Friedman v. Sebelius
755 F. Supp. 2d 98
D.D.C.2010Background
- Purdue Frederick misbranded OxyContin and solicited marketing claims from 1995–2001, with the company earning ~$2.8B in sales during that period.
- Friedman, Goldenheim, and Udell were Purdue officers charged under the responsible corporate officer doctrine for misbranding.
- The government pled guilty pleas to misbranding; the company paid ~$600M in sanctions; plaintiffs agreed to disgorgement totaling $34.5M.
- Agreed Statements of Facts admitted plaintiffs had authority to prevent or correct misbranding but failed to do so over a five-and-a-half year period.
- IG issued exclusion notices under 42 U.S.C. § 1320a-7(b); the period was initially 20 years, later reduced to 12 years after mitigating evidence and agency reconsideration.
- ALJ upheld 15-year exclusion, DAB reduced to 12 years, and plaintiffs sought judicial review arguing lack of personal wrongdoing and improper length.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1320a-7(b)(1) permits exclusion for misdemeanor RC officer convictions | Plaintiffs claim the conviction reflects status, not personal wrongdoing. | Secretary reads 'relating to' broadly to cover nexus to fraud/financial misconduct. | Yes; statute authorizes exclusion for offenses related to fraud/financial misconduct. |
| Whether the Secretary’s interpretation of 'relating to' is reasonable | Plaintiffs urge a narrow reading limiting to personal fraud. | Secretary's broad nexus interpretation is reasonable and consistent with precedent. | Reasonable interpretation under Chevron step-two; consistent with ordinary meaning. |
| Whether the 12-year exclusion is supported by substantial evidence | Mitigating evidence and lack of personal wrongdoing lessen penalty. | Aggravating factors (>$5,000 loss, acts over ≥1 year) support longer term; mitigating cooperation considered. | 12-year exclusion supported by substantial evidence and discretionary balancing. |
Key Cases Cited
- Morales v. Trans World Airlines, Inc., 504 U.S. 374 (U.S. 1992) (broad meaning of 'relating to' applicable to statutory terms)
- United States v. Park, 421 U.S. 658 (U.S. 1975) (responsible corporate officer liability; liability based on responsibility to prevent/correct)
- United States v. Dotterweich, 320 U.S. 277 (U.S. 1943) (RC officer doctrine; corporate liability without personal knowledge)
- Westin v. Shalala, 845 F. Supp. 1446 (D. Kan. 1994) (exclusion for offenses relating to neglect/abuse broadly construed)
- Travers v. Sullivan (Travers II), 801 F. Supp. 394 (E.D. Wash. 1992) (relating to delivery of an item/service broad enough to cover non-direct care)
- Travers v. Sullivan (Travers I), 791 F. Supp. 1471 (E.D. Wash. 1992) (relating to delivery of an item/service includes billing/administrative conduct)
- Anderson v. Thompson, 311 F. Supp. 2d 1121 (D. Kan. 2004) (judicial review under §1320a-7(f) aligns with §405(g) standard)
- Southeast Alabama Medical Center v. Sebelius, 572 F.3d 912 (D.C. Cir. 2009) (statutory interpretation consistent with agency practice)