The opinion of the court was delivered by: LASKER
The National Association of Pharmaceutical Manufacturers ("NAPM") is a national trade association consisting of manufacturers and distributors of pharmaceutical products. The National Pharmaceutical Alliance ("NPA") is a not-for-profit corporation organized to promote the interests of manufacturers and distributors of pharmaceutical and other products throughout the United States. In this action they challenge the legality of regulations promulgated in 1979 by the Food and Drug Administration ("FDA") pursuant to section 501(a)(2)(B) of the Food, Drug & Cosmetic Act, 21 U.S.C. § 351(a)(2)(B) (the "Act"). That statute provides that a drug is "adulterated" within the meaning of the Act if it is not manufactured in conformance with "current good manufacturing practice" ("CGMP"). The regulations prescribe standards for a wide variety of drug manufacturing practices, and violation of the regulations renders a drug product "adulterated" within the meaning of the Act and therefore subject to the Act's enforcement provisions, which include seizures of the offending product and injunctions. In addition, manufacturers of adulterated drugs are subject to possible criminal sanctions.
The instant action challenges the regulations on a wide variety of grounds and seeks a declaratory judgment that the regulations are invalid because they are unconstitutionally vague and are arbitrary, capricious, not otherwise in accordance with law, and unsupported by substantial evidence. The government moves for summary judgment on the ground that all of plaintiffs' claims are barred by principles of res judicata as the result of a prior lawsuit between the parties in which the validity of the regulations was challenged. See National Association of Pharmaceutical Manufacturers v. Food & Drug Administration, 637 F.2d 877 (2d Cir. 1981), aff'g, 487 F. Supp. 412 (S.D.N.Y. 1980) ("NAPM I"). The Government also contends that, in the event the action is not res judicata, it is entitled to summary judgment on the merits because the regulations are not invalid on any of the grounds advanced by plaintiffs. Plaintiffs cross-move for summary judgment on the merits as to eight of the 11 counts of the complaint; they contend that further discovery is necessary before counts IX and X will be ripe for disposition by summary judgment. For the reasons set forth below, we conclude that Counts II, IV, VIII and X are barred by res judicata, and that the Government is entitled to summary judgment on the merits on the remaining counts.
I. The Res Judicata Claim
The regulations at issue in this case were promulgated pursuant to the notice and comment procedures of 5 U.S.C. § 553, and became effective March 28, 1979. See 43 Fed. Reg. 45013 (1978).On August 23, 1979, the plaintiffs in this action filed a complaint in this court (NAPM I) requesting a declaratory judgment that the FDA acted beyond its authority in promulgating the regulations as substantive rather than interpretive regulations.
No other challenges to the lawfulness of the regulations were asserted in NAPM I. Judge MacMahon dismissed the complaint, and the Court of Appeals, following a detailed review of the legislative history and relevant case law, concluded that the FDA had authority to issue substantive regulations under the CGMP statute, and affirmed the dismissal of the complaint.
The Government argues that the judgment and affirmance in the prior action preclude litigation of this action, citing the principle that
"a final judgment is res judicata "not only to all matters pleaded, but to all that might have been" and "not only as to all matters litigated and decided by it, but as to all relevant issues which could have been but were not raised and litigated in the suit."
The Government contends that all of the plaintiffs' challenges to the lawfulness of the regulations could have been asserted in the earlier action, and that prosecution of the instant action is therefore barred.
Plaintiffs respond that res judicata bars a subsequent suit between the same parties only when the subsequent suit involves the same cause of action as the first suit.
They contend that the present suit asserts a different cause of action from that of NAPM i, since NAPM I sought only a declaratory judgment as to the legal effect to be accorded the regulations -- i.e., their status as substantive or interpretive -- while the present action seeks a declaratory judgment that the regulations are invalid on their merits under the standards set forth in 5 U.S.C. § 706(2).
Plaintiffs also argue that there was a strong practical justification for seeking an immediate judicial determination as to whether the rules would be given substantive or interpretive effect, without the delay that might have been occasioned if all possible challenges to the regulations' validity had been asserted in that suit as well. It is argued that if the regulations were held to have been merely interpretive, a manufacturer whose practices did not conform to the regulations could nevertheless avoid penalties in enforcement proceedings if he were able to prove to a court's satisfaction that his methods in fact constituted current good manufacturing practices within the meaning of the statute. If the regulations were substantive, on the other hand, noncompliance would automatically constitute a violation of the law, unless the manufacturer could show that the regulations were invalid because they were arbitrary and capricious or otherwise deficient under the standards of 5 U.S.C. § 706(2). Under such circumstances, plaintiffs argue, most manufacturers would feel compelled to bring their practices into strict compliance with the regulations, in some cases at great cost, and hence the initial lawsuit was brought to respond to the manufacturers' urgent need for an authoritative determination of the regulations' legal effect. Plaintiffs contend that they should not now be barred from challenging the validity of the regulations on their merits merely because they have already litigated what they contend was a more urgent and entirely distinct legal issue.
To determine whether res judicata bars any or all of the claims asserted in this action, a review of the complaint's allegations is necessary. The complaint is divided into eleven "counts," each of which alleges that for the reasons stated in the count the regulations are unsupported by substantial evidence and are arbitrary, capricious and not otherwise in accordance with the law.
Count I alleges that because the CGMP statute does not apply to so-called "new drugs" -- (that is, drugs that have received pre-marketing clearance under the provisions of section 505 of the Food, Drug and Cosmetics Act, 21 U.S.C. § 355), the FDA acted beyond its authority in making the CGMP regulations applicable to all drugs.
Count II of the complaint alleges that because some of the regulations are merely technical in nature and violation of such regulations may not in fact affect the purity or safety of the drug, the FDA acted beyond its authority by providing that any violation of the regulations renders the affected drug adulterated under the Act.
Count III alleges that the regulations are invalid because in promulgating them the FDA did not limit itself to requiring the use of practices actually prevailing in the industry, but instead adopted requirements that the FDA found to be feasible and valuable in assuring drug quality. Plaintiffs claim that a "feasible and valuable" standard is an incorrect interpretation of "current good manufacturing practice."
Count IV alleges that the regulations are invalid because they are intended to apply to all future drug manufacturing, although current good manufacturing practice, is, according to plaintiffs, necessarily varies over time as standards in the industry change.
Count V alleges that the regulations unlawfully establish non-statutory standards for current good manufacturing practice, in that the standards set forth in the regulations are vague and do not describe in sufficient detail the procedures which manufacturers must follow in order to be in compliance with the regulatory standards.
Count VI repeats the allegations in Count V and adds a claim that the regulations are unconstitutional on grounds of vagueness.
Count VII alleges that in promulgating the regulations, the FDA violated the procedural requirements of 5 U.S.C. § 553, by relying on material that the FDA did not include in the administrative record.
Count VIII alleges that the regulations are unlawful because the binding nature of the regulations permits the FDA to submit the administrative record to the court in an enforcement proceeding in lieu of presenting expert testimony as to what constitutes current good manufacturing practice, and the administrative record supporting the regulations at issue here is inadequate for such a purpose.
Count IX alleges that the regulations are invalid because in promulgating them the FDA relied upon irrelevant factors, including requests from other government agencies for standards which would assist such agencies in their procurement of drug products for federal government needs.
Count X alleges that the FDA's action in promulgating the regulations as substantive rather than interpretative was unlawful because the FDA's decision to do so was made without providing the public with notice and an opportunity to comment.
Count XI alleges that many individual provisions of the regulations are invalid because they are unreasonably burdensome and contrary to current good manufacturing practice.
In Herendeen v. Champion International Corp.,5 the Second Circuit articulated the standards for barring a lawsuit on grounds of res judicata as follows:
"[I]t is firmly established that a prior judgment must have been rendered by a court of competent jurisdiction, been a final judgment on the merits, and that the same cause of action and the same parties or their privies were involved in both suits.
"The test for determining whether causes of action are the same for purposes of res judicata has been variously expressed. Most frequently cited as the relevant criteria by both this court and the New York courts are whether a different judgment in the second action would impair or destroy rights or interests established by the judgment entered in the first action, whether the same evidence is necessary to maintain the second cause of action as was required in the first, and whether the essential facts and issues in the second were present in the first."
Here, the dispute centers on whether the causes of action asserted in the present complaint should be deemed the same as that asserted in the earlier action, since there is no question that the prior judgment was on the merits and involved the same parties. For purposes of analyzing this issue, the various counts of the complaint can be divided roughly into two categories: those which challenge the validity of the regulations on grounds related to their substantive status, and those which challenge the regulations on other grounds. Although the Government contends that both categories of claims are barred by res judicata, certainly the argument is stronger as to the first category, and we therefore address those claims first.
We conclude that four counts of the complaint, Counts II, IV, VIII and X, fall into the first category, and that it is clear that these counts cannot be entertained without re-opening the precise issue decided in NAPM I -- that is, whether the regulations could lawfully be promulgated as binding, substantive regulations.
The allegations in Count X state that prior to the promulgation of the regulations at issue here the FDA had treated CGMP regulations as interpretive rather than as substantive, and that the FDA's decision to promulgate the new regulations as substantive was "made secretly without public notice"
and was therefore unlawful. To grant plaintiffs relief on this claim would clearly "impair or destroy rights or interests" established by the prior judgment, which upheld the FDA's authority to issue the regulations as substantive; moreover, the complaint does not allude to any facts or evidence in support of this claim that were not available in the earlier action.
The prior judgment therefore bars the claim alleged in Count X.
The same analysis holds for Counts II, IV, and VIII. Count II alleges that it was unlawful for the FDA to provide that noncompliance with any of the regulations renders a drug adulterated within the meaning of the statute. However, it is a necessary consequence of the binding nature of the regulations that they have the force and effect of law and that a violation of the regulations is a violation of the statutory requirement of abiding by current good manufacturing practice. To the extent that Count II alleges that the regulations should not have been made substantive because some of the regulations are merely "technical" or trivial, the claim is barred by the prior judgment upholding the substantive nature of the regulations. Moreover, if plaintiffs intend to assert in Count II that some of the regulations are invalid on their merits because their requirements are not justified under a "current good manufacturing practice" standard, the claim is merely duplicative of that asserted in Count XI, in which plaintiffs challenge the lawfulness of many specific regulations. Accordingly, to the extent it is not duplicative of Count XI, Count II is barred by the prior judgment.
Count IV is also barred by the prior judgment, because it alleges that the FDA unlawfully "froze" the concept of current good manufacturing practice by issuing binding regulations prescribing what current good manufacturing practice is. Such a claim cannot be entertained without reopening the issue whether it was proper for the FDA to make the regulations binding.
The same barrier applies to Count VIII, which alleges that the regulations are invalid because the administrative record is inadequate to serve the function that an administrative record must serve when regulations have substantive effect. The allegations of Count VIII center on the fact that when regulations are binding the FDA is not required to prove what constitutes current good manufacturing practice by the laborious process of presenting expert testimony on the issue in each enforcement case. Instead, the regulations establish what CGMP is, and if the validity of the regulations themselves is challenged in the enforcement proceeding, the question for review is simply whether the administrative record adequately supports the promulgation of the regulations.
In Count VIII, plaintiffs allege that the regulations should not have been promulgated as binding, and the FDA should not be permitted to forego the necessity of presenting expert testimony in enforcement proceedings, because the administrative record is inadequate. To the extent that this claim seeks to reopen the issue whether the regulations were lawfully made binding, it is barred by the earlier judgment. To the extent, however, that it can be read to assert that the regulations are invalid on their merits because they are not adequately supported by the administrative record, it is simply duplicative of Count XI, which challenges specific regulations on their merits.
The remaining counts of the complaint do not appear to challenge the substantive nature of the regulations, but assert that the regulations are invalid for other reasons. These counts allege that the FDA is without authority to apply the regulations to so-called "new" drugs (Count I); that the FDA applied an incorrect interpretation of current good manufacturing practice in establishing the regulations (Count III); that the regulations are arbitrary and capricious and violate the Constitution because they are excessively vague (Counts V and VI); that the FDA unlawfully relied on non-record information and irrelevant factors in promulgating the regulations (Counts VII and IX); and that many individual provisions of the regulations are excessively burdensome or contrary to current good manufacturing practice (Count XI).
As previously noted, the factors to be evaluated in determining whether the theories asserted in the present suit are to be deemed the same cause of action asserted in the earlire suit are whether judgment for plaintiffs in this suit would impair rights or interests established by the first judgment, whether the same evidence is necessary in both suits, and whether the facts and issues essential to this suit were present in the first. Applying these factors, we are persuaded that res judicata does not bar the remaining claims of the current complaint. The right or interest established in NAPM I was the FDA's authority to establish CGMP regulations having the force and effect of law. That authority cannot be affected by a judgment for plaintiffs on the remaining counts of their complaint, which challenge the content and scope of the regulations, not their legal effect.
Moreover, as to one of the remaining counts, Count XI, the evidence necessary to a decision includes the administrative record, a review of which was not necessary to the decision in NAPM I. As to the other counts, although the "facts" and "evidence" are in some sense the same as in NAPM I -- because the consistency of the regulations with applicable legal standards is the sole issue -- the inquiry necessary to determine the merits of plaintiffs' current claims is nevertheless quite different. The earlier suit required only an analysis of whether the legislative histories of 5 U.S.C. § 701(a) and of the CGMP statute, and the relevent case law, supported the FDA's authority to promulgate binding CGMP regulations. The instant suit necessitates an analysis, for example, of whether the specific regulations established by the FDA are excessively vague; whether, in promulgating them, the FDA relied on improper factors or legal standards; and, in the case of Count I, the relationship between the CGMP statute and the statute governing "new" drugs.
The Government places heavy reliance on Teltronics Services, Inc. v. L M Ericsson Telecommunications, Inc.,10 which emphasizes the necessity of precluding repetitive litigation "based upon the same conduct alleged in the first complaint."
However, the circumstances in Teltronics, in which the plaintiff alleged identical antitrust claims against one of its suppliers in two separate actions, cannot reasonably be analogized to the situation here, where the lawsuits involve separate legal issues, albeit pertaining to the same regulations. While we have agreed with the Government that the plaintiffs should not be permitted to advance in this suit new arguments as to why the FDA should not have promulgated substantive regulations, we believe that the plaintiffs were not obligated to advance all other theories as to the regulations' invalidity as well.
Such a ruling does not mean, as the Government argues, that plaintiffs are necessarily free to assert further legal challenges to the regulations in separate lawsuits. Rather, it recognizes that in view of plaintiffs' legitimate need for a prompt determination of the legal effect of the regulations in the earlier action,
and the significant difference between the claim asserted in the earlier action and the claims advanced in the remaining counts of the current complaint, preclusion of the present claims is not warranted under principles of res judicata.
II. Applicability of CGMP Regulations to New Drugs
Count I of the complaint alleges that the FDA had no authority to require that drugs approved for marketing under Section 505(b) of the Act, 21 U.S.C. § 355(b), -- so-called "new drugs" -- must also comply with CGMP regulations. Plaintiffs contend that because, under the new-drug provisions, the FDA approves the manufacturing methods used in producing any new drug before permitting the drug to be marketed, and because the new-drug provisions of the Act contain their own enforcement mechanisms by which such approval can be withdrawn if the manufacturing methods ...