Appeal from the United States District Court for the Eastern District of Pennsylvania; D.C. Civil No. 89-0173.
Mansmann, Scirica, and Seitz, Circuit Judges.
In this appeal from a judgment assessing fines against a retail pharmacy and its owner, we are faced with the question of whether strict liability may be imposed for civil violations of the recordkeeping provisions of the Comprehensive Drug Abuse Prevention and Control Act, 21 U.S.C. §§ 801-971. The defendants argued, and the district court found, that the audit shortages -- though substantial -- resulted through inadvertence and human error. We conclude that the district court correctly ruled that the Act provides for liability without fault and will thus affirm.
In October of 1986 the Drug Enforcement Administration, acting pursuant to an administrative inspection warrant, conducted an investigative audit of Green Drugs, a Philadelphia retail pharmacy, and its owner and manager, Raymond Kauffman, a registered pharmacist.*fn1 DEA investigators reviewed Green Drugs' records and stock, and noted that the pharmacy's receipt records accounted for more quantities of drugs than its dispensing records and inventory showed. Specifically, the investigators found shortages of 4,798 Percodan tablets, 1,902 Percocet tablets, and 2,753 Preludin tablets.
The government commenced this civil action with a three-count complaint, alleging that the defendants' failure to keep complete and accurate records of each drug violated the recordkeeping provisions of the Comprehensive Drug Abuse Prevention and Control Act, popularly known as the Controlled Substances Act, 21 U.S.C. §§ 827(a), (b) & 842(a)(5). The government sought a $25,000 civil penalty for each count.
At trial, the government presented corrected shortage figures: 1,698 Percodan tablets, 1,697 Percocet tablets, and 2,752 Preludin tablets. The defendants challenged the government's computation of the shortages contending that the deficiencies were minor, considering the large quantities of drugs processed by the pharmacy, and were due to human error and "inadvertent mistake." The defendants further argued that, as a matter of law, they could not be held liable because the recordkeeping provisions do not provide for strict liability.
The district court entered judgment in favor of the government. Accepting Kauffman's testimony, the court found that the shortages in the pharmacy's inventory were "inadvertent and innocent" and that the defendants acted in good faith. The court stated, however, that Congress had "imposed strict liability on retail pharmacists to account for Schedule Two substances," and "decreed that good faith is not a defense to inaccurate record keeping." The district court took into account the defendants' innocent motives and corrective measures before assessing a $6,000 fine, $2,000 for each count. The pharmacy and its owner appeal.
We have jurisdiction to review the final order of the district court under 28 U.S.C. § 1291. The question presented on appeal is whether a civil violation of the recordkeeping provisions of the Act may be found and punished by a fine where the shortages are due to human error and no intent to violate the statute has been shown. The defendants would add, ". . . and where no illegal gains have been realized." Although the issue has received some mention in cases decided under the statute, United States v. Williams, 416 F. Supp. 611, 614 (D.D.C. 1976); United States v. Barbacoff, 416 F. Supp. 606, 610 (D.D.C. 1976), it is apparently one of first impression before the Courts of Appeals. Because the matter involves application and interpretation of legal precepts, our standard of review is plenary. United States v. Engler, 806 F.2d 425, 431 (3d Cir. 1986), cert. denied, 481 U.S. 1019, 95 L. Ed. 2d 506, 107 S. Ct. 1900 (1987); Dent v. Cunningham, 786 F.2d 173, 175 (3d Cir. 1986).
Every registrant under the Controlled Substances Act engaging in the "manufacture, distribution, or dispensing of controlled substances" is required to "make a complete and accurate record of all stocks thereof on hand."*fn2 21 U.S.C. § 827(a)(1). Section 827(a)(3) likewise requires the registrant to maintain "a complete and accurate record of each . . . substance manufactured, received, sold, delivered, or otherwise disposed." Id. § 827(a)(3). Such records must be maintained in strict accordance with regulations promulgated by the Attorney General and be available for inspection and copying by authorized officials for at least two years. Id. § 827(b). Failure to maintain the requisite records constitutes a violation of 21 U.S.C. § 842(a)(5),*fn3 and subjects the offender to civil or penal penalties, depending on whether the act was committed knowingly. Id. § 842(c). "Inadvertent" mistakes due to sloppy recordkeeping subject pharmacies and owners to fines; a "knowing" violation subjects them to criminal sanctions of imprisonment, fines or both.
In tone and tenor, the Act's recordkeeping provisions mirror other food and drug legislation that Congress has enacted. The Supreme Court has upheld strict liability prosecutions under such statutes, where ...