United States District Court, N.D. Ohio, Eastern Division
IN RE NATIONAL PRESCRIPTION OPIATE LITIGATION THIS DOCUMENT RELATES TO Track One Cases
OPINION AND ORDER REGARDING PLAINTIFFS' SUMMARY
JUDGMENT MOTIONS ADDRESSING THE CONTROLLED SUBSTANCES
AARON POLSTER UNITED STATES DISTRICT JUDGE.
the Court are two related summary judgment motions filed by
Plaintiffs: (1) a Motion for Partial Summary Adjudication of
Defendants' Duties Under the Controlled Substances Act
(Doc. #: 1887); and (2) a Motion for Partial
Summary Adjudication against Manufacturer and Distributor
Defendants (Doc. #: 1910).
the first motion, Plaintiffs ask the Court to determine that,
as a matter of law, the Controlled Substances Act
(“CSA”), 21 U.S.C. §§ 801 et
seq., and its implementing regulations, 21 C.F.R.
§§ 1301 et seq., require defendants who
are “registrants” to: (1) identify suspicious
orders of controlled substances; (2) report to the Drug
Enforcement Administration (“DEA”) suspicious
orders when discovered; and (3) decline to ship a suspicious
order unless and until, through due diligence, the registrant
can determine the order is not likely to be diverted into
illegal channels. For the reasons set forth below, the Court
GRANTS Plaintiffs' first Motion (Doc. #:
second Motion goes further and asks the Court to determine
that, as a matter of law and undisputed fact, Defendants
failed to comply with the three above-listed duties. Because
there are material facts in dispute, the Court
DENIES Plaintiffs' second Motion (Doc.
#: 1910). The Court's reasoning and analysis is set forth
parties have filed about 30 motions seeking summary judgment
on various issues and claims. The Court sets out here, in it
first summary judgment opinion, the legal standards it will
apply when considering all of these motions. The Court will
not repeat these legal standards in subsequent opinions, and
instead incorporates them by reference in advance.
to Rule 56 of the Federal Rules of Civil Procedure, summary
judgment is appropriate “if the movant shows that there
is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). In reviewing summary judgment motions,
the Court must view evidence in the light most favorable to
the non-moving party to determine whether a genuine issue of
material fact exists. Adickes v. S.H. Kress &
Co., 398 U.S. 144 (1970); CenTra, Inc. v.
Estrin, 538 F.3d 402, 412 (6th Cir. 2008).
is “material” only if its resolution will affect
the outcome of the lawsuit. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986); Daugherty v. Sajar
Plastics, Inc., 544 F.3d 696, 702 (6th Cir.
2008). Determination of whether a factual issue is
“genuine” requires consideration of the
applicable evidentiary standards. Thus, in most civil cases,
the Court will decide “whether reasonable jurors could
find by a preponderance of the evidence that the [non-moving
party] is entitled to a verdict.” Anderson,
477 U.S. at 252. However, if the non-moving party faces a
heightened burden of proof, such as clear and convincing
evidence, it must show that it can produce evidence which, if
believed, will meet the higher standard. Street v. J.C.
Bradford & Co., 886 F.2d 1472, 1479 (6th
filing a motion for summary judgment, the moving party has
the initial burden of establishing there are no genuine
issues of material fact as to an essential element of the
claim or defense at issue. Street v. J.C. Bradford &
Co., 886 F.2d 1472, 1479-80 & n.12 (6th
Cir. 1989); Chappell v. City of Cleveland, 584
F.Supp.2d 974, 988 (N.D. Ohio 2008). The moving party,
however, is not required to file affidavits or other similar
materials negating a claim on which its opponent bears the
burden of proof, so long as the moving party relies upon the
absence of the essential element in the record. Celotex
Corp. v. Catrett, 477 U.S. 317 (1986);
Chappell, 584 F.Supp.2d at 987.
response, the non-moving party may not rely merely on
allegations or denials in its own pleading; rather, its
response must set out specific facts showing a genuine issue
for trial. See Fed. R. Civ. P. 56(e); see also
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 586-87 (1986). In this regard, “Rule 56 does
not impose upon the district court a duty to sift through the
record in search of evidence to support a party's
opposition to summary judgment”; rather, “Rule 56
allocates that duty to the opponent of the motion, who is
required to point out the evidence, albeit evidence that is
already in the record, that creates an issue of fact.”
Williamson v. Aetna Life Ins. Co., 481 F.3d 369,
379-80 (6th Cir. 2007) (citation omitted);
see Fed. R. Civ. P. 56. Moreover, the non-moving
party must show more than a scintilla of evidence to overcome
summary judgment; it is not enough for the non-moving party
to show that there is some metaphysical doubt as to material
facts. Matsushita Elec. Indus. Co., 475 U.S. at
586-87; see also Barr v. Lafon, 538 F.3d 554, 574
(6th Cir. 2008).
the ultimate inquiry is whether the record as a whole, when
viewed in the light most favorable to the non-moving party,
could lead a rational trier of fact to find in favor of the
non-moving party. Matsushita Elec. Indus. Co., 475
U.S. at 586-87; see also Anderson, 477 U.S. at 252
(“The judge's inquiry, therefore, unavoidably asks
whether reasonable jurors could find by a preponderance of
the evidence that the [non-moving party] is entitled to a
verdict - whether there is [evidence] upon which a jury can
properly proceed to find a verdict for the party producing
it, upon whom the onus of proof is imposed.”). If,
after reviewing the record as a whole, a rational fact-finder
could not find for the nonmoving party, summary judgment is
appropriate since there is no genuine issue of material fact
for determination at trial. On the other hand, if a
reasonable jury could return a verdict for the nonmoving
party, summary judgment for the moving party is
inappropriate. Baynes v. Cleland, 799 F.3d 600, 606
(6th Cir. 2015) (citing Anderson, 477
U.S. at 248.
the movant requests the Court to make a purely legal
determination, it need not delve into factual disputes.
See, e.g., Chernin v. Welchans, 641 F.Supp. 1349,
1358 (N.D. Ohio 1986) (factual disputes are not
“material” where determination of the
constitutionality of a law on its face is a legal, not
Court's analysis of Plaintiffs' Motions begins with
the CSA itself and the DEA's implementing regulations.
The Court then examines case law applying this statute and
regulations. Because the parties cite them, the Court also
reviews two letters issued by the DEA that discuss the CSA
and the DEA's regulations; but the Court does not rely
upon these letters to determine what duties the law imposes
upon the defendants. The Court also re-adopts more fully
Discovery Ruling No. 12 in this case, which examined earlier
in this case (in a different context) the duties imposed upon
Defendants under the CSA.
at the end of this Order, the Court examines what the
Defendants actually did compared to what the law requires.
CSA Statutory and Regulatory Framework.
requires all manufacturers and distributors of certain
controlled substances to register with the DEA. See
21 U.S.C. §§ 822, 823. Under Section 823, the DEA
shall register an applicant unless it determines that issuing
the registration is “inconsistent with the public
interest.” 21 U.S.C. §§ 823(b), (d), and I.
In addition, the DEA may revoke a registration upon finding
that the registrant has committed acts that would render its
registration “inconsistent with the public
interest.” 21 U.S.C. § 824(a)(4).
determining the public interest, the DEA Administrator
considers the following factors:
(21) maintenance of effective control against diversion of
particular controlled substances into other than legitimate
medical, scientific, and industrial channels;
(2) compliance with applicable State and local law;
(3) prior conviction record of applicant under Federal or
State laws relating to the manufacture, distribution, or
dispensing of such substances;
(4) past experience in the distribution of controlled
(5) such other factors as may be relevant to and consistent
with the public health and safety.
21 U.S.C. §§ 823(b), (d), and (e).
authorizes the DEA “to promulgate rules and regulations
. . . relating to the registration and control of the
manufacture, distribution, and dispensing of controlled
substances….” 21 U.S.C. § 821. Pursuant to this
authorization, the DEA has promulgated regulations that set
forth security requirements for registered manufacturers,
distributors, and dispensers of controlled substances.
See 21 C.F.R. §§ 1301.71-77. Sections
1301.71 and 1301.74 apply to plaintiffs' arguments in
this case. Specifically, Section 1301.71(a) states as
All applicants and registrants shall provide effective
controls and procedures to guard against theft and diversion
of controlled substances. In order to determine whether a
registrant has provided effective controls against diversion,
the Administrator shall use the security requirements set
forth in §§ 1301.72 1301.76 as standards for the
physical security controls and operating procedures necessary
to prevent diversion. * * *
21 C.F.R. § 1301.71(a).
1301.74(b) states as follows:
The registrant shall design and operate a system to disclose
to the registrant suspicious orders of controlled substances.
The registrant shall inform the Field Division Office of the
Administration in his area of suspicious orders when
discovered by the registrant. Suspicious orders include
orders of unusual size, orders deviating substantially from a
normal pattern, and orders of unusual frequency.
21 C.F.R. § 1301.74(b).
DEA ruling in Southwood Pharmaceuticals.
2007, the DEA Deputy Administrator issued an administrative
decision and final order revoking the registration of
Southwood Pharmaceuticals, Inc. to manufacture controlled
substances. See Southwood Pharmaceuticals, Inc., 72
Fed. Reg. 36487-01, 36498, 2007 WL 1886484 (DEA July 3,
2007). In December of 2005, Southwood had begun selling large
quantities of hydrocodone to internet pharmacies, many of
which were dispensing illegal prescriptions for controlled
substances. Id. at 36488-36491. At the time,
Southwood did not re-evaluate its criteria and procedures to
determine whether these orders were suspicious; without
inquiring into the nature of their internet businesses,
Southwood sold its new customers large quantities of
hydrocodone. Id. at 36496. Moreover, after learning
substantial information which raised serious doubt as to the
legality of their businesses, Southwood continued to supply
extraordinarily large quantities of hydrocodone to these
internet pharmacies. Id. at 36498-36500.
Deputy Administrator found that Southwood's due diligence
efforts were “wholly deficient.” Id. at
36498. Specifically, the Deputy Administrator found that
Southwood “failed miserably to conduct adequate due
diligence” and “did not stop selling to any of
its internet pharmacy customers while it investigated the
legitimacy of their [business] activities.”
Id. at 36500. Based on Southwood's inadequate
due diligence measures and repeated failure to report
suspicious orders, the Deputy Administrator concluded that to
allow Southwood's registration to continue would be
“inconsistent with the public interest.”
Id. at 36500-36501 (quoting 21 U.S.C. §
824(a)(4)). The DEA revoked Southwood's registration to
distribute controlled substances because its distribution was
not, in fact, adequately “controlled.”
DEA ruling in Masters Pharmaceutical
2015, the DEA Acting Administrator issued an administrative
order revoking the registration of Masters Pharmaceutical,
Inc. to distribute controlled substances. See Masters
Pharmaceutical, Inc. (“Masters I”),
80 Fed. Reg. 55418-01, 2015 WL 5320504 (DEA Sept. 15, 2015).
Over the course of several years, Masters had repeatedly
ignored and failed to investigate or report hundreds of
suspicious orders and continued to ship them anyway. See
Id. at 55426-55472. Based on its “wholesale
failure” to comply with the requirements of Section
1301.74(b), the Acting Administrator found that Masters had
committed acts that rendered its registration
“inconsistent with the public interest.”
Masters I, 80 Fed. Reg. 55418-01, 55501 (quoting 21
U.S.C. § 824(a)(4)).
Acting Administrator found that, in Southwood, the
DEA had made clear to registrants that to comply with the
duty to maintain effective controls against diversion, a
distributor must perform due diligence on its customers.
Masters I, 80 Fed. Reg. 55418-01, 55477 (citing
Southwood, 72 Fed. Reg. 36487-01, 36, 498). The
Acting Administrator further found that, when a registrant
has obtained information that an order is suspicious, but
chooses to ignore that information and fails to report the
order, it violates its duties under Section 1301.74. See
Masters I, 80 Fed. Reg. 55418-01, 55478. And while a
distributor may perform due diligence and properly conclude
that an order initially flagged as suspicious is not
suspicious after all, in order to render the order
non-suspicious and exempt the distributor from the DEA's
mandatory reporting and no-shipping requirements, “the
investigation must dispel all red flags indicative that a
customer is engaged in diversion.” Id. In
other words, if, after investigating, the distributor has
“any remaining basis to suspect that a customer is
engaged in diversion, ” it must deem the order
suspicious, inform the DEA, and decline to ship the order.
D.C. Circuit ruling in Masters Pharmaceutical
petitioned the United States Court of Appeals for the
District of Columbia Circuit (“D.C. Circuit”) to
review the DEA's ruling. See Masters Pharmaceutical,
Inc. v. DEA (“Masters II”) 861 F.3d
206 (D.C. Cir. 2017). Specifically, Masters asserted the
Acting Administrator had effectively amended the CSA
regulatory scheme by adding a new “
No-Shipping Requirement” to the list of security
requirements in Sections 1301.71 to 1301.76. See
Masters, 861 F.3d at 221-222. The D.C. Circuit
disagreed. It found that in Southwood, the DEA had
first articulated the No-Shipping Requirement, which
“mandates that pharmaceutical companies exercise
‘due diligence' before shipping any suspicious
order.” Id. at 221-22.
reviewing security requirements regarding the maintenance of
effective controls against diversion, the D.C. Circuit found
that a distributor must comply with two obligations. First,
under Section 1301.71(a), it must: (a) “design and
operate a system” to identify “suspicious orders
of controlled substances” (known as a “Suspicious
Order Monitoring System, ” or “SOMS”), and
(b) report those orders to the DEA - this is the Reporting
Requirement. See Masters II, 861 F.3d at 212.
Second, once a distributor has reported a suspicious order,
it must either: (1) decline to ship it; or (2) hold the order
and conduct some “due diligence” - this is the
No-Shipping Requirement. Id. If a distributor
chooses the latter due diligence option, and it is able to
determine the order is not likely to be diverted into illegal
channels, it may then go ahead and ship the order.
Id. at 212-213 (citing Southwood, 72 Fed.
Reg. 36487-01, 36, 500). Conversely, if a distributor
conducts due diligence but is unable to determine the order
is not likely to be diverted into illegal channels, it must
decline to ship the order. See id.
Letter dated September 27, 2006.
September 27, 2006, the DEA sent all registered distributors
a letter “to reiterate the responsibilities of
controlled substance distributors in view of the prescription
drug abuse problem our nation currently faces.” Pls.
MSJ on CSA Duties, Ex. B (Doc. #: 1887-4). The letter
stressed the importance of distributors' responsibility
to maintain appropriate safeguards against diversion. See
Id. at 1-2. Specifically, it stated the requirement to
report suspicious orders under Section 1301.74(b) was in
addition to and not in lieu of the statutory requirement to
maintain effective controls against diversion, which included
a duty to “exercise due diligence to avoid filling
suspicious orders that might be diverted.” Id.
letter further stated as follows:
It bears emphasis that the [regulatory] reporting requirement
is in addition to, not in lieu of, the general requirement .
. . that a distributor maintain ...