Michael Friedman v. Kathleen Sebelius
686 F.3d 813
D.C. Cir.2012Background
- Purdue Frederick misbranded OxyContin, a schedule II drug, leading to corporate felony misbranding conviction and RCO-based misdemeanor convictions for Friedman, Goldenheim, and Udell.
- OIG initially proposed a 20-year exclusion under 42 U.S.C. § 1320a-7(b)(1) and (3), later reduced to 12 years by DAB for the executives.
- ALJ and DAB affirmed the 12-year exclusion; the district court reviewed and upheld the Secretary's exclusion as authorized by statute.
- The Secretary's position rests on a circumstance-specific interpretation of 1320a-7(b)(1)(A) (misdemeanor relating to fraud).
- Appellants challenged both the statutory authorization and the 12-year length, arguing lack of substantial evidence and arbitrary treatment, while the Secretary argued for deference to statutory interpretation.
- The court held that while exclusion is authorized, the 12-year length was arbitrary and required remand for explanation consistent with agency precedent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §1320a-7(b)(1)(A) authorize exclusion for a misdemeanor relating to fraud? | Friedman argues the term is generic and requires fraud_elements (categorical). | Friedman defends a circumstance-specific nexus between conduct and fraud. | Yes; statute authorizes exclusion under a circumstance-specific reading. |
| Should the 'relating to fraud' phrase be read categorically or circumstantially? | Appellants advocate a categorical approach requiring core elements of fraud. | Secretary adopts circumstance-specific approach linking facts to fraud. | Circumstance-specific interpretation applied. |
| Is the 12-year exclusion length supported by substantial evidence and proper procedure? | Length exceeds baseline and lacks substantial evidence for aggravating factors. | Aggravating factors (financial loss, duration, impact) supported by substantial evidence; cooperation mitigated duration. | Exclusion length was arbitrary and capricious; remand required for justification consistent with precedent. |
| Did the agency properly justify departure from prior precedents on length of exclusion under APA review? | DAB failed to reconcile with prior precedents; 12-year length departs from agency practice. | Agency discretion allowed; prior cases cited were distinguishable. | DAB departure from precedent insufficiently explained; remand needed. |
| Is APA review applicable or limited to §405(g) review for this exclusion? | APA applies; §405(g) review is not the exclusive standard. | Review is governed by §405(g) as incorporated by §1320a-7(f). | Arbitrary and capricious standard applies upon remand; compatible with §405(g) framework. |
Key Cases Cited
- Nijhawan v. Holder, 557 U.S. 29 (U.S. 2009) (circumstance-specific vs categorical approach discussion)
- Morales v. Trans World Airlines, 504 U.S. 374 (U.S. 1992) (relating to has broad scope; nexus approach discussed)
- Shepard v. United States, 544 U.S. 13 (U.S. 2005) (categorical vs circumstance-specific interpretation framework)
- Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (U.S. 1987) (expansive interpretation of 'relate to' language)
- Morissette v. United States, 342 U.S. 246 (U.S. 1952) (strict liability concerns in due process context)
- Universal Camera Corp. v. NLRB, 340 U.S. 474 (U.S. 1951) (APA-like arbitary-and-capricious standard applied via substantial evidence)
- National Kidney Pts. Ass'n v. Sullivan, 958 F.2d 1127 (D.C. Cir. 1992) (administrative-review framework under §405(g))