Morall v. Drug Enforcement Administration

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 12, 2005 Decided June 24, 2005

No. 04-1367

KATHY A. MORALL, M.D.,
PETITIONER

v.

DRUG ENFORCEMENT ADMINISTRATION,
RESPONDENT

On Petition for Review of an Order of the
United States Drug Enforcement Administration

Joseph M. Hannon, Jr. argued the cause for petitioner.
With him on the briefs was Robert N. Spencer.
Teresa A. Wallbaum, Senior Trial Attorney, U.S.
Department of Justice, argued the cause and filed the brief for
respondent.
Before: EDWARDS, HENDERSON, and TATEL, Circuit
Judges.
Opinion for the Court filed by Circuit Judge EDWARDS.
Opinion filed by Circuit Judge HENDERSON, concurring in
the judgment.
EDWARDS, Circuit Judge: Kathy A. Morall, M.D. petitions
this court to review the Drug Enforcement Administration’s
(“DEA”) decision to revoke her certificate of registration. On
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September 28, 2001, DEA issued an Order to Show Cause to Dr.
Morall, proposing to revoke her DEA registration, which
authorizes the dispensing of controlled substances, on the
grounds that, inter alia, she had failed to maintain complete and
accurate records of controlled substances. In June 2002, a
hearing on these charges was held before an Administrative Law
Judge (“ALJ”). After hearing testimony from Dr. Morall, Dr.
Greenfield and Dr. Teich, who testified on behalf of Dr. Morall,
and DEA Investigator Barnhill, the ALJ concluded “that a
preponderance of the evidence [did] not establish that it would
be inconsistent with the public interest to continue [Dr.
Morall’s] DEA registration.” Opinion and Recommended
Ruling, Findings of Fact, Conclusions of Law and Decision of
the ALJ (Apr. 28, 2003) (“ALJ Decision”) at 20, reprinted in
App. tab B.
The ALJ made a number of credibility findings in Dr.
Morall’s favor and also noted that “[t]he Colorado Board of
Medical Examiners [had] reviewed the DEA report of
investigation but determined to take no disciplinary action
against [Dr. Morall], and thus she is fully licensed in Colorado.”
Id. at 18. In sum, the ALJ found that, although Dr. Morall’s
violations of DEA record-keeping regulations were egregious,
the violations “occurred over a fairly short period of time,” Dr.
Morall “appeared to regret” her errors, and “the record does not
establish that [Dr. Morall] diverted any controlled substances.”
Id. at 20. The ALJ thus recommended that no action be taken
against Dr. Morall. DEA filed no exceptions to the ALJ’s
decision.
Over a year later, the Deputy Administrator declined to
adopt the ALJ’s proposed findings of fact and law and revoked
Dr. Morall’s registration. The Deputy Administrator
acknowledged that the record-keeping failures alone might not
warrant revocation in light of compelling, extenuating
circumstances in Dr. Morall’s personal life. Kathy A. Morall,
 3

M.D., Revocation of Registration, 69 Fed. Reg. 59,956, 59,960
(Oct. 6, 2004). The Deputy Administrator determined, however,
that Dr. Morall’s registration should be revoked because “she
lied to the investigators on numerous occasions.” Id. The
Deputy Administrator thus concluded that “[i]f [Dr. Morall’s]
only failures involved record-keeping, the Deputy Administrator
might find it appropriate to impose a lesser sanction than
revocation . . . . [Dr. Morall’s] false and misleading statements,
however, cannot be excused.” Id.
In reaching this judgment, the Deputy Administrator relied
almost exclusively on the testimony of the DEA Investigator,
almost as if no other testimony or evidence was in the record.
The Deputy Administrator’s decision takes no account
whatsoever of the ALJ’s credibility findings, completely ignores
the testimony of Dr. Greenfield and of Dr. Teich, and
substantially fails to acknowledge the testimony given by Dr.
Morall that explains or disputes the DEA Investigator’s claims.
The agency decision is, in short, stunningly one-sided in its
focus and, thus, utterly arbitrary and capricious.
We hold that DEA’s decision cannot withstand review,
because it fails to consider contradictory record evidence where
such evidence is precisely on point. Such a lapse of reasonable
and fair decisionmaking is particularly acute where, as here, the
decision entirely ignores the ALJ’s credibility findings.
Furthermore, DEA has failed to explain its departure from prior
cases that have consistently declined to revoke a physician’s
registration in comparable circumstances and also in situations
involving much more serious conduct. Therefore, even if
DEA’s decision were adequately supported, the penalty imposed
would be unwarranted by law. Accordingly, we vacate the
revocation of Dr. Morall’s registration.
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I. BACKGROUND
A. Factual Background
Kathy A. Morall, M.D. is a Colorado-licensed physician
who, until the revocation of her DEA registration, was
practicing psychiatry at the Jefferson Center for Mental Health
(“Jefferson Center”). Dr. Morall, a graduate of Howard
University School of Medicine, had practiced general and
forensic psychiatry for over twenty years, and had qualified as
an expert in both state and federal court.
In July 1997, Dr. Morall went to work for Joshua Holland,
M.D. as a physician at the Holland Center for Family Health
(“Holland clinic”), a weight-loss clinic located at 128 Steele
Street, Suite 200, in Denver, Colorado. Dr. Holland resided in
Phoenix, Arizona. Dr. Morall testified that she decided to work
in a weight-loss clinic because obesity, “the number one health
problem in the country,” is “predominantly associated with
psychological issues” and “has a domino effect on so many parts
of one’s life.” Tr. of Proceedings Before the ALJ (“Tr.”) at 292,
reprinted in App. tab F. The Holland clinic focused on the
“phen-fen” treatment, which combined phentermine and
Pondimin, a brand name product containing fenfluramine
hydrochloride.
The circumstances giving rise to this case occurred after the
closure of the Holland clinic. This period was marked by a
series of unfortunate events for Dr. Morall. She testified that
she had begun to experience severe headaches, weight gain, high
blood pressure, fatigue, hair loss, and depression, and that she
was eventually diagnosed with a disorder created by an increase
in hormones from the pituitary gland. During this same time
period, Dr. Morall’s father died of a brain tumor and she thought
that she might have a brain tumor as well; her son had a seizure
and was diagnosed with an illness similar to sickle cell anemia;
and several close friends passed away, including one who
 5

committed suicide. One of the close friends who passed away
was Mr. Carl Ousley, who Dr. Morall described as akin to a
member of her family. Dr. Morall also explained that she had
no support staff to assist her in her practice during most of the
period after the closure of the Holland clinic.
1. Closure of the Holland Clinic
On September 15, 1997, Pondimin was withdrawn from the
market after it was linked to a heart valve disorder and to a heart
and lung disorder. According to Dr. Morall, in the wake of
Pondimin’s withdrawal, the Holland clinic suffered serious
financial losses, and she and Dr. Holland discussed ways to
maintain the clinic as a viable operation. Dr. Holland ultimately
resolved to provide permanent cosmetics at the clinic, a decision
with which Dr. Morall strongly disagreed. She believed it
would be “[o]ffensive to [the] clients . . . [who] came with
serious weight problems who are now afraid that they may have
a medical problem, problems with their heart, and our response
was going to be but, by the way, do you want permanent
makeup?” Tr. at 306. Dr. Holland nevertheless sent a letter,
which included Dr. Morall’s name, to all clinic patients
informing them that permanent makeup would be offered.
According to Dr. Morall, at this point her relationship with Dr.
Holland began to deteriorate.
On Friday, November 7, 1997, Dr. Morall underwent minor
surgery. She testified that while she was still at the hospital, the
clinic office manager paged her to inform her that Dr. Holland
had closed the clinic that day and instructed the locks to be
changed. Dr. Morall stated that she went directly from the
hospital to the Holland clinic and called the “medical board” to
inquire about directives for closing a practice. She also wanted
to notify the clinic’s patients that, come Monday, they would not
be able to reach anyone at the clinic number or address. That
same day, she moved all of her possessions from the Holland
clinic to Suite 202 in the same building and resolved to open her
 6

own practice where she could continue to treat patients with
weight issues.
2. Dr. Morall’s Relocation of Her Practice
In November 1998, Dr. Morall was evicted from her own
practice in Suite 202 of the Steele Street building for failure to
pay rent. At this point, Dr. Morall moved her practice to an
office in her home. She testified that she “took care of patients
from [her] home,” but did not see them there, explaining that she
maintained established patients, whom she only needed to see at
three-month intervals, on weight-loss medication, and that she
hoped to move back to another office location within the three-
month time period. See Tr. at 351.
Dr. Morall testified that after she moved her practice to her
home, her drug distributor notified her that controlled substances
could only be delivered to her home if it was her DEA registered
address. Accordingly, Dr. Morall called DEA to request that her
registered location be changed from the Steele Street address to
her home address. Dr. Morall spoke with Ms. Betty Garcia, a
DEA registration technician.
According to a memorandum prepared by Ms. Garcia, Dr.
Morall had informed Ms. Garcia that she saw patients at her
home and that she had a safe there to store controlled
substances. Dr. Morall disputes this account of her November
12, 1998 phone conversation with Ms. Garcia. She testified that
she did not tell Ms. Garcia that she was “seeing” patients at her
home: “I think I said I was taking care of patients in my home.”
Tr. at 354. She also attested to telling Ms. Garcia that she had
a “safe place” to store controlled substances, rather than a safe.
Dr. Morall maintained that “I can’t imagine my calling up and
saying I want the meds transferred, by the way, I have a safe.
There would be no reason . . . [because] there was no
requirement for a safe,” and there was never a safe in the prior
places where she had worked, including her practice at Suite 202
 7

or at the Holland clinic. Id. On November 12, 1998, Dr.
Morall’s DEA registration was modified to reflect her home
address. The request to have controlled substances delivered to
her home triggered a DEA investigation.
Following the modification of her DEA registration to her
home address, Dr. Morall ordered a shipment of 3,000 dosage
units of phentermine and 200 dosage units of Meridia to that
address.
3. DEA’s Investigation of Dr. Morall
On December 1, 1998, Investigator Lisa Barnhill and Task
Force Officer John Gray went to Dr. Morall’s residence.
Investigator Barnhill testified that Dr. Morall initially denied
having any controlled substances at her home and only
acknowledged their existence when specifically asked about the
recent shipment. When Dr. Morall retrieved the controlled
substances, they were in a box on the floor of a closet. The box,
which also contained open bottles, loose pills, and trash, did not
comport with DEA requirements that drugs be stored in a locked
and substantially constructed cabinet.
Dr. Morall did not recall initially denying the existence of
controlled substances in her home and noted that there was no
reason for her to deny it as she had called DEA to change her
registration address in order to have them there.
Also during the December 1 inspection, the investigators
requested that Dr. Morall provide them with records of her
handling of controlled substances. According to Investigator
Barnhill, Dr. Morall told her that she was in the process of
moving her practice from the Steele Street location and that her
records were still at that location, but agreed to provide them the
next day. On December 3, Dr. Morall left a voice mail message
for Investigator Barnhill saying the records were in the mail. On
December 4, she left a second message saying she wanted to
speak with an attorney before sending them. Dr. Morall testified
 8

to changing her mind on the way to the post office, because she
was not sure whether providing the records could violate any
privacy obligations she owed her patients.
On December 21, 1998, Dr. Morall sent some copies of
records to Investigator Barnhill. They appeared to have been
reconstructed rather than contemporaneous; they were
incomplete and inaccurate and they did not conform to
Investigator Barnhill’s specifications in a number of ways. Dr.
Morall testified that the documents she sent to Investigator
Barnhill on December 21 were an attempt to reconstruct records
from memory and some contemporaneous notes. She asserted
that she knew the records were incomplete and that the
documents were not contemporaneous with her dispensing of the
drugs, and that she had not intended to represent otherwise.
According to Investigator Barnhill, the investigators
requested the originals of the reconstructed documents but
received no response from Dr. Morall. On January 5, 1999,
having obtained an administrative subpoena to inspect Dr.
Morall’s home, Investigator Barnhill and others executed the
warrant. They found Dr. Morall’s records intermingled with
personal papers, financial data, and other such documents, as
well as a notepad on which Dr. Morall had apparently tried to
reconcile the quantities of drugs given to patients.
Investigators also found a vial of phentermine belonging to
a patient named Carl Ousley that identified Dr. Morall as the
prescribing physician. According to Investigator Barnhill, when
Dr. Morall was asked the identity of Mr. Ousley, she answered
that he was her uncle, while Dr. Morall’s husband said that
Ousley was a friend. Dr. Morall testified that she had referred
to Ousley as “Uncle Carl,” because that is what her family called
him as he had been “like a family member for 20 years” joining
the family on trips and family reunions. Tr. at 374.
 9

Investigators also found an empty manufacturer’s 100-count
bottle of phentermine, as well as other empty prescription vials
in different locations in Dr. Morall’s home. Dr. Morall told the
investigators that she had dispensed the medications to her
patients, but she was unable to provide the documentation to
support this assertion. Investigators also found the empty bottles
of Meridia and three open bottles of phentermine that Dr. Morall
showed them during the December 1 visit; they were in a file
cabinet in the closet, which had a lock, but the key was in the
key hole. Investigators counted 542 tablets of phetermine 15 mg
on January 5, compared to an earlier count of 735 tablets on
December 1.
According to Investigator Barnhill, Dr. Morall informed her
that she had not dispensed from her home since the
investigators’ December 1 visit. Dr. Morall, however, testified
that she had actually told Investigator Barnhill that she had not
dispensed from the Steele Street address since that time. Indeed,
the records that Dr. Morall supplied to Investigator Barnhill on
December 21 had indicated that she provided phentermine to
patients after December 1. It is undisputed that, as of the
January 5 inspection, Dr. Morall had not informed Investigator
Barnhill that she had been evicted from the Steele Street
location. Dr. Morall testified that she “was embarrassed” by the
situation and “didn’t want to say that if [she] didn’t have to,”
because she thought she “would be able to work something out
to get back in.” Tr. at 363.
In the course of the January 5 inspection, investigators
asked Dr. Morall if she had ever taken phentermine herself. She
testified that when she began working at the Holland clinic, Dr.
Holland had written her a prescription and suggested that she try
it. She never used the prescription and did not try the
medication until she gained weight related to her illness. At that
point, she received a prescription from a physician who was a
friend and tried the medication, but “[i]t didn’t work. . . . [She]
 10

had too many complicated problems going on at the time . . . .”
Tr. at 343. She asserted that she never tried it “for any reason
other than to address [her] symptom of weight gain,” id., and she
did not take phentermine from the bottles and vials found in her
home.
In the course of their investigation of Dr. Morall, the
investigators also learned of a theft at the Holland clinic, in July
1997, which had not been properly reported to DEA.
Investigator Barnhill initially asserted that the drugs in the
Holland clinic had been ordered under Dr. Morall’s DEA
registration number and that Dr. Morall was therefore
responsible for reporting the theft. Investigator Barnhill
conceded on cross-examination, however, that she had no
evidence that Dr. Morall ordered the medications that were
stolen and that she had no evidence that Dr. Morall ordered
controlled substances prior to November 25, 1997, which was
after the Holland clinic had closed. Investigator Barnhill
admitted that she just “assume[d]” that Dr. Morall had ordered
the drugs, because she had been registered at that location,
though she did not know whether Dr. Holland was also
registered there. Tr. at 191. Moreover, it is undisputed that Dr.
Morall reported the theft to the police.
Dr. Morall maintained that she did not order medications
for the Holland clinic and that Dr. Holland’s assistant in Phoenix
ordered medications for both his Denver and Phoenix clinics.
She also testified that when she learned of the theft, she called
Dr. Holland and the “medical board” and that someone at the
board gave her a toll-free number to call DEA, which she did.
Investigator Barnhill also suggested that Dr. Morall was
responsible for failing to document a return of controlled
substances. She asserted that the investigators learned of an
instance in which Dr. Morall did not document a return, in May
1998, of drugs that had been recalled. Dr. Morall maintained
that Dr. Holland had ordered the particular drugs, which were no
 11

longer available as of November 1997, and that she had not
heard that they had been returned under her registration number
until the day of the hearing. She noted that when she moved
from Suite 200 to Suite 202 in the Steele Street building, the
remaining medications in the Holland clinic were locked in a
room inside Suite 200, which she could not access.
As to Suite 202, Investigator Barnhill testified that Dr.
Morall agreed to allow investigators to inspect that location, but
that, despite numerous calls and conversations, they were not
able to arrange a specific date. Dr. Morall acknowledged that
investigators called her to arrange a visit to the Steele Street
location, and explained that she discussed the calls with her
attorney at the time, who instructed her that all contacts should
be through him. Investigator Barnhill admitted that Dr. Morall’s
attorney had contacted her to inform her that he was
representing Dr. Morall, but stated that she did not try to contact
him because “[h]e made no statements that he did not want
[investigators] to talk to [Dr. Morall] directly.” Tr. at 217.
Investigator Barnhill admitted that she was told, in writing,
by Dr. Morall, to contact her attorney prior to contacting any of
her patients, but Investigator Barnhill conceded that she did not
do so when she attempted to call a few patients in the course of
her investigation.
Investigators ultimately obtained a search warrant for Suite
202 of the Steele Street building and executed that warrant on
May 6, 1999. Investigator Barnhill testified that the premises
were in disarray. There were records that were not current and
did not meet DEA requirements. The investigators also found
a wheeled plastic cart with no locking device that contained
controlled substances.
Dr. Morall explained that she had kept controlled
substances in a locked filing cabinet in Suite 202 and, each day,
placed medications that she intended to provide to patients that
 12

day on the plastic cart. She further asserted that the day she was
evicted from the Steele Street office, she was in the process of
moving her possessions out of the office when the building
manager saw her and locked her out. Consequently, she had no
opportunity to secure the medications that she had previously
placed on the cart.
One item seized from Suite 202 was a price list of certain
controlled substances for weight loss. Based solely on this price
list, Investigator Barnhill testified that “it looked to [her] like
[Dr. Morall] was just pretty much pushing drugs.” Tr. at 111.
On cross-examination, however, Investigator Barnhill admitted
that the name of the clinic at the top of the price list was actually
Dr. Holland’s clinic, not “Total Health Care Systems,” the name
that Dr. Morall gave her own practice in Suite 202. She also
admitted that she did not know of any patient who was ever
given the price list, at least by Dr. Morall.
DEA performed a number of accountability audits of Dr.
Morall, which reflected various shortages and/or overages of the
drugs. One particular audit covering the time period from
November 25, 1997 to January 5, 1999 and incorporating the
records seized at the Steele Street location revealed shortages of
thousands of dosage units of controlled substances. Dr. Morall
maintained that she had dispensed the drugs to her patients, but
she lacked the documentation to support this assertion.
Investigator Barnhill admitted on cross-examination,
however, that, if Dr. Morall was correct in her testimony that she
was treating seventeen patients during that time and prescribing
a regiment of about two pills per day, the number of
unaccounted-for medications could easily be accounted for by
such legitimate dispensing. Investigator Barnhill also admitted
that she did not attempt to check if Dr. Morall’s patients had
received the medications. She and her partner tried to contact
“just very few” of the patients and only actually spoke to one
patient, who did not deny that he and his wife were both patients
 13

of Dr. Morall or that they had received medication from her. Tr.
at 181-82.
Following completion of the investigation of Dr. Morall,
Investigator Barnhill provided a copy of her report to the
Colorado Board of Medical Examiners (“Medical Board”). It is
undisputed that the Medical Board elected to take no action
against Dr. Morall.
At the hearing before the ALJ, Dr. Morall fully
acknowledged that her record keeping was “abysmal” after the
closure of the Holland clinic. Tr. at 330-31. In light of the
stressful events transpiring in her life at the time – her father’s
death, her son’s illness, her own health problems, including
depression, and the deaths of several close friends – Dr. Morall
described her personal state during the relevant time period: “I
would spend hours sitting in my office, and I wasn’t doing
anything, I was just sitting, and I took notes always with the
intention of transferring information to the charts, but I never
did. I had boxes from my office in between the living room and
the dining room that I needed to sort through. I couldn’t do it.
I really was not able to do much of anything, and it wasn’t like
me.” Tr. at 347-48.
Stephen Teich, M.D. testified at the hearing that he is a
psychiatrist who has known Dr. Morall since the late 1980s and
that he considered himself her friend as well as her colleague.
He amplified the consuming events in Dr. Morall’s life during
the time period in question. Dr. Teich also asserted that he
considered Dr. Morall an “excellent psychiatrist” who handled
medications “at least as well as most everybody I’ve seen, if not
better.” Tr. at 260. Dr. Teich thought “it would be a great
limitation on her ability to work and a loss to the patient
population she deals with if she were not able to prescribe . . . .”
Id. When asked about Dr. Morall’s risk to abuse or divert
controlled substances, he underscored that he could not imagine
such a possibility. Indeed, there is absolutely no evidence in the
 14

record of substance abuse by Dr. Morall or her family.
Investigator Barnhill explicitly admitted on cross-examination
that she had received no reports of diversion or abuse pertaining
to Dr. Morall, there was no evidence that Dr. Morall ever abused
phentermine, and there was no indication that any patient of Dr.
Morall ever received phentermine for other than a legitimate
medical purpose.
According to Dr. Morall, as of the date of her hearing, she
had been working as a staff psychiatrist for the Jefferson Center,
a mental health center providing care for low-income and
indigent clients, for two and a half years. She also submitted
into evidence an affidavit by Holly Greenfield, M.D., a
psychiatrist and, between 1995 and 2001, Medical Director of
the Jefferson Center. Dr. Greenfield stated that she had hired
Dr. Morall at the Jefferson Center and served as her immediate
supervisor. According to Dr. Greenfield, Dr. Morall was “an
exceptionally competent and compassionate psychiatrist” and a
“tremendous asset to the [Jefferson] Center.” Aff. of Holly
Greenfield, M.D. at 2-3, reprinted in App. tab H. Dr. Greenfield
also stated that she “never had any reason to suspect that Dr.
Morall in any way abused or diverted any controlled substance,”
and she “found no problems with her documentation of [their]
use.” Id. at 3. According to Dr. Greenfield, Dr. Morall was “too
good of a psychiatrist and too much of an asset to Jefferson
Center and its patients” to lose her registration. Id. at 4.
Dr. Morall stated unequivocally that she would take a
course in record keeping for controlled substances in order to
maintain her DEA registration; indeed, she “[thought] it would
be appropriate.” Tr. at 453.
B. Statutory and Regulatory Background
The Controlled Substances Act (“Act”), as amended,
requires persons who dispense controlled substances to obtain
proper registration from the Attorney General. See 21 U.S.C. §
 15

822(a)(2) (2000). The authority to deny, revoke, or suspend
registrations has been delegated to the Administrator of DEA,
see 21 U.S.C. § 824 (2000), 28 C.F.R. § 0.100(b) (2004), and
redelegated to the Deputy Administrator, see 28 C.F.R. § 0.104
& App. § 12 (2004).
The Act authorizes suspension or revocation of a certificate
of registration where the registrant “has committed such acts as
would render his registration under section 823 of this title
inconsistent with the public interest . . . .” 21 U.S.C. §
824(a)(4). Section 823(f) provides the factors to be considered
“[i]n determining the public interest”:
(1) The recommendation of the appropriate State licensing
board or professional disciplinary authority.
(2) The applicant’s experience in dispensing, or conducting
research with respect to controlled substances.
(3) The applicant’s conviction record under Federal or State
laws relating to the manufacture, distribution, or dispensing
of controlled substances.
(4) Compliance with applicable State, Federal, or local laws
relating to controlled substances.
(5) Such other conduct which may threaten the public
health and safety.
21 U.S.C. § 823(f) (2000). The Administrator is not required to
“make findings as to all of the factors enumerated . . . . Rather,
he may give each factor the weight he deems appropriate.”
Henry J. Schwarz, Jr., M.D., Denial of Application, 54 Fed. Reg.
16,422, 16,424 (Apr. 24, 1989). DEA bears the initial burden of
proving that registration is not in the public interest; the burden
of production then shifts to the would-be registrant to rebut the
evidence. See Humphreys v. DEA, 96 F.3d 658, 661 (3d Cir.
1996) (citing Shatz v. United States Dep’t of Justice, 873 F.2d
1089, 1091 (8th Cir. 1989)).
 16

Registrants dispensing controlled substances must comply
with a number of statutory and regulatory requirements. As
relevant here, they must maintain inventories and other records
pursuant to 21 U.S.C. § 827(a)(1) (2000). They are also
required to hold a DEA registration at any location where they
dispense controlled substances, see 21 C.F.R. § 1301.12 (2004),
and to store controlled substances “in a securely locked,
substantially constructed cabinet,” id. § 1301.75. Finally,
physicians who provide controlled substances directly to
patients must maintain written records of such dispensing
covering a minimum of two years; take an initial inventory of all
controlled substances on hand and biennial inventories
thereafter; and maintain records of receipts, dispensings, and
transfers of controlled substances. See id. §§ 1304.03(b),
1304.04, 1304.11, 1304.21.
C. DEA’s Decision
On September 28, 2001, the Deputy Assistant
Administrator, Office of Diversion Control, DEA, issued an
Order to Show Cause to Dr. Morall, proposing to revoke her
DEA certificate of registration and deny any pending
applications for renewal on the ground that such registration
would be inconsistent with the public interest pursuant to 21
U.S.C. §§ 823(f), 824(a)(4). Dr. Morall requested a hearing,
which took place before the ALJ in June 2002. At the hearing,
Dr. Morall and Dr. Teich testified on Dr. Morall’s behalf; Dr.
Greenfield’s testimony was also submitted by way of affidavit.
Investigator Barnhill was DEA’s sole witness.
On April 28, 2003, the ALJ issued proposed findings of fact
and conclusions of law. She considered each of the factors
provided at 21 U.S.C. § 823(f). The ALJ found that factor one
– recommendation of state licensing board – weighed in Dr.
Morall’s favor, because the Colorado Board of Medical
Examiners reviewed the DEA report of the investigation but
decided to take no disciplinary action against Dr. Morall.
 17

Similarly, factor three – convictions related to controlled
substances – weighed in Dr. Morall’s favor as the record did not
indicate that Dr. Morall had ever been convicted of a state or
federal violation pertaining to controlled substances.
Under factor two – experience in handling controlled
substances – the ALJ considered DEA’s arguments that Dr.
Morall neglected an obligation to report the theft of controlled
substances from the Holland clinic; that she failed to report the
return of controlled substances to the supplier; that she
dispensed controlled substances from her home prior to being
registered there; that she did not properly store controlled
substances at either her Steele Street or home location; and that
she failed to take an initial inventory and maintain appropriate
records.
The ALJ specifically credited Dr. Morall’s testimony that
she was not responsible for ordering controlled substances when
she worked at the Holland clinic; that she reported the theft to
the police, the Medical Board, and DEA; that she had not
ordered the drugs that were returned under her DEA registration
number and did not know that they were returned under her
number; that she did not have the opportunity to secure the
drugs she intended to dispense on the day that she was evicted
from her Steele Street office; and that she had told Ms. Garcia
that she was taking care of patients from her home, but did not
say she saw them there. The ALJ therefore concluded that DEA
did not establish by a preponderance of the evidence that Dr.
Morall failed to secure controlled substances at the Steele Street
location, failed to report a theft, dispensed controlled substances
from her home without being registered there, or failed to keep
records of a return.
Because it was undisputed, however, that Dr. Morall did not
take inventories, maintain proper records, or properly store
drugs at her home, the ALJ determined that factor two weighed
 18

against Dr. Morall. For the same reason, the ALJ concluded that
factor four also weighed against Dr. Morall.
Under factor five, the ALJ found that Dr. Morall had not
engaged in any other conduct that could threaten the public
health or safety.
The ALJ concluded that, although Dr. Morall’s record-
keeping violations were egregious, “they occurred over a fairly
short period of time and the record does not establish that [Dr.
Morall] diverted any controlled substances. In addition, [Dr.
Morall] appeared to regret her past conduct and I find that she
is unlikely to repeat it.” ALJ Decision at 20. Thus, the ALJ
recommended that Dr. Morall’s registration not be revoked,
because “a preponderance of the evidence does not establish that
it would be inconsistent with the public interest to continue [Dr.
Morall’s] DEA registration.” Id.
Although counsel for DEA was granted an extension of
time to file exceptions to the ALJ’s decision, no exceptions were
filed. The ALJ transmitted the record of proceedings to the
Deputy Administrator on July 14, 2003.
Over a year later, on September 16, 2004, counsel for Dr.
Morall sent a letter complaint to the Office of the Inspector
General, stating that while the ALJ’s decision “was very
favorable to [Dr. Morall], the DEA’s delay in confirming that
decision has imposed de facto punishment upon her,” because
no new registration could issue. Letter from Robert N. Spencer
to Civil Rights & Civil Liberties Complaints, Office of the
Inspector General of 9/16/04 at 1, reprinted in App. tab D.
Counsel for Dr. Morall explained that “[n]eedless to say, this is
creating havoc for my client with her employer and her health
care insurance panels, which require proof of current DEA
registration. At this point, I can only believe the DEA’s
inexcusable delay in acting upon Dr. Morall’s case is intentional
. . . .” Id.
 19

Less than two weeks after the letter was sent to her, the
Deputy Administrator served Dr. Morall with a final order
revoking Dr. Morall’s certificate of registration. The Deputy
Administrator declined to adopt the ALJ’s opinion and
recommended rulings, findings of fact, conclusions of law, and
decision.
After findings of fact that largely traced Investigator
Barnhill’s testimony and entirely ignored Dr. Morall’s on
numerous disputed facts, the Deputy Administrator determined
that only factors two, four, and five were pertinent to the legal
question whether Dr. Morall’s registration was inconsistent with
the public interest. With regard to factors two and four, the
Deputy Administrator found that Dr. Morall had committed
serious record-keeping violations. The Deputy Administrator
concluded, however, that Dr. Morall’s record-keeping failures
might be partly excused by the extremely stressful
circumstances in her life during this time period. Thus, the
balance of her decision focused on factor five.
Under factor five, the Deputy Administrator was
“particularly disturbed . . . by the numerous occasions that [Dr.
Morall] provided false information to DEA investigators and
repeatedly frustrated their attempts to conduct their
investigation.” 69 Fed. Reg. at 59,960. Although Dr. Morall
had testified that she “never meant to mislead the investigators
and denied making false statements,” the Deputy Administrator
found that Dr. Morall “has no credibility, because it is absolutely
clear that she lied to the investigators on numerous occasions.”
Id.
Specifically, the Deputy Administrator concluded that
[Dr. Morall] lied about possessing controlled substances at
her house. She lied about having a safe in her house in
which to store controlled substances. She lied about
treating patients from her home. She lied about the true
 20

identity of a friend for whom she had written prescriptions
for controlled substances. She misled the investigators
about the existence of patient records. She continually
maintained that she had controlled substance records at her
office, when in truth she did not. She later admitted that
she had tried to create the records from memory. . . .
Moreover, [Dr. Morall] agreed to assist DEA
investigators in their inspection of the Steele Street
location, without telling them that she had been evicted
from that location. . . . [She] also made false statements
regarding the transfer of drugs.
Id.
The Deputy Administrator also pointed to Dr. Morall’s
inability to account for many of the controlled substances under
her care, and stressed that while Dr. Morall “asserted that the
controlled substances were legitimately dispensed to patients,
she had no records to support her assertion.” Id. The Deputy
Administrator stated that, although she did “not necessarily find
that [the] controlled substances were diverted,” id.,
circumstantial evidence suggested that Dr. Morall or someone
close to her might be abusing controlled substances in Dr.
Morall’s possession.
The Deputy Administrator ordered Dr. Morall’s DEA
registration revoked, explaining that “[i]f [Dr. Morall’s] only
failures involved record-keeping, the Deputy Administrator
might find it appropriate to impose a lesser sanction than
revocation of [her] DEA registration. [Dr. Morall’s] false and
misleading statements, however, cannot be excused.” Id.
II. ANALYSIS
A. Standard of Review
We review DEA’s factfinding for substantial evidence. See
21 U.S.C. § 877 (2000). Substantial evidence “means evidence
 21

which is substantial, that is, affording a substantial basis of fact
from which the fact in issue can be reasonably inferred.
Substantial evidence is more than a scintilla, and must do more
than create a suspicion of the existence of the fact to be
established.” NLRB v. Columbian Enameling & Stamping Co.,
306 U.S. 292, 299-300 (1939) (internal citations omitted).
In applying the substantial evidence test, we have
recognized that an agency decision “may be supported by
substantial evidence even though a plausible alternative
interpretation of the evidence would support a contrary view.”
Robinson v. Nat’l Transp. Safety Bd., 28 F.3d 210, 215 (D.C.
Cir. 1994) (internal quotation marks omitted). Our function is
to determine “whether the agency . . . could fairly and
reasonably find the facts that it did.” Id. (internal quotation
marks omitted). However, the court “may not find substantial
evidence ‘merely on the basis of evidence which in and of itself
justified [the agency’s decision], without taking into account
contradictory evidence or evidence from which conflicting
inferences could be drawn.’” Lakeland Bus Lines, Inc. v. NLRB,
347 F.3d 955, 962 (D.C. Cir. 2003) (quoting Universal Camera
Corp. v. NLRB, 340 U.S. 456, 487 (1951)). And, while the
agency is the ultimate factfinder, the ALJ’s “decision is part of
the record, and the record must be considered as a whole in
order to see whether the result is supported by substantial
evidence. The agency’s departures from the [ALJ’s] findings
are vulnerable if they fail to reflect attentive consideration to the
[ALJ’s] decision.” Greater Boston Television Corp. v. FCC,
444 F.2d 841, 853 (D.C. Cir. 1970) (footnotes omitted).
Although 21 U.S.C. § 877 does not specify a standard for
reviewing the agency’s reasoning as distinguished from its
factfinding, “the APA provides the appropriate default standard:
A court must set aside agency action it finds to be ‘arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law.’” Tourus Records, Inc. v. DEA, 259 F.3d
 22

731, 736 (D.C. Cir. 2001) (quoting 5 U.S.C. § 706(2)(A)
(2000)). “[A]n agency [decision is] arbitrary and capricious if
the agency . . . entirely failed to consider an important aspect of
the problem, offered an explanation for its decision that runs
counter to the evidence before the agency, or is so implausible
that it could not be ascribed to a difference in view or the
product of agency expertise.” Motor Vehicle Mfrs. Ass’n of the
United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43 (1983).
To uphold DEA’s decision, then, we must satisfy ourselves
“that the agency ‘examine[d] the relevant data and articulate[d]
a satisfactory explanation for its action including a rational
connection between the facts found and the choice made.’” El
Rio Santa Cruz Neighborhood Health Ctr. v. United States Dep’t
of Health & Human Servs., 396 F.3d 1265, 1276 (D.C. Cir.
2005) (quoting Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43)
(internal quotation marks omitted) (alterations in original).
Applying these standards, we conclude that DEA’s decision
cannot withstand review.
B. DEA’s Decision To Revoke Dr. Morall’s Registration
The Deputy Administrator’s decision to order the harshest
of possible sanctions – revocation – turned primarily on her
determination that the record revealed evidence of “other
conduct which may threaten the public health and safety.” 21
U.S.C. § 823(f)(5). She determined that if Dr. Morall’s “only
failures involved record-keeping, the Deputy Administrator
might find it appropriate to impose a lesser sanction than
revocation of [Dr. Morall’s] DEA registration.” 69 Fed. Reg. at
59,960. The extenuating circumstances to which the Deputy
Administrator alluded included Dr. Morall’s physical health
problems involving her pituitary gland (which led her to believe
that she might have to undergo brain surgery), her son’s seizure
and ultimate diagnosis of a disease related to sickle cell anemia,
the deaths of several of her friends (including one by suicide),
 23

and her own serious depression during the relevant time period.
See id.
The Deputy Administrator’s overarching finding under
factor five was that Dr. Morall is a liar. While Dr. Morall had
testified that she “never meant to mislead the investigators and
denied making false statements,” id., the Deputy Administrator
found that Dr. Morall “has no credibility, because it is absolutely
clear that she lied to the investigators on numerous occasions,”
id. The Deputy Administrator found that these “lies” obliterate
Dr. Morall’s credibility, reflect a failure to cooperate with
investigators, and justify terminating the physician’s capacity to
prescribe and dispense controlled substances. Id.
There is no doubt that Dr. Morall was not as forthcoming as
she might have been. This is very different, however, from
characterizing Dr. Morall as a willful liar, a conclusion that
simply does not emanate from the record before us. That said,
it is not our job to evaluate Dr. Morall’s credibility. Rather, our
job is to determine whether the conclusions drawn by the
Deputy Administrator follow from a fair and reasonable review
of the relevant evidence.
Our lodestar is the question whether the record as a whole
provides substantial evidence to support the agency action. We
conclude that it does not, because the decision of the Deputy
Administrator gives no indication whatsoever that the decision
maker considered any of Dr. Morall’s testimony bearing directly
on each of the purported “lies.” To be clear, DEA’s decision
does not withstand review because the agency decisionmaker
entirely ignored relevant evidence. See El Rio Santa Cruz
Neighborhood Health Ctr., 396 F.3d at 1278 (finding agency
action arbitrary and capricious in failing to address relevant
evidence before it); Robinson, 28 F.3d at 216 (agency may not
ignore testimony bearing on critical fact in case); Lakeland Bus
Lines, 347 F.3d at 962 (court cannot find substantial evidence
 24

solely on the basis of evidence that supports the result, without
considering contradictory evidence).
The Deputy Administrator concluded that
[Dr. Morall] lied about possessing controlled substances at
her house. She lied about having a safe in her house in
which to store controlled substances. She lied about
treating patients from her home. She lied about the true
identity of a friend for whom she had written prescriptions
for controlled substances. She misled the investigators
about the existence of patient records. She continually
maintained that she had controlled substance records at her
office, when in truth she did not. She later admitted that
she had tried to create the records from memory. . . .
. . . [She] also made false statements regarding the
transfer of drugs.
69 Fed. Reg. at 59,960.
As indicated above, Dr. Morall presented extensive
testimony pertaining to each of these disputed facts, though one
would not know it from the Deputy Administrator’s analysis.
We will consider here just a few examples of the testimony that
the Deputy Administrator ignored. It is particularly troubling
that the Deputy Administrator does not appear to have
considered testimony by Dr. Morall that the ALJ credited. The
ALJ expressly credited Dr. Morall’s testimony that she told Ms.
Garcia that she was taking care of patients from her home, but
did not say that she saw them there. See ALJ Decision at 18.
The Deputy Administrator gave no indication that she
considered Dr. Morall’s testimony, nor any reason for rejecting
the ALJ’s decision to credit Dr. Morall’s account, when she
made the conclusory finding that Dr. Morall “lied about treating
patients from her home.”
 25

The ALJ also credited Dr. Morall’s account “that she did
not order the drugs that were returned using her DEA
registration number and did not know they were returned under
her number.” ALJ Decision at 18. Dr. Morall had testified at
length that at the time that the recalled drugs could have been
ordered – i.e., when they were still on the market – she was an
employee of Dr. Holland’s, and that her understanding was that
Dr. Holland’s assistant ordered drugs for the clinic. See Tr. at
296, 334. She maintained that she had not heard anything about
the returned drugs at issue until the day of the hearing. Id. The
Deputy Administrator ignored both Dr. Morall’s testimony and
the ALJ’s decision to credit it in finding that Dr. Morall “made
false statements regarding the transfer of drugs.”
The Deputy Administrator also ignored the ALJ’s
conclusion that Dr. Morall “appeared to regret her past conduct
and . . . is unlikely to repeat it,” a finding that clearly implicates
credibility. See ALJ Decision at 20.
Although DEA is the ultimate fact finder, the agency’s
decision is vulnerable when it does not take the ALJ’s findings
into consideration. The reviewing court “must take the ALJ’s
findings into account as part of the record[;] . . . the significance
to be ascribed to them ‘depends largely on the importance of
credibility in the particular case.’” Reckitt & Colman, Ltd. v.
Adm’r, DEA, 788 F.2d 22, 26-27 (D.C. Cir. 1986) (quoting
Universal Camera Corp., 340 U.S. at 496-97). Obviously,
credibility is central to the Deputy Administrator’s analysis here.
DEA provides no reason for ignoring the ALJ’s decision to
credit critical portions of Dr. Morall’s testimony or the ALJ’s
conclusion that Dr. Morall regretted her actions and was
unlikely to repeat them. Indeed, it does not so much as
acknowledge evidence that the ALJ found determinative. The
Deputy Administrator’s failure to consider findings of the ALJ,
which get at the heart of Dr. Morall’s credibility, fortifies our
conclusion that DEA’s decision does not survive substantial
 26

evidence review. See E. Tenn. Natural Gas Co. v. FERC, 953
F.2d 675, 681 (D.C. Cir. 1992) (per curiam) (“Because the ALJ
relied on substantial evidence in the record, coupled with a
well-reasoned and highly sensible analysis, in reaching [its]
conclusion . . . , we can find no basis upon which to accept the
[agency’s] unsupported and ill-reasoned conclusion to the
contrary.”).
The DEA’s decision is disturbing for another reason.
Although the Deputy Administrator “[did] not necessarily find
that [the unaccounted-for] controlled substances were diverted,”
she “[n]evertheless” concluded that “the lack of proper
documentation to account for the shortage of large quantities of
drugs; [Dr. Morall’s] admission to the use of phentermine; her
demonstrated lack of candor; empty drug vials around her home
of which she was unable to account for their origins or
disposition, all suggest possible drug use on [Dr. Morall’s] part,
or by someone close to her.” 69 Fed. Reg. at 59,960. In other
words, while the Deputy Administrator acknowledged that the
record does not support a finding of diversion, she insinuated
that Dr. Morall or someone close to her was abusing drugs.
In light of the record evidence presented in this case, the
DEA’s suggestion of “possible drug use” by Dr. Morall is both
irresponsible and appalling. The suggestion is dangerously
arbitrary and entirely unsupported. And it unnecessarily damns
Dr. Morall, who was viewed by her colleagues to be “an
exceptionally competent and compassionate psychiatrist,” Aff.
of Holly Greenfield, M.D. at 2-3, and someone with “very high”
ethical standards. Tr. at 251 (testimony of Dr. Teich).
The record contains absolutely no evidence that Dr. Morall,
her family, or anybody else abused drugs. Indeed, the ALJ
found that § 823(f)(5) weighed in Dr. Morall’s favor, because
“[t]he record does not establish that [Dr. Morall] has engaged in
any other conduct that may threaten the public health or safety,”
ALJ Decision at 19, and concluded that “the record does not
 27

establish that [Dr. Morall] diverted any controlled substances,”
id. at 20. Dr. Morall testified that she did not abuse or divert
controlled substances, and testimony by Dr. Teich and Dr.
Greenfield corroborated her position. See Tr. at 292, 422-23
(testimony of Dr. Morall); Tr. at 252-53 (testimony of Dr.
Teich); Aff. of Holly Greenfield, M.D. at 3. Even Investigator
Barnhill – the Government’s sole witness – conceded that she
was aware of no reports of diversion or abuse and no evidence
that Dr. Morall ever abused drugs or prescribed them for an
illegitimate purpose. Tr. at 79, 159, 198-99, 223. The Deputy
Administrator failed to consider any of this evidence before
making the unsupported and profoundly stigmatizing insinuation
that Dr. Morall abused drugs or diverted them to someone close
to her.
No one doubts that Dr. Morall kept poor records and that
her work and living environs were a mess during an unusually
stressful time in her life. It is not at all clear, however, that the
unaccounted-for dosage units constitute anything other than a
manifestation of the poor record keeping, i.e., the failure to
document when patients were provided with what dosages.
Indeed, the record contains evidence – evidence entirely omitted
in the Deputy Administrator’s decision – that the missing
dosages could have been accounted for if Dr. Morall’s patients
had been contacted, and Investigator Barnhill admitted that the
investigators spoke with only one patient, who did not deny that
he was a patient of Dr. Morall’s who received medication from
her. See Tr. at 181-82, 207-08. Dr. Morall’s admitted use of
phentermine, meanwhile, related to a prescribed amount of the
medication that she tried as a possible treatment for weight gain
related to a serious medical condition. See Tr. at 343.
In short, the profoundly stigmatizing suggestion that Dr.
Morall or a member of her family abused drugs simply is not
sustainable on the record before us. See Humphreys, 96 F.3d at
665-66 (“The Deputy Administrator’s inferences of a threat of
 28

public harm are overly broad and only weakly, if at all,
supported by the present record. Indeed, the Deputy
Administrator admitted that no such diversion in fact occurred.
The conclusion that substantial risk for diversion existed . . . ,
under these circumstances, is so unlikely as to be
unsustainable.”). What is particularly troubling here is that
DEA’s suggestion of possible drug abuse by Dr. Morall is
offered for no apparent reason other than to disparage Dr.
Morall. The conclusion of DEA’s decision makes it clear that
the agency’s action against Dr. Morall rests solely on her
record-keeping failures and her alleged lying to investigators,
and the decision to impose the harshest of possible sanctions
rests on the alleged lies alone. The decision does not purport to
rest on diversion of controlled substances or drug abuse.
Therefore, the Deputy Administrator’s passing comment on
possible drug abuse is gratuitous and condemnable.
In light of the foregoing, we hold that DEA’s decision to
revoke Dr. Morall’s registration cannot withstand substantial
evidence review. The agency’s decision fails to consider
relevant contradictory evidence, including evidence that led the
ALJ to contrary findings of fact and credibility. And it
inappropriately insinuates that Dr. Morall or someone in her
family may have abused drugs when there is not a shred of
evidence to support this suggestion. In sum, DEA’s decision is
arbitrary and capricious and therefore cannot stand.
C. The Revocation Penalty
Even if the agency’s decision were sufficiently supported,
the penalty imposed – which is the harshest of possible sanctions
– would be unwarranted by law. See Bluestone Energy Design,
Inc. v. FERC, 74 F.3d 1288, 1294 (D.C. Cir. 1996) (agency’s
“choice of a sanction” will be upheld “unless the sanction is
either ‘unwarranted in law or . . . without justification in fact.’”
(quoting Butz v. Glover Livestock Comm’n Co., 411 U.S. 182,
 29

185-86 (1973) (ellipsis in original and internal quotation marks
omitted))).
DEA offered no explanation for its decision to revoke Dr.
Morall’s registration while declining to revoke the registration
of any other physician in a comparable context, or even under
significantly more troubling circumstances. The decision to
revoke Dr. Morall’s registration, therefore, constitutes such
arbitrary decisionmaking that it cannot withstand the most
deferential of judicial review. See Gulf Power Co. v. FERC, 983
F.2d 1095, 1098-1100 (D.C. Cir. 1993) (holding “that the
sanction the [agency] imposed was not rationally arrived at on
this record and was wholly disproportionate to the error
[petitioner] committed,” where, inter alia, the agency “did not
explain why it had not taken the same position . . . in similar
circumstances in the past”). Indeed, an agency’s need to explain
contrary precedents “is particularly acute,” as here, “when an
agency is applying a multi-factor test through case-by-case
adjudication.” LeMoyne-Owen Coll. v. NLRB, 357 F.3d 55, 61
(D.C. Cir. 2004).
Nowhere in its decision, in its brief to the court, or during
the oral argument, did DEA identify a single case in which a
physician’s registration was revoked under analogous
circumstances. The conduct at issue here does not come close
to the acts in other cases in which DEA consistently declined to
revoke the physician’s DEA registration. For example, in
Theodore Neujahr, D.V.M., Continuation of Registration, 65
Fed. Reg. 5680 (Feb. 4, 2000), DEA declined to revoke the
registration of Dr. Neujahr, a veterinarian, despite findings that
he had used his DEA certificate of registration to obtain
controlled substances for his personal use, which he then
abused; furnished false information to DEA; dispensed
controlled substances for other than legitimate medical
purposes; and failed to maintain adequate physical security of
controlled substances. See id. at 5680-82. DEA decided to
 30

continue Dr. Neujahr’s registration even though he had initially
told investigators who found Dexedrine in his care that “he was
going to use the Dexedrine to treat obese dogs, but ultimately
admitted that he had taken the Dexedrine himself.” Id. at 5680.
Investigators in Dr. Neujahr’s case had also discovered that he
had kept controlled substances in an unlocked drawer at both a
registered and an unregistered location. See id. DEA
determined that revocation was unwarranted, however, because
of evidence that Dr. Neujahr had eventually sought help and
been able to remain drug free, and because he was remorseful
for his prior behavior. See id. at 5682.
Similarly, in Karen A. Kruger, M.D., Grant of Restricted
Registration, 69 Fed. Reg. 7016 (Feb. 12, 2004), DEA declined
to revoke the physician’s registration even though she had
unlawfully issued prescriptions over a one-year period resulting
in the aggregate dispensing of approximately 5,500 dosage units
of a particular controlled substance. See id. at 7016. Dr. Kruger
had initially told a DEA investigator that, as an anesthesiologist,
she rarely had occasion to prescribe, but had prescribed Tenuate
to six-to-ten friends. She ultimately admitted to investigators,
however, that she “had not prescribed to friends for about the
last year, and instead, had issued prescriptions in fictitious
names and then picked up the medications from the dispensing
pharmacies” for her own use. Id. Dr. Kruger also admitted that
“she telephoned bogus prescriptions to many . . . pharmacies in
Chicago and its suburbs, using approximately forty different
names, and that she took as many as 40 to 60 tablets per day,”
even though she acknowledged that the recommended dosage of
Tenuate was only one tablet daily. Id. Dr. Kruger’s Illinois
Controlled Substance License was placed on probation for six
months and the record contained only “scant” evidence of her
recovery from a “long duration” of drug abuse. Id. at 7017.
Despite her initial assertion that she had prescribed Tenuate
to friends rather than to herself, DEA found Dr. Kruger’s “ready
 31

willingness to cooperate with law enforcement authorities when
questioned about allegations of her improperly prescribing” a
significant consideration in her favor. Id. at 7017-18. DEA
declined to revoke Dr. Kruger’s registration, and merely
restricted the registration to the authority to administer and
prescribe controlled substances used in the practice of
anesthesiology, removed Dr. Kruger’s ability to prescribe for
herself, and required that she submit to random drug testing for
two years. See id. at 7018; see also, e.g., Jeffrey Martin Ford,
D.D.S., Grant of Restricted Registration, 68 Fed. Reg. 10,750,
10,753 (Mar. 6, 2003) (granting limited registration despite
“fairly extensive history of substance abuse” and “inconsistent
and evasive testimony during the administrative hearing,”
because the Deputy Administrator concluded that the dentist was
“now prepared to comply with laws regulating the use of
controlled substances”); Wesley G. Harline, M.D., Continuation
of Registration with Restrictions, 65 Fed. Reg. 5665, 5668 (Feb.
4, 2000) (continuing physician’s registration despite, inter alia,
Government’s expert testimony that physician’s record keeping
was “grossly deficient”); Paul W. Saxton, Continuation of
Registration, 64 Fed. Reg. 25,073, 25,078-79 (May 10, 1999)
(declining to revoke physician’s registration where, inter alia,
physician prescribed anabolic steroids when it was illegal to do
so and failed to maintain complete and accurate records of his
controlled substance handling, which rendered him “unable to
account for large quantities of drugs”).
In support of its revocation of Dr. Morall’s registration,
DEA primarily relies on two cases, both of which arose in the
context of sanctions for pharmacies (not physicians) and
involved circumstances that differ from this case in critical
respects. RX Returns, Inc., Revocation of Registration, 61 Fed.
Reg. 37,081 (July 16, 1996), traced almost four years of ongoing
discussions between a disposal company dealing with controlled
substances and DEA. In 1992, a DEA inspection of RX Returns
uncovered 17 violations that, among other things, prevented
 32

DEA from completing an accountability audit and left controlled
substances in unsecured and improperly stored conditions. See
id. at 37,082. The result of this inspection, and subsequent
meetings between DEA and the disposal company, was a
memorandum of understanding between DEA and RX Returns
in which the company agreed to correct all 17 cited violations
and comply with applicable laws and regulations. The
memorandum of understanding also memorialized the precise
corrective actions that needed to be taken. See id. at 37,083.
DEA provided RX Returns with over a year to follow this
corrective course and, in 1994, conducted a second inspection.
Again, DEA uncovered numerous problems in processing,
record keeping, and security systems. A third inspection, in
1995, once again revealed such violations. On the heels of three
years of corrective instruction by DEA, investigators found
Schedule II controlled substances in the company’s premises,
where the company lacked the authorization to handle such
substances and had not even realized that such substances where
in its possession. In addition, the continued failure to account
for controlled substances rendered DEA unable to effectuate an
accountability audit for a period of four years. See id. at 37,083-
87. Even in light of this long history of second chances, DEA
resolved to stay the revocation of RX Returns’ registration and
impose a one-year probationary period, finding that “it is in the
public interest for [the company] to be given yet another
opportunity to demonstrate” compliance with DEA’s regulatory
requirements. Id. at 37,090.
Alexander Drug Company, Inc., Revocation of Registration,
66 Fed. Reg. 18,299 (April 6, 2001), the other case on which
DEA relies, also pertained to continued noncompliance over a
period of years and despite repeated inspections and
interventions by DEA and the South Carolina Department of
Health and Environmental Control. Moreover, the pharmacy
had been convicted of a felony count of maintaining false
 33

records regarding the dispensing of controlled substances. See
id. at 18,299-304. In deciding to revoke the pharmacy’s
registration, the Administrator expressed particular concern with
“the absence of evidence of remedial actions and the
Respondent’s demonstrated continued unwillingness or inability
to comply with state and federal regulations.” Id. at 18,304.
In contrast, Dr. Morall’s record-keeping failures occurred
during a relatively brief time period when, as the Deputy
Administrator found, Dr. Morall was coping with her own health
problems, her son’s seizure and subsequent diagnosis, and the
death of her father and of several friends. This was also the first
time that Dr. Morall, who had almost no administrative
assistance, was responsible for her own record keeping. Dr.
Morall has always acknowledged that her record keeping
suffered during this time, and she readily agreed to take classes
to improve her record keeping in order to retain her registration.
See Tr. at 331, 453-54.
In sum, on this record, the decision to revoke Dr. Morall’s
registration is a flagrant departure from DEA policy and
practice. And, as the foregoing cases indicate, this policy and
practice has been endorsed in a number of decisions rendered in
recent years. Because the departure is not only unexplained, but
entirely unrecognized in the Deputy Administrator’s decision,
the agency’s sanction could not withstand abuse of discretion
review even if the decision had been supported by substantial
evidence. Although “mere unevenness in the application of [a]
sanction does not render its application in a particular case
‘unwarranted in law,’” Butz, 411 U.S. at 188, the agency’s
decision to revoke the registration in this case constitutes an
unprecedented and unexplained departure from its consistent
policy of declining to revoke a physician’s DEA registration in
a wide range of cases in which the record is comparable or
significantly more troubling. See Gulf Power Co., 983 F.2d at
1098-1100; Wonsover v. SEC, 205 F.3d 408, 413 (D.C. Cir.
 34

2000) (“‘The main point is that a court should not second-guess
the judgment of the [agency] in connection with the imposition
of sanctions, unless the [agency] has acted contrary to law,
without basis in fact or in abuse of discretion.’” (quoting
Svalberg v. SEC, 876 F.2d 181, 185 (D.C. Cir.1989))). We do
not mean to suggest that no restrictions on Dr. Morall’s
registration might not have been appropriate, but only that
revocation on this record and in light of DEA policy and
practice is unwarranted.
III. CONCLUSION
The agency’s findings in this case do not survive substantial
evidence review and the decision is arbitrary and capricious.
Accordingly, we hereby grant the petition for review and vacate
the revocation of Dr. Morall’s registration. The case is
remanded to the agency for a prompt disposition of this matter
consistent with this opinion.
So ordered.
KAREN LECRAFT HENDERSON, Circuit Judge, concurring in
the judgment:
I agree with the majority’s decision to remand to the Drug
Enforcement Administration (DEA) but do so on the
narrow ground that the DEA’s review sequence in this case
appears arbitrary and perhaps even retaliatory. Although
the DEA elected not to challenge the ALJ’s decision against
revocation, Morall’s license sat in limbo for over one year
after the ALJ transmitted the record to the Deputy
Administrator (DA) for review on July 14, 2003. It was
only after Morall’s counsel wrote a letter of complaint to
the Department Of Justice Inspector General that the
DA—in a matter of days—issued the final decision
reversing the ALJ and revoking Morall’s registration.
While the timing may have been mere coincidence, the
unexplained and lengthy delay and the rush to judgment
following counsel’s letter suggest the review process may
have been irregular and therefore arbitrary in violation the
Administrative Procedure Act. For this reason I believe
remand to the DEA is necessary. That said, I believe the
DA’s substantive decision to revoke Morall’s registration
is supported by both precedent and substantial evidence and
therefore could be sustained in a different procedural
posture.
The notion that poor recordkeeping may of itself warrant
revoking a controlled substance registration, noted by the
DA and rejected by the majority, is neither new nor peculiar
to this case. As the DEA observed in Alexander Drug Co.,
66 Fed. Reg. 18,299 (DEA 2001), “[p]ast DEA cases
consistently have held that the failure to comply with record
keeping requirements is a basis for revoking a registration.”
66 Fed. Reg. at 18,303 (citing Singers-Andreini Pharm.,
Inc., 63 Fed. Reg. 4,668 (DEA 1998); Arthur Sklar, d/b/a
 2

King Pharm., 54 Fed. Reg. 34623 (DEA 1989); Summer
Grove Pharm., 54 Fed. Reg. 28,522 (DEA 1989); Boro
Pharm. and Bell Apothecary, 53 Fed. Reg. 15151 (DEA
1988)); see also id. at 18,304 (“[P]ast DEA cases have
found record keeping violations to be a basis for the
revocation of a registration based on the public interest.”
(citing Summer Grove Pharm., supra). In fact, the
government has pointed to two cases in which registration
has been revoked on this basis. In Alexander Drug, the
DEA revoked a pharmacy’s registration because a
“persistent pattern of non-compliance [with applicable
record keeping regulations], taken together with [the
owner’s] failure to testify as to corrective actions taken to
prevent future record keeping violations, create an
unacceptable risk for the public interest.” 66 Fed. Reg. at
18,304. In RX Returns, 61 Fed. Reg. 37,081 (DEA 1996),
the DEA concluded that revoking the registration of a
controlled substance disposal company was in the public
interest because the company failed to maintain “effective
controls against diversion,” noting that its first biennial
inventory failed to account for 500 controlled substances,
the DEA investigator was unable during an inspection to
reconcile records with drugs on hand and the company had
unsecured schedule II substances on the premises.1 The
facts here do not of course mirror those in previous
revocation cases but the flagrant recordkeeping violations
the DEA found in this case (including failure to secure
controlled substances) are likewise serious enough to justify

1
The DEA nonetheless stayed the revocation because the disposal
company was engaged in a new industry to which no DEA regulations
specifically applied and it had worked with the DEA to address the
absence of such regulations.
 3

revocation. And, in any event, the DA reasonably found
significant misconduct on Morall’s part beyond her
recordkeeping errors, as will be discussed below.
The DA applied the six-factor test set out in 21 U.S.C.
823(f), see maj. op. at _[15], and concluded that
continuation of Morall’s controlled substance registration
was inconsistent with the public interest under factors two,
four and five.2 The DA first determined that factors two
and five (experience in dispensing controlled substances
and compliance with applicable state and federal law)
weighed strongly in favor of revocation because Morall had
committed “numerous violations of the Controlled
Substances Act by failing to adhere to proper
record-keeping,” most notably in failing to keep accurate
records of, or to secure, her drug inventories. These
findings are unassailable and largely undisputed. See Tr. at
231 (Morall characterizing her recordkeeping as
“[a]bysmal” and “horrible”); ALJ Op at 20 (Morall’s
violations were “egregious”); ALJ Op. at 7-8 (noting during
December 1, 1998 inspection of Morall’s residence DEA
investigators found “open bottles of Meridia and
phentermine as well as loose pills, candy wrappers, and
other trash” in box on closet floor); id. at 9-10 (noting
during January 5, 1999 inspection investigators found same

2
As the DEA has repeatedly stated, the statutory factors “are
considered in the disjunctive; the Deputy Administrator may rely on
any one or a combination of factors and may give each factor the
weight she deems appropriate in determining whether a registration
should be revoked or an application for registration denied.” Robert
A. Smith, M.D., 70 Fed. Reg. 33,207, 33,208 (citing Henry J.
Schwartz, Jr., M.D., 54 Fed. Reg. 16,422 (DEA 1989)); see also maj.
op. at __[15]
 4

drugs stored in unlocked cabinet in closet). As a
consequence of Morall’s utter disregard for tracking her
controlled substances, the DEA’s final audit revealed that
of the substances she handled from November 25, 1997 to
January 5, 1999, at least 7,154 dosage units remained
unaccounted for.
The DA also found that the fourth statutory factor
(conduct which may threaten the public health and safety)
supported revocation because of “the numerous occasions
that [Morall] provided false information to DEA
investigators and repeatedly frustrated their attempts to
conduct their investigation.” DEA Dec. at 19. The DA
found that such “false and misleading statements . . . cannot
be excused” because the DEA “cannot maintain the
integrity of its regulatory system if its registrants, when
asked to provide information required by law, provide false
information.” Id. Noting that at the hearing Morall denied
intending to mislead the investigators or making false
statements, the DA concluded that Morall “ha[d] no
credibility, because it is absolutely clear that she lied to the
investigators on numerous occasions.” DEA Dec. at 17.
Specifically, the DA found that Morall “lied about
possessing controlled substances at her house,” “having a
safe in her house in which to store controlled substances,”
“treating patients from her home,” and “the true identity of
a friend for whom she had written prescriptions for
controlled substances.” DEA Dec. at 17. The DA further
found that Morall “misled the investigators about the
existence of patient records” because she “continually
maintained that she had controlled substance records at her
office, when in truth she did not,” “later admitted that she
had tried to create the records from memory” and “made
 5

false statements regarding the transfer of drugs.” Id.
Finally, the DA found Morall “refus[ed] to cooperate with
the DEA investigators,” forcing them to obtain
administrative inspection warrants for both her residence
and her Steele Street office, and “agreed to assist DEA
investigators in their inspection of the Steele Street
location, without telling them that she had been evicted
from that location.” Id.
While acknowledging that Morall was not “forthcoming,”
the majority rejects the DA’s findings that she was not
credible and that she intentionally misled the investigators
because, it contends, the DA “ entirely ignored relevant
evidence.” maj. op. at 23 (emphasis in original), namely
Morall’s “extensive testimony pertaining to each of these
disputed facts,” maj. op. at __ [24]. First, it is clear from
the DA’s decision that she did not ignore Morall’s contrary
testimony—she simply did not believe it. See DA Dec. at
17 (noting at hearing Morall “claimed that she had never
meant to mislead the investigators and denied making false
statements” but finding Morall “has no credibility”). In any
event, the cited testimony is not compellingly “relevant” to
the DA’s findings . The majority points to two specific
portions of Morall’s hearing testimony. On the one hand,
it cites Morall’s testimony that Dr. Holland, not Morall, had
ordered the drugs that were returned to the supplier and that
she was unaware of the return until the hearing—this
notwithstanding the supplier’s computer printout showed
the pharmaceuticals had been purchased by Morall while
employed at the Holland’s clinic and returned by her (under
her registration number) on May 1, 1998, months after
Holland’s clinic closed. See Tr. 333-34. The majority also
points to Morall’s hairsplitting statement “I took care of
 6

patients from my home but I didn’t actually see patients at
my home,” Tr. 351 (emphasis added) (which the majority
apparently, and curiously, interprets as contradicting the
DA’s statement that Morall had lied about not “treating
patients from her home”). Examples of such elaborate
parsing are peppered throughout Morall’s hearing
testimony. She also testified, for example, that she had not
told DEA registration technician Garcia she had a “safe” in
her home but rather a “safe place” to store drugs, Tr. 354
(by which she apparently meant a cluttered box on her
closet floor, see ALJ Op. at 8); that when she told DEA
Investigator Barnhill she had not dispensed drugs since
December 1, 1998, she had actually said “I did not dispense
from Steele Street,” Tr. 372; and that when she le f t a
voicemail for Barnhill saying the drug records were “in the
mail,” she was “on [her] way to the post office” but then
changed her mind about mailing them before reaching her
destination, 3 Tr. 369-70. The DA’s failure to specifically
cite these snippets is unremarkable given that she expressly
discredited Morall’s testimony. Nor is it surprising the DA
did not directly assail the ALJ’s bare finding that Morall
was credible, see maj. op. at __[24-25], which finding was
apparently based on the same equivocations in her
testimony. See ALJ Op. at 18.4

3
In the end, of course, it turned out there were few if any such
“records” to mail (only evolving reconstructions), notw ithstanding
Morall’s initial statement to the DEA that they were located at her
Steele Street office. See ALJ Op. at 8, 9.

4
I do not understand how the ALJ’s determination that Morall
“appeared to regret her past conduct” “implicates credibility” as the
majority posits. Maj. op. at __[25].
 7

In sum, the DA’s decision is supported by the record.
The majority acknowledges that the DEA (represented here
by the DA) “is the ultimate fact-finder.” Maj. op. at __[25].
As such, the DEA “is not required to adopt the credibility
determinations of an administrative law judge” and is not
bound by the ALJ’s findings even if they “rested on his
evaluation of the credibility of the witnesses.” Kay v. FCC,.
396 F.3d 1184, 1189 (D.C. Cir. 2005) (citing FCC v.
Allentown Broad. Corp., 349 U.S. 358, 363-64 (1955)).
Accordingly, “the question for the reviewing court remains
the same whether the agency agrees or disagrees with the
ALJ—is the agency's decision supported by substantial
evidence.” Id. In this case the DEA’s final findings
regarding Morall’s credibility both during the DEA
investigation and subsequently at the DEA hearing are
supported by ample evidence, notwithstanding Morall
herself may have challenged such evidence in her own
testimony.
Finally, I would note that the majority’s lengthy
discussion of the DA’s remarks regarding the possibility of
diversion or abuse is a red herring. As the majority
acknowledges, the DEA’s revocation decision “rests solely
on her record-keeping failures and her alleged lying to
investigators” and “does not purport to rest on diversion of
controlled substances or drug abuse.” Maj. op. at _ [28].
Thus, I do not see how the DA’s remarks can make the
unrelated decision to revoke Morall’s registration arbitrary
and capricious.
For the foregoing reasons I concur only in the majority’s
disposition—remanding to the DEA to reconsider its
sanction. I do not agree with the majority’s suggestion that
 8

as a matter of law and fact revocation cannot be re-imposed
on remand.