Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

RITE AID CORP. v. BOARD OF PHARM. OF NEW JERSEY

September 14, 1976

RITE AID CORPORATION, a corporation of the State of Delaware, et al., Plaintiffs,
v.
The BOARD OF PHARMACY OF the STATE OF NEW JERSEY et al., Defendants



The opinion of the court was delivered by: GARTH

Plaintiffs, Rite Aid Corporation, Rite Aid Pharmacy of Bergenfield, Inc., and Milton H. Silver seek to declare unconstitutional and to enjoin the enforcement of certain New Jersey statutes which regulate the practice of pharmacy. The statutes challenged are N.J.S.A. 45:14-1, 3, 12, and 35 of the New Jersey Pharmacy Act and N.J.S.A. 52:14B-10(c) of the New Jersey Administrative Procedure Act. After a plenary trial on the merits before a three-judge district court convened pursuant to 28 U.S.C. § 2281 et seq., we have concluded that it would be inappropriate to abstain from exercising federal jurisdiction and that the plaintiffs have failed to carry their burden of establishing the unconstitutionality of the challenged statutes.

  I.

 The retail pharmacy industry in New Jersey distributes pharmaceuticals through both independently owned pharmacies and corporations owning several pharmacies (chain stores). *fn1" Of the approximate 1,560 retail pharmacies in New Jersey, 168 or 10.8% are owned and operated as chain stores. Rite Aid *fn2" is the largest pharmacy chain store system in New Jersey. Since 1966, when Rite Aid opened its first store in New Jersey, it has grown in number to 51 stores located throughout the state. In addition to prescription items, Rite Aid sells health and beauty aids at discounts of 15 to 35%. Rite Aid's prescription prices are 15 to 20% lower than the average price charged by an independently owned pharmacy.

 The practice of pharmacy in New Jersey is regulated by the Board of Pharmacy of the State of New Jersey (Board) which is composed of five registered pharmacists "actively engaged in conducting a pharmacy" (N.J.S.A. 45:14-1), one lay "public member" representing the interests of the public (N.J.S.A. 45:1-2.2(b)) and one lay state executive official (N.J.S.A. 45:1-2.2(c)). In appointing the five pharmacist board members, the Governor gives consideration to the recommendations submitted by the New Jersey Pharmaceutical Association. See N.J.S.A. 45:1-2.2(a); Campbell dep. at 96-98. At the time this action was brought, all the pharmacist Board members owned independent retail pharmacies. *fn3"

 On April 6, 1973 Paul Pumpian, the Secretary to the Board, received two letters complaining that Rite Aid's store in Bergenfield, New Jersey (Rite Aid of Bergenfield, Inc.) was improperly filling prescriptions. Pumpian, at the request of the Board, referred the letters to the Enforcement Bureau of the Division of Consumer Affairs. The Enforcement Bureau is that organization of New Jersey state government charged with conducting investigations and inspections for the nineteen professional or occupational licensing boards within the Division of Consumer Affairs. From April to July, 1973, the Enforcement Bureau conducted an investigation of the Bergenfield pharmacy. *fn4"

 On August 27, 1973 the Enforcement Bureau forwarded the written report of its investigation to the Board. On the basis of that report the Board members concluded that there was sufficient cause to believe that Rite Aid of Bergenfield had filled and refilled prescriptions without authorization, and that it had sold and distributed an adulterated pharmaceutical. The Board forwarded the report to the Attorney General's office for the institution of disciplinary proceedings. Thereafter, a complaint was served charging Rite Aid of Bergenfield and Milton Silver and David Carter, pharmacists at Bergenfield, with unlawfully dispensing and selling prescription drugs in violation of N.J.S.A. 45:14-26.1 (filling or refilling prescriptions without authorization); N.J.S.A. 45:14-15 (recording of prescriptions); and N.J.S.A. 45:14-16 (failure to strictly follow prescription).

 On July 29 and 30, 1974, Judge Mintz as hearing officer held hearings regarding the alleged Rite Aid violations. Thereafter, on September 24, 1974, his report issued, finding that Rite Aid of Bergenfield had filled and refilled prescriptions without authorization, dispensed a prescription in adulterated form, failed to affix a proper label on a prescription, and failed to properly record the name of the dispensing pharmacist. As to Milton Silver, Judge Mintz concluded that he dispensed a prescription drug without authorization and without affixing a label to the container. Carter was not found to have violated any provision of the pharmacy laws. Judge Mintz recommended that Rite Aid of Bergenfield's pharmacy permit be suspended for thirty days and that Silver's license be suspended for seven days. No monetary fine was recommended.

 Rite Aid *fn5" filed exceptions with the Board. However, on December 6, 1974 the Board issued its Decision and Order which adopted the entire report of its hearing officers, but increased the suspension of Rite Aid of Bergenfield's pharmacy permit to ninety days. *fn6" The Board also modified the hearing officer's recommendation as to Silver. Silver's license was not suspended, but in lieu thereof, the Board assessed a civil penalty of $ 325.00 which was suspended.

 Thereafter, Rite Aid applied to a single judge of the district court for a preliminary injunction staying the operation of the Board's order pending a decision on these proceedings. The Board consented to a stay of its order pending the outcome of this litigation.

 On January 17, 1975 Rite Aid filed its Second Amended Complaint and Request for Convocation of Three Judge Court. *fn7" The Complaint named the Board, its secretary, the five pharmacist Board members and the Governor and Attorney General of New Jersey as defendants.

 The Third Count alleges that the Board's investigation, prosecution and adjudication of complaints pursuant to N.J.S.A. 45:14-3, 12 and 35 is unconstitutional. *fn9"

 The Fourth Count alleges that the designation of a hearing officer pursuant to N.J.S.A. 52:14B-10(c) *fn10" was unauthorized and unconstitutional as the statute fails to delineate standards for the selection of a hearing officer.

 The Fifth Count alleges that the Board has enforced the pharmacy statutes against Rite Aid in an unequal, arbitrary and discriminatory manner.

 The Complaint seeks the convening of a three judge district court pursuant to 28 U.S.C. § 2281, a declaratory judgment holding N.J.S.A. 45:14-1, 3, 12, 35 and N.J.S.A. 52:14B-10(c) unconstitutional on their face and as applied, injunctive relief restraining the enforcement of these statutes and an order declaring the Board's Decision and Order as to Rite Aid null and void and enjoining its enforcement. *fn11"

 II.

 The defendants have argued that the doctrine of equitable restraint requires us to abstain, leaving the plaintiffs to their state remedies. In support of this contention, we are referred to Younger v. Harris, 401 U.S. 37, 91 S. Ct. 746, 27 L. Ed. 2d 669 (1971) and in particular Huffman v. Pursue, 420 U.S. 592, 95 S. Ct. 1200, 43 L. Ed. 2d 482 reh. denied, 421 U.S. 971, 95 S. Ct. 1969, 44 L. Ed. 2d 463 (1975).

 Younger involved the enjoining of a state criminal proceeding with which we are not concerned here. Huffman extended the Younger doctrine to a "state proceeding which in important respects is more akin to a criminal prosecution than are most civil cases." 420 U.S. at 604, 95 S. Ct. at 1208. In Huffman, a sheriff and a prosecuting attorney in Ohio sought to close a theatre specializing in the display of allegedly pornographic films which had been adjudged obscene after adversary hearings. The proceeding was brought under a state statute which provided that the exhibition of obscene films constituted a nuisance. The state court determined that the theatre had exhibited obscene films and ordered it closed for a year. Rather than appealing that state court order, an action in federal district court was filed based on 42 U.S.C. § 1983. The plaintiff there sought injunctive relief and a declaration that the Ohio statute was unconstitutional. The district court reached the merits of the controversy and enjoined the theatre's closing. The United States Supreme Court vacated the district court order and remanded for its consideration of Younger abstention.

 The Supreme Court in discussing the application of Younger abstention, which heretofore had been restricted to criminal proceedings, said:

 
The State is a party to the Court of Common Pleas proceeding, and the proceeding is both in aid of and closely related to criminal statutes which prohibit the dissemination of obscene materials. Thus, an offense to the State's interest in the nuisance litigation is likely to be every bit as great as it would be were this a criminal proceeding. Cf. Younger v. Harris, supra, 401 U.S. 37, at 55 n.2, 91 S. Ct. 746, at 757, 27 L. Ed. 2d 669 (Stewart, J. concurring). Similarly, while in this case the District Court's injunction has not directly disrupted Ohio's criminal justice system, it has disrupted that State's efforts to protect the very interests which underlie its criminal laws and to obtain compliance with precisely the standards which are embodied in its criminal laws. (Footnote omitted.)
 
420 U.S. at 604-05, 95 S. Ct. at 1208

 Thus, the most recent Supreme Court discussion of Younger comity considerations in a civil context extended the reach of the doctrine of equitable restraint only to those civil proceedings which are in aid of, or closely related to, a state's enforcement of its criminal laws. The cases following Huffman in which Younger abstention was applied, however, have in many instances gone beyond the strict requirement of a criminal nexus. These cases have apparently engrafted onto Younger a substitute condition which would require abstention where the state has a strong and peculiar relationship to, or interest in, the existing state proceedings. The courts which have so extended Younger equate the identified "strong state interest" with the quasi criminal nexus required by Huffman. Anonymous v. Association of the Bar of City of New York, 515 F.2d 427 (2nd Cir. 1975) (attorney disciplinary proceedings characterized as "quasi criminal"); Greene v. Virginia State Bar Association, 411 F. Supp. 512 (E.D. Va.1976) (3 judge dist. ct.) (attorney disciplinary proceedings); Niles v. Lowe, 407 F. Supp. 132 (D.Haw.1976) (3 judge dist. ct.) (attorney disciplinary proceedings); Mildner v. Gulotta, 405 F. Supp. 182 (E.D.N.Y.1975) (3 judge dist. ct.) (attorney disciplinary proceedings); McCune v. Frank, 521 F.2d 1152 (2d Cir. 1975) (police officer disciplinary proceedings); Ahrensfeld v. Stephens, 528 F.2d 193 (7th Cir. 1975) (state eminent domain proceedings); Littleton v. Fisher, 530 F.2d 691 (6th Cir. 1976) (child custody proceedings); Burdick v. Miech, 409 F. Supp. 982 (E.D.Wis.1975) (3 judge dist. ct.) (bastardy proceedings); Lerner v. Wittig, 394 F. Supp. 866 (E.D.Wis.1975) (municipal court proceedings). *fn12"

 Presumably, this further extension of Younger was based upon the underlying considerations of comity found in Younger. However, we are not convinced that the Supreme Court's holding in Huffman requires this additional extension of Younger to civil cases where a criminal nexus is absent. Nor need we decide whether, if faced with situations similar to those reflected in the cases noted above, we too, would have relied upon a "strong state interest" (as being comparable to a "criminal nexus") to suffice for Younger-Huffman abstention.

 Here the record discloses neither a sufficient criminal nexus nor a sufficiently strong state interest to require abstention.

 While we recognize that New Jersey has enacted legislation which provides for criminal penalties for certain activities relating to controlled dangerous substances (see N.J.S.A. 24:21-1 et seq.), these provisions are not "closely related to or akin to" the New Jersey statutes regulating the practice of pharmacy. N.J.S.A. 45:14-1 et seq. which regulates the practice of pharmacy in New Jersey appears as a unified, cohesive and comprehensive statutory scheme with its own sanction and penalty provisions. The sanctions and penalties specified are completely civil in nature and are enforced through civil rather than criminal actions. See, e.g., N.J.S.A. 45:14-26.3, 27, 35 and 37.

 Moreover, there is no intimation or suggestion in the record that criminal charges against Rite Aid have ever been contemplated during these past 27 months or that criminal charges have ever been employed at any time in aid of enforcement of the pharmacy laws.

 Thus, restricting ourselves to the qualifications set forth by the Supreme Court in Huffman, there is no reason or basis for our abstaining here. *fn13"

 Furthermore, even if we were inclined to follow the expanded approach of the authorities listed above and seek to abstain on the basis of a "strong state interest", we would not do so here, for as indicated, the record discloses no such interest.

 We have here no more than a routine, garden variety state agency administrative proceeding. It is neither quasi criminal in character, ( Anonymous v. Association of the Bar of City of New York, supra) nor is there present such a strong state interest as can be equated to that interest which a state has in its own criminal proceedings ( Burdick v. Miech, supra at 984-985). No such special circumstances appear here as might otherwise warrant abstention based on a strong state interest in proceedings involving eminent domain ( Ahrensfeld v. Stephens, supra), bastardy ( Burdick v. Miech, supra), child custody ( Littleton v. Fisher, supra), or attorney discipline ( Anonymous v. Association of the Bar of City of New York, supra).

 We do not suggest or intimate that New Jersey is unconcerned with the proper regulation of the practice of pharmacy. We assume that New Jersey is as concerned with the regulation of pharmacy as it is concerned with the regulation of all similar professions and occupations. (See N.J.S.A. Title 45 generally). However, that concern, unless evidenced by a stronger state interest than appears in this record, is insufficient to meet the abstention requirements of even those cases which have extended Younger beyond Huffman. Were we to hold otherwise on a record such as this, we would be expanding the doctrine of Younger-Huffman abstention to all and every state agency proceeding regardless of its nature. This we decline to do.

 Nor do we think this Court should exercise its equitable discretion under Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61 S. Ct. 643, 85 L. Ed. 971 (1941). In Pullman the Supreme Court held that where an interpretation by the state courts of an unresolved question of state law may avoid the necessity of deciding a constitutional question, the federal court should abstain from adjudicating the constitutional question until the state courts could interpret the statute. "Pullman abstention", however, is founded on the exercise of the equitable discretion of the district court, Baggett v. Bullitt, 377 U.S. 360, 375-76, 84 S. Ct. 1316, 12 L. Ed. 2d 377 (1964), and is not required where it is unlikely that the resolution of the state law question will significantly affect the federal constitutional claims. Harris County Commissioners Court v. Moore, 420 U.S. 77, 83-84, 95 S. Ct. 870, 43 L. Ed. 2d 32 (1975). See also Bellotti v. Baird, 428 U.S. 132, 96 S. Ct. 2857, 49 L. Ed. 2d 844 (1976).

 The pertinent state law here, N.J.S.A. 45:14-1, provides for the membership of the Board of Pharmacy:

 
The board shall consist of five members, to be appointed from time to time as hereinafter directed, by the governor, each of whom shall be a citizen of and an able and skilled registered pharmacist in this state, shall have been registered as a pharmacist in this state for at least five years prior to his appointment, shall be actually engaged in conducting a pharmacy at the time of his appointment and shall continue in the practice of pharmacy during the term of his office. (Emphasis added.)

 In its Complaint, Rite Aid alleged that this statute discriminates against chain store pharmacies in that pharmacists employed in such establishments may not be chosen to serve as members of the Board of Pharmacy. Second Amended Complaint, First Count, para. 7. Rite Aid predicates its contention on the requirement that members be "engaged in conducting a pharmacy" which it interprets as meaning that the pharmacist must be the owner of the pharmacy.

 While the courts of New Jersey have not yet construed this clause, the Governor has appointed pharmacists to the Board who did not own their own pharmacies. *fn14" This Executive interpretation notwithstanding, we think that a definitive construction of the statutory language by the New Jersey courts would not avoid the necessity of deciding the constitutional questions which Rite Aid has raised.

 III.

 Rite Aid first attacks N.J.S.A. 45:14-1 on its face as being in violation of the due process clause of the Fourteenth Amendment, because the statute requires that pharmacists be regulated and disciplined by a board composed primarily of competitors. Thus, argues Rite Aid, the Board members are necessarily biased and can neither be impartial in their regulatory functions nor in adjudicating alleged violations of the Pharmacy Act by plaintiffs and other non Board-member pharmacists.

 It is fundamental that one accused of violating the law is entitled to a fair trial in a fair tribunal. Tumey v. Ohio, 273 U.S. 510, 47 S. Ct. 437, 71 L. Ed. 749 (1927); In re Murchison, 349 U.S. 133, 75 S. Ct. 623, 99 L. Ed. 942 (1955). In achieving that standard we have sought to prevent not only actual bias, but also the appearance of bias. In re Murchison, supra at 136, 75 S. Ct. 623. To this end, the Supreme Court has stated that "every procedure which would offer a possible temptation to the average man as a judge . . . not to hold the balance nice, clear, and true between the state and the accused, deprives the latter due process of law." Tumey v. Ohio, supra, 273 U.S. at 532, 47 S. Ct. at 444. It is clear that where the adjudicator has a substantial pecuniary interest in the outcome, the probability of actual bias is too high to be constitutionally tolerable. Withrow v. Larkin, 421 U.S. 35, 46-47, 95 S. Ct. 1456, 43 L. Ed. 2d 712 (1975); Gibson v. Berryhill, 411 U.S. 564, 579, 93 S. Ct. 1689, 36 L. Ed. 2d 488 (1973).

 We do not believe that the Board, consisting as it does of five pharmacists and two lay persons as required by N.J.S.A. 45:14-1, creates a situation of probable bias in the regulation of pharmacists. The claim made by Rite Aid is similar to the argument advanced by the plaintiff in Kachian v. Optometry Examining Board, 44 Wis. 2d 1, 170 N.W.2d 743, 747-48 (1969). In this argument Rite Aid is not claiming actual bias but rather contends that ". . . there is an inbuilt, inescapable even if indirect, financial interest involved when [a pharmacist] board member sits in judgment on a fellow-[pharmacist]." Kachian, 170 N.W.2d at 747-48.

 Admittedly, the practice and conduct of a retail pharmacy primarily involves commercial activity in which various retail pharmacies compete for customers. Cf. Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 96 S. Ct. 1817, 48 L. Ed. 2d 346 (1976). However, mere theoretical competition alone has never been a sufficient predicate for an inductive conclusion of probable economic bias. Apoian v. State, 89 S.D. 539, 235 N.W.2d 641 (S.D. 1975); Blanchard v. Michigan State Bd. of Exam. in Optometry, 40 Mich. App. 320, 198 N.W.2d 804 (1972); Kachian v. Optometry Examining Board, supra.

 Rite Aid, however, argues that Gibson v. Berryhill, supra, and Wall v. American Optometric Association, Inc., 379 F. Supp. 175 (N.D. Ga.) (3 judge dist. ct.) aff'd mem. 419 U.S. 888, 95 S. Ct. 166, 42 L. Ed. 2d 134 (1974), support its facial attack on the N.J.S.A. 45:14-1. We cannot agree.

 Gibson v. Berryhill involved a disciplinary proceeding against a non-self-employed optometrist who was not, and could not become a member of the Alabama Optometric Association. The disciplinary proceeding was conducted by the Alabama Board of Optometry whose members were limited by statute to members of the Association, which itself, limited its members to self employed optometrists. Thus, out of Alabama's 192 practicing optometrists, only the 100 Association members were eligible for appointment to the Board. On that record, the Supreme Court agreed "that the pecuniary interest of the members of the Board of Optometry had sufficient substance to disqualify them, given the context in which [the] case arose." 411 U.S. at 579, 93 S. Ct. at 1698.

 In Wall v. American Optometric Association, Inc., supra, the members of the Georgia State Board of Examiners in Optometry were traditionally chosen by the governor from among the members of the Georgia Optometric Association, a private organization which was composed of "dispensing" as contrasted with "prescribing" optometrists. *fn16" Thus, out of Georgia's 300 optometrists, only the 200 members of the Association were eligible for appointment to the Board which regulated the practice of optometry. In this circumstance, the district court found that the board members had a substantial pecuniary interest and hence could not be "called disinterested in the outcome of plaintiffs' license revocating proceedings." 379 F. Supp. at 189.

 It is clear that both Gibson and Wall involve constitutional attacks addressed not to the face of the statutes involved, but rather to the manner in which they were applied. In neither case did the courts rest their holdings on the fact that mere board membership of individuals in the identical profession as those to be regulated, created a temptation to be biased. *fn17"

 There is nothing that appears on the face of N.J.S.A. 45:14-1 to indicate the presence of that kind of substantial pecuniary interest which was found to disqualify board members in Gibson and Wall. As in Gibson and Wall, to determine if such an interest exists, we must look to more than the mere words of the statute. Evidence is required. Recognizing that the plaintiffs here attack the statute on both facial and "as applied" grounds, we therefore ordered the taking of evidence to afford the plaintiffs an ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.