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United States v. McAdam

United States District Court, Ninth Circuit

November 12, 2013



CAROLYN S. OSTBY, Magistrate Judge.

I. Introduction

This case was closed in 2010 after the parties stipulated to entry of a Consent Decree, which Judge Cebull signed on November 4, 2010. ECF 5. [1] Generally, the Consent Decree required McAdam to bring himself into compliance with the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301-397 (the "Act"). The Court "retain[ed] jurisdiction [] for the purpose of enforcing or modifying [the Consent] Decree and for the purpose of granting such additional relief as may be necessary or appropriate." ECF 5 at 18.

In February 2013, the United States filed the following documents: (1) "Petition for an Order to Show Cause Why Defendant Toby McAdam Should Not be Held in Civil Contempt" ( ECF 18 ) and (2) "Motion for Liquidated Damages" ( ECF 19 ). After the Court granted McAdam extensions of time to respond ( see ECF 21, 28, 31), it held a hearing on these motions on September 25, 2013. Despite adequate notice of the hearing, McAdam failed to appear. The United States presented the testimony of Lisa Altha, FDA Compliance Officer, regarding the FDA investigations of McAdam's activities.

On September 25, 2013, the Court issued a Show Cause Order, giving McAdam another opportunity to appear and show cause why he should not be held in contempt and sanctioned for violating the Consent Decree. ECF 34. This show-cause hearing was held on October 21, 2013. The Court heard testimony from McAdam and further testimony from Lisa Althar. In addition, the United States was given time to file its "Motion for Attorney Fees" ( ECF 45 ). McAdam responded with a "Motion to Vacate Fines and Response" ( ECF 46 ).

Having considered the oral testimony, written motions, and arguments of the parties, the Court enters the following Findings and Recommendations.

II. Background Facts

A. Events Leading to Consent Decree

In 2006, the Food and Drug Administration ("FDA") issued Defendant Greta Armstrong a Warning Letter that Risingsun was advertising unapproved cancer remedies on the websites and, and warned her that selling unapproved products for use in the cure, mitigation, treatment, and prevention of disease violated the Act. The FDA also advised that the products advertised on the website were misbranded under the Act and did not contain adequate directions for usage. McAdam then informed the FDA by telephone that he was the owner of Risingsun and he would remove the offending drug claims from the websites. McAdam sent a letter to the FDA shortly thereafter confirming that he would remove the offending drug claims.

The following year, in November 2007, FDA investigators inspected Risingsun and discovered that McAdam's violations of the Act continued. McAdam wrote two more letters promising that he would cease illegal activity. Despite this, on April 4 and 10, 2009, FDA investigators noted that Risingsun's websites and many of their product labels still contained illegal drug claims that its products could cure, mitigate, treat, or prevent disease.

In May and June 2010, the FDA made numerous undercover purchases of Risingsun's products and found that McAdam continued to sell illegal unapproved new drugs which the FDA had previously informed McAdam were in violation of 21 U.S.C. §§ 352(f)(1) and 355(a). These purchases were shipped from Montana to undercover investigators located in Maryland, Arizona, and Washington State.

On October 13, 2010, the United States filed its Complaint herein invoking the injunction provisions of the Act, 21 U.S.C. § 332(a). The Complaint alleged, among other things, that McAdam regularly sold unapproved drugs in interstate commerce to treat serious diseases such as cancer, anemia, asthma, ADD/ADHD, arthritis, epilepsy, and intestinal parasites. These drugs were alleged to be "new drugs, " as defined by 21 U.S.C. § 321(p)(1), in that they were not generally recognized, among experts qualified by scientific training and experience to evaluate the safety and effectiveness of drugs, as safe and effective for use under the conditions prescribed, recommended, or suggested in their labeling. See ECF 1. The Complaint also alleged:

(1) that McAdam violated 21 U.S.C. § 331(d) by introducing or delivering for introduction into interstate commerce such unapproved drugs in violation of 21 U.S.C. § 355;
(2) that McAdam sold new animal drugs, as defined by 21 U.S.C. § 321(v)(1), that were unapproved by the FDA, and which were "unsafe" within the meaning of 21 U.S.C. § 360b(a), and "adulterated" within the meaning of 21 U.S.C. § 351(a)(5); and
(3) that McAdam's drug products were "misbranded" within the meaning of 21 U.S.C. § 353(b)(1) because they were prescription drugs, the distribution of which without a prescription resulted in the drug being "misbranded" while held for sale, and within the meaning of 21 U.S.C. § 352(f)(1), because the labeling failed to bear adequate directions for use.

B. Consent Decree

The parties negotiated the Consent Decree. McAdam was represented by counsel throughout those negotiations.

The Consent Decree enjoins McAdam from introducing into interstate commerce, holding for sale after shipment in interstate commerce, and manufacturing, processing, packaging, labeling, holding, selling, and distributing a broad range of products, including, inter alia, (a) any topically-applied product for human or animal use containing extracts or components of the Bloodroot or Graviola plants, (b) any "new drug, " (c) any "new animal drug, " and (d) any dietary supplement, unless and until (i) the FDA approves a new drug application or abbreviated new drug application for the product pursuant to 21 U.S.C. § 355, or (ii) the FDA approves an investigational new drug application for the product pursuant to 21 U.S.C. § 355(i) and 21 C.F.R. § 312, or (iii) the FDA approves a new animal drug application or ...

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