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UNITED STATES v. ALGON CHEM. INC.

April 12, 1988

UNITED STATES of America, Plaintiff,
v.
ALGON CHEMICAL INC., a corporation; and Edward Latinsky, an individual, Defendants



The opinion of the court was delivered by: BISSELL

 These cross-motions arise out of a Complaint filed on May 12, 1987 by the United States of America ("United States") against Algon Chemical, Inc. ("Algon") and Edward B. Latinski, President of Algon. In this cause, the United States sought preliminary and permanent injunctive relief against the distribution in interstate commerce of 13 lots of bulk drugs *fn1" in contravention of § 331(a), (c) *fn2" of the Federal Food, Drug and Cosmetic Act (the 'Act'), 21 U.S.C. § 301 et seq., and temporary, preliminary and permanent injunctive relief against the receipt and distribution of similar drugs in future contravention of the Act. The Court ordered the defendants to show cause as to why an order should not be entered issuing a preliminary and permanent injunction restraining them from violation of the Act. After oral argument on May 28, 1987, the Court, finding no material issue of fact, dismissed plaintiff's application for preliminary injunction and sua sponte ordered the parties to file cross-motions for summary judgment.

 Plaintiff's Complaint alleges that the drugs are not labeled with adequate directions for use and are, therefore, misbranded within the meaning of 21 U.S.C. § 352(f)(1). Additionally, plaintiff alleges that one of the lots of drugs, penicillin, is an unapproved new animal drug within the meaning of 21 U.S.C. § 321(w)(3), *fn3" and therefore is adulterated under 21 U.S.C. § 360b(a)(1)(A) *fn4" and § 351(a)(5). *fn5" The United States brings this proceeding under 21 U.S.C. § 332(a) which vests the United States District Courts with jurisdiction to enjoin and restrain violations of the Act.

 The defendant, Algon, argues that the 13 lots of drugs are exempt from the labeling requirements of § 352(f)(1) of the Act by virtue of an exempting regulation, 21 C.F.R. § 201.122. Additionally, defendant argues that the same exempting regulation serves to make § 321(w)(3) inapplicable to the seized penicillin.

 Presently before the Court are cross-motions for summary judgment pursuant to Fed.R.Civ.P. 56. On a motion for summary judgment, "the judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. " Fed.R.Civ.P. 56(c). The parties, in moving for summary judgment, have agreed that there exist no genuine issues of material fact. *fn6" The Court will proceed therefore, upon consideration of the pleadings and affidavits submitted, to determine which party is entitled to judgment as a matter of law.

 THE FACTS

 Algon has been engaged in receiving and selling in interstate commerce bulk pharmaceutical and chemical supplies for approximately eight years. Drugs that are in bulk form require further processing before actual use. The 13 lots of bulk drugs in question were purchased by Algon after importation into the United States by ICC Industries, and were stored by the NBC Warehouse and Storage Co. in Garfield, New Jersey. These bulk drugs were intended solely for the use of veterinarians in the practice of veterinary medicine. To prevent Algon from shipping the drugs, the Food and Drug Administration ("FDA") requested that the State of New Jersey embargo the drugs under state law until the FDA could obtain relief in federal court. *fn7" The drugs were placed under embargo beginning September 3, 1986.

 Prior to imposition of the embargo, Algon shipped portions of the 13 lots to, among others, Schuyler Laboratories, Rushville, Illinois and Brinton Veterinary Clinic, Willmar, Minnesota. *fn8" Schuyler, Algon's principal customer, resells the drugs to veterinarians. *fn9" None of the parties involved -- Algon, Schuyler, Borge and their veterinarian consignees -- holds FDA approvals for use of the drugs.

 Two of the embargoed articles were in containers bearing cautionary labels stating "to be used only for manufacturing, processing or repacking. " The remaining articles bore labeling indicating only the name of the drug and its origin. None of these drug items were accompanied by labeling that indicated directions for use.

 THE LAW

 A. Labeling Under 352(f)(1).

 In its Complaint, plaintiff alleges that defendant introduced or delivered for introduction into interstate commerce drugs which were misbranded within the meaning of 21 U.S.C. § 352(f)(1). Section 352 provides that:

 
[a] drug . . . shall be deemed to be ...

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