Bhutani v. United States Food & Drug Administration , 161 F. App'x 589 ( 2006 )

UNPUBLISHED ORDER
Not to be cited per Circuit Rule 53
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted January 4, 2006*
Decided January 5, 2006
Before
Hon. RICHARD A. POSNER, Circuit Judge
Hon. DANIEL A. MANION, Circuit Judge
Hon. ILANA DIAMOND ROVNER, Circuit Judge
No. 05-1077
BALDEV R. BHUTANI, Petition for Review of an Order of the
Petitioner, United States Food and Drug
Administration
v.
UNITED STATES FOOD AND
DRUG ADMINISTRATION and
MICHAEL O. LEAVITT,** Secretary,
Department of Health and Human
Services,
Respondents.
*
After an examination of the briefs and the record, we have concluded that
oral argument is unnecessary. Thus, the appeal is submitted on the briefs and the
record. See Fed. R. App. P. 34(a)(2).
Pursuant to Fed. R. App. P. 43(c), we have substituted Michael O. Leavitt
**
for Tommy G. Thompson as the named respondent.
No. 05-1077 Page 2
ORDER
Baldev Raj Bhutani, the former president of a generic drug manufacturing
company, petitions this court for review of a final order of the United States Food
and Drug Administration (“FDA”) permanently debarring him from rendering
services to persons with approved or pending drug applications. The debarment
resulted from Bhutani’s felony convictions for violating the Federal Food, Drug, and
Cosmetic Act (“FDCA”). We deny the petition.
In 1996 a jury found Bhutani guilty of seven felony offenses including six
counts of violating the FDCA, 21 U.S.C. §§ 331(a),(e),(k), and 333(a)(2), for, among
other things, introducing adulterated generic drug products into interstate
commerce from 1988 to 1989. After this court heard two appeals of Bhutani’s
criminal case, see United States v. Bhutani, 266 F.3d 661 (7th Cir. 2001), United
States v. Bhutani, 175 F.3d 572 (7th Cir. 1999), and while Bhutani was serving his
30 month sentence for his crimes, the FDA notified Bhutani in 2003 that it
proposed to debar him under the Generic Drug Enforcement Act (“GDEA”), 21
U.S.C. §§ 335a-335c. The GDEA was enacted in 1992, before Bhutani’s convictions
but several years after his criminal conduct. The GDEA mandates permanent
debarment for any individual “convicted of a felony under Federal law for
conduct . . . relating to the regulation of any drug product” under the FDCA.
Id. § 335a(a)(2)(B). The FDA also informed Bhutani that he had an opportunity for
an evidentiary hearing if he presented specific facts demonstrating a genuine and
substantial issue of fact.
Under § 335a(a)(2)(B), the only fact relevant to Bhutani’s debarment was
whether he had been convicted of felonies for conduct related to the regulation of a
drug product under the FDCA. Because he acknowledged that he had qualifying
felony convictions, in December 2004 the FDA denied his request for an evidentiary
hearing. The agency also rejected Bhutani’s legal arguments that debarment was
unconstitutional and barred by equitable defenses. The FDA issued an order
permanently debarring Bhutani from “providing services in any capacity to a person
that has an approved or pending drug product application.” 21 U.S.C.
§ 335a(a)(2)(B); Baldev Raj Bhutani, 69 Fed. Reg. 70148 (Dep’t of Health and
Human Servs. and Food and Drug Admin. Dec. 2, 2004) (denial of hearing; final
debarment order).
On appeal, Bhutani raises two constitutional issues: that his debarment
violates the Ex Post Facto and Double Jeopardy Clauses of the Constitution. These
are pure questions of law that we review de novo. See Bae v. Shalala, 44 F.3d 489,
492 (7th Cir. 1995). Bhutani argues that his debarment under § 335a(a)(2)(B)
violates the prohibition against ex post facto laws because the GDEA—the law
authorizing his debarment—was passed only after he had engaged in the conduct
No. 05-1077 Page 3
giving rise to his FDCA felony convictions. But we have already held that
permanent debarment under such retroactive application of the GDEA does not
offend the Ex Post Facto Clause because debarment is a remedial, not punitive,
sanction. Bae, 44 F.3d at 496 (“The GDEA’s civil debarment penalty is solely
remedial,” so the ex post facto prohibition is inapplicable); see also DiCola v. FDA,
77 F.3d 504, 507 (D.C. Cir. 1996) (same).1
Bhutani next asserts that his debarment is prohibited by the Double
Jeopardy Clause because he has already been convicted and sentenced for his
conduct. But double jeopardy precludes only multiple criminal punishments, not
civil sanctions. See Hudson v. United States, 522 U.S. 93, 99 (1997). Determining
whether debarment is criminal or civil requires a two-step analysis. First, we look
to the statute to see if the legislature expressly or impliedly intended that the
sanction be criminal or civil. Id. Although § 335a(a)(2)(B) does not specifically
characterize debarment as civil, the Supreme Court has held that if authority to
debar is vested in an administrative agency (such as the FDA in this case), it “is
prima facie evidence that Congress intended to provide for a civil sanction.”
Hudson, 522 U.S. at 103. Since Bhutani has offered nothing to rebut this prima
facie evidence, § 335a(a)(2)(B) is presumptively a civil sanction.
Second, we examine whether there is the “clearest proof” that § 335a(a)(2)(B)
is nonetheless so punitive that it transforms what Congress deemed a civil sanction
into a criminal penalty. Hudson, 522 U.S. at 100. Because we held in Bae that
debarment is remedial, it is therefore neither punitive nor criminal. The Supreme
Court’s analysis in Hudson two years after Bae confirms this conclusion. Hudson
held that there was “little evidence” that a debarment sanction prohibiting further
participation in banking activities was so punitive as to transform the civil penalty
into a criminal penalty. The Court reasoned that debarment has not historically
been viewed as punishment, does not come into play only upon a finding of scienter,
and is not akin to imprisonment. Id. at 104. The Court also found that even though
the underlying conduct for imposing debarment might also be criminal, this alone
was not enough to make debarment criminally punitive. Id. at 105. Finally,
although debarment sanctions are meant to deter others from similar conduct—an
objective of criminal punishment—“deterrence may serve civil as well as criminal
1
Bhutani also argues that the GDEA cannot be applied retroactively as a
matter of statutory construction. Because he did not expressly raise or develop the
issue of statutory construction before the FDA, we will not consider it here. See
Myron v. Chicoine, 678 F.2d 727, 731 (7th Cir. 1982) (collecting cases); see also
DiCola 77 F.3d at 506 n.* (by not raising the issue before the FDA, petitioner
waived appellate review of whether GDEA could be applied retroactively as a
matter of statutory law).
No. 05-1077 Page 4
goals.” Id. (internal quotation and citation omitted). Under this authority,
Bhutani’s permanent occupational debarment under the GDEA is a civil sanction,
so double jeopardy is not offended. See DiCola, 77 F.3d at 507.
Bhutani raises other nonconstitutional issues which we can readily dispose
of. He claims that the FDA arbitrarily and capriciously failed to examine the
“exculpatory” evidence of the consent and voluntary agreements he made with the
FDA in 1991 to bring his drug product into compliance with the FDCA. He asserts
that the agreements are evidence that there was an “implied contract” in which the
FDA promised to forgo all future action against him and that the FDA should
therefore be “estopped” from debarring him. But the 1991 agreements do not state
or imply that the FDA promised to release Bhutani from additional remedial
sanctions in general, or debarment in particular. Indeed, these agreements are
understandably silent about debarment because the GDEA debarment provision
was not even enacted until 1992.
Next, Bhutani argues that the FDA was arbitrary and capricious by not
considering the facts underlying his convictions, which he believes are mitigating.
But these facts are irrelevant to debarment since the only issue under
§ 335a(a)(2)(B) is whether he had a prior felony conviction for violating the FDCA.
“Congress adopted a bright-line rule excluding from the generic drug industry all
individuals with prior felony convictions relating to the approval or regulation of
any generic drug product.” Bae, 44 F.3d at 495. Bhutani’s related argument that
the FDA erred by not giving him a hearing fails for the same reason—the only issue
of material fact was whether Bhutani had been convicted of felonies for conduct
related to the regulation of a drug product under the FDCA, and since he admitted
that he was, a hearing was not required.
Bhutani next argues that the FDA should be barred from bringing suit under
the doctrine of laches because the agency took too long to initiate debarment
proceedings. He claims this delay prejudiced him because his “evidence” is now
stale. Laches bars an action only if the plaintiff’s delay in bringing suit is
unreasonable and if the delay “materially prejudices the defendant.” Smith v.
Caterpillar, Inc., 338 F.3d 730, 733 (7th Cir. 2003). But in this case, even if there
were an unreasonable delay and even assuming that laches can be invoked against
the federal government, see United States v. Administrative Enterprises, Inc., 46
F.3d 670, 672-73 (7th Cir. 1995), Bhutani can’t show he was prejudiced because the
only material issue is whether Bhutani had prior FDCA-related convictions. Since
he concedes the fact of these convictions, the absence of any other evidence is
immaterial and therefore nonprejudicial.
Finally, Bhutani contends that the FDA should have subjected him to five-
year, as opposed to permanent, debarment. However, § 335a(c)(2)(A)(ii) mandates
No. 05-1077 Page 5
permanent debarment for individuals like Bhutani who are penalized under
§ 335a(a)(2). See 21 U.S.C. § 335a(c)(2)(A)(ii). Permanent debarment is therefore
both authorized and required.
Accordingly, the petition for review is DENIED.