Seizures of Counterfeit Goods a Priority for CBP

Reaffirming its commitment to keeping counterfeit merchandise from reaching consumers, U.S. Customs and Border Protection (CBP) has been busy in recent months. Recently, CBP announced that its officers at the Detroit Metropolitan Airport seized 192 separate shipments of fake merchandise between November 1, 2010 and January 17, 2011. During this period, the seizures included counterfeit designer purses, sunglasses, cell phones, and sports jerseys. According to CBP estimates, the seized items totaled an estimated worth of $2 million.

Additionally, CBP announced that its inspectors at the Los Angeles/Long Beach seaport complex were able to seize a shipment of counterfeit Marlboro cigarettes. The shipment from China contained over 22,000 cartons of fake Marlboro cigarettes. In an effort to get the shipment through customs, the shippers of the merchandise provided false invoicing information, identifying the contents as “hang tags and hang plugs.” However, an examination of the shipment by CBP import specialists and inspectors revealed its true contents.

With countless seizures of illegal goods being made, CBP has signaled that stopping counterfeit goods is a main priority. According to CBP, the sale of counterfeit goods is problematic for a few key reasons. First, fraudulent goods may be dangerous to consumers, as the imposters often appear to be of the same quality but have the potential to be inferior and present added safety risks to unsuspecting consumers. Additionally, CBP notes that counterfeit products negatively affect trademark owners who have invested time and money developing their products. Lastly, criminal organizations are often involved in the sale of counterfeit merchandise to launder the organizations illegal profits.

With the amount of counterfeit goods being attempting make entry into the U.S. is unlikely to slow, CBP is expected to have a busy year ahead.

Lawyers at Fuerst Ittleman PL are experienced in handling issues and litigation regarding products that are either counterfeit or otherwise infringe on legal trademarks.

Fourth Circuit Dismisses Challenge To Federal Embryonic Stem Cell Research Funding Citing Lack Of Standing Of Challengers

On January 21, 2011, the United States Court of Appeals for the Fourth Circuit affirmed a decision of the District Court of Maryland dismissing a consolidated case challenging the federal funding of research involving embryonic stem cells. In agreeing with the District Court, the Fourth Circuit found that both plaintiffs lacked standing, an essential constitutional requirement to bringing case before the court. A copy of the decision can be read in full at: Mary Scott Doe v. Obama.

Article III of the United States Constitution provides that the judicial power of the federal court system extends to “cases” and “controversies.” However, in order to bring a case, the plaintiff must have “standing” to assert its claim. To satisfy the constitutional requirement of “standing,” a plaintiff must establish: 1) it has suffered an “injury in fact” which is “concrete and particularized” and “actual or imminent” and not merely “hypothetical;” 2) causation, i.e. the injury is “fairly traceable to the challenged action of the defendant;” and 3) redressability, meaning that “it is likely, as opposed to merely speculative” that the injury will be remedied by a favorable decision. Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000).

In Mary Scott Doe, two groups of plaintiffs attempted to challenge the constitutionality of Executive Order 13505 (“EO 13505”) and its implementing National Institute of Health (“NIH”) Guidelines which expanded federal funding of human embryonic stem cell research. NIH Guidelines currently permit funding for research involving stem cells from embryos “donated by individuals who sought reproductive treatment . . . and who gave voluntary written consent for the human embryos to be used for research purposes.” 74 Fed. Reg. 32170, 32174. The plaintiffs alleged that EO 13505 and the NIH Guidelines violated the 13th and 14th Amendments to the U.S. Constitution as well as the Administrative Procedure Act and the Dickey-Wicker Amendment, which prohibits use of federal funds for “research in which a human embryo . . . is destroyed, discarded, or knowingly subjected to risk of injury or death.”

The first named plaintiff, Mary Scott Doe, represented a class of all frozen embryos held throughout the US for either research or adoption purposes. The plaintiffs argued that the class of frozen embryos had standing because EO 13505 and the NIH Guidelines “increase the embryos risk of being reduced to . . . stem cells” thus creating an “injury in fact” necessary to bring a case. However, the Court rejected this argument, stating that in order to establish standing “named plaintiffs who represent a class must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent.” (emphasis added). The Court went on to state that because the “complaint provides no basis to conclude that the named plaintiff . . . [will] suffer any injury at all, much less an injury due to the challenge government policy,” “Doe” has failed to allege a “concrete and particularized harm.” Thus, the Court found that “Doe” could not establish an injury in fact.

Furthermore, the Court found that even if “Doe” could assert an injury, “Doe” could not establish causation on the part of the defendant, the US government. Here, the Court found that funding for research was limited to those embryos which were voluntarily donated for research by biological donors. As such, any injury which could have occurred was the result of the independent actions of a third party, not the named defendant. “Where a third party . . . makes the independent decision that causes an injury, that injury is not fairly traceable to the government . . . .The mere fact that the government permits private donors to chose to donate their embryos for research does not . . . make the decision fairly traceable to [EO] 13505 or the NIH Guidelines.”

The Fourth Circuit also affirmed the dismissal for lack of standing for the second group of plaintiffs, parents who have children that were adopted frozen embryos and who are considering adopting embryos again. The Court found that the adoptive parent plaintiffs did not claim that they had already suffered an injury. Rather, the adoptive parent plaintiffs claimed that they faced the treat of a future injury because “EO 13505 will reduce the number of in vitro human embryos available for adoption such that they will be unable to adopt.” However, the Court went on to find that the adoptive parent plaintiffs failed to allege facts to “infer that such injury would be actual or imminent.”

In finding that the adoptive parent plaintiffs lacked standing, the Fourth Circuit relied upon Supreme Court precedent established in Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992). In Lujan, the Supreme Court found that in order for a plaintiff to establish standing through the claiming of a future injury, it must be alleged that future injury is “certainly impending.” Id. at 565 n. 2 (emphasis in original). In this case, the Fourth Circuit found that “the plaintiff parents . . . did not allege that they have already tried and failed to adopt embryos, nor do they allege any concrete plans for future adoption, so the possibility that they will never suffer the alleged injury looms too large.”

Fuerst Ittleman has built a reputation not only in the field of complex litigation but also in the legal aspects of the cutting edge field of stem cell research. If you have any questions pertaining to new NIH guidelines or to contact a complex litigation attorney please contact Fuerst Ittleman PL at contact@fidjlaw.com. For more information on Fuerst Ittlemans experience in the legal aspects of stem cell therapies, age management medicine, food and drug law in general, and FDA regulatory and enforcement actions, please visit our Food, Drug and Cosmetic Law practice page.

Federal Judge Finds that Rule 30(b)(6) Depositions Go Beyond Listed Subjects

A recent ruling from the U.S. District Court for the Northern District of Iowa casts doubt on the position that a deposition under Federal Rule of Civil Procedure Rule 30(b)(6) is limited to the matters described in its notice. While the Rule requires a party to identify the matters for which it intends to examine a deponent, there has historically been confusion regarding whether this requirement places a strict limitation on the scope of the examination itself.

The case, American General Life Insurance Co. v. Billard, involved questions concerning a life insurance policy which required a representative of American General to be deposed on behalf of the company. To this end, the defendants counsel took a deposition of a company representative after giving notice under Rule 30(b)(6). This rule is available where a corporation or other entity is to be deposed and provides in relevant part that: “[i]n its notice or subpoena, a party may name as the deponent a public or private corporation, a partnership, an association, a governmental agency, or other entity and must describe with reasonable particularity the matters for examination.”

While the Rule does not state that the subject-matter of depositions is strictly limited to the matters for examination described in the notice or subpoena, this is a position that some, including counsel for American General, took. While the defendants notice named 16 different subjects for the testimony, a disagreement arose during the deposition when the witness was asked to testify to matters not identified in the notice. Believing that testimony was limited to the matters identified in the notice, counsel for American General repeatedly instructed the witness not to answer questions that exceeded the scope of the subjects named in the notice. Subsequently, counsel for American General suspended the deposition and moved for a protective order, asking the court to limit the scope of questioning to the matters identified in the notice. In response, defendants counsel filed a motion for discovery sanctions, arguing that opposing counsel improperly instructed the witness not to respond to matters that were properly within the scope of the discovery request. Ultimately, the judge sided with the defendants counsel and found that Rule 30(b)(6) does not limit the scope of depositions to the matters identified in the notice.

The purpose of identifying the subject-matter of depositions under Rule 30(b)(6) is primarily to allow the corporation or other entity to choose a representative who has knowledge of the subjects to be deposed during the deposition. However, because there has been some controversy regarding whether the Rule limits the scope of the examination to the matters described in the notice, the fact that counsel for American General misapplied the Rule was not what the judge ultimately took issue with. Rather, the judge found it problematic that counsel for American General continued the deposition and repeatedly instructed the witness not to answer. In a situation where there is doubt as to whether matters of examination exceed the proper scope of the deposition, the appropriate action would be to end the examination promptly and seek immediate relief from the court.

Lawyers at Fuerst Ittleman have substantial experience in complex litigation matters, including the taking and defending of Rule 30(b)(6) depositions.

GAO Suggests that FDA Shift Gears Regarding Health Claims in Food Labeling

The GAO, an independent agency that investigates the efficacy of federal programs for Congress, recently issued a report recommending that the FDA reform the way it handles claims made in food labeling. This report comes as a result of a performance audit that the GAO conducted throughout 2010 where the FDAs oversight of qualified health claims and structure/function claims was evaluated.

While health claims are those that characterize the relationship between a food or food component and a health-related condition, “qualified health claims” have an added limitation. In a qualified health claim, the relationship between the consumption of a food and a health-related condition is limited by providing a statement in labeling that qualifies the amount of scientific support backing the claim. In contrast, structure/function claims are those that describe the relationship between a food or food component and its effect on a structure or function of the body.

The key issue that the FDA must consider regarding both of these types of claims is whether food manufacturers possess a level of scientific support to make these claims. The FDA is tasked with overseeing and enforcing federal food labeling requirements, which prohibits the use of false or misleading claims in food labeling. However, in the area of health-related claims, the FDA is not the only agency tasked with enforcing federal requirements. The Federal Trade Commission (FTC) is responsible for enforcing federal laws that prohibit deceptive acts and practices. The FTC shares jurisdiction with the FDA in the area of health-related claims, and where the FDA focuses mainly on food labeling, the FTCs focus is on food advertising.

Although the FDA also targets food manufacturers for making improper claims in advertising, a key distinction between the FDA and FTC is that the latter possesses subpoena power. While the FTC can require companies to turn over relevant evidence concerning the scientific support substantiating its claims, the FDA has no such power. This distinction is highlighted in the GAOs report and according to the GAO, may be a critical factor limiting the efficacy of the FDAs oversight of health-related claims in food labeling. Because of this limited ability to force companies to turn over documents in support of their claims, the GAO concluded its study with a recommendation that the FDA to seek guidance from Congress regarding what authority could be used to require companies to provide scientific evidence of health-related claims.

For more information regarding FDA and FTC regulatory compliance, please contact us at contact@fidjlaw.com.

Seafood Executives Plead Guilty to Selling Mislabeled Fish

Shortly before a trial that was to begin in Mobile, Alabama, two executives from an Arizona based seafood wholesaler, Consolidated Seafood Enterprises, pled guilty to a scheme to defraud the public by mislabeling imported fish. The plea agreement of one of the defendants may be viewed here.

Consolidated Seafood Enterprises contracted with importers to bring in fish from overseas and then sell them to wholesalers that supplied restaurants and stores. Both executives admitted that they bought and sold approximately 385,000 pounds of frozen catfish, called basa, swai and sutchi, which was falsely labeled to evade customs duties. They then passed 101,000 pounds off as grouper to customers in southern states including Alabama and Florida. They sold 25,000 pounds of Lake Victoria Perch as grouper or snapper. The defendants also admitted to overstating the size of shrimp they sold and falsely labeling them as wild caught from the U.S., when in fact they were from shrimp farms in foreign countries.

Under the terms of the plea agreement, one executive Karen Blyth, will serve 2 years and 9 months in prison, while her co-defendant, David Phelps will serve 2 years in prison. The defendants also agreed to the forfeiture of over 7,000 pounds of fish. The Court will determine the amount of fine and both executives will not be able to hold ownership or managerial interests in the seafood industry until after they serve 3 years of supervised release after completing their prison sentences. The Court accepted the plea agreement on January 24, 2011.

The mislabeling of food products is a violation of the Food, Drug & Cosmetic Act, and the Lacey Act, while submitting false statements to Customs to evade duties is a violation of Title 18 of the Criminal Code. Fuerst Ittleman lawyers have substantial experience representing clients involved in both the distribution and importation of food products who are under federal criminal investigation for violations of these laws.

Discovery Violations Result In Judge Striking Defenses in DuPont’s Benlate Pesticide Litigation

A recent decision in ongoing DuPont Benlate pesticide litigation in Miami-Dade County Circuit Court demonstrates the serious consequences that can arise from a partys deliberate attempt to conceal discoverable information. On January 20, 2011, Miami-Dade Circuit Court Judge Amy Steele Donner ordered DuPonts defenses struck as a sanction for discovery violations described by the Court as an “unconscionable scheme” which constituted a fraud on the court.

The sanctions stem from litigation, which began in 1992, between DuPont and five Miami-Dade County growers for crop damage from the use of Benlate, a pesticide produced by DuPont until 2001. The plaintiffs claimed that discovered documents revealed a near 20 year cover up by DuPont whereby DuPont misfiled and mislabeled documents in an effort to avoid their discovery obligations. The growers alleged that DuPont deposited tens of thousands of pages of documents into a document depository created by DuPont for the litigation but then subsequently removed those documents claiming they were not relevant to the case.

On March 17, 2010, Judge Donner issued an Order demanding DuPont immediately produce all documents it deemed unrelated to the case which it had previously removed from the document depository. In response, DuPont surrendered over 37,000 documents, though the plaintiffs claimed 67,000 more pages should be produced. On May 14, 2010, Judge Donner held a hearing to determine whether DuPonts actions were a violation of discovery rules but did not issue a ruling until January 20, 2011. In the Courts January 20, 2011 ruling, the Court found that DuPont purposefully “manipulated the [document] depository . . . in order to interfere with the plaintiffs ability to conduct discovery.” The Court went on to describe DuPonts actions as a “fraud on the court” designed to “restrict the plaintiffs ability to gather evidence to prove its claims.” As a result of DuPonts actions, Judge Donner struck DuPonts defenses and will conduct a trial on damages only.

In striking DuPonts defenses, Judge Donner relied upon Florida Rule of Civil Procedure 1.380 which governs sanctions for discovery violations. Pursuant to Fla. R. Civ. P 1.380(b)(2)(C), a trial court may enter an order striking out pleadings and defenses and render a default judgment against a disobedient party. However, the striking of pleadings and/or the entering of a default judgment is rare and considered “the most severe of al sanctions which should be employed only in extreme circumstances.” Precision Tune Auto Care, Inc. v. Radcliffe, 804 So. 2d 1287, 1290 (Fla. 4th DCA 2002). “A deliberate and contumacious disregard of the courts authority will justify application of this severest of sanctions, as will bad faith, willful disregard or gross indifference to an order of the court, or conduct which evinces deliberate callousness.” Mercer v. Raine, 443 So. 2d 944, 946 (Fla. 1983).

Fuerst Ittleman has built a reputation for getting results in wide variety of complex litigation cases in federal, state, local, and appellate courts. Contact a complex litigation attorney from Fuerst Ittleman at contact@fidjlaw.com.

Hyperbaric Clinic Reopens Amidst Controversy

Neubauer Hyperbaric Neurologic Center, a controversial clinic, reopened last week after spending nearly two years closed due to an accident involving two of its patients. The accident, which killed a young boy and his grandmother, involved a fire that caused the clinics closure. However, this was not the only trouble for the Fort Lauderdale based clinic.

In 2009, the FDA issued a Warning Letter alleging that the clinic was improperly marketing its hyperbaric chambers. According to the FDA, the clinic was marketing its devices for uses that were not approved by the Agency. Specifically, the FDA claimed that the clinic was promoting treatments for unapproved conditions, including stroke, cerebral palsy, multiple sclerosis, and coma. Although there are several conditions for which hyperbaric treatment is recognized, the FDA took issue with the company claiming to treat unlisted conditions and cited them for promoting “off-label” uses.

The question of whether the Neubauer Clinic may promote off-label uses of hyperbaric oxygen is a complicated one. An off-label use is one other than the approved intended uses that appear in the products labeling. While pharmaceutical companies and the manufacturers of medical devices may be targeted by the FDA for promoting their devices for off-label uses, the FDA ordinarily is not empowered to interfere with the methods that doctors use to treat patients. Rather, the practice of medicine allows doctors to pursue treatment plans that are adapted to the specific patient. Thus, where a doctor promotes various treatments that he or she performs using these devices, the doctor is promoting the practice of medicine and is not subject to FDA interference. While it is unclear whether the FDA will again target the Neubauer Clinic for its marketing materials, the clinic may be protected from FDA enforcement by restricting promotions to the services and procedures its doctors utilize.

For more information regarding medical devices or FDA regulatory compliance, please contact us at contact@fidjlaw.com.

FDA Begins Overhaul of 510(k) Process

This week, the FDA announced its plans to overhaul its system for reviewing and clearing medical devices. The plan, which contains 25 distinct actions that the FDA intends to implement in 2011, comes as a result of two internal working groups that were created by the FDAs Center for Devices and Radiological Health (CDRH) in 2009. The CDRH set up these groups in an effort to address widespread concerns regarding the FDAs premarket notification process.

Currently, the most utilized pathway for medical device manufacturers to gain FDA clearance necessary to market new devices is through the 510(k) process. This process requires submitters to provide highly-detailed information regarding the intended use of the device, including any safety issues posed and how the device compares to other devices that have already gained FDA approval or been cleared through this process. In what is known as “substantial equivalence,” the FDA issues a finding allowing new devices to come to market and is primarily based on the perceived link between the applicants submitted comparable devices and the applicant device. Conversely, if the FDA believes that the applicant device is not substantially equivalent to the comparable devices that were submitted, then the Agency will issue a determination of “NSE,” meaning that the device at issue is not substantially equivalent to a legally marketed device. A determination of NSE may be reached for a variety of reasons, including any perceived differences between the intended use of the comparable devices and the applicant device or added risks that bear on the devices safety. Because there have been ongoing concerns regarding the unpredictable and inefficient nature of the 510(k) process, including what truly leads the FDA to conclude a new device is not substantially equivalent, the FDA unveiled its plan to improve this process.

Aimed at increasing the efficiency of the 510(k) process, while ensuring that the safety of new devices on the market is not diminished, the FDA intends to take several actions in the coming year that may greatly impact the pathway for the approval of medical devices. For instance, the Agency plans to publish several draft guidance documents that are intended to create more transparency regarding FDA determinations. To this end, the FDA intends to provide guidance concerning when it believes clinical data should be submitted, what kinds of information supports “intended use,” and how comparable devices should be utilized in 510(k) submissions.

Additionally, the FDA intends to streamline its “de novo” review process, which may help lower-risk medical devices gain the clearance necessary to enter the market. This is particularly important for new devices that cannot point to clear comparable devices on the market but do not pose heightened risks to safety. The de novo process entails a review of a device submission after the Agency has made the initial determination that the device is not substantially equivalent to any currently being marketed. While de novo review has come under fire for being too complicated and time-consuming, the FDAs plan seeks to breathe new life into this underutilized process.

The FDAs review of medical devices through the 510(k) or PMA process is complex. Fuerst Ittleman has extensive experience successfully navigating medical devices through FDA review. For more information on FDAs review of medical devices, please contact us at contact@fidjlaw.com.

Virgin Islands Economic Development Commission taxation issues escalate to the Third Circuit Court of Appeals

On Monday January 17, 2011, three taxpayers filed motions to intervene in the Third Circuit Court of Appeals case of Appleton v. Comm’r, docket # 10-4522.

In Appleton, the Government of the U.S. Virgin Islands (“USVI”) moved to intervene at as a party at the trial level – before the U.S. Tax Court. The Tax Court denied the USVI’s motion to intervene in a full Tax Court opinion, Appleton v. Comm’r, 135 T.C. 23 (2010) available here. A full discussion of the significance of the Tax Court’s opinion will be the topic of a separate post.

The USVI appealed the Tax Court’s decision to the Third Circuit and also moved for an expedited briefing schedule. On December 30, 2010, the Third Circuit granted the USVI’s motion in part and entered an abbreviated briefing schedule which will require the parties to fully brief their positions on or before February 18, 2011.

On January 14, 2011, the USVI filed its opening brief. On January 17th, less than one business day after the USVI filed its opening brief, attorneys at Fuerst Ittleman moved under a judicially crafted exception to the Federal Rules of Appellate Procedure (International Union v. Scofield, 382 U.S. 205, 217 n.10 (1965)) that only allow intervention in certain limited circumstances.

The issue that the Third Circuit will have to decide is whether other taxpayers who could, potentially, have the USVI intervene in their case before the Tax Court, can have input at the appellate level as to whether the USVI can intervene. However the more fundamental issue that we will be seeking to address is who are the proper parties to the USVI residency cases. It remains to be seen how Mr. Appleton, the USVI, and the United States government will view the motion to intervene before the Third Circuit.

The attorneys at Fuerst Ittleman have intimate knowledge of the USVI. In particular one of the attorneys is a member of the USVI bar and lived and practiced on the island of St. Thomas for years.

United States Tax Court Opines on its own Jurisdiction to Resolve USVI Tax Issues

On August 17, 2010, the Tax Court issued a full Tax Court Opinion in the case of Huff v. Comm’r, 135 T.C. 10 (2010) available here.

The issue before the Tax Court in Huff was whether the Tax Court had jurisdiction over the case given that the District Court of the Virgin Islands has “exclusive jurisdiction over the income tax laws applicable in the Virgin Islands” pursuant to 48 U.S.C. section 1612.

The Tax Court held that although this case involves putative Virgin Islands transactions, the notice of deficiency determines deficiencies in Federal income tax. Whether Petitioner satisfies all the requirements set forth in I.R.C. sec. 932(c)(4), and thus need not file a Federal tax return or pay Federal income tax for 2002, 2003, and 2004, is a matter which the Tax Court has jurisdiction to decide.

What is interesting to note is what is missing from the Court’s opinion. The Petitioner in Huff moved to dismiss on the grounds that 48 U.S.C. section 1612 divested the Tax Court of jurisdiction. However the Petitioner also moved to dismiss on forum non conveniens grounds citing the Supreme Court case of Sinochem Int’l Co. v. Malay. Int’l Shipping Corp. , 549 U.S. 422 (2007) (Ginsberg, J.) which stated:

“The common-law doctrine of forum non conveniens Ëœhas continuing application [in federal courts] only in cases where the alternative forum is abroad, and perhaps in rare instances where a state or territorial court serves litigational convenience best.”

The Tax Court never addressed this legal issue and even omitted any reference to it as if this argument never existed. The issue of what court has jurisdiction will soon be addressed as the attorneys at Fuerst Ittleman have sought certification on this very issue to the Third Circuit Court of Appeals.

The attorneys at Fuerst Ittleman handle all types of tax controversy and litigation including litigation with the IRS and USVI over USVI residency and income tax refunds. In fact one of the attorneys at Fuerst Ittleman lived and worked in the USVI and is a member of the USVI bar.