Civil Money Penalties: Biologics, Drugs, and Medical Devices

SUMMARY: The Food and Drug Administration (FDA) is issuing final

regulations to establish hearing procedures for use when FDA proposes

the imposition of administrative civil money penalties. This rule

implements the civil money penalty provisions of several statutes: the

National Childhood Vaccine Injury Act of 1986 (NCVIA), the Prescription

Drug Marketing Act of 1988 (PDMA), the Safe Medical Devices Act of 1990

(SMDA), the Generic Drug Enforcement Act of 1992 (GDEA), and the

Mammography Quality Standards Act of 1992 (MQSA).

EFFECTIVE DATE: August 28, 1995.

FOR FURTHER INFORMATION CONTACT: Joseph M. Sheehan, Center for Devices

and Radiological Health (HFZ-84), Food and Drug Administration, 2098

Gaither Rd., Rockville MD 20850, 301-594-4765.

SUPPLEMENTARY INFORMATION:

I. Background

In the Federal Register of May 26, 1993 (58 FR 30680), FDA issued a

notice of proposed rulemaking (NPRM) to establish procedures for

hearings concerning the administrative imposition of civil money

penalties by the agency. The NPRM noted that Congress had in recent

years given FDA authority to impose civil money penalties in the NCVIA,

the PDMA, the SMDA, and the GDEA. FDA requested that comments be filed

by July 26, 1993.

Subsequently, a trade association requested an extension of time to

file comments, and, in the Federal Register of July 27, 1993 (58 FR

40103), the agency extended the deadline for comments to August 25,

1993. In the July 27, 1993, Federal Register, FDA corrected an

inadvertent error in the proposed rule and added a reference to civil

money penalties authority provided for in the MQSA. The MQSA was added

to the list of statutes covered by proposed part 17 insofar as the MQSA

provided for the administrative imposition of civil money penalties.

Also, as an interim measure pending adoption of proposed part 17,

FDA issued a regulation in the Federal Register of September 22, 1993

(58 FR 49190), under which it could temporarily conduct civil money

penalties hearings pursuant to part 12 (21 CFR part 12). FDA is now

revoking procedural regulations that it issued as a temporary measure

pending adoption of part 17. This revocation will be effective when

these part 17 regulations become effective. Specifically, Sec. 5.99 (21

CFR 5.99) (as published at 58 FR 34212, June 24, 1993) and

Sec. 10.50(c)(21) (21 CFR 10.50(c)(21)) (as published at 58 FR 49190)

were issued to allow FDA to use part 12 for civil money penalties

proceedings on an interim basis. Because this delegation is no longer

needed and because retention of these provisions in the Code of Federal

Regulations would be confusing, FDA is revoking Secs. 5.99 and

10.50(c)(21) when the new part 17 becomes effective.

As to any pending civil money penalty administrative actions that

were subject to Notices of Opportunity for Hearing under part 12, when

these part 17 regulations become effective, FDA will send letters to

the respondents explaining that the agency intends to reinitiate the

actions by the complaint and answer process of part 17. None of the

pending actions has yet reached the point in the process of publication

of a Notice of Hearing under 21 CFR 12.35. Since part 17 was

specifically drafted to govern administrative hearings on civil money

penalty assessments, its use for pending actions will not prejudice the

respondents and will assure consistency in the adjudication of these

matters. If, for any reason, there is a stay of the effectiveness of

these part 17 regulations, the agency will proceed with the pending

civil money penalty administrative actions under current 21 CFR 5.99,

10.50(c)(21), and part 12.

II. Summary of and Response to Comments

In response to FDA's NPRM, the agency received 12 public comments.

Most came from device manufacturers or their representatives and device

manufacturer trade associations. In addition, one consumer group and

the Administrative Conference of the United States commented. What

follows is a summary of and response to each comment. Most of those

commenting made more than one comment. Except for those comments that

are not germane to a particular proposed section of part 17, the

comments are considered in connection with the proposed sections to

which they are related. In addition to the changes discussed below, a

number of editorial changes to the text of the final rule have been

made to improve the clarity of the regulation.

A. General Comments on the Preamble

In responding to comments and formulating a final rule, FDA has

balanced competing concerns: Namely, the interests of potential

defendants in securing as many procedural safeguards as practicable,

and the interests of the public in an efficient process that

effectively implements the statutes. FDA is very conscious of the need

to provide due process for companies and individuals from whom the

Government is seeking civil money penalties, and the comments were

carefully evaluated against this standard. At the same time, for the

civil money penalty remedy to become an effective enforcement tool

under the statute, the administrative process must be able to proceed

with predictability and efficiency. The industry, as a whole, benefits

from an efficient administrative civil penalties process in that such a

system will help to maintain consistency in enforcement and thereby

protect the majority of companies who stay in compliance against unfair

competition from the small minority of firms that do not.

Accordingly, in developing this final rule, FDA has sought to

establish an efficient, predictable system that processes cases in a

fair and responsible manner, while affording defendants adequate

procedural safeguards. As benchmarks, the agency has examined other

existing civil money penalty processes, particularly as administered by

the Environmental Protection Agency (EPA) and by the Inspector General

of the Department of Health and Human Services (HHS). (See HHS

regulation on Medicare Exclusions and Civil Money Penalties, 42 CFR

part 1005; EPA Civil Penalties and Permit Revocation Regulation, 40 CFR

part 22; Program Fraud Civil Remedies Regulation for HHS, 45 CFR part

79; and Program Fraud Civil Remedies Regulation for EPA, 40 CFR part

27).

These regulations provide a variety of procedural rights. FDA has

selected from among these various provisions to create a fair hearing

process. In response to comments, FDA has made over 25 changes in the

final rule (see concluding section of this preamble), in addition to

numerous clarifications throughout the preamble. For example,

procedural safeguards under part 17 include motions for summary

decisions, interlocutory appeal from rulings of the presiding officer,

settlement conferences, allowing the parties to determine an

appropriate settlement, and providing additional time before the

[[Page 38613]]

hearing for the exchange of exhibits, witness lists, and written

testimony. All of the EPA and HHS regulations provide for appeal of a

presiding officer's initial decision to an appeals board. EPA has an

Environmental Appeals Board, while HHS has the Departmental Appeals

Board (DAB). FDA has determined (see paragraph 101 below) that it would

be an appropriate use of agency resources, as well as an efficient and

effective means for handling appeals, to have the DAB serve as the

reviewing authority for appeals of decisions by presiding officers on

civil penalty actions.

The DAB is generally recognized as a fair and effective

adjudicative forum. The DAB is an independent body within HHS with

expertise in adjudication of civil money penalties. Accordingly, FDA

will use that board, at least initially, for the adjudication of all

appeals, including review of default judgments, interlocutory appeals,

and appeals from initial decisions under this part. Elsewhere in this

issue of the Federal Register, FDA is publishing a final rule in which

the Commissioner of Food and Drugs delegates to the DAB the authority

for the adjudication of appeals.

While a number of comments to the proposed rule sought procedures

virtually identical to procedural rights available in civil litigation

in Federal district courts, another comment urged that FDA use a more

efficient complaint and answer procedure to streamline the process.

These part 17 regulations provide a level of procedural safeguards

consistent with that provided in other existing civil money penalties

regulations. FDA believes that these procedures afford a respondent an

impartial forum for the adjudication of any contested civil money

penalty assessments.

1. Two comments questioned the use of administrative civil money

penalties in connection with the PDMA and the NCVIA. Those commenting

argued that, without specific congressional authority, FDA may not

administratively impose civil money penalties, but must seek them

through court proceedings. Additionally, another comment argued that

FDA may not bind any future statutory grant of civil money penalties

authority to part 17 hearing procedures.

FDA disagrees with the position that civil money penalties in

connection with the PDMA and the NCVIA may not be imposed

administratively, for the reasons stated in the preamble to the NPRM

(58 FR 30680 through 30681). FDA acknowledges that the issue has not

been directly addressed by the courts, but it agrees with the comment

of the Administrative Conference of the United States that ``any

challenge to FDA's authority to impose penalties administratively under

such statutes (as the NCVIA) should be unsuccessful, cf., United States

v. International Harvester, 387 F. Supp. 1338 (D.D.C. 1974).''

As to implementation of any future civil money penalty statutory

provision, FDA has reconsidered the desirability of determining in

advance the use of part 17 procedures. Although the use of part 17

procedures to implement future civil money penalty legislation may be

entirely appropriate, the agency prefers to preserve the flexibility to

determine the procedures that will apply to specific statutory language

once enacted. Section 17.1 has been modified to reflect this change.

2. One comment raised the concern that FDA has thus far not been

delegated authority to impose civil money penalties by the Secretary of

Health and Human Services (the Secretary). The comment's premise is

incorrect. The Secretary has delegated to the Commissioner of Food and

Drugs (the Commissioner) all authority given the Secretary under the

Federal Food, Drug, and Cosmetic Act (the act). (See Sec. 5.10(a)(1).)

(See also section 903 of the act (21 U.S.C. 393).) In addition, the

Secretary has delegated to the Commissioner authority to perform all

functions vested in the Secretary by Congress under section 351 of the

Public Health Service Act (the PHS Act) (42 U.S.C. 262) concerning

biologic recall orders. (See 5 CFR 5.10(a)(5).) The Secretary has

granted the Commissioner authority to impose civil money penalties

under the NCVIA. (See Sec. 5.10(a)(35).) Also the Secretary delegated

to the Commissioner authority granted the Secretary under the MQSA,

which includes authority to impose civil money penalties. (See 21 CFR

5.10(a)(36).)

3. One comment requested FDA to correct its misquoting in the NPRM

regarding the language of section 17(f) of the SMDA (21 U.S.C. 333(g))

by using ``and'' when the statute provided ``or''.

The preamble to the NPRM stated (58 FR 30680 at 30681) that ``civil

money penalties are not authorized against persons who violate section

519(a) of the act (21 U.S.C. 360i(a)) * * * or section 520(f) of the

act (21 U.S.C. 360j(f)) * * * unless the violation constitutes a

significant and knowing departure from such requirements or a risk to

the public health.'' [emphasis added.] In the July 27, 1993, Federal

Register (58 FR 40103 through 40104), FDA corrected its inadvertent

misquote. Section 17(f) of the SMDA (21 U.S.C. 333(g)(1)(B)) states

that civil money penalties shall not apply to any person who violates

the requirements of section 519(a) or 520(f) ``* * * unless such

violation constitutes (I) a significant or knowing departure from such

requirements, or (II) a risk to public health * * *.'' [emphasis added]

Conversely, another comment argued that FDA had been inadvertently

correct and that the legislative history shows that Congress had

actually intended that the violations in question constitute

significant and knowing departures in order to be punishable by civil

money penalties. FDA rejects this argument because Congress' intent is

clear from the language of the statute. The legislative history

contained in the Conference Report on the SMDA also supports FDA's

interpretation (H. Conf. Rept. 959, 101st Cong., 2d Sess. 29 (1990)).

4. Another comment stated that FDA should make clear that civil

money penalties are in addition to other remedies available under law,

not in lieu of them. FDA agrees that the agency has the authority to

use civil money penalties in addition to other judicial and

administrative remedies, if appropriate.

5. One comment asserted that violations of medical device

reporting, current good manufacturing practice (CGMP), and tracking

regulations should be enforced through civil money penalties. FDA

agrees that these violations, as well as others, are suitable

candidates for civil money penalty actions where authorized by the

SMDA. FDA does not intend to rule out the use of civil money penalties

in any situation provided for by law. Nor does FDA believe that civil

money penalties need be the only remedy it may use to enforce these

violations.

6. A comment urged the use of civil money penalties in lieu of

warning letters for serious violations of law. FDA advises that its

normal practice is to give prior notice by a warning letter or other

means before taking more significant enforcement action. However, in

the case of very serious violations or other special circumstances, the

agency can and will continue to initiate judicial enforcement actions,

as may be appropriate with or without the customary prior notice. Civil

money penalties were not intended to take the place of warning letters;

rather, civil money penalties were intended to assist the agency in

safeguarding the regulatory system.

On April 21, 1995, President Clinton directed agencies to use

discretion to modify penalties for small businesses. FDA's traditional

approach, by which the agency usually provides written

[[Page 38614]]

warning to encourage voluntary correction of violations before

undertaking the imposition of regulatory sanctions, is in keeping with

the President's directive. Also, as discussed in paragraph 25, in

addition to establishing the respondent's liability, FDA must prove the

appropriateness of the penalty under the applicable statute in

administrative civil money penalty actions.

7. One comment requested that the agency set forth specific

examples of what will constitute substantial compliance with device

tracking regulations such as assigning a percentage of trackable

devices that would constitute ``substantial compliance.'' Until FDA has

gathered more information on how and to what extent industry has

complied with the device tracking regulations, it would be premature

for the agency to present such specific, defining examples. FDA

declines to do this at this time.

8. Yet another comment proposed that all civil money penalty

proposals be cleared through the Department of Health and Human

Services prior to implementation. Because the Commissioner of Food and

Drugs has been delegated authority to impose civil money penalties as

noted in comment 2 of section II.A. of this document, the agency

declines to adopt the comment's suggestion. However, as previously

noted in the preamble and in paragraph 101 below, FDA has selected the

DAB, at least initially, as the reviewing authority for appeals of

civil penalty matters. Thus, the DAB's decision will constitute final

agency action on contested FDA civil money penalties matters.

9. Several comments noted the absence of any prohibition against ex

parte communications with the presiding officer. FDA agrees that

restrictions on communications with the presiding officer concerning

matters involved in part 17 hearings would be appropriate. Therefore,

the agency has added Sec. 17.20 to provide restrictions on ex parte

communications.

10. Another comment requested that FDA specifically state that its

part 17 regulation does not provide for a private right of action. FDA

advises that only Congress can create a private right of action. FDA's

regulations are not intended to create such a right.

11. One comment requested that FDA make explicit the authority of

the parties and of the presiding officer to use alternative dispute

resolution (ADR) in resolving a dispute under part 17. FDA agrees that

settlement discussions should be encouraged. Therefore, the presiding

officer has been given authority to require the parties to attend

settlement conferences, which could include a conference held before an

impartial third party, including the presiding officer, another

administrative law judge, or a professional mediator. This change is

reflected in revised Sec. 17.19, and the agency believes it is a

sufficient authorization for the use of ADR procedures.

12. The same comment suggested that FDA clarify whether an appeal

to the Commissioner after an initial decision is required before a

respondent may seek judicial review. The comment noted that in Darby v.

Cisneros, 113 S.Ct. 2539 (1993), the Supreme Court determined that

agency regulations that permit, but do not require, an aggrieved party

to seek administrative review of a presiding officer's decision, allow

parties to forego the option of administrative review and proceed

directly to court. The comment stated a preference for requiring that a

party seek administrative review of a presiding officer's decision

before going to court, asserting that to be a sensible allocation of

responsibilities between courts and agencies. FDA agrees and accepts

the suggestion that FDA recast the regulation to ensure that a

respondent must request administrative review, which is now made to the

DAB, before seeking judicial review. Section 17.51(c) has been revised

accordingly.

13. One comment criticized the proposal on grounds that the new

part 17 will limit respondents' ability to reasonably contest the

agency's allegations, but did not provide specifics to support the

assertion. Absent any specific concerns raised by the comment, FDA can

only reiterate that the agency believes these procedures reasonably

accord due process and offer respondents a fair opportunity to contest

the Center's allegations before an impartial presiding officer.

14. One comment took issue with that portion of the preamble of the

NPRM which establishes FDA headquarters in Rockville, MD, as the

``venue of choice for hearing procedures.'' The author of the comment

urged that hearings take place in the FDA district office in whose

jurisdiction the violations are alleged to have occurred. The author

further argued that the burden of proof for change of venue from the

districts where the alleged violations occurred should rest with the

Center rather than the respondent. FDA believes this comment would be

more persuasive if the presiding officer were an FDA official from the

pertinent district office. However, since the administrative law

judge's principal office is in Rockville, MD, and other types of

administrative hearings are held there (e.g., hearings under part 12 of

FDA's procedural regulations), Rockville, MD, is the most logical and

appropriate venue in most cases. FDA notes that the presiding officer

has ample discretion to change the venue of the hearing when the

Rockville location would present a significant hardship to the

respondent.

15. Another comment recommended that FDA establish an internal

procedure such as an intra-agency council of senior compliance

officials and representatives from the Office of the Chief Counsel to

assure the fair exercise of prosecutorial discretion in choosing which

civil penalty cases to bring and how large a penalty to seek.

FDA agrees that it is important to exercise enforcement discretion

in a fair and reasonable manner. Due to the newness of the civil

penalties authority and the lack of FDA precedents in this area, the

Office of Regulatory Affairs, Office of Enforcement, will establish

coordinating procedures to help assure consistent policies in

exercising civil money penalties authority agencywide. This will

augment FDA's existing multilevel process that reviews all compliance

actions proposed by the field and Centers, including civil money

penalties, and which includes review by the Office of the Chief

Counsel. If FDA determines that additional review procedures are

appropriate after further experience assessing civil money penalties,

it can establish those as a matter of internal agency procedure and not

regulation.

B. Comments on Specific Sections

Section 17.3--Definitions

16. One comment noted that proposed Sec. 17.3 defined several terms

including ``defective,'' ``knowing departure,'' ``significant

departure,'' and ``minor violations,'' used in the SMDA, but that the

defined terms were not used elsewhere in the proposed rule and,

therefore, were unnecessary. The comment urged that it should be made

clear that the purpose of the definitions section is to define certain

terms used in the SMDA, not terms used in 21 CFR part 17.

FDA agrees that the final rule should clarify that these defined

terms apply to specific acts giving rise to civil money penalties, and

has revised Sec. 17.3 to reflect these changes. The agency has also

modified the definition of ``person'' or ``respondent'' in Sec. 17.3(b)

to provide additional examples of potential respondents. Finally, FDA

has included by reference in Sec. 17.3 definitions from the act, Title

21, Code of Federal

[[Page 38615]]

Regulations, and the PHS Act as they may be used in part 17

proceedings.

17. Another comment took issue with FDA's interpretation of the

phrase ``significant departure'' as that term is used at 21 U.S.C.

333(g)(1)(B)(i), which applies to certain recordkeeping and reporting

requirements for devices (21 U.S.C. 360i(a)) and to CGMP requirements

for devices (21 U.S.C. 360j(f)). Proposed Sec. 17.3(c), which is now

Sec. 17.3(a)(1), defined significant departure as a ``departure from

requirements which is neither isolated nor inconsequential.'' The

comment contended that this definition is likely to be met more often

than not in the case of CGMP violations. The comment further argued

that this result was contrary to the intent of Congress.

FDA notes that the comment cited no statutory language or

legislative history regarding the definition of ``significant

departure,'' although a review of the conference report (H.R. Conf.

Rep. No. 959, 101st Cong., 2d Sess. 29 (1990)) indicates that Congress

did not limit a ``significant departure'' as the comment advocated. FDA

believes, however, that the proposed definition could be improved to

state that a significant departure includes a single major incident or

a series of incidents that collectively are consequential. Section 17.3

has been amended to reflect this interpretation and to clarify that

``significant departure'' is being defined for the purposes of

interpreting 21 U.S.C. 333(g)(1)(B)(i).

The agency emphasizes that it will not seek assessments of civil

money penalties for trivial violations. FDA cannot list all violations

that it regards as ``inconsequential,'' and believes that it can and

will make reasonable judgments about the importance of violations.

18. One comment requested that the definition of ``knowing

departure'' be revised. The author would have ``knowing'' limited to

actual knowledge. FDA's proposed definition stated that ``knowing

departure means actual knowledge of departure from requirements, or

acting in deliberate ignorance of such departure, or acting in reckless

disregard of such departure.'' FDA disagrees with the comment. Part 17

defines ``knowing'' consistently with the definitions of ``knowingly''

or ``knew'' in the act as amended by the GDEA in 1992 (now 21 U.S.C.

321(bb)). Nothing in the SMDA or its legislative history suggests that

the definition of ``knowing'' in 21 U.S.C. 333(g)(1)(B)(i) was intended

to be more restrictive than the definitions of ``knowingly'' or

``knew'' that were added to the act by the GDEA in 1992. FDA has

revised the definition of ``knowing'' to clarify that it is being

defined for the purposes of interpreting 21 U.S.C. 333(g)(1)(B)(i).

19. Another comment maintained that the specific acts giving rise

to civil money penalties are defined much too broadly. For example the

author of the comment maintained that ``minor violations'' is too

broadly defined. In proposed Sec. 17.3, the term ``minor violations''

was defined as ``violations which are isolated and inconsequential.''

The term ``minor violations,'' as used in 21 U.S.C.

333(g)(1)(B)(ii), prohibits the assessment of civil money penalties for

minor violations against a person who demonstrates substantial

compliance with the requirements of 21 U.S.C. 360i(e) and (f), which

relate to device tracking and correction reports. FDA believes that the

term ``minor violations'' was used by Congress to prohibit the

assessment of civil penalties when a departure from requirements does

not rise to a level of single major incident or a series of incidents

that are collectively consequential. FDA has revised the final rule

(Sec. 17.3(a)(3)) accordingly and has clarified that ``minor

violations'' is being defined for the purposes of interpreting 21

U.S.C. 333(g)(1)(B)(ii). FDA notes that this definition of ``minor

violation'' is the converse of that adopted for significant departure

as used in 21 U.S.C. 333(g)(1)(B).

20. FDA received several comments on the definition of

``defective.'' As proposed, Sec. 17.3(a)(4) defined defective to

include ``any defect in performance, manufacture, construction,

components, materials, specifications, design, installation,

maintenance, service, or any defect in mechanical, physical and

chemical properties in a device.'' The comments expressed concern about

possible broad implications of the proposed definition. In the final

rule, FDA has generally retained the proposed definition but clarified

that it is included in the defined terms solely for the purpose of

interpreting 21 U.S.C. 333(g)(1)(B)(iii), which pertains to the very

narrow area of devices that may be prepared, packed or held under

insanitary conditions.

One comment argued that the inclusion of ``performance'' in the

definition of ``defective'' is overly broad because it includes

potential user error in the operation of the device. The comment

suggested ``performance'' should be eliminated from the definition.

The intent of 21 U.S.C. 333(g)(1)(B)(iii) was to exempt, from

potential assessment of civil penalties, those violations that may

result from preparing, packing, or holding devices under insanitary

conditions but that do not involve ``defective'' devices.

FDA agrees that performance failures based solely on user error

unrelated to the conditions stated in 21 U.S.C. 351(a)(2)(A) or

unrelated to problems with the device itself would not be considered a

``defect in performance'' of the device. The agency has revised the

definition to make it clearer that ``defect in performance'' refers to

``defect in performance of a device,'' not to defect in performance of

a user.

21. The same comment also recommended that the definition of

``defective'' in Sec. 17.3 be amended to add the following statement:

``Defective service and maintenance are included within the scope of

this definition only to the extent that such defects are the result of

negligence.''

FDA does not believe that a different standard should be applied to

service and maintenance than to other activities covered by the

definition, such as manufacture and construction. Therefore, the agency

is not adopting the suggested amendment to the definition. FDA notes

that it does not envision minor deviations from established maintenance

or service schedules as being the basis for a civil money penalty

action. FDA has clarified the definition of ``defective'' to substitute

``or'' for ``and'' in the phrase ``any defect in the mechanical,

physical, or chemical properties of a device,'' since a defect in any

one of these properties would cause the device to be ``defective.''

22. Another comment requested that the definition of ``defective''

for purposes of civil money penalty actions incorporate the concept

that a device is defective only if the device could reasonably be

expected to pose a risk of some harm or not to function as intended

because of the defect.

FDA disagrees. FDA will not seek civil money penalties because of

trivial defects. However, defects are deviations that can affect the

quality or performance characteristics of a device. To require a

showing that the deviation is expected to cause harm or malfunction

would shift the standard to allow more deviations and to provide less

public health protection. The civil money penalty remedy is intended to

promote the public health and the adopted definition of ``defective''

for purposes of 21 U.S.C. 333(g)(1)(B)(iii) supports this goal.

Section 17.5--Complaint

23. A comment remarked that Sec. 17.5 does not contain any

safeguards to ensure that FDA will only bring actions

[[Page 38616]]

in those instances where it believes in good faith after properly

conducting an investigation that violations have occurred sufficient to

warrant civil money penalties. The comment did not identify what those

safeguards should be. Although FDA declines to change Sec. 17.5, as the

answer to comment 15 makes clear, FDA's review process for assessing

civil money penalties should ensure that the agency will bring such

actions only under the circumstances stated in the comment.

24. One comment argued that a complaint should specify ``all

facts'' on which FDA is relying. FDA believes that the requirement

regarding the contents of the complaint filed under part 17, as

proposed, is consistent with other civil processes. For example, a

complaint filed under Rule 8(a) of the ``Federal Rules of Civil

Procedure,'' requires only ``* * * (2) a short and plain statement of

the claim showing that the pleader is entitled to relief * * *.'' The

requirements for a complaint are also consistent with the previously

cited EPA and HHS Program Fraud Civil Remedies regulations.

FDA intends to file complaints that provide a reasonable

description in sufficient detail for a respondent to have a fair

understanding of the bases for the action. Moreover, the regulations

requiring production of documents (Sec. 17.23) and exchanges of witness

statements and exhibits (Sec. 17.25) provide for detailed presentations

of factual information.

25. The same comment argued that the complaint should justify the

amount of civil penalties being sought in accordance with factors

identified in Sec. 17.34. Again, FDA believes that a complaint filed

under part 17 satisfies the requirements of notice pleading.

FDA recognizes that under the Administrative Procedure Act (APA) (5

U.S.C. 556(d)), as interpreted by the Supreme Court in Director, OWCP

v. Greenwich Collieries, 114 S. Ct. 2251, 2257 (1994), the agency has

the burden of proof on the respondent's liability and on the

appropriateness of the penalty in light of the factors specified in the

statute to be taken into account in determining the penalty. However,

the proof that is required by the APA and specified in Sec. 17.33(b) is

to be presented by the Center at the time of the hearing, not, as the

comment suggests, in the complaint. In order to clarify that the burden

of proof referenced in the APA requires the Center to prove the

respondent's liability and the appropriateness of the penalty under the

applicable statute, Sec. 17.33(b) has been revised to state that ``in

order to prevail, the Center must prove respondent's liability and the

appropriateness of the penalty under the applicable statute by a

preponderance of the evidence.''

26. This same comment called for ``the intervention of [an]

impartial, non-investigating party regarding whether an administrative

complaint is sustainable.'' FDA believes that part 17 already provides

for such an ``impartial non-investigating party'' in the form of a

presiding officer, who is an administrative law judge qualified under 5

U.S.C. 3105.

27. Another comment objected that the regulation does not provide

for a separation of investigatory and adjudicatory functions and stated

that civil money penalty proceedings should be among those hearings to

which separation of functions applies. FDA has added Sec. 17.20 to

provide restrictions on ex parte communications with the presiding

officer. Since the DAB will be adjudicating appeals in civil money

penalties proceedings, there is no need to adopt separation-of-

functions rules in these proceedings.

28. Yet another comment complained that Sec. 17.5(a) fails to

identify anyone in FDA management who must approve the decision to

impose a civil money penalty. Further, the author of the comment stated

a belief that an initial determination of whether or not civil money

penalties should be imposed should be made prior to the service of a

complaint.

FDA advises that such an initial determination is in fact made. As

described in paragraph 15, FDA has an established review procedure for

enforcement cases, and that process will have added coordination for

civil money penalties cases due to the newness of the authority and the

lack of FDA precedents. However, since this is an institutional

decision, it is not appropriate to designate a single individual as the

agency's decisionmaker.

29. Yet another comment argued that notice pleading such as that

provided for in Sec. 17.5(b)(1) is inappropriate in light of the

limited discovery provided for under these regulations. The comment

called for either a more detailed notice in the complaint or greater

discovery.

As discussed in paragraphs 24 and 61, FDA believes expanded

discovery and pleading are not necessary. FDA intends to file

complaints that provide a reasonable description in sufficient detail

for respondents to have a fair understanding of the bases for the

action.

30. One comment requested that FDA first put a respondent on notice

via a warning letter before it files a claim for civil money penalties.

FDA advises that as with FDA's judicial enforcement remedies, it will

normally give prior notice by a warning letter or other means, although

there may be exceptional circumstances where no prior warning would be

given.

Section 17.7--Service of Complaint

31. One comment stated that an affidavit as proof of service should

suffice only when service is made by personal delivery. FDA agrees that

an affidavit is most appropriate when service is made by personal

delivery, and has amended Sec. 17.7(b)(1) to refer to ``personal

delivery.''

32. A comment expressed concerns about the costs to be incurred by

both the Center and the respondent as a result of these administrative

procedures. FDA was mindful of the costs of litigation when it proposed

part 17, and has sought to draft these procedures to minimize costs to

all concerned. For example, providing for written direct testimony

rather than oral direct testimony will significantly reduce the time

and costs associated with hearings before the presiding officer.

Section 17.9--Answer

33. One comment argued that Sec. 17.9 should provide for amendments

to an answer after submission. FDA advises that it intends that

complaints and answers may be amended on motion of the parties

throughout the proceeding to conform to proof as justice may require.

The ``Federal Rules of Civil Procedure'' follow this method for

amendment of pleadings, allowing the motions to be ruled on by the

district judge. Similarly, the presiding officer has been given this

authority, which is so provided in the final rule (Sec. 17.9(d)).

34. A comment argued that 30 days is not sufficient to file an

answer and that 60 days should be allowed for this purpose. FDA advises

that if 30 days is not sufficient, a respondent may apply for more time

upon a showing of good cause. (See Sec. 17.9(c).)

35. One comment observed that Sec. 17.9(c) provides for a request

for an extension of time within which to file an answer, which request

is to be ruled on by the presiding officer, who at that stage will not

have been appointed. Under proposed Sec. 17.12, the presiding officer

is appointed only after the respondent has answered. The comment

requested that the final rule change the procedure.

FDA agrees and is changing the rules to eliminate Sec. 17.12, which

is unnecessarily repetitious, to include the

[[Page 38617]]

definition of ``presiding officer'' in Sec. 17.3, and to add a

provision to Sec. 17.5(d) for the assignment of the presiding officer

upon the filing of the complaint.

36. Another comment objected that the proposed rules allow for the

default of a respondent who fails to answer a complaint because

extraordinary circumstances prevented it from responding within a

particular timeframe.

FDA believes the regulation, as proposed, adequately addresses this

point. Section 17.9(c) provides for an extension of time within which

to file an answer when the respondent can show good cause.

Additionally, a respondent may file a motion to reopen a default

judgment on the grounds that extraordinary circumstances prevented the

respondent from filing an answer. This should provide the relief that

the comment requested.

Section 17.11--Default Upon Failure to File An Answer

37. A comment argued that Sec. 17.11 should apply an ``excusable

neglect'' standard, not an ``extraordinary circumstances'' test, for

determining when relief from default for failure to answer should be

granted. FDA prefers the ``extraordinary circumstances'' test, which,

although somewhat harder to meet, is justified by the need to encourage

respondents to respond in a timely fashion. Additionally, both EPA's

and HHS's Program Fraud Civil Remedies regulations use an

``extraordinary circumstances'' test for determining whether to set

aside a default judgment.

38. Another comment recommended that the language set forth in

Sec. 17.11(a) be modified to contain a requirement for the Commissioner

to stay the initial decision of default upon a showing of extraordinary

circumstances. FDA has changed Sec. 17.11 regarding the issuance of a

decision based upon default to allow the presiding officer to issue the

initial decision rather than the Commissioner. The determination of

whether to set aside a default judgment is an administrative matter

that is better suited for initial review by the presiding officer, and

which would be subject to appeal to the DAB.

39. The same comment stated that it is imperative that the term

``extraordinary circumstances'' be fully defined. FDA disagrees. To

attempt to define and thus limit the circumstances which will be deemed

``extraordinary'' would be futile. FDA could not possibly anticipate

all ``extraordinary circumstances.'' Indeed, such an attempt would

probably not be in the interest of respondents as a group, since it

would necessarily limit the kinds of circumstances that could be

considered ``extraordinary'' and, therefore, in which a default

decision could be set aside.

40. Yet another comment requested that no time limit be imposed on

the remedy set forth in proposed Sec. 17.11(c) concerning late filing

of an answer. FDA disagrees. It is difficult to conceive of

``extraordinary circumstances'' that would justify extending the period

for filing an answer or motion before the initial decision becomes

final and binding. The regulation sets forth a reasonable procedure for

the presiding officer to set aside a default judgment upon the showing

of extraordinary circumstances by the respondent.

41. A comment requested that, in order for a default judgment to be

entered for failure to answer a complaint, the Center should be

required to prove that the complaint was received by the respondent.

FDA agrees and has amended Sec. 17.11 accordingly.

42. A comment advocated a provision authorizing a party to move to

disqualify a presiding officer in order to assure a fair and impartial

hearing. The agency advises that such a motion, carefully documented

and based upon good cause, may be filed without a provision in these

rules specifically authorizing it. The APA (5 U.S.C. 556(b)) authorizes

disqualification of a presiding officer based on the filing in good

faith of a timely and sufficient affidavit.

Section 17.13--Notice of Hearing

43. One comment argued that Sec. 17.13 should contain clear

standards, with reasonable timeframes, for setting the date, time, and

place of the hearing or prehearing conference. Further, the comment

suggested that the rules should clarify that the presiding officer sets

all hearing dates.

FDA believes that it is currently clear that the presiding officer

sets all hearing dates. However, FDA disagrees that the rules should

set timeframes for a hearing or prehearing conference. Scheduling

depends on many variables, including the schedule of the presiding

officer, the length of the hearing, the number of witnesses, etc. The

presiding officer needs flexibility to schedule prehearing conferences,

testimony, and briefing within the limits set forth in the regulation.

Accordingly, additional specific time limitations are not being added

to the regulations.

44. One comment requested that Sec. 17.13 explicitly provide that

either the notice of hearing or the complaint state specifically and in

detail each violation alleged and the factual basis for it. The

complaint is required to state the allegations of liability against the

respondent, including the statutory basis for liability, to identify

the violations that are the basis for the alleged liability, and to

state the reasons that the respondent is responsible for the

violations. In addition, the notice of hearing requires a statement as

to the nature of the hearing and the legal authority and jurisdiction

under which the hearing is to be held, as well as a description of the

procedures for the conduct of the hearing.

FDA declines to make the requested change. The agency believes that

the regulations, including Sec. 17.5(b), require that a complaint

provide a respondent with a reasonable description in sufficient detail

for a respondent to have a fair understanding of the bases for the

action and the issues for the hearing. FDA has clarified in Sec. 17.13

that the notice of hearing is to be served on the respondent after the

answer has been filed.

45. Another comment expressed the view that proposed Sec. 17.13(f),

which is now Sec. 17.13(e), allows ex parte communications between the

Center and the presiding officer without participation or comment by

the respondent. The comment requested that ex parte communications not

be permitted.

As noted in comment 9 above, Sec. 17.20 has been added to restrict

ex parte communications under part 17. However, FDA believes that ex

parte contacts are necessary with respect to scheduling of the hearing

or prehearing conference, and are contemplated for such administrative

purposes. Ex parte scheduling contacts are common at agencies

throughout the Federal Government and are not improper under

Sec. 17.20. All scheduling decisions made before the notice of hearing

is served are subject to change on motion of the respondent, in any

event.

Section 17.15--Parties to the Hearing

46. One comment argued that Sec. 17.15 should specify that parties

may settle issues prior to the hearing without admitting liability. FDA

advises that there is no need to specifically state that the parties

can stipulate that a settlement does not carry with it an admission of

liability.

The regulation provides that the parties may agree to a settlement

of all or a part of the matter. It would be inappropriate to limit by

regulation the issues that may or may not be covered in a settlement

agreement. The final rule allows for wide latitude in settlement

agreements.

[[Page 38618]]

47. Another comment requested that FDA specifically state that

respondent's counsel may be present and participate at the hearing. FDA

agrees, and has amended the regulation to add Sec. 17.15(c)

accordingly.

48. A comment recommended that the final rule state whether a

settlement pursuant to Sec. 17.15(b) is to be incorporated in the

initial decision or is instead to be an independent agreement between

the parties. The comment went on to state that, if the settlement is to

be incorporated in an independent agreement, the complaint should be

dismissed.

FDA advises that a settlement agreement is to be an independent

agreement. However, FDA believes that it is not necessary to require

the dismissal of the complaint upon the filing of a settlement

agreement, as the case will be considered resolved and closed by the

filing of the settlement agreement, and the agreement will so provide.

Section 17.17--Summary Decisions

49. A comment objected to the inclusion of a summary decision

procedure in proposed part 17. FDA affirms the desirability of summary

decision procedures in this context. In many situations, the facts will

be undisputed and the only question to be decided is one of law. In

such cases, time and money can be saved through a summary decision

procedure.

50. The author of the same comment urged that, if summary decision

procedures are retained, time to respond to a motion for summary

decision should be 30 days, not 10. FDA agrees that 10 days is a short

time in which to respond. Therefore, FDA is extending from 10 to 30

days the period in which to respond to a motion for summary decision.

51. Another comment argued that summary judgment for the Center

should never be granted without the filing of an affidavit prior to the

motion being filed. The comment asserts that failure to require an

initial affidavit prior to a motion for summary decision denies the

respondent the opportunity to verify the facts set forth in the

complainant's pleadings.

The language in Sec. 17.17 setting forth the use of affidavits in

filing for a motion for summary decision is virtually identical to the

language in Rule 56 of the ``Federal Rules of Civil Procedure.''

Respondent may oppose the motion for summary decision with specific

facts or opposing affidavits. The presiding officer may only grant the

motion if the pleadings, affidavits, and other material in the record

show that there is no genuine issue as to any material fact.

Additionally, the presiding officer may direct further evidentiary

proceedings on facts still at issue. Accordingly, FDA believes the rule

provides adequate safeguards for the due process rights of the

respondent.

52. Another comment asked the following: (1) Whether or not a

proceeding will be stayed pending an interlocutory appeal granting

partial summary decision, and (2) whether judicial review of such a

decision is a prerequisite to interlocutory relief.

The decision to stay a proceeding pending appeal is within the

discretion of the presiding officer, who will make such a decision

based on the facts before him or her at the time. Similarly, FDA

believes that in some circumstances it would not be necessary or

appropriate to have an interlocutory appeal of a presiding officer's

partial summary judgment decision on civil money penalties. A decision

by a district court granting partial summary judgment is usually not

reviewable by the court of appeals on an interlocutory basis. (See,

e.g., King v. California Co., 224 F.2d 193 (5th Cir.), cert. denied,

352 U.S. 1007 (1955); Marino v. Nevitt, 311 F.2d 406 (3rd Cir. 1963);

Acha v. Blame, 570 F.2d 57 (2nd Cir. 1978).)

53. Another comment suggested that respondents should be given an

opportunity to conduct discovery before FDA may bring a motion for

summary decision. FDA advises that the presiding officer has the

discretion to deny the motion, grant the motion, or order a continuance

to permit affidavits or additional evidence to be obtained under

Sec. 17.23(a).

54. Another comment argued that a party should have the option of

taking an interlocutory appeal on a partial summary decision order or

appealing the issue after a final disposition of the entire matter. FDA

believes that a party should be permitted to request interlocutory

appeal and has amended Sec. 17.17 and added Sec. 17.18 accordingly.

Economy of effort dictates that partial summary decisions not be

appealed routinely to the entity designated by the Commissioner to

decide appeals (currently the DAB) on an interlocutory basis, but FDA

has agreed to provide the option to permit interlocutory appeal within

the discretion of the presiding officer and the entity hearing the

appeal. In general, appeal of all issues after a final disposition of

the entire matter would reduce unnecessary review time for resolution

of civil money penalty cases.

55. One comment expressed a concern about language in the preamble

of the proposed rule to the effect that the SMDA permits FDA to bypass

the administrative hearing procedure and pursue the imposition of civil

money penalties in Federal court. FDA has reconsidered the language

stated in the NPRM.

The statute authorizes assessment of civil money penalties in an

administrative procedure under the SMDA (21 U.S.C. 333(g)(2)), and this

is the most efficient manner of imposing civil money penalties.

Judicial review would only occur in the United States Court of Appeals

as initiated by the respondent (21 U.S.C. 333(g)(3)).

Section 17.19--Authority of the Presiding Officer

56. A comment objected that Sec. 17.19 does not set forth criteria

upon which the presiding officer is to base the assignment of a hearing

date. This hearing date, according to the comment, should be within at

least 30 days of the giving of written notice in all hearings.

FDA does not believe it is necessary to set forth such criteria.

The presiding officer will set dates based upon factors such as his or

her own schedule, the length of the hearing, and the number of

witnesses. FDA hopes that hearings will be completed expeditiously, but

a 30-day period from notice until actual hearing may not be enough time

in complex hearings.

57. A comment complained that proposed Sec. 17.19(b)(14), which is

now paragraph (b)(15), does not define ``related or similar

proceedings.'' FDA chose not to define this phrase because of the

difficulty of anticipating all proceedings that might be ``related or

similar.'' The comment provides no help in defining the phrase, and the

agency does not believe that a definition is necessary.

58. A comment argued that FDA should not have the power to subpoena

documents because this would impermissibly broaden FDA's enforcement

powers. FDA disagrees. Congress has specifically provided that FDA may

subpoena documents under certain circumstances in civil money penalty

proceedings. (See 21 U.S.C. 333(g)(2)(A) and 21 U.S.C. 335(b)(1)(A)).

This statutory authority is similar to that granted to, and exercised

by, other Federal entities, such as the EPA and the HHS Inspector

General, and the agency expects to use this authority to the extent

provided by law. (See paragraph 60 below.)

59. Yet another comment complained that proposed Sec. 17.19(b)(16),

which is now paragraph (b)(17), which permits the presiding officer to

``waive, suspend, or modify any rule,'' gives too much discretion to

the presiding officer. The

[[Page 38619]]

comment urged that this language be deleted. FDA disagrees. Under 21

CFR 12.70(m), the presiding officer in formal FDA evidentiary hearings

has had this authority for many years, and there have been few, if any,

allegations that this authority has been abused.

60. One comment opposed the authorization in Sec. 17.19(b)(5) for

issuance of subpoenas by the presiding officer in proceedings under

section 303(g)(2)(A) of the act (21 U.S.C. 333(g)(2)(A)). The author of

the comment stated that this section of the SMDA authorizes only an

investigative subpoena, not a hearing subpoena.

FDA disagrees with the comment's interpretation of the SMDA, which,

in pertinent part, reads as follows: ``In the course of any

investigation, the Secretary may issue subpoenas requiring the

attendance and testimony of witnesses and the production of evidence

that relates to matters under investigation.'' FDA interprets this to

allow the agency to issue subpoenas related to a civil money penalty

proceeding at any time, including during the adjudication of the

penalty. The legislative history indicates that the agency was given

authority to subpoena records and witnesses relevant to the civil

penalty proceeding. In addition, the statutory phrase ``attendance and

testimony of witnesses and the production of evidence'' reflects an

intention that the testimony and documents be useable at the hearing

itself.

Section 17.23--Discovery

61. A comment stated that FDA should authorize depositions, written

interrogatories, and requests for admissions. The comment argued that,

while brevity and economy are worthwhile goals, respondents need fuller

discovery. The comment asserts that discovery depositions are necessary

tools in the formation of a response to a civil money penalties

complaint. Specifically, the comment objects to the presentation of

hearing testimony orally without the opportunity to depose witnesses

before the hearing.

FDA disagrees, and does not believe that additional forms of

discovery are necessary for due process to be accorded to respondents.

EPA and HHS adjudicative procedures provide these discovery mechanisms

under their regulations enacted pursuant to the Program Fraud Civil

Remedies Act (31 U.S.C. 3801, et. seq.). However, 31 U.S.C.

3803(g)(3)(B)(ii) requires that discovery be authorized to the extent

allowed by the presiding officer. The program statutes that these part

17 provisions implement do not require that discovery be provided and

FDA is not required to provide for discovery under the APA, which

governs these procedures. (See Pacific Gas and Electric Co. v.

F.E.R.C., 746 F.2d 1383, 1387 (9th Cir. 1984); McClelland v. Andrus,

606 F.2d 1278, 1285 (D.C. Cir. 1979).)

FDA has discretion to determine the extent of discovery to which a

party is entitled in an administrative hearing. In order to allow the

parties to present a witness' testimony in the event that a witness

would be unavailable for the hearing, FDA has added Sec. 17.23(e) to

provide for depositions in limited circumstances. Specifically, the

presiding officer may order depositions upon a showing that the

information sought is not available by alternative methods and there is

a substantial reason to believe that relevant and probative evidence

may not otherwise be preserved for presentation by a witness at the

hearing.

In order to provide advance notice of each witness' testimony prior

to cross-examination at the hearing, FDA has changed Sec. 17.37(b) to

require that direct testimony of witnesses be submitted in written

form. Section 17.25(a) requires that parties exchange written testimony

at least 30 days before the hearing. This should eliminate any concern

that a party may be unfairly surprised by a witness' testimony

presented at a hearing. Section 17.19(b)(10) has also been changed to

authorize the presiding officer to recall a witness for additional

testimony upon a showing of good cause. The failure of a party to

provide written direct testimony of a witness before a hearing will

result in exclusion of the witness' testimony.

The prehearing production of documents and exchange of exhibits by

both parties, coupled with the right to cross-examine witnesses at the

hearing and recall witnesses upon a showing of good cause, obviates the

need for routine depositions, written interrogatories, and requests for

admission. Recent changes to the ``Federal Rules of Civil Procedure''

have significantly reduced the number of depositions available to

parties in Federal court litigation because of their expensive and time

consuming nature (Fed. R. Civ. Proc. 30(a)(2)). FDA believes that its

provision for written direct testimony is more cost effective for all

concerned. Additionally, to ensure timely exchange of documents between

the parties, Sec. 17.23(a) has been changed to require that requests

for production of documents be answered 30 days after the request, and

that the request be made no later than 60 days before the hearing,

unless otherwise ordered by the presiding officer.

62. Another comment argued that Sec. 17.23 should specifically

authorize the presiding officer to grant protective orders for trade

secrets and confidential commercial information.

FDA agrees and has added a new paragraph to Sec. 17.19(b)(18) to

the final rule authorizing the presiding officer to issue protective

orders for the protection of trade secrets and confidential commercial

information. In order to reflect this change and to eliminate any

confusion that resulted from the proposed rule, FDA has revised

Secs. 17.28, 17.33, and 17.41 to more clearly state the disclosure

rules related to part 17 hearings. Additionally, in Sec. 17.23(d)(3)

FDA has added that the burden of showing that a protective order is

necessary is on the party seeking the order.

63. A comment argued that Sec. 17.23 should specifically exempt

``privileged'' information from access by FDA, even under a protective

order. The comment expressed concern that the subsection authorizing

the presiding officer to grant a protective order does not address

trade secrets and confidential commercial information.

The agency believes that it would not be appropriate for FDA to be

denied access to such information. FDA typically has broad access to

confidential documents through its regulatory activities and carefully

safeguards the confidentiality of those documents. As discussed in

comment 62, the presiding officer is authorized to issue a protective

order that will prevent public disclosure of such information.

Section 17.25--Exchange of Witness Lists, Witness Statements, and

Exhibits

64. A comment took issue with the harshness of the ``extraordinary

circumstances'' test for relief for failure to exchange witness lists,

statements, and exhibits. The author argued that this relief should be

granted only when a party did not substantially comply or noncompliance

was in bad faith.

FDA disagrees with the comment's interpretation of proposed

Sec. 17.25(b)(2). However, the agency has clarified that Sec. 17.25

(b)(2) and (b)(3) refer to the timely exchange of witness lists under

Sec. 17.25(a). The exclusion of other evidence not exchanged in

accordance with Sec. 17.25(a) is within the discretion of the presiding

officer as noted in Sec. 17.25(b)(1). The agency believes that it is

fair and appropriate to grant relief from sanctions for failure to

follow the requirements for the timely exchange of witness lists only

if there are ``extraordinary circumstances.''

[[Page 38620]]

To provide additional time for the parties to prepare for the

hearing, FDA has changed the deadline for the exchange of witness

lists, exhibits, and prior written statements of witnesses from 15 days

to 30 days before the hearing. Section 17.25(c) has also been changed

to add that objections to authenticity of documents, exchanged pursuant

to Sec. 17.25(a), must be made no later than 5 days before the hearing,

or the documents will be deemed authentic.

Section 17.27--Hearing Subpoenas

65. A comment argued that the authority of the presiding officer

under Sec. 17.27 to subpoena witnesses broadens FDA's power and is not

authorized under the PDMA and the NCVIA. FDA agrees that because

neither the PDMA nor the NCVIA grants FDA subpoena powers, Sec. 17.27

should not be made applicable to hearings under these statutes.

FDA is altering Sec. 17.27 to clarify that subpoenas may only be

issued by the presiding officer to the extent authorized by law. In

order to ensure that a party can prove that a witness has been served

with a subpoena, FDA has deleted the provision on service of subpoenas

by first-class mail. Revised Sec. 17.27(e) provides that subpoenas

shall be served in the manner prescribed for service of a complaint in

Sec. 17.7.

Section 17.30--Computation of Time

66. Another comment contended that the ``less than 7 days'' time

period stated in proposed Sec. 17.30(b) should be changed to be ``less

than 11 days'' if the summary decision response time in Sec. 17.17

remains at 10 days. The comment explained that Rule 6(a) of the

``Federal Rules of Civil Procedure'' uses the ``less than 11 days''

rule specifically to avoid routine requests for extension of the 10-day

time for responding to most motions, a period that may include only 5

business days. FDA is changing the summary decision response time to 30

days (see paragraph 50), which should obviate the need for routine

requests for extension of the time for responding to motions for

summary decision.

Section 17.33--The Hearing and Burden of Proof

67. A comment urged that the presiding officer be required to

exclude from the public portion of a hearing all evidence involving

what he or she has determined to be trade secrets or confidential

commercial information. FDA believes that this is unnecessary.

The agency has revised Sec. 17.33(d) to clarify the scope of

information that may be presented in a closed hearing. Under Sec. 17.33

the presiding officer will apply existing laws and regulations to

protect trade secrets and confidential commercial information from

public disclosure.

68. Yet another comment urged that the Center be required to prove

its case by ``clear and convincing evidence'' in light of what the

comment refers to as the extremely broad definitions of punishable acts

in Sec. 17.3, rather than by a ``preponderance of evidence'' as

provided for in the proposal.

FDA believes that the definitions in Sec. 17.3 as revised provide

adequate explanation of the defined terms. The acts for which civil

money penalties may be assessed, however, are delineated in the various

statutory schemes for civil penalties to which part 17 applies. The

``preponderance of evidence'' test is common in many civil proceedings,

and is the appropriate standard of proof to be applied by the presiding

officer under 5 U.S.C. 556(d). (See Sea Island Broadcasting of S.C. v.

Federal Communications Commission, 627 F.2d 240 (D.C.Cir.), reh. den.,

cert. denied, 449 U.S. 834 (1980).) FDA rejects the comment.

Section 17.34--Determining the Amount of Penalties and Assessments

69. Two comments urged that FDA include ``degree of culpability''

as a factor in determining the amount of a civil money penalty under

Sec. 17.34. The degree of culpability is listed as a factor to be

considered in 21 U.S.C. 333(g)(2)(B). Because the statutory civil money

penalty provisions implemented by this regulation differ, FDA has

referenced the statutory scheme under which the penalty is assessed for

purposes of determining the amount of penalty, rather than listing

factors in Sec. 17.34. Accordingly, FDA rejects the comment.

70. Another comment argued that FDA should factor in the degree to

which a respondent has cooperated with FDA. FDA believes that the

presiding officer could properly consider the extent of cooperation

under the authority provided in Sec. 17.34(c).

Section 17.35--Sanctions

71. Another comment argued that the sanctions section (Sec. 17.35)

is unclear, unnecessarily harsh, and goes beyond the authority

delegated to FDA. The comment urged FDA to describe the types of

misconduct to which the section applies and to limit sanctions. Such

sanction provisions are not novel. For example, they are included in

regulations used by EPA and HHS to implement statutory civil money

penalty provisions and are designed to enable the presiding officer to

manage proceedings effectively. FDA cannot anticipate all types of

misbehavior and misconduct that could give rise to sanctions. Further,

FDA cannot anticipate what sanctions may be appropriate for particular

conduct in a particular situation. The presiding officer must have

discretion in this area, and Sec. 17.35 is consistent with the

discretion that may be delegated to the presiding officer under the APA

(5 U.S.C. 556(c)). FDA therefore declines to accept the comment.

72. A comment argued that FDA needs to provide a means of appeal of

an order of the presiding officer imposing sanctions. FDA agrees.

Sanctions should be subject to requests for interlocutory appeal.

Section 17.18 has been added to allow for interlocutory appeal of

matters certified by the presiding officer to need immediate review.

However, the rule does not contain a provision for the automatic stay

of proceedings before the presiding officer pending appeal.

73. A comment argued that the sanctions listed in Sec. 17.35 are

too harsh and that financial penalties might be more appropriate than

the loss of the right to defend against or prosecute a civil money

penalty claim.

FDA disagrees. The sanctions imposed in Sec. 17.35 are similar to

sanctions available under Rule 37 of the ``Federal Rules of Civil

Procedure,'' as well as under the Program Fraud Civil Remedies

regulations of EPA and HHS, and are a justifiable means of compelling

the parties to adhere to the orders and rulings of the presiding

officer. As in a proceeding before a judge in Federal court, a party's

recalcitrance in disobeying a presiding officer's order in an

administrative hearing should not be tolerated. The wide range of

sanctions listed in Sec. 17.35 provide flexibility for the presiding

officer who might be presented with a party's failure to comply with an

order through refusal or neglect.

74. In connection with appellate rights, one comment urged that the

parties be afforded the right of judicial review of sanctions imposed

during a part 17 hearing.

FDA advises that it has no authority to provide for an appeal to

the courts before the agency's final decision is issued. Under

Sec. 17.51, the final decision constitutes final agency action which is

subject to judicial review. The entire record that forms the basis of

the final decision would be available to the reviewing Court of

Appeals.

75. Another comment disagreed with proposed Sec. 17.35(g), which

provides

[[Page 38621]]

that the presiding officer may order a party to pay expenses. This

remedy, the author argued, is unenforceable and outside the authority

of the Government to provide.

FDA does not agree that it lacks the authority or that such an

order of the presiding officer is unenforceable. However, because of

the wide range of other sanctions available to the presiding officer

for regulating the conduct of the hearing, FDA has made the change

requested by the comment and eliminated Sec. 17.35(g) as proposed.

Section 17.37--Witnesses

76. One comment took issue with what was viewed as a requirement

that a cross-examining party pay a witness' travel expenses in a

situation where direct testimony was submitted in writing. This was not

FDA's intention in drafting Sec. 17.37. FDA advises that it intends

that a party submitting a witness' testimony in writing is responsible

for paying the travel and other expenses of that witness on cross-

examination at the hearing. FDA has added Sec. 17.37(g) to clarify its

intention.

77. A comment objected to Sec. 17.37 because it could be

interpreted to permit rebuttal witnesses and evidence to be submitted

without any provision for discovery or identification, as provided for

in connection with a party's presentation of its case in chief. FDA

advises that, because rebuttal testimony and other rebuttal evidence

are limited in scope and in quantity, requirements for notice and

discovery are not necessary. Thus, FDA is not specifically providing

for discovery or notice of a rebuttal witness' appearance. However,

Sec. 17.39(g) allows the presiding officer to permit the parties to

introduce rebuttal witnesses and evidence. Implicit in this authority

is the authority to set the terms of rebuttal testimony, as justice may

require.

78. Yet another comment argued that Sec. 17.37(e) is unduly broad

in permitting cross-examination of witnesses on matters other than

those within the scope of his or her direct examination. The comment

recommended that the rules for cross-examination be predicated upon the

``Federal Rules of Evidence.''

FDA disagrees. In the interest of truth seeking in general and in

the interest of procedural economy, FDA prefers Sec. 17.37(e) as

proposed. This provision is similar to what EPA and HHS provide in

their Program Fraud Civil Remedies of regulations, which give the

presiding officer discretion to allow cross-examination of witnesses

beyond the scope of their direct examination, rather than limiting

cross-examination to only those matters within the scope of direct

examination. Otherwise, the opposing party would have to request that a

subpoena be issued to a witness by the presiding officer, making the

witness its own in a manner that unnecessarily wastes time.

Section 17.39--Evidence

79. One comment objected to Sec. 17.39 to the extent that it

renders privileged information nondiscoverable. Section 17.39 is

similar to Rule 45 of the ``Federal Rules of Civil Procedure,'' which

allows privileged information to be withheld by a person responding to

a subpoena. FDA rejects the comment.

80. Another comment objected to language in Sec. 17.39(b), which

allows the presiding officer discretion to apply the ``Federal Rules of

Evidence.'' According to the comment, the presiding officer is given

authority to invoke the ``Federal Rules of Evidence'' in an arbitrary

and capricious fashion, which, the comment alleges, abridges the due

process rights of both parties. The comment does not, however, provide

any details to support its assertion.

FDA disagrees with the comment. To the contrary, under

Sec. 17.39(b) the presiding officer is allowed to apply the ``Federal

Rules of Evidence'' when appropriate which is similar to what EPA and

HHS provide in their Program Fraud Civil Remedies regulations. Section

17.39(f) has been changed to substitute the relevant language of Rule

408 of the ``Federal Rules of Evidence'' in place of the reference to

Rule 408 in the proposed rule.

Section 17.41--The Administrative Record

81. A comment suggested that Sec. 17.41 should include an explicit

exemption to the ``open record'' provision, not subject to the

discretion of the presiding officer, if the officer has determined that

a portion of the record contains trade secrets or confidential

commercial information.

FDA believes this to be a good suggestion, and has so provided.

Trade secrets, confidential commercial information, information the

disclosure of which would constitute a clearly unwarranted invasion of

personal privacy, or other information that would be withheld from

public disclosure under 21 CFR part 20 are to be protected from

disclosure by order of the presiding officer. Additionally, FDA is

amending 21 CFR 20.86, concerning disclosure of information in

administrative proceedings, to include part 17.

82. Another comment was concerned that the proposal does not

contain a provision authorizing the correction of the hearing

transcript and recommended that a provision similar to that contained

in 21 CFR 12.98(d) be included in Sec. 17.41. FDA has made the

requested change in Sec. 17.41(a).

Section 17.43--Posthearing Briefs

83. A comment objected to the requirement that briefs be filed

simultaneously and be limited to 30 pages. According to the comment,

these restrictions may prejudice respondents, however, the comment does

not state how respondents may be prejudiced.

Under Sec. 17.43, a party may file a longer brief if the presiding

officer has found that the issues in the proceeding are so complex or

the administrative record is so voluminous as to justify longer briefs.

In the absence of a showing that simultaneous briefs will prejudice a

party unfairly, FDA sees no reason to change this requirement.

Additionally, parties may file proposed findings of fact and

conclusions of law. FDA has added to Sec. 17.43 that proposed findings

of fact and conclusions of law are also limited to 30 pages unless the

presiding officer orders otherwise.

84. Another comment requested that Sec. 17.43 be clarified to state

whether the 30-page limitation includes exhibits and attachments. FDA

advises that the 30-page limitation does not include exhibits and

attachments unless some material is made part of an exhibit or

attachment to avoid the 30-page limitation when the material should

reasonably have been included in the main portion of the brief itself.

Section 17.45--Initial Decision

85. One comment complained that requiring the presiding officer to

decide the case within 90 days will inherently increase the risk of an

incorrect result, thereby allegedly denying due process. FDA disagrees.

Ninety days should be an ample amount of time for a presiding officer

to decide most part 17 hearings. If the presiding officer needs more

time, he or she may request that the entity deciding the appeal set a

new deadline under Sec. 17.45(c). As stated in the preamble, the DAB

will be deciding, at least initially, appeals to the Commissioner for

presiding officer decisions under this part, including a presiding

officer's request for extending deadlines.

86. Another comment urged FDA to include timeframes for extensions

of deadlines for rendering an initial decision. This would assure a

speedier process, according to the comment. FDA disagrees. It is

difficult if not impossible to set forth in a regulation the criteria

for extending timeframes in issuing

[[Page 38622]]

hearing decisions. FDA believes that attempting to do so would be

unworkable.

87. Yet another comment urged that the initial decision be required

to include a discussion of the reasons for the findings and conclusions

upon which the decision is based. However, Sec. 17.45 already requires

that the initial decision shall contain findings of fact, conclusions

of law, and the amount of any penalties imposed. Section 17.45(b)

further elaborates on this requirement. In FDA's view, the regulation

as proposed does not permit a ``conclusory'' initial decision as the

comment seems to presuppose. FDA declines to make the requested change.

88. One comment requested that Sec. 17.45 provide that the initial

decision be automatically stayed pending disposition of an appeal or

motion for reconsideration. FDA disagrees. The agency does not believe

that such a provision is necessary since no civil money penalty can be

imposed until there has been final agency action. The initial decision

would not become final agency action until any appeal has been acted

on, the appeal time has expired, or the respondent has stated an

intention not to seek an appeal.

89. Another comment recommended that the word ``may'' (in

Sec. 17.45(c)), as it applies to the Commissioner's authority to set a

new timeframe for issuing the initial decision, be changed to

``shall.'' This, the comment alleges, would preclude indefinite delay

in the issuance of an initial decision. FDA declines to adopt this

comment. As indicated under comment 86, FDA believes it would be

unworkable to specify all the criteria for determining when timeframes

for issuing initial decisions may be extended. FDA reaffirms its

intention that all such decisions be made promptly.

Section 17.47--Appeals

90. A comment suggested that Sec. 17.47 should be modified to

explicitly provide for an automatic stay of a decision pending an

appeal or motion for reconsideration. As stated in a prior response

(see paragraph 88 above), such an automatic stay is not necessary.

91. A comment requested that FDA make clear that the Commissioner's

decision, which has been delegated to the DAB, not to consider an

appeal or the affirmation of the presiding officer's decision on appeal

constitutes final agency action subject to judicial review. FDA agrees

with the comment and affirms that such events do constitute final

agency action. However, the agency sees no reason to amend any

regulation to accomplish this. This statement in the preamble should

suffice.

92. A comment urged that oral argument of an appeal to the entity

designated by the Commissioner to decide appeals (currently the DAB) be

allowed. FDA disagrees. Oral argument would not provide the DAB with

any additional information that could not be included in the briefs

allowed to be filed by the parties under Sec. 17.47. The time required

to conduct oral argument does not justify any advantage that might be

gained from it.

93. A comment urged that FDA allow 60 days for submission of an

appellate brief, especially considering the complexity of likely

issues. The comment cites the part 12 practice of allowing 60 days for

an appellate brief. FDA disagrees with the comment. The agency believes

that issues raised in part 17 hearings will generally be less complex

and the volume of testimony smaller than is the case concerning part 12

hearings. Thus, 30 days should be sufficient. If not, Sec. 17.47

provides for extensions upon a showing of good cause.

94. A comment alleged that proposed Sec. 17.47(f), which has been

redesignated as Sec. 17.47(g), favors appellees (which it alleges will

usually be the Center) by allowing the appellee to make any argument

based on the record in support of the initial decision or decision

granting summary decision. This, the comment alleges, is unfair because

the appellant does not have as much leeway.

FDA disagrees. The appellant has the discretion to determine the

specific exceptions to the initial decision that are to be urged on

appeal. Section 17.47(c) has been changed to clarify that in the notice

of appeal the appellant must identify and support specific exceptions

with citations to the record and explain the basis for the exceptions.

Since the appellant may urge whatever exceptions it finds appropriate,

FDA sees no prejudice in allowing the appellee to make arguments on

matters contained in the record. If the entity deciding the appeal

(currently the DAB) reverses on issues that the presiding officer

considered pivotal, it may still affirm on other grounds if the

appellee has raised such other grounds below. There should be no

prejudice to either side as both sides have the record before them and

can brief on appeal all issues raised in it. As explained in paragraph

95 below, FDA is amending Sec. 17.47(h) to allow the DAB to request

additional briefing when an issue has not been adequately briefed by

the appellant.

95. Similar objection was raised to Sec. 17.47(g), relating to the

appellee's right to make any argument based on the record. The comment

stated that if the purpose of this provision is to allow the appellee

to anticipate sua sponte decisions by the Commissioner favorable to the

appellant, the regulation would be better if recast as allowing the

Commissioner to request both parties to address issues not raised by

the appellant but determined to be important by the Commissioner.

As previously discussed, the Commissioner has initially designated

the DAB to conduct appeals of civil money penalty proceedings under

this part. FDA advises that the purpose of the provision in

Sec. 17.47(g) is to allow the DAB or other entity deciding the appeal

to affirm a decision based on issues raised before the presiding

officer but that did not serve as a basis for the presiding officer's

decision. This will allow the entity deciding the appeal to overrule

the presiding officer on an issue considered pivotal by the presiding

officer, but nevertheless to decide the matter in favor of the appellee

on other issues based on evidence adduced at the hearing. However, FDA

agrees with the comment that the entity deciding the appeal may wish to

decide an issue that is not fully briefed by both parties. Therefore,

FDA is amending Sec. 17.47(h) to allow that entity discretion to

request additional briefing if it: (a) Proposes to affirm an initial

decision based on arguments not fully briefed by appellant, and (b)

believes that additional briefing is necessary.

96. One comment took issue with the review standard of

``substantial evidence on the whole record'' in Sec. 17.47. The comment

argued that the standard of substantial evidence on the whole record is

applicable for appellate court review of agency action, but should not

be applied by an agency head when the agency does not preside at the

evidentiary hearing under the APA, 5 U.S.C. 557(b). The comment went on

to state that the burden of proof by a preponderance of the evidence

rests upon the complainant under 5 U.S.C. 556(d).

FDA agrees that the appropriate burden of proof before the

presiding officer is a preponderance of the evidence, as explained in

paragraph 68 above. However, the agency may limit review of the initial

decision by the presiding officer if the powers of review have been

limited by rule. See 5 U.S.C. 557(b).

FDA has provided that an administrative law judge serve as the fact

finder in its civil money penalty actions. As the fact finder, the

presiding officer is required to make his or her

[[Page 38623]]

findings based on the preponderance of the evidence standard.

When an appeal is made to the DAB under part 17, the DAB, if it

decides to review the initial decision, will review disputed issues of

fact based on the standard of whether the initial decision is supported

by substantial evidence on the whole record. Additionally, the final

regulation in Sec. 17.47 has set the standard of review on a disputed

issue of law to be whether the initial decision is erroneous. These

standards of review are similar to the HHS regulation on appeals of

Medicare exclusions, 42 CFR part 1005. The purpose of limiting the

scope of the DAB's review of appeals from the presiding officer is to

allow the presiding officer to serve as the fact finder and to limit

the DAB's reviewing powers to be similar to that of an appellate court.

The APA permits the standards of review set forth in Sec. 17.47 for the

DAB's review of initial and summary decisions by the presiding officer.

97. Another comment suggested that only the respondent should be

permitted to appeal an adverse initial decision. The comment supports

its argument by noting that FDA's proposed procedures did not follow

the EPA model, which precludes appeals by any party other than the

defendant. However, as the comment points out, the EPA provision tracks

the statute, 31 U.S.C. 3803(i)(2)(A)(i), with procedures that are

statutorily imposed on EPA.

In enacting the civil money penalty provisions in the statutes to

which this regulation applies, Congress did not choose to prescribe,

other than in a general manner, the administrative procedures to be

followed in FDA's assessment of civil money penalties. FDA therefore

does not believe the Center should be precluded from requesting the DAB

to review an initial decision with which the Center disagrees.

The comment questioned the fairness of allowing the Center to

appeal an initial decision in favor of the respondent. Because FDA has

revised the appeals provisions in the final rule to designate the DAB,

at least initially, to make the decision for the Commissioner, the

independent review by the DAB should eliminate speculation of possible

bias of the reviewing authority. FDA notes that in civil cases where

the United States is a party plaintiff, district court decisions that

are adverse to the plaintiff may be subject to appeal by the plaintiff.

For example, the act (21 U.S.C. 360pp(a)) provides that Federal

district courts shall have jurisdiction over civil penalties arising

from prohibited acts (21 U.S.C. 360oo) pertaining to the regulation of

electronic products. If the United States disagrees with a district

court judgment as to the amount or lack of penalty, the Federal Rules

of Appellate Procedure (Rule 4) authorize an appeal. Under part 17, the

Center's right to appeal an initial decision to the DAB is consistent

with appellate review authorized for civil cases in Federal district

courts.

In cases that are appealed to the DAB, the DAB will normally issue

a decision within 60 days. In circumstances where that is not

practicable, the DAB will notify the parties of the anticipated time

period for ruling on the appeal. Accordingly, Sec. 17.47(j) has been

changed to add ``if practicable'' to the 60-day timeframe for the DAB's

decision.

98. A comment requested that the time to file an appeal be set at

60 days and that the time to submit a brief be set by the presiding

officer. FDA disagrees. The only reason given by the author of the

comment for this extension of time is that the issues involved are

likely to be more factually and legally complex than those in the

typical civil penalty adjudications by other agencies. Further, the

comment suggested that a change in the deadlines would avoid routine

requests for extension of time.

The agency believes that it is far from clear that the issues

involved in part 17 hearings will be more factually and legally complex

than those in ``typical civil penalty adjudication.'' However, in order

to alleviate the concerns expressed by the comment, FDA changed

Sec. 17.47(b)(2) to provide that the 30-day time limit to file the

notice of appeal may be extended by the Commissioner or the entity

designated by the Commissioner to hear appeals (currently the DAB),

within his or her discretion, upon request of the appealing party for

good cause shown. In order to ensure that a party has adequate time to

respond to the brief filed in support of the appeal, Sec. 17.47(d) has

also been changed to allow the entity deciding appeals, within his or

her discretion, to extend the time limit for the filing of a brief in

opposition to the appeal upon request of the party and a showing of

good cause.

99. Another comment recommended that Sec. 17.47(d) not prohibit an

appellant's reply brief. The comment stated that, on a practical level,

motions for leave to reply will regularly be filed typically

accompanied by a brief. Further, the comment argues that, based on past

practice, such briefs will be routinely read and considered in any

case. FDA agrees and is amending Sec. 17.47 to allow for a short (no

more than 10 pages) reply brief.

100. One comment requested that FDA explain more clearly what FDA

means in proposed Sec. 17.47(i), which is Sec. 17.47(j) in the final

rule, for the Commissioner to ``decline to review the case.'' Indeed,

FDA agrees, as the comment presupposes, a decision to decline to review

the case has the same legal effect as a decision to affirm the initial

decision summarily without further comment. Such a summary decision may

be issued without findings of fact or conclusions of law.

In Sec. 17.47(j), FDA has added that a decision by the DAB to

decline to review the case shall be the final decision, rendering the

initial decision final and binding on the parties 30 days after the

declination. For clarification of the possible actions by the entity

designated by the Commissioner to decide the appeal, currently the DAB,

FDA has changed Sec. 17.47(j) in the final rule to authorize the entity

to reverse the initial decision or decision granting summary decision.

The proposed Sec. 17.47(i) only provided that the Commissioner could

reverse the penalty, but did not explicitly state that the initial

decision could be reversed.

101. Another comment opposed any form of summary affirmance of a

decision appealed by the Center. The author of the comment alleged that

a respondent is entitled to an explanation, however concise, of the

reasons why the Commissioner agrees with the presiding officer.

According to the comment, the right to omit such an explanation invites

cursory review and inappropriately relieves the Commissioner of the

burden of responsibility that accompanies the authority to penalize a

manufacturer.

FDA rejects the comment and, in so doing, notes that summary

affirmances are routinely used by the courts of appeals. Additionally,

the EPA and HHS regulations on program fraud that were previously cited

provide for similar affirmance of an initial decision by the presiding

officer, as does the HHS regulation on Medicare exclusions and civil

penalties. FDA continues to believe that a summary disposition is

appropriate in various circumstances, such as where issues are not

complex and where the evidence heavily favors the appellee.

Underlying the comment may be the concern that the Commissioner

might be biased in favor of the Center, when deciding an appeal and

using summary affirmances to do so. In order to provide the parties

with an independent review of civil penalty appeals, eliminate

speculation of possible bias by the reviewing authority, and to allow

for

[[Page 38624]]

more efficient and effective use of the Commissioner's resources, FDA

has elected to designate the DAB to decide appeals under this part, at

least initially.

The DAB serves as the reviewing authority for HHS administrative

hearings in the previously cited regulations, as does the Environmental

Appeals Board for EPA. These Boards have the training and resources to

review appeals of civil penalty actions, whereas the Commissioner would

be required to set up a separate process for handling civil penalty

appeals. The DAB is the logical choice, at least initially, to review

appeals of decisions rendered by the presiding officer in part 17

matters, while efficiently and effectively using agency resources.

FDA will use the DAB to decide appeals under part 17 for at least a

4-year period. After 4 years, FDA will evaluate the DAB's role and the

Commissioner will determine whether to maintain or alter the delegation

to the DAB.

Section 17.49--Delegated Functions

102. A comment suggested that Sec. 17.49 should contain criteria

for selecting and delegating authority to an individual under that

section. Because FDA is initially providing that the DAB be designated

as the entity to decide any appeals under this part, Sec. 17.49 has

been eliminated.

103. A comment alleged that Sec. 17.49 allows the Commissioner to

assign an agency party with an interest in the litigation to make the

final decision on appeal, as long as the individual was not assigned to

advise the Center. As noted in paragraph 101, appeals will initially be

handled by the DAB. Therefore, any concern about an agency party's

influence on the final decision should be eliminated.

104. A comment argued that all civil money penalty assessments

should be finally decided by the Commissioner without delegation to

another FDA official. As noted in the preceding paragraphs, FDA has

provided, at least initially, for appeals to the DAB for a variety of

reasons. Therefore, FDA rejects the comments.

Section 17.51--Judicial Review

105. A comment urged that FDA should not be allowed to seek

judicial review of an adverse decision. Only a respondent should be

allowed to do so, according to the comment. FDA agrees. Section 17.51

should not be interpreted to provide for the Center to seek judicial

review. Once a final decision is rendered denying civil money

penalties, this becomes the decision of the agency from which there is

no judicial appeal by FDA or any of its Centers. Section 17.51 is being

amended to clarify this issue.

III. Summary of Changes

1. In Sec. 17.1, concerning the scope of the regulation, the

reference to future statutory civil money penalty authority has been

deleted. (See comment paragraph 1.)

2. In Sec. 17.3(a), (b), (d), (e), and (f), references to

definitions in the applicable statutes and regulations have been added.

In Sec. 17.3(a) the definition of ``significant departure'' has been

changed to either a single major incident, or a series of incidents

that are collectively consequential (paragraph 17). In section 17.3(a)

the definition of ``minor violations'' has been changed to ``departures

from requirements that do not rise to a level of a single major

incident or a series of incidents that are collectively consequential''

(paragraph 19). Section 17.3(a)(4) has been revised to clarify that ``*

* * defect in performance * * *'' refers to ``* * * defect in

performance, * * * or service of a device,'' (paragraph 20). In

Sec. 17.3(b) scientific or academic establishment or governmental

agency or organizational unit has been added to the definition of

``person or respondent'' (paragraph 16). In Sec. 17.3(c) the definition

of ``presiding officer'' has been added (paragraph 35). In Sec. 17.3(g)

the definition of Departmental Appeals Board has been added (paragraph

101).

3. Section 17.5(c) has been revised to provide for the right of the

Center to amend its complaint (paragraph 33). Section 17.5(d) has been

revised to provide that the presiding officer is assigned to the case

upon filing of the complaint (paragraph 35).

4. Section 17.9(a) is revised to add that the respondents may

answer without requesting a hearing. Section 17.9(b) is revised to add

that allegations not denied are deemed to be admitted, and that all

defenses must be stated in the answer (paragraph 33). Section 17.9(d)

was added to provide that respondents may amend their answers

(paragraph 33).

5. Section 17.11(a) is revised to add a requirement for proof of

service and the authority of the presiding officer to enter default

judgments and hold hearings on motions to reopen default judgments

(paragraph 38). In Sec. 17.11(a) the reference to the Commissioner has

been deleted (paragraph 38).

6. Section 17.12 has been eliminated because the presiding officer

is now appointed when the complaint is filed (paragraph 35).

7. Section 17.13 was changed to clarify that the notice of hearing

is to be served on a respondent after an answer has been filed

(paragraph 44).

8. Section 17.15(b) was revised to add a provision that settlement

agreements are to be filed in the docket and do not require

ratification by the presiding officer (paragraph 48). Section 17.15(c)

was added to clarify that parties may be represented by counsel at the

hearing (paragraph 47).

9. In Sec. 17.17(a) the response time to motions for summary

judgment has been extended from 10 days to 30 days (paragraph 50).

Section 17.17(b) was changed to clarify that summary decision shall be

granted when there is no genuine issue as to any material fact

(paragraph 51). Section 17.17(e) now limits the ability of a party to

obtain interlocutory review of a partial summary decision and refers to

the DAB as, currently, the reviewing authority (paragraph 52).

10. New Sec. 17.18 was added to provide for interlocutory appeal

from a ruling of the presiding officer (paragraph 54).

11. Section 17.19(b)(3) was changed to authorize the presiding

officer to require parties to attend conferences for settlement

(paragraph 11). A new Sec. 17.19(b)(10) was added to authorize the

presiding officer to allow a witness to be recalled for additional

testimony (paragraph 61). Proposed Sec. 17.19(b)(10) through (b)(17)

have been renumbered. For consistency of language, in Sec. 17.19(b)(13)

(proposed Sec. 17.19(b)(12)) summary ``judgment'' now reads summary

``decision'' when there is no ``genuine'' issue of material fact. A new

Sec. 17.19(b)(18) has been added to authorize the presiding officer to

issue protective orders (paragraph 62).

12. New Sec. 17.20, has been added to provide restrictions on ex

parte communications (paragraph 9).

13. Section 17.21(c)(8) now includes discussion of ``scheduling

dates for completion of discovery'' as an authorized use of a

prehearing conference (paragraph 61). Section 17.21(d) has been changed

to require the presiding officer to issue an order after a prehearing

conference (paragraph 61).

14. In Sec. 17.23(a) a requirement has been added that requests for

``production, inspection, and copying'' of documents be made no later

than 60 days before the date of the hearing, unless otherwise ordered

by the presiding officer.

The party served with the request must respond no later than 30

days after the request has been made (paragraph 61). In Sec. 17.23(c) a

reference to new Sec. 17.23(e) has been added. A new Sec. 17.23(d)(3)

now places the burden of showing that a protective order is necessary

on the party seeking the order

[[Page 38625]]

(paragraph 62). Proposed Sec. 17.23(d)(3) has been renumbered (d)(4).

Section 17.23(e) has been added to provide for oral depositions under

limited circumstances (paragraph 61).

15. Section 17.25(a) has been revised to change the deadline for

the exchange of witness lists, prior written statements, and exhibits

from 15 days to 30 days before the hearing (paragraph 64). For

clarification, Sec. 17.25(b)(2) and (b)(3) have been changed to

specifically clarify that the paragraphs concern the admission of

testimony by any witness whose name does not appear on the witness

lists exchanged under Sec. 17.25(a). Section 17.25(c) now imposes a

deadline of ``5 days'' prior to the hearing for objection to

authenticity of documents (paragraph 64).

16. Section 17.27(a) now explicitly limits the issuance of

subpoenas to when such issuance is ``authorized by law'' (paragraph

65). For ease of proving service, Sec. 17.27(e) has been changed to

delete the provision on service of subpoenas by first class mail

(paragraph 65).

17. Section 17.28(b) was revised to clarify that a protective order

may be issued to protect information that would be withheld from public

disclosure under the agency's public information regulations in 21 CFR

part 20 (paragraph 63).

18. For clarification, Sec. 17.31(b) was changed to provide that an

opposing party must be served with a copy of a document no later than

when the document is filed in the docket. Section 17.32(a) now requires

that the presiding officer also be served with a copy of documents

filed with the Dockets Management Branch.

19. For clarification, in Sec. 17.33(b) and (c) ``is to'' was

replaced with ``must''.

Section 17.33(b) has been clarified to add that the Center has the

burden of proof to establish that the proposed penalty is appropriate

under the applicable statute (paragraph 25). Section 17.33(d) was

revised to include a reference to information that would be withheld

from public disclosure under 21 CFR part 20.

20. Section 17.34 has been changed to refer to the statute under

which the penalty is assessed for purposes of determining the amount of

the penalty. The DAB has been referenced as the entity currently

designated by the Commissioner to decide appeals under this part in

Sec. 17.34(a) and (c) (paragraph 101).

21. Proposed Sec. 17.35(g), which authorized the presiding officer

to order the payment of costs as a sanction, has been deleted

(paragraph 75). New Sec. 17.35(g) now provides for interlocutory appeal

to the entity designated by the Commissioner to decide appeals

(currently the DAB) of sanctions imposed by the presiding officer

(paragraph 72).

22. Section 17.37(b) now requires, rather than permits, that direct

testimony of witnesses be submitted by written declaration under

penalty of perjury. The proposed provision in Sec. 17.37(b) on

``sufficient time for other parties to subpoena witness'' has been

deleted in light of the addition of new Sec. 17.37(g) (paragraph 76).

For clarity, Sec. 17.37(f)(2) was modified to explain more clearly that

an officer or employee of a party who is ``designated to be the party's

sole representative for purposes of the hearing'' may not be excluded

from hearing the testimony of other witnesses. Section 17.37(f)(3) has

also been revised to make clear that each party may also have an

individual, such as an expert witness, present at the hearing who would

not be excluded from hearing other witnesses' testimony. New

Sec. 17.37(g) was added to clarify that a cross-examining party need

not subpoena the witness, and to require that a sponsoring party

produce a witness at its own expense (paragraph 76).

23. In Sec. 17.39(f), a modified version of the language of Rule

408 of the ``Federal Rules of Evidence'' has been substituted for the

proposed reference to Rule 408 (paragraph 80). For clarification, in

Sec. 17.39(g) a reference to the discretion of the presiding officer

was added.

24. In Sec. 17.41(a) a provision has been added to allow for

corrections for transcription errors (paragraph 82). Section 17.41(b)

has been changed to reference the DAB as the entity currently

designated by the Commissioner to decide appeals under this part.

Section 17.41(c) has been revised to clarify that upon motion of any

party the presiding officer shall protect from disclosure documents

that would be withheld from public disclosure under the agency's public

information regulations at 21 CFR part 20 (paragraph 81).

25. Section 17.43 has been revised to add a page limit provision

for filing of proposed findings of fact and conclusions of law

(paragraph 83).

26. Section 17.45(c) has been changed to reference ``the

Commissioner or the entity deciding the appeal.''

27. Section 17.47 has been changed to authorize appeals to the DAB

instead of to the Commissioner (paragraph 101). Section 17.47(b)(2) now

provides that the Commissioner or other entity designated by the

Commissioner to hear appeals (currently the DAB) has discretion to

extend the 30-day time limit to file an appeal upon request of a party

and a showing of good cause.

Section 17.47(c) has been revised to add a page limitation for

briefs in support of appeals and a requirement that exceptions listed

in the notice of appeal be explicitly supported by citations to the

record (paragraph 94). The prohibition on the filing of an appellant's

reply brief in proposed Sec. 17.47(d) has been deleted. Section

17.47(d) has been changed to allow the Commissioner or the entity

designated by the Commissioner to hear appeals, currently the DAB, to

extend the 30-day time limit for the filing of a brief opposing the

appeal upon request of the party and a showing of good cause. New

Sec. 17.47(e) has been added to provide the right of an appellant to

file a reply brief within 10 days of being served with the appellee's

brief (paragraph 99). Section 17.47(h) has been renumbered as

Sec. 17.47(k) and has been revised to add that the standard of review

on a disputed issue of law is whether the initial decision is erroneous

(paragraph 101). Proposed Sec. 17.47(e) through (i) have been

renumbered. New Sec. 17.47(h) has been added to authorize the entity

deciding the appeal (currently the DAB) to request additional briefing

by the parties (paragraph 95). Section 17.47(j) has added ``if

practicable'' to the 60-day deadline for the decision on appeal. For

consistency of language, ``summary judgment'' was changed to ``summary

decision'' in Sec. 17.47(j), which was proposed Sec. 17.47(i). In

Sec. 17.47(j) explicit language authorizing the entity deciding the

appeal (currently the DAB) to reverse the initial decision or decision

granting summary decision has been added (paragraph 100). Section

17.47(j) now clarifies that a decision by the entity deciding the

appeal (currently the DAB) to decline to review the case shall be the

final action of the agency and the initial decision shall be final and

binding on the parties 30 days after the declination.

28. Section 17.48 has been changed to reference the DAB as the

entity currently designated by the Commissioner to decide appeals under

this part.

29. Section 17.49 has been deleted.

30. Section 17.51(a) now states that only a respondent may petition

for judicial review or file a petition for stay of a decision by the

Commissioner (paragraph 105). New Sec. 17.51(c) makes explicit that

exhaustion of an appeal to the entity deciding the appeal (currently

the DAB) is a jurisdictional prerequisite to judicial review (paragraph

12).

31. Section 17.54 has been revised to state amounts assessed under

part 17 are to be delivered to the Director of FDA's

[[Page 38626]]

Division of Financial Management and then deposited in the U.S.

Treasury.

32. In addition, the following revisions have been made to other

regulations:

a. Section 5.99, regarding issuance of notices and orders relating

to civil money penalties, has been deleted (see the Background section

of this document).

b. Section 10.50(c)(21), regarding opportunities for a hearing

under 21 CFR part 12, has been deleted (paragraph 9).

c. Section 20.86, regarding disclosure of data and information in

administrative proceedings, has been revised to include part 17

(paragraph 81).

IV. Environmental Impact

The agency has determined under 21 CFR 25.24(a)(8) that this action

is of a type that does not individually or cumulatively have a

significant effect on the human environment. Therefore, neither an

environmental assessment nor an environmental impact statement is

required.

V. Analysis of Impacts

FDA has examined the impacts of the final rule under Executive

Order 12866 and the Regulatory Flexibility Act (Pub. L. 96-354).

Executive Order 12866 directs agencies to assess all costs and benefits

of available regulatory alternatives and, when regulation is necessary,

to select regulatory approaches that maximize net benefits (including

potential economic, environmental, public health and safety, and other

advantages; distributive impacts; and equity). The agency believes that

this final rule is consistent with the regulatory philosophy and

principles identified in the Executive Order. In addition, the final

rule is not a significant regulatory action as defined by the Executive

Order and so is not subject to review under the Executive Order.

The Regulatory Flexibility Act requires agencies to analyze

regulatory options that would minimize any significant impact of a rule

on small entities. The final rule specifies the procedures to be

followed by persons who have the right to a hearing on the

administrative imposition of civil money penalties by the agency. As

such, the rule does not impose any burden on regulated industry.

Because the procedures themselves are protections and do not impose

significant costs beyond what the underlying statute imposes, the

agency certifies that the final rule will not have a significant

economic impact on a substantial number of small entities. Therefore,

under the Regulatory Flexibility Act, no further analysis is required.

List of Subjects

21 CFR Part 5

Authority delegations (Government agencies), Imports, Organization

and functions (Government agencies).

21 CFR Part 10

Administrative practice and procedure, News media.

21 CFR Part 17

Administrative practice and procedure, Animal drugs, Biologics,

Civil money penalties hearings, Drugs, Generic drugs, Prescription

drugs samples, Medical devices.

21 CFR Part 20

Confidential business information, Courts, Freedom of information,

Government employees.

Therefore, under the Federal Food, Drug, and Cosmetic Act and the

Public Health Service Act and under authority delegated to the

Commissioner of Food and Drugs, Title 21, Chapter 1 of the Code of

Federal Regulations is amended as follows:

PART 5--DELEGATIONS OF AUTHORITY AND ORGANIZATION

1. The authority citation for 21 CFR part 5 continues to read as

follows:

Authority: 5 U.S.C. 504, 552, App. 2; 7 U.S.C. 138a, 2271; 15

U.S.C. 638, 1261-1282, 3701-3711a; secs. 2-12 of the Fair Packaging

and Labeling Act (15 U.S.C. 1451-1461); 21 U.S.C. 41-50, 61-63, 141-

149, 467f, 679(b), 801-886, 1031-1309; secs. 201-903 of the Federal

Food, Drug, and Cosmetic Act (21 U.S.C. 321-394); 35 U.S.C. 156;

secs. 301, 302, 303, 307, 310, 311, 351, 352, 354, 361, 362, 1701-

1706, 2101, 2125, 2127, 2128 of the Public Health Service Act (42

U.S.C. 241, 242, 242a, 242l, 242n, 243, 262, 263, 263b, 264, 265,

300u-300u-5, 300aa-1, 300aa-25, 300aa-27, 300aa-28); 42 U.S.C.

1395y, 3246b, 4332, 4831(a), 10007-10008; E.O. 11490, 11921, and

12591; secs. 312, 313, 314 of the National Childhood Vaccine Injury

Act of 1986, Pub. L. 99-660 (42 U.S.C. 300aa-1 note).

Sec. 5.99 [Removed]

2. Section 5.99 Issuance of notices and orders relating to the

administrative imposition of civil money penalties under various

statutes is removed.

PART 10--ADMINISTRATIVE PRACTICES AND PROCEDURES

3. The authority citation for 21 CFR part 10 continues to read as

follows:

Authority: Secs. 201-903 of the Federal Food, Drug, and Cosmetic

Act (21 U.S.C. 321-394); 21 U.S.C. 41-50, 141-149, 467f, 679, 821,

1034; secs. 2, 351, 354, 361 of the Public Health Service Act (42

U.S.C. 201, 262, 263b, 264); secs. 2-12 of the Fair Packaging and

Labeling Act (15 U.S.C. 1451-1461); 5 U.S.C. 551-558, 701-721; 28

U.S.C. 2112.

Sec. 10.50 [Amended]

4. Section 10.50 Promulgation of regulations and orders after an

opportunity for a formal evidentiary public hearing is amended by

removing paragraph (c)(21).

5. New part 17 is added to read as follows:

PART 17--CIVIL MONEY PENALTIES HEARINGS

Sec.

17.1 Scope.

17.3 Definitions.

17.5 Complaint.

17.7 Service of complaint.

17.9 Answer.

17.11 Default upon failure to file an answer.

17.13 Notice of hearing.

17.15 Parties to the hearing.

17.17 Summary decisions.

17.18 Interlocutory appeal from ruling of presiding officer.

17.19 Authority of the presiding officer.

17.20 Ex parte contacts.

17.21 Prehearing conferences.

17.23 Discovery.

17.25 Exchange of witness lists, witness statements, and exhibits.

17.27 Hearing subpoenas.

17.28 Protective order.

17.29 Fees.

17.30 Computation of time.

17.31 Form, filing, and service of papers.

17.32 Motions.

17.33 The hearing and burden of proof.

17.34 Determining the amount of penalties and assessments.

17.35 Sanctions.

17.37 Witnesses.

17.39 Evidence.

17.41 The administrative record.

17.43 Posthearing briefs.

17.45 Initial decision.

17.47 Appeals.

17.48 Harmless error.

17.51 Judicial review.

17.54 Deposit in the Treasury of the United States.

Authority: Secs. 301, 303, 307, 501, 502, 505, 510, 513, 516,

519, 520, 701 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C.

331, 333, 337, 351, 352, 355, 360, 360c, 360f, 360i, 360j, 371);

sec. 351, 354, 2128 of the Public Health Service Act (42 U.S.C. 262,

263b, 300aa-28); 5 U.S.C. 554, 555, 556, 557.

Sec. 17.1 Scope.

This part sets forth practices and procedures for hearings

concerning the administrative imposition of civil money penalties by

FDA. Listed below are the statutory provisions that as of August 28,

1995, authorize civil money

[[Page 38627]]

penalties that are governed by these procedures.

(a) Section 303 (b)(2) through (b)(4) of the Federal Food, Drug,

and Cosmetic Act (the act) authorizing civil money penalties for

certain violations of the act that relate to prescription drug

marketing practices.

(b) Section 303(g) of the act authorizing civil money penalties for

certain violations of the act that relate to medical devices.

(c) Section 307 of the act authorizing civil money penalties for

certain actions in connection with an abbreviated new drug application

or certain actions in connection with a person or individual debarred

under section 306 of the act.

(d) Section 351(d)(2)(B) of the Public Health Service Act (the PHS

Act) authorizing civil money penalties for violations of biologic

recall orders.

(e) Section 354(h)(2) of the PHS Act, as amended by the Mammography

Quality Standards Act of 1992, authorizing civil money penalties for

failure to obtain a certificate, failure to comply with established

standards, among other things.

(f) Section 2128 of the PHS Act authorizing civil money penalties

for intentionally destroying, altering, falsifying, or concealing any

record or report required to be prepared, maintained, or submitted by

vaccine manufacturers pursuant to that section of the PHS Act.

Sec. 17.3 Definitions.

The following definitions are applicable in this part:

(a) For specific acts giving rise to civil money penalty actions

brought under 21 U.S.C. 333(g)(1):

(1) Significant departure, for the purpose of interpreting 21

U.S.C. 333(g)(1)(B)(i), means a departure from requirements that is

either a single major incident or a series of incidents that

collectively are consequential.

(2) Knowing departure, for the purposes of interpreting 21 U.S.C.

333(g)(1)(B)(i), means a departure from a requirement taken: (a) With

actual knowledge that the action is such a departure, or (b) in

deliberate ignorance of a requirement, or (c) in reckless disregard of

a requirement.

(3) Minor violations, for the purposes of interpreting 21 U.S.C.

333(g)(1)(B)(ii), means departures from requirements that do not rise

to a level of a single major incident or a series of incidents that are

collectively consequential.

(4) Defective, for the purposes of interpreting 21 U.S.C.

333(g)(1)(B)(iii), includes any defect in performance, manufacture,

construction, components, materials, specifications, design,

installation, maintenance, or service of a device, or any defect in

mechanical, physical, or chemical properties of a device.

(b) Person or respondent includes an individual, partnership,

corporation, association, scientific or academic establishment,

government agency or organizational unit thereof, or other legal

entity, or as may be defined in the act or regulation pertinent to the

civil penalty action being brought.

(c) Presiding officer means an administrative law judge qualified

under 5 U.S.C. 3105.

(d) Any term that is defined in the act has the same definition for

civil money penalty actions that may be brought under that act.

(e) Any term that is defined in Title 21 of the Code of Federal

Regulations has the same definition for civil money penalty actions

that may arise from the application of the regulation(s).

(f) Any term that is defined in the PHS Act has the same definition

for civil money penalty actions that may be brought under that act.

(g) Departmental Appeals Board (DAB) means the Departmental Appeals

Board of the Department of Health and Human Services.

Sec. 17.5 Complaint.

(a) The Center with principal jurisdiction over the matter involved

shall begin all administrative civil money penalty actions by serving

on the respondent(s) a complaint signed by the Office of the Chief

Counsel attorney for the Center and by filing a copy of the complaint

with the Dockets Management Branch (HFA-305), Food and Drug

Administration, rm. 1-23, 12420 Parklawn Dr., Rockville, MD 20857.

(b) The complaint shall state:

(1) The allegations of liability against the respondent, including

the statutory basis for liability, the identification of violations

that are the basis for the alleged liability, and the reasons that the

respondent is responsible for the violations;

(2) The amount of penalties and assessments that the Center is

seeking;

(3) Instructions for filing an answer to request a hearing,

including a specific statement of the respondent's right to request a

hearing by filing an answer and to retain counsel to represent the

respondent; and

(4) That failure to file an answer within 30 days of service of the

complaint will result in the imposition of the proposed amount of

penalties and assessments, as provided in Sec. 17.11.

(c) The Center may, on motion, subsequently amend its complaint to

conform with the evidence adduced during the administrative process, as

justice may require.

(d) The presiding officer will be assigned to the case upon the

filing of the complaint under this part.

Sec. 17.7 Service of complaint.

(a) Service of a complaint may be made by:

(1) Certified or registered mail or similar mail delivery service

with a return receipt record reflecting receipt; or

(2) Delivery in person to:

(i) An individual respondent; or

(ii) An officer or managing or general agent in the case of a

corporation or unincorporated business.

(b) Proof of service, stating the name and address of the person on

whom the complaint was served, and the manner and date of service, may

be made by:

(1) Affidavit or declaration under penalty of perjury of the

individual serving the complaint by personal delivery;

(2) A United States Postal Service or similar mail delivery service

return receipt record reflecting receipt; or

(3) Written acknowledgment of receipt by the respondent or by the

respondent's counsel or authorized representative or agent.

Sec. 17.9 Answer.

(a) The respondent may request a hearing by filing an answer with

the Dockets Management Branch (HFA-305), Food and Drug Administration,

rm. 1-23, 12420 Parklawn Dr., Rockville, MD 20857, within 30 days of

service of the complaint. Unless stated otherwise, an answer shall be

deemed to be a request for hearing.

(b) In the answer, the respondent:

(1) Shall admit or deny each of the allegations of liability made

in the complaint; allegations not specifically denied in an answer are

deemed admitted;

(2) Shall state all defenses on which the respondent intends to

rely;

(3) Shall state all reasons why the respondent contends that the

penalties and assessments should be less than the requested amount; and

(4) Shall state the name, address, and telephone number of the

respondent's counsel, if any.

(c) If the respondent is unable to file an answer meeting the

requirements of paragraph (b) of this section within the time provided,

the respondent shall, before the expiration of 30 days from service of

the complaint, file a request for an extension of time within which to

file an answer that meets the requirements of paragraph (b) of this

[[Page 38628]]

section. The presiding officer may, for good cause shown, grant the

respondent up to 30 additional days within which to file an answer that

meets the requirements of paragraph (b) of this section.

(d) The respondent may, on motion, amend its answer to conform with

the evidence as justice may require.

Sec. 17.11 Default upon failure to file an answer.

(a) If the respondent does not file an answer within the time

prescribed in Sec. 17.9 and if service has been effected as provided in

Sec. 17.7, the presiding officer shall assume the facts alleged in the

complaint to be true, and, if such facts establish liability under the

relevant statute, the presiding officer shall issue an initial decision

within 30 days of the time the answer was due, imposing:

(1) The maximum amount of penalties provided for by law for the

violations alleged; or

(2) The amount asked for in the complaint, whichever amount is

smaller.

(b) Except as otherwise provided in this section, by failing to

file a timely answer, the respondent waives any right to a hearing and

to contest the amount of the penalties and assessments imposed under

paragraph (a) of this section, and the initial decision shall become

final and binding upon the parties 30 days after it is issued.

(c) If, before such a decision becomes final, the respondent files

a motion seeking to reopen on the grounds that extraordinary

circumstances prevented the respondent from filing an answer, the

initial decision shall be stayed pending a decision on the motion.

(d) If, on such motion, the respondent can demonstrate

extraordinary circumstances excusing the failure to file an answer in a

timely manner, the presiding officer may withdraw the decision under

paragraph (a) of this section, if such a decision has been issued, and

shall grant the respondent an opportunity to answer the complaint as

provided in Sec. 17.9(a).

(e) If the presiding officer decides that the respondent's failure

to file an answer in a timely manner is not excused, he or she shall

affirm the decision under paragraph (a) of this section, and the

decision shall become final and binding upon the parties 30 days after

the presiding officer issues the decision on the respondent's motion

filed under paragraph (c) of this section.

Sec. 17.13 Notice of hearing.

After an answer has been filed, the Center shall serve a notice of

hearing on the respondent. Such notice shall include:

(a) The date, time, and place of a prehearing conference, if any,

or the date, time, and place of the hearing if there is not to be a

prehearing conference;

(b) The nature of the hearing and the legal authority and

jurisdiction under which the hearing is to be held;

(c) A description of the procedures for the conduct of the hearing;

(d) The names, addresses, and telephone numbers of the

representatives of the government and of the respondent, if any; and

(e) Such other matters as the Center or the presiding officer deems

appropriate.

Sec. 17.15 Parties to the hearing.

(a) The parties to the hearing shall be the respondent and the

Center(s) with jurisdiction over the matter at issue. No other person

may participate.

(b) The parties may at any time prior to a final decision by the

entity deciding any appeal agree to a settlement of all or a part of

the matter. The settlement agreement shall be filed in the docket and

shall constitute complete or partial resolution of the administrative

case as so designated by the settlement agreement. The settlement

document shall be effective upon filing in the docket and need not be

ratified by the presiding officer or the Commissioner of Food and

Drugs.

(c) The parties may be represented by counsel, who may be present

at the hearing.

Sec. 17.17 Summary decisions.

(a) At any time after the filing of a complaint, a party may move,

with or without supporting affidavits (which, for purposes of this

part, shall include declarations under penalty of perjury), for a

summary decision on any issue in the hearing. The other party may,

within 30 days after service of the motion, which may be extended for

an additional 10 days for good cause, serve opposing affidavits or

countermove for summary decision.

The presiding officer may set the matter for argument and call for

the submission of briefs.

(b) The presiding officer shall grant the motion if the pleadings,

affidavits, and other material filed in the record, or matters

officially noticed, show that there is no genuine issue as to any

material fact and that the party is entitled to summary decision as a

matter of law.

(c) Affidavits shall set forth only such facts as would be

admissible in evidence and shall show affirmatively that the affiant is

competent to testify to the matters stated. When a motion for summary

decision is made and supported as provided in this regulation, a party

opposing the motion may not rest on mere allegations or denials or

general descriptions of positions and contentions; affidavits or other

responses must set forth specific facts showing that there is a genuine

issue of material fact for the hearing.

(d) If, on motion under this section, a summary decision is not

rendered on all issues or for all the relief asked, and if additional

facts need to be developed, the presiding officer will issue an order

specifying the facts that appear without substantial controversy and

directing further evidentiary proceedings on facts still at issue. The

facts specified not to be at issue shall be deemed established.

(e) Except as provided in Sec. 17.18, a party may not obtain

interlocutory review by the entity deciding the appeal (currently the

DAB) of a partial summary decision of the presiding officer. A review

of final summary decisions on all issues may be had through the

procedure set forth in Sec. 17.47.

Sec. 17.18 Interlocutory appeal from ruling of presiding officer.

(a) Except as provided in paragraph (b) of this section, rulings of

the presiding officer may not be appealed before consideration on

appeal of the entire record of the hearing.

(b) A ruling of the presiding officer is subject to interlocutory

appeal to the entity deciding the appeal (currently the DAB) if the

presiding officer certifies on the record or in writing that immediate

review is necessary to prevent exceptional delay, expense, or prejudice

to any participant, or substantial harm to the public interest.

(c) When an interlocutory appeal is made, a participant may file a

brief on the appeal only if specifically authorized by the presiding

officer or the entity deciding the appeal (currently the DAB), and if

such authorization is granted, only within the period allowed by the

presiding officer or the entity deciding the appeal. If a participant

is authorized to file a brief, any other participant may file a brief

in opposition, within the period allowed by the entity deciding the

appeal (currently the DAB). The deadline for filing an interlocutory

appeal is subject to the discretion of the presiding officer.

Sec. 17.19 Authority of the presiding officer.

(a) The presiding officer shall conduct a fair and impartial

hearing, avoid delay, maintain order, and assure that a record of the

proceeding is made.

(b) The presiding officer has the authority to:

[[Page 38629]]

(1) Set and change the date, time, and place of the hearing on

reasonable notice to the parties;

(2) Continue or recess the hearing in whole or in part for a

reasonable time;

(3) Require parties to attend conferences for settlement, to

identify or simplify the issues, or to consider other matters that may

aid in the expeditious disposition of the proceeding;

(4) Administer oaths and affirmations;

(5) Issue subpoenas requiring the attendance and testimony of

witnesses and the production of evidence that relates to the matter

under investigation;

(6) Rule on motions and other procedural matters;

(7) Regulate the scope and timing of discovery consistent with

Sec. 17.23;

(8) Regulate the course of the hearing and the conduct of the

parties;

(9) Examine witnesses;

(10) Upon motion of a party for good cause shown, the presiding

officer may allow a witness to be recalled for additional testimony;

(11) Receive, rule on, exclude, or limit evidence;

(12) Upon motion of a party or on the presiding officer's own

motion, take official notice of facts;

(13) Upon motion of a party, decide cases, in whole or in part, by

summary decision when there is no genuine issue of material fact;

(14) Conduct any conference, argument, or hearing on motions in

person or by telephone;

(15) Consolidate related or similar proceedings or sever unrelated

matters;

(16) Limit the length of pleadings;

(17) Waive, suspend, or modify any rule in this part if the

presiding officer determines that no party will be prejudiced, the ends

of justice will be served, and the action is in accordance with law;

(18) Issue protective orders pursuant to Sec. 17.28; and

(19) Exercise such other authority as is necessary to carry out the

responsibilities of the presiding officer under this part.

(c) The presiding officer does not have the authority to find

Federal statutes or regulations invalid.

Sec. 17.20 Ex parte contacts.

No party or person (except employees of the presiding officer's

office) shall communicate in any way with the presiding officer on any

matter at issue in a case, unless on notice and opportunity for all

parties to participate. This provision does not prohibit a person or

party from inquiring about the status of a case or asking routine

questions concerning administrative functions or procedures.

Sec. 17.21 Prehearing conferences.

(a) The presiding officer may schedule prehearing conferences as

appropriate.

(b) Upon the motion of any party, the presiding officer shall

schedule at least one prehearing conference at a reasonable time in

advance of the hearing.

(c) The presiding officer may use a prehearing conference to

discuss the following:

(1) Simplification of the issues;

(2) The necessity or desirability of amendments to the pleadings,

including the need for a more definite statement;

(3) Stipulations and admissions of fact as to the contents and

authenticity of documents;

(4) Whether the parties can agree to submission of the case on a

stipulated record;

(5) Whether a party chooses to waive appearance at an oral hearing

and to submit only documentary evidence (subject to the objection of

the other party) and written argument;

(6) Limitation of the number of witnesses;

(7) Scheduling dates for the exchange of witness lists and of

proposed exhibits;

(8) Discovery and scheduling dates for completion of discovery;

(9) The date, time, and place for the hearing; and

(10) Such other matters as may tend to expedite the fair and just

disposition of the proceedings.

(d) The presiding officer shall issue an order containing all

matters agreed upon by the parties or ordered by the presiding officer

at a prehearing conference.

Sec. 17.23 Discovery.

(a) No later than 60 days prior to the hearing, unless otherwise

ordered by the presiding officer, a party may make a request to another

party for production, inspection, and copying of documents that are

relevant to the issues before the presiding officer. Documents must be

provided no later than 30 days after the request has been made.

(b) For the purpose of this part, the term ``documents'' includes

information, reports, answers, records, accounts, papers and other data

and documentary evidence. Nothing contained in this section may be

interpreted to require the creation of a document, except that

requested data stored in an electronic data storage system must be

produced in a form readily accessible to the requesting party.

(c) Requests for documents, requests for admissions, written

interrogatories, depositions, and any forms of discovery, other than

those permitted under paragraphs (a) and (e) of this section, are not

authorized.

(d)(1) Within 10 days of service of a request for production of

documents, a party may file a motion for a protective order.

(2) The presiding officer may grant a motion for a protective

order, in whole or in part, if he or she finds that the discovery

sought:

(i) Is unduly costly or burdensome,

(ii) Will unduly delay the proceeding, or

(iii) Seeks privileged information.

(3) The burden of showing that a protective order is necessary

shall be on the party seeking the order.

(4) The burden of showing that documents should be produced is on

the party seeking their production.

(e) The presiding officer shall order depositions upon oral

questions only upon a showing that:

(1) The information sought cannot be obtained by alternative

methods, and

(2) There is a substantial reason to believe that relevant and

probative evidence may otherwise not be preserved for presentation by a

witness at the hearing.

Sec. 17.25 Exchange of witness lists, witness statements, and

exhibits.

(a) At least 30 days before the hearing, or by such other time as

is specified by the presiding officer, the parties shall exchange

witness lists, copies of prior written statements of proposed

witnesses, and copies of proposed hearing exhibits, including written

testimony.

(b)(1) If a party objects to the proposed admission of evidence not

exchanged in accordance with paragraph (a) of this section, the

presiding officer will exclude such evidence if he or she determines

that the failure to comply with paragraph (a) of this section should

result in its exclusion.

(2) Unless the presiding officer finds that extraordinary

circumstances justified the failure to make a timely exchange of

witness lists under paragraph (a) of this section, he or she must

exclude from the party's hearing evidence the testimony of any witness

whose name does not appear on the witness list.

(3) If the presiding officer finds that extraordinary circumstances

existed, the presiding officer must then determine whether the

admission of the testimony of any witness whose name does not appear on

the witness lists exchanged under paragraph (a) of this section would

cause substantial prejudice to the objecting party. If the presiding

officer

[[Page 38630]]

finds that there is not substantial prejudice, the evidence may be

admitted. If the presiding officer finds that there is substantial

prejudice, the presiding officer may exclude the evidence, or at his or

her discretion, may postpone the hearing for such time as is necessary

for the objecting party to prepare and respond to the evidence.

(c) Unless a party objects within 5 days prior to the hearing,

documents exchanged in accordance with paragraph (a) of this section

will be deemed to be authentic for the purpose of admissibility at the

hearing.

Sec. 17.27 Hearing subpoenas.

(a) A party wishing to procure the appearance and testimony of any

individual at the hearing may, when authorized by law, request that the

presiding officer issue a subpoena.

(b) A subpoena requiring the attendance and testimony of an

individual may also require the individual to produce documents at the

hearing.

(c) A party seeking a subpoena shall file a written request

therefor not less than 20 days before the date fixed for the hearing

unless otherwise allowed by the presiding officer, upon a showing by

the party of good cause. Such request shall specify any documents to be

produced and shall designate the witnesses and describe the address and

location thereof with sufficient particularity to permit such witnesses

to be found.

(d) The subpoena shall specify the time and place at which the

witness is to appear and any documents the witness is to produce.

(e) The party seeking the subpoena shall serve it in the manner

prescribed for service of a complaint in Sec. 17.7.

(f) If a party or the individual to whom the subpoena is directed

believes a subpoena to be unreasonable, oppressive, excessive in scope,

or unduly burdensome, or if it wishes to raise any other objection or

privilege recognized by law, the party or individual may file a motion

to quash the subpoena within 10 days after service or on or before the

time specified in the subpoena for compliance if it is less than 10

days after service. Such a filing will state the basis for the motion

to quash. The presiding officer may quash or modify the subpoena or

order it implemented, as justice may require.

Sec. 17.28 Protective order.

(a) A party or a prospective witness may file a motion for a

protective order with respect to discovery sought by a party or with

respect to the hearing, seeking to limit the availability or disclosure

of evidence.

(b) When issuing a protective order, the presiding officer may make

any order which justice requires to protect a party or person from

oppression or undue burden or expense, or to protect trade secrets or

confidential commercial information, as defined in Sec. 20.61 of this

chapter, information the disclosure of which would constitute a clearly

unwarranted invasion of personal privacy, or other information that

would be withheld from public disclosure under 21 CFR part 20. Such

orders may include, but are not limited to, one or more of the

following:

(1) That the discovery not be had;

(2) That the discovery may be had only on specified terms and

conditions, including a designation of the time or place;

(3) That the discovery may be had only through a method of

discovery provided for by this part other than that requested;

(4) That certain matters not be inquired into, or that the scope of

discovery be limited to certain matters;

(5) That the contents of discovery or evidence be sealed;

(6) That the information not be disclosed to the public or be

disclosed only in a designated way; or

(7) That the parties simultaneously file specified documents or

information enclosed in sealed envelopes to be opened as directed by

the presiding officer.

Sec. 17.29 Fees.

The party requesting a subpoena shall pay the cost of the fees and

mileage of any witness subpoenaed in the amounts that would be payable

to a witness in a proceeding in a United States District Court. A check

for witness fees and mileage shall accompany the subpoena when served.

Sec. 17.30 Computation of time.

(a) In computing any period of time under this part or in an order

issued thereunder, the time begins with the day following the act or

event, and includes the last day of the period, unless either such day

is a Saturday, Sunday, or Federal holiday, in which event the time

includes the next business day.

(b) When the period of time allowed is less than 7 days,

intermediate Saturdays, Sundays, and Federal holidays shall be excluded

from the computation.

(c) When a document has been served or issued by placing it in the

mail, an additional 5 days will be added to the time permitted for any

response.

Sec. 17.31 Form, filing, and service of papers.

(a) Form. (1) Documents filed with the Dockets Management Branch

(HFA-305), Food and Drug Administration, rm. 1-23, 12420 Parklawn Dr.,

Rockville, MD 20857, shall include an original and two copies.

(2) The first page of every pleading and paper filed in the

proceeding shall contain a caption setting forth the title of the

action, the case number assigned by the Office of the Chief Counsel,

and designation of the pleading or paper (e.g., ``motion to quash

subpoena'').

(3) Every pleading shall be signed by, and shall contain the

address and telephone number of, the party or the person on whose

behalf the pleading was filed, or his or her counsel.

(4) Pleadings or papers are considered filed when they are received

by the Dockets Management Branch.

(b) Service. A party filing a document with the Dockets Management

Branch under this part shall, no later than the time of filing, serve a

copy of such document on every other party. Service upon any party of

any document, other than service of a complaint, shall be made by

delivering a copy personally or by placing a copy of the document in

the United States mail or express delivery service, postage prepaid and

addressed, to the party's last known address. When a party is

represented by counsel, service shall be made on such counsel in lieu

of the actual party.

(c) Proof of service. A certificate of the individual serving the

document by personal delivery or by mail, setting forth the time and

manner of service, shall be proof of service.

Sec. 17.32 Motions.

(a) Any application to the presiding officer for an order or ruling

shall be by motion. Motions shall state the relief sought, the

authority relied upon, and the facts alleged, and shall be filed with

the Dockets Management Branch (HFA-305), Food and Drug Administration,

rm. 1-23, 12420 Parklawn Dr., Rockville, MD 20857, delivered to the

presiding officer, and served on all other parties.

(b) Except for motions made during a prehearing conference or at

the hearing, all motions shall be in writing. The presiding officer may

require that oral motions be reduced to writing.

(c) Within 15 days after a written motion is served, or such other

time as may be fixed by the presiding officer, any party may file a

response to such motion.

(d) The presiding officer may not grant a written motion before the

time for filing responses thereto has expired, except upon consent of

the parties or

[[Page 38631]]

following a hearing on the motion, but may overrule or deny such motion

without awaiting a response.

Sec. 17.33 The hearing and burden of proof.

(a) The presiding officer shall conduct a hearing on the record to

determine whether the respondent is liable for a civil money penalty

and, if so, the appropriate amount of any such civil money penalty

considering any aggravating or mitigating factors.

(b) In order to prevail, the Center must prove respondent's

liability and the appropriateness of the penalty under the applicable

statute by a preponderance of the evidence.

(c) The respondent must prove any affirmative defenses and any

mitigating factors by a preponderance of the evidence.

(d) The hearing shall be open to the public unless otherwise

ordered by the presiding officer, who may order closure only to protect

trade secrets or confidential commercial information, as defined in

Sec. 20.61 of this chapter, information the disclosure of which would

constitute a clearly unwarranted invasion of personal privacy, or other

information that would be withheld from public disclosure under part 20

of this chapter.

Sec. 17.34 Determining the amount of penalties and assessments.

(a) When determining an appropriate amount of civil money penalties

and assessments, the presiding officer and the Commissioner of Food and

Drugs or entity designated by the Commissioner to decide the appeal

(currently the DAB) shall evaluate any circumstances that mitigate or

aggravate the violation and shall articulate in their opinions the

reasons that support the penalties and assessments imposed.

(b) The presiding officer and the entity deciding the appeal shall

refer to the factors identified in the statute under which the penalty

is assessed for purposes of determining the amount of penalty.

(c) Nothing in this section shall be construed to limit the

presiding officer or the entity deciding the appeal from considering

any other factors that in any given case may mitigate or aggravate the

offense for which penalties and assessments are imposed.

Sec. 17.35 Sanctions.

(a) The presiding officer may sanction a person, including any

party or counsel for:

(1) Failing to comply with an order, subpoena, rule, or procedure

governing the proceeding;

(2) Failing to prosecute or defend an action; or

(3) Engaging in other misconduct that interferes with the speedy,

orderly, or fair conduct of the hearing.

(b) Any such sanction, including, but not limited to, those listed

in paragraphs (c), (d), and (e) of this section, shall reasonably

relate to the severity and nature of the failure or misconduct.

(c) When a party fails to comply with a discovery order, including

discovery and subpoena provisions of this part, the presiding officer

may:

(1) Draw an inference in favor of the requesting party with regard

to the information sought;

(2) Prohibit the party failing to comply with such order from

introducing evidence concerning, or otherwise relying upon, testimony

relating to the information sought; and

(3) Strike any part of the pleadings or other submissions of the

party failing to comply with such request.

(d) The presiding officer may exclude from participation in the

hearing any legal counsel, party, or witness who refuses to obey an

order of the presiding officer. In the case of repeated refusal, the

presiding officer may grant judgment to the opposing party.

(e) If a party fails to prosecute or defend an action under this

part after service of a notice of hearing, the presiding officer may

dismiss the action or may issue an initial decision imposing penalties

and assessments.

(f) The presiding officer may refuse to consider any motion,

request, response, brief, or other document that is not filed in a

timely fashion or in compliance with the rules of this part.

(g) Sanctions imposed under this section may be the subject of an

interlocutory appeal as allowed in Sec. 17.18(b), provided that no such

appeal will stay or delay a proceeding.

Sec. 17.37 Witnesses.

(a) Except as provided in paragraph (b) of this section, testimony

at the hearing shall be given orally by witnesses under oath or

affirmation.

(b) Direct testimony shall be admitted in the form of a written

declaration submitted under penalty of perjury. Any such written

declaration must be provided to all other parties along with the last

known address of the witness. Any prior written statements of witnesses

proposed to testify at the hearing shall be exchanged as provided in

Sec. 17.25(a).

(c) The presiding officer shall exercise reasonable control over

the manner and order of questioning witnesses and presenting evidence

so as to:

(1) Make the examination and presentation effective for the

ascertainment of the truth;

(2) Avoid undue consumption of time; and

(3) Protect witnesses from harassment or undue embarrassment.

(d) The presiding officer shall permit the parties to conduct such

cross-examination as may be required for a full disclosure of the

facts.

(e) At the discretion of the presiding officer, a witness may be

cross-examined on relevant matters without regard to the scope of his

or her direct examination. To the extent permitted by the presiding

officer, a witness may be cross-examined on relevant matters with

regard to the scope of his or her direct examination. To the extent

permitted by the presiding officer, cross-examination on matters

outside the scope of direct examination shall be conducted in the

manner of direct examination and may proceed by leading questions only

if the witness is a hostile witness, an adverse party, or a witness

identified with an adverse party.

(f) Upon motion of any party, the presiding officer may order

witnesses excluded so that they cannot hear the testimony of the other

witnesses. This rule does not authorize exclusion of:

(1) A party who is an individual;

(2) In the case of a party that is not an individual, an officer or

employee of the party designated to be the party's sole representative

for purposes of the hearing; or

(3) An individual whose presence is shown by a party to be

essential to the presentation of its case, including an individual

employed by a party engaged in assisting counsel for the party.

(g) If a witness' testimony is submitted in writing prior to cross-

examination, the cross-examining party need not subpoena the witness or

pay for his or her travel to the hearing. The sponsoring party is

responsible for producing the witness at its own expense, and failure

to do so shall result in the striking of the witness' testimony.

Sec. 17.39 Evidence.

(a) The presiding officer shall determine the admissibility of

evidence.

(b) Except as provided in this part, the presiding officer shall

not be bound by the ``Federal Rules of Evidence.'' However, the

presiding officer may apply the ``Federal Rules of Evidence'' when

appropriate, e.g., to exclude unreliable evidence.

(c) The presiding officer shall exclude evidence that is not

relevant or material.

(d) Relevant evidence may be excluded if its probative value is

substantially outweighed by the danger of unfair prejudice, confusion

of the issues, or by considerations of undue

[[Page 38632]]

delay or needless presentation of cumulative evidence.

(e) Relevant evidence may be excluded if it is privileged under

Federal law.

(f) Evidence of furnishing or offering or promising to furnish, or

accepting or offering or promising to accept, a valuable consideration

in settling or attempting to settle a civil money penalty assessment

which was disputed as to either validity or amount, is not admissible

to prove liability for or invalidity of the civil money penalty or its

amount. Evidence of conduct or statements made in settlement

negotiations is likewise not admissible. This rule does not require the

exclusion of any evidence otherwise discoverable merely because it is

presented in the course of settlement negotiations. This rule also does

not require exclusion when the evidence is offered for another purpose,

such as proving bias or prejudice of a witness or opposing a contention

of undue delay.

(g) The presiding officer may in his or her discretion permit the

parties to introduce rebuttal witnesses and evidence.

(h) All documents and other evidence offered or taken for the

record shall be open to examination by all parties, unless otherwise

ordered by the presiding officer pursuant to Sec. 17.28.

Sec. 17.41 The administrative record.

(a) The hearing will be recorded and transcribed. Witnesses,

participants, and counsel have 30 days from the time the transcript

becomes available to propose corrections in the transcript of oral

testimony. Corrections are permitted only for transcription errors. The

presiding officer shall promptly order justified corrections.

Transcripts may be obtained following the hearing from the Dockets

Management Branch at a cost not to exceed the actual cost of

duplication.

(b) The transcript of testimony, exhibits, and other evidence

admitted at the hearing and all papers and requests filed in the

proceeding constitute the administrative record for the decision by the

presiding officer and the entity designated by the Commissioner of Food

and Drugs to decide the appeal, currently the DAB.

(c) The administrative record may be inspected and copied (upon

payment of a reasonable fee) by anyone unless otherwise ordered by the

presiding officer, who shall upon motion of any party order otherwise

when necessary to protect trade secrets or confidential commercial

information, as defined in Sec. 20.61 of this chapter, information the

disclosure of which would constitute a clearly unwarranted invasion of

personal privacy, or other information that would be withheld from

public disclosure under part 20.

Sec. 17.43 Posthearing briefs.

Any party may file a posthearing brief. The presiding officer shall

fix the time for filing such briefs (which shall be filed

simultaneously), which shall not exceed 60 days from the date the

parties received the transcript of the hearing or, if applicable, the

stipulated record. Such briefs may be accompanied by proposed findings

of fact and conclusions of law. The presiding officer may permit the

parties to file responsive briefs. No brief may exceed 30 pages

(exclusive of proposed findings and conclusions) unless the presiding

officer has previously found that the issues in the proceeding are so

complex, or the administrative record is so voluminous, as to justify

longer briefs, in which case the presiding officer may set a longer

page limit. Proposed findings of fact and conclusions of law shall not

exceed 30 pages unless the presiding officer has previously found that

the issues in the proceeding are so complex, or the administrative

record is so voluminous, as to justify longer proposed findings and

conclusions, in which case the presiding officer may set a longer page

limit.

Sec. 17.45 Initial decision.

(a) The presiding officer shall issue an initial decision based

only on the administrative record. The decision shall contain findings

of fact, conclusions of law, and the amount of any penalties and

assessments imposed.

(b) The findings of fact shall include a finding on each of the

following issues:

(1) Whether the allegations in the complaint are true, and, if so,

whether respondent's actions identified in the complaint violated the

law;

(2) Whether any affirmative defenses are meritorious; and

(3) If the respondent is liable for penalties or assessments, the

appropriate amount of any such penalties or assessments, considering

any mitigating or aggravating factors that he or she finds in the case.

(c) The presiding officer shall serve the initial decision or the

decision granting summary decision on all parties within 90 days after

the time for submission of posthearing briefs and responsive briefs (if

permitted) has expired. If the presiding officer believes that he or

she cannot meet the 90-day deadline, he or she shall notify the

Commissioner of Food and Drugs or other entity designated by the

Commissioner to decide the appeal of the reason(s) therefor, and the

Commissioner or that entity may then set a new deadline.

(d) Unless the initial decision or the decision granting summary

decision of the presiding officer is timely appealed, the initial

decision or the decision granting summary decision shall constitute the

final decision of FDA and shall be final and binding on the parties 30

days after it is issued by the presiding officer.

Sec. 17.47 Appeals.

(a) Either the Center or any respondent may appeal an initial

decision, including a decision not to withdraw a default judgment, or a

decision granting summary decision to the Commissioner of Food and

Drugs or other entity the Commissioner designates to decide the appeal.

The Commissioner has currently designated the Departmental Appeals

Board (DAB) to decide appeals under this part. Parties may appeal to

the DAB by filing a notice of appeal with the DAB, rm. 637-D, Hubert H.

Humphrey Bldg., 200 Independence Ave. SW., Washington, DC 20201, and

the Dockets Management Branch (HFA-305), Food and Drug Administration,

rm. 1-23, 12420 Parklawn Dr., Rockville, MD 20857, in accordance with

this section.

(b) (1) A notice of appeal may be filed at any time within 30 days

after the presiding officer issues an initial decision or decision

granting summary decision.

(2) The Commissioner or the entity designated by the Commissioner

to hear appeals may, within his or her discretion, extend the initial

30-day period for an additional period of time if the Center or any

respondent files a request for an extension within the initial 30-day

period and shows good cause.

(c) A notice of appeal shall be accompanied by a written brief of

no greater length than that allowed for the posthearing brief. The

notice must identify specific exceptions to the initial decision, must

support each exception with citations to the record, and must explain

the basis for each exception.

(d) The opposing party may file a brief of no greater length than

that allowed for the posthearing brief in opposition to exceptions

within 30 days of receiving the notice of appeal and accompanying

brief, unless such time period is extended by the Commissioner or the

entity designated by the Commissioner to hear appeals on request of the

opposing party for good cause shown. Any brief in opposition to

exceptions shall be filed with the Dockets

[[Page 38633]]

Management Branch and the DAB (addresses above).

(e) The appellant may file a reply brief not more than 10 pages in

length within 10 days of being served with appellee's brief.

(f) There is no right to appear personally before the Commissioner

of Food and Drugs or other entity deciding the appeal (currently the

DAB).

(g) The entity deciding the appeal will consider only those issues

raised before the presiding officer, except that the appellee may make

any argument based on the record in support of the initial decision or

decision granting summary decision.

(h) If on appeal the entity deciding the appeal considers issues

not adequately briefed by the parties, the entity may ask for

additional briefing. However, no such additional briefs will be

considered unless so requested.

(i) If any party demonstrates to the satisfaction of the entity

deciding the appeal (currently the DAB) that additional evidence not

presented at the hearing is relevant and material and that there were

reasonable grounds for the failure to adduce such evidence at the

hearing, the entity deciding the appeal may remand the matter to the

presiding officer for consideration of the additional evidence.

(j) The Commissioner of Food and Drugs or other entity deciding the

appeal (currently the DAB) will issue a decision on the appeal within

60 days, if practicable, of the due date for submission of the

appellee's brief. In the decision, the entity deciding the appeal may

decline to review the case, affirm the initial decision or decision

granting summary decision (with or without an opinion), or reverse the

initial decision or decision granting summary decision, or increase,

reduce, reverse, or remand any civil money penalty determined by the

presiding officer in the initial decision. If the entity deciding the

appeal declines to review the case, the initial decision or the

decision granting summary decision shall constitute the final decision

of FDA and shall be final and binding on the parties 30 days after the

declination by the entity deciding the appeal.

(k) The standard of review on a disputed issue of fact is whether

the initial decision is supported by substantial evidence on the whole

record. The standard of review on a disputed issue of law is whether

the initial decision is erroneous.

Sec. 17.48 Harmless error.

No error in either the admission or the exclusion of evidence, and

no error or defect in any ruling or order or in any act done or omitted

by the presiding officer or by any of the parties is grounds for

vacating, modifying, or otherwise disturbing an otherwise appropriate

ruling or order or act, unless refusal to take such action appears to

the presiding officer or the Commissioner of Food and Drugs or other

entity deciding the appeal (currently the DAB) to be inconsistent with

substantial justice. The presiding officer and the entity deciding the

appeal at every stage of the proceeding will disregard any error or

defect in the proceeding that does not affect the substantial rights of

the parties.

Sec. 17.51 Judicial review.

(a) The final decision of the Commissioner of Food and Drugs or

other entity deciding the appeal (currently the DAB) constitutes final

agency action from which a respondent may petition for judicial review

under the statutes governing the matter involved. Although the filing

of a petition for judicial review does not stay a decision under this

part, a respondent may file a petition for stay of such decision under

Sec. 10.35 of this chapter.

(b) The Chief Counsel of FDA has been designated by the Secretary

of Health and Human Services as the officer on whom copies of petitions

for judicial review are to be served. This officer is responsible for

filing the record on which the final decision is based. The record of

the proceeding is certified by the entity deciding the appeal

(currently the DAB).

(c) Exhaustion of an appeal to the entity deciding the appeal

(currently the DAB) is a jurisdictional prerequisite to judicial

review.

Sec. 17.54 Deposit in the Treasury of the United States.

All amounts assessed pursuant to this part shall be delivered to

the Director, Division of Financial Management (HFA-100), Food and Drug

Administration, rm. 11-61, 5600 Fishers Lane, Rockville, MD 20857, and

shall be deposited as miscellaneous receipts in the Treasury of the

United States.

PART 20--PUBLIC INFORMATION

7. The authority citation for part 20 continues to read as follows:

Authority: Secs. 201-903 of the Federal Food, Drug, and Cosmetic

Act (21 U.S.C. 321-393); secs. 301, 302, 303, 307, 310, 311, 351,

352, 354-360F, 361, 362, 1701-1706, 2101 of the Public Health

Service Act (42 U.S.C. 241, 242, 242a, 242l, 242n, 243, 262, 263,

263b-263n, 264, 265, 300u-300u-5, 300aa-1); 5 U.S.C. 552; 18 U.S.C.

1905.

Sec. 20.86 [Amended]

8. Section 20.86 is amended by revising the first sentence to read

as follows:

Sec. 20.86 Disclosure in administrative or court proceedings.

Data and information otherwise exempt from public disclosure may be

revealed in Food and Drug Administration administrative pro

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