 10 are unconstitutionally vague due to the lack of a scienter requirement. Doc. 221 at 10-11. Additionally, Defendants argue that Defendants Miles, S.K. Labs, and Patel are not executives or control persons of USP, and that neither S.K. Labs nor Patel are even USP employees, and thus cannot be prosecuted for USP's alleged misbranding. Doc. 221 at 13.
The Government responds, inter alia , that the FDCA repeatedly has passed constitutional muster because the distribution of food touches people's lives such that they "are largely beyond self-protection." Doc. 240 at 7-8 (citing Park , 421 U.S. at 668, 95 S.Ct. 1903 ). Further, the Government points out that both the Supreme Court and the Court of Appeals for the Fifth Circuit have construed criminal statutes to impose strict liability even where violators could be subject to imprisonment. Doc. 240 at 8-9 (citing, inter alia , United States v. Freed , 401 U.S. 601, 607-10, 91 S.Ct. 1112, 28 L.Ed.2d 356 (1971) ; United States v. Ayo-Gonzalez , 536 F.2d 652, 661 (5th Cir. 1976) ). Additionally, the Government contends that the named Defendants are "responsible corporate agents" properly subject to prosecution because (1) Geissler, Doyle, and Hebert owned and had decision-making authority for USP; (2) Patel supervised the manufacture of USP's products at S.K. Labs; (3) Miles was responsible for ensuring the compliance of USP's products with the FDCA; and (4) the named Defendants directly participated in the formulation, shipment, manufacture, and labeling of the adulterated and misbranded products. Doc. 241 at 9-12. The Government further urges that the relevant statutory provisions are not vague on their face or as applied because the FDCA provides numerous definitions of adulteration and misbranding, which is sufficient to satisfy due process, especially considering the "common sense" meanings that must be given to the FDCA's criminal provisions. Doc. 241 at 12-16.
When a defendant challenges a criminal statute as vague, courts consider the challenge under the rubric of the Fifth Amendment's due process clause. Johnson v. United States , - U.S. -, 135 S.Ct. 2551, 2556-57, 192 L.Ed.2d 569 (2015). The government violates due process by taking away an individual's "life, liberty, or property under a criminal law so vague that it fails to give ordinary people fair notice of the conduct it punishes, or so standardless that it invites arbitrary enforcement." Id. at 2556 (citation omitted). To qualify as unconstitutionally vague, a statute must be "impermissibly vague in all its applications," Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc. , 455 U.S. 489, 495, 102 S.Ct. 1186, 71 L.Ed.2d 362 (1982), including its application to the party bringing the vagueness challenge, United States v. Clark , 582 F.3d 607, 612-13 (5th Cir. 2009). "Objections to vagueness under the Due Process Clause rest on the lack of notice and hence may be overcome in any specific case where reasonable persons would know that their conduct is at risk."
Maynard v. Cartwright , 486 U.S. 356, 361, 108 S.Ct. 1853, 100 L.Ed.2d 372 (1988). On the other hand, an ordinance is vague in all its applications where (1) "it subjects the exercise of [a] right . to an unascertainable standard," or (2) persons "of common intelligence must necessarily guess at its meaning." Coates v. City of Cincinnati , 402 U.S. 611, 614, 91 S.Ct. 1686, 29 L.Ed.2d 214 (1971) (citation omitted)
Counts 9 and 10 allege violations of 21 U.S.C § 333(a)(1), which makes it a misdemeanor offense to introduce into interstate commerce "any food, drug, device, tobacco product, or cosmetic that is adulterated or misbranded," in violation of 21 U.S.C § 331(a). While strict liability crimes are not unheard of and do not always offend constitutional requirements, such offenses are generally disfavored. United States v. U.S. Gypsum Co. , 438 U.S. 422, 437-38, 98 S.Ct. 2864, 57 L.Ed.2d 854 (1978). As Defendants argue, section 333(a)(1) does not include a scienter requirement. See Park , 421 U.S. at 672-73, 95 S.Ct. 1903 ("The [FDCA] does not, as we observed in [United States v .] Dotterweich [320 U.S. 277, 281, 64 S.Ct. 134, 88 L.Ed. 48 (1943) ] make criminal liability turn on 'awareness of some wrongdoing' or 'conscious fraud.' ").
The regulation of food, drugs, and cosmetics pursuant to section 333(a), however, "imposes criminal sanctions as a means of regulating activities so dangerous to the public welfare as not to permit of exception for good faith and ignorance. A person acts at his peril in this field." United States v. Hohensee , 243 F.2d 367, 371 (3d Cir. 1957) (citing Dotterweich , 320 U.S. 277, 64 S.Ct. 134, 88 L.Ed. 48 ). Moreover, due process is not violated simply because section 333(a) does not contain a mens rea requirement. See Park , 421 U.S. at 666, 95 S.Ct. 1903 (rejecting appellate court's finding that due process was violated where the defendant was found guilty of violating section 331 despite the lack of evidence of defendant's "wrongful action" given his position of authority in the corporation); United States v. Greenbaum , 138 F.2d 437, (3d Cir. 1943) (holding that due process was not violated merely because mens rea was not a required element of the crime of introducing adulterated eggs in interstate commerce because the offense was capable of inflicting widespread injury, and requiring proof of the offender's guilty knowledge and wrongful intent would be virtually impossible) (citing Shevlin-Carpenter Co. v. Minnesota , 218 U.S. 57, 69-70, 30 S.Ct. 663, 54 L.Ed. 930 (1910) ). Thus, Defendants' motion to dismiss on this basis should be DENIED .
b. Vague as Applied
The named Defendants next argue that the statute underlying Count 9 of the Indictment, namely 21 U.S.C. § 343(a)(1), is unconstitutionally vague as applied because they are accused of using "false and misleading" terms by labeling OEP-AF as containing CA "extract" rather than the actual powdered CA root used. Doc. 221 at 14-15. Defendants assert that neither the FDCA nor its regulations define the term "extract," thus the statutory phrase "false or misleading" is unconstitutionally vague as applied to dietary supplements whose labels claim to use "extracts." Doc. 221 at 15.
Defendants assert that Count 10 also must be dismissed because the statute on which the count is based is unconstitutionally vague as applied. Doc. 221 at 16. Defendants particularly take issue with the language in the statute providing that a dietary supplement is "adulterated" if it "presents a significant or unreasonable risk of illness or injury under conditions of use recommended or suggested in labeling." Doc. 221 at 16 (emphasis added). Defendants contend that the italicized words are irremediably vague and ambiguous. Doc. 221 at 16-18.
With respect to Count 9, the Government responds that the court or a jury can resolve any dispute about the definition of the term "extract," but the use of the word does not make the governing statute vague. Doc. 240 at 14-15. Additionally, the Government avers that the FDCA's plain language provides ample definitions of the terms "adulterated" and "misbranded" sufficient to satisfy due process, and such provisions must be given their common sense meanings, i.e., it is common sense that potentially dangerous and/or mislabeled supplements are illegal. Doc. 240 at 12. As to Count 10, the Government urges that the term "significant or unreasonable" risk is not vague because jurors make decisions every day using similar standards, and any perceived problem with respect to that language is not addressed by the doctrine of vagueness, but by the requirement that the Government must prove its case beyond a reasonable doubt. Doc. 240 at 13-14.
In Count 9, it is alleged that Defendants misbranded OEP-AF as containing CA "extract" when in fact USP and Geissler substituted an ingredient that cost about six times less. Doc. 240 at 15. As the Government properly observes, substituting a cheaper ingredient for a more expensive one, but listing the more expensive ingredient on the label would constitute misbranding. Moreover, as argued by the Government, simply because there is no statutory or regulatory definition of "extract" does not render the penal statute vague. Indeed, a number of both defense and Government's experts appear to be knowledgeable about what an "extract" is. Government expert Dr. Oberlies appears to have considerable experience in various extraction methods, Doc. 294 at 16-18, and several experts from both sides discuss extracts or rely on extensive scientific literature that discusses extracts, see, e.g. , Doc. 222 at 18, 28-29, 65-66, 71-73; Doc. 222-1 at 47; Doc. 222-2 at 7, 19; Doc. 222-3 at 7, 17; Doc. 222-5 at 14; Doc. 222-14 at 11, 29; Doc. 232 at 9, 11, 13, 24-25, 31-32, 39, 59, 65-67. Moreover, juries are capable of using their common sense to determine the core of a meaning that they are capable of understanding. See Tuilaepa v. California , 512 U.S. 967, 975, 114 S.Ct. 2630, 129 L.Ed.2d 750 (1994) ("For purposes of vagueness analysis, however, in examining the propositional content of a factor, our concern is that the factor have some 'common-sense core of meaning . that criminal juries should be capable of understanding.' ") (quotation omitted); Mid-Continent Cas. Co. v. Kipp Flores Architects, L.L.C. , 602 Fed. App'x 985, 994 (5th Cir. 2015) (per curiam) (using a "common sense" approach to determining whether the definition of "advertisement" was met).
Similarly, in Count 10, Defendants are alleged to have shipped adulterated OEP-NF, which the Government claims was associated with an outbreak of severe hepatic injuries. During oral argument, Defendants cited to Johnson v. United States , - U.S. -, 135 S.Ct. 2551, 192 L.Ed.2d 569 (2015) and Sessions v. Dimaya , - U.S. -, 138 S.Ct. 1204, 200 L.Ed.2d 549 (2018) for the proposition that the phrase "significant or unreasonable risk" is unconstitutionally vague as applied. In Johnson , the Court addressed a provision in the Armed Career Criminal Act (the "ACCA"), which enhances a defendant's sentence if, as relevant here, the defendant had three or more convictions for a "violent felony." The ACCA defines "violent felony," in relevant part, as one that "involves conduct that presents a serious potential risk of physical injury to another ." 135 S.Ct. at 2555-56 (emphasis in original). This came to be known as the "residual clause." Id. at 2556.
The Johnson Court held that two features of the residual clause rendered it unconstitutionally vague. Id. at 2557. First, the residual clause left "grave uncertainty about how to estimate the risk posed by a crime," in that it tied the judicial assessment of risk to an "ordinary case," not to the actual facts of the case or the statutory elements of the violent felony. Id. Second, the residual clause left uncertainty about the level of risk it took for a crime to qualify as a violent felony. Id. at 2558. The Court concluded that the residual clause's effect of "combining indeterminacy about how to measure the risk posed by a crime with indeterminacy about how much risk it takes for the crime to qualify as a violent felony" rendered it too unpredictable and arbitrary to satisfy the Due Process Clause. Id. The Court further noted that the failure of persistent efforts by courts to establish a workable standard also demonstrated that the residual clause was unconstitutionally vague. Id.
Nevertheless, the Court rejected the argument that holding the residual clause unconstitutional would place terms in criminal law such as "substantial risk," "grave risk," and "unreasonable risk" in constitutional doubt. Id. at 2561. Distinguishing such terms, the Court noted that they did not generally link themselves with "a confusing list of examples" and, "[m]ore importantly, almost all of the cited laws require gauging the riskiness of conduct in which an individual defendant engages on a particular occasion. " Id. (emphasis in original). The Court thereby pointed out that it did not doubt the constitutionality of laws that called for the application of a standard such as "substantial risk" so long as the phrase related to real-world conduct" rather than an idealized "ordinary case of the crime." Id.
In contrast to Johnson , the challenged statutory language involved here - "significant or unreasonable risk" - is tied to the actual facts of this case and does not require any assessment about the risk or level thereof presented in a hypothetical scenario. Rather, the language at issue in Count 10 comports with the Supreme Court's statement that such qualitative standards are constitutional when they are tied to "real-world" conduct as is alleged in Count 10. Thus, Johnson does not support the dismissal of Count 10.
Dimaya also does not call for a different result. In that case, the Court addressed whether the term "crime of violence" in the Immigration and Nationality Act (the "INA") was unconstitutionally vague. The residual clause provision to which the INA referred provided that a "crime of violence" was "a felony . that, by its nature, involves a substantial risk that physical force against the person or property of another may be used in the course of committing the offense." 138 S.Ct. at 1211 (emphasis added). As in Johnson , in determining whether a particular felony constituted a crime of violence, courts interpreting the INA were required to assess the underlying crime's "ordinary case" to measure the risk of the crime. Id. at 1215. And, as in Johnson , the INA also expressed ambiguity about the "level of risk" that would serve to make a crime "violent." Id. at 1214-15 (noting the similarity between the ACCA's "serious potential risk" provision and the INA's "substantial risk" language). The Dimaya court observed that "[m]any perfectly constitutional statutes use imprecise terms like 'serious potential risk' . or 'substantial risk' . The problem came from layering such a standard on top of the requisite 'ordinary case' inquiry." Id. at 1214. The Court found that the term "substantial" risk, in and of itself, was not vague because jurors made decisions every day using similar standards. Id.
In the instant case, the same result holds true in relation to the words "significant or unreasonable" risk as that term is defined in section 21 U.S.C. § 342(f)(1)(A). As such, Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Kenneth Miles' Motion to Dismiss Counts Nine and Ten for Unconstitutional Vagueness , Doc. 221, should be DENIED .
2. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, Matthew Hebert, Kenneth Miles, S.K. Laboratories, Inc. and Sitesh Patel's Motion to Dismiss Count 10 , Doc. 220
Defendants next assert that the alleged outbreak of liver injuries"associated with" USP's aegeline-containing products cannot support the adulteration charge in Count 10 because the Government fails to set forth sufficient facts, such as scientific testing or expert evidence, that establish a causal connection between the shipment referenced in Count 10 and the purported 2013 outbreak. Doc. 220 at 11-14. Similarly, Defendants argue that the Indictment alleges no facts supporting the alleged risk of illness posed by OEP-NF "under the conditions of use recommended or suggested in the labeling," which is a key element of the crime of adulteration. Doc. 220 at 14-15 (quoting 21 U.S.C. § 342(f)(1)(A) ). Defendants also take issue with the fact that the Indictment does not specify the types of consumers who were allegedly injured by OEP-NF and whether they used the supplement in compliance with the recommended dosage on the label. Doc. 220 at 15-16.
The Government responds that Defendants' motion improperly challenges the sufficiency of the evidence underlying the Indictment when the Court must take all allegations in an indictment as true in considering a motion to dismiss. Doc. 239 at 1-2 (citing United States v. Fontenot , 665 F.3d 640, 644 (5th Cir. 2011) ). Moreover, the Government contends that the Indictment adequately charges a crime in Count 10 and gives Defendants sufficient notice of the charge. Doc. 239 at 2-4. As to Defendants' argument that the Indictment must allege facts indicating that consumers used OEP-NF per the terms of the label, the Government asserts that Count 10 contains the required language and greater specificity and supporting evidence is not necessary. Doc. 239 at 4-5.
Pursuant to Rule 7(c) of the Federal Rules of Criminal Procedure : "The indictment or information must be a plain, concise, and definite written statement of the essential facts constituting the offense charged . A count may incorporate by reference an allegation made in another count. A count may allege that the means by which the defendant committed the offense are unknown or that the defendant committed it by one or more specified means." As applicable to Count 10, a product shall be deemed to be "adulterated" if it "is a dietary supplement or contains a dietary ingredient that presents a significant or unreasonable risk of illness or injury under conditions of use recommended or suggested in labeling." 21 U.S.C. § 342(f)(1)(A).
An indictment "in the language of" a criminal statute is valid if the words of the statute "fully, directly, and expressly, without any uncertainty or ambiguity, set forth all the elements necessary to constitute the offence intended to be punished." Van Liew v. United States , 321 F.2d 664, 674 (5th Cir. 1963). If, however, as here, the statute is pleaded in the indictment in general terms, "it must be accompanied with such a statement of the facts and circumstances as will inform the accused of the specific offence, coming under the general description, with which he is charged." Id. (quoting Russell v. United States , 369 U.S. 749, 765, 82 S.Ct. 1038, 8 L.Ed.2d 240 (1962) ). "The propriety of granting a motion to dismiss an indictment . by pretrial motion is by-and-large contingent upon whether the infirmity in the prosecution is essentially one of law or involves determinations of fact . If a question of law is involved, then consideration of the motion is generally proper." Fontenot , 665 F.3d at 644 (quoting United States v. Flores , 404 F.3d 320, 324 (5th Cir. 2005) ). "In reviewing a challenge to an indictment alleging that it fails to state an offense, the court is required to take the allegations of the indictment as true and to determine whether an offense has been stated." Id. (quoting United States v. Crow , 164 F.3d 229, 234 (5th Cir. 1999) ).
Count 10 contains only one substantive paragraph, which states that the named Defendants "shipped and caused the shipment of adulterated [OEP-NF] in interstate commerce . [and] [t]he dietary supplement was adulterated because it was a 'dietary supplement . that present[ed] a significant or unreasonable risk of illness or injury under conditions of use recommended or suggested in labeling." Doc. 95 at 27 (quoting 21 U.S.C.A. § 342(f)(1)(A) ). The caption of Count 10 alleges violations of sections 331(a) and 333(a)(1). Doc. 95 at 27. Nevertheless, Count 10 "incorporates by reference all of the allegations set out in Paragraphs 1 through 35, 39 through 44, and Paragraph 67." Doc. 95 at 27. Those paragraphs set forth (1) the definition of "dietary supplement"; (2) the allegation that Defendants created OEP-NF using the synthetic chemical aegeline; and (3) that, in the fall of 2013, an outbreak of liver injuries was associated with USP's aegeline-containing products, which caused numerous consumers to experience jaundice and other liver-related symptoms and several consumers to need liver transplants. Doc. 95 at 2-3, 9-11.
Here, although the pertinent statutes are pleaded in the Indictment in general terms, they were accompanied by the above description of facts and circumstances, which is sufficient to inform Defendants of the specific offense with which they are charged. FED. R. CRIM. P. 7(c) ; Van Liew , 321 F.2d at 674. Defendants' challenges to Count 10 amount to questions of fact and, thus, are not the proper subject of a motion to dismiss. Fontenot , 665 F.3d at 644. Accordingly, Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, Matthew Hebert, Kenneth Miles, S.K. Laboratories, Inc. and Sitesh Patel's Motion to Dismiss Count 10 , Doc. 220, should be DENIED .
3. Defendants USPlabs, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motions to Dismiss Counts Two Through Four of the First Superseding Indictment as Untimely , Doc. 293
The Indictment alleges: (1) in Count 2, that Defendants Hebert and Geissler communicated by email in May 2010 regarding fraudulent "geranium" COAs, and a retailer was emailed that DMAA was a natural extract; (2) in Count 3, that Defendants Doyle and Patel communicated via email in August 2010 about altering "geranium" COAs to contain false information; and (3) in Count 4, that "Person Y" and Patel discussed in a September 2010 email documents for a shipment of "geranium" for use in USP's products, including the use of a fake COA altered "at co-schemers' direction." Doc. 95 at 19.
Defendants argue that Counts 2 through 4 are untimely because they were not brought within the applicable five-year statute of limitations, and the Government has not established by a preponderance of the evidence that it submitted an official request to China (the "Request") for assistance in its investigation of USP which would be sufficient to toll the limitations period. Doc. 293 at 6. Defendants contend that although Judge Fitzwater signed an ex parte order tolling the statute of limitations while China responded to the Request, that order is insufficient to save Counts 2 through 4 from dismissal because: (1) the Government failed to provide to Judge Fitzwater (or to Defendants) a copy of the Request when the Government moved for a tolling order pursuant to 18 U.S.C. § 3292 ; (2) the Request did not satisfy all the mandatory requirements of the Government's Agreement on Mutual Legal Assistance in Criminal Matters with the People's Republic of China (the "MLAA"); (3) the Government did not demonstrate by a preponderance of the evidence that any evidence supporting Defendants' alleged wrongdoing was actually in China; and (4) there is no evidence of the date that China took "final action" on the Request, which would be the date that tolling ends. Doc. 293 at 6, 9-16. As such, Defendants argue that Judge Fitzwater's tolling order should not be given any effect. Doc. 293 at 10-11, 13.
The Government responds that the statute of limitations was tolled beginning in April 2015 by virtue of its Request, and because China has not yet provided any evidence or taken "final action" in response to the Request, the statute of limitations was tolled pursuant to section 3292, and will continue to be tolled until either (1) China responds; or (2) the expiration of three years, whichever occurs first. Doc. 305 at 1, 8 (citing 18 U.S.C. § 3292(c) ). The Government argues that Judge Fitzwater's order was not clearly erroneous since the Government provided Judge Fitzwater with (1) the letter transmitting the Request to China, including the Federal Express receipt, Doc. 293-13; and (2) an affidavit from the Government's attorney verifying that the Request had been sent to Chinese authorities in April 2015, Doc. 293-15. Doc. 305 at 4-5. The Government concludes that its Request need not contain the level of detail set forth in the MLAA because the statute does not require it, nor is it unusual for the Government to maintain the confidentiality of requests for legal assistance from other countries. Doc. 305 at 5-7.
Defendants were first indicted in November 2015. Doc. 1. Counts 2 through 4 are based on emails from 2010, which relate to allegedly falsified geranium COAs. Doc. 95 at 19. The general statute of limitations applicable in non-capital, criminal cases is five years. 18 U.S.C. § 3282(a). Congress, however, has provided for the suspension of the statute of limitations where evidence may be located in a foreign country. 18 U.S.C. § 3292(a)(1). Section 3292 provides that:
[u]pon application of the United States, filed before return of an indictment, indicating that evidence of an offense is in a foreign country, the district court before which a grand jury is impaneled to investigate the offense shall suspend the running of the statute of limitations for the offense if the court finds by a preponderance of the evidence that an official request has been made for such evidence and that it reasonably appears, or reasonably appeared at the time the request was made, that such evidence is, or was, in such foreign country.
Id.
The Government may meet its burden under section 3292 by submitting to the court a variety of documents. United States v. Trainor , 376 F.3d 1325, 1332-33 (11th Cir. 2004). The evidentiary requirement is "not a high standard of proof" and may be satisfied by the Government's submission of a broad range of materials, "including a sworn or verified application containing the necessary factual information, testimony by Government officials, affidavits, declarations, exhibits, or other materials of evidentiary value," as well as hearsay evidence, that "meet a minimum threshold of reliability." Id. at 1333 ; see also United States v. Wilson , 249 F.3d 366, 371 (5th Cir. 2001) (noting that an application to toll the statute of limitations under section 3292 is a pre-indictment, ex parte proceeding, such that only evidence from the government is presented), abrogated on other grounds by Whitfield v. United States , 543 U.S. 209, 212, 125 S.Ct. 687, 160 L.Ed.2d 611 (2005).
As the Government correctly notes, the tolling period begins when the official request is made and ends (1) when the foreign court or authority takes final action on the request, or (2) after three years, whichever period is shorter. 18 U.S.C. § 3292(b-c) ; United States v. Meador , 138 F.3d 986, 991-92 (5th Cir. 1998). Section 3292 defines "official request" as "a letter rogatory, a request under a treaty or convention, or any other request for evidence made by a court of the United States or an authority of the United States having criminal law enforcement responsibility, to a court or other authority of a foreign country." 18 U.S.C. § 3292(d).
As argued by Defendants, however, a "request" within the meaning of the MLAA treaty must include:
(1) the name of the competent authority conducting the investigation to which the request relates;
(2) a description of the subject matter and nature of the investigation, including the relevant statutes and potential punishments;
(3) the purpose of the evidence and its relevance to the investigation;
(4) the time limit within which compliance is requested; and
(5) a description of the actual evidence sought.
Doc. 293 at 11 (citing MLAA Art. 4.1); see also MLAA Art. 1.3 (providing that the agreement "is intended solely for mutual legal assistance between the Parties. The provisions of this Agreement shall not give rise to a right on the party of any private person to obtain, suppress, or exclude any evidence.").
While a treaty such as the MLAA supersedes a federal statute if there is a conflict, Medellin v. Texas , 552 U.S. 491, 518, 128 S.Ct. 1346, 170 L.Ed.2d 190 (2008), there is no direct conflict here. Indeed, this case is analogous to the Wilson case cited above. There, the Government presented the district court with only a copy of a letter addressed to the attorney general of the Bahamas, which requested certain authenticated records that allegedly were physically present in the Bahamas. 249 F.3d at 371. The Wilson court noted that the official request was made pursuant to an MLAA. Id. at n.2 ("The request was made 'pursuant to the Treaty between the United States and the Commonwealth of The Bahamas on Mutual Assistance in Criminal Matters, signed at Nassau June 12 and August 18, 1987' and thus meets 18 U.S.C. § 3292's requirement that the "official request" be "a request under a treaty or convention.")
In the present case, the Government provided to Defendants its 11-page ex parte Application for an Order Pursuant to 18 U.S.C. § 3292 to Suspend the Limitations Period (the "Application"), which explained the Government investigation into USP and detailed the roles of a Chinese citizen, Vincent Zhou, and Chinese company, SmartChem, in Defendants' scheme. Doc. 293-12. The Application further included a letter the Government sent to Zhang Xiaoming at the Chinese Department of Judicial Assistance and Foreign Affairs, which explained the nature of the Government's investigation and stated that it sought bank, business, and official records as well as the opportunity to interview Zhou. Doc. 293-13. The Federal Express mailing label addressed to Xiaoming also was included. Doc. 293-13 at 4. Finally, attached to the Application was a sworn declaration signed by Government attorney Patrick Runkle attesting to the above. Doc. 293-15. The process followed by the Government in this case is substantially the same process described in Wilson . Indeed, the Government provided Defendants with more than enough evidence to prove that it submitted the Request. More importantly, the Application and its attachments were sufficient to support Judge Fitzwater's tolling order. Finally, because Defendants have not been provided with the actual Request, their argument that the Government did not wholly comply with the MLAA's requirements for making an official request is speculative. Accordingly, Defendants USPlabs, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motions to Dismiss Counts Two Through Four of the First Superseding Indictment as Untimely , Doc. 293, should be DENIED . The motion also should be denied as to Patel and S.K. Laboratories for the reasons noted above.
4. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motion to Dismiss Count Six , Doc. 387
Count 6 charges that, during the FDA's proceedings to determine whether an outbreak of liver injuries was associated with USP's aegeline-based products, these Defendants continued to distribute OEP despite representing to the FDA that they would cease distribution and, in fact, Defendants attempted to impede the FDA's investigation by failing to provide material information about OEP, the anticipated shipments thereof, and promotional activities therefore. Doc. 95 at 20-21 (citing 18 U.S.C. § 2, 1505 ).
a. Failure to State an Offense
Defendants first argue that Count 6 fails to state an offense because the FDA's inspections of USP in October and November 2013 were not "proceedings" within the meaning of 18 U.S.C. § 1505. Doc. 387 at 8-9. The Government counters that the investigations in question qualify as "proceedings before" the FDA. Doc. 411 at 5-13.
Section 1505 imposes criminal liability, in relevant part, upon any individual who "corruptly influences, obstructs, or impedes or endeavors to influence, obstruct or impede the due and proper administration of the law under which any pending proceeding is being had before any department or agency of the United States..." (emphasis added). In United States v. Pugh , the Court of Appeals for the Sixth Circuit held that an FDA inspection of an herbal supplement distributor's facilities was an agency "proceeding" for purposes of section 1505. 404 Fed. App'x 21 (6th Cir. 2010). In that case, an FDA inspector appeared unannounced at the company's headquarters and arranged to inspect their warehouses the next day. One of the warehouse managers was told that an investigator was coming, so he moved out of the warehouse boxes which contained mislabeled supplements and, after the investigation was complete, moved the boxes back in. Id. at *1. Subsequently, he was convicted of violating section 1505.
On appeal, he argued that the evidence was insufficient because the FDA inspection was not an agency "proceeding" within the meaning of section 1505. Id. at *25. The Sixth Circuit rejected this argument, holding that "it is clear . that the FDA inspection was an agency proceeding for purposes of the relevant statute." Id. ; see also United States v. Senffner , 280 F.3d 755, 761 (7th Cir. 2002) (holding that an SEC investigation was a proceeding for purposes of section 1505 ); United States v. Schwartz , 924 F.2d 410, 423 (2d Cir. 1991) (holding that a Customs Service interview of defendants for purposes of determining whether it should seize potentially illegal arms was an "agency proceeding"); United States v. Vixie , 532 F.2d 1277, 1278 (9th Cir. 1976) (holding that submitting a false document in response to an IRS subpoena violated section 1505 because the administrative investigation was a "proceeding"); United States v. Fruchtman , 421 F.2d 1019, 1021 (6th Cir. 1970) (stating that an investigation conducted by an attorney for the Federal Trade Commission was a "proceeding" under section 1505 ); c.f. United States v. Bergfeld , 280 F.3d 486, 487 (5th Cir. 2002) (noting defendant's guilty plea and conviction under section 1505 for attempting to evade the FDA's prohibition against the importation of certain medical devices, but reversing on speedy trial grounds). Defendants' reliance on United States v. Ramos is misplaced because the statute under which that defendant was indicted was 18 U.S.C. § 1512(c), which addresses an "official proceeding" rather than an "agency proceeding." 537 F.3d 439, 462-63 (5th Cir. 2008) (noting the distinction between an "official proceeding" and an agency investigation). Defendants' motion to dismiss on this basis should be denied.
b. Whether Any of Defendants' Alleged Conduct Obstructed or Impeded "the Due and Proper Administration of Law"
i. Whether Defendants' alleged misrepresentation to the FDA that they would cease distributing OEP products constituted an obstruction or impediment
Defendants next argue that none of their alleged conduct "obstructed or impeded" the "due and proper administration of the law" because the actions described in Count 6 "were neither inherently corrupt, nor undertaken for corrupt purposes." Doc. 387 at 12-13. Further, Defendants assert, the FDA had no legal authority to either seize the dietary supplements while on site for the inspection or issue an administrative detention order. Doc. 387 at 15. As such, Defendants maintain that their alleged sales of OEP products during the FDA's October/November 2013 inspections cannot constitute an act of obstruction or impediment of the "due and proper administration of the law." Doc. 387 at 15-16. Defendants also argue that the FDA did not allege that USP's products were adulterated until the day after the FDA's "proceedings" were completed, so any sales of OEP products during said "proceedings" could not have obstructed or impeded the due and proper administration of the law. Doc. 387 at 16-17.
The Government responds that Defendants' motion to dismiss is procedurally improper because they are essentially challenging the sufficiency of the evidence when the proper issue is whether the Indictment sufficiently charges the offense. Doc. 411 at 10-11, 13. The Government maintains that the Indictment alleges that Defendants falsely told the FDA that they would cease distribution of certain products in an attempt to prevent further potential FDA actions - which constitutes obstruction - and that providing such materially misleading information in the midst of a public health emergency investigation constitutes interference with the "due and proper administration of the law." Doc. 411 at 13-14 (citing Indictment, Doc. 95 at 20). Thus, allegations regarding what the FDA chose to do or not do during the investigations are issues for the jury's consideration. Doc. 411 at 11.
Contrary to Defendants' argument, at this stage of the proceedings, the Government is not required to demonstrate that Defendants' conduct was "corrupt" and, in fact, obstructed or impeded the due and proper administration of the law. See U.S. v. Mann , 517 F.2d 259, 267 (5th Cir. 1975) (holding that an indictment cannot be dismissed under Rule 12 by virtue of a "sufficiency-of-the-evidence" defense that raises factual questions "embraced in the general issue."). Further, the FDA's ability, vel non , to seize or detain the supplements and the issue of when the product was declared adulterated are simply not material to the issue of whether Count 6 is properly charged. As such, Defendants' motion to dismiss Count 6 on that basis should be denied.
ii. Whether Defendants' actions constituted an obstruction or impediment to the proceedings
Defendants next argue that the allegation that they attempted to obstruct and impede the FDA's investigation by failing to provide material information about OEP, anticipated shipments thereof, and related promotional activities must be dismissed because they had no affirmative duty to provide the FDA with any more information than what the agency was authorized to obtain. Doc. 387 at 17-18. Defendants assert that the FDA's authority to demand information during an inspection is limited by specific grants of statutory authority, and Defendants' alleged omission of information is not a criminal act because they had no duty to disclose. Doc. 387 at 18-19. The Government counters that omissions in providing information violate the obstruction statute because they block the flow of truthful information. Doc. 411 at 15.
The Indictment alleges that Defendants attempted to impede the FDA's investigation by representing that they would cease and desist distribution of OEP products, but then continuing to sell the products and "failed to provide material information about [OEP], the anticipated shipments thereof, and the promotional activities therefor." Doc. 95 at 20-21. The allegations are sufficient to put Defendants on notice of the specific conduct that allegedly violated section 1505, which is the salient issue. The determination of whether such allegations, if proven, establish Defendants'
corrupt obstruction or impediment, is an issue reserved to the trier of fact. See United States v. Rainey , 757 F.3d 234, 247 (5th Cir. 2014) (holding that an indictment must allege every element of the crime charged and in such a way as to enable the accused to prepare his defense and allow the accused to invoke the double jeopardy clause in any subsequent proceeding, but noting that the Court "is not concerned with whether the indictment could have been better framed, or whether it invokes a particular 'ritual of words' . so long as the indictment as a whole 'fairly imports' the element."). Accordingly, Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motion to Dismiss Count Six , Doc. 387, should be DENIED .
5. Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Sitesh Patel, and Cyril Willson's Joint Motion to Dismiss Count 7 , Doc. 379
Count 7 of the Indictment charges the named Defendants with Conspiracy to Introduce Misbranded Food Into Interstate Commerce with an Intent to Defraud and Mislead in violation of 21 U.S.C. § 331(a), 343(a)(1). Doc. 95 at 22-24. The Indictment alleges that the object of the conspiracy was to avoid law enforcement attention and match imported substances with false and misleading product labeling, and that overt acts committed in furtherance of that object included instructing Chinese chemical sellers to falsely label packages sent to USP, to wit: labeling DMAA as "geranium flower powder extract," labeling nine different chemicals as "green coffee samples" in individual bags, and labeling ground CA root powder as CA root "extract."
Defendants assert that Count 7 should be dismissed because (1) the documents at issue in this count - written materials accompanying the importation of the food to S.K. Labs and USP from China - do not fall within the definition of "labeling"; (2) the Indictment does not allege facts establishing that the allegedly false and misleading "labeling" was material; and (3) the FDCA's definition of "labeling" is unconstitutionally vague. Doc. 379 at 1.
Defendants first argue that the term "labeling" only applies to materials that provide information about the product to the prospective purchasers and ultimate consumers whom the FDCA is designed to protect. Doc. 379 at 7-9. They contend that they did not violate the statute because the documents supporting Count 7 were not directed to the ultimate consumer - they were directed to USP and S.K. Labs. Doc. 379 at 10-11. Further, Defendants argue, the written materials at issue did not constitute labels that were intended to "provide substantial information about the use or benefits of the article" to the consumer as required. Doc. 379 at 10 (quoting United States v. Hanafy , 124 F.Supp.2d 1016, 1027 (N.D. Tex. 2000) ).
The Government responds that a "food shall be deemed to be misbranded" in violation of 21 U.S.C. § 343(a)(1), "[i]f [ ] its labeling is false or misleading in any particular." Doc. 404 at 6 (quoting 21 U.S.C. § 343(a)(1) ). Further, "labeling" includes "labels and other written, printed, or graphic matter (1) upon any article or any of its containers or wrappers, or (2) accompanying such article." Doc. 404 at 6 (quoting 21 U.S.C. § 321(m) ). Accordingly, the Government asserts that the statute plainly encompasses written materials accompanying food ingredients; thus, the "food" Defendants caused to be shipped had false "labeling" in violation of section 343(a)(1). Doc. 404 at 6-7. Further, the Government adds that the basic identity of the substances being shipped and their provenance are "substantial information" to government regulators and others about the articles and, as such, they constitute "labeling" under 21 U.S.C. § 321(m). Doc. 404 at 9. Finally, the Government contends that the Indictment satisfies even Defendants' incorrect assertion that the labeling must be directed to the end user because "the conspiracy propagated false labeling from ingredient shipments to false and misleading labeling of end products to consumers and retailers." Doc. 404 at 10.
Defendants reply that the Government is changing its theory of the case by focusing on consumers' exposure to allegedly misbranded finished products rather than, as the Indictment specifies, Defendants' alleged attempt to mislead the FDA regarding the ingredients used in the supplements. Doc. 437 at 3-4. Defendants assert that the only "consumer" of the ingredients at issue was USP, which knew what they were. Doc. 437 at 3.
The purpose of the FDCA is "to safeguard the consumer by applying [it] to articles from the moment of their introduction into interstate commerce all the way to the moment of their delivery to the ultimate consumer." United States v. Sullivan , 332 U.S. 689, 696, 68 S.Ct. 331, 92 L.Ed. 297 (1948). The Indictment alleges that the false documentation that accompanied the shipments of the supplement ingredients constituted labels. Doc. 95 at 23-24. Section 321(m) plainly states that the term "labeling" includes "all labels and other written, printed, or graphic matter (1) upon any article or any of its containers or wrappers, or (2) accompanying such article ." 21 U.S.C. § 321(m) (emphasis added). Thus, putting aside the definition of the term "label," section 321 also prohibits "other [false] written, printed, or graphic matter" from accompanying food "articles." Count 7 alleges that falsified documents accompanied the three shipments in question. Such documentation is "labeling" within the meaning of the FDCA.
Nevertheless, the documentation also must "provide substantial information about the use or benefits of the article," United States v. Hanafy , 302 F.3d 485, 490 (5th Cir. 2002), and thereby constitute "an essential supplement to the label attached to the package," Kordel v. United States , 335 U.S. 345, 348, 69 S.Ct. 106, 93 L.Ed. 52 (1948). In that light, the Hanafy court held that documentation which merely identified the contents of a shipping tray with no more information than that which was already on the articles themselves did not "explain" or provide "substantial information" rising to the level of "labeling." 302 F.3d at 490. While the Government argues that the labels accompanying the food articles at issue constituted "substantial information" to government regulators about the articles, there is no suggestion in the record that the allegedly substantial information explained the use of or benefits of the article as required by Hanafy or that Defendants conspired to have it do so.
Rather, it appears from the language of Count 7 that the "labeling" in question constituted Defendants' identifying the articles sent "with no more information than that which [was] already upon the articles themselves." Merely putting a "label" on something - albeit an allegedly false label - that does not "explain" or provide "substantial information" is insufficient and does not rise to the level of "labeling" as contemplated by Kordel and Hanafy .
Thus, Defendants' motion to dismiss Count 7, Doc. 379, should be GRANTED on this basis.
6. Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Kenneth Miles' Joint Motion to Dismiss Counts 5, 8, and 9, Doc. 383
Counts 5, 8, and 9 are premised entirely on the sale of OEP-AF, which allegedly contained CA root as opposed to CA extract. Count 5 charges Defendants Doyle and Willson with wire fraud, 18 U.S.C. § 1343, based on an email communication from August 2013 between the two regarding a "draft product advertisement featuring false claims about [CA] (root) extract that were ultimately included on USP's website." Doc. 95 at 19. Defendants USP and Geissler are charged in Count 8 with felony misbranding, 21 U.S.C. § 331(a), 333(a)(2). Defendants Doyle, Hebert, S.K. Labs, Patel, and Miles are charged in Count 9 with misdemeanor misbranding, 21 U.S.C. § 331(a), 333(a)(1). Doc. 95 at 25-26. The latter two charges are based on an October 2013 shipment of OEP-AF with a label that falsely declared CA root extract as an ingredient in the product.
Defendants move to dismiss the respective counts against them pursuant to Rule 12(b)(3)(B)(v) of the Federal Rules of Criminal Procedure for failure to state an offense. Doc. 383 at 1. They argue that Counts 5, 8, and 9 fail to establish that the identification of CA as an "extract" on OEP-AF's label and related advertisements is false and misleading. Doc. 383 at 3. Defendants assert that, according to the dictionary definition of the term "extract," the CA root utilized in OEP-AF is in fact an extract because Defendant Geissler stated that it was "washed with water to remove fibers and sh-t." Doc. 383 at 5 (defining "extract" per Merriam Webster's Dictionary as "a product (such as an essence or concentrate) prepared by extracting; especially: a solution (as in alcohol) of essential constituents of a complex material (such as meat or an aromatic plant)." Defendants further note that the dictionary definition of extract also means "to withdraw (something, such as a juice or a constituent element) by physical or chemical process."Id. (quoting MERRIAM WEBSTER'S DICT. ) (online ed. 2017) ). Defendants claim that under these definitions, the form of CA used in OEP-AF was an "extract," even as pulverized powder, because the process described by Defendant Geissler "withdrew" a portion of the root from fibers and other materials contained in the root "by a physical . process," prior to converting the substance into powder. Doc. 383 at 5-6. In the alternative, Defendants argue that Count 5 should be dismissed because the Indictment does not allege facts sufficient to establish that the alleged "extract" misrepresentation was material to consumers or that CA powder does not confer the same benefits as CA extract. Doc. 383 at 6-7.
The Government responds that the issue of whether the ingredient in OEP-AF was an extract is a question for the jury. Doc. 407 at 3-4. The Government points out that the Indictment, which is valid on its face, alleges that pulverized root of CA is not the same as CA extract, and the allegations in the Indictment must be taken as true in addressing a motion to dismiss. Doc. 407 at 3-4. As for the materiality of Defendants' representations specifically in relation to Count 5, the Government urges that the Indictment's alleged facts permit an inference of materiality and, that too, is a question for the fact-finder. Doc. 407 at 4-5.
a. CA Root as an Extract
As the Government correctly asserts, on a motion to dismiss an indictment, the Court must take all allegations in the indictment as true. Fontenot , 665 F.3d at 644. Hence, an indictment cannot be dismissed under Rule 12 by virtue of a "sufficiency-of-the-evidence" defense that raises factual questions "embraced in the general issue." Mann , 517 F.2d at 267 (quotation omitted). With respect to the parties' assertions about the nature of the CA, albeit powder or extract, those are questions of fact for the jury as the Government correctly argues. See Sparf v. United States , 156 U.S. 51, 78-79, 15 S.Ct. 273, 39 L.Ed. 343 (1895) ("It is the province of the court, and of the court alone, to determine all questions of law arising in the progress of a trial; and it is the province of the jury to pass upon the evidence, and determine all contested questions of fact.); see, e.g., United States v. Dixon , 132 F.3d 192, 198 (5th Cir. 1997) (finding that question of whether defendant's sale of drugs was an act in furtherance of a drug conspiracy as charged, rather than an independent drug sale, was a question of fact for the jury); United States v. Hancock , 268 F.2d 205, 206 (2d Cir. 1959) (in prosecution for wire fraud, questions about whether defendant had made a false representation as to a borrower's assets in interstate telephone conversation for purpose of inducing loan and whether the lender relied thereon were for jury). Thus, Defendants' motion to dismiss Counts 5, 8, and 9 on this basis fails.
b. Materiality of the "Extract" Misrepresentation in Regard to Count 5
Materiality of a falsehood is an element of the wire fraud statute and is also a question for the jury. Neder v. United States , 527 U.S. 1, 9, 25, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999). If the facts alleged in an indictment warrant an inference of materiality, the indictment is not fatally insufficient for its failure to allege materiality verbatim. United States v. Caldwell , 302 F.3d 399, 409 (5th Cir. 2002). The Indictment here makes several allegations that pertain to the materiality element of Count 5. Among other things, the Indictment alleges that Defendants created and used a promotional write-up for OEP-AF that touted "ethanol extracts" of the CA root as among the "hard-hitting super extracts" in the product. Doc. 95 at 16. Defendants stated that these extracts had produced "exciting emerging data" in scientific studies when, as alleged in the Indictment, the extract Defendants advertised was not in the product. Doc. 95 at 16. Defendants admit in their motion that OEP-AF contained no ethanol extract of CA (they claim it was a "water" extract). Doc. 383 at 5-6. They also admit that the advertising text as alleged in the Indictment appeared on their website. Doc. 383 at 6. These allegations are sufficient to infer materiality because, if true, Defendants falsely stated in advertising that their dietary supplement contained a "hard-hitting" extract that had produced "exciting emerging [scientific] data." Further, if proven, it is also apparent that Defendants made these misrepresentations to convince consumers to buy their product. It is inarguable that consumers purchase dietary supplements, in part, based on their purported ingredients and the supposed effects of those ingredients. Thus, Defendants' alleged statements about what their supplements contained are material to those buying decisions.
Accordingly, Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Kenneth Miles' Joint Motion to Dismiss Counts 5, 8, and 9 , Doc. 383, should be DENIED .
7. Defendant Kenneth Miles' Motion to Dismiss Counts 9 and 10 , Doc. 392
In addition to adopting the arguments raised in the prior motions to dismiss Counts 9 and 10, Doc. 220 & Doc. 221, Defendant Miles separately moves to dismiss these counts on the basis that (1) he is not a "responsible corporate officer"; and (2) it was "objectively impossible" for him to prevent the alleged violations. Doc. 392 at 1, 4-8.
Miles alleges that he was hired by USP in June 2012 - years after the alleged conspiracies began - as a salaried employee for the position of Chief Compliance Officer and he was not the "quality assurance executive" the Indictment describes. Doc. 392 at 5-6 (arguing that the quality assurance executive was Lorena Macias). Miles contends that his role at USP was to improve its "Good Manufacturing Procedures" in compliance with the FDA regulations. Doc. 392 at 5-6. In doing so, Miles alleges that he necessarily relied on representations from USP's owners, his fellow employees, legal counsel, and independent auditors. Doc. 392 at 5. As such, Miles argues that he did not have the power or authority to take necessary measures to prevent or remedy the alleged violations of the FDCA statute nor was he privy to the emails, falsified documents, or communications which the Government claims as proof of intent to defraud and mislead in Counts 9 and 10. Doc. 392 at 5-8. Further, Miles contends that he was completely unaware that OEP was causing "liver issues" or that the other Defendants were hiding that information. Doc. 392 at 8.
Again, the Government maintains that (1) the Indictment sufficiently charges Miles as being responsible for FDCA compliance and shipping and causing the shipment of products in violation of the FDCA; and (2) Miles' arguments that he had no such responsibility and could not have prevented the criminal acts are factual disputes that can only be resolved by a jury. Doc. 415 at 2-6.
For the reasons already stated, the Government is correct that Miles' challenges to the indictment are fact-based and must be reserved for the jury. Fontenot , 665 F.3d at 644 ; Mann , 517 F.2d at 267. Accordingly, Miles' Motion to Dismiss Counts 9 and 10 , Doc. 392, should be DENIED .
8. Defendant Cyril Willson's Motion to Dismiss Count 5 and Motion to Adopt In-Part Codefendants' Motion to Dismiss Counts 5, 8, 9, Doc. 394
The Indictment alleges that Willson was "responsible for coordinating much of USP's scientific research and for identifying new substances as prospective ingredients." Doc. 95 at 2. Count 5 charges Defendants Doyle and Willson with wire fraud, 18 U.S.C. § 1343, based on an email communication from August 2013 between the two regarding a "draft product advertisement featuring false claims about [CA] (root) extract that were ultimately included on USP's website." Doc. 95 at 19.
In addition to moving to adopt the arguments raised in the prior motion to dismiss Count 5, Doc. 383, Willson separately moves to dismiss this sole count against him. He first argues that the allegations and undisputed facts establish that the ingredient at issue was an extract, or at least that Willson believed it to be, so he cannot be properly alleged to have made or intended to make a false representation. Doc. 394 at 1-2. Additionally, Willson asserts that the Indictment's allegations are vague because they do not explain what an "extract" is. Doc. 394 at 4-6.
The Government responds that the pulverized root powder that Defendants used in their product is not the same as an "extract," which contains only compounds extracted by a solvent. Doc. 416 at 2-3. And again, the Government maintains that the Indictment sufficiently charges Willson, and he cannot raise factual disputes (despite framing the facts as "undisputed") in a motion to dismiss. Doc. 416 at 3-5.
Willson's request to adopt, in relevant part, the arguments raised by Codefendants in Doc. 383 is GRANTED . However, for the reasons already stated, the Government is correct that Willson's challenges to the indictment are fact-based and must be reserved for the jury. Fontenot , 665 F.3d at 644 ; Mann , 517 F.2d at 267. As such, Willson's motion to dismiss Count 5, Doc. 394, should be DENIED .
D. CONCLUSION
For the reasons stated above, it is recommended that:
1. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Kenneth Miles's Motion to Dismiss Counts Nine and Ten for Unconstitutional Vagueness , Doc. 221, be DENIED ;
2. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, Matthew Hebert, Kenneth Miles, S.K. Laboratories, Inc., and Sitesh Patel's Motion to Dismiss Count Ten , Doc. 220, be DENIED ;
3. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motion to Dismiss Counts Two Through Four of the First Superseding Indictment as Untimely , Doc. 293, be DENIED ;
4. Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel and Cyril Willson's Motion to Dismiss Count 7 , Doc. 379, be GRANTED ;
5. Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel and Kenneth Miles' Joint Motion to Dismiss Counts 5, 8, and 9 , Doc. 383, should be DENIED ;
6. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motion to Dismiss Count 6 , Doc. 387, be DENIED ;
7. Defendant Kenneth Miles' Motion to Dismiss Count Nine and Ten , Doc. 392, be DENIED ; and
8. Defendant Cyril Willson's Motion to Dismiss Count 5, Doc. 394, be DENIED .
SO RECOMMENDED on June 13, 2018.
INSTRUCTIONS FOR SERVICE AND NOTICE OF RIGHT TO APPEAL/OBJECT
A copy of this report and recommendation will be served on all parties in the manner provided by law. Any party who objects to any part of this report and recommendation must file specific written objections within 14 days after being served with a copy. See 28 U.S.C. § 636(b)(1) ; FED. R. CIV. P. 72(b). An objection must identify the specific finding or recommendation to which objection is made, state the basis for the objection, and specify the place in the magistrate judge's report and recommendation where the disputed determination is found. An objection that merely incorporates by reference or refers to the briefing before the magistrate judge is not specific. Failure to file specific written objections will bar the aggrieved party from appealing the factual findings and legal conclusions of the magistrate judge that are accepted or adopted by the district court, except upon grounds of plain error. See Douglass v. United Services Automobile Ass'n, 79 F.3d 1415, 1417 (5th Cir. 1996), modified by statute, 28 U.S.C. § 636(b)(1) (extending the time to file objections from ten to fourteen days).
The Food and Drug Administration defines a COA as "a document, provided by the supplier of a component prior to or upon receipt of the component, that documents certain characteristics and attributes of the component." Guidance for Industry Current Good Manufacturing Practice in Manufacturing, Packaging, Labeling, or Holding Operations for Dietary Supplements, 2010 WL 5574459, at *9 (Dec. 1, 2010).
The Indictment spells out the number of each count rather than using Arabic numerals, for example, "Count One," instead of "Count 1." The parties sometimes refer to the counts with Arabic numerals and other times spell out the number of each count. For purposes of consistency, the court will use Arabic numerals when referring to the counts in the Indictment, except when quoting the exact title of a motion.
Defendants support their argument that the Government must prove materiality to establish a violation of the FDCA with the "intent to defraud or mislead" by citing to Neder v. United States , 527 U.S. 1, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999) and United States v. Watkins , 278 F.3d 961 (9th Cir. 2002). In Neder , the Supreme Court analyzed whether a "scheme or artifice to defraud" required materiality. 527 U.S. 1, 119 S.Ct. 1827. The Court held that it did, reasoning that when Congress enacted the mail fraud, wire fraud, and bank fraud statutes, "fraud" had a well-settled meaning at common law that required materiality. Id. In Watkins , the Ninth Circuit followed the logic of Neder in extending the materiality requirement to the "intent to defraud" and the "intent to mislead" under the FDCA. 278 F.3d 961. In response to Defendants' motion to dismiss Count 7, the Government states that it is not aware that any other circuit has extended the materiality requirement to the FDCA. See Gov't's Resp. 7 n.3 (Doc. 404). The court's independent research also leads it to the same conclusion.
The court is not persuaded by Defendants' additional argument that any alleged false and misleading labeling to the Government about the identity of these ingredient shipments were not material because the Government would have let the shipments into the country in any event. As the Government correctly notes: "Even if that were true, which it is not, it has nothing to do with whether the allegations in the indictment are sufficient to permit an inference of materiality. In any event, whether the statements were actually material is a matter for the fact-finder to determine at trial." Gov't's Resp. 8 (Doc. 404).
The defendant in Walton challenged the Anti-Tampering Act (the "Act"), under which he was convicted, as unconstitutionally vague. United States v. Walton , 36 F.3d 32, 34 (7th Cir. 1994). The Act imposes criminal penalties on anyone who "with reckless disregard for the risk that another person will be placed in danger of death or bodily injury and under circumstances manifesting extreme indifference to such risk, tampers with any consumer product that affects interstate or foreign commerce, or the labeling of, or container for, any such product." 18 U.S.C. § 1365(a) (emphasis added). The Act explicitly adopts the definition of "labeling" used in the Food, Drug and Cosmetic Act at section 321(m), the same language Defendants are challenging in this case, and which defines "labeling" to mean "all labels and other written, printed, or graphic matter (1) upon any article or any of its containers or wrappers, or (2) accompanying the article." Id. § 1365(h)(2).
Insofar as Defendants are making a vagueness challenge to the FDCA's definition of "labeling" as applied in this case, the allegations in the Indictment, which the court must take as true on a motion to dismiss, see United States v. Fontenot , 665 F.3d 640, 644 (5th Cir. 2011), suggest that Defendants understood that FDA scrutiny could be avoided by inaccurate ingredient labeling. Count 7 includes an allegation that Geissler instructed a Chinese chemical seller via e-mail to misbrand a shipment of nine different chemicals sent from China to USPlabs in Texas by writing: "Please send as Green coffee samples and send them all together.... And don't label the individual bags. Label as green coffee sample 1, 2, 3 etc." Doc. 95 at 24. The Indictment also alleges that Geissler was concerned about importing large amounts of DMAA, which he referred to as a "questionable powder," and told Patel that the "last thing" he wanted was for USPlabs to be "on the FDA radar." Id. at 6.
Defendant USP is a dietary supplement own-label distributor; Defendant S.K. Labs contracted to manufacture USP's supplements and consulted on supplement formulation; Defendants Geissler, Doyle, and Hebert are principals of USP; Defendant Willson is a consultant to USP; Defendant Miles is USP's compliance officer; and Defendant Patel is an employee of S.K. Labs.
The outbreak occurred in Hawaii.
The FDA defines a COA as "a document, provided by the supplier of a component prior to or upon receipt of the component, that documents certain characteristics and attributes of the component." Guidance for Industry Current Good Manufacturing Practice in Manufacturing, Packaging, Labeling, or Holding Operations for Dietary Supplements , 2010 WL 5574459, at *9 (Dec. 1 2010).
The Indictment also alleges in Count 11 that certain Defendants conspired to commit money laundering, but no motion to dismiss has been filed as to that count or as to Count 1. Doc. 95 at 28-29.
Counts 9 and 10 are misdemeanor charges.
Defendants also suggest that the Government never undertook any administrative proceedings to declare aegeline or OEP-NF adulterated, which it was "required" to do if it believed that any of USP's products were adulterated. Doc. 220 at 13; Doc. 274 at 9-10. This argument is baseless as there is no such requirement. Additionally, Defendants' argument that the Government has changed the theory of the case as relates to adulteration - to a "mix of ingredients" rather than to solely aegeline - by virtue of the expert reports of Drs. Herbert Bonkovsky and Bill Gurley, Doc. 274 at 5-9, is addressed in the Court's order denying Defendants' motions to exclude those witnesses.
Defendants' opening brief did not list Patel or S.K. Labs in its caption, but it does seek the dismissal of Counts 3 and 4, which involve Patel, an employee of S.K. Labs. Doc. 293 passim . Further, although Defendants' reply brief purports to seek dismissal of Counts 2 through 4 as to Miles and Willson, Doc. 344 at 1, Counts 2 through 4 did not involve them.
The three-year period expired in April 2018.