Korangy v. United States Food & Drug Administration

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

AMILE A. KORANGY, M.D.; KORANGY 

RADIOLOGY ASSOCIATES, P.A.,

Petitioners,

v.  No. 05-2300

UNITED STATES FOOD AND DRUG

ADMINISTRATION,

Respondent.



AMILE A. KORANGY, M.D.; KORANGY 

RADIOLOGY ASSOCIATES, P.A.,

Petitioners,

v.  No. 06-1860

UNITED STATES FOOD AND DRUG

ADMINISTRATION,

Respondent.



On Petition for Review of an Order

of the Food and Drug Administration.

(A-05-35)

Argued: May 24, 2007

Decided: August 17, 2007

Before WILKINSON, MOTZ, and TRAXLER, Circuit Judges.

Petition for review denied by published opinion. Judge Traxler wrote

the opinion, in which Judge Wilkinson and Judge Motz joined.

2 KORANGY v. USFDA

COUNSEL

ARGUED: Timothy Cronin Lynch, OFFIT & KURMAN, Maple

Lawn, Maryland, for Petitioners. Anne Lobell Murphy, UNITED

STATES DEPARTMENT OF JUSTICE, Appellate Staff, Civil Divi-

sion, Washington, D.C., for Respondent. ON BRIEF: Alex M. All-

man, OFFIT & KURMAN, Maple Lawn, Maryland, for Petitioners.

Daniel Meron, General Counsel, Sheldon T. Bradshaw, Chief Coun-

sel, Food and Drug Division, Eric M. Blumberg, Deputy Chief Coun-

sel, Litigation, Marci B. Norton, Associate Chief Counsel for

Enforcement, UNITED STATES DEPARTMENT OF HEALTH

AND HUMAN SERVICES, Washington, D.C.; Peter D. Keisler,

Assistant Attorney General, Douglas N. Letter, Appellate Staff, Civil

Division, UNITED STATES DEPARTMENT OF JUSTICE, Wash-

ington, D.C., for Respondent.

OPINION

TRAXLER, Circuit Judge:

Dr. Amile Korangy and Korangy Radiology Associates ("KRA")

petition this court for review of an order of the Food and Drug

Administration imposing monetary sanctions on Korangy and KRA

for allowing a statutorily-required certification to lapse and for per-

forming mammograms after the certification expired. For the reasons

that follow, we deny the petition for review.

I.

Under the Mammography Quality Standards Act ("MQSA"), facili-

ties that provide mammographies must be certified by the FDA. See

42 U.S.C.A. § 263b(b) (West Supp. 2007). In accordance with the

MQSA, the FDA in 1999 issued a certificate for the operation of a

mammography facility, known as "Baltimore Imaging Center," in

Catonsville, Maryland. The 1999 certificate issued by the FDA was

set to expire on May 6, 2002, and the expiration date was noted on

the certificate itself. By 1999, Baltimore Imaging Center was operated

by KRA, which is wholly owned by Korangy.

KORANGY v. USFDA 3

The American College of Radiology ("ACR") is an FDA-approved

accreditation body that inspects mammography equipment to deter-

mine compliance with the MQSA. ACR inspected Korangy’s equip-

ment and informed Korangy by letter in April 2002 that his

mammography equipment failed the quality standards for clinical

image and that he should immediately stop using the equipment.

ACR’s letter explained to Korangy that the failure would be reported

to the FDA and that the FDA would "officially notify" Korangy to

stop using the equipment. See J.A. 32.

Notwithstanding his knowledge that his mammography produced

images of unacceptable quality, Korangy continued to use the

machine. He bought a new mammography unit that was provisionally

certified for use on July 25, 2002. From May 7 (the day after his orig-

inal certificate expired) until July 25 (the day before the new unit was

certified), Korangy was operating without the required certification.

During that uncertified period, he performed 192 mammograms at the

Catonsville facility.

The FDA learned that Korangy was performing mammograms

without the proper certification, and it filed a complaint in September

2003 seeking civil penalties against Korangy and KRA. An adminis-

trative law judge granted partial summary judgment in favor of the

FDA, concluding that KRA and Korangy were each liable for one

penalty for failing to obtain the required certificate. See 42 U.S.C.A.

§ 263b(h)(3)(A) (West Supp. 2007). Because the Act prohibits con-

ducting an examination or procedure without a certificate, the ALJ

also concluded that Korangy and KRA each had committed an addi-

tional 192 separate violations by performing mammograms during the

certification lapse. In a separate proceeding, the ALJ determined the

appropriate amount of the sanctions. The FDA initially sought

$10,000 (the statutory maximum) for each violation by Korangy and

KRA. Korangy contended, however, that he lacked the ability to pay

sanctions in that amount. Although the FDA could not verify

Korangy’s claim because he did not come forward with all of the rele-

vant financial information, the FDA nonetheless reduced its sanctions

request from $10,000 per violation to $3,000 per violation. The ALJ

assessed penalties in the amount sought by the FDA. The total amount

of sanctions imposed was more than one million dollars—$579,000

separately assessed against both KRA and Korangy.

4 KORANGY v. USFDA

Korangy and KRA appealed to the Departmental Appeals Board of

the Department of Health and Human Services, and the Board

affirmed the ALJ’s decision. Korangy and KRA then filed this peti-

tion for review.

II.

As noted above, the MQSA requires mammography facilities to be

certified by the FDA, see 42 U.S.C.A. § 263b(b), and authorizes the

imposition of civil monetary penalties for the "failure to obtain a cer-

tificate as required by subsection (b) of this section." 42 U.S.C.A.

§ 263b(h)(3)(A). A $3,000 penalty was imposed on KRA and on

Korangy for violation of this requirement. Neither KRA nor Korangy

challenge that penalty on appeal. KRA (but not Korangy), however,

does challenge the imposition of separate penalties for each of the 192

mammograms performed during the certification lapse.

The penalties for each of the mammograms performed were

imposed under § 263b(h)(3)(D), which authorizes penalties for "each

violation, or for each aiding and abetting in a violation of, any provi-

sion of, or regulation promulgated under, this section by an owner,

operator, or any employee of a facility required to have a certificate."

28 U.S.C.A. § 263b(h)(3)(D). KRA contends that it is the facility,1

and not the owner or operator of the facility, and that the penalties

were therefore not authorized under § 263b(h)(3)(D).

We agree with KRA’s construction of the statute. Section

263b(h)(3)(D) unambiguously authorizes penalties to be imposed on

owners, operators, and employees of the mammography facility, but

it does not authorize penalties to be imposed on the facility itself.

KRA’s argument falters at the next step, however, because KRA’s

claim that it is the facility, as opposed to the owner or operator of the

facility, is foreclosed, both as a matter of fact and of procedure.

1

The MQSA defines "facility" as the physical place where mammo-

grams are performed. See 42 U.S.C.A. 263b(a)(3)(A) (West Supp. 2007)

("The term ‘facility’ means a hospital, outpatient department, clinic, radi-

ology practice, or mobile unit, an office of a physician, or other facility

as determined by the Secretary, that conducts breast cancer screening or

diagnosis through mammography activities. . . .").

KORANGY v. USFDA 5

The issue is foreclosed to KRA as a factual matter because it

admitted in the proceedings below that it was the owner of the mam-

mography facility. KRA’s status as the owner of mammogram facility

is a question of fact, and KRA cannot now be heard to challenge the

ownership that it previously admitted. See, e.g., Lucas v. Burnley, 879

F.2d 1240, 1242 (4th Cir. 1989) ("The general rule is that a party is

bound by the admissions of his pleadings." (internal quotation marks

omitted)); cf. Zinkand v. Brown, 478 F.3d 634, 638 (4th Cir. 2007)

("Judicial estoppel is a principle developed to prevent a party from

taking a position in a judicial proceeding that is inconsistent with a

stance previously taken in court.").

The argument KRA seeks to raise on appeal is also barred as a pro-

cedural matter because KRA never argued below that penalties could

not be imposed on it under § 263b(h)(3)(D) because it was the facility

and not the owner of the facility. "[I]ssues raised for the first time on

appeal are generally not considered absent exceptional circumstances.

The underlying rationales for this rule are respect for the lower court,

an avoidance of unfair surprise to the other party, and the need for

finality in litigation and conservation of judicial resources." Holly Hill

Farm Corp. v. United States, 447 F.3d 258, 267 (4th Cir. 2006) (inter-

nal quotation marks and alterations omitted). There are no exceptional

circumstances in this case that would warrant our departure from this

general rule. The language of § 263b(h)(3)(D) is abundantly clear and

should have put KRA on notice from the beginning of these proceed-

ings that the FDA was seeking to impose penalties on it in its capacity

as the owner of the mammography facility. If there were doubt about

KRA’s ownership, it was incumbent upon KRA to raise the issue in

a timely manner, when it could have been resolved by the agency

charged with enforcing the MQSA. See Lane Hollow Coal Co. v.

Director, Office of Workers’ Comp. Programs, 137 F.3d 799, 806

(4th Cir. 1998) ("Simple fairness to those who are engaged in the

tasks of administration, and to litigants, requires as a general rule that

courts should not topple over administrative decisions unless the

administrative body not only has erred but has erred against objection

made at the time appropriate under its practice." (internal quotation

marks omitted)). Accordingly, we reject KRA’s contention that the

civil penalties assessed against it for the 192 mammograms performed

during the certification lapse were not authorized under

§ 263b(h)(3)(D).

6 KORANGY v. USFDA

III.

Korangy argues that an FDA guidance manual requires the FDA to

give a facility, after a certification lapse, specific notice that perform-

ing mammograms could result in the imposition of civil penalties.

Korangy contends that there is a factual dispute about whether he

actually received the required notice. Because the ALJ expressly did

not resolve the dispute, Korangy contends that the order must be

vacated and the case remanded to the ALJ for resolution of the factual

dispute.

The factual dispute identified by Korangy involves two letters sent

by the FDA. On April 1, 2002, the FDA sent Korangy a letter inform-

ing him that his certificate was about to expire and that it would vio-

late the statute to perform mammograms after its expiration. On May

1, 2002, the FDA sent a second letter to Korangy directing him to

stop performing mammograms and stating that he would be subject

to civil penalties if he continued to perform them. Korangy denied

having received either letter. The ALJ did not decide whether

Korangy in fact received these letters, concluding that even without

them Korangy had all the notice that he needed. We agree with the

ALJ’s analysis on this point.

The manual upon which Korangy’s argument hinges states that:

The decision as to whether a facility should receive a Warn-

ing Letter or Civil Money Penalties would depend on the

severity of the situation found. Prior notice should be estab-

lished before considering Civil Money Penalties. Factors

affecting severity could include the number of patients that

were examined while uncertified, whether the facility knew

that it was performing mammography uncertified (i.e., was

it clear from correspondence that the facility received that

they were no longer certified). . . .

J.A. 81 (emphasis added). Assuming for purposes of this case that the

guidance manual establishes binding standards with which the FDA

must comply, we simply cannot conclude that the agency’s actions

were in any way inconsistent with the requirements of the manual.

While the manual requires that prior notice be given, nothing in the

KORANGY v. USFDA 7

manual mandates that notice must come in any particular form, or that

the notice must come from the FDA itself. In this case, the 1999 cer-

tificate itself shows on its face that it expires on May 6, 2002. The

ACR, the entity that performed the inspection of the equipment, sent

Korangy a letter on April 29, 2002, stating that the equipment had

failed the accreditation examination, that he should immediately stop

performing mammograms, and that continuing to perform mammo-

grams "may result in official sanction and fines from the FDA." J.A.

32. Because Korangy acknowledges that he received this letter, the

record clearly supports the ALJ’s determination that Korangy

received sufficient notice. See Knox v. United States Dep’t of labor,

434 F.3d 721, 723 (4th Cir. 2006) ("Under the Administrative Proce-

dure Act. . . , federal courts can overturn an administrative agency’s

decision only if it is arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with the law, or unsupported by substan-

tial evidence." (internal quotation marks omitted)). The ALJ thus

properly resolved the issues before it, and there is no need to remand

for resolution of the factual dispute surrounding the April and May

letters from the FDA.

IV.

Finally, Korangy and KRA contend that the penalty imposed is

excessive and violates the Eighth Amendment. We disagree.

The Excessive Fines Clause of the Eighth Amendment prohibits

the government from imposing excessive fines as punishment. While

Eighth Amendment claims often arise in the criminal context, civil

sanctions may fall within the scope of the amendment. See Austin v.

United States, 509 U.S. 602, 610 (1993); Thomas v. Commissioner,

62 F.3d 97, 99 (4th Cir. 1995). Civil fines serving remedial purposes

do not fall within the reach of the Eighth Amendment. However, if

a civil sanction "can only be explained as serving in part to punish,"

then the fine is subject to the Eighth Amendment. Austin, 509 U.S.

at 610. If the civil penalty is punitive and thus subject to the Eighth

Amendment, it will be found constitutionally excessive only if it is

"grossly disproportional to the gravity of [the] offense." United States

v. Bajakajian, 524 U.S. 321, 334 (1998); see United States v. Ahmad,

213 F.3d 805, 813 (4th Cir. 2000).

8 KORANGY v. USFDA

The FDA argues that the penalties authorized by the MQSA are

wholly remedial and thus not subject to the Eighth Amendment.

While we harbor some doubt about that characterization, see Bajaka-

jian, 524 U.S. at 329 (suggesting that remedial actions are brought to

obtain compensation or indemnification for lost revenues), we need

not resolve that issue. Assuming that the penalties are at least partially

punitive and thus subject to the Eighth Amendment, we cannot con-

clude that penalties imposed are grossly disproportionate to the grav-

ity of the offense.

Preliminarily, we note that Congress authorized up to $10,000 for

each violation of the MQSA. The $3,000 per violation penalty

imposed by the FDA thus represents a substantial reduction of the

penalty authorized by Congress. See id. at 336 (noting that "judg-

ments about the appropriate punishment for an offense belong in the

first instance to the legislature"). Moreover, KRA lost its certification

not because of a failure to comply with a reporting requirement or

some similar "technicality," cf. id. at 337 (finding forfeiture of more

than $350,000 to be constitutionally excessive where the defendant’s

crime was "solely a reporting offense"), but because its equipment did

not produce an image of adequate quality. The seriousness of that

deficiency cannot be over-emphasized. Breast cancer is most curable

at its earliest stages. If mammography equipment does not produce an

image of acceptable quality, early-stage breast cancer may not be

detected, thus depriving the patient of the best chance for cure. Under

these circumstances, it would be impossible to conclude that a single

$3,000 penalty would be grossly disproportionate to the gravity of a

single offense.

This case, of course, does not involve a single violation of the

MQSA. It involves 193 violations committed by Korangy and 193

violations committed by KRA, resulting in a combined penalty of

more than $1,000,000. While we recognize that this is a substantial

penalty, the amount of the penalty is the direct result of the number

of individual offenses committed by Korangy and KRA. Contrary to

the suggestion of the petitioners, the gravity of their offenses does not

diminish because they repeatedly committed the same offense. To the

contrary, the repeat offenses mean that more early cancers may have

been missed and more patients may have missed their best chance for

a cure. Because the petitioners committed very grave violations of the

KORANGY v. USFDA 9

2

MQSA, a substantial penalty was warranted. Under these circum-

stances, we cannot conclude that the penalties assessed against

Korangy and KRA were grossly disproportional to the gravity of the

offenses they committed, and we therefore reject the petitioners’

Eighth Amendment claims.

V.

Accordingly, for the foregoing reasons, we hereby deny the peti-

tion for review.

PETITION FOR REVIEW DENIED

2

Moreover, if the FDA could not impose separate penalties for

repeated violations, that would serve as perverse encouragement for out-

of-compliance clinics to perform as many mammograms as possible.

Clinics could put off for as long as possible purchasing expensive new

equipment and continue to profit from each mammography performed,

secure in the knowledge that their profits would exceed any sanctions

that might ultimately be imposed.