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United States v. an Article of Device . . . Diapulse

July 17, 1985


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division, Nos. 73 C 157 & 75 C 343, James B. Moran, Judge.

Author: Fairchild

Before BAUER and ESCHBACK, Circuit Judges, and FAIRCHILD, Senior Circuit Judge.

FAIRCHILD, Senior Circuit Judge.

Claimant, Dr. Henry J. Niemeyer, M.D., appeals from an order of the district court affirming the Food and Drug Administration's FDA) refusal to accept claimant's proposed relabeling of two previously condemned "Diapulse" devices.*fn1 We affirm.

This matter arose from two civil seizures under Section 304 (a) of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 334 (a), to condemn two identical Diapulse devices. The first device was seized from claimant's medical offices on February 26, 1973; the second on February 3, 1975. The two cases were consolidated for trial. The Government, on behalf of the FDA, alleged that the devices were misbranded within the meaning of 21 U.S.C. §§ 352(a) and 352(f) (1) because they were ineffective for the claims contained in their labeling and failed to bear adequate directions for their use.*fn2 Claimant elected not to defend the devices' labeling and instead sought to have the devices brought into compliance with the law through relabeling.

The district court, Judge Will, ruled that the Government was entitled to partial summary judgment, but, over the Government's objection, declined to condemn the devices and instead conducted a bench trial to determine the validity of the claims in the relabeling proposal. Judge Will entered a judgment in favor of claimant, directing that the devices be returned to claimant provided that they be relabeled solely for use as an adjunct treatment in healing soft tissue inflammation, sprains and strains. The Government appealed, contending that the district court erred in conducting a trial de novo on the relabeling proposal rather than condemning the devices and requiring claimant to submit a compliance proposal to the FDA.

This court reversed, holding that a trial de novo was improper and that claimants only recourse was to seek, after any unsuccessful remand for consideration of relabeling, judicial review of the agency action "under an appropriate standard of judicial review of administrative action" U.S. v. An Article of Device . . . Diapulse, 650 F.2d 908, 911 (7th Cir. 1981).

Upon remand the district court, Judge Moran, entered an order of condemnation and remanded the matter to the FDA for consideration of the claimant's proposed relabeling. The FDA denied claimant's request for approval of proposed new labeling in a letter from Harry E. Butts, Director, to Michael G. Berkman, claimant's attorney, dated November 3, 1982. In August 1983 the Government sought the entry of a judgment and claimant responded by seeking review of the FDA's decision. Judge Moran, by order dated March 21, 1984, upheld the FDA's decision.


The first issue raised by claimant's appeal is the scope of judicial review applicable to the FDA's decision. Claimant argues that because the entire evidentiary record of the trial before Judge Will is now a part of the administrative record of the FDA in the present case*fn3 this is an "evidentiary" rather than a "non-evidentiary" record reviewable under the substantial evidence standard of § 706(2)(E) of the Administrative Procedure Act, 5 U.S.C. § 706(2)(E). The Government argues that the FDA's decision was the product of informal agency adjudication on a non-evidentiary record reviewable under the arbitrary and capricious standard set forth in § 706(2)(A) of the Act. Each party contends he can succeed under either standard. Judge Moran did not reach the question of which standard applied, finding that under either standard the appeal would fail.

In all cases agency action must be set aside if the action was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2) (A). "Review under the substantial-evidence test is authorized only when the agency action is taken pursuant to a rulemaking provision of the Administrative Procedure Act itself, 5 U.S.C. § 533 (1964 ed., Supp. V), or when the agency action is based on a public adjudicatory hearing. See 5 U.S.C. §§ 556, 557 (1964 ed., Supp. V)." Citizens to Preserve Overton Park v Volpe, 401 U.S. 402, 414, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971). Neither situation exists here. The FDA's decision to deny relabeling is the result of informal adjudication*fn4 subject to review under the arbitrary and capricious standard.

A condemned device may be brought into compliance with the provisions of the Food, Drug, and Cosmetic Act (FDCA) "under the supervision of an officer or employee duly designated by the Secretary." 21 U.S.C. § 334(d)(1). Claimant's devices were seized before 1976; at that time the Act did not require preclearance of medical devices, nor did it set forth scientific standards for demonstrating a device's effectiveness. The FDA took the position that in general the requirements were the same as those established statutorily for drugs, i.d., claimant has the burden of producing "adequate and well-controlled investigations, including clinical investigations, by experts qualified by scientific training and experience . . . on the basis of which it could fairly and responsibly be concluded by such experts that the drug [or device] will have the effect it purports or is represented to have under the conditions of use prescribed, recommended, or suggested in the labeling or proposed labeling thereof." 21 U.S.C. § 355(d).*fn5 The FDA applied this standard in evaluating claimant's proposed relabeling of Diapulse. The agency's consideration of claimant's compliance proposal was an informal adjudicatory process. The agency was not required to conduct an "on the record" hearing designed to produce a record that is to be the basis of agency action - "the basic requirement for substantial-evidence review." Citizens to preserve Overton Park v. Volpe, 401 U.S. at 415.

Claimant argues that because the trial before Judge Will occurred and the transcript of that trial is part of the administrative record the FDA's action is based upon a public adjudicatory hearing and therefore subject to substantial evidence review. It is clear, however, from U.S. v. An Article of Device . . . Diapulse, supra, that the trial should not have occurred, and its record is part of the administrative record in this case solely for the information it contains and as a matter of administrative convenience. The Agency is not bound by the finding in ...

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