Statutory Interpretation - Federal Food, Drug, and Cosmetic Act -Third Circuit Holds That the FDA Can Obtain Restitution on Behalf of Consumers

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STATUTORY INTERPRETATION--FEDERAL FOOD, DRUG, AND COSMETIC ACT--THIRD CIRCUIT HOLDS THAT THE FDA CAN OBTAIN RESTITUTION ON BEHALF OF CONSUMERS.--United States v. Lane Labs-USA Inc., 427 F.3d 219 (3d Cir. 2005).

How should courts interpret statutory silence regarding a requested remedy? One line of cases adopts the presumption that a federal court's equitable authority is plenary unless Congress indicates otherwise. (1) Another recent line of cases, however, limits judicial power: if a statute explicitly identifies particular remedies, courts should be "chary of reading others into it." (2) Recently, in United States v. Lane Labs-USA Inc., (3) the Third Circuit became the second court of appeals to adhere to the presumption of plenary equitable authority, agreeing with the Food and Drug Administration (FDA) that district courts may order restitution under the Federal Food, Drug, and Cosmetic Act (4) (FDCA) despite the absence of explicit statutory permission. (5) Although the court introduced an unnecessary wrinkle into the doctrinal test, it providently navigated warring precedents.

Andrew Lane is the owner of Lane Labs-USA Inc. (Lane Labs), which markets and distributes health products (6) and generates approximately $30 million each year in sales. (7) As of 2004, its products included BeneFin, a powder or caplet containing shark cartilage; MGN-3, a dietary fiber made from rice bran and shiitake mushroom extract; and SkinAnswer, a skin cream containing an extract of sand brier. (8) Lane Labs characterized these three products as effective treatments for cancer and HIV. (9)

Beginning in 1997, the FDA sent multiple warning letters to Lane Labs, asserting that the company was marketing unapproved and misbranded drugs in violation of the FDCA. (10) The agency filed suit against Lane Labs in 1999 and then amended its complaint in 2002 to request a permanent injunction, restitution for consumers, and disgorgement of any remaining profits. (11) After finding that the products were new and misbranded drugs under the FDCA, the district court granted the FDA's motion for summary judgment, issued a permanent injunction against sales of the products without FDA approval, and ordered the requested restitution. (12)

The Third Circuit affirmed. (13) The sole issue on appeal (14) was the district court's authority to order restitution under section 302(a) of the FDCA, which provides district courts with jurisdiction "to restrain violations" of the statute. (15) Writing for a unanimous panel, Judge Rendell (16) interpreted Supreme Court precedent as establishing a two-pronged test to determine whether a district court sitting in equity can award restitution. First, once the court's equitable jurisdiction has been invoked, restitution is available unless "there is a clear statutory limitation" indicating otherwise. (17) Second, even when the first prong is satisfied, restitution is permitted only "where it furthers the purposes of the statute." (18)

In articulating and applying the first prong, the court relied on the interpretive presumption expressed in two Supreme Court cases, Porter v. Warner Holding Co. (19) and Mitchell v. Robert DeMario Jewelry, Inc., (20) which held that restitution is available under the Emergency Price Control Act of 1942 (21) and the Fair Labor Standards Act of 1938, (22) respectively. (23) Judge Rendell emphasized Porter's instruction that "[u]nless a statute in so many words, or by a necessary and inescapable inference, restricts the court's jurisdiction in equity, the full scope of that jurisdiction is to be recognized and applied." (24) Similarly, the court endorsed Mitchell's insistence that when Congress invokes courts' equitable authority, "it must be taken to have acted cognizant of the historic power of equity to provide complete relief in the light of statutory purposes." (25) The legislative history of the FDCA, even as presented by the appellants and amicus, (26) did not amount to the requisite necessary and inescapable inference. …