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Date: 10-14-2021
Case Style:
United States of America v. SHARON P. CARTER
United States of America v. GREGORY CONIGLIARO
Case Number: 19-1644
19-1645
Judge:
Court: United States Court of Appeals
For the First Circuit
Plaintiff's Attorney: Ross B. Goldman, Criminal Division, Appellate Section, United
States Department of Justice, with whom Andrew E. Lelling, United
States Attorney, Amanda P.M. Strachan, Assistant United States
Attorney, Donald C. Lockhart, Assistant United States Attorney,
Brian A. Benczkowski, Assistant Attorney General, and John P.
Cronan, Principal Deputy Assistant Attorney General
Defendant's Attorney:
Description:
Boston, MA - Criminal defense lawyer represented defendant with counts that pertained to their roles in connection with other aspects of NECC's operations charges. After patients across the country became
seriously ill or died in the fall of 2012 after having been injected with a contaminated medication traced to the New England Compounding Center ("NECC").
These consolidated appeals are
the latest to reach us in connection with the federal criminal
investigation that ensued after patients across the country became
seriously ill or died in the fall of 2012 after having been
injected with a contaminated medication traced to the New England
Compounding Center ("NECC"). NECC was a licensed pharmacy based
in Framingham, Massachusetts. It combined drugs with other
substances to create specialized medications -- a practice known
as compounding.
Unlike in the other appeals that we have considered in
connection with the federal criminal investigation into NECC's
operations, see United States v. Stepanets, 989 F.3d 88 (1st Cir.
2021); United States v. Cadden, 965 F.3d 1 (1st Cir. 2020); United
States v. Chin (Chin I), 965 F.3d 41 (1st Cir. 2020), the appellant
here is the government. It challenges the post-verdict judgments
of acquittal that the District Court entered in favor of Sharon
Carter and Gregory Conigliaro, who were, respectively, NECC's
former Director of Operations and NECC's former Vice President,
Secretary, Treasurer, and General Manager.
Carter and Conigliaro were named along with twelve
others in a 131-count indictment that a grand jury in the District
of Massachusetts handed up in December 2014. Neither Carter nor
Conigliaro was charged with playing any direct role in the physical
compounding of the contaminated medication that was linked to
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patient illnesses and deaths. Instead, each was charged only with
counts that pertained to their roles in connection with other
aspects of NECC's operations. Among those charges was one that
alleged that each had, while working at NECC, conspired to defraud
the United States in violation of 18 U.S.C. § 371 "by interfering
with and obstructing" the ability of the United States Food and
Drug Administration ("FDA") to oversee the practices of NECC.
A jury found both Carter and Conigliaro guilty of
violating § 371 following their joint trial. Carter and Conigliaro
then each moved pursuant to Federal Rule of Criminal Procedure 29
for a post-verdict judgment of acquittal on the § 371 count for
which each had been found guilty.1 The District Court granted the
motions. The government now appeals the resulting judgments of
acquittal. We reverse.
I.
We describe the facts concerning the defendants' alleged
conduct as they are pertinent to our analysis. To set the stage
for that analysis, though, it is useful first to recount both the
involved procedural history that has brought us to this point and
some of the basic legal background that bears on the issues present
in these appeals.
1 Before and during the trial, both defendants had
already filed multiple motions challenging the § 371 conspiracy
charge against them, each of which the District Court had denied.
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A.
The indictment charged that between 1998 and
approximately October 2012, Carter, Conigliaro,2 and three of their
codefendants who also were employees of NECC at the time -- Barry
Cadden, Robert Ronzio, and Alla Stepanets3 -- had engaged in a
conspiracy to violate 18 U.S.C. § 371. That statute criminalizes
the "conspir[acy]" by "two or more persons . . . to commit any
offense against the United States, or to defraud the United States,
or any agency thereof in any manner or for any purpose" as long as
"one or more of such persons do any act to effect the object of
the conspiracy." Id. We have interpreted the "defraud" clause of
§ 371 to encompass conspiracies that seek to "interfere with
government functions." United States v. Goldberg, 105 F.3d 770,
773 (1st Cir. 1997); see also United States v. Morosco, 822 F.3d
1, 6 (1st Cir. 2016) (explaining that § 371 criminalizes
conspiracies to "obstruct[] the operation of any government agency
by any 'deceit, craft or trickery, or at least by means that are
2 Conigliaro began working at NECC in 2004 and was
charged with joining the conspiracy then.
3 Ronzio was NECC's National Sales Manager. He ended
up entering into a cooperation agreement with the government and
pleading guilty to the § 371 conspiracy count that he faced.
Stepanets was a pharmacist who worked in NECC's packing area. See
Stepanets, 989 F.3d at 96. Cadden was NECC's founder and
president. Stepanets and Cadden were both acquitted of the § 371
conspiracy count by their respective juries but found guilty of
other counts that each faced. See id. at 93; Cadden, 965 F.3d at
8.
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dishonest'" (quoting Hammerschmidt v. United States, 265 U.S. 182,
188 (1924))); United States v. Barker Steel Co., 985 F.2d 1123,
1128 (1st Cir. 1993) ("The objective of the agreement is unlawful
if it is 'for the purpose of impairing, obstructing or defeating
the lawful function of any department of [g]overnment.'"
(quoting United States v. Hurley, 957 F.2d 1, 4 (1st Cir. 1992))).
In detailing the alleged § 371 conspiracy, the
indictment charged the defendants with "interfering with and
obstructing the lawful governmental functions of the FDA." In
support of this contention, the indictment alleged that Carter,
Conigliaro, and their co-conspirators had agreed to enter into a
conspiracy defraud the FDA by "purport[ing] to be operating NECC
as a state-regulated pharmacy, dispensing drugs pursuant to valid,
patient-specific prescriptions as required by Massachusetts law,
rather than as a drug manufacturer distributing drugs in bulk to
customers without prescriptions and thereby subject to heightened
regulatory oversight by the FDA" pursuant to its authority under
the Food, Drug, and Cosmetic Act ("FDCA").
Passed in 1938, the FDCA gave the FDA authority to
regulate "any new drug." Act of June 25, 1938, Pub. L. 75-717, 52
Stat. 1040 (codified at 21 U.S.C. § 301 et seq.); FDCA § 505(a)
(codified at 21 U.S.C. § 355(a)). During the time of the alleged
conspiracy, the FDCA defined "new drug" as "[a]ny drug . . . not
generally recognized . . . as safe and effective for use under the
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conditions prescribed, recommended, or suggested in the labeling
thereof." 21 U.S.C. § 321(p). It further provided that "[n]o
person shall introduce or deliver for introduction into interstate
commerce any new drug, unless an approval of an application filed
[with the FDA] is effective with respect to such drug." Id.
§ 355(a). In addition, it provided that any "new drug" must be
made in accordance with "current good manufacturing practice"
("GMP") -- a set of regulations that the FDA subsequently
promulgated to impose strict safety controls on manufacturers of
new drugs. Id. § 351(a)(2)(B); see also 21 U.S.C. § 371(a) ("The
authority to promulgate regulations for the efficient enforcement
of this chapter, except as otherwise provided in this section, is
vested in the [Commissioner of the FDA].").
Compounded drugs would appear to fit within the FDCA's
definition of a "new drug." After all, "[d]rug compounding is a
process [that] combines, mixes, or alters ingredients to create a
medication tailored to the needs of an individual patient . . .
that [is typically] not commercially available." Thompson v.
Western States Med. Cntr., 535 U.S. 357, 360-61 (2002).
Nevertheless, for the first fifty years after the FDCA's enactment,
"the FDA generally left regulation of compounding to the States."
Id. at 362.
"[E]ventually," however, the FDA "became concerned . . .
that some pharmacists were manufacturing and selling drugs under
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the guise of compounding, thereby avoiding the FDCA's new drug
requirements." Id. It then began to take a more proactive role
in the oversight of compounders -- at least those compounders that
the FDA concluded behaved as manufacturers. Id. at 362-63.
The indictment here centered on the role that the alleged
conspirators supposedly played in defrauding the FDA. In
particular, the indictment claimed that the defendants conspired
to prevent the FDA from being able to determine whether NECC was
a manufacturer or a pharmacy by intentionally misrepresenting the
nature of the company's operations. The indictment explained in
that respect that, as a "manufacturer," NECC would have been
subject to heightened regulatory oversight by the FDA pursuant to
its authority under the FDCA, while, as a "pharmacy," NECC would
have been primarily regulated by state pharmacy boards. By
conspiring to misrepresent to the FDA that NECC was operating only
as a pharmacy and not as a manufacturer, the indictment alleged,
the defendants conspired to interfere with the FDA's oversight
function with respect to NECC and thereby conspired to defraud the
United States in violation of § 371, given that such regulatory
oversight by FDA is a "government function."
The indictment also alleged how the defendants carried
out the alleged conspiracy to misrepresent the company's
operations. Specifically, it alleged that the defendants agreed
to participate in a conspiracy by which NECC would regularly
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misrepresent to the FDA that it was shipping its compounded
medications to customers (which were hospitals and medical
facilities rather than patients in their own right) pursuant to
valid, patient-specific prescriptions. Yet, in fact, the
indictment alleged, the company was processing the customers'
orders for those medications without there being any such
prescriptions. It then described three methods by which NECC
allegedly disguised the fact that it was shipping compounded drugs
in this manner before turning to the roles that that conspirators
allegedly each played in carrying out the deception.
One such alleged method involved "backfilling." Here,
NECC allegedly allowed customers to place their first order for
medications without supplying any prescriptions or patient names.
NECC then collected from customers the roster of patient names to
whom these customers ended up prescribing and administering the
medications on site. Thereafter, NECC allegedly attached such a
roster either retrospectively to that first order or used it to
process a subsequent order by the same customer -- thereby making
it look as if NECC had filled the orders only after it had received
valid, patient-specific prescriptions from a customer.
A second alleged method involved NECC's processing of
orders using prescriptions for fictitious patients. Sometimes,
according to the indictment, NECC processed orders using the names
of celebrities or fantasy characters that customers had supplied,
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such as "Michael Jackson" and "Wonder Woman." At other times, the
indictment alleged, NECC used the names of customers' staff members
or those of previous patients that customers had supplied. At
still other times, NECC allegedly fabricated the prescriptions
rather than relying on its customers to do so. And, finally,
according to the indictment, NECC sometimes used a given patient
name for multiple medications and for multiple units of the same
medication in a single order, applying a ratio that would look
plausible to regulators rather than filling a valid multidose
prescription.
Pursuant to yet a third alleged method of shipping the
drugs without a valid patient-specific prescription, according to
the indictment, NECC processed some customers' orders using just
the names of those institutional customers. NECC allegedly did so
even though the customer was a hospital or medical facility that
would then itself later dispense the drug to a patient and thus
was not itself a patient for whom a prescription had been issued.
Under this method, then, the drug was shipped by NECC to its
customers without there being any patient identified who had been
issued a prescription for it.
The indictment alleged that the defendants helped NECC
deploy these methods despite knowing that the company was
representing to the FDA that it was a compounding pharmacy that
dispensed drugs only pursuant to valid prescriptions for
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individual patients and therefore was not subject to the FDA's GMP
regulations that govern drug manufacturers. In setting forth this
allegation, the indictment highlighted several statements
allegedly made by the defendants that purportedly showed their
awareness of both the alleged scheme and the regulatory background
in which NECC's scheme was taking place.
The indictment included, for example, Conigliaro's
alleged statements to the FDA that NECC was a "compounding-only
pharmacy, not a manufacturer" and thus "not subject to GMP." Also
cited in the indictment was an email Carter shared with NECC's
order-processing staff, instructing them that "the MAX total
number of units . . . per patient must make sense," that "all names
must resemble 'real' names," and not to use "obviously fake names
[] (Mikey Mouse)" because she "must be able to logically explain
to a regulator why [NECC] processed x# of units per patient"
(emphasis added).
B.
The § 371 case against Carter and Conigliaro eventually
went to trial. They were tried along with the four other
defendants who were also charged with committing the § 371 offense.
At trial, the government presented documentary
evidence alongside testimony from twenty-nine witnesses, many of
whom were from the FDA or were former NECC employees. We summarize
the record presented at trial as it is relevant to the motions for
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judgments of acquittal by Carter and Conigliaro that are before us
in these appeals.
Many of the documents that the government introduced at
trial were the product of two search warrants executed against
NECC and its sales-affiliate, Medical Sales Management. The
evidence introduced included order forms that NECC had filled for
its customers under various "patient" names, such as "Ted Bundy"
and "Barney Fife." The evidence also included an employee manual
that Carter signed that detailed the "FDA Modernization Act of
1997-Pharmacy Compounding Provisions" and "[h]ow to handle an FDA
inspection" (as well as many of the emails described in the
indictment).
In addition, the government introduced testimony from
several former employees who testified to Carter's and
Conigliaro's understanding of the importance to NECC of the company
being considered a pharmacy and not a manufacturer in the eyes of
regulators. Ken Boneau, for example, one such former sales
representative, testified that during his training as a new
employee, it was explained to him that "if the FDA regulated
[NECC], there would be a lot of limitations" and that it was
"important that the FDA not regulate NECC." Beth Reynolds, an
NECC licensing coordinator, further testified to conversations
that she had with Conigliaro and others about NECC needing to
comply with state laws requiring the compounder to meet state
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manufacturing guidance. As to Carter, the government introduced
testimony from former employees, including Boneau and Mario
Giamei, Jr., about emails that they had received from Carter about
what to do in the event that NECC's customers did not provide
patient names with orders. And, finally, FDA Agent Michael
Mangiacotti testified that during the search of NECC's offices, he
found signs posted in the sales staff's cubicles with instructions
from Carter warning NECC employees about the need to give
"regulators" the impression that NECC was compounding drugs after
receipt of real patient names.
C.
The jury was instructed with respect to the § 371 counts
that Carter, Conigliaro, and their co-defendants had been "charged
with conspiring to defraud the FDA by impeding its ability to
perform its regulatory function by misleading it into believing
that NECC was a Massachusetts regulated compounding pharmacy and
not operating as a drug manufacturer subject to FDA regulation and
oversight." The jury was further instructed that "[a] conspiracy
is an agreement between or among two or more persons to accomplish
an unlawful purpose," and that, "[t]o prove a defendant guilty of
a crime of conspiracy, the government must prove three essential
elements beyond a reasonable doubt": (1) "that the conspiratorial
agreement alleged in the indictment and not some other agreement
or agreements existed at or about the time specified"; (2) "that
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a defendant knowingly and willfully joined in that agreement with
the purpose of seeing it succeed in accomplishing its unlawful
goals"; and (3) "that one of the conspirators committed an overt
act, that is, took an affirmative step to further the purposes of
the conspiracy at some time during its existence."
The jury acquitted all the defendants of the § 371 counts
at issue other than Carter and Conigliaro, who were each found
guilty. Carter and Conigliaro each then then filed a motion for
a post-verdict judgment of acquittal supported by a memorandum.
The memoranda advanced three arguments for entering the judgments
of acquittal.
First, the memoranda argued that it was legally
impossible for either Carter or Conigliaro to have been part of
the alleged conspiracy due to what the record assertedly showed
about the FDA's authority, during the life of the alleged
conspiracy, to conduct the regulatory oversight of NECC with which
they were alleged to have interfered. Second, the memoranda
contended that Carter and Conigliaro could be convicted on the
counts of which the jury had found them guilty only by adopting an
overbroad and vague construction of § 371's "defraud" clause that
would deprive them of fair notice and thus violate their right to
due process under the Fifth Amendment of the United States
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Constitution.4 Third, and finally, the memoranda contended that
the evidence presented at trial was insufficient to support their
convictions under § 371, even assuming the defenses to those
convictions that we have just described failed.
At the same time that Carter and Conigliaro moved for
judgments of acquittal on the § 371 counts under Rule 29, they
also moved in the alternative pursuant to Federal Rule of Criminal
Procedure 33 for a new trial on those counts. Conigliaro argued
in support of his motion for a new trial that the District Court
had failed to sever his trial from that of four other defendants
named in the indictment with whom he and Carter were jointly tried
and that the District Court had also committed several prejudicial
evidentiary errors. Carter contended in her new trial motion that
the jury's verdict finding her guilty of violating § 371 was
contrary to the substantial weight of the evidence and that her
trial, too, was tainted in various ways by prejudicial evidence.
D.
The District Court held a hearing on the motions for
entering a post-verdict judgment of acquittal on the one § 371
4 Insofar as the defendants meant to argue not only
that the construction of § 371's "defraud" clause on which their
convictions are premised deprived them of fair notice in violation
of the Due Process Clause, but also -- separately -- that § 371 is
void for vagueness in violation of the Due Process Clause, the
District Court rejected that argument and neither defendant renews
it on appeal.
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count that Carter and Conigliaro each faced. The District Court
granted those motions in a written decision on June 7, 2019. It
thus did not rule on the then-still-pending Rule 33 motions for a
new trial on those same counts that were also brought by these
codefendants. The District Court determined that its ruling in
their favor on the motions to enter judgments of acquittal on their
§ 371 counts rendered their new trial motions moot.
The District Court issued a lengthy opinion setting
forth its reasoning for ruling as it did on the Rule 29 motions.
See United States v. Conigliaro, 384 F. Supp. 3d 145 (D. Mass.
2019). That opinion included a substantial discussion of the legal
impossibility and due process defenses that Carter and Conigliaro
advanced. In granting the motions, the District Court did not
reach the contention that, even if those defenses were unavailing,
the Rule 29 motions still would have to be granted based on the
independent contentions Carter and Conigliaro both made that the
evidence was insufficient to support their conviction of the
charges.
Because the District Court's analysis of these defenses
engages in a detailed manner with the state of regulatory play
during the alleged conspiracy, it is useful to provide a relatively
fulsome description of some of the key regulatory milestones before
describing the District Court's analysis further. After providing
this historical background, we then turn to a review of the
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District Court's reasoning in its opinion, starting with its
discussion of the defense of legal impossibility.
1.
As we explained above, the FDCA authorizes the FDA to
regulate "any new drug," FDCA § 505(a) (codified at 21 U.S.C.
§ 355(a)), which was defined in the relevant period as "[a]ny
drug . . . not generally recognized . . . as safe and effective
for use under the conditions prescribed, recommended, or suggested
in the labeling thereof." 21 U.S.C. § 321(p). And, as we also
explained above, although compounded drugs would seem to fit within
that definition, for the first fifty years after the FDCA's
enactment, the FDA generally left regulation of compounding to
state pharmacy boards. Western States, 535 U.S. at 360-61. Over
time, however, as we have noted, the FDA grew concerned that some
pharmacists were manufacturing and selling large quantities of
drugs under the guise of compounding in an effort to evade the
FDA's "new drug" requirements. Id.
The FDA responded to the concerns about compounding by
issuing a Compliance Policy Guide in 1992. FDA Compliance Policy
Guide (CPG) Sec. 7132.16 (1992) (the "1992 CPG"). It explained
"that while retail pharmacies . . . are exempted from certain
requirements of the [FDCA], they are not the subject of any general
exemption from the [FDCA's] new drug, adulteration, or misbranding
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provisions." Western States, 535 U.S. at 360-61 (quoting the 1992
CPG).
The Guide announced that the FDA "may, in the exercise
of its enforcement discretion, initiate federal enforcement
actions . . . when the scope and nature of a pharmacy's activities
raise[] the kinds of concerns normally associated with a
manufacturer and . . . result[] in significant violations of the
new drug, adulteration, or misbranding provisions of the Act."
Id. (quoting the 1992 CPG). But, the Guide also announced that
the FDA otherwise would continue to exercise discretionary
abstention from the policing of prescription-based compounding
pharmacies as well as pharmacies that compounded drugs without
prescriptions in "very limited quantities" for buyers with whom
they could demonstrate an "established professional practitionerpatient-pharmacy relationship." Id. at 363 (quoting the 1992 CPG).
Congress codified parts of the FDA's 1992 Guide
concerning compounding a number of years later in the Food and
Drug Administration Modernization Act of 1997 ("FDAMA"). See Pub.
L. 105-115, 111 Stat. 2296, § 127 (codified at 21 U.S.C. § 503A
(1997)). In particular, as the District Court noted:
[The FDAMA] created a safe harbor for
compounded drugs, exempting them from the
FDCA's "new drug" requirements provided that
certain criteria were met, most pertinently,
that they be compounded in response to a valid
prescription or only in limited nonprescription quantities where an established
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relationship existed between the specific
pharmacist, patient, and prescribing
physician.
Conigliaro, 384 F. Supp. 3d at 160 (citing 21 U.S.C. § 353a(a)).
The next major development of note occurred in 2002.
That was when the Supreme Court of the United States struck down
adjacent provisions of the FDAMA in Thompson v. Western States on
the ground that they violated the First Amendment. See Western
States, 535 U.S. at 377. The Court did not reach the question of
severability in that decision. See id. at 360. But, thereafter,
a circuit split ensued as to what, if anything, remained of the
FDAMA and its provisions regulating compounders.
The Ninth Circuit held that the FDAMA as a whole was
invalid. See Western States Med. Ctr. v. Shalala, 238 F.3d 1090
(9th Cir. 2001). The Fifth Circuit held, in contrast, that the
FDAMA stripped of those unconstitutional provisions remained
viable after Western States. See Med. Ctr. Pharmacy v. Mukasey,
536 F.3d 383 (5th Cir. 2008). Our circuit did not weigh in on the
issue.
The FDA reacted to Western States in 2002 by issuing a
new CPG. See FDA Compliance Policy Guide Sec. 460.200 Pharmacy
Compounding (2002) (the "2002 CPG"). The 2002 CPG sought to head
off any uncertainty that might result from the Supreme Court's
decision in Western States with respect to the FDA's continued
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enforcement approach by, as the District Court explained,
"essentially reembrac[ing] the FDA's 1992 guidance." Conigliaro,
384 F. Supp. at 160.
The 2002 CPG reiterated that, for enforcement purposes,
the FDA would continue to draw a line between, on the one hand,
compounders that operated like traditional retail pharmacies in
that they produced and sold drugs "upon receipt of a valid
prescription for an individually identified patient from a
licensed practitioner," and, on the other hand, compounders that
operated like manufacturers in that they, for instance,
"receive[d] and use[d] large quantities of bulk drug substances to
manufacture large quantities of unapproved drug products in
advance of receiving a valid prescription for them." The FDA
assured compounders of the first kind, which operated as retail
pharmacies, that it would abstain from enforcement actions, but
warned compounders of the second kind, which operated as
manufacturers, that it would "seriously consider enforcement
action" against them. The FDA, moreover, specified that one of
the factors it would consider in determining whether a compounder
fell into this latter category of manufacturers was whether it
"compound[ed] . . . drugs in anticipation of receiving
prescriptions, except in very limited quantities in relation to
the amounts of drugs compounded after receiving valid
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prescriptions." This 2002 CPG, while not legally binding, remained
in effect through the end of the alleged conspiracy in 2012.
2.
Carter and Conigliaro drew on this regulatory history in
making their legal impossibility and due process arguments to the
District Court. They claimed that, during the relevant period,
there was "no discernible federal law" or regulation that
"defin[ed] any clear distinction between a compounding pharmacy
and a drug manufacturer." As a result, the defendants argued, it
was legally impossible to conspire to interfere with the FDA's
"government functions" overseeing compounders. Moreover, the
defendants argued that, in light of this history, it would violate
notions of fair warning embedded in the Due Process Clause of the
Fifth Amendment to find them criminally liable under § 371.
The District Court began its opinion assessing the
defendants' defenses with the defense of legal impossibility. It
then took up their due process-based contentions. We describe
each portion of the District Court's analysis in turn.
a.
A "pure legal impossibility" defense applies "when no
statute proscribe[s] the result that the defendant expected,
desired, and intended to achieve." United States v. Fernandez,
722 F.3d 1, 31 (1st Cir. 2013) (citation omitted). "Pure legal
impossibility is always a defense" -- including where, as here,
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the defendants were charged and convicted of the inchoate crime of
conspiracy. Id.
As the District Court explained, however, legal
impossibility is distinct from factual impossibility. Factual
impossibility "arises when an attempt is frustrated by a physical
circumstance of which the actor is unaware." Conigliaro, 384 F.
Supp. 3d at 153 (citing People v. Fiegelman, 33 Cal. App. 2d 100
(1939)). And, as the District Court also noted, "we long have
held that factual impossibility is not a defense to . . .
liability . . . for inchoate offenses such as conspiracy or
attempt." Id. at 153 (citing United States v. Dixon, 449 F.3d
194, 202 (1st Cir. 2006)).
Against this legal backdrop, the District Court
explained that, in its view, "if the FDA, even if mistakenly,
disavowed a legal right to regulate compounding pharmacies like
NECC, and if the evidence at trial showed that the FDA abstained
from regulating NECC as a result of its internal determination of
its own jurisdiction, a legal impossibility defense would plainly
be available." Id. at 158 (emphasis added). The District Court
added that it did not mean "to fault the FDA" insofar as it wrongly
disavowed legal authority that it possessed, as the court
"recognize[d] . . . that the dividing line between pharmaceutical
compounding and drug manufacturing had (prior to the NECC disaster)
never been drawn with any clarity by Congress," which, "in turn,
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created a regulatory lacuna in the borderland in which NECC
progressively came to operate." Id.
The District Court then noted that "another way to frame
a legal impossibility defense" in this case would be to base it
"on the proposition that the government failed to meet its burden
of proof on a required element of the crime -- namely, that the
'government functions' with which the conspirators sought to
interfere were in fact being exercised by the FDA." Id. at 159.
It explained that in identifying this framing of the legal
impossibility defense it was "influenced by basic principles of
lenity and due process," which "require that it be 'reasonably
clear at the relevant time that the defendant's conduct was
criminal.'" Id. (quoting United States v. Lanier, 520 U.S. 259,
267 (1997)).
The District Court at that point undertook an extensive
analysis of the federal statutory, precedential, and regulatory
regime that governed compounding pharmacies during the time of the
alleged conspiracy -- reviewing much of the history discussed above
as well as additional statements made by FDA officials. The
District Court found that "the FDA itself" had "rejected" the
position that it had the authority to regulate compounding
pharmacies during those years. Id. at 162. The District Court
also found that the FDA in that time period repeatedly failed "to
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articulate a clear line between compounding and drug
manufacturing." Id.
According to the District Court, the FDA recognized over
that span of time that its "authority over compounding [was]
limited, unclear, and contested." Id. at 165 (citing Testimony
Before the House of Representatives Subcommittee on Oversight and
Investigations, Committee on Energy and Commerce, Nov. 14, 2012).
And, the District Court further noted, "the evidence [at trial]
plainly show[ed] that during the life of the charged conspiracy,
the FDA was not, and did not believe that it should be, in the
business of regulating companies like NECC that were engaged in
anticipatory pharmacy compounding." Id. at 165. "[T]he bottom
line," the District Court then concluded, was that "during the
critical times, these defendants (and NECC) could not have
defrauded the FDA by interfering with the relevant regulatory
functions because there were none to speak of." Id.
b.
The District Court next considered the defendants' due
process-based defenses. The District Court had stated in the
introductory section of its opinion that the entry of judgments of
conviction of the defendants on the § 371 count that each faced
would "violate[]" their "rights to fair notice and due process."
Id. at 148. In the course of its due process analysis, though,
the District Court appeared to rely less on a conclusion based on
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the Fifth Amendment's Due Process Clause than on the related
concerns about "fair warning" rooted in the rule of lenity that it
had invoked in connection with its second framing of the legal
impossibility defense described above.
In that regard, the District Court explained that a
narrow construction of the "government functions" element of the
§ 371 offense might be appropriate based on such concerns. It
then stated that because the record showed that the FDA's
regulatory authority was uncertain in this area and that the agency
had not in fact exercised it, the "tie-breaking rule of lenity"
applied to § 371. See id. at 168.
The District Court elaborated on these conclusions
regarding due process and lenity as follows. It explained that if
the defendants' convictions were based on "the hypothetical
jurisdiction that the FDA might have asserted over 'new' drugs,
based on a 1938 statute, standing alone -- and irrespective of the
contrary positions since taken by the FDA itself -- . . . [they]
raise[d] legitimate concerns of constitutional due process and
fair notice." Id. at 168. The District Court then closed by
emphasizing that "[b]ecause the FDA did not believe it had the
statutory authority to regulate . . . new forms of pharmacy
compounders" like NECC, "people 'of common intelligence' in the
industry were left to guess as to the FDA's future enforcement
policies." Id. at 167. It also noted that "[p]revious judicial
- 26 -
decisions had not 'fairly disclosed' to the industry that the FDA
was poised to insert itself as a hands-on overseer of compounding
pharmacies; to the contrary, the few cases that had been decided
mostly pointed in the opposite direction." Id. And, it finally
noted that "even if the argument could be made that the FDA had
never affirmatively and publicly renounced its residual authority
to regulate compounders, the contradictory nature of the public
pronouncements it did make on the subject would justify application
of the tie-breaking rule of lenity." Id.
The District Court did not specify to what provision of
law the "tie-breaking" rule of lenity that it invoked would apply.
It appeared to be concluding, however, at least given its earlier
statements, that the rule of lenity would apply to the "government
functions" element of the § 371 offense at issue.
In consequence of the narrow construction of that
element that it was thus required to adopt, the District Court
appeared to conclude, a juror could not find beyond a reasonable
doubt that the "government functions" with which the defendants
had been charged with conspiring to interfere existed. Here, it
seemed to suggest that such a finding would be precluded by the
lack of clarity in the record as to whether the FDA had the
regulatory authority with which the defendants allegedly conspired
to interfere in the years during which the conspiracy was alleged
to have been ongoing.
- 27 -
Notably, though, the District Court did not appear to be
concluding at any point in its analysis that the rule of lenity
would apply to the FDCA itself, as opposed to the "government
functions" element impliedly incorporated into § 371 in a case
involving an alleged fraud of the sort at issue here. Thus, the
District Court did not appear to be holding that, due to the rule
of lenity, the term "new drug" in 21 U.S.C. § 321(p) would have
to be construed narrowly during the life of the conspiracy to
exclude either the practice of compounding altogether or, at the
least, that practice in the form in which NECC was alleged to have
engaged in it. In other words, the District Court at no point
held that the FDA would have been legally barred during the
relevant period of time from treating NECC as a "manufacturer"
under that statute, even for purposes of exercising its civil
regulatory enforcement powers and even if the agency had chosen to
assert such authority only after having provided due notice to
regulatory parties of its intention to do so.
E.
The District Court entered the post-verdict judgments of
acquittal four days after issuing its written decision granting
the motions for such judgments. The United States then timely
appealed.
- 28 -
II.
We begin our analysis with the government's contention
that neither a legal impossibility defense (in either of the
formulations articulated by the District Court that we have just
described) nor a due process defense (including the variant of it
that appears to be premised on the rule of lenity that, as we have
just explained, the District Court seems to have embraced rather
than a variant premised on the Fifth Amendment itself) justifies
an affirmance of the District Court's post-verdict judgments of
acquittal in this case. We review a District Court's post-verdict
judgment of acquittal de novo. See United States v. Mubayyid, 658
F.3d 35, 47 (1st Cir. 2011).
In undertaking this review, we consider preserved
arguments putting forward the defense of legal impossibility de
novo. See Fernandez, 722 F.3d at 8. But, insofar as the District
Court's judgments of acquittal rested on factual determinations,
we "may uphold [them] only if the evidence, viewed in the light
most favorable to the government, could not have persuaded any
trier of fact of the defendants' guilt beyond a reasonable doubt."
Mubayyid, 658 F.3d at 47. Similarly, in considering the
government's challenge to the District Court's due process ground
for acquittal, our review is again de novo. See United States v.
Silva, 794 F.3d 173, 177 (1st Cir. 2015).
- 29 -
Because we agree with the government's contention that
the District Court's grounds for granting the Rule 29 motions were
mistaken, we will also consider Carter's contention that we may
nonetheless affirm the District Court's judgment as to her because
the evidence was insufficient to support her conviction of the
charged offense. As we will explain, we find that contention
unavailing as well.
Here, as before, our review is de novo. United States v.
Velazquez-Fontanez, 6 F. 4th 205, 212 (1st Cir. 2021). The central
inquiry is “whether ‘any rational trier of fact could have found
the essential elements of the crime beyond a reasonable doubt.’”
Id. (quoting United States v. Bailey, 405 F.3d 102, 111 (1st Cir.
2005)). We engage in it by viewing the record "in the light most
favorable to the verdict and draw[ing] all reasonable inferences
in the verdict's favor." Id. (citing United States v. MeléndezGonzález, 892 F.3d 9, 17 (1st Cir. 2018)).
Before explaining our reasons for agreeing with the
government's challenges to the District Court's ruling on the
defendants' Rule 29 motions, however, it is important to clarify
up front a critical point about the discussion of the defenses
just described that will follow. We thus start our analysis with
that clarification.
- 30 -
A.
Questions implicating the FDA's authority to regulate
compounders as "manufacturers" under the FDCA in the relevant
period are of central import to the defenses at issue. We thus
emphasize up front that the analysis of those defenses that follows
adopts -- as we have explained above we understand the District
Court itself to have also adopted -- the premise (for which no
preserved challenge has been made) that, during the life of the
conspiracy, the FDA possessed the statutory authority under the
FDCA to regulate NECC as a "manufacturer" because a compounded
drug was a "new drug" within the meaning of the FDCA, see 21 U.S.C.
§ 321(p), whatever the FDA's own view (even if "mistaken") may
have been as to whether it possessed that authority.5
It is important to be clear about this premise for the
following reason. We do not dispute that, if the FDCA itself were
properly construed to be limited in a way that precluded the FDA
from exercising such regulatory power over NECC during the period
of the alleged conspiracy, even if the FDA sought to exercise such
authority after making known in advance its intention to do so, a
legal impossibility defense would be available to the defendants
5 We also note that no party has made the argument
that NECC was an "outsourcing facility" as defined by 21 U.S.C.
§§ 331(a), 333(a), and 353(b)(1) and thus eligible to be exempt
from certain provisions of the FDCA if it satisfied several
requirements, including registration with the FDA as such a
facility and compliance with the current GMP.
- 31 -
on that basis. Thus, in rejecting the defense of legal
impossibility here, we do not mean to suggest otherwise.
Moreover, we are aware that the defendants do attempt on
appeal to advance a defense of legal impossibility grounded in
that understanding of the legal limits on the FDA's regulatory
authority in the relevant time period -- due to the limited manner
in which they contend that the FDCA must itself be construed -- as
an alternative basis for affirming the District Court's rulings on
their Rule 29 motions. But, neither defendant developed that
argument below.
Indeed, consistent with that finding of forfeiture,
there is no indication that the District Court understood any such
contention to have been advanced. The opinion of the District
Court not only did not address such a contention but also appeared
to premise its own analysis on the understanding that the FDCA
conferred such regulatory authority on the FDA. See, e.g., id.
at 159. Thus, we, like the government, do not understand the
District Court, with respect to either variant of the legal
impossibility defense that it laid out, to have held that such a
legal limit on the FDA's authority was then in place. The result
is that any defense to the charges at issue before us on appeal
that is premised on the contention that the scope of the FDCA
itself did not reach pharmacies engaged in compounding during the
life of the alleged conspiracy -- because the term "new drug" in
- 32 -
the FDCA did not encompass compounded drugs -- would have to
satisfy the demanding plain error standard to succeed. See United
States v. Pinkham, 896 F.3d 133, 136 (1st Cir. 2018). But, the
defendants cannot meet that standard, at least given the contrary
circuit case law regarding the meaning of the FDCA during that
time frame. See Med. Ctr. Pharmacy, 536 F.3d 383, 395, 400; see
also United States v. Rivera-Morales, 961 F.3d 1, 13 (1st Cir.
2020) ("[A] criminal defendant generally cannot show that a legal
error is clear or obvious in the absence of controlling precedent
resolving the disputed issue in his favor." (citing United
States v. Delgado-Sánchez, 849 F.3d 1, 10-11 (1st Cir. 2017);
United States v. Amaro-Santiago, 824 F.3d 154, 163 (1st Cir.
2016))).
For these reasons, our discussion of the legal
impossibility and due process defenses that will follow adopts as
its sole focus the focus of the District Court, the government,
and the defendants in their preserved arguments to us on appeal.
It thus considers only how the FDA's own understanding of its
regulatory authority -- as reflected in part in its own public and
internal statements regarding it -- bears on Carter’s and
Conigliaro’s criminal liability under § 371 on the understanding
that the FDCA is best construed to have authorized the FDA to treat
a compounded drug as a "new drug" and thus a compounding pharmacy
as a "manufacturer" under the FDCA during the years in question.
- 33 -
B.
With that background in place, we are -- at last -- well
positioned to take up the government's argument that, given the
state of regulatory play during the life of the conspiracy, neither
variant of the legal impossibility defense that the District Court
described as being available to the defendants was available. The
government further contends that any fair-warning-based defense
(whether rooted in the Fifth Amendment's Due Process Clause or the
application of the rule of lenity to the "government functions"
element of § 371) is also -- given the relevant regulatory history
-- unavailing. We agree with the government in both respects.
1.
We start with the government's arguments as to the
District Court's first way of framing the legal impossibility
defense. Here, the government appears to treat the District Court
as having held that the defendants made out a viable legal
impossibility defense because, even if the FDCA would have
authorized the FDA to have asserted regulatory authority over NECC
as a manufacturer during the alleged conspiracy, the record
established that the agency had disavowed any authority to do so
during the relevant time frame and thereby had barred itself from
doing so. On this understanding, then, the District Court held
that, due to what the record showed regarding the FDA's own
understanding of its own regulatory power, mistaken though it may
- 34 -
have been, there were no "government functions" with which the
defendants could conspire to interfere and hence the charged crime
was one that it was legally impossible for the defendants to
commit.
It is not entirely clear to us that the District Court
did in fact embrace the holding regarding the defense of legal
impossibility that the government attributes to it. The District
Court stated that a disavowal-based variant of that defense would
"plainly be available" if the record showed that the agency had
made such a disavowal. Conigliaro, 384 F. Supp. 3d at 158. But,
it is not evident to us that the District Court then actually held
that judgments of acquittal must be entered on the basis of the
variant of the legal impossibility defense that it described that
was predicated on the record showing that the agency had in fact
made such a disavowal of its legal authority. The District Court
appeared instead to hinge its ruling vis-a-vis legal impossibility
on the second variant of that defense that it described, and which
we next address.
Nevertheless, the defendants, like the government,
appear to treat the District Court as having relied on the first
variant of the legal impossibility defense and not solely the
second, and, in any event, they urge us to embrace it ourselves.
We thus proceed on the understanding that the District Court did
- 35 -
so hold, and we conclude that, insofar as it did, it erred, just
as the government contends.
As a threshold matter, we are dubious that, even if the
FDA had disavowed its legal authority during the life of the
conspiracy, it would follow that the offense charged here was
legally impossible to commit. And that is so because the offense
charged here was conspiracy to defraud the FDA by means of
deceptive practices that were designed to prevent the agency from
determining that the company was operating as a manufacturer.
An agency's "mistaken" disavowal of authority is not
written in stone. See FCC v. Fox Television Stations, Inc., 556
U.S. 502, 513 (2009); Massachusetts v. EPA, 549 U.S. 497, 532
(2007). Thus, the FDA would appear to have been entitled at any
time to reverse course and assert the authority that (for purposes
of evaluating the existence of this variant of the legal
impossibility defense) we understand the FDCA itself would have
entitled it to assert vis-a-vis compounders like NECC, at least so
long as the FDA in reversing course did so on a going-forward basis
and after providing due notice. Indeed, it is hard for a disavowal
of authority to be "mistaken" -- as the District Court plainly
indicated it was assuming any disavowal here might have been -- if
the authority in fact does not exist. See Conigliaro, 384 F. Supp.
3d at 158.
- 36 -
Thus, even if there had been a mistaken disavowal of
authority by the FDCA vis-a-vis its power to treat compounders
like NECC as manufacturers, we do not see why such a mistaken
disavowal would provide the basis for a legal impossibility defense
that would bar a finding that Carter and Conigliaro violated § 371.
Regulated parties who conspire to trick an agency into thinking
they are conducting themselves other than they are -- and in a
manner that would be material to an agency's decision about whether
it may wish to assert regulatory authority that it had previously
disavowed but legally might be capable of asserting upon rethinking
the disavowal -- may easily be understood to have defrauded the
United States, notwithstanding that during the period that the
conspiracy was ongoing the agency had wrongly construed its power
too narrowly. The deception by the alleged conspirators could be
found to have prevented the agency from rethinking its authority
in light of how regulated parties were in fact operating and
thereby lulled the agency into not determining that it needed to
reverse course and, on a prospective basis after providing due
notice, assert the regulatory authority that it had previously
disclaimed.
There is, however, also a more record-specific reason in
this case for rejecting this disavowal-based ground for crediting
a defense of legal impossibility to the charges at issue. The
- 37 -
record fails to support a finding that the claimed disavowal
occurred.
The District Court offered a lengthy account of its
understanding of what the record showed about the extent of FDA
authority over compounders during the period of the alleged
conspiracy. In the course of that account, the District Court
addressed the government's contention that the complex regulatory
history revealed that, during the life of the conspiracy,
"compounding pharmacies would be subject to the drug approval,
manufacturing, and inspection provisions of the FDCA" and that
"NECC was making new drugs, as defined in the FDCA, and was subject
to the jurisdiction of the FDA." Conigliaro, 384 F. Supp. 3d
at 161 (quoting the government).
The District Court explained that "[t]he difficulty
with" the government's contention was that, in its view, "the most
significant actor rejected it: the FDA itself." Id. The District
Court indicated that it was relying for that critical finding on
"internal memoranda, testimony by senior FDA officials before
various House and Senate committees as part of Congress's
investigation into the fungal meningitis outbreak, in-court
testimony and exhibits offered at the trial" it oversaw. Id.
(footnote omitted).
But, the materials that the District Court identified as
support for its findings do not support a finding that the alleged
- 38 -
disavowal occurred. It is true that, from that collection of
evidence, as the District Court found, "the picture emerge[d] of
an agency struggling to make sense of a statutory regime that
Congress had not updated since 1938 and that had been overwhelmed
by the rapidity of the advances in modern medicine and pharma."
Id. at 162. The District Court also supportably found that the
FDA was "under considerable pressure" due to developments in the
pharmaceutical industry itself that had resulted in a "demand
vacuum" for generics and specialty drugs that "compounding
pharmacies like NECC stepped in to fill." Id. Nor do we disagree
with the District Court that the record shows "the FDA recognized
that an overly robust enforcement posture on its part towards
compounders could jeopardize hospitals' and clinics' supplies of
potentially life-saving medications." Id.
But, the District Court did not identify any statement
in which the FDA during the time period in question publicly or
internally disavowed that it possessed regulatory power to treat
a compounding pharmacy as a manufacturer, including even one
engaged in practices not unlike those in which the government
asserts the record suffices to show that NECC was then engaged.
The District Court did note statements in which FDA officials
expressed concerns about the fit between the existing regulatory
structure and compounding. Id. It noted as well expressions of
concern within the FDA about whether it did have the authority to
- 39 -
treat compounders as manufacturers and the circumstances in which
it could do so. Id. at 163. But none of those statements support
the conclusion that the FDA in fact disavowed its legal authority
to so treat them.
Moreover, the guidance documents that the FDA issued
during the relevant time period concerning its authority to treat
compounded drugs as "new drugs" under the FDCA affirmed rather
than disclaimed the FDA's legal authority over compounders under
that statute's "new drug" authority. See Western States, 535 U.S.
at 362 ("[W]hile retail pharmacies . . . are exempted from certain
requirements of the [FDCA], they are not the subject of any general
exemption from the [FDCA's] new drug, adulteration, or misbranding
provisions." (quoting 1992 CPG). To be sure, in 2002, the FDA
issued guidance that stated that "section 503A" -- the section of
the FDAMA that codified the FDA's 1992 CPG to compounders -- "is
now invalid" in light of the Supreme Court's decision in Western
States and the Ninth Circuit's determination that § 503A was not
severable. See Shalala, 238 F.3d 1090. But, that statement -- at
least in context -- cannot be read to be a disavowal of authority
over compounders. In that same guidance, the FDA explained that
"when the scope and nature of a pharmacy's activities raise the
kinds of concerns normally associated with a drug manufacturer and
result in significant violations of the new drug, adulteration, or
misbranding provisions of the [FDCA], [the] FDA has determined
- 40 -
that it should seriously consider enforcement action" under the
FDCA.
The FDA did also define a safe harbor from its regulatory
oversight over compounding pharmacies in the guidance it publicly
supplied. But, it defined that safe harbor as encompassing
compounding pharmacies that produced and sold drugs "upon receipt
of a valid prescription for an individually identified patient
from a licensed practitioner."
Indeed, in another case pending before this Court also
stemming from the NECC disaster, United States v. Chin (Chin II),
No. 20-1050 (1st Cir. ___), the government has made clear that the
safe harbor defined in the 2002 CPG extended to only "the
compounding of drugs prior to the receipt of valid, patientspecific prescriptions under specified circumstances, not shipping
them before the receipt of a valid prescription." Therefore, even
if NECC's compounding practices were in compliance with the safe
harbor, its delivery practices were not. The announcement of the
safe harbor is thus at odds with the notion that the FDA disavowed
authority to regulate compounders outright or even to regulate
compounders alleged to have engaged in the practices that NECC was
alleged to have engaged in here.
At most, then, the record supports a finding that the
FDA publicly rejected the notion that its regulatory authority to
treat compounders as manufacturers was clear or without caveats.
- 41 -
But, that is not a finding of an actual disavowal by the FDA of
its authority to treat NECC as a manufacturer under the FDCA,
insofar as that company was engaging in practices that did not
entitle it to claim the protection of the safe harbor that the
agency had publicly identified in the 2002 guidance. Thus, while
the District Court did state that "the bottom line" was that
"during the critical times, these defendants (and NECC) could not
have defrauded the FDA by interfering with the relevant regulatory
functions because there were none to speak of," Conigliaro, 384
F. Supp. 3d at 166, we cannot agree that the record supports such
a finding.
This conclusion is not undermined by the support in the
record for the District Court's finding that "the evidence plainly
show[ed] that during the life of the charged conspiracy, the FDA
was not, and did not believe that it should be, in the business of
regulating companies like NECC that were engaged in anticipatory
pharmacy compounding." Id. at 165. That finding does not
establish that the FDA understood itself to lack the power under
the FDCA to treat a compounding pharmacy like NECC as a
manufacturer. It establishes only that, at that time, the FDA was
of the view that a certain type of dispensing by compounding
pharmacies -- because of the bounded way in which it was undertaken
-- was not something that the FDA "should" be in the "business" of
policing. That is not itself evidence of a disavowal of authority,
- 42 -
let alone a disavowal of authority to regulate the practices in
which NECC was engaged.
The defendants nevertheless insist that the District
Court was correct in finding that the FDA had disavowed its
authority over compounders like NECC by the time the alleged
conspiracy took place. In support, they point to the testimony of
Samia Nasr, who led FDA's Center for Drug Evaluation and Research
Compounding Team from 2011 to 2016. Nasr testified at trial that
the FDA put all inspections of compounding pharmacies on hold from
2009 to 2012.
With respect to NECC, the defendants contend, this hold
became manifest in the FDA's 2011 and 2012 correspondence with the
Colorado Board of Pharmacy that the defendants introduced into
evidence. There, the Colorado regulators notified the FDA that
NECC was shipping drugs in bulk quantities across state lines and
the FDA, in response, referred the Colorado regulators to the
Massachusetts Board of Pharmacy rather than investigating the
allegation. According to the defendants, the "national
moratorium" on inspections compels the conclusion that the FDA
"affirmatively disclaimed its authority" to regulate compounders.
The evidence to which the defendants point, however,
shows at most that the FDA made an internal policy decision not to
exercise its authority over compounders -- a decision that lacked
legally binding force that would preclude the FDA from reversing
- 43 -
course (after giving proper notice) on even a prospective basis.
Cf. Fox Television Stations, 556 U.S. at 515. The defendants thus
fail to show that the evidence compelled a reasonable jury to
conclude that the FDA disavowed its legal right to regulate
compounders, such that it understood itself to be as powerless
legally during the period of the alleged conspiracy as if the FDCA
had been amended during that period of time to strip the FDA of
exercising the power it was not exercising. And, for that reason,
the first ground on which the District Court based its conclusion
of legal impossibility -- or, at least, the first ground the
parties treat the District Court as having based that conclusion
on -- does not hold up.
2.
The government also challenges the District Court's
other formulation of the legal impossibility defense. In that
formulation, the District Court focused on the FDA having abstained
from exercising its regulatory authority over compounders as a
result of its uncertainty about its own authority, even assuming
that the agency did not in doing so actually disavow the existence
of such regulatory authority. The District Court reasoned as
follows in justifying its decision to grant the Rule 29 motions
based on a defense of this kind.
The District Court began this aspect of its analysis by
finding, on the basis of the FDA's conflicting public statements
- 44 -
about its authority to regulate compounders as well as its
inability to clearly distinguish compounding manufactures from
compounding pharmacies, that "the FDA's 'authority over
compounding [was] limited, unclear and contested.'" Conigliaro,
384 F. Supp. 3d at 165 (quoting congressional testimony). In
particular, the District Court noted that "the FDA was unable under
[c]ongressional questioning to articulate a clear line between
compounding and drug manufacturing." Id. at 162. The District
Court pointed to testimony by Dr. Janet Woodcock, an FDA official,
before Congress, that described the FDA's understanding of "how
much product . . . a drug compounder [could] make without being
designated a manufacturer" as "blurry" and that there "[was] no
bright line in the statute that says when you cross that line and
become a manufacturer." Id. at 163 (quoting congressional
testimony).
Next, the District Court addressed the import of that
finding. It explained that the ambiguity in these statements was
such that, even if the FDA had authority under the FDCA to treat
compounders like NECC as manufacturers during the years of the
alleged conspiracy, the "contrary position[] . . . taken by the
FDA itself [at that time] . . . raises legitimate concerns of
- 45 -
constitutional due process and fair notice."6 Id. at 166. It then
appeared to hold, based on that conclusion, that those due process
and lenity concerns warranted a narrow construction of the
"government functions" element of the § 371 offense with which the
defendants were charged. Finally, the District Court appeared to
wrap up its analysis by holding that this narrow construction
precluded the "government functions" element of § 371 from
encompassing regulatory authority of the uncertain type that the
District Court had found that the FDA possessed.
Here, too, we agree with the government that this chain
of reasoning is mistaken. As an initial matter, we do not find
persuasive the notion that it was legally impossible for the
defendants to have conspired to interfere with a government
function just because it was unclear during the life of the
conspiracy whether the government had that function or understood
itself to have it. That it is unclear to alleged conspirators
whether the government will assert a regulatory function because
it is convinced that the government is uncertain of its authority
6 The District Court noted as well that a federal
district court in the Eleventh Circuit had found that "though [the
FDA] certainly has the statutory authority to do so, the FDA has
chosen not to draw the line between manufacturing and traditional
compounding with formal regulations. Nor has it sought to
distinguish traditional pharmacy compounding from pharmacists who
are manufacturing under the guise of compounding." United
States v. Franck's Lab, 816 F. Supp. 2d 1209, 1248 (M.D. Fla. Sept.
12, 2011) (vacated pursuant to the parties' join motion).
- 46 -
to assert it provides no basis for concluding that such a function
does not exist. Thus, if the government function was one that the
government had the legal authority to exercise -- and we have no
reason not to assume that was the case, at least with respect to
prospective exercise after the provision of due notice -- then we
do not see how it would be legally impossible for the defendants
to conspire to trick the government into wrongly concluding through
misrepresentations about NECC's means of operating that it could
not be regulated pursuant to that function.
That is not to say the lack of clarity about the
existence of that function -- especially if fostered by the
government's indications of its own doubts about the existence of
that function -- would have no bearing on whether the evidence in
a given case suffices to prove the elements under § 371 beyond a
reasonable doubt. It is only to say that the lack of clarity about
the existence of a government function does not equate to its nonexistence.
Thus, such lack of clarity cannot in and of itself make
it legally impossible for the defendants to have conspired to
interfere with a government function, insofar as the function's
existence is not disputed as a matter of law and there is no basis
for concluding that the function could not be asserted after the
provision of due notice prospectively. For, if that is the case,
then so long as the evidence is otherwise sufficient the fact that
- 47 -
the FDA's authority was less than clear during the alleged
conspiracy -- and that the FDA itself understood it to be unclear
during that time frame -- is of no moment for purposes of assessing
the availability of the defense of legal impossibility to the § 371
charges at issue. After all, those charges concern an alleged
conspiracy to trick the FDA into thinking that a company subject
to its regulatory authority was operating differently than it was
in order to conceal the fact that its actual manner of operating
would make it subject to more intensive regulatory oversight.
Nor is there force to the contention that the defendants'
legal impossibility defense to their § 371 charges has merit
because -- due to concerns about fair warning -- the high degree
of uncertainty about which compounders were subject to FDA's
regulations pertaining to drug manufacturers during the period of
time at issue itself precluded the FDA from lawfully exercising
regulatory authority over NECC as if it were a manufacturer even
if the FDA otherwise would have had such authority under the FDCA.
The defendants were not charged with violating the FDCA based on
evidence showing that NECC was operating as a manufacturer. They
were charged with violating § 371 for conspiring to interfere with
the FDA's ability to determine whether to regulate NECC as such by
misleading the FDA about practices of the company that could bear
on just that determination.
- 48 -
Thus, absent the FDA lacking the legal power to do so
even on a going forward basis -- and after having given the
requisite degree of fair warning of its intention to do so -- we
see no basis for concluding that the ambiguity about the FDA's
authority that the District Court identified precluded it from
being "reasonably clear at the relevant time that the defendant's
conduct was criminal." Lanier, 520 U.S. at 267. We appreciate
the District Court's concern with the "worrisome position that, in
this context, what is not affirmatively permitted by the law is
criminally prohibited." Conigliaro, 384 F. Supp. 3d at 166. But,
because the defendants were charged with conspiring to defraud the
FDA by impeding its ability to determine NECC's status through
misrepresentations about the company's operations, we do not find
that "worrisome position" implicated here. As we have explained
above, the precise contours of the "government functions"
implicated in a § 371 conspiracy -- assuming the agency has the
authority to engage in those functions in the first place -- do
not have to be defined before defendants can formulate the
requisite agreement to interfere with those functions. The
defendants here could have been mistaken as to whether NECC's
compounding practices would have run afoul of the FDA's regulations
under the FDCA while still conspiring to interfere with the FDA's
ability to draw such a conclusion. After all, a conspiracy does
not need to be successful in order to be illegal.
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In support of the District Court's finding of legal
impossibility, the defendants make the related argument that it
was legally impossible for them to obstruct the FDA in deeming
NECC to be a manufacturer because the FDA did not actively make
such determinations concerning compounding manufacturers in the
indictment period. The defendants point to testimony suggesting
that the agency was, at the very least, hesitant to enforce its
regulations concerning drug manufacturers against compounders and
that it even abstained from conducting inspections of compounders
for a period.
But, for purposes of a defense of legal impossibility,
the FDA's actual exercise of its legal authority over compounders
in general and over NECC specifically is irrelevant. That is so
because the FDA's exercise of its legal authority can at most show
the factual impossibility of actually interfering with the FDA's
oversight function during the time of the alleged conspiracy. The
defendants, however, were convicted of conspiring to defraud the
United States by interfering with the FDA's oversight function,
not of actually interfering with its oversight function. And,
because, as the District Court correctly stated, "factual
impossibility is not a defense to . . . liability . . . for
inchoate offenses such as conspiracy or attempt," the literal
inability of the defendants to actually interfere with the FDA's
enforcement actions cannot be a defense. Conigliaro, 384 F. Supp.
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3d at 153 (quoting Dixon, 449 F.3d at 202). Or, to put it
differently, if a juror could find the defendants guilty of
conspiring to interfere with the FDA's oversight function
regardless of whether they succeeded in interfering with it, then
that juror could also find them guilty of doing so even if the FDA
did not actually engage in oversight over compounders during that
time. See United States v. Jimenez Recio, 537 U.S. 270, 274
(2003).
Conigliaro raises one final argument in support of the
District Court's finding of legal impossibility: he contends that
it was legally impossible for him to have violated § 371 because
§ 371 only criminalizes conspiracies to defraud the federal
government and that here the object of the conspiracy was a state
agency. See Tanner v. United States, 483 U.S. 107, 130 (1987).
Conigliaro is correct that a conspiracy to defraud a state agency,
such as a state pharmacy board, would not violate § 371. But, the
question of whether the object of the conspiracy charged here was
the federal government is a factual one for the jury. At its root
then, his argument is that there was insufficient evidence for a
juror to have concluded that he conspired with others to defraud
the FDA. As Conigliaro has not brought such a challenge, we do
not consider whether the evidence is sufficient to support his
conviction under § 371. To the extent that this argument is raised
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by Carter, we consider its merits in the course of our evaluation
below of the sufficiency of the evidence supporting her conviction.
3.
We come, then, to the government's challenge to the
District Court's due process ground for acquittal. In determining
whether the defendants' convictions comported with the due process
requirement of fair notice, "the touchstone is whether the
[relevant] statute, either standing alone or as construed, made it
reasonably clear at the relevant time that the defendant's conduct
was criminal." Lanier, 520 U.S. at 267. The defendants contend,
and the District Court agreed, that such clarity was absent in
this case. In support, the defendants reassert:
• That the FDA's statutory authority to regulate compounding
pharmacies as manufacturers under the FDCA was at best
"contested" and "unclear" -- especially in the wake of
Western States;
• That the FDA disclaimed whatever authority it had, thus again
depriving the defendants of fair notice;
• That because the FDA did not exercise whatever authority it
had over compounders, the defendants were not on notice that
there were "government functions" with which their activities
could "interfere," Goldberg, 105 F.3d at 773;
• That because neither the FDCA nor the FDA's construal of that
statute drew a clear line in the relevant respect, it was
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unclear that NECC's compounding activities constituted
manufacturing and, thus, for that reason, too, the defendants
lacked fair notice that their alleged conspiracy to cover up
those activities would make them guilty of conspiring to
interfere with the FDA's "government functions" in violation
of 18 U.S.C. § 371.
For much the same reasons that we have already given in explaining
why the legal impossibility defenses are not available here, we
also conclude that there is no due process-based bar to the
defendants being convicted under § 371.
We do not dispute the District Court's finding that
the FDA did not in fact exercise its legal authority over
compounders that operated as manufacturers during the time of the
alleged conspiracy. But, the defendants fail to show that this
fact is relevant to the defendants' due process right of fair
notice (or even to an application of the rule of lenity).
The defendants' contention in this respect appears to
be that, due to notice concerns rooted in the guarantee of due
process, we must construe the meaning of "government functions"
for purposes of the "defraud clause" of § 371 narrowly to refer to
functions that the government is actually carrying out rather than
those that it merely has the legal authority to carry out. And
that is so, the defendants appear to contend further, because this
court noted in United States v. Goldberg, 105 F.3d 770 (1st Cir.
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1997), that the "defraud clause" has "a special capacity for abuse
because of the vagueness of the concept of interfering with a
proper government function." 105 F.3d at 775.
But, neither Goldberg nor our other due process
precedents supports this construction of the "defraud" clause.
"[T]he touchstone" for determining whether a conviction comported
with the due process requirements of fair notice and lenity, as we
noted, "is whether the [relevant] statute, either standing alone
or as construed, made it reasonably clear at the relevant time
that the defendant's conduct was criminal." Lanier, 520 U.S.
at 267. If the defendants had been charged and convicted of
interfering with the FDA's oversight function over compounders
that operated as manufacturers, we may assume that it would matter
for due process purposes whether it was reasonably clear that the
FDA possessed the function to regulate NECC's activities as a legal
matter. But, here, as we noted in our discussion of legal versus
factual impossibility, the defendants were not so charged. They
were charged with the distinct offense of conspiring to interfere
with the FDA's oversight function over compounders that operated
as manufacturers. And, with respect to that offense, the
uncertainty that the District Court described regarding FDA
authority does not preclude it from being reasonably clear that a
conspiracy to pass off NECC as a kind of compounding pharmacy that
it was not -- through the stratagems detailed in the indictment -
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-- was one prohibited by § 371. Or, at least, that uncertainty
does not do so if we find -- as we must, given the arguments made
to us -- that the FDA remained free throughout the life of the
conspiracy to choose to regulate compounders as manufacturers
under the FDCA in accord with the 2002 CPG insofar as it gave
notice of its intention to do so.
In other words, the defendants could have reasonably
understood that agreeing to make material misrepresentations to
the FDA about how NECC operated so as to shield it from being
deemed a manufacturer under the FDCA could have impeded the FDA's
ability to make a determination regarding NECC's status as a
manufacturer under that same statute. And, as the making of that
determination is itself an oversight function of the FDA -- and as
there is no preserved argument to us supporting the conclusion
that the FDA was legally barred from exercising that function even
prospectively and after giving notice of its intent to exercise it
during the conspiracy -- the defendants were on notice that the
conspiracy's alleged stratagems could interfere with the FDA’s
exercise of that function. We consequently agree with the
government that the District Court erred in finding that the fair
notice concerns -- whether rooted in the Due Process Clause or
precedent concerning when the rule of lenity applies -- precluded
the defendants’ convictions.
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C.
Having found no merit to the defendants' legal
impossibility and due process arguments, we have left only the
separate ground on which Carter asks us to affirm her post-verdict
judgment of acquittal. Here, she contends that the record does
not contain sufficient evidence to permit a reasonable juror to
find beyond a reasonable doubt that she knowingly and willfully
joined the alleged conspiracy.7
Carter asks us to remand this issue to the District
Court, which did not previously reach her sufficiency challenge.
But, we routinely resolve such challenges on appeal and see no
reason to deviate from that practice in this case. See, e.g.,
Stepanets, 989 F.3d at 97, 101, 112. Reviewing de novo and
construing the evidence in the light most favorable to the verdict,
see id. at 95, we find that a reasonable jury could have found
beyond a reasonable doubt that Carter conspired to violate § 371.
We therefore conclude that Carter's sufficiency argument has no
merit.
7 Conigliaro made a similar sufficiency argument
below, but does not renew it on appeal. Insofar as Conigliaro
does mean to renew his insufficiency of the evidence challenge
when he contends in his surreply brief that "there is no evidence
in the Record that [he] ever misrepresented anything to the FDA
about prescriptions or anything else," he has failed to adequately
develop that challenge. See United States v. Zannino, 895 F.2d 1,
17 (1st Cir. 1990).
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At trial, the government introduced an email into
evidence that Cadden sent Carter on May 21, 2012, and that Carter
forwarded on that same day to other NECC employees with the words:
"New confirming guidelines in regards to patient names. (please
see Barry’s e-mail below). When an order is received that does
not have the correct number or format of patient names, then we
need to show Barry the order. At that time, he will determine how
to proceed.” Cadden's email below those words instructed NECC
employees who processed orders for medications that "[t]he MAX
total number of units (vials, syringes, etc.) per patient must
make sense. I must be able to logically explain to a regulator
why we processed x# of units per patient. . . . All names must
resemble 'real' names . . . no obviously false names! (Mickey
Mouse[)]." (emphases added).
On the basis of this email thread, a juror could find
that Carter was familiar with NECC's practice of pretending to
process drugs pursuant to valid, patient-specific prescriptions
and also familiar with the target of that pretense:
"regulator[s]." The jury could likewise find that Carter took
deliberate actions to promote that pretense -- in this case, by
forwarding Cadden's instructions to other staff.
Moreover, the record includes internal emails in which
Carter admitted that she and her colleagues had processed orders
without valid prescriptions and instead used patient names from
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previous orders -- admissions that again support the finding that
she knowingly and willfully joined the § 371 conspiracy. In
September 2011, for instance, Carter notified an NECC sales
representative that "[w]e processed [the order of a customer] using
old p[atient] names." And in June 2012, Carter similarly emailed
her alleged co-conspirator Ronzio that she had "used the old names
in the file that we had not used previously," and that "[w]e are
still processing the order for today so [the customer] will not
need to send in more names."
Carter seeks to resist the weight of this evidence by
arguing that even if the evidence was sufficient to support a
finding that she knowingly and willingly helped to process orders
without valid prescriptions and also that she knowingly and
willingly helped to cover up that practice, the evidence did not
suffice to support the further finding that she did so to interfere
with the regulatory function of the FDA. That further finding, as
she rightly contends, is necessary because for a conspiracy
conviction to stand, "the evidence must establish that the
defendant . . . intended to effectuate the objects of the
conspiracy." United States v. Burgos, 703 F.3d 1, 11 (1st Cir.
2012) (internal quotations and citation omitted). However, there
was in fact sufficient evidence to support that further finding in
this case.
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At trial, a law enforcement agent testified that he had
found a folder entitled "Tech Manual" at Carter's workstation.
That folder included a document labeled "compounding legally."
The jury could thus reasonably infer that Carter was aware of the
FDA's regulatory authority and enforcement approach and therefore
also aware that NECC, given its practice of compounding large
quantities of drugs without valid prescriptions, was subject to
that authority and enforcement, and that covering up that practice
by, for instance, using fictitious patient names, would interfere
with the FDA's ability to exercise its oversight over NECC.
Other circumstantial evidence added support to this
inference by showing that some of Carter's closest colleagues made
that awareness explicit. The jury, for instance, heard testimony
by Ronzio that Cadden had considered and rejected the possibility
of officially registering NECC as a manufacturer with the FDA in
internal conversations because he worried that NECC was "very far
from . . . current Good Manufacturing Practices, which the FDA
required." The record also contained communications between NECC
and its regulators -- both at the FDA and at the state level -- in
which Carter's colleagues represented that NECC was a pharmacy
that produced drugs only pursuant to valid prescriptions and was
therefore not subject to the FDA's stricter regulations for
manufacturers.
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For example, Conigliaro claimed in a faxed letter to the
Missouri State Board of Pharmacy on March 23, 2009, that "[a]ll of
[NECC's] compounding activities are carried out in compliance with
applicable local, state and federal rules and regulations as well
as . . . the FDA's Compliance Policy Guide Sec. 460.200 Pharmacy
Compounding," which is the FDA's 2002 CPG (emphases added). A few
years earlier, on October 1, 2004, he claimed in an email to the
FDA that NECC "compounds numerous different sterile and nonsterile preparations to fill patient specific, physician
prescriptions," that it "always compound[s] only the amount [it]
anticipate[s] will be required based on prescribing physician's
historical prescribing patterns," and, finally, that it is a
"small-scale, family-run, compounding-only pharmacy, not a
manufacturer. As such we are not subject to GMP [current good
manufacturing practice]."
Similarly, Cadden wrote to the FDA on January 5, 2007,
to deny allegations that the FDA had made in its warning letter to
NECC -- namely, that NECC "told physicians that [it] would fill
prescriptions written in the name of a staff member rather than in
the name of an actual patient." Cadden assured the FDA that this
alleged practice "contradicts all of [NECC’s] standard operating
procedures." He claimed that "NECC dispenses compounded
medications upon the receipt of valid prescriptions. We are
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engaged in the practice of pharmacy and comply with the
Massachusetts Board of Registration in Pharmacy’s laws and rules."
Based on this evidence as a whole, a reasonable juror
could find that Carter, who occupied a supervisory role within
NECC and worked closely with Cadden and Conigliaro, shared her
alleged co-conspirators' intention of interfering with the
regulatory functions of the FDA. See United States v. McDonough,
727 F.3d 143, 156 (1st Cir. 2013) ("[A]n agreement to join a
conspiracy may . . . be proved by direct or circumstantial
evidence." (internal citations and quotation marks omitted)); see
also Mubayyid, 658 F.3d at 57 ("[A] conspiracy may be based on a
tacit agreement shown from an implicit working relationship."
(citations and quotation marks omitted)); United States v.
Serrano, 870 F.2d 1, 7 (1st Cir. 1989) (concluding that evidence
of fraudulent intent was sufficient in part because of the
defendant's "supervisory responsibilities"). Finding sufficient
evidence in the record to support Carter’s conviction, we reject
Carter’s argument that the District Court’s judgment of acquittal
can be affirmed on these alternative grounds and reverse.
III.
Because, as we have concluded, the District Court's
post-verdict judgments of acquittal must be reversed, there
remains to address the alternative request that Carter and
Conigliaro both made for a new trial. Deeming this request moot,
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the District Court did not rule on it below, even though Federal
Rule of Criminal Procedure 29(d)(1) provides that "[i]f the court
enters a judgment of acquittal after a guilty verdict, the court
must also conditionally determine whether any motion for a new
trial should be granted if the judgment of acquittal is later
vacated or reversed." Because we review a district court's newtrial ruling for an abuse of discretion, see, e.g., United States
v. Gonzalez, 949 F.3d 30, 34 (1st Cir. 2020), and because we do
not have full briefing on the defendants' arguments in support of
their request for a new trial, we remand this request to the
District Court, in accord with the requests of the parties.
Outcome: We thus reverse the District Court's post-verdict
judgments of acquittal, reinstate the jury's convictions, and
remand to the District Court for further proceedings consistent
with this opinion.
Plaintiff's Experts:
Defendant's Experts:
Comments: