MICHAEL W. COTTER United States Attorney DAVID SULLIVAN U ... · DAVID SULLIVAN Case 1:10-cv-00128-SEH Document 18 Filed 02/22/13 Page 5 of 5. MICHAEL W. COTTER . United States Attorney

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MICHAEL W. COTTER

United States Attorney

DAVID SULLIVAN

Trial Attorney

U.S. Department of Justice

Consumer Protection Branch

P.O. Box 386

Washington, D.C. 20044

(202) 514-0516

[email protected]

Attorneys for Plaintiff

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MONTANA

UNITED STATES OF AMERICA, )

)

Plaintiff, ) Civil No. CV-10-128-BLG-RFC

)

v. ) UNITED STATES’ PETITION FOR

) AN ORDER TO SHOW CAUSE

TOBY CARL MCADAM and ) WHY DEFENDANT TOBY

GRETA S. ARMSTRONG, ) MCADAM SHOULD NOT BE

individuals ) HELD IN CIVIL CONTEMPT

d/b/a RISINGSUN HEALTH )

)

Defendants. )

_______________________________)

Petitioner, the United States of America, by its attorneys, hereby petitions

the Court for an Order requiring defendant Toby McAdam (d/b/a/ Risingsun

Health) to show cause why he should not be held in civil contempt for failing to

comply with the Consent Decree of Permanent Injunction ("Consent Decree")

Case 1:10-cv-00128-SEH Document 18 Filed 02/22/13 Page 1 of 5

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entered by this Court on November 4, 2010. The United States hereby submits the

attached Memorandum of Law and Declaration of Lisa Althar, Compliance Officer

in the Seattle District Office of the United States Food and Drug Administration

(“FDA”), in support of this Petition and states as follows:

1. Defendant McAdam produces various products intended to be either

ingested by humans or animals, or intended to be topically applied to humans or

animals, including drugs and dietary supplements (“Products”);

2. On November 4, 2010, the Court entered the Consent Decree, which

required defendant McAdam, among other things, to cease manufacturing and

distributing Products until he satisfied certain criteria set forth in Paragraphs 4 and

5 of the Consent Decree;

3. Defendant McAdam failed to satisfy those criteria;

4. Notwithstanding the express requirements of the Consent Decree,

defendant McAdam has continued to manufacture and distribute Products;

5. Moreover, on September 15, 2011, when FDA notified defendant

McAdam pursuant to the Consent Decree that his continued production violated

the unequivocal requirements of the Consent Decree, and ordered him to cease

production pursuant to Paragraph 10 of the Consent Decree, defendant McAdam

failed to comply with FDA's direction;


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6. After several reminders of the express requirements of the Consent

Decree and his obligations thereunder, defendant McAdam submitted a sworn

affidavit with this Court dated November 8, 2012, stating that he “will cease

operations.” An attorney from FDA’s Office of Chief Counsel responded to the

affidavit by letter dated November 15, 2012, stating that FDA “interpret[s] your

letter to indicate that you have acceded to FDA’s shutdown order and will not

recommence operations until authorized by FDA in accordance with Paragraph 11

of the Consent Decree.”

7. Following defendant McAdam’s sworn affidavit promising to cease

operations, FDA conducted an undercover purchase of a Risingsun product. An

FDA investigator using an undercover identity placed an order for the product on

Risingsun’s website on November 21, 2012, and the product was delivered in

interstate commerce to an address in Maryland on December 17, 2012.

WHEREFORE, the United States of America respectfully requests that this

Court:

1. Issue an order directing defendant McAdam to appear before the

Court to show cause, if any he has, at such time and place as the Court shall direct,

why he should not be held in civil contempt for failure to comply with the Consent

Decree of Permanent Injunction entered November 4, 2010;


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2. Following the issuance of the Order to Show Cause and an

appropriate hearing, enter a judgment of civil contempt against defendant McAdam

for violations of the Consent Decree;

3. Make factual findings as are necessary to require defendant McAdam

to cease production of Products in accordance with Paragraphs 4, 5 and 10 of the

Decree, and such cessation shall continue until the requirements of the Consent

Decree are met to FDA’s satisfaction;

4. Following entry of the Order, should defendant McAdam violate any

provision of the Consent Decree, including, but not limited to, the production or

distribution of Products prior to satisfying the requirements of Paragraphs 4 and/or

5 of the Consent Decree (as applicable), defendant McAdam shall, upon written

notice from FDA, and without further order of the Court, pay conditional fines to

the United States Treasury in the amount of $1,000 per each day of violation;

5. Award Plaintiff its attorneys’ fees, all investigational expenses, and

court costs relating to his violation of the Consent Decree and this contempt

proceeding pursuant to Paragraphs 12 and 18 of the Consent Decree; and

6. Grant any such other relief as the Court deems just and proper.

Dated this 22nd

day of February 2013.


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Of Counsel:

WILLIAM B. SCHULTZ

Acting General Counsel

ELIZABETH H. DICKINSON

Acting Chief Counsel

Food and Drug Division

ERIC M. BLUMBERG

Deputy Chief Counsel, Litigation

THOMAS J. COSGROVE

Associate Chief Counsels

for Enforcement

United States Department of

Health and Human Services

Office of the General Counsel

Food and Drug Administration

10903 New Hampshire Avenue

Silver Spring, MD 20993-0002

Respectfully submitted,

STUART F. DELERY

Principal Deputy Assistant Attorney General

MAAME EWUSI-MENSAH FRIMPONG

Deputy Assistant Attorney General

Civil Division


MICHAEL W. COTTER

United States Attorney

MICHAEL S. BLUME

Director



By: s/ David Sullivan

DAVID SULLIVAN

Trial Attorney



P.O. Box 386

Washington, D.C. 20004

CERTIFICATE OF SERVICE

The undersigned hereby acknowledges that the foregoing Petition for an

Order to Show Cause Why Defendant Should Not Be Held in Civil Contempt and

was served, by agreement with defendant Toby McAdam, via email and FEDEX

on this 22nd day of February, 2013.

/s/ David Sullivan

DAVID SULLIVAN


MICHAEL W. COTTER United States Attorney DAVID SULLIVAN Trial Attorney U.S. Department of Justice Consumer Protection Branch P.O. Box 386 Washington, D.C. 20044 (202) 514-0516 [email protected] Attorneys for Plaintiff

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MONTANA

UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) ) Civil No. CV-10-128-BLG-RFC TOBY CARL MCADAM and ) GRETA S. ARMSTRONG, ) Individuals ) MEMORANDUM IN SUPPORT d/b/a RISINGSUN HEALTH ) OF PETITION FOR AN ORDER

) TO SHOW CAUSE WHY ) DEFENDANT SHOULD NOT BE

) HELD IN CIVIL CONTEMPT ) AND MOTION FOR ) LIQUIDATED DAMAGES Defendants. ) ______________________________ )

Case 1:10-cv-00128-SEH Document 18-1 Filed 02/22/13 Page 1 of 34

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TABLE OF CONTENTS

TABLE OF AUTHORITIES ................................................................................... iii

I. Background ............................................................................................................ 2

A. Prior Violations ................................................................................................. 2

B. The Complaint .................................................................................................. 4

C. The Consent Decree .......................................................................................... 5

D. Defendant McAdam’s Conduct ........................................................................ 9

1. The September 15 Letter ................................................................................ 9

2. The February 14 through 16 Inspections .....................................................10

3. FDA’s July 27 and October 31 Letters ........................................................12

4. The October 17, 2012 Inspection .................................................................13

5. Defendant McAdam's October 31, 2012 Affidavit ......................................14

II. Argument ............................................................................................................ 15

A. The Court Should Find Defendant McAdam in Civil Contempt ...................15

1. Standard for Civil Contempt .........................................................................15

2. Defendant Should Be Held in Civil Contempt ............................................17

a. A Court Order Was In Effect ....................................................................17


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b. Defendant McAdam Has Failed to Comply With

Multiple Clear Requirements of the Consent Decree ..............................17

c. Defendants’ Attempts to Avoid the Consent Decree are

Unavailing .................................................................................................21

3. Sanctions Should Be Imposed for Defendant’s Violations .........................21

III. Defendant McAdam Should Be Ordered to Pay Liquidated Damages ............ 24


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TABLE OF AUTHORITIES

FEDERAL CASES

F.T.C. v. Affordable Media, 179 F.3d 1228 (9th Cir. 1999) ..............................................................................16

F.T.C. v. EDebitPay, LLC, 695 F.3d 938 (9th Cir. 2012) ................................................................................15

Gompers v. Buck's Stove & Range, Co., 221 U.S. 418 (1911) .............................................................................................15

Hook v. Ariz. Dept' of Corr., 972 F.2d 1012 (9th Cir. 2008) ..............................................................................25

In re Dual-Deck Video Cassette Recorder Antitrust Litig., 10 F.3d 693 (9th Cir. 1993) ..................................................................................16

Int'l Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821 (1994) .............................................................................................23

Koninklijke Philips Elecs., N.V. v. KXD Tech., Inc., 539 F.3d 1039 (9th Cir. 2008) ..............................................................................15

Labor/Cmty. Strategy Ctr. v. L.A. Cnty Metro. Trans. Auth.,, 564 F.3d 1115 (9th Cir. 2009) ..............................................................................16

McComb v. Jacksonville Paper Co., 336 U.S. 187 (1949) .............................................................................................21

Nehmer v. U.S. Dept. of Veterans Affairs, 494 F.3d 846 (9th Cir. 2007) ................................................................................17

Reno Air Racing Ass'n v. McCord, 452 F.3d 1126 (9th Cir. 2006) ..............................................................................16

Rufo v. Inmates of Suffolk Cnty Jail, 502 U.S. 367 (1992) .............................................................................................17

SEC v. Hickey, 322 F.3d 1123 (9th Cir. 2003) ..............................................................................21


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Shillitani v. United States, 384 U.S. 364 (1966) .............................................................................................15

Spallone v. United States, 493 U.S. 265 (1990) .............................................................................................15

Stone v. City & Cnty. of San Francisco, 968 F.2d 850 (9th Cir. 1992) ................................................................................16

U.S. v. FMC Corp., 531 F.3d 813 (9th Cir. 2008) ................................................................................25

United States v. Bright, 596 F.3d 683 (9th Cir. 2010) ................................................................................16

United States v. City of Jackson, 359 F.3d 727 (5th Cir. 2004) ................................................................................24

United States v. Dotterweich, 320 U.S. 277 (1943) .............................................................................................20

United States v. United Mine Workers of Am., 330 U.S. 258 (1947) ...................................................................................... 15, 22

Whittaker Corp. v. Execuair Corp., 953 F.2d 510 (9th Cir.1992) .................................................................................15

FEDERAL STATUTES

5 U.S.C. § 706(2)(A) .................................................................................................. 9

21 U.S.C. §§ 301-397................................................................................................. 3

21 U.S.C. § 321(ff) ...................................................................................................11

21 U.S.C. § 321(g) ...................................................................................................10

21 U.S.C. § 321(p) ...................................................................................................10

21 U.S.C. § 321(p)(1)................................................................................................. 4

21 U.S.C. § 321(v)(1)................................................................................................. 5


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21 U.S.C. § 331(a) ..................................................................................................... 5

21 U.S.C. § 331(d) ...................................................................................................65

21 U.S.C. § 332(a) ...................................................................................................54

21 U.S.C. § 342(g)(1)...........................................................................................8, 18

21 U.S.C. § 351(a)(5) ................................................................................................. 5

21 U.S.C. § 352(f)(1) .............................................................................................4, 5

21 U.S.C. § 353(b)(1)................................................................................................. 5

21 U.S.C. § 355 ............................................................................................... 5, 6, 17

21 U.S.C. § 355 (a) .................................................................................................... 4

21 U.S.C. § 355(i) ...................................................................................................... 6

21 U.S.C. § 360b(a) ................................................................................................... 5

21 U.S.C. § 360b(b) ................................................................................................... 6

21 U.S.C. § 360b(j) .................................................................................................... 6

FEDERAL REGULATIONS

21 C.F.R § 111.205(a) ..............................................................................................12

21 C.F.R. § 111.70(e) ...............................................................................................11

21 C.F.R. § 111.75(a)(1)(i) ......................................................................................11

21 C.F.R. § 111.83(a) ...............................................................................................11

21 C.F.R. 312 ............................................................................................................. 6

21 C.F.R. Pt 111 ...................................................................................................8, 18

21 C.F.R. Pt 330 ......................................................................................................... 6

72 Fed. Reg. 34752 (June 25, 2007) ........................................................................18


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Defendant Toby McAdam has continuously flaunted this Court’s Consent

Decree of Permanent Injunction since it was entered on November 4, 2010

(“Consent Decree”) (Dkt. #5). The Food and Drug Administration (“FDA”)

repeatedly attempted to convince Defendant McAdam to comply with the Consent

Decree and the law, but to no avail. As Defendant McAdam has now filed a false

affidavit with this Court that Risingsun Health (“Risingsun”) would cease

operations and comply with the Consent Decree, the Government is left with no

choice except to seek this Court’s intervention to protect the public health from

Defendant’s contumacious conduct. Plaintiff, United States of America, submits

this Memorandum of Law, along with the Declaration of FDA Compliance Officer

Lisa Althar (See Exhibit A hereinafter referred to as “Althar Decl.”), in support of

its Motion for an Order to Show Cause why Defendant Toby C. McAdam, d/b/a

Risingsun Health, should not be held in civil contempt for violating the Consent

Decree, and Motion for Liquidated Damages.

Should the Court find Defendant McAdam in contempt, the United States

requests that it issue an order requiring that he cease manufacturing, processing,

packaging, labeling, holding, selling and/or distributing all products intended to be

either ingested by humans or animals, or intended to be topically applied to

humans or animals, including all drugs and/or dietary supplements, in accordance

with Paragraphs 4, 5, and 10 of the Consent Decree, and that such cessation


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continue until Defendant McAdam complies with the terms and conditions of the

Consent Decree. The United States also requests, pursuant to Paragraphs 12 and

18 of the Consent Decree, that this Court award plaintiff its attorneys’ fees, all

investigational expenses, and court costs relating to Defendant’s contumacious

actions. Finally, the United States requests that the Court order Defendant

McAdam to pay eighty thousand dollars in liquidated damages as previously

assessed by FDA in accordance with Paragraph 17 of the Consent Decree.

I. Background

A. Prior Violations

Since at least 2006, Defendant McAdam has been making and selling

unapproved drugs for cancer and other serious diseases. (Althar Decl. ¶¶ 5-8).

This behavior poses a significant threat to the public health. More particularly,

when a person suffers from a serious disease and turns to an unapproved cure, the

safety and efficacy of which has not been demonstrated to FDA, serious

consequences can result. Such a person may forgo effective treatment and/or be

injured by a potentially unsafe drug.

On April 6, 2006, FDA issued Co-Defendant Gretta Armstrong1 a Warning

Letter that Risingsun was advertising unapproved cancer remedies on the websites

www.risingsunhealth.com and www.bloodrootproducts.com, and warned her that 1 At this point, the Government does not seek a finding of contempt or liquidated damages against Defendant Armstrong.


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selling unapproved products for use in the cure, mitigation, treatment, and

prevention of disease violated the Federal Food, Drug, and Cosmetic Act, 21

U.S.C. §§ 301-397 (the “Act”). (Id. ¶ 4). FDA also informed Defendant

Armstrong that the products advertised on the website were misbranded under the

Act in that they did not contain adequate directions for the uses for which they

were offered. (Id.). On April 7, 2006, after receipt of that Warning Letter,

Defendant McAdam informed FDA by telephone that he was the actual owner of

Risingsun and that he would remove the offending drug claims from the websites.

(Id. ¶ 5).

By letter dated April 23, 2006, Defendant McAdam again promised to FDA

that he would remove his offending drug claims. (Id. ¶ 5). FDA investigators then

inspected Risingsun between November 27 and 29, 2007, and discovered that

Defendants’ violations of the Act were ongoing. (Id. ¶ 6). Following two more

written promises by Defendant McAdam that he would cease his illegal activity

(see id.), two FDA investigators inspected Risingsun between April 4 and 10,

2009. The investigators noted that Risingsun’s websites and many of the firm’s

product labels still contained illegal drug claims that its products could cure,

mitigate, treat, or prevent disease. (Id.).

In May and June, 2010, FDA made numerous undercover purchases of

Risingsun’s products and found that Defendants continued to sell illegal


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unapproved new drugs (Id. ¶¶ 7-8), which FDA had previously informed

Defendant McAdam was in violation of 21 U.S.C. §§ 352(f)(1) and 355(a). (See

Althar Decl., Ex. 1 ¶¶ 3-4). Included in these purchases were products called

“ADD/ADHD Support,” “Amazonian Analgesia,” “Amazonian MoodEz,”

“Anemia Support,” “Arthritis Support,” and “CanFree Internal Formula –

Capsules.” (Id.). The labels on each of these products contained claims that the

products could cure, mitigate, or treat disease. (Id.). These purchases were

shipped from Montana to undercover investigators located in Maryland, Arizona,

and Washington State. (Id.).

B. The Complaint

On October 13, 2010, the United States filed a Complaint against

Defendants under the injunction provisions of the Act, 21 U.S.C. § 332(a). (Dkt.

# 1). The Complaint alleged, among other things, that Defendants regularly sold

unapproved drugs in interstate commerce to treat serious diseases such as cancer,

anemia, asthma, ADD/ADHD, arthritis, epilepsy, and intestinal parasites. (Id. ¶¶ 7,

8, 12). These drugs were alleged to be “new drugs,” as defined by 21 U.S.C.

§ 321(p)(1), in that they were generally recognized, among experts qualified by

scientific training and experience to evaluate the safety and effectiveness of drugs,

as safe and effective for use under the conditions prescribed, recommended, or

suggested in their labeling. (Id. ¶¶ 9,10). The Complaint alleged that Defendants


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violated 21 U.S.C. § 331(d) by introducing or delivering for introduction into

interstate commerce such unapproved drugs in violation of 21 U.S.C. § 355. (Id.

¶ 13). The Complaint also alleged that Defendants sold new animal drugs, as

defined by 21 U.S.C. § 321(v)(1), that were unapproved by FDA, and which

therefore were unsafe within the meaning of 21 U.S.C. § 360b(a) and adulterated

within the meaning of 21 U.S.C. § 351(a)(5). (Id. ¶¶ 14-16). Furthermore, the

Complaint alleged that Defendants’ drug products were misbranded within the

meaning of 21 U.S.C. § 353(b)(1) because they were prescription drugs, the

distribution of which without a prescription resulted in the drug being misbranded

while held for sale, and within the meaning of 21 U.S.C. § 352(f)(1), because their

labeling failed to bear adequate directions for use. (Id. ¶¶ 17-18). The introduction

of adulterated and misbranded new animal drugs into interstate commerce is

prohibited under 21 U.S.C. § 331(a). (Id.).

C. The Consent Decree

Simultaneously with the filing of the Complaint, the parties filed the

negotiated Consent Decree. As this Court has already determined, Defendants

were represented by able food and drug counsel throughout the negotiation of the

Consent Decree. (See March 8, 2012 Order at 3, Dkt. #12). The Consent Decree

was entered by this Court on November 4, 2010, and has several key components.


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First, the Consent Decree enjoins Defendants from: introducing into

interstate commerce, holding for sale after shipment in interstate commerce, and

manufacturing, processing, packaging, labeling, holding, selling, and distributing a

broad range of products, including, inter alia, (a) any topically-applied product for

human or animal use containing extracts or components of the Bloodroot or

Graviola plants, (b) any “new drug,” (c) any “new animal drug,” and (d) any

dietary supplement, unless and until (i) FDA approves a new drug application or

abbreviated new drug application for the product pursuant to 21 U.S.C. § 355, or

(ii) FDA approves an investigational new drug application for the product pursuant

to 21 U.S.C. § 355(i) and 21 C.F.R. 312, or (iii) FDA approves a new animal drug

application or abbreviated new animal drug application for the product pursuant to

21 U.S.C. § 360b(b) or such product meets the requirements for the investigational

new animal drug exemption pursuant to 21 U.S.C. § 360b(j). (Consent Decree ¶

3.A).

Second, before manufacturing or distributing any new drug, the Consent

Decree requires that Defendants demonstrate to FDA that the new drug is the

subject of a valid FDA approval.2

2 The Consent Decree also contains provisions regarding “over-the-counter” (“OTC”) human drugs that are purported to be manufactured and labeled in accordance with an FDA OTC monograph pursuant to 21 C.F.R. Pt 330. (Consent Decree ¶ 4).


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Third, before manufacturing or distributing any product that is not a new

drug, but which is intended either to be ingested by humans or animals or topically

applied to humans or animals (each such product called an “Other Product”), the

Consent Decree requires Defendants to retain a “labeling expert,” who is defined

as:

an independent person or person . . . without any personal or financial ties to Defendants and their families, and who, by reason of background, training, education, or experience, is qualified to review Defendants’ product labeling and determine whether such Other Product(s) comply with the applicable requirements of the Act.

(Consent Decree ¶ 5). Before marketing or distributing any Other Product,

Defendants’ labeling expert must review the products to “determine whether

Defendants have omitted all claims from their labeling that would cause such

Other Product to be a drug and/or [, with respect to a dietary supplement,] that

constitute unapproved or unauthorized health claims within the meaning of the

Act.” (Id.). In this regard, before FDA will consider permitting Defendant to

manufacture or distribute any Other Product, the labeling expert “shall submit a

written report to FDA analyzing whether Defendants are operating in compliance

with the Act and whether each such Other Product may be manufactured and/or

distributed in compliance with the Act.” (Id.).

The Consent Decree also generally enjoins Defendants from introducing

unapproved, misbranded, and/or adulterated human and animal drugs into


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interstate commerce, or causing the adulteration or misbranding of such products

held for sale after shipment in interstate commerce. (Id. ¶¶ 7(A)-(E)). With regard

to dietary supplements, the Consent Decree enjoins the introduction into interstate

commerce of any dietary supplements adulterated within the meaning of 21 U.S.C.

§ 342(g)(1) (requiring dietary supplements to be prepared, packed and held in

accordance with current Good Manufacturing Practice (“cGMP”) regulations, as

set forth at 21 C.F.R. Pt 111). (Id. ¶ 7(F)).

In the event of future violations of the Consent Decree, the Act, or FDA’s

regulations, the Consent Decree provides that “FDA may, as and when it deems

necessary in its sole discretion, direct Defendants, in writing, and order Defendants

to take appropriate corrective action. . . .” (Id. ¶ 10). Such corrective action, may

include, an order to “[c]ease manufacturing, processing, packaging, labeling,

holding, selling, and/or distributing any or all drugs and/or dietary supplements,”

or “any other corrective action(s) as FDA deems necessary to protect the public

health or to bring Defendants and their products into compliance with the Act,

applicable regulations, and this [Consent] Decree.” (Id.).

In addition, the Consent Decree orders that Defendants will pay monetary

damages if they violate the Consent Decree (Id. ¶ 17), attorney’s fees in a contempt

action (Id. ¶ 18), and the costs of “all FDA inspections, investigations, supervision,

reviews, examinations, and analyses specified in [the Consent Decree] or that FDA


9

deems necessary to evaluate Defendants’ compliance” at the standard prevailing

rates. (Id. ¶ 12).

Lastly, the Consent Decree specifies that “[a]ll decisions specified in this

[Consent] Decree shall be vested in the discretion of FDA and shall be final and

Defendants shall abide by the decisions of FDA.” (Id. ¶ 19). If contested, the

Consent Decree provides that FDA’s decisions “shall be reviewed by the Court

under the arbitrary and capricious standard set forth in 5 U.S.C. § 706(2)(A).”

(Id.).

D. Defendant McAdam’s Conduct

To FDA’s knowledge, Defendant McAdam has never been in compliance

with the requirements of the Consent Decree. Despite FDA’s several warnings and

orders to cease operations in accordance with the Consent Decree, Defendant

McAdam continues to flout the law and this Court’s Order.

1. The September 15 Letter

By letter dated September 15, 2011 (“September 15 Letter”), FDA notified

Defendant McAdam that Risingsun was selling numerous products in violation of

Paragraphs 4 and 5 of the Consent Decree. (See Althar Decl. ¶ 10). FDA has

never received any certification from Defendant McAdam under these two

Paragraphs such that he would be permitted to sell his products lawfully under the

Consent Decree. (Id.). Furthermore, the September 15 Letter provided Defendant


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McAdam with notice that FDA found numerous new claims and statements on

Defendants’ website, www.bloodrootproducts.com, that Risingsun’s products are

intended to affect the structure or function of the human body, and other claims

that its products are intended to cure, treat, or prevent various diseases (which

claims cause the products to be drugs within the meaning of 21 U.S.C. § 321(g),

and also “new drugs” within the meaning of 21 U.S.C. § 321(p)). (Id. ¶ 11). The

sale of such products would violate, inter alia, Paragraphs 3, 4, and 7(A) of the

Consent Decree. In light of these violations, in the September 15 Letter, FDA

invoked the Consent Decree and ordered Defendant McAdam to cease operations

until he could demonstrate compliance with the Consent Decree:

By this letter, and pursuant to Paragraph 10 of the Consent Decree, FDA hereby provides notice that [Defendants] are in violation of the Consent Decree, and accordingly as discussed further below, must immediately cease all manufacturing, processing, packaging, labeling, holding, selling, and/or distributing all products intended to be ingested by, or applied topically to, humans or animals, including, without limitation, any drugs and/or dietary supplements.

(Althar Decl. ¶ 12, Ex. 8 at 13).

2. The February 14 through 16 Inspections

From February 14 through February 16, 2012, FDA conducted an inspection

at Risingsun. (Althar Decl. ¶ 13). FDA’s inspection revealed that Defendant

McAdam continued to sell products in violation of the Consent Decree, including


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products intended to be applied topically or ingested by humans and animals, that

had not been cleared in accordance with Paragraphs 4 and 5 of the Consent Decree.

(Id.). Moreover, although it appears Defendant McAdam removed the illegal drug

claims that were identified in the September 15 Letter from his website, FDA

investigators identified two new Risingsun products with illegal drug claims. (Id.).

Next, the February 2012 inspection revealed gross cGMP deficiencies,

which were specifically addressed in Paragraph 7.E of the Consent Decree.

Defendants manufacture numerous products that are expressly labeled as “dietary

supplements” (Id. ¶ 14), and FDA regulates these products as “dietary

supplements” under the Act.3 The dietary supplement cGMP violations observed

by FDA included:

• Risingsun failed to conduct any appropriate test or examination to verify the identities of components that are dietary ingredients as required by 21 C.F.R. § 111.75(a)(1)(i). Specifically, Defendant McAdam confirmed to investigators that Risingsun does not conduct any identity testing as required by the law. (Id. ¶ 15).

• Risingsun failed to collect and hold reserve samples of each lot of packaged and labeled dietary supplements that it distributes, as required by 21 C.F.R. § 111.83(a). (Id.).

• Risingsun has not established product specifications for the identity, purity, strength, and composition of the finished batch of each dietary supplement it manufactures to ensure the quality of the product, as required by 21 C.F.R. § 111.70(e). (Id.).

3 The definition of dietary supplement is provided in 21 U.S.C. § 321(ff). As described in the Declaration of Lisa Althar at paragraph 14, Defendant McAdam calls many of his products “dietary supplements” and they indeed qualify as such under the Act.


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• Risingsun does not prepare written master manufacturing records for each unique formulation and batch size of dietary supplements to ensure uniformity in the finished batch from batch to batch as required by 21 C.F.R § 111.205(a). Specifically, Defendant McAdam confirmed to investigators that Risingsun does not have written master manufacturing records for any of its dietary supplements. (Id.).

Following the February 2012 inspection, Defendant McAdam faxed to FDA

a letter dated March 5, 2012, which indicated that he would address the observed

cGMP deficiencies in the near future; Defendant McAdam never submitted a

corrective action plan as requested by FDA in the April 20 Letter. (Id. ¶ 16).

Furthermore, on March 29, 2012, FDA sent an invoice of $1,524.39, pursuant to

Paragraph 12 of the Consent Decree, to reimburse the Agency for the cost of the

February 2012 inspection. (Id.). Defendant has not paid this invoice. (Id.).

On April 20, 2012, FDA sent Defendant McAdam a letter observing that

Defendant McAdam had failed to abide by FDA’s prior shutdown order, and

reiterated that he could be liable for liquidated damages pursuant to Paragraph 17

of the Consent Decree. (Id. ¶ 17).

3. FDA’s July 27 and October 31 Letters

Defendant McAdam never responded to the April 20 Letter, and on July 27,

2012, FDA sent him a letter (the “July 27 Letter”) requesting that he pay liquidated

damages in the amount of $80,000 because of his blatant and ongoing violations of

the Consent Decree and the Act. (Id. ¶ 18). The July 27 Letter recounted the


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violations noted in FDA’s two prior letters, and linked the liquidated damages to

violations of the specific provisions of the Consent Decree, discussed supra. (Id.).

Defendant McAdam never paid the liquidated damages as requested. (Id.

¶ 19). On October 31, 2012, an attorney from FDA’s Office of Chief Counsel

informed Defendant McAdam via letter that his case had been referred back to the

office to consider whether to bring further court proceedings, and informed him

that, in the absence of immediate compliance with the Consent Decree, FDA

would refer this case back to the Department of Justice to file a motion with the

Court seeking an award of liquidated damages under Paragraph 7 of the Consent

Decree. (Id.; see also Althar Decl. Ex. 19).

4. The October 17, 2012 Inspection

Based on a tip from a Montana resident, on October 17, 2012, FDA

conducted an inspection of Gesunheit! Nutrition Center, a retail establishment in

Bozeman, Montana, and found further evidence that Defendant McAdam flouted

the Consent Decree. FDA investigators found, inter alia, that the retail

establishment was selling several “black salve” products for human use containing

extracts of the Bloodroot plant, some of which had been purchased from Defendant

as recently as July 31, 2012. (Id. ¶ 20). As discussed supra, Defendant’s sale of

such products is specifically prohibited under Paragraph 3(A)(1) of the Consent

Decree. In addition to the “black salve” products, FDA investigators discovered


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about 28 other products for sale that were manufactured and/or distributed by

Defendant McAdam. (Id.) Each of these products is intended to be applied

topically to or ingested by humans, and none of them are permitted to be sold

under the Consent Decree because Defendant McAdam has not complied with

Paragraphs 4 and 5 therein. (Id.)

5. Defendant McAdam’s October 31, 2012 Affidavit

In response to the letter from FDA’s Chief Counsel’s Office dated October

31, 2012, Defendant McAdam filed a sworn affidavit with this Court dated

November 8, 2012, stating that he “will cease operations.” (Id. ¶ 21). An attorney

from FDA’s Office of Chief Counsel responded to the affidavit by letter dated

November 15, 2012, stating that FDA “interpret[s] your letter to indicate that you

have acceded to FDA’s shutdown order and will not recommence operations until

authorized by FDA in accordance with Paragraph 11 of the Consent Decree.”

(Id.). Defendant McAdam did not respond to this letter. (Id.).

Following Defendant McAdam’s sworn affidavit promising to cease

operations, FDA conducted an undercover purchase of the Risingsun product

called “Lugol’s 2.2% Iodine Solution.” (Id. ¶ 22). An FDA investigator using an

undercover identity placed an order for the product on Risingsun’s website on

November 21, 2012, and the product was delivered in interstate commerce to an

address in Maryland on December 17, 2012. (Id.) According to the product’s


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label, it “supports thyroid health” and it “can be toxic, or even deadly, if taken in

excessive amounts.” (Id.)

II. Argument

A. The Court Should Find Defendant McAdam in Civil Contempt

1. Standard for Civil Contempt

It is unquestioned that federal courts have inherent power to force entities to

comply with their lawful orders through actions for civil contempt. Spallone v.

United States, 493 U.S. 265, 276 (1990); Shillitani v. United States, 384 U.S. 364,

370 (1966). “[T]he power of courts to punish for contempts is a necessary and

integral part of the independence of the judiciary, and is absolutely essential to the

performance of the duties imposed on them by law.” Gompers v. Buck’s Stove &

Range, Co., 221 U.S. 418, 450 (1911). Federal courts have the authority to issue

contempt sanctions for violations of judicial orders, including consent decrees.

F.T.C. v. EDebitPay, LLC, 695 F.3d 938, 943 (9th Cir. 2012).

Sanctions for civil contempt may be imposed to coerce compliance with a

court order or to compensate the injured party for losses sustained. Koninklijke

Philips Elecs., N.V. v. KXD Tech., Inc., 539 F.3d 1039, 1044 (9th Cir. 2008);

Whittaker Corp. v. Execuair Corp., 953 F.2d 510, 517 (9th Cir.1992) (citing

United States v. United Mine Workers of Am., 330 U.S. 258, 303-04 (1947). Civil

contempt “consists of a party’s disobedience to a specific and definite court order


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by failure to take all reasonable steps within the party’s power to comply.” Reno

Air Racing Ass’n v. McCord, 452 F.3d 1126, 1130 (9th Cir. 2006) (quoting In re

Dual–Deck Video Cassette Recorder Antitrust Litig., 10 F.3d 693, 695 (9th Cir.

1993)). To justify civil contempt, the moving party must establish that “(1) that

[the alleged contemnor] violated the court order, (2) beyond substantial

compliance, (3) not based on a good faith and reasonable interpretation of the

order, (4) by clear and convincing evidence.” United States v. Bright, 596 F.3d

683, 694 (9th Cir. 2010) (quoting Labor/Cmty. Strategy Ctr. v. L.A. Cnty Metro.

Trans. Auth., 564 F.3d 1115, 1123 (9th Cir. 2009)); see also F.T.C. v. Affordable

Media, 179 F.3d 1228, 1239 (9th Cir. 1999) (“The standard for finding a party in

civil contempt is well settled: The moving party has the burden of showing by

clear and convincing evidence that the contemnors violated a specific and definite

order of the court.”). If the moving party meets this initial four-part test, the

burden then shifts to the alleged contemnor to demonstrate why it was unable to

comply. Affordable Media, LLC, 179 F.3d at 1239; Stone v. City & Cnty. of San

Francisco, 968 F.2d 850, 856 n. 9 (9th Cir. 1992). In other words, the accused

party must “show [that it] took every reasonable step to comply.” Stone, 968 F.2d

at 856 n. 9 (citation omitted).


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2. Defendant Should Be Held in Civil Contempt

a. A Court Order Was In Effect The Supreme Court has consistently recognized that a consent decree

entered by the court reflects “an agreement that the parties desire and expect will

be reflected in, and be enforceable as, a judicial decree that is subject to the rules

generally applicable to other judgments and decrees.” Rufo v. Inmates of Suffolk

Cnty Jail, 502 U.S. 367, 378 (1992). Accordingly, a party who fails to comply

with the terms of a court-ordered consent decree is subject to the court’s contempt

power. See Nehmer v. U.S. Dept. of Veterans Affairs, 494 F.3d 846, 860 (9th Cir.

2007) (“It is well established that the district court has the inherent authority to

enforce compliance with a consent decree that it has entered in an order, to hold

parties in contempt for violating the terms therein . . . .” (citing Rufo, 502 U.S. at

381 & n.6).

b. Defendant McAdam Has Failed to Comply With Multiple Clear Requirements of the Consent Decree

As described in detail above, Defendant McAdam has unabashedly failed to

comply with several key paragraphs of the Consent Decree. First, notwithstanding

that Paragraph 3.A.1 of the Consent Decree clearly prohibits the sale of topical

products containing extracts of the Bloodroot plant unless the product is approved

by FDA under 21 U.S.C. § 355, Risingsun continues to sell such products to a local

retailer in violation of the Consent Decree. (Supra, p. 14).


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Second, Defendant McAdam violates Paragraphs 4 and 5 of the Consent

Decree by continuing to sell products that are intended to be used topically or

ingested by humans, without submitting certifications by an expert that the

products comply with the law. (Supra, pp. 10-15).

Third, as described above (see supra, pp. 11-13), despite FDA’s warnings

and orders to come into compliance, Defendant McAdam continues to make and

sell dietary supplements that are in gross noncompliance with FDA’s dietary

supplement cGMP regulations set forth at 21 C.F.R. Pt 111, which render those

products adulterated under 21 U.S.C. § 342(g)(1). FDA’s cGMP regulations are

critical to ensuring the safety of dietary supplements in the United States, and have

been applicable to companies like Risingsun with fewer than 20 employees since

June 25, 2010. See Current Good Manufacturing Practice in Manufacturing,

Packaging, Labeling, or Holding Operations for Dietary Supplements; Final Rule,

72 Fed. Reg. 34752 (June 25, 2007). The purpose and importance of the cGMP

regulations were underscored by FDA in the preamble to the dietary supplement

cGMP regulations:

CGMPs are intended to establish a comprehensive system of process controls, including documentation of each stage of the manufacturing process, that can minimize the likelihood of, or detect, problems and variances in manufacturing as they occur and before the product is in its finished form. These process controls that are a part of CGMPs are essential to ensure that the


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dietary supplement is manufactured, packaged, held, and labeled in a consistent and reproducible manner.

Id. at 34762. Risingsun’s failure to abide by the cGMP regulations puts its

customers at risk.

Fourth, Defendant McAdam has repeatedly refused to abide by FDA’s order

pursuant to Paragraph 10 of the Consent Decree that Risingsun cease

manufacturing, processing, packaging, labeling, holding, selling, and/or

distributing all products intended to be ingested by, or applied topically to, humans

or animals, including, without limitation, any drugs and/or dietary supplements.

(See supra pp. 11, 13-15). Indeed, despite his sworn affidavit promising to cease

operations, he continues to sell products in violation of the Consent Decree. (See

supra p. 15).

Lastly, Defendant McAdam has refused to pay for the inspectional and

supervisional costs incurred by FDA in enforcing the Consent Decree as provided

in Paragraph 12 of the Consent Decree, in effect transferring the consequences of

his continued violations to the public.

Altogether, Defendant McAdam’s conduct demonstrates profound defiance

of the FDA and this Court and exhibits a clear disregard for the public health.

Both the United States and the public suffered as a result of Defendant McAdam’s

contumacious conduct. First, as in all of its civil enforcement actions, FDA’s

primary goal in enjoining Defendants is to protect the public health. By failing to


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comply with the Consent Decree’s requirements, Defendant McAdam continues to

expose the public to unapproved drugs that have not been demonstrated safe or

effective, and dietary supplements that are not manufactured in accordance with

the cGMP regulations. Furthermore, Defendant McAdam profits from this

unlawful activity. The Act’s protections are designed to prevent just such a

circumstance. See United States v. Dotterweich, 320 U.S. 277, 285 (1943)

(“Balancing relative hardships, Congress has preferred to place it upon those who

have at least the opportunity of informing themselves of the existence of conditions

imposed for the protection of consumers before sharing in illicit commerce, rather

than to throw the hazard on the innocent public who are wholly helpless.”).

Further, the United States spent considerable time and resources negotiating

the terms of the Consent Decree, investigating whether Defendant McAdam

complies with the Consent Decree and the law, and documenting Defendant’s non-

compliance, all at the public’s expense. Yet the public continues to be exposed to

Defendant McAdam’s illegal products.

Finally, it is hard to overstate the importance of deterring similar actions in

the future. Compliance with decrees such as this one will be dramatically undercut

if Defendants, and others similarly situated, learn that they can violate and

disregard court orders with impunity. Such an occurrence not only lessens respect

for the rule of law, as embodied in this Court’s Order, but in cases under the Act, it


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exposes the public to illegal and hazardous products. For all of the above-

mentioned reasons, Defendant McAdam should be held in civil contempt of the

Consent Decree.

c. Defendants’ Attempts to Avoid the Consent Decree are Unavailing

Instead of complying with the Consent Decree, Defendant McAdam has

filed two motions in this case (see Dkt. #s 8 & 13) and a separate civil lawsuit4

seeking to vacate or modify it. His arguments are frivolous and have already been

rejected by this Court. (Dkt. #s 12 & 16). Defendant has been the subject of the

Consent Decree since its entry in 2010. His new found disagreement with its terms

has no effect the Decree’s binding effect on his conduct.

3. Sanctions Should Be Imposed for Defendant’s Violations

“District courts have broad equitable power to order appropriate relief in

civil contempt proceedings.” SEC v. Hickey, 322 F.3d 1123, 1128 (9th Cir. 2003).

In explaining this broad authority, the Supreme Court has noted that “[t]he measure

of the court’s power in civil contempt proceedings is determined by the

requirement of full remedial relief.” McComb v. Jacksonville Paper Co., 336 U.S.

187, 193 (1949).

4 See Complaint in Civil No. CV-12-137-BLG-RFC, Toby C. McAdam v. United States Food and Drug Administration; Margaret Hamburg, et al. The Complaint and Summons in that action were served on the Government on December 28, 2012.


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In exercising its discretion, the Court may properly consider the following

factors, among others: (1) the extent of the contemnor’s disobedience; (2) the

seriousness of the consequences of the conduct; (3) the need to terminate the

conduct to protect the public interest; and (4) the importance of deterring similar

actions in the future. United Mine Workers of Am., 330 U.S. at 303.

Here, despite the plain language of the Consent Decree, Defendant McAdam

has continued selling illegal and prohibited products. Furthermore, even though

FDA exercised its authority under Paragraph 10 of the Consent Decree and ordered

Defendant McAdam to cease selling products that are used topically or ingested by

humans or animals, he has refused to comply with such order. To attempt to

appease this Court and FDA, Defendant filed a false affidavit wherein he swore

compliance with the Consent Decree. (Dkt. # 17).

Because civil sanctions are necessary to force Defendant McAdam to

comply with the Consent Decree and FDA’s order, this Court should first order

Defendant McAdam to immediately cease all manufacturing, processing,

packaging, labeling, holding, selling, and/or distributing all products intended to be

ingested by, or applied topically to, humans or animals, including, without

limitation, any drugs and/or dietary supplements, unless and until FDA in writing

certifies compliance and permits the resumption of operations.


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Second, as detailed above, it is clear that simply ordering Defendant

McAdam to obey that which this Court has already ordered will provide no

additional inducement for him to comply. Therefore, Plaintiff requests that this

Court impose conditional prospective fines on Defendant McAdam to ensure his

compliance with the Consent Decree and to deter any future violations. See Int’l

Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 827 (1994) (“[C]ivil

contempt sanctions, or those penalties designed to compel future compliance with

a court order, are considered to be coercive and avoidable through obedience, and

thus may be imposed in an ordinary civil proceeding upon notice and an

opportunity to be heard.”). Specifically, Plaintiff requests that this Court order

that, if Defendant McAdam commits any further violations of the Consent Decree,

he shall pay to the United States Treasury $1,000 per each day of continued

violation. See Workers of Am. v. Bagwell, 512 U.S. at 829 (stating that a common

civil contempt sanction “is a per diem fine imposed for each day a contemnor fails

to comply with an affirmative court order.”). To properly incentivize Defendant

McAdam to come into compliance with the Consent Decree and the law, this

conditional penalty should be in addition to the liquidated damages provided by

Paragraph 17 of the Consent Decree and discussed in Section III, infra.

Third, Plaintiff also requests that this Court order Defendant McAdam to

reimburse the United States for its attorneys’ fees, all investigational expenses, and


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court costs related to his violation of the Consent Decree and these contempt

proceedings pursuant to Paragraphs 12 and 18 of the Consent Decree.5 See United

States v. City of Jackson, 359 F.3d 727, 732 (5th Cir. 2004) (noting that the

Government was entitled to attorneys fees in a civil contempt proceeding when the

plain language of the consent decree at issue specifically contemplated the award

of such fees).

III. Defendant McAdam Should Be Ordered to Pay Liquidated Damages

As discussed, supra, the Consent Decree included a liquidated damages

provision. Under Paragraph 17:

If Defendants fail to comply with any of the provisions of this [Consent] Decree, including any time frame imposed by this [Consent] Decree . . . on motion of the Plaintiff, Defendants shall pay to the United States of America: one thousand dollars ($1,000.00) in liquidated damages, and an additional sum of one thousand dollars ($1,000.00) in liquidated damages for each day the violation of the Act, its implementing regulations, and/or this [Consent] Decree continues.

5 Paragraph 18 of the Consent Decree states: “Should the United States bring, and prevail in, a contempt action to enforce the terms of this [Consent] Decree, Defendants shall, in addition to other remedies, reimburse the United States for its attorneys’ fees, investigational expenses, expert witness fees, travel expenses incurred by attorneys and witnesses, administrative and court costs, and any other costs or fees, including overhead, related to such contempt proceedings.” Consent Decree ¶ 18.


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Through this provision, Defendants agreed in advance to pay liquidated damages

for their noncompliance.6 The Government bargained for and obtained this

important provision. At the request of Defendant McAdam, the amount of

damages was capped at eighty thousand dollars per calendar year per defendant,

and Paragraph 17 provides that any motion filed by the Government for liquidated

damages must simply specify the noncompliance giving rise to the motion. Id.

The intent of the parties with respect to liquidated damages for violations of the

Consent Decree, as reflected in the Court’s Order, is unambiguous and should be

upheld. U.S. v. FMC Corp., 531 F.3d 813, 819 (9th Cir. 2008) (“Contract

principles are generally applicable in our analysis of consent decrees, provided

contract analysis does not undermine the judicial character of the decree. Key to

the present case, consent decrees are construed as contracts for purposes of

enforcement.”) (quoting Hook v. Ariz. Dept’ of Corr., 972 F.2d 1012, 1014 (9th

Cir. 2008).

FDA has been exceptionally restrained in invoking liquidated damages,

having warned Defendant McAdam in writing twice before finally seeking said

damages in the July 27 Letter. But now, with Defendant McAdam appearing as if

he never intended to comply with the Consent Decree, and as further evidenced by 6 Under the Consent Decree, an award of liquidated damages is not dependant on a finding of contempt, by the Court. If the Court decides that a finding of contempt is needed for such damages to be awarded, however, the preconditions for such a finding have clearly been established supra.


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the affidavit he submitted falsely promising that he will comply, this Court should

award the Government the requested $80,000 in liquidated damages. The

requested liquidated damages, plus prospective fines for future violations, as

requested supra,7 should be imposed to ensure that Defendant McAdam will

finally come into compliance with the Consent Decree and the law, and the public

health will be protected against Risingsun’s illegal products.

7 As discussed, supra, it is appropriate for this Court to award conditional prospective fines of $1,000 per day plus the $80,000 in liquidated damages to ensure immediate compliance. Unless the prospective conditional fines are imposed, Defendant McAdam may have little incentive to comply with the Consent Decree in the future.


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Dated: February 22, 2013

Of Counsel: WILLIAM B. SCHULTZ Acting General Counsel ELIZABETH H. DICKINSON Acting Chief Counsel Food and Drug Division ERIC M. BLUMBERG Deputy Chief Counsel, Litigation THOMAS J. COSGROVE Associate Chief Counsels for Enforcement United States Department of Health and Human Services Office of the General Counsel Food and Drug Administration 10903 New Hampshire Avenue Silver Spring, MD 20993-0002

Respectfully submitted, STUART F. DELERY Principal Deputy Assistant Attorney General MAAME EWUSI-MENSAH FRIMPONG Deputy Assistant Attorney General Civil Division U.S. Department of Justice MICHAEL W. COTTER United States Attorney MICHAEL S. BLUME Director U.S. Department of Justice Consumer Protection Branch By: s/ David Sullivan DAVID SULLIVAN Trial Attorney U.S. Department of Justice Consumer Protection Branch P.O. Box 386 Washington, D.C. 20004


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CERTIFICATE OF SERVICE The undersigned hereby acknowledges that the foregoing Memorandum in

Support of Petition for an Order to Show Cause Why Defendant Should Not Be

Held in Civil Contempt and Motion for Liquidated Damages was served, by

agreement with defendant Toby McAdam, via email and FEDEX on this 22nd day

of February, 2013.

/s/ David Sullivan DAVID SULLIVAN

CERTIFICATE OF COMPLIANCE

The undersigned hereby acknowledges that the foregoing Memorandum in

Support of Petition for an Order to Show Cause Why Defendant Should Not Be

Held in Civil Contempt and Motion for Liquidated Damages contains 5,644 words,

excluding the caption, table of contents, table of authorities, and certificate of

service.

/s/ David Sullivan DAVID SULLIVAN


Documents

MICHAEL W. COTTER United States Attorney DAVID SULLIVAN U ... · DAVID SULLIVAN Case 1:10-cv-00128-SEH Document 18 Filed 02/22/13 Page 5 of 5. MICHAEL W. COTTER . United States Attorney