MEMORANDUM AND ORDER REGARDING OBJECTIONS TO REPORT AND RECOMMENDATION ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DEFENDANTS' MOTIONS TO SUPPRESS AND FOR SUMMARY JUDGMENT
On April 6, 1999 Magistrate Judge Kenneth P. Neiman recommendedthat the defendants' Motion to Suppress Evidence be denied, thatthe plaintiff's Motion for Summary Judgment be allowed and thatdefendant's Motion for Summary Judgment be denied. After acareful, de novo review of the motions, the Magistrate Judge'sReport and Recommendation, the defendants' objections and theGovernment's opposition to those objections, this court is firmlypersuaded that the Report and Recommendation is correct.
For the reasons set forth in Magistrate Judge Neiman's detailedand thoughtful memorandum, the defendants' Motions to Suppressand for Summary Judgment are hereby DENIED and plaintiff's Motionfor Summary Judgment is hereby ALLOWED. The allowance of theplaintiff's motion disposes of the issue of liability. The clerkwill set a date and time for aconference to establish a schedule to address the issue ofremedy.
It is So Ordered.
REPORT AND RECOMMENDATION REGARDING DEFENDANTS' MOTION TO SUPPRESS EVIDENCE (Docket No. 32), PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (Docket No. 30), and DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (Docket No. 33)
In its ten count complaint, the United States of America ("theGovernment") seeks civil penalties against James D. Little("Little") and Little's HSC Pharmacy ("Little's Pharmacy")(collectively "Defendants"), for alleged violations of theComprehensive Drug Abuse Prevention and Control Act of 1970,21 U.S.C. § 801 et seq. (the "Controlled Substances Act" or"Act"), and regulations promulgated thereunder. Each count of thecomplaint alleges a specific violation of the record keepingprovisions of the Act. In Counts I through V, the Governmentmaintains that Defendants had shortages of various Schedule IIsubstances. In Counts VI through VIII, the Government allegesthat Defendants had impermissible overages in violation of theAct. In Count IX, the Government claims that Defendants failed tofile the requisite power of attorney form for one of itspharmacists. And in Count X, the Government alleges thatDefendants failed to accurately record the receipt of a number ofcontrolled substances on the required Drug EnforcementAdministration ("DEA") form 222.
Presently before the court is the Government's motion forsummary judgment, in which it claims that Defendants are strictlyliable, as mandated by the Act, for the various violations provenby the evidence of record. In turn, Defendants have moved forsummary judgment claiming that the Government presentsinsufficient evidence as a matter of law. Defendants have alsomoved to suppress evidence obtained through an administrativewarrant.
All three motions have been referred to the court for a reportand recommendation pursuant to Rule 3 of the Rules for UnitedStates Magistrates of the United States District Court for theDistrict of Massachusetts. See 28 U.S.C. § 636(b)(1)(B). Forthe reasons which follow, the court will recommend thatDefendants' motions to suppress and for summary judgment bedenied and that the Government's motion for summary judgment beallowed.
I. SUMMARY JUDGMENT STANDARD
In accordance with Fed.R.Civ.P. 56(c), summary judgment will begranted if "there is no genuine issue as to any material fact"and "the moving party is entitled to a judgment as a matter oflaw." Magee v. United States, 121 F.3d 1, 3 (1st Cir. 1997).Once the moving party has demonstrated that no genuine issue ofmaterial fact exists, the burden is on the opposing party tocontradict that demonstration by coming "forward with specificprovable facts which establish that there is a triable issue."Aponte Matos v. Toledo Davila, 135 F.3d 182, 186 (1st Cir.1998). A genuine issue is one which a reasonable fact findercould resolve in favor of the non-moving party. Id.
Not every genuine factual conflict, however, necessitates atrial. "It is only when a disputed fact has the potential tochange the outcome of the suit under the governing law if foundfavorably to the non-movant that the materiality hurdle iscleared." Parrilla-Burgos v. Hernandez-Rivera, 108 F.3d 445,448 (1st Cir. 1997) (internal quotations omitted). The facts areto be viewed in a light most favorable to the non-movant. Dykesv. DePuy, Inc., 140 F.3d 31, 36 (1st Cir. 1998). When decidingcross motions for summary judgment, the court must consider eachmotion separately and draw inferences against each movant inregard to their respectivemotions. Reich v. John Alden Life Ins. Co., 126 F.3d 1, 6 (1stCir. 1997). Summary judgment may be granted when there is nodispute as to any material fact and only questions of law remain.See id.
II. FACTUAL BACKGROUND
The facts are largely undisputed, particularly because Littleasserted his Fifth Amendment privilege against self-incriminationwith regard to most of the Government's allegations. At allrelevant times Little was the president, treasurer and owner ofLittle's Pharmacy, a retail pharmacy in North Adams,Massachusetts. As it was authorized to dispense Schedule II, III,IV and V controlled substances, the pharmacy was required toregister with the DEA. The DEA monitors registrants' compliancewith the record keeping provisions of the Act throughadministrative inspections and audits.
In April of 1995, DEA investigator Jerry Campagna received ananonymous tip that an employee of Little's Pharmacy may have beendiverting an oxycodone based drug. On May 9, 1995, pursuant tothe Controlled Substances Act, the Government submitted anapplication for an administrative warrant to inspect, copy andverify the correctness of records, reports and other documents.According to the application, Little's Pharmacy had never beforebeen inspected to ensure its compliance with the Act.
After the warrant was issued by this court, an administrativeinspection was conducted at Little's Pharmacy on May 11, 1995,followed by a records audit. (Exhibit 1 (Docket No. 31) LombardoDec. ¶ 4.) The inspection and audit uncovered inaccuracies inLittle's Pharmacy's records, (id. ¶ 5; Exhibit 2), includingshortages of five Schedule II controlled substances. Thoseshortages included 3,084 tablets of Roxicet, 642 tablets ofMethylphenidate 5 mg, 561 tablets of Methylphenidate 10 mg, 286tablets of Percocet, and 250 tablets of Roxiprin. (Lombardo Dec.¶ 6; Exhibit 2; Exhibit 4 (Little Dep. at 10-13); Exhibit 5(Little Ints. Nos. 14-22).) The Government maintains that each ofthe missing narcotics has a black market or street value and ahigh potential for abuse. (Lombardo Dec. ¶ 7.)
The audit also disclosed several overages of Schedule IIsubstances. In particular, the pharmacy lacked the requisite DEAdocumentation, form 222, to account for 220 tablets ofMethylphenidate 20 mg., 179 tablets of Ritalin 5 mg., and 120tablets of Ritalin 10 mg. (Lombardo Dec. ¶ 9; Little Dep. at15-16.) Also disclosed was an incomplete form 222, filled in byLittle, which lacked the number of packages and date received ofcertain Schedule II substances. (Lombardo Dec. ¶ 10; Exhibit 3;Little Dep. at 8.)
The inspection also revealed other deficiencies, specificallythat Little's Pharmacy did not have a power of attorney on filefor its pharmacist, John Fantasia ("Fantasia"). A power ofattorney must be filed for individuals authorized by the pharmacyto obtain and execute order forms. (Lombardo Dec. ¶ 9; LittleDep. at 15-16.)
A. Defendants' motion to suppress1
Defendants assert that all evidence seized as a result of theMay 11, 1995 execution of the administrative inspection warrantshould be suppressed. Defendants claim that the particularityrequirements for issuance of an administrative warrant were notmet and that the inspection was mere pretense for a criminalinvestigation.
Although, generally speaking, "[t]here is no exclusionary rulein civilcases," Borges v. Our Lady of the Sea Corp., 935 F.2d 436, 440(1st Cir. 1991), the Fourth Amendment does govern administrativewarrants. Donovan v. Enter. Foundry, Inc., 751 F.2d 30, 35 (1stCir. 1984). If an administrative warrant may be quashed forinsufficient indicia of probable cause, even when probable causefor an administrative warrant is less strict than that for acriminal warrant, id. at 33-34, the court sees no reason whythe evidence seized by such a warrant could, under certaincircumstances, also be "quashed," i.e., suppressed. Indeed, evenin civil cases, the decision to exclude evidence is within thediscretion of the court. Borges, 935 F.2d at 440.
There appears to be no dispute that items to be inspected andseized through an administrative warrant need be stated with somedegree of particularity. Marshall v. Barlow's, Inc.,436 U.S. 307, 309-12, 98 S.Ct. 1816, 56 L.Ed.2d 305 (1978). The mereassertion in an application for an administrative warrant thatthe search will be limited to evidence deemed violative of aparticular statute may be impermissibly overbroad. United Statesv. Storage Spaces Designated Nos. 8 and 49, 777 F.2d 1363, 1369(9th Cir. 1985). "Delineating the scope of a search with somecare is particularly important where documents are involved."Marshall, 436 U.S. at 324, 98 S.Ct. 1816. If a warrant provides"sufficient standards by which the DEA Investigator reasonablycould distinguish between those documents he could inspect andthose he could not the warrant [is] sufficiently particular."United States v. Burka, 700 F. Supp. 825, 829 (E.D.Pa. 1988).
Here, the warrant application identified "records, reports andother documents Little's HSC Pharmacy, Inc. is required to keepunder Title 21, United States Code, Sections 827 and 828, andregulations promulgated thereunder, to inventory any stock ofcontrolled substances on the premises, and to perform all otherlawful activities authorized in Title 21, U.S.C. § 880."(Pavlan Aff. (Docket No. 37) Exhibit B.) In addition, theaffidavit submitted in support of the application for the warrantwas highly specific as to the documents sought. (Pavlan Aff.Exhibit C ¶¶ 2-3.) In the court's opinion, the level ofspecificity contained in the warrant and supporting affidavit wassufficient.
Defendants' second line of defense against the Government's useof evidence seized as a result of the administrative warrant isthat the civil investigation was a subterfuge for a criminalinvestigation. They argue that the Government sought anadministrative warrant to avoid the more stringent FourthAmendment probable cause requirement applicable in criminalmatters.
There is no dispute that, in light of the desire to protectpublic safety and prevent the diversion of drugs, the probablecause requirement is comparatively lenient in the context ofhighly regulated pharmacies. It may be based solely on the factthat a pharmacy has not been previously inspected. Matter ofSearches and Seizures Conducted on October 2, and 3, 1980,665 F.2d 775, 777 (7th Cir. 1981). Even so, the government's actualmotivation to conduct its investigation is irrelevant so long asthe inspector has reason to inspect pursuant to the Act, even ifsearching for criminal activity. United States v. Rogers,976 F.2d 734 (6th Cir. 1992) (Table) (citing cases). See also UnitedStates v. Acklen, 690 F.2d 70 (6th Cir. 1982).
The court is unconvinced that the instant inspection was merepretense. In short, Defendants have provided insufficientevidence in support of their claim. In fact, Defendants wereultimately charged civilly, not criminally. That fact alonedemonstrates that the execution of the administrative warrant wasnot a subterfuge for a criminal investigation, Defendants' fearsto the contrary. Accordingly, the court will recommend thatDefendants' motion to suppress be denied.
B. The parties' cross-motions for summary judgment
Before addressing the substance of the parties' cross-motionsfor summary judgment, the court must confront, as requested bythe parties, changes enacted on October 1, 1998, to theControlled Substances Act, more particularly, whether thosechanges should be applied retroactively. Defendants say yes, theGovernment no.
At the time this case was filed in April of 1997, the Actmandated strict liability for record keeping violations. Inaddition, civil penalties could amount to as much as $25,000 foreach violation. Pursuant to the October amendments, however,strict liability is no longer the substantive standard. Rather,the Government must allege and prove negligence in record keepingfor liability to attach. In addition, the maximum fine wasdecreased to $10,000 per violation.
The Supreme Court has addressed the issue of retroactivity anumber of times. As made evident by the Court's most recentopinions, retroactive application of a statute is, in general,highly disfavored, so much so that a presumption exists againstit. See Lindh v. Murphy, 521 U.S. 320, 117 S.Ct. 2059, 138L.Ed.2d 481 (1997); Hughes Aircraft Co. v. United States,520 U.S. 939, 117 S.Ct. 1871, 138 L.Ed.2d 135 (1997). In essence, theCourt has directed that an individual should be made to complywith laws enunciated at the time the conduct occurred. As JusticeStory's oft-quoted definition of impermissible retroactivelegislation states, "[e]very statute which takes away or impairsvested rights acquired under existing laws, or creates a newobligation, imposes a new duty, or attaches a new disability, inrespect to transactions or considerations already past, must bedeemed retrospective." See Hughes Aircraft, 520 U.S. at 947,117 S.Ct. 1871 (quoting Society for Propagation of the Gospel v.Wheeler, 22 F.Cas. 756, 767 (C.C.D.N.H. 1814) (No. 13, 156)).
The court sees no reason why the presumption againstretroactive application of the October 1998 amendments to theControlled Substances Act should not hold. First, it isundisputed that Congress made no express mandate that the Act beapplied retroactively. See Landgraf v. USI Film Prods.,511 U.S. 244, 268-69, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994). Second,as the Government asserts, the new law, if applied retroactively,would "attach new legal consequences" adverse to the Government'sinterests to already completed events. Lindh, 521 U.S. at 323,117 S.Ct. 2059.
Granted, in most cases in which retroactivity is at issue, itis an individual plaintiff — rather than the Government — whoseeks to avoid the stricter penalties or burdens imposed by a newlaw. See id. (inmate seeking habeas relief not subject to morestringent amendments of the Antiterrorism and Effective DeathPenalty Act). In other cases in which retroactivity is at issue,the plaintiff may be a private company seeking to avoid newfinancial or substantive burdens imposed by government action.See Landgraf, 511 U.S. at 270, 114 S.Ct. 1483 (vested rightsmay not be impaired by retroactive effect of governmentalenactments). Here, in contrast, it is the Government, as theplaintiff, who seeks to avoid the retroactive application of anact of Congress. Notwithstanding this anomaly, the court cannotfind any case law which either sets this case apart or calls forthe use of a different standard simply because it is thegovernment which seeks to avoid the retroactive application of astatute.
Finally, the court believes that the Controlled Substances Actshould be viewed in the context of the general savings clause,1 U.S.C. § 109, which, as applied here, authorizes the continuanceof preexisting prosecutions under statutes which have beenamended after the alleged violations have occurred. SeeCommonwealth of Massachusetts v. Sec. of Agriculture, 984West Page183 F.2d 514, 519 (1st Cir. 1993). As the Government asserts, hadCongress intended a retroactive change in the standards applied,it would have had to have made an express provision to thateffect as required by the savings clause. It did not.Accordingly, the court will recommend that the amendments to theAct — at least the change in the substantive standard — not applyretroactively to the case at bar and that the standard to beapplied be strict liability, the standard in effect at the timeof Defendants' conduct.
The court's recommendation does not encompass changes in civilpenalties accomplished by the 1998 amendments. The Governmentconcedes that that issue is not yet before the court. Ifanything, the Government acknowledges that, despite itsdisfavoring the retroactive application of the Act, the change intide regarding the maximum penalty per violation may have asignificant effect on the sanctions which ought to be levied bythe court.
2. Strict Liability
The Controlled Substances Act mandates adherence to stringentrecord keeping with regard to various regulated drugs.2 TheAct was passed in 1970 to reduce the number of legitimatecontrolled substances diverted into illegal drug traffic. UnitedStates v. Moore, 423 U.S. 122, 135, 96 S.Ct. 335, 46 L.Ed.2d 333(1975). As a result, the focus of the Act is record keeping andits provisions apply to all who have the authority to dispensedrugs. United States v. Green Drugs, 905 F.2d 694, 695-96 (3dCir. 1990). The law is well settled that the Act, as appliedhere, imposes strict liability for those who dispense drugs.Id. at 695. Defendants concede as much. Those falling withinthe purview of the Act may not exculpate themselves by claiming"human error," inadvertence or lack of intent. Id. See alsoUnited States v. Poulin, 926 F. Supp. 246, 250 (D.Mass. 1996).What Defendants knew or should have known is immaterial.
The Government argues that Defendants' strict liability — andtherefore summary judgment in the Government's favor — isunavoidable based on the evidence of record. First, theGovernment urges the court to give preclusive effect tothe state licensing board's finding that Little's actionsconstituted "a failure to make and maintain proper accounting ofcontrolled substances and a failure to make and maintain properrecords of controlled substances in violation of G.L. c. 94C §25(5)." (Pl.Supp.Mem. (Docket No. 61) Exhibit 1 at 6.) While itis true that the resolution of factual matters by a stateadministrative agency is entitled to preclusive effect, BathIron Works Corp. v. Director, Office of Workers' CompensationPrograms, U.S. Dep't of Labor, 125 F.3d 18, 21 (1st Cir. 1997),Defendants cannot be said to have had a full and fair opportunityto litigate the underlying legal claim here, a prerequisite tosuch offensive collateral estoppel. Monarch Life Ins. Co. v.Ropes & Gray, 65 F.3d 973, 981 (1st Cir. 1995). Moreimportantly, the court doubts whether the state board'sadministrative decision may be considered a final judgment on themerits. See Stowe v. Bologna, 415 Mass. 20, 610 N.E.2d 961(1993). The court understands that Defendant may seek judicialreview of the state board's finding.
Nevertheless, the Government maintains that, independent of thestate board's finding, Defendants are strictly liable based onthe evidence provided the court. In response, Defendants assertthat the Government cannot prove even its prima facie case, letalone deserve judgment as a matter of law. Thus, while Defendantsagree that strict liability may be imposed for record keepingviolations, at least prior to the amendments to the Act in 1998,they strongly disagree as to what proof would demonstrateviolations of this kind.
In essence, Defendants' argument, boils down to an assertionthat the Government cannot prove a negative. The Government,Defendants maintain, cannot point to any particular record asbeing inaccurate. Rather, they assert, the documents collected bythe DEA during the administrative inspection of Little's Pharmacywere correct unto themselves.
Likewise, Defendants do not directly contest the results of theaudit. Instead, they challenge its methodology. It was for thisreason that Defendants moved to strike the Campagna Declaration,(Docket No. 48), claiming that the inspector lacked personalknowledge of the pill audit because, rather than count by hand,he used a pill counter. For similar reasons, Defendants maintainthat portions of the Declaration of Frank Lombardo, another DEAinvestigator, should be stricken (Docket No. 40). The courtpreviously denied both motions to strike by margin notation.3
Still, Defendants press forward and argue that the Governmentcannot identify any specific records which were incomplete orinaccurate. In support, Defendants point to Lombardo's depositionin which he was asked if he could "identify any document seizedfrom Little's Pharmacy that is inaccurate and/or incomplete?" Hisanswer and ensuing testimony follow:
A: Do you want me to testify to each individual record that was seized each prescription on the face of its own is that a complete record . . . is that the question?
Q: Correct, I am making an assumption and trying to get a response . . . It was omitted from the answer to [interrogatory] number nine that any records seized from Little's Pharmacy was in fact inaccurate or incomplete . . . What was stated in interrogatory number nine was that records were incomplete in that there were not sufficient records of disposal.
A: I think the question was answered as a whole for that drug itself. Are all the records complete and accurate for drug number one, no, these are missing records.
The question would have to be phrased differently to seek the answer you're seeking for each individual record that was taken . . . Is this a complete record.
Q: Let me tell you what I am trying to get to the bottom of. Since the inception of this case and since I have been involved in this case the question that I have always had is identify the record that is incomplete and/or inaccurate.
And I did try to ask it by interrogatory and I think I got a response that the records that were seized did in fact accurately reflect what was dispensed.
However there must be additional records that weren't contained at Little's Pharmacy of disposition and because those records weren't maintained Mr. Little's records were incomplete and/or inaccurate . . . Is that a correct representation?
A: I believe so.
Q: So if . . . And we don't have them in front of us . . . But if we were to pull out a Schedule II Controlled Substances prescription dispensed by Little's Pharmacy for Joe Smith in the amount of 20 and it contained all of the information required under the Federal Controlled Substances Act would that be an accurate and complete record of disposal for those tablets identified in the prescription?
A: For that particular prescription for what you described, yes.
Q: If we were to take that to the next step and say you pulled out every Schedule II controlled substance prescription and it contained all the information required under the Federal Controlled Substances Act each of those Schedule II prescriptions would be an accurate record of disposal for the quantity of controlled substance listed in that prescription?
A: For each prescription to stand on its own and contain everything you say it should contain those individual prescriptions would be a complete record.
To group them together to account for one drug they would be incomplete in so much that there are not enough dispensing records to account for all the drugs. . . .
Q: So I suppose you cannot tell me whether any prescriptions were missing from Mr. Little's files?
A: There are records of disbursement missing be it a prescription, a theft or loss form or disposal record or any other record showing that that drug left the pharmacy.
I cannot accurately tell you how many of those forms.
There could be one, there could be a hundred. It depends on what amounts.
Q: So it could be zero prescriptions?
A: No. . . . It may if there is a theft or loss form missing or a disposal record missing . . . some other required record outside of a prescription to show those drugs left the pharmacy.
Q: So in fact there may be no missing prescriptions?
A: That would only occur if there were missing theft or loss forms or disposal records.
(Pavlan Aff. Exhibit A (Lombardo Dep. at 65-70).)
Viewing this testimony along with Defendants' arguments inopposition to summary judgment, it is clear to the court thatDefendants miss the aim of the Controlled Substances Act. Aviolation of the Act occurs each time the Government can provethat controlled substances are missing. Proven shortages, oroverages for that matter, constitute record keeping violationsunder the statute. Poulin, 926 F. Supp. at 252. Other courtshave so held. United States v. Stidham, 938 F. Supp. 808, 816(S.D.Ala. 1996) (general deficiencies in record keeping support aviolation of the Act). To prove such a record keepingviolation, the Government need only demonstrate that a shortageor overage exists. The Government is not required to producedocuments in support when none exist. Poulin, 926 F. Supp. at252. If such documents existed there would be no shortage.
Granted, the Act makes clear that the maintenance of a"perpetual inventory" is not required of regulated pharmacies.21 U.S.C. § 827(a)(3). A biennial inventory is all that the statuterequires. 21 U.S.C. § 827(a)(1). However, accurate and completerecords, reflecting the numbers of controlled substances on handat any given time, is also undisputedly required by the Act.21 U.S.C. § 827(a)(3). So, while the Act leaves the method in whicha pharmacy chooses to maintain its records to its discretion, theonus is on each regulated pharmacy to keep complete and accuraterecords. This is fundamental to the strict liability mandated bythe Act prior to the 1998 amendments.
This may seem harsh. In fact, there appears to be someagreement among the parties that, at least with respect to theshortages uncovered, the drugs were quite possibly missingthrough no fault of Defendants, having possibly been stolen fromLittle's Pharmacy by an unnamed employee. However, Defendants arenot charged with a failure to maintain the required biennialinventory. They are charged civilly with a failure to maintainaccurate records.4
The harsh result exemplified here may well be the reason why,in October of 1998, Congress changed the standard to be appliedto one of negligence. As described, a pharmacy empowered todispense controlled substances will now be held liable only if itknew or should have known about an illegal diversion, orinaccurate records, and chose to do nothing. As applied here,however, the Act imposes strict liability.
Interestingly enough, Defendants' wilfulness, irrelevant forpurposes of liability, may be considered by the court withrespect to the imposition of civil fines. A prevalent methodologyutilized by sister courts for imposing civil fines for recordkeeping violations is to weigh four factors extrapolated from thelanguage of the Act: "(1) the willfulness of the violations; (2)whether, and to what extent the defendant profited from theillegal activity; (3) harm to the public; and (4) the financialcapacity of the defendant to pay." Poulin, 926 F. Supp. at253-54. See United States v. Queen Village Pharmacy, 1990 WL165907 at *2 (E.D.Pa. 1990); United States v. Barbacoff,416 F. Supp. 606, 610 (D.D.C. 1976). While this methodology bespeaksCongress' intention to impose varying fines for varying degreesof egregiousness, it also signals that Congress contemplatedexacting fines for what may be considered the most minor ofinfractions. Green Drugs, 905 F.2d at 698.
Another tangle for Defendants is Little's individualizedassertion of his Fifth Amendment right against selfincrimination. (See Exhibits 4 and 5.) The court previouslyaddressed this conundrum when the Government sought to compelLittle, as well as Little's Pharmacy, to respond to certaininterrogatories and requests for production of documents. Whenallowing the Government's motion, the court warned that, "[i]fLittle maintains his reliance on a Fifth Amendment privilege, herisks certain adverse consequences." Mem. & Order (April 10,1998) (citing Hasbro, Inc. v. Serafino, 958 F. Supp. 19, 23(D.Mass. 1997); United States v. Lileikis, 899 F. Supp. 802, 804(D.Mass. 1995); Serafino v. Hasbro, Inc., 82 F.3d 515, 518 (1stCir. 1996)). Those consequences are now made evident.
At present, the court must view the facts and inferences in alight most favorable to Defendants, the non-moving party. Byasserting his Fifth Amendment privilege, however, Little hasfailed to offer any genuine and material facts to counter thecopious record presented by the Government. Moreover, Little'sassertion of the privilege "creates a compelling inference thatthe Government's allegations against [Defendants] are true."U.S. v. Lileikis, 929 F. Supp. 31, 37 (D.Mass. 1996). This isparticularly so given the substantial probative evidence offeredby the Government in support of its motion for summary judgment.See Hasbro Inc., 958 F. Supp. at 25.
The Government presents evidence that Defendants hadsignificant undocumented shortages and overages of controlledsubstances on hand. (See Exhibit 2.) There is also evidencethat Defendants failed to file several appropriate DEA formsrelevant to shortages and overages and failed to have a power ofattorney form on file for its pharmacist Fantasia per21 C.F.R. § 1305.07 and 1305.09(e). (Exhibit 1 ¶¶ 6, 8-10.) On the day ofthe inspection the power of attorney form for Fantasia was neverproduced, although it was requested. (Lombardo Dec. ¶ 9.) It waspurportedly provided two years later in the form of minutes froma meeting and only then in response to a court order. Suchminutes, however, do not meet the regulatory requirements for alegally sufficient power of attorney, nor were they signed byFantasia, another regulatory requirement whose violation mandatesstrict liability. 21 C.F.R. § 1305.07.
In response, Defendants have not presented any evidence fromwhich the court could even reasonably infer that a dispute existsas to their strict liability under the Controlled Substances Act.As the First Circuit has explained,
The existence of such an issue [of material fact] must be shown by resort to materials of suitable evidentiary quality. Such a showing cannot be manufactured by negative implication; that is to say, a party opposing summary judgment cannot rely on an absence of competent evidence, but must affirmatively point to specific facts that demonstrate the existence of an authentic dispute.
Collier v. City of Chicopee, 158 F.3d 601, 604 (1st Cir. 1998)(internal quotation marks omitted). Simply put, Defendants havefailed to present "properly documented facts on which atrialworthy federal issue might rest." Id. Compare Poulin,926 F. Supp. at 249 (proceeding to bench trial before imposition offines under the Controlled Substances Act). Accordingly, thecourt will recommend that summary judgment be allowed on Counts Ithrough IX.
The same holds true for Count X, which concerns the receipt ofdrugs and an incomplete 222 form. The only documentary evidencepresented in this regard are invoices from the James BrudnickCompany (Pl.Opp. (Docket No. 38) Exhibit 1) which were seizedduring the inspection on May 11, 1995. The invoices together withLombardo's testimony demonstrate that the DEA Form 222, attachedto the Government's motion for summary judgment at Exhibit 4, areinaccurate. Defendants make no contrary showing. Accordingly, thecourt will also recommend that Defendants be held strictly liablefor the violations claimed in Count X.5
For the foregoing reasons, the court recommends thatDefendants' motion to suppress be DENIED, that Defendants' motionfor summary judgment be DENIEDas well, and that the Government's motion for summary judgment,to the extent it seeks the imposition of strict liability, beALLOWED. The imposition of fines by the trial court is foranother day.6
April 6, 1999.
1. This court itself approved the administrative warrant atissue. It addresses Defendants' motion with the knowledge thatits recommendation is subject to de novo review. Cf. Camachov. Autoridad de Telefonos de Puerto Rico, 868 F.2d 482, 490 (1stCir. 1989) (that judge authorized previous wiretap does notnecessitate recusal).
2. Section 827 provides in pertinent part:
Except as provided in subsection (c) of this section —
(1) every registrant under this subchapter shall, on May 1,1971, or as soon thereafter as such registrant first engages inthe manufacture, distribution, or dispensing of controlledsubstances, and every second year thereafter, make a complete andaccurate record of all stocks thereof on hand, except that theregulations prescribed under this section shall permit each suchbiennial inventory (following the initial inventory required bythis paragraph) to be prepared on such registrant's regulargeneral physical inventory date (if any) which is nearest to anddoes not vary by more than six months from the biennial date thatwould otherwise apply;
(2) on the effective date of each regulation of the AttorneyGeneral controlling a substance that immediately prior to suchdate was not a controlled substance, each registrant under thissubchapter manufacturing, distributing, or dispensing suchsubstance shall make a complete and accurate record of all stocksthereof on hand; and
(3) on and after May 1, 1971, every registrant under thissubchapter manufacturing, distributing, or dispensing acontrolled substance or substances shall maintain, on a currentbasis, a complete and accurate record of each such substancemanufactured, received, sold, delivered, or otherwise disposed ofby him, except that this paragraph shall not require themaintenance of a perpetual inventory.
(b) Availability of records
Every inventory or other record required under this section (1)shall be in accordance with, and contain such relevantinformation as may be required by, regulations of the AttorneyGeneral, (2) shall (A) be maintained separately from all otherrecords of the registrant, or (B) alternatively, in the case ofnonnarcotic controlled substances, be in such form thatinformation required by the Attorney General is readilyretrievable from the ordinary business records of the registrant,and (3) shall be kept and be available, for at least two years,for inspection and copying by officers or employees of the UnitedStates authorized by the Attorney General.
21 U.S.C. § 827.
3. The declarations are admissible under Rule of Evidence803(8) as a "record, report, statement, or data compilation . . .of public offices or agencies . . . in civil actions andproceedings investigation made pursuant to authority granted bylaw, unless the sources of information or other circumstancesindicate lack of trustworthiness." The First Circuit has flatlyrejected the argument that official firsthand knowledge berequired in the compilation of such a report. Robbins v.Whelan, 653 F.2d 47 (1st Cir. 1981).
4. The timing of the investigation may also have provenunfortunate for Defendants. Had the administrative warrant andsubsequent inspection not occurred in May of 1995, but in July,by which time Defendants may have conducted the appropriatebiennial inventory, Defendants may well have realized thatsignificant numbers of controlled substances were missing.Defendants then might have filed the appropriate theft and lossforms and rectified their records. This, of course, is merespeculation.
5. For the same reasons that the court finds that theGovernment proffers sufficient uncontroverted evidence torecommend that it prevail at summary judgment, the court willconversely recommend that Defendants' motion for summary judgmentbe denied.
6. The parties are advised that under the provisions of Rule3(b) of the Rules for United States Magistrates in the UnitedStates District Court for the District of Massachusetts, anyparty who objects to these findings and recommendations must filea written objection with the Clerk of this Court within ten (10)days of the party's receipt of this Report and Recommendation.The written objection must specifically identify the portion ofthe proposed findings or recommendations to which objection ismade and the basis for such objection. The parties are furtheradvised that failure to comply with this rule shall precludefurther appellate review by the Court of Appeals of the DistrictCourt order entered pursuant to this Report and Recommendation.See Keating v. Secretary of Health & Human Services,848 F.2d 271, 275 (1st Cir. 1988); United States v. Valencia-Copete,792 F.2d 4, 6 (1st Cir. 1986); Scott v. Schweiker, 702 F.2d 13, 14(1st Cir. 1983); United States v. Vega, 678 F.2d 376, 378-379(1st Cir. 1982); Park Motor Mart v. Ford Motor Co.,616 F.2d 603, 604 (1st Cir. 1980). See also Thomas v. Arn, 474 U.S. 140,154-55, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985). A party may respondto another party's objections within ten (10) days after beingserved with a copy thereof.