Posted: 30 Jun 2015 04:22 AM PDT
By John R. Fleder –
Although there are many areas where practitioners and others disagree regarding the FDC Act, there is at least one subject that seems to generate universal agreement: FDA has the authority to issue a Form 482 to a companies subject to inspection under 21 U.S.C. § 374, and those companies have no right to refuse FDA’s entry to a facility. FDA has publicly articulated this principle many times and acted accordingly when questioned at the front door by a company that questions FDA’s right to inspection without a warrant and without the firm’s consent. Indeed, this author clearly publicly advocated that position in 1989 when employed by the Department of Justice. Administrative Inspections by the Food and Drug Administration: The Role of the Department of Justice, 44 Food Cosmetic Law Journal 297 (July 1989).
That article cited many district court and courts of appeals rulings involving FDA supporting that principle. Those courts generally concluded that FDA-regulated industries are “closely regulated,” thereby exempting FDA from needing a warrant to conduct an inspection. Id. at 298-99. However, the article also cited to two FDA cases that concluded that FDA could notordinarily compel an inspection of a regulated company without a warrant unless FDA obtained the consent of the establishment to be inspected. Id. at 299 (U.S. v. Kramer Grocery Co., 418 F.2d 987 (8th Cir. 1969) (here) and U.S. v. Stanack Sales Co., 387 F.2d 849 (3d Cir. 1968) (here)). The article noted that these two rulings preceded two Supreme Court cases that had ruled that other federal agencies had the right to conduct administrative inspections without the consent of the regulated entity and without a warrant: U.S. v. Biswell, 406 U.S. 311 (1972) (the firearms industry) (here) and Colonnade Catering Corp. v. U.S., 397 U.S. 72 (1970) (the liquor industry) (here). The article also cited to the legislative history of FDC Act for the proposition that warrantless and compelled inspections by FDA were appropriate and would not violate the Fourth Amendment. Administrative Inspections by the Food and Drug Administration: The Role of the Department of Justice at 299.
In the intervening period of more than 25 years, the law in this area has not materially changed. FDA has continued to proceed on the assumption that it has the statutory right to enter regulated companies’ premises by the mere act of issuing a Form 482, and that FDA does not need the actual consent of the establishment or a judicial warrant to enforce that right. Few companies have challenged FDA’s position. However, FDA has from time to time obtained “administrative warrants” from U.S. Magistrate Judges when companies have refused or limited an FDA inspection.
A very recent Supreme Court case indicates that the law in this area may be evolving in a direction that could provide FDA-regulated industries with an argument that most thought was unavailable, namely that perhaps FDA cannot insist that a company “allow” an FDA inspection based on issuance of a Form 482. We do believe that the recent decision from the U.S. Supreme Court is at least worthy of discussion.
On June 22, 2015, the Court by a 5-4 vote decided City of Los Angeles v. Patel. A group of motel operators and a lodging association had commenced a suit seeking declaratory and injunctive relief by making a facial challenge to a Los Angeles ordinance that requires hotel operators to make their registries concerning their guests available on demand to the police. The ordinance provides for a criminal fine for a hotel operator’s failure to make guest records available to a police officer demanding the records. Justice Alito’s dissent noted that the requirement to make those records available on demand had been in effect for 116 years. Similarly, as noted above, FDA has enforced 21 U.S.C. § 374 by “compelling” inspections merely by issuance of a Form 482. Similar to the Los Angeles ordinance, failure to “permit” an FDA inspection is a crime. 21 U.S.C. §§ 331(f) and 333.
First, the Supreme Court ruled that the plaintiffs could mount a facial challenge to the Los Angeles ordinance even though the plaintiffs had not been fined or had refused to comply with a police demand for hotel registry documents. Next, the Court examined whether there was merit to plaintiffs’ argument that hotel operators could mount a challenge if and when the police demanded records pursuant to the ordinance. The Supreme Court ruled that the ordinance’s requirement that hotel operators make their registries available to the police on demand was unconstitutional “because it penalizes them for declining to turn over their records without affording them any opportunity for precompliance review.” Slip Op. at 1.
In examining whether the police needed a warrant to force operators to provide records, the Court rejected the argument that no warrant was required even though the police had “special needs” independent of conducting a criminal investigation, namely to ensure compliance and deter criminals from operating on a hotel’s premises. However, the Court then noted that absent consent, exigent circumstances or the like, the subject of an administrative search “must be afforded an opportunity to obtain precompliance review before a neutral decision maker.” Slip Op. at 10. The Court concluded that absent an opportunity for a hotel operator to get precompliance review, the ordinance posed a risk that an administrative search would exceed statutory limits or be used as a pretext to harass hotel operators and their guests.
The Court noted that the police could issue an administrative subpoena seeking records “without probable cause that a regulation is being infringed.” Slip Op. at 11. FDA would certainly argue that a Form 482 is at least analogous to an administrative subpoena and that even if this case applies to FDA, FDA investigators need do nothing more than what they are doing today, namely issuing Form 482s. However, the plaintiffs in Patel suggested to the Court that even when a subpoena is issued, the hotel operators need to be able to move to quash the subpoena before any search of records takes place. The Court adopted this argument.
Los Angeles argued that these procedures should not be applied to the ordinance because it “is facially valid under the more relaxed standard that applies to searches of this category of businesses,” namely “closely regulated” industries. Slip Op. at 14. The Court addressed this argument by noting that in the past 45 years, it had only identified four industries, liquor sales, auto junkyards, firearms dealings, and mining as having had “such a history of government oversight that no reasonable expectation of privacy ... could exist for the proprietor over the stock of such an enterprise.” Slip Op. at 14. Notably absent from the cited list are industries regulated by FDA. Perhaps the reason is that in those 45 years no case involving FDA on that issue has come up to the Supreme Court.
The Court discussion of those four industries cites to Colonnade Catering and Biswell, the two Supreme Court decision that lower courts have relied on for the proposition that FDA can conduct warrantless inspections. The Court noted, however, that defining an industry as being “closely regulated” is the exception and that classifying hotels as being pervasively regulated “would permit what has always been a narrow exception to swallow the rule.” Slip Op. at 14. Los Angeles unsuccessfully argued that hotels have been subject to warrantless searches for decades.
The Court then concluded that even if hotels are pervasively regulated, the ordinance at issue would be reasonable under the Fourth Amendment only if it passed three other tests: (1) there is a substantial government interest in the regulatory inspection scheme; (2) warrantless inspections are necessary; and (3) the statute’s inspection program in terms of certainty and regularity of its application provides a constitutional substitute for a warrant. Slip Op. at 16. The Court concluded that the ordinance failed the second and third requirements. The Court suggested that even assuming the need for the element of surprise, it was not apparent that the police could not obtain an ex parte warrant after being refused entry.
Finally, the Court stated that while it has upheld inspections of closely regulated industries that call for searches at least four times a year or on a regular basis, the ordinance at issue imposed no comparable standard. Slip Op. at 17. In contrast, FDA inspects very few companies on what anyone could argue is a “regular basis.”
It is here that the Patel case raises the most interesting issues. Until now, most commentators looked at whether an industry is closely regulated according to the length and scope of the agency’s regulation of that industry. On that basis, three justices dissenting in the case concluded that the hotel industry is indeed “closely regulated.” However, Patel arguably changes that analysis by focusing on whether a police officer is given too much discretion as to which hotels to “search” and whether the industry in question is subject to frequent inspections as opposed to occasional and sporadic inspections. If these are the criteria for determining whether an industry is closely regulated, an interesting challenge could be mounted to FDA’s status as “closely regulating” the industries it regulates.
So where does that leave us? We suspect that few companies regulated by FDA should want to risk the ire of FDA and the possibility of facing severe sanctions by refusing to “permit” an FDA inspection. FDA will surely continue to argue that FDA industries are closely regulated and fit within the line of Supreme Court cases that allow for warrantless inspections and no opportunity for a company to obtain judicial review before FDA enters premises pursuant to a Form 482. It is certainly not the point of this posting to provide anyone with legal advice and to advocate that companies should incur the risk and expense of challenging FDA on this topic.
However, the law in this area seems murkier than most commentators would have thought before Patel was decided. Can companies legally tell FDA that they can refuse entry by an FDA inspector until the company gets “preenforcement review”? Will someone file the same type of preenforcement judicial challenge to FDA’s warrantless scheme, the way the hotel operators did inPatel? Must FDA get a warrant before it can legally “force” a company to “permit” an inspection? Will courts rule that FDA inspections do not require warrants and that preenforcement judicial review is not available? We may or may not see answers in the foreseeable future. Who knows when and even whether someone will make these arguments to challenge FDA’s authority
Although there are many areas where practitioners and others disagree regarding the FDC Act, there is at least one subject that seems to generate universal agreement: FDA has the authority to issue a Form 482 to a companies subject to inspection under 21 U.S.C. § 374, and those companies have no right to refuse FDA’s entry to a facility. FDA has publicly articulated this principle many times and acted accordingly when questioned at the front door by a company that questions FDA’s right to inspection without a warrant and without the firm’s consent. Indeed, this author clearly publicly advocated that position in 1989 when employed by the Department of Justice. Administrative Inspections by the Food and Drug Administration: The Role of the Department of Justice, 44 Food Cosmetic Law Journal 297 (July 1989).
That article cited many district court and courts of appeals rulings involving FDA supporting that principle. Those courts generally concluded that FDA-regulated industries are “closely regulated,” thereby exempting FDA from needing a warrant to conduct an inspection. Id. at 298-99. However, the article also cited to two FDA cases that concluded that FDA could notordinarily compel an inspection of a regulated company without a warrant unless FDA obtained the consent of the establishment to be inspected. Id. at 299 (U.S. v. Kramer Grocery Co., 418 F.2d 987 (8th Cir. 1969) (here) and U.S. v. Stanack Sales Co., 387 F.2d 849 (3d Cir. 1968) (here)). The article noted that these two rulings preceded two Supreme Court cases that had ruled that other federal agencies had the right to conduct administrative inspections without the consent of the regulated entity and without a warrant: U.S. v. Biswell, 406 U.S. 311 (1972) (the firearms industry) (here) and Colonnade Catering Corp. v. U.S., 397 U.S. 72 (1970) (the liquor industry) (here). The article also cited to the legislative history of FDC Act for the proposition that warrantless and compelled inspections by FDA were appropriate and would not violate the Fourth Amendment. Administrative Inspections by the Food and Drug Administration: The Role of the Department of Justice at 299.
In the intervening period of more than 25 years, the law in this area has not materially changed. FDA has continued to proceed on the assumption that it has the statutory right to enter regulated companies’ premises by the mere act of issuing a Form 482, and that FDA does not need the actual consent of the establishment or a judicial warrant to enforce that right. Few companies have challenged FDA’s position. However, FDA has from time to time obtained “administrative warrants” from U.S. Magistrate Judges when companies have refused or limited an FDA inspection.
A very recent Supreme Court case indicates that the law in this area may be evolving in a direction that could provide FDA-regulated industries with an argument that most thought was unavailable, namely that perhaps FDA cannot insist that a company “allow” an FDA inspection based on issuance of a Form 482. We do believe that the recent decision from the U.S. Supreme Court is at least worthy of discussion.
On June 22, 2015, the Court by a 5-4 vote decided City of Los Angeles v. Patel. A group of motel operators and a lodging association had commenced a suit seeking declaratory and injunctive relief by making a facial challenge to a Los Angeles ordinance that requires hotel operators to make their registries concerning their guests available on demand to the police. The ordinance provides for a criminal fine for a hotel operator’s failure to make guest records available to a police officer demanding the records. Justice Alito’s dissent noted that the requirement to make those records available on demand had been in effect for 116 years. Similarly, as noted above, FDA has enforced 21 U.S.C. § 374 by “compelling” inspections merely by issuance of a Form 482. Similar to the Los Angeles ordinance, failure to “permit” an FDA inspection is a crime. 21 U.S.C. §§ 331(f) and 333.
First, the Supreme Court ruled that the plaintiffs could mount a facial challenge to the Los Angeles ordinance even though the plaintiffs had not been fined or had refused to comply with a police demand for hotel registry documents. Next, the Court examined whether there was merit to plaintiffs’ argument that hotel operators could mount a challenge if and when the police demanded records pursuant to the ordinance. The Supreme Court ruled that the ordinance’s requirement that hotel operators make their registries available to the police on demand was unconstitutional “because it penalizes them for declining to turn over their records without affording them any opportunity for precompliance review.” Slip Op. at 1.
In examining whether the police needed a warrant to force operators to provide records, the Court rejected the argument that no warrant was required even though the police had “special needs” independent of conducting a criminal investigation, namely to ensure compliance and deter criminals from operating on a hotel’s premises. However, the Court then noted that absent consent, exigent circumstances or the like, the subject of an administrative search “must be afforded an opportunity to obtain precompliance review before a neutral decision maker.” Slip Op. at 10. The Court concluded that absent an opportunity for a hotel operator to get precompliance review, the ordinance posed a risk that an administrative search would exceed statutory limits or be used as a pretext to harass hotel operators and their guests.
The Court noted that the police could issue an administrative subpoena seeking records “without probable cause that a regulation is being infringed.” Slip Op. at 11. FDA would certainly argue that a Form 482 is at least analogous to an administrative subpoena and that even if this case applies to FDA, FDA investigators need do nothing more than what they are doing today, namely issuing Form 482s. However, the plaintiffs in Patel suggested to the Court that even when a subpoena is issued, the hotel operators need to be able to move to quash the subpoena before any search of records takes place. The Court adopted this argument.
Los Angeles argued that these procedures should not be applied to the ordinance because it “is facially valid under the more relaxed standard that applies to searches of this category of businesses,” namely “closely regulated” industries. Slip Op. at 14. The Court addressed this argument by noting that in the past 45 years, it had only identified four industries, liquor sales, auto junkyards, firearms dealings, and mining as having had “such a history of government oversight that no reasonable expectation of privacy ... could exist for the proprietor over the stock of such an enterprise.” Slip Op. at 14. Notably absent from the cited list are industries regulated by FDA. Perhaps the reason is that in those 45 years no case involving FDA on that issue has come up to the Supreme Court.
The Court discussion of those four industries cites to Colonnade Catering and Biswell, the two Supreme Court decision that lower courts have relied on for the proposition that FDA can conduct warrantless inspections. The Court noted, however, that defining an industry as being “closely regulated” is the exception and that classifying hotels as being pervasively regulated “would permit what has always been a narrow exception to swallow the rule.” Slip Op. at 14. Los Angeles unsuccessfully argued that hotels have been subject to warrantless searches for decades.
The Court then concluded that even if hotels are pervasively regulated, the ordinance at issue would be reasonable under the Fourth Amendment only if it passed three other tests: (1) there is a substantial government interest in the regulatory inspection scheme; (2) warrantless inspections are necessary; and (3) the statute’s inspection program in terms of certainty and regularity of its application provides a constitutional substitute for a warrant. Slip Op. at 16. The Court concluded that the ordinance failed the second and third requirements. The Court suggested that even assuming the need for the element of surprise, it was not apparent that the police could not obtain an ex parte warrant after being refused entry.
Finally, the Court stated that while it has upheld inspections of closely regulated industries that call for searches at least four times a year or on a regular basis, the ordinance at issue imposed no comparable standard. Slip Op. at 17. In contrast, FDA inspects very few companies on what anyone could argue is a “regular basis.”
It is here that the Patel case raises the most interesting issues. Until now, most commentators looked at whether an industry is closely regulated according to the length and scope of the agency’s regulation of that industry. On that basis, three justices dissenting in the case concluded that the hotel industry is indeed “closely regulated.” However, Patel arguably changes that analysis by focusing on whether a police officer is given too much discretion as to which hotels to “search” and whether the industry in question is subject to frequent inspections as opposed to occasional and sporadic inspections. If these are the criteria for determining whether an industry is closely regulated, an interesting challenge could be mounted to FDA’s status as “closely regulating” the industries it regulates.
So where does that leave us? We suspect that few companies regulated by FDA should want to risk the ire of FDA and the possibility of facing severe sanctions by refusing to “permit” an FDA inspection. FDA will surely continue to argue that FDA industries are closely regulated and fit within the line of Supreme Court cases that allow for warrantless inspections and no opportunity for a company to obtain judicial review before FDA enters premises pursuant to a Form 482. It is certainly not the point of this posting to provide anyone with legal advice and to advocate that companies should incur the risk and expense of challenging FDA on this topic.
However, the law in this area seems murkier than most commentators would have thought before Patel was decided. Can companies legally tell FDA that they can refuse entry by an FDA inspector until the company gets “preenforcement review”? Will someone file the same type of preenforcement judicial challenge to FDA’s warrantless scheme, the way the hotel operators did inPatel? Must FDA get a warrant before it can legally “force” a company to “permit” an inspection? Will courts rule that FDA inspections do not require warrants and that preenforcement judicial review is not available? We may or may not see answers in the foreseeable future. Who knows when and even whether someone will make these arguments to challenge FDA’s authority
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