DEA Administrative Decisions Update: DEA’s Questionable Practice of (Un)official Notice

By Karla L. Palmer & Andrew J. Hull – 

From time to time, we have posted on significant final orders in DEA administrative cases. We now plan to blog on these cases in a more regular fashion, partly because we have noted that a number of these “routine” revocation cases often also include some significant procedural rulings by the DEA Administrator. In fact, we have noticed an increase in such rulings involving disagreements between the administrative law judges and the Administrator.

Since September of this year, the DEA Acting Administrator has issued four final orders. Three of these cases involve DEA’s revocation of a registrant’s Certificate of Registration due to the registrant’s loss of authority to handle controlled substances in the state in which the registrant is licensed:

• Charles Syzman, D.O., 81 Fed. Reg. 64937 (Sept. 21, 2016)
• Richard J. Settles, D.O., 81 Fed. Reg. 64940 (Sept. 21, 2016)
• Kevin L. Lowe, M.D., 81 Fed. Reg. 64949 (Sept. 21, 2016)

These three cases are typically referred to as “loss of state authority cases,” in which the agency considers state authority to handle controlled substances a necessary condition of maintaining a DEA registration. These cases, as is typical, involve DEA’s summary disposition of the matter once DEA determines that the registrant lacks state authority. We will be blogging on a recently released fourth case, Edge Pharmacy, 81 Fed. Reg. 72092 (Oct. 19, 2016), in the near future.

In this post, however, we focus on the Acting Administrator’s arbitrary use of official notice without applying the requisite procedural safeguards to the respondent in the Settles case referenced above.

The Administrative Procedure Act (APA) allows an agency to take official notice in a final adjudication (somewhat analogous to judicial notice) of certain facts outside of the agency record. See 5 U.S.C. § 556(e) (“When an agency decision rests on official notice of a material fact not appearing in the evidence in the record, a party is entitled, on timely request, to an opportunity to show the contrary.”) The agency must note in its order that it is taking official notice of a material fact, and it must provide the parties an opportunity to refute that official notice.

In the past, DEA has relied on official notice of material facts outside of the agency record. For example, the agency will take official notice of a relevant action by a state medical or pharmacy board related to a registrant’s license or of proceedings in parallel criminal or civil cases. Typically, the Administrator will follow the appropriate procedure of stating it is taking official notice of a certain non-record fact and providing the parties a period of time to challenge that fact. See, e.g., Kamal Tiwari, M.D., 76 Fed. Reg. 71604, 71606 & n.4 (Nov. 18, 2011) (noting that the agency was taking official notice pursuant to 5 U.S.C. § 556(e) of the respondent’s licensing status listed on a state licensing website and providing the respondent with twenty days to dispute the fact).

Notwithstanding the Administrator’s past practice of providing a respondent notice and an opportunity to “show the contrary” consistent with the APA, the Acting Administrator, in the Settles case, appears to have ignored the APA’s statutory process for taking official notice. Dr. Settles, a physician, faced a series of allegations by DEA that he lacked state authority to hold a controlled substance registration, materially falsified an application to DEA, and engaged in various prescribing violations. He waived his right to a hearing, and the Acting Administrator issued the final order based on the record forwarded to him by agency counsel.

However, after the record had been forwarded to him, the Acting Administrator—on his own initiative—reviewed the medical licensing websites of New Mexico and Colorado and relied on these websites to further support the record evidence that Dr. Settles lacked state authority to practice medicine in those states. Settles, 81 Fed. Reg. at 64944 & n.13. The Acting Administrator failed, however, to take official notice of these facts, and he failed to provide Dr. Settles with any opportunity to challenge these findings.

The Acting Administrator’s disregard for the APA’s minimal notice requirements in relying on certain non-record facts is somewhat inexplicable, but not unprecedented. A similar failure to use the APA’s official notice procedures occurred in another case, Gregory White, M.D., 79 Fed. Reg. 24754, 24755 (May 1, 2014), in which the then-Deputy Administrator made a finding based on his own “internet search” on the California medical board’s website without taking official notice—or providing the respondent with opportunity to dispute—his finding as required by the APA. 5 U.S.C. § 556(e).

The ability to take official notice of facts is an important and helpful tool for an agency adjudication. But, like other provisions of the APA, it must be used within its statutory bounds in order to afford an aggrieved party necessary due process.  If DEA relies on certain non-record material facts in its adjudications, it too must go through the statutory process.

One final thought for consideration: The APA prohibits any employee “engaged in the performance of investigative or prosecuting functions for an agency in a case” from “participat[ing] or advis[ing] in the decision, recommended decision or agency review.” 5 U.S.C. § 554(d). Query as to where the boundaries would be in regard to the Acting Administrator’s actions and whether the Acting Administrator’s own internet searches for material facts constitutes an investigative function that would prohibit him from participating or advising in agency review of the record or in writing the final order. The same question would also be relevant to such actions by an administrative law judge.