PART TWO: A Discussion of the Case Law that the FDA Cites In Support of Its Expansive Position on Jurisdiction Over the Intrastate Manufacture of Food and Drugs
According to published policy (as set forth in its entirety in Part 1 of this essay), the FDA claims to have “jurisdiction over all products made from interstate components regardless of the amount present, even though the finished product has not moved in interstate commerce.” It is on the basis of this policy that the FDA presumably based enforcement actions against the Chipotle Mexican Grill restaurant linked to a norovirus outbreak that occurred in California. Therefore, in this part of my essay, I will summarize the six court cases that the FDA has cited in support of its policy, and then critically examine the extent to which the cases provide solid support or not. In so doing, my goal is to prepare the groundwork for an additional assessment (in Part III of this essay) of whether the FDA’s position is likely to avoid legal challenge, by Chipotle or any other entity that in the future decides to contest the scope of the FDA enforcement authority.
All of the cases that the FDA cites are relatively old, with the most recent one being from 1974.[1] I will address the cases here in chronological order, starting with a case decided in 1961.
United States v. 39 Cases, 192 F. Supp. 51 (E. D. Mich. 1961). This case involved drugs that the FDA had seized based on allegations that the drugs were misbranded in violation of the Federal Food, Drug, and Cosmetic Act (FDCA). The tablets had been manufactured in Michigan for sale in that state alone, but component ingredients had been shipped in interstate commerce. The manufacturer argued that for misbranding to be a violation of the FDCA the finished product must itself have been shipped (or held for shipment) in interstate commerce. The provision in the Act in question gives the FDA authority to seize misbranded or adulterated food or drugs “when introduced into or while in interstate commerce or while held for sale (whether or not the first sale) after shipment in interstate commerce.” 21 USC § 334(a)(1). Consequently, the dispute was over whether a drug made with components shipped in interstate commerce satisfies the “held for sale…after shipment” part of the provision. The manufacturer argued that it did not because the component ingredients shipped in interstate commerce “lose their identity as individual components when combined to form” the pills, putting the pills beyond FDA jurisdiction.
In its decision upholding the seizure, the court rejected the manufacturer’s argument, but not as categorically as the FDA’s current policy would seem to suggest. First, the court observed that “it is evident” that pills would be subject to seizure if manufactured from a single ingredient that had been shipped in interstate commerce.[2] The court thus thought it would be “incongruous” to hold that a single ingredient formed into pills would be subject to FDA jurisdiction, but pills that were made from several ingredients would not be. Second, the Court addressed two cases that the manufacturer had cited in support of its argument.[3] Specifically, the Court wrote:
In both cases, the Courts held that an article or device is not subject to jurisdiction of the Act where the only components shipped in interstate commerce were either a minor ingredient of the final product or several commonly used components which lost their identity within the newly manufacture device.
Notably, the court did not dispute or limit these rules, accepting that not all ingredients or components in interstate commerce suffice to create jurisdiction. Instead, the court found that, “in contrast [to the two cases], in the case at bar, the ‘drugs comprising the [seized pills] are the very heart of the manufactured and tableted ‘drug’ and were proclaimed as such to the public.” Thus, far from approving a broad rule that affirmed the FDA’s jurisdiction “over all products made from interstate components regardless of the amount present,” as the FDA claims, the court made a much more conservative ruling, doing so to avoid creating what it deemed to be a loophole, which is something the prior Supreme Court decisions had warned against creating.[4]
Further, it bears emphasizing that the enforcement power that was affirmed here was the power to seize misbranded or adulterated products. It does not necessarily follow that the FDA has jurisdiction over the manufacturing operation itself, or could seek penalties for violations of the Act based on manufacturing activities that occurred solely within a state for finished products to be sold and consumed (or used) within that same state. Consequently, if there had been boxes of burritos that Chipotle had planned to sell, despite having been manufactured in the restaurant and contaminated with norovirus, it seems beyond reasonable dispute that the FDA could seize the adulterated food products to protect the public. But nothing in this cited case seems to answer the broader question of the FDA’s jurisdiction over the restaurant operation itself. For example, could the FDA file a lawsuit to close a restaurant, or to demand other changes to its operations? Given that local health departments already have direct regulatory authority over restaurants, it seems like a stretch to consider the FDA directly asserting its own authority too.
United States v. 40 Cases, 289 F.2d 343 (2nd Cir. 1961). This court of appeals decision reversed one of the two cases that the Michigan drug manufacturer had cited in its defense, and did so in a way that was substantially consistent with the approach taken by the Michigan court in the decision just discussed above. Like the pills in the Michigan case, the products here had been manufactured using ingredients shipped in interstate commerce and then deemed to have been misbranded—that is, cans of blended oil labeled as containing 25% olive oil, but actually containing little or none. The oils from which the blend was made had all been shipped in interstate commerce, although the blending and subsequent sale occurred only in New York.
Much like the drug manufacturer, the oil manufacturer argued “that the process of the oils…created a new product…which was not the same as the [oils] transported in interstate commerce.” In disagreeing, the court here explained:
in this case all the components of the oil blend had been transported in interstate commerce, and the completed mixture was being held for sale as “oil”—the very same type of food which had traveled across the state line. This is not a case in which oil which was transported interstate was used as one of many ingredients in a finished product which in no way resembled the food which had crossed state lines. Oil may come in many varieties, but to the unsophisticated consumer one oil blend is much like another. We would be undermining the remedial legislative purpose of consumer protection were we to deny the power to seize misbranded articles on the ground that such foods as corn oil, peanut oil, soya bean oil and olive oil when mixed constitute a “different product” from a blend of less than all or from a pure measure of any one of them.
Yet, even though the court upheld the seizure of the misbranded oil, it did so in a way that plainly acknowledged not all combinations of interstate ingredients would automatically be subject to FDA jurisdiction. For there would be no other reason for the court to point out that the facts of the case were not such that the “finished product…in no way resembled the food which had crossed state lines.” Consequently, one could reasonably interpret the court’s ruling here to leave open the possibility that, with a different set of fact, there might be a different conclusion. For example, if the sole interstate ingredient was oil, and that oil was used make cookies from many non-interstate ingredients, the resulting cooking might be beyond FDA jurisdiction. But, in any case, there is no question that the rules announced by this court’s decision still applied only to the question of FDA jurisdiction over the product being seized, and nothing else.
Palmer v. United States, 340 F.2d 48 (5th Cir. 1964). This decision of the Fifth Circuit Court of Appeals appears to have been cited solely because of a single rule-sentence included in the case: “Shipment of the active ingredient of a drug is the equivalent of shipping the drug.” This rule is supported by citations to the two cases above, with the citations preceded by the “Cf.” signal, which is used to indicate that the cited cases are supportive of the rule by analogy only, and not directly. The question before this court was whether a criminal conviction for the “dispensing of drugs that had moved in interstate commerce” could be upheld despite the lack of direct evidence that the illegal drug sale in Texas had involved amphetamine manufactured in South Carolina (as an expert had testified). In upholding the conviction, the court also pointed out that there had been evidence that the active ingredient in the drugs must have come from out of state, because there was no in-state source for the ingredient. So that is apparently why the court included the rule about the shipment of active ingredients. This was not a case, however, that involved a question about FDA jurisdiction, or about enforcement of the FDCA regarding misbranded or adulterated food. It is, thus, at most, a case where a limited rule established in previous cases was cited again, but by analogy only. Consequently, this case offers no support for the FDA policy position. In short, if one of my former legal writing students had asked me whether to cite this case to support the FDA position, I would have definitely told them no.
United States v. Dianovin Pharmaceuticals, Inc., 324 F. Supp. 724 (Dist. P.R. 1972) affirmed by 475 F.2d 100 (1st Cir. 19373). These two cases, like the Michigan District Court case, U.S. v. 39 Cases, discussed above, are a District Court decision that was then affirmed by Circuit Court of Appeals. The facts of this case are relatively complicated, but the crux of the two court decisions are quite straightforward.
The drugs in question were ampules of an injectable form of vitamin K that, based on FDA inspections, had previously been manufactured under insanitary conditions, with multiple violations of GMP regulations found in the plant. After the threat of seizure, the FDA sought a permanent injunction from the District Court in 1969, “generally prohibiting defendants from manufacturing or introducing into interstate commerce drugs manufactured by the defendants in violation of the [FDCA].” A little over a year later, the FDA and the defendants requested that the court suspend the injunction, based on the agreement of the parties that it “would revert to its full force and effect if the defendants were to commit any of the [acts listed in the agreement].” Several months later, a FDA inspection found multiple violations of the agreement and thus the Agency sought reinstatement of the permanent injunction, along with several new requirements regarding the operation of the manufacturing facility.
The District Court reinstated the injunction along with the additional requirements. In so doing, the Court noted that it possessed jurisdiction based on its previous Orders for Permanent Injunction and Suspension. The court also noted the defendant’s jurisdictional argument that the drugs were sold only locally and the company was thus “not engaged in interstate commerce.” Responding to this argument, the court pointed out that “[i]t is enough that the active ingredient in the drug be shipped in interstate commerce to satisfy the interstate commerce requirement of the [FDCA].” But it was not on that basis that the Court reinstated the injunction and imposed new requirements on the defendant’s manufacturing operation; it was on the basis that there had been violations of the prior agreement. The defendants agreed to comply with the new Order of the court (to continue operating), but reserved the right to appeal the jurisdictional issue.
The appeal court decision is interesting (and a bit frustrating) because the basis for the court’s rejection of the defendants’ jurisdictional argument fails to support the FDA position. In other words, the court did not need to address the defendant’s argument at all. But as commonly occurs, the court could not resist the urge to discuss (and reject) the arguments, making this part of the decision into something called “dictum.”[5] But before getting to the dictum portion of the ruling, here is the true basis for the court’s decision to uphold the injunction: The defendant never challenged the District Court’s jurisdiction when the first injunction and then the suspension order had been entered. The appellate court thus ruled “[j]urisdiction had long before been settled,” because the defendant had neither objected to jurisdiction, nor filed an appeal from the entry of the originals. Thus, according to the Court, the “government, on its reinstatement motion, had no duty whatever to reestablish the interstate connection of the drugs; at the very most, at this late date, had [defendants] wished to raise a jurisdictional defense, the burden of proving the necessary facts was theirs.”
The court then turned to the defendants’ jurisdictional argument, even though it was not necessary to the ruling, given that the argument had already been rejected on other grounds. Still, the court writes that the “jurisdictional argument fails.” Citing an Act provision regarding drugs “held for sale…after shipment in interstate commerce,” 21 U.S. C. § 331(k), the court pointed to the fact that the “component raw materials” of the defendants’ drugs were shipped in interstate commerce. Therefore, according to the court, the “use of components shipped in interstate commerce to make vitamin K for injection brought their activities with § 331(k), and conferred jurisdiction to restrain violations thereof upon the district court.” The court also rejected the “new” drug argument, explaining that “[a]ll drugs whether older or new are subject to the prohibition against adulteration or misbranding,” and that the “evidence of seriously deficient conditions and practices at the plant, coupled with a history of unsuccessful efforts to obtain compliance…, more than warranted injunctive relief.”
Although arguably not binding precedent, the court of appeal not only rejected all of the defendants’ jurisdictional arguments, it did so in a way that affirmed the FDA’s ability to enforce the FDCA’s provision with regard to plant operations. The other cases upon which the FDA has relied for support of its position on jurisdiction all dealt with enforcement efforts taken against misbranded or adulterated products, efforts that clearly have stronger support in the case law in situations where the Agency is seeking to seize or otherwise prevent the sale of food or drugs that are deemed to be unsafe. For that reason, the decision in this case would appear to provide the best support among any of the cases that the FDA cited in its Policy Guidance Manual. It is thus interesting to ponder why the FDA did not also cite the appellate decision upon which the court here expressly relied, U.S. v. Cassaro, 443 F.2d 153 (1st Cir. 1971),
In Cassaro, the question was whether the owners of a commercial bakery that made and sold product solely within Massachusetts could be found to have violated the FDCA for allowing flour to become adulterated during the manufacturing process as a result of insect infestation and other insanitary conditions at the facility. The defendants argued that the flour was not being held for sale, as the Act required, because the flour was solely intended for use in baking products. It is important to note, though, that the food that the defendants was deemed to have adulterated is the flour, and not the resulting baked goods. Thus, in holding that the defendants had violated the Act, the court was really only called upon to decide whether the situation presented by this case was really any different than the one the Supreme Court had faced in the Wiesenfeld Warehouse case (discussed in Part I), where the owner of a warehouse was found to have violated the Act by allowing food to become adulterated while held for intrastate sale after interstate shipment.
The court in Cassaro decided that there was no difference because a key purpose of the Act was to protect interstate commerce from the inevitable negative effects on sales that occurs when the public learns of food being made with adulterated ingredients. Thus, in passing the Act:
Congress reasoned that the adulteration of goods that had been shipped in interstate commerce would lead to consumer dissatisfaction and lack of confidence in those goods, thereby depressing the demand for out-of-state products and making it difficult for out-of-state manufacturers to market them. The knowledge that local bread and rolls have been made with contaminated interstate flour would presumably depress the demand for interstate flour in a similar manner.
The court thus held that causing the adulteration of previously unadulterated ingredients shipped in interstate commerce is a violation of the Act even if the ingredient is to be used in the making of food to be sold solely within the state in which the food was made. In other words, the court treated the commercial bakery as if it was a warehouse, upholding the enforcement action based on the failure to keep the flour—an ingredient—safe from adulteration. And even though it was not going be sold—only used in baking products that were then going to be sold—that made no legal difference here, according to this court, applying Supreme Court precedent. Whether the Supreme Court would agree is not something we know, although an educated guess is possible.
What the Cassaro court does NOT hold, though, is that a punishable violation of the Act occurs when the adulteration did not occur within the plant because of some alleged regulatory failing there. It therefore is an open question whether a restaurant (or any other wholly in-state facility) would be subject to FDA enforcement authority under the Act for manufacturing food that is adulterated, but only because an ingredient that was already adulterated was used. That the already adulterated ingredient arrived via interstate commerce would not seem to be enough, at least not without some demonstrated prior knowledge of the adulteration.
United States v. 14 Cases, 374 F. Supp. 922 (W.D. Miss. 1974). This case is but one more case involving a drug manufactured for in-state sale using an interstate ingredient. There was no question that the ingredient was an “active ingredient,” but it made up .less than one-percent of the finished drug. Citing cases (already discussed), the defendants argued that the requirement of interstate commerce was not satisfied by “minor ingredients of the final product or components which lost their identity in the final product.” The court rejected this argument, holding that it is enough so long as the ingredient shipped in interstate commerce was an active ingredient. But because this holding is specific to drug products only, this case does not shed light on the jurisdictional question in food product cases. There might be an analogy to an “active ingredient” in food, but it is not readily apparent what that might be. The closer analogy is probably an ingredient that, even if present in small amounts, is somehow definitive of the final product—e.g., mint extract in mint ice cream, or sesame seeds on sesame bagels. But even if so interpreted, like many of the other cases cited, this case similarly acknowledges that not all interstate ingredients will always be enough to give the FDA enforcement authority. Thus, again, the FDA’s position that “interstate components regardless of amounts” does not have any clear support in the existing case law, leaving much to argue about for both sides of the issue.
[1] It should be noted that a court decision does not lose precedential value by virtue of its age alone. It is true, however, that with the exception of U.S. Supreme Court cases, the older a case is the more likely it becomes that one or more subsequent cases has narrowed, modified, or otherwise limited the holdings or rules in the earlier cases. It is also true that decisions by U.S. District Courts—the federal version of trial courts—have no precedential value, in that such decisions are only persuasive, but not binding, authority on other courts. Only U.S. Circuit Courts of Appeal have the power to issue decisions that are binding on all of the district courts within a given circuit, such that the district courts are bound to follow an applicable rule of its circuit court. All that said, it is not uncommon for district courts to cite to other district court cases that have ruled on similar issues based on similar or analogous facts. District courts are nonetheless free to reach conclusions directly opposite what other district courts have reached. Consequently, to cite to a district court case in support of a legal argument is to cite to a case that has no power to bind the court to which it is cited.
[2] Although perhaps not as evident as the court suggests, it probably is evident that finished pills that were shipped in interstate commerce, and then repackaged for sale solely within the state, would be subject to FDA jurisdiction, if misbranded, or if the pills were found to have been adulterated.
[3] The first of the two cases addressed, U.S. v. An Article or Device Consisting of 31 Units, 180 F. Supp. 52 (E.D. Mich. 1959), held that a medical device was not subject to seizure “solely by reason of the fact that they contain component parts shipped in interstate commerce”). The other case addressed, U.S. v. 40 Cases, More or Less, 188 F. Supp. (N.D. N.Y. 1960), was subsequently reversed by the Court of Appeals, with that reversing decision being one of the cases that the FDA cites in support of its policy, U.S. v. 40 Cases, which is the case that is discussed next.
[4] On appeal to the Sixth Circuit Court of Appeals, the manufacturer repeated its argument that there was no jurisdiction because “mixing several other drugs shipped in interstate commerce did not result…in the new mixture’s being a drug held for sale after shipment in interstate commerce.” U.S. v. Detroit Vital Foods, Inc., 330 F.2d 78, 81 (6th Cir. 1964). The question on appeal was whether the ingredients used to make the seized pills “lose their identity as individual components when combined to form such tablets.” Id. The Sixth Circuit answered no, explaining that “[t]hese ingredients are, so to speak, put in a package together. In their combination, they do not form something new and different.” Id. The court of appeals thus adopted the reasoning and conclusions of the district court in holding that the FDA had jurisdiction over the pills, which thus had been properly seized.
[5] Dictum is short or the Latin legal phrase “obiter dictum,” which refers to a court’s incidental expression of an opinion that is not necessary to the court’s decision and, thus, it is not considered as precedent. But as Supreme Court Justice William Douglas is said to have remarked during an oral argument in which the attorney asserted that a referenced part of a Supreme Court decision was dictum, “But we still said it, didn’t we?” Thus, even though a given part of a court decision may be accurately described as dictum, attorneys do not hesitate to cite to these portions, being careful to not mischaracterize what the court said as a decision’s holding or reasoning.
