United States of America v. Organic Pastures Dairy Company LLC et al, No. 1:2008cv01786 - Document 48 (E.D. Cal. 2010)
Court Description: MEMORANDUM DECISION AND ORDER RE: United States of America's 22 Motion for Summary Judgment, signed by Judge Oliver W. Wanger on 4/20/2010. (Kusamura, W)
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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 EASTERN DISTRICT OF CALIFORNIA 7 8 9 UNITED STATES OF AMERICA, 10 1:08-CV-01786-OWW-GSA Plaintiff, MEMORANDUM DECISION AND ORDER RE: UNITED STATES OF AMERICA S MOTION FOR SUMMARY JUDGMENT (Doc. 22.) 11 12 13 14 v. ORGANIC PASTURES DAIRY COMPANY, et al., 15 Defendants. 16 I. 17 18 INTRODUCTION This matter is before the Court on the government s motion for 19 summary judgment 20 government seeks to permanently enjoin Defendants Organic Pastures 21 Dairy Company and Mark McAfee from distributing and/or introducing 22 raw milk across state lines, in contravention of the Federal Food, 23 Drug, and Cosmetic Act ( FDCA ). 24 injunctive 25 Defendants in December 2008, resolving criminal cases against them. 26 In the agreements, Defendants acknowledged that Organic Pastures 27 employees violated the FDCA by distributing raw milk to out-of- 28 state customers in 2007. relief and is entry based of on a permanent The The government s request for separate 1 injunction. agreements signed by 1 Defendants do not dispute the liability portions of the United 2 States motion. Instead, they oppose the breadth of the 3 government s proposed relief, arguing the terms of the permanent 4 injunction are duplicative of their criminal plea arrangements, 5 impose on California s regulation of the raw milk industry, are 6 financially crippling, and constitute a personal attack on Mr. 7 McAfee. 8 milk into interstate commerce following their criminal pleas, 9 therefore the permanent injunction is unnecessary. Defendants also contend that they ceased distributing raw 10 II. 11 FACTUAL BACKGROUND 12 The following facts are taken from the parties submissions in 13 connection with motion for summary judgment. The facts are largely 14 undisputed.1 15 16 A. The Parties 17 Defendant Organic Pastures Dairy Company ( Organic Pastures ) 18 is a California Corporation that maintains its principal place of 19 business in Fresno, California. 20 engaged in milking cows and packaging, labeling, selling, and 21 distributing raw milk and raw milk products including cream, (SUF 1.) Organic Pastures is 22 23 24 25 26 27 1 Unless otherwise noted, the facts are undisputed. (See Stmt. of Undisp. Facts in Support of Def. s Mot. for Summ. J. ( SUF ), filed by the United States on Dec. 8, 2009). Defendants object to much of the evidence submitted by the United States on various grounds. Virtually all of Defendants objections are without merit. To the extent that Defendants sole dispute with facts is based upon the inadmissability of the government s evidence, and is not challenged by any admissible evidence submitted by Defendants, these facts are viewed as undisputed. 28 2 1 butter, buttermilk, and colostrum. (SUF 3.) 2 customers its 3 including national retailer Whole Foods Market, and via its 4 website (www.organicpastures.com). in California, Defendant 5 Mark selling McAfee It has over 60,000 products ( McAfee ) is the (SUF 2.) to retailers, co-founder and 6 managing member of Organic Pastures. He is responsible 7 for the day-to-day operations of Organic Pastures, including all 8 manufacturing and distributing operations. (Id.) 9 10 B. Defendants Interstate Raw Milk Practices 11 According to the United States, Defendants have a long history 12 of 13 customers. 14 Prosecution 15 Pastures employees distributed raw milk to out-of-state customers 16 in 2007. Specifically, Defendants admitted that two shipments were 17 made to out-of-state customers with the knowledge and consent of 18 Organic 19 detection: 20 21 22 23 24 25 selling raw milk In late and 2008, Agreements, Pastures and raw milk products pursuant to Defendants were labeled to separate acknowledged as out-of-state pet Deferred that food Organic to avoid On October 10, 2007, one or more of defendant Organic Pastures' agents or employees, with the knowledge and consent of Organic Pastures, caused a box of raw milk and dairy products, labeled as or otherwise represented to be "pet food," to be sent by defendant Organic Pastures from Fresno, California to Renton, Washington, knowing that the intended use of such foods and/or dietary supplements was for human consumption. The box contained one ½ gallon of unpasteurized raw whole milk and one ½ gallon of unpasteurized raw Super Choco Colostrum. The invoice number was #356546557. 26 27 28 On October 16, 2007, one or more of defendant Organic Pastures' agents or employees, with the knowledge and consent of Organic Pastures, caused one box of raw milk and dairy products, labeled as or otherwise 3 represented to be "pet food," to be sent by defendant Organic Pastures from Fresno, California to Reno, Nevada, knowing that the intended use of such foods and/or dietary supplements was for human consumption. The box contained one ½ gallon of unpasteurized raw whole milk and one pint of unpasteurized raw colostrum. The invoice number was #165465524. 1 2 3 4 These products were foods and/or dietary supplements, and were misbranded when so introduced into or delivered for introduction into interstate commerce, in that they were falsely and misleadingly labeled as, or otherwise represented to be "pet food," when they were actually intended for human consumption, in violation of Title 21, United States Code, Sections 331(a) and 333(a)(1). 5 6 7 8 9 10 (Doc. 24-14, Defendant McAfee s Deferred Prosecution Agreement, 11 at 9:3-9:23.2) 12 In addition to the criminal plea agreements, the government 13 supports its motion with evidence gathered by the FDA during its 14 investigation of Organic Products. 15 packaging 16 testimonials, statements made by Organic Pastures employees, and 17 McAfee s own statements to FDA investigators and various news 18 outlets. 19 Defendants shipping containers, which stated that the products 20 are labeled and intended for: Pet Food consumption only. 3 21 Nowhere 22 indicating that the products were to be limited to pet consumption 23 or identifying the products as pet food. labels, Organic This evidence consists of Pastures web content, website First, the government points to the exterior labeling of on the individual retail products was there (SUF 16-17.) a label However, 24 25 26 2 Identical language is contained in Defendant Organic Pastures Plea Agreement, signed on November 26, 2008. (Doc. 2415, 10:9-10:26.) 27 3 28 The relevant shipping containers were for products sold in interstate commerce in 2007. 4 1 the individual retail products bore statements such as the best 2 milk you ll ever taste, and that Organic Pastures products are 3 highly recommended by [...] thousands of happy healthy people. 4 (SUF 5 statement 6 Defendants raw milk and raw milk products are intended for human 7 consumption: 17.) on individual retail products clearly shows that Raw (unpasteurized) milk and raw milk dairy products may contain disease-causing micro-organisms. Persons at highest risk of disease from these organisms include newborns and infants; the elderly; pregnant women; those taking corticosteriods, antibiotics or antacids; and those having chronic illnesses or other conditions that weaken their immunity. 8 9 10 11 12 On the United States account, a prominent packaging (SUF 18.) 13 The United States also contends that statements by Defendants 14 employees demonstrate that Organic Pastures distributed and/or 15 distributes raw milk and raw milk products in interstate commerce 16 for human consumption. 17 an email from Kaleigh McAfee, Manager of Sales and Marketing at 18 Organic Pastures, to an undercover FDA investigator in September 19 2007. 20 absolutely send raw milk to all fifty states and espouses the 21 health benefits of raw milk - that it cures asthma. 22 The email does not state that raw milk is intended to be used as 23 pet food. 24 In particular, the United States points to In the email, Ms. McAfee states that Organic Pastures can (SUF 21.) (SUF 22.) The United States identifies another email, this one sent by 25 Defendant McAfee to an FDA public affairs specialist in 2007. 26 the email McAfee stated that when raw milk is tested and labeled 27 as intended for direct human consumption it is extremely safe. 28 5 In 1 (SUF 23-24.) McAfee also indicated his intention to sell raw milk 2 to humans and declared that there is nothing the FDA can do about 3 it. (SUF 25.) 4 In a 2005 Portland Tribune article, Defendant McAfee stated 5 that Organic Pastures consciously labels its raw milk products as 6 pet food to avoid federal regulation of the interstate sale of 7 raw milk: The neat thing about the law is that it can be interpreted in many ways. The state of Oregon understood that there was a loophole by putting a pet sticker on the product. And there s no regulation that you can t eat pet food, either. I am a revolutionist in this, and I won t overlook any loophole that will get the milk out there. 8 9 10 11 12 (SUF 55.) 13 The United States provides additional examples of Defendants 14 intent to distribute raw milk and raw milk products into interstate 15 commerce for human consumption. 16 several 17 concerning 18 creatively labeled its products for sale outside of California in 19 such a way that it is not illegal under the law [...] this provides 20 raw food drinkers the freedom to choose a raw product over a dead 21 product. statements the made pet by food The United States points to Organic Pastures labeling: It is also great pet food. on [Organic its website Pastures] has (SUF 50.) 22 According to the United States, Defendants employees have 23 also made statements reflecting Organic Pastures intention to sell 24 raw milk in interstate commerce. In July 2005, an FDA investigator 25 ordered 26 website. 27 called Organic Pastures to inquire about the pet food label. (Id.) several raw (SUF 52.) milk products through Organic Pastures When the investigator received the items, he 28 6 1 The Organic Pastures sales representative responded that the 2 product was safe for humans and that the pets only sticker is a 3 legal loophole for us to sell out of state. (Id.) 4 5 C. Related Criminal Proceeding 6 While this case was pending, Defendant Organic Pastures faced 7 similar charges in a criminal action involving similar conduct. 8 The criminal matter concluded in settlement by plea agreement on 9 December 22, 2008 and was approved by Magistrate Judge Sandra M. 10 Snyder on January 9, 2009. 11 agreement, Defendant Organic Pastures pled guilty to two counts of 12 misdemeanor 13 interstate commerce of misbranded food, in violation of 21 U.S.C. 14 §§ 331(a) and 333(a)(1). 15 a deferred prosecution agreement whereby he agreed to the filing of 16 a two count information charging him and Organic Pastures with the 17 same violations. (SUF 71.) introduction (SUF 69.) and delivery (SUF 70.) Pursuant to the plea for introduction into Defendant McAfee entered into 18 In these agreements, both Defendants admitted that: (1) on two 19 separate occasions one or more of defendant Organic Pastures 20 agents or employees, with the knowledge and consent of Organic 21 Pastures, caused [a] box of raw milk and dairy products, labeled as 22 or otherwise represented to be pet food, to be sent by defendant 23 Organic Pastures into interstate commerce, knowing that the 24 intended use of such foods and/or dietary supplements was for human 25 consumption; and (2) Organic Pastures raw milk and raw milk 26 products 27 misbranded when so introduced into or delivered for introduction 28 into were interstate foods and/or commerce, dietary in that 7 supplements, they were and falsely were and 1 misleadingly labeled as, or otherwise represented to be pet food, 2 when they were actually intended for human consumption in violation 3 of [21 U.S.C. §§ 331(a) and 333(a)(1).] (SUF 72-73.) 4 III. 5 On 6 November 20, PROCEDURAL BACKGROUND 2008, United civil 8 violated: (1) 21 U.S.C. § 331(a), by introducing or delivering, 9 and causing to be introduced or delivered, into interstate commerce food 11 343(a)(1); (2) the Public Health Services Act ( PHSA ), 42 U.S.C. 12 § 264, by distributing raw milk and raw milk products in interstate 13 commerce in final package form for human consumption; and (3) 21 14 U.S.C. § 331(d), by introducing or delivering, and causing to be 15 introduced or delivered, into interstate commerce new drugs within 16 the meaning of 21 U.S.C. § 321(p) that are neither approved under 17 21 U.S.C. § 355(a), nor exempt from approval pursuant to 21 U.S.C. 18 § 355(I). 20 21 the meaning of Defendants 10 19 within that a for misbranded alleging filed complaint is injunction, States 7 that permanent the 21 U.S.C. § (Doc. 1.) Defendants filed their Answer to Plaintiff s Complaint on January 20, 2009. (Doc. 2.) The United States moved for summary judgment on December 8, 22 2009. (Doc. 22.) 23 submitted: 24 ( Memorandum ); (2) a Statement of Undisputed Facts in Support of 25 its Motion;; (3) the Declaration of Barbara Cassens; (4) the 26 Declaration of Jeanne M. Weishaar; (5) the Declaration of Stefano 27 Luccioli, M.D.; (5) a Proposed Order of Permanent Injunction; 28 and (6) several hundred pages of exhibits, most of which appear to (1) In support of its motion, the United States a Memorandum 8 of Points and Authorities 1 be related to the FDA s investigation of Organic Pastures. 2 (Docs. 22-2 through 24-16.) Defendants opposed the United States motion on January 19, 3 4 2010. (Doc. 31.) In support of its opposition, Defendants 5 submitted: (1) a Memorandum opposing the motion ( Opposition ); (2) 6 the Declaration of Mark McAfee; (3) the Declaration of J. Kenneth 7 Gorman; and (4) a Request for Judicial Notice.4 8 36.) (Docs. 33 through 9 Defendants do not dispute the liability portion of the United 10 States motion, i.e., they acknowledge that they violated the FDCA 11 and 12 interstate commerce in 2007. 13 the unapproved raw drugs provision of the FDCA. 14 oppose 15 duplicative of their criminal plea arrangements, inconsistent with 16 the State of California s regulation of the raw milk industry, 17 cost-prohibitive, and constitutes a personal attack on Mr. McAfee. PHSA by the introducing motion on and/or distributing raw milk into They also concede that they violated grounds that the Instead, they relief proposed is 18 IV. 19 20 Summary LEGAL STANDARD judgment/adjudication is appropriate when "the 21 pleadings, the discovery and disclosure materials on file, and any 22 affidavits show that there is no genuine issue as to any material 23 fact and that the movant is entitled to judgment as a matter of 24 law." Fed. R. Civ. P. 56©. The movant "always bears the initial 25 26 27 28 4 Defendants request judicial notice of California Food and Agricultural Code §§ 32731 through 36061. (Doc. 34.) As the United States does not object and the matters are of public record, the request is GRANTED. 9 1 responsibility of informing the district court of the basis for its 2 motion, 3 depositions, answers to interrogatories, and admissions on file, 4 together with the affidavits, if any, which it believes demonstrate 5 the absence of a genuine issue of material fact." Celotex Corp. v. 6 Catrett, quotation 7 omitted). and 477 identifying U.S. 317, those 323 portions (1986) of (internal the pleadings, marks 8 Where the movant will have the burden of proof on an issue at 9 trial, it must "affirmatively demonstrate that no reasonable trier 10 of fact could find other than for the moving party." Soremekun v. 11 Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). 12 respect to an issue as to which the non-moving party will have the 13 burden of proof, the movant "can prevail merely by pointing out 14 that there is an absence of evidence to support the nonmoving 15 party's case." With Soremekun, 509 F.3d at 984. 16 When a motion for summary judgment is properly made and 17 supported, the non-movant cannot defeat the motion by resting upon 18 the 19 non-moving party must set forth, by affidavit or as otherwise 20 provided in Rule 56, specific facts showing that there is a 21 genuine issue for trial. 22 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986)). A 23 non-movant's bald assertions or a mere scintilla of evidence in his 24 favor are both insufficient to withstand summary judgment. FTC v. 25 Stefanchik, 559 F.3d 924, 929 (9th Cir. 2009). 26 must 27 affirmative evidence from which a jury could find in his favor. 28 Id. (emphasis in original). "[S]ummary judgment will not lie if [a] allegations show a or denials genuine of its own pleading, rather the Soremekun, 509 F.3d at 984. (quoting issue of 10 material fact [A] non-movant by presenting 1 dispute about a material fact is genuine, that is, if the 2 evidence is such that a reasonable jury could return a verdict for 3 the nonmoving party." 4 whether a genuine dispute exists, a district court does not make 5 credibility determinations; rather, the "evidence of the non-movant 6 is to be believed, and all justifiable inferences are to be drawn 7 in his favor." Anderson, 477 U.S. at 248. In determining Id. at 255. 8 V. 9 10 According to the DISCUSSION United States, Defendants history of 11 distributing raw milk and raw milk products across state lines 12 establishes that Defendants violated 21 U.S.C. § 331(a) and 42 13 U.S.C. § 264. 14 marketing of raw milk as a therapeutic cure for asthma and other 15 health conditions violated 21 U.S.C. § 331(d) s bar on unapproved 16 new drugs. 17 seeks an injunction forbidding Defendants from engaging in either 18 of these practices.5 19 The United States also contends that Defendants Pursuant to 21 U.S.C. § 332(k), the United States Defendants do not dispute the liability portions of the United 20 States motion. In particular, Defendants acknowledge that they 21 introduced and/or distributed raw milk into interstate commerce in 22 2007 in violation of 21 U.S.C. § 331(a) and 42 U.S.C. § 264(a). 23 (See Doc. 31, 4:19-4:20 ( [Defendants] do[] not dispute that the 24 deferred prosecution agreement and plea agreement bar any argument 25 5 26 27 28 The government provides a Proposed Order of Permanent Injunctive Relief, outlining the proposed terms for injunctive relief. (Doc. 22-4.) Defendants stipulate to the initial three paragraphs of the proposed injunction. Defendants, however, object to the remainder of the proposed injunction on various grounds. 11 1 [on] 2 [....] )).6 3 new drugs claim, which was advanced pursuant to 21 U.S.C. § 4 331(d).7 5 government s proposed injunction. 6 liability on the charges of mislabeling its conduct Nor do Defendants oppose the government s unapproved Defendants do, however, object to the breadth of the Section 332(a) of Title 21 of the United States Code empowers 7 district courts to enjoin violations of § 331. 21 U.S.C. § 332(a). 8 Here, the unopposed evidence shows that Defendants have violated 9 the FDCA by distributing misbranded raw milk at least two times 10 since 2007; it also demonstrates that Defendants impermissibly 11 promoted the therapeutic benefits/capabilities of raw milk. 12 SUF 5, 11, 9-79; 13 Agreement. ) 14 Defendants violated §§ 331(a) and (d) of the FDCA, the government 15 is entitled to an injunction if it also establishes a cognizable 16 danger of recurrent violations. (See Doc. 24-14, McAfee s Deferred Prosecution Because the government has established that See United States v. Odessa Union 17 18 19 20 21 6 According to Defendants, although the plea agreements establish liability as a matter of law, they do not establish the penalty as a matter of law, and the drastic remedies sought by the Federal government are not warranted in any respect. (Doc. 31, 5:16-5:18.) 7 22 23 24 25 26 27 28 In opposing the United States motion for summary judgment, Defendants initially argue that the government did not present any evidence that any consumer purchased raw milk with the expectation that it was a drug. Defendants also challenge the evidentiary basis to elevate raw milk to drug status. Defendants, however, withdraw from those positions, conceding that the United States satisfied its new drug claim under 21 U.S.C. § 331(d). Specifically, Defendants state that the classification of raw milk as a drug is dubious at best, and in any case, moot. (Doc. 31, 5:19-5:20) (emphasis added). Because Defendants did not oppose the United States § 331(d) motion, a thorough analysis of § 331(d) and the interpreting case law is not required. 12 1 Warehouse Co-op, 833 F.2d 172, 176 (9th Cir. 1987); United States 2 v. Diapulse Corp. of Am., 457 F.2d 25, 28 (2d Cir. 1972) ( The 3 passage of the [Food, Drug, and Cosmetic Act] is, in a sense, an 4 implied finding that violations will harm the public and ought, if 5 necessary, be restrained. ). 6 may be inferred from past unlawful conduct.8 7 F.2d at 176; United States v. Blue Ribbon Smoked Fish, Inc., 179 F. 8 Supp. 2d 30, 50 (E.D.N.Y. 2001) (citations omitted). 9 The government asserts The probability of future violations that because Odessa Union, 833 Defendants actively 10 violated the FDCA in 2007 by shipping raw milk to out-of-state 11 customers, they are reasonably likely to violate the FDCA in the 12 future. 13 promotion of raw milk and raw milk products as a therapeutic cure 14 for various health conditions. 15 Defendants have flouted the law for years, and the record is 16 replete with evidence suggesting that Defendants are likely to 17 resume their illegal conduct with the criminal agreements are 18 dissolved within a year. The government applies the same reasoning to Defendants On the government s account, 19 Defendants contend that even if their past conduct violated 20 the FDCA, they ceased much of the behavior complained of by the 21 government years ago. 22 proposed 23 shipping raw milk out-of-state in 2007 and have removed from injunction is Specifically, Defendants rejoin that the largely unnecessary as they stopped 24 8 25 26 27 28 The probability of future violations may also be inferred based on Defendants numerous statements of intent to ignore and violate the prohibition against interstate raw milk sales. Id. The government argues that Defendants are reasonably likely to violate the FDCA in the future based on Defendants statements of intent to violate the FDCA s prohibitions against interstate raw milk sales. 13 1 Organic Pastures website all claims/testimonials concerning raw 2 milk s health benefits. 3 improvement and their intention to comply with FDCA requirements 4 are relevant to the inquiry, the Ninth Circuit has emphasized that 5 a past pattern of activity bears heavily on whether the offender is 6 likely to violate the FDCA in the future. 7 F.2d at 176 ( the district court must weigh [the offender s] 8 continuing 9 violations, since an inference arises from [the offender s] past [] problems Although Defendants progress towards in light of its See Odessa Union, 833 extensive history of 10 violations that future violations are likely to occur. ). Courts 11 have also recognized the carry-over effects of marketing and 12 promotional claims in actions arising under the FDCA. 13 States v. Lane Labs-USA, Inc., 324 F. Supp. 2d 547, 574 (D.N.J. 14 2004). See United 15 Here, given the history of admitted violations by Defendants, 16 as well as their acknowledgments concerning the promotion of raw 17 milk s 18 likelihood of additional FDCA violations. 19 at 176; 20 (finding that likelihood of continuing FDCA violations was great 21 despite the company s arguments that it had not violated the FDCA 22 for many years.9). therapeutic effects, the government has established a Odessa Union, 833 F.2d see also Lane Labs-USA, Inc., 324 F. Supp. 2d 547, 574-76 Given the uncontested facts, Defendants cannot 23 24 25 26 27 28 9 In Lane Labs-USA, the United States moved to permanently enjoin Defendants from distributing and marketing certain products made from shark cartilage. The Court found that Defendants violated the FDCA, §§ 331(a), 331(d), and 331(k), and issued a permanent injunction. In response to Defendants arguments that it had ceased violated the FDCA, the Court stated: Defendants further contend that they have rectified 14 1 satisfy the burden to establish that there is no reasonable 2 expectation that the wrong will be repeated. 3 W.T. Grant, 345 U.S. 629, 633 (1953). 4 United States v. That is not the end of the analysis, however. In FDCA cases, 5 injunctive relief must be used sparingly, to prevent future harm, 6 and not to punish past violations. 7 Laboratories, Inc., 812 F. Supp. 458, 487-88 (D.N.J. 1993) (citing 8 SEC v. Bonastia, 614 F.2d 908, 912 (3d Cir. 1980)). 9 court has considerable discretion in granting injunctive relief and 10 in tailoring injunctive relief, but the relief must not be overly 11 broad in light of the conduct of the enjoined party. 12 Odessa Union, 833 F.2d at 177; see also United States v. Captain's 13 Select Seafood, Inc., No. 08-CV-1658-PJS-RLE, 2009 WL 398081 at *2 See United States v. Barr A district See generally 14 15 16 17 18 19 any past missteps [...] Defendants claim that they have cooperated with the FDA in every regard by complying with FDA inspections, permitting access to Lane Labs' facilities and supplying records and materials requested by the Government. Defendants argue that the broad reach of the requested injunction is meant to impermissibly punish Lane Labs for past violations that it has worked to rectify [...] 20 21 22 23 24 25 26 27 28 However, Defendants' past pattern of activity bears upon whether Lane Labs is likely to violate the FDCA in the future. Courts have recognized the carry-over effects of marketing and promotional claims in actions arising under the FDCA. Courts have also looked to a defendant's repeated violations when issuing injunctions in other types of cases [...] Given Defendants' past pattern of behavior, in which Lane Labs has purposefully flouted the FDCA framework throughout the pendency of this lawsuit, this Court finds that an injunction of this scope is warranted. (Id. at 573-75) (citations and quotations omitted). 15 1 (D. Minn. Feb. 17, 2009) (finding the government s injunction 2 overly 3 conduct). broad and Defendants 4 disproportional oppose the in light government's of the challenged proposed permanent 5 injunction on a number of grounds. 6 arguments is that the proposed injunction is unneeded and overly 7 broad. 8 unnecessary because Defendants ceased distributing raw milk in 9 interstate commerce in 2007. According to Defendants, The substance of Defendants' the proposed injunction is Defendants also criticize the scope 10 of the proposed injunction, arguing that it give[s] the FDA 11 unlimited, undefined discretion to order [Organic Pastures] to do, 12 or stop doing, anything the FDA determines, which threatens 13 Organic Pastures financial viability. 14 The government responds that the proposed injunction in the 15 case is no different than the injunctions in Odessa Union, 833 F.2d 16 172, Lane Labs-USA, Inc., 324 F. Supp. 2d 547, and United States v. 17 Endotec, Inc., 06-CV-1281-ORL-18KRS, 2009 WL 3111815 (M.D. Fla. 18 Sep. 28, 2009). 19 proposed injunctive relief is both warranted and necessary to 20 ensure that Defendants do not resume their unlawful conduct. 21 to FDA involvement, the government offers a similar take: the terms 22 are essential to enable the FDA to ensure [] compliance with the 23 FDCA, the PHSA, and the regulations. Specifically, the government argues that the As 24 Here, the injunction sought by the government is overly broad 25 in light of Organic Pastures and McAfee s conduct. In particular, 26 the 27 written statement from any purchaser agreeing that it will not 28 sell or distribute Defendants raw milk products outside the state government s proposed injunction 16 would require a signed 1 of California. 2 statement, regardless of the type of buyer (individual or entity), 3 location, size or distribution history. 4 tailored to either Organic Pastures or McAfee s prior conduct and 5 lacks an interstate nexus. 6 Defendants have ever engaged in a straw purchase or a resale 7 agreement involving interstate distribution. 8 developed during an exchange between the government s counsel and 9 the Court during oral argument on March 12, 2010: 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Court: This would require any purchaser to sign such a Such a provision is not Moreover, there is no evidence that These arguments were Paragraph 11 [...] calls for the obtaining of written statements from any purchaser or a reseller that the person or entity will not sell outside the State of California and the defendants are required to maintain copies of the signed statements and make them immediately available to the FDA on request. The Court has the concern that this paragraph does not say interstate. Conceivably, one way to read this paragraph is that every carton of milk that s sold or any raw milk product that is sold is going to require the consumer and the retailer and/or wholesaler to sign this statement. And that would, I think, have such a chilling effect on the conduct of business that it would put the defendant out of business. And because it says to any person or entity that purchases these products and holds these products for resale to any other person or entity. And so that could be consumer, that could be mom and pop - any - not even a retail establishment. At a fair or a theater or any place where milk products can be sold and then resold to other consumers. And if you ve got the prohibition that it can t be done, in effect, what you re doing is you are making the defendant the enforcement arm of the FA to police on an industry wide basis [...] requiring that person to get the signed statement and then turn it over to the FDA or to have the defendant be the custodian, to make it available to the FDA for inspection. When the prohibition is that they can t do it. And this adds a level of burden. We haven t had any statistics from the defendant as to how 17 many, if you will, resellers they sell to, But the Court can certainly conceive that this isn t just, for instance, grocery stores or other distributors who have large customer bases. This applies to anybody and everybody who s going to resell milk. 1 2 3 4 Counsel: And Your Honor, you did - I think the operative language in here is that it applies to entities that hold products for resale. Court: Right. Counsel: I think the FDA - the government would be remiss in not including this paragraph to prevent the scenario where, you now, straw purchasers are middle men who are not named in the order and have no notice of the order can participate in a chain transaction that will milk or other raw milk products across [...] Court: Well, for instance, is there one iota of evidence that the defendant has ever done this? Counsel: Your Honor, the defendant s wrote [...] that their employees had knowledge that milk had been sold to people who were intending to take milk across state lines [...] the reason we are asking for written statements for people that are going to resell [raw milk] is that those people, who are taking milk across state lines, now have knowledge and they are on notice that their conduct is illegal and that the FDA can proceed against those people [...] but the statement is here, you know, in part to almost protect the defendants for tho people they know are reselling this milk [...] Court: Well, how about the prohibitory language if it were on a label that simply said not intended for resale if - and again, though, it seems to me completely unworkable because of the various channels of distribution that these kinds of products are sold through. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 My sense of it is - I ve heard what you said. It seems at best unprecedented and it seems unduly burdensome. 24 25 26 27 28 (Reporter s Transcript ( RT ), March 12, 2010, 27:12-30:19.) Many of the proposed injunction s remaining provisions are similar. For example, the proposed injunction requires Defendants 18 1 to 2 delivering raw milk products across state lines, which are already 3 barred pursuant to 21 U.S.C. § 331(a) and by the 2008 agreements 4 settling 5 perpetuity and does not provide an exception in the event the 6 prohibition on the interstate sale of raw milk is repealed or 7 changed. 8 approval of the FDA to conduct a legal enterprise. 9 obtain written their authorization criminal cases. from The the FDA in provision advance continues of in In that scenario, Defendants would need the written This case differs from those involving adulterated food 10 under 21 U.S.C. § 331(a) and § 21 U.S.C. § 342.10 11 the government argued that the facts of this case were similar to 12 those analyzed and invoked in Odessa Union. 13 reasoning remains instructive it is cited throughout this opinion 14 - the factual comparisons are better suited for the more typical 15 adulteration 16 working conditions. 17 from Odessa Union, where FDA inspections revealed that the wheat in 18 the Odessa-operated elevators was moldy and contaminated with live 19 and dead insects, insect larvae and rodent excreta. 20 Union, 833 F.2d at 174 ( In May 1985, [FDA] inspections showed live 21 insect infestation at each of seven facilities [...] [t]wo stations 22 contained rodent excreta on the grain-conveying equipment. In 1983 case involving contaminated At oral argument, While Odessa Union's food and insanitary The circumstances here are distinguishable See Odessa 23 24 25 26 27 28 10 A food is deemed adulterated under 21 U.S.C. § 342(a)(4) if processed under insanitary conditions, whether [the food has] actually ... become dangerous to health or not. Blue Ribbon Smoked Fish, Inc., 179 F. Supp. 2d at 44. To prove adulteration under § 342(a)(4), the government must show a reasonable possibility that, by virtue of the insanitary conditions under which the food is prepared, packed, or held, an article of food may have been rendered filthy or injurious to health. Id. 19 1 and 1984, the Washington State Department of Agriculture [...] 2 inspected Odessa's storage facilities and discovered significant 3 sanitary problems [...] [a]s a result of the [] inspections, the 4 government sought a preliminary injunction to enjoin the sale and 5 movement of wheat held in Odessa's elevators until Odessa complied 6 with FDCA standards. ). 7 The same reasoning applies to the remaining adulterated food 8 cases cited in the government s motion, United States v. Blue 9 Ribbon Smoked Fish, Inc., 179 F. Supp. 2d 30 (E.D.N.Y. 2001) and 10 United States v. Union Cheese Co., 902 F. Supp. 778 (N.D. Ohio 11 1995). 12 their operating plants were insanitary and they distributed 13 adulterated []food on a continued basis throughout the years. 14 Specifically, in Blue Ribbon Smoked Fish, FDA inspections revealed 15 old seafood product residue on food contact surfaces; mold in the 16 cooler, freezer, and ceiling of the slicing and packing room; a 17 plastic dividing curtain that touched the floor and came into 18 contact with fish; liquid dripping onto seafood from other seafood 19 stored above; and old dripping product residue on the walls and fan 20 shrouds in the cold smoking/drying room.11 21 inspections 22 monocytogenes, a foodborne pathogen, in food samples and in the 23 plant environment. In those cases, defendants were enjoined on grounds that at the plant also Id. at 46. revealed Id. at 36-37. the presence of FDA L. As in Odessa Union, the facts and 24 11 25 26 27 28 The FDA also found that the plant's construction was not designed to prevent bacterial contamination and filth and that there were inadequate doors or barriers between the slicing and packing room and the garage and toilet, lack of control over foot traffic and product flow to prevent cross-contamination of the finished ready-to-eat product and that surfaces were in disrepair making adequate cleaning impossible. Id. at 36-37. 20 1 reasoning of Blue Ribbon Smoked Fish involved contaminated food and 2 unhealthy working conditions, circumstances not present in this 3 case.12 4 In this context, the true defect in the government s proposed 5 injunction comes to light: the injunction mirrors those issued in 6 Odessa Union and Blue Ribbon Smoked Fish, however, there is no 7 evidence that Defendants products are adulterated, contaminated, 8 or that they are causing harm to the public.13 9 U.S.C. § 342 case. This is not a 21 Instead, the government s evidence is that 10 Defendants mislabeled, misbranded, and shipped raw milk and raw 11 milk products across state lines in violation of the FDCA. 12 well-established precedent, injunctive relief must be narrowly- 13 tailored to reflect that evidence and prevent specific harms 14 threatened. On these facts, the suggestion that government should 15 have access 16 contamination/adulteration cases is unpersuasive. 17 the The distinction and control between this normally case and associated those Under with involving 18 19 20 21 22 23 24 25 26 27 28 12 At oral argument, counsel for the United States stated: [T]he FDA has not conducted an inspection of the facility to ascertain their compliance with the [FDCA] and the [PHSA]. This fact alone distinguishes this case from Odessa Union and Blue Ribbon Smoked Fish. 13 Paragraph 14 of the government s proposed injunction is instructive: Duly authorized representatives of FDA shall be permitted, without prior notice and as and when FDA deems necessary to make inspections of Defendants facilities [...] FDA representatives shall be permitted prompt access to buildings, equipment, in-process and finished materials, containers, labeling, and other material therein; to take photographs and make video recordings; to take samples of Defendants finished and unfinished materials and products [....] . (Doc. 22-4, ¶ 14) (emphasis added). The record in this case does not support such expansive injunctive relief. This is not a 21 U.S.C. § 342 case. 21 1 contamination, such as Odessa Union and Blue Ribbon Smoked Fish, 2 was developed in detail in open court during oral argument. 3 reference 4 facilities without prior notice, which the government requested in 5 paragraph 14 of the proposed injunction, the Court stated: 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 to the FDA s ability to inspect Organic In Pastures [Paragraph 14 states that] [d]uly authorized representatives shall be permitted without prior notice and as and when FDA deems necessary to make an inspection of their facilities, et cetera, et cetera, et cetera. And again, if this were a dirty operator, if you had found conditions in the plant that would cause you to distrust their operations, their sanitation practices, the integrity of the products, this might be justified. But there s no evidence that the defendants products are adulterated or contaminated or that they are causing harm to the public. And again, the law is very clear[] on injunctive relief. The injunctive relief should be no broader than is necessary to accomplish the purposes for which it is sought. And here, you re - it seems to me like you re mixing apples and oranges. You re taking language from orders where you have contamination, where you ve had adulteration, where you ve had other kinds of risks rather than - this is simply, if you will, mislabeling, referring to something as a drug, having beneficial effects, and the third thing is you want to prohibit interstate sales. And these kinds of inspections and these kinds of, if you will, access to buildings and the like, without a search warrant seem to me there s no facts whatsoever to justify them. If you want a records inspection provision, to inspect sales records, to inspect invoices, that s something entirely different, That would be consistent with what you re seeking here. But, in other words, here you re asking for remedies for which there s no evidence whatsoever to support. 24 (RT, March 12, 2010, 33:23-34:25.) 25 Here, the government has demonstrated that Defendants violated 26 21 U.S.C. § 331(a) and (d), which prohibit distributing raw milk 27 across state lines and marketing raw milk s health benefits. 28 22 The 1 government has also established a likelihood of additional FDCA 2 violations 3 Government's motion for summary judgment is GRANTED and Defendants 4 shall 5 government s proposed injunction, however, is not narrowly-tailored 6 to the evidence and is more suited for a contamination/adulteration 7 case such as Odessa Union and Blue Ribbon Smoked Fish. 8 of the permanent injunction must comport with principles of equity 9 and be in harmony with the overall objectives of the legislation be under Ninth permanently Circuit enjoined 10 [the FDCA]. 11 1211, 1219 (7th Cir. 1979). 12 precedent. from such Therefore, distribution. the The The terms Commodity Futures Trading Comm'n v. Hunt, 591 F.2d injunction accordingly. The Court has fashioned the permanent 13 VI. 14 CONCLUSION For the foregoing reasons: 15 1. The government's motion for summary judgment is GRANTED. 18 2. Defendants Organic Pastures Dairy Company and Mark McAfee are 19 hereby enjoined from violating 21 U.S.C. § 331(a) and (d) as 20 follows: 16 17 21 22 A. Defendants and their directors, officers, agents, 23 representatives, employees, attorneys, successors, assigns, and any 24 and all persons in active concert or participation with them must 25 not introduce or deliver for introduction into interstate commerce 26 any food that is misbranded under 21 U.S.C. § 343(a); 27 28 B. Defendants and their 23 directors, officers, agents, 1 representatives, employees, attorneys, successors, assigns, and any 2 and all persons in active concert or participation with them must 3 not introduce or deliver for introduction into interstate commerce 4 any unapproved new drugs within the meaning of 21 U.S.C. § 5 321(p); 6 7 C. Defendants and their directors, officers, agents, 8 representatives, employees, attorneys, successors, assigns, and any 9 and all persons in active concert or participation with them must 10 not introduce or deliver for introduction into interstate commerce 11 raw milk or raw milk products in final package form within the 12 meaning of 42 U.S.C. § 264(a); 13 14 D. Upon entry of this Order, Defendants and each and all of 15 their directors, officers, agents, representatives, employees, 16 attorneys, successors, assigns, and any and all persons in active 17 concert or participation with any of them who receive actual notice 18 of this Order by personal service or otherwise, are permanently 19 restrained and enjoined from directly and indirectly introducing 20 and delivering for introduction, and causing to be introduced and 21 delivered for introduction, into interstate commerce any raw milk 22 and raw milk products as defined at 21 C.F.R. § 1240.3(I) and (j), 23 including any products that contain raw milk and/or raw colostrum, 24 in any form (e.g., frozen, partially-frozen, liquid, dry, powdered) 25 for any intended use (e.g., human consumption, pet food, and any 26 other use) regardless of how labeled, described, represented or 27 designated, unless specifically authorized in writing by the FDA in 28 advance of any such introduction or delivery for introduction into 24 1 interstate commerce. If the FDCA is amended or modified to allow 2 the interstate sale of raw milk or raw milk products, advanced FDA 3 approval is not necessary and this order is amended accordingly 4 without the necessity for further Court action. 5 E. 6 Defendants shall maintain records regarding the sale 7 and/or distribution of all of Defendants raw milk and raw milk 8 products (including any products that contain raw milk and/or raw 9 colostrum) including, but not limited to, records demonstrating to 10 whom (name and address) products were sold and distributed, the 11 date 12 amount/quantity. Defendants shall also maintain at least one copy 13 of the following documentation with respect to their raw milk and 14 raw milk products (including any products that contain raw milk 15 and/or raw colostrum): (a) all label(s) affixed to the products; 16 (b) all stickers and labeling affixed to shipping containers; and 17 (c) all flyers, brochures, labeling, and other materials promoting, 18 describing, or otherwise relating to these products. Upon request, 19 FDA shall have prompt access to all of the records and/or documents 20 described herein. of sale and distribution, and the product type and 21 22 F. Upon entry of this Order, Defendants shall add the 23 following statement to the individual retail invoices and packaging 24 slips for each of Defendants raw milk and raw milk products 25 (including 26 colostrum): 27 introduction, introduce, or cause to be introduced into interstate 28 commerce, or deliver or cause to be delivered for introduction into any products Organic that contain Pastures 25 will raw no milk and/or raw longer offer for 1 interstate commerce, any unpasteurized raw milk or raw milk 2 products. Upon entry of this Order, Defendants shall also post 3 this written statement on all websites that Defendants own or 4 control and on all websites on which Defendants make available for 5 purchase (either via a hyperlink or reference to another website) 6 its raw milk and raw milk products (including any products that 7 contain raw milk and/or raw colostrum), including but not limited 8 to www.organicpastures.com. 9 displayed on each websites home page and on each page from which 10 Defendants products can be ordered through their website(s), by 11 mail, or by telephone. 12 also remove from their corporate vehicle or other locations it is 13 displayed, any reference to raw milk as a cure for asthma or any 14 statement/slogan promoting raw milk s health benefits. This statement shall be continuously Upon entry of this Order, Defendants shall 15 16 G. Upon entry of this Order, Defendants shall provide notice 17 to its commercial buyers, defined as those persons or entities 18 purchasing in excess of 2% of Defendants gross sales from raw 19 milk/raw 20 wholesale and/or retail redistribution, that its raw milk and raw 21 milk products are not to be sold or distributed outside the state 22 of California. 23 statement to the commercial retail invoices and packaging slips, 24 obtaining a signed written statement from the person or entity, or 25 sending a notarized letter to the appropriate mailing address 26 (person s place of business or entity s headquarters). 27 shall maintain copies of the selected method of notification and 28 shall make them immediately available to FDA upon request. milk products (combined on a yearly basis), or for Such notice can be accomplished by adding such a 26 Defendants If the 1 FDCA is amended or modified to allow the interstate sale of raw 2 milk or raw milk products, this provision shall no longer have 3 effect. 4 5 H. Within ten (10) calendar days after the entry of this 6 Order, Defendants shall provide a duly executed copy of this Order, 7 by personal service or certified mail (restricted delivery, return 8 receipt requested), to each and all of its directors, officers, 9 agents, representatives, employees, retail/wholesale consignees of 10 their raw milk and raw milk products (including any products that 11 contain 12 attorneys, 13 participation with any of them (including doing business as 14 entities). 15 entry of this Order, Defendants shall provide to FDA an affidavit 16 of compliance, stating the fact and manner of compliance with the 17 provisions 18 positions of all associated persons who have received a copy of 19 this Order and the manner of notification. 20 Defendants become associated, at any time after the entry of this 21 Order, with new associated persons, Defendants shall: (a) within 22 fifteen (15) calendar days of such association, provide a copy of 23 this Order to each such associated person by personal service or 24 certified mail (restricted delivery, return receipt requested), and 25 (b) on a quarterly basis, notify FDA in writing when, how, and to 26 whom the Order was provided. raw milk and and/or any and raw all colostrum), persons in successors, active assigns, concert or Within thirty-five (35) calendar days of the date of of this paragraph and identifying the names and In the event that 27 28 I. Within ten (10) calendar days of entry of this Order, 27 1 Defendants shall post a copy of this Order in a conspicuous 2 location 3 distribution facilities, and shall ensure that the Order remains 4 posted for a period of twelve (12) months at each location. in a common area at any of their manufacturing or 5 J. 6 Defendants shall notify the District Director, FDA San 7 Francisco Office, in writing at least fifteen (15) calendar days 8 before any change in ownership, character, or name of its business, 9 such as dissolution, assignment, or sale resulting in the emergence 10 of a successor corporation, 11 subsidiaries, 12 entities, or any other change in the corporate structure of Organic 13 Pastures, or in the sale or assignment of any business assets, such 14 as buildings, equipment, or inventory, that may affect compliance 15 with this Order. 16 any potential successor or assignee at least fifteen (15) calendar 17 days before any sale or assignment. 18 with an affidavit of compliance with this paragraph no later than 19 ten (10) calendar days prior to such assignment or change in 20 ownership. franchises, the creation affiliates, or or dissolution doing business of as Defendants shall provide a copy of this Order to Defendants shall furnish FDA 21 22 K. All notifications, certifications, reports, 23 correspondence, and other communications to FDA required by this 24 Order 25 District Office, 1431 Harbor Bay Parkway, Alameda, California, 26 94502-7070. shall be addressed to the Director, FDA San Francisco 27 28 L. This order does not in any way limit the FDA's ability 28 1 under generally applicable federal laws and regulations to 2 regulate, monitor, inspect, and supervise Organic Pastures Dairy 3 Company or any business operated, directly or indirectly, by Mark 4 McAfee. 5 Pastures Dairy Company or Mark McAfee of their obligations to 6 comply with generally applicable federal laws and regulations. This order also does not in any way relieve Organic 7 M. 8 Should the United States bring and prevail in a contempt 9 action to enforce the terms of this Order, Defendants shall, in 10 addition to other remedies, reimburse the United States for its 11 attorneys' 12 investigational and analytical expenses incurred in bringing such 13 an action. fees, court costs, expert witness fees, and 14 N. 15 This Court retains jurisdiction to issue such further 16 decrees and orders as may be necessary to enforce or modify this 17 Order and for granting such other relief as may be necessary and 18 appropriate for the proper disposition of this case. 19 20 IT IS SO ORDERED. 21 Dated: 9i274f April 20, 2010 /s/ Oliver W. Wanger UNITED STATES DISTRICT JUDGE 22 23 24 25 26 27 28 29
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