Novelty, Inc. v. Drug Enforcement Administration

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 14, 2009 Decided June 22, 2009
Unsealed July 7, 2009

No. 08-1296

NOVELTY, INC.,
PETITIONER

v.

DRUG ENFORCEMENT ADMINISTRATION ET AL.,
RESPONDENTS

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

Jonathan W. Emord argued the cause for the petitioner.
Teresa A. Wallbaum, Acting Deputy Chief for Policy and
Appeals, United States Department of Justice, argued the cause
for the respondent. Anita Gay, Attorney, entered an appearance.
Before: HENDERSON, TATEL and BROWN, Circuit Judges.
Separate statements filed by Circuit Judge KAREN LECRAFT
HENDERSON, Circuit Judge DAVID S. TATEL and Circuit Judge
JANICE ROGERS BROWN.
ORDER
Novelty, Inc. petitions for review of the order of the United
States Drug Enforcement Administration in Novelty
Distributors, Inc., 73 Fed. Reg. 52,689 (Sept. 10, 2008).
 2

IT IS ORDERED that the petition for review be denied. Judge
Henderson sets forth her reasons for denying the petition in her
separate concurring statement, as does Judge Tatel in his
separate concurring statement. Judge Brown dissents from the
denial for the reasons stated in her dissent.
Per Curiam

KAREN LECRAFT HENDERSON, Circuit Judge, concurring:
Novelty, Inc. (Novelty) petitions for review of the order of
the United States Drug Enforcement Administration (DEA),
Novelty Distributors, Inc., 73 Fed. Reg. 52,689 (Sept. 10, 2008)
(Final Order), which revoked its registration to distribute list I
chemical products pursuant to the Controlled Substances Act, 21
U.S.C. §§ 801 et seq. (CSA or Act). For the reasons set out
below, I conclude that Novelty’s petition for review should be
denied.
I.
The CSA requires “[e]very person who . . . distributes
any . . . list I chemical [to] obtain annually a registration issued
by the Attorney General.” 21 U.S.C. § 822(a)(1). Section
823(h) requires the Attorney General to “register an applicant to
distribute a list I chemical unless [he] determines that
registration of the applicant is inconsistent with the public
interest.” Id. § 823(h). The Attorney General considers five
factors in determining whether registration is inconsistent with
the public interest:
(1) maintenance by the applicant of effective controls
against diversion of listed chemicals into other than
legitimate channels;

(2) compliance by the applicant with applicable
Federal, State, and local law;
 3

(3) any prior conviction record of the applicant under
Federal or State laws relating to controlled substances
or to chemicals controlled under Federal or State law;

(4) any past experience of the applicant in the
manufacture and distribution of chemicals; and

(5) such other factors as are relevant to and consistent
with the public health and safety.

Id. § 823(h). The Attorney General may suspend or revoke a
registration if the registrant “has committed such acts as would
render his registration . . . inconsistent with the public interest as
determined under [21 U.S.C. § 823].” Id. § 824(a)(4). A list I
chemical distributor must obtain a “[s]eparate registration . . . at
each principal place of business or professional practice where
[it] . . . distributes . . . list I chemicals.” Id. § 822(e). The
Attorney General has delegated the authority to deny, revoke or
suspend registration to the DEA Administrator, 28 C.F.R.
§ 0.100(b), who has redelegated to the Deputy Administrator
(DA). Id. § 0.104.
Novelty is an Indiana-based wholesale distributor of retail
products to approximately 10,000 convenience stores in the
United States, including over-the-counter pharmaceutical
products containing ephedrine and pseudoephedrine. The CSA
defines ephedrine and pseudoephedrine as “list I chemicals.” 21
U.S.C. § 802(34)(C) & (K). Ephedrine and pseudoephedrine
have legitimate uses1 but they can also be diverted for use in the

1
“Pseudoephedrine is a decongestant used for the temporary relief
of nasal congestion due to the common cold, hay fever, or other upper
respiratory allergies. Ephedrine is used for the temporary relief of
shortness of breath, tightness of chest, and wheezing due to bronchial
asthma.” DEA, Security Requirements for Handlers of
Pseudoephedrine, Ephedrine, and Phenylpropanolamine, 69 Fed. Reg.
 4

manufacture of methamphetamine, a schedule II controlled
substance. Id. § 812(c); 21 C.F.R. § 1308.12(d). In 1998, the
DEA granted Novelty a certificate of registration authorizing it
to distribute list I chemical products from its Greenfield, Indiana
facility. The DEA renewed Novelty’s registration annually until
2008.
According to Novelty’s president,2 Novelty stores its list I
chemical products in a secure area in its registered Greenfield,
Indiana warehouse. Administrative Hearing Transcript at 131-
32, Novelty Distributors, Docket No. 08-33 (DEA Mar. 24-Apr.
1, 2008) (Hearing Tr.). Only employees who pass a background
check and receive training are authorized to enter the secure
area. Each Novelty sales representative services approximately
80 convenience store customers and makes deliveries to each
customer approximately every two weeks. According to
Novelty’s vice president of product, the customer tells the sales
representative how many list I chemical products it needs and
the sales representative orders them from Novelty’s Greenfield
facility. Novelty drivers transport the list I chemical products
weekly in company trucks to approximately 150 self-storage
units that Novelty rents from independent self-storage facilities
throughout the country. Novelty informs its sales representative
of the time of delivery to the self-storage unit. The list I
chemical products typically remain in the self-storage unit
anywhere from a few hours to two days until the sales
representative transfers them to his vehicle for delivery to the
customer. Each self-storage unit is locked and has varying
degrees of additional security as provided by the individual

45,616, 45,616 (July 30, 2004).
2
Novelty’s president as well as other Novelty officials and
various DEA personnel testified at the administrative hearing held to
decide whether Novelty’s registration should be revoked. See infra
at 9.
 5

storage facilities. According to Novelty’s president, “there are
cameras around . . . a lot of [the storage facilities],” “[t]hey have
access points” and “[t]hey have codes to get into places.” Id. at
131. One Novelty sales representative testified that the self-
storage unit he used had only a padlocked door for security. Id.
at 538. None of Novelty’s approximately 150 self-storage units
is registered with the DEA.
Novelty sells combination ephedrine and pseudoephedrine
products of different strengths and in varying quantities per
package and it carries more than ten product lines containing list
I chemicals. Novelty’s vice president of product testified that
Novelty limits each convenience store customer to one case of
each product type per the sales representative’s bi-weekly
delivery to reduce the risk of diversion. According to Novelty’s
director of category management, Novelty enforces its one case
per product type limit by issuing a warning to a noncompliant
sales representative for a first infraction and terminating him for
a second infraction. In addition, Novelty ceases selling list I
chemical products to any customer purchasing in excess of one
case per product type. Novelty’s director of category
management testified that between January 2007 and January
2008, there were approximately 35 to 45 violations of the one
case limit of an estimated 100,000 to 120,000 total transactions.
According to one of the DEA investigators who testified,
however, Novelty violated its one case limit 85 times between
January and July 2007. According to another DEA investigator,
during a November 2002 raid on an illegal methamphetamine
lab in Connecticut, the DEA discovered ephedrine product
manufactured by DMD Pharmaceuticals (DMD). DMD
informed the DEA that in September 2002 it had shipped the
product to Novelty for distribution. When the DEA contacted
Novelty, Novelty was unable to identify the convenience stores
that had purchased the ephedrine product later diverted.
 6

On May 5, 2004, Dan Raber, Diversion Group Supervisor
in the DEA’s Indianapolis District Office, sent Novelty and
other Indiana registrants a letter regarding the transportation and
delivery of list I chemical products to retailers. Letter from Dan
E. Raber, Diversion Group Supervisor, to Novelty Distributors,
Novelty Distributors, Docket No. 08-33 (May 5, 2004) (Raber
Letter). The Raber Letter specifically addressed the practice of
“storing List I chemical products (including over-the-counter
ephedrine and pseudoephedrine items) and distributing them
from satellite locations, such as commercial storage units,
personal residences and or delivery vehicles.” Id. at 1. It
“remind[ed] all registrants that ‘any . . . distribution from[] a
location other than the registered location (including the use of
delivery vehicles for overnight storage) is a violation of federal
law.’” Id. According to Novelty’s vice president of product,
Novelty concluded that it had to register all 150 self-storage
units or stop using the units for list I chemical products, which
it declined to do. In September 2004, it filed suit in the
Southern District of Indiana seeking a declaratory judgment that
the Raber Letter constituted a rule making conducted without
the requisite notice and comment. Novelty, Inc. v. Tandy, No.
04-cv-1502, 2006 WL 2375485, at *1 (S.D. Ind. Aug. 15, 2006).
Almost four years later, on August 7, 2008, the district court
granted the DEA’s motion for summary judgment, concluding
that the Raber Letter was an interpretive rule that did not require
notice and comment.3 Novelty, Inc. v. Tandy, No. 05-cv-1502,
2008 WL 3835655, at *16 (S.D. Ind. Aug. 7, 2008).
On January 17, 2008, the DA suspended Novelty’s
registration and issued an order to show cause why the DEA

3
From the Raber Letter’s issuance in May 2004 until the
Suspension Order issued in January 2008, Novelty continued using the
self-storage units for distribution of list I chemical products. See infra
at 19-20.
 7

should not revoke Novelty’s registration, setting forth several
grounds therefor. Order to Show Cause and Immediate
Suspension of Registration, Novelty Distributors, Docket No.
08-33 (DEA Jan. 17, 2008) (Suspension Order). First, Novelty
used unregistered self-storage units to distribute list I chemical
products, a factor weighing against Novelty’s continued
registration under 21 U.S.C. §§ 823(h)(2) (noncompliance with
applicable laws) and 824(a)(4) (acts inconsistent with public
interest). Id. at 1. Second, Novelty distributed list I chemical
products to its customers in quantities greater than could be used
for legitimate purposes, a factor weighing against Novelty’s
continued registration under 21 U.S.C. § 823(h)(1) (ineffective
controls against diversion). Id. at 2. Third, Novelty maintained
inaccurate records in violation of 21 U.S.C. § 830(a) (record
keeping requirements for list I chemical transactions) and 21
C.F.R. § 1310.04.4 Id. Fourth, Novelty distributed ephedrine
and pseudoephedrine products to retailers that were not self-
certified as required by 21 U.S.C. § 830(e)(1)(B)(i).5 Id. Fifth,

4
A distributor must keep records of “regulated transaction[s]
involving a listed chemical . . . for two years after the date of the
transaction.” 21 U.S.C. § 830(a). The records must be “retrievable
and shall include the date of the regulated transaction, the identity of
each party to the regulated transaction, a statement of the quantity and
form of the listed chemical, a description of the tableting machine or
encapsulating machine, and a description of the method of transfer.”
21 U.S.C. § 830(a)(2); see also 21 C.F.R. § 1310.04 (tracking 21
U.S.C. § 830(a)).
5
“A regulated seller may not sell any scheduled listed chemical
product at retail unless the seller has submitted to the Attorney
General the self-certification referred to in subparagraph (A)(vii).” 21
U.S.C. § 830(e)(1)(B)(i). Subparagraph (A)(vii) requires a seller to
“submit[] to the Attorney General a self-certification that all
[employees of the seller who deliver list I chemical products to the
consumer’s custody] have . . . undergone training provided by the
 8

Novelty distributed list I chemical products packaged in a form
that did not comply with 21 U.S.C. § 830(d)(2).6 Id. at 2-3.
Sixth, Novelty distributed list I chemical products in Kentucky
and North Carolina in a form (tablets instead of gel-caps)
prohibited by their respective state laws. Id. at 3. Based on the
above-cited grounds, the DA found that “the scheduled listed
chemical products distributed by Novelty have been, and are
likely to continue to be, diverted into the illicit manufacture of
methamphetamine” and that “Novelty has failed to maintain
effective controls against such diversion as required by 21
U.S.C. § 823(h)(1).” Id. Accordingly, the DA concluded that
“Novelty’s continued registration . . . would constitute an
imminent danger to the public health and safety.” Id.
Shortly after the Suspension Order issued, Novelty
approached an ephedrine product manufacturer proposing that
Novelty act as its sales agent. Novelty offered to receive
retailers’ orders for ephedrine products and then transmit the
orders to the manufacturer. The manufacturer would then use a
third-party shipper to “distribute” the ephedrine products
directly to the retailers. Under Novelty’s proposal, the retailer
itself could either prepare7 the ephedrine product for sale or the

seller.” Id. § 830(e)(1)(A)(vii).
6
“With respect to ephedrine base [or] pseudoephedrine base . . .
in a scheduled listed chemical product . . . a seller or distributor may
not sell such a product in nonliquid form (including gel caps) at retail
unless the product is packaged in blister packs, each blister containing
not more than 2 dosage units, or where the use of blister packs is
technically infeasible, the product is packaged in unit dose packets or
pouches.” 21 U.S.C. § 830(d)(2).
7
Preparation for sale involves removing the ephedrine product
from the box in which it is shipped and placing the product in the
retailer’s secure display cabinet.
 9

Novelty sales representative could do so when he next called on
the retailer. The manufacturer rejected the proposal.
Novelty requested a hearing before an administrative law
judge (ALJ) as allowed by the Suspension Order. The hearing
was held from March 24 to April 2, 2008. The ALJ then issued
her decision, rejecting the charges that Novelty had (1)
distributed list I chemical products to retailers that were not self-
certified, (2) distributed ephedrine products packaged in a non-
conforming way and (3) distributed ephedrine products in
Kentucky and North Carolina in violation of state law.
Recommended Rulings, Findings of Fact, Conclusions of Law,
and Decision of the ALJ, Novelty Distributors, Docket No. 08-
33, at 37-40, 71-72, 78-79 (DEA May 21, 2008) (ALJ Decision).
The ALJ found, however, that Novelty did not maintain
effective controls against diversion under 21 U.S.C. § 823(h)(1)
based both on its record-keeping errors and on multiple
violations of its one case per product type limit.8 The ALJ
declined to decide whether 21 U.S.C. § 822(e) (requiring
“separate registration at each principal place of business” where
list I chemicals are distributed) required Novelty to register its
self-storage units because of the then-pending litigation
regarding the Raber Letter in the Southern District of Indiana.
Id. at 91 n.38. Nevertheless, the ALJ did find that Novelty had
a duty to comply with the Raber Letter until the litigation
challenging Raber’s interpretation of the statute was resolved,
which duty Novelty failed to meet and, as a consequence
thereof, Novelty’s failure weighed in favor of revocation under
21 U.S.C. § 823(h)(2). Id. at 91. While the ALJ found that the
first two factors listed in section 823(h) supported the
conclusion that Novelty’s continued registration was
inconsistent with the public interest, she found that the third

8
The DA cited the DMD Pharmaceuticals diversion, supra at 5,
as evidence thereof. Final Order at 52,694.
 10

factor (prior convictions), fourth factor (past distribution
experience) and fifth factor (other considerations) weighed in
Novelty’s favor and thus were consistent with the public interest
under 21 U.S.C. § 823(h)(3), (4) and (5), respectively. The ALJ
recommended that the DA “levy compliance requirements upon
[Novelty].”9 Id. at 101. On review, the DA instead revoked
Novelty’s registration. Final Order at 52,704. Novelty timely
petitioned for review under the Administrative Procedure Act,
5 U.S.C. § 702, and the CSA, 21 U.S.C. § 877.
II.
Under the APA, we must “set aside agency action, findings,
and conclusions found to be . . . arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law.” 5
U.S.C. § 706(2)(A). “Findings of fact by the Attorney General
[are conclusive] if supported by substantial evidence.” 21
U.S.C. § 877. We “‘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.’” Morall v. DEA, 412 F.3d 165, 177 (D.C. Cir. 2005)
(quoting Lakeland Bus Lines, Inc. v. NLRB, 347 F.3d 955, 962
(D.C. Cir. 2003) (internal quotations omitted)) (alteration in
Morall). The DEA is the ultimate fact finder but “[t]he agency’s
departures from the [ALJ’s] findings are vulnerable if they fail
to reflect attentive consideration to the [ALJ’s] decision.” Id.
(quoting Greater Boston Television Corp. v. FCC, 444 F.2d 841,
853 (D.C. Cir. 1970)) (first alteration added). To uphold agency
action, we must determine “that the agency examine[d] the
relevant data and articulate[d] a satisfactory explanation for its

9
The ALJ recommended that the DA “use her discretion to levy
compliance requirements upon [Novelty] to a degree that would
satisfy the DEA that [Novelty] is operating [sic] with the DEA to
protect the public interest.” ALJ Decision at 101.
 11

action including a rational connection between the facts found
and the choice made.” Id. (quoting El Rio Santa Cruz
Neighborhood Health Ctr. v. U.S. Dep't of Health & Human
Servs., 396 F.3d 1265, 1276 (D.C. Cir. 2005) (internal
quotations omitted)) (alteration in original). In determining the
public interest under the factors set forth in 21 U.S.C. § 823(h),
the DA need not “make findings as to all of the factors
enumerated. . . . Rather, he may give each factor the weight he
deems appropriate.” Id. at 173-74 (internal quotations omitted)
(ellipsis in original). We “review the DA’s decision[], insofar
as [it] interpret[s] statutes, under the standard articulated by the
Supreme Court in Chevron U.S.A. Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837 (1984).” Wedgewood Vill.
Pharmacy v. DEA, 509 F.3d 541, 549 (D.C. Cir. 2007). Under
Chevron step 1, if a statute is unambiguous, then we “must give
effect to the unambiguously expressed intent of Congress.”
Chevron, 467 U.S. at 843. If the statute is ambiguous, we move
to Chevron step 2 and “must defer to the agency’s interpretation
as long as it is ‘based on a permissible construction of the
statute.’” Creekstone Farms Premium Beef, L.L.C. v. Dep’t of
Agric., 539 F.3d 492, 498 (D.C. Cir. 2008) (quoting Chevron,
467 U.S. at 843). Although Novelty raised a host of objections
both to the DA’s investigation and to the Final Order, I conclude
that only the following merit discussion.10

10
Novelty made the following additional objections: (1) the DA
imposed a no-risk standard on distributors of list I chemical products
to convenience stores and small retailers contrary to “congressional
intent,” Pet’r Br. at 31; (2) the DA did not articulate a discernible
standard of acceptable risk of diversion, id. at 32; (3) the DA’s
revocation of Novelty’s registration was part of a biased enforcement
campaign against distributors of list I chemical products to
convenience stores and small retailers, id. at 33-35; (4) the DA
exhibited prejudgment bias, id. at 38-43; see generally Withrow v.
Larkin, 421 U.S. 35, 47 (1975); and (5) DEA agents imposed a prior
restraint—in violation of the First Amendment to the United States
 12

A.
Novelty argues that the DA failed to consider contradictory
evidence and failed to explain her departure from the ALJ’s
recommended sanction. Novelty lists numerous facts favorable
to it that the ALJ relied upon but that the DA allegedly
disregarded. Pet’r Br. at 23-30. Contrary to Novelty’s assertion,
the DA referenced most of the listed facts in her Final Order.
Those facts not explicitly mentioned—such as areas of
Novelty’s distribution system free of the risks she identified in
other areas—are either irrelevant to the DA’s reasoning or of
little weight, such as the fact that many of Novelty’s packages
were secured with plastic zip-ties. I can “reasonably discern,”
ACS of Anchorage, Inc. v. FCC, 290 F.3d 403, 408 (D.C. Cir.
2002), that the DA considered the holes she identified in
Novelty’s distribution system to be serious notwithstanding an
otherwise compliant background; that is, to find Novelty’s
distribution system flawed, she was hardly required to identify
every non-flawed aspect of it.
The DA also adequately explained why she revoked
Novelty’s registration despite the ALJ’s recommendation to
impose compliance conditions. The DA acknowledged that “the
evidence points to some measures which [Novelty] voluntarily
undertook” to prevent diversion. Final Order at 52,703. But the
DA found that “these measures do not address the serious
problems with its distribution practices that are established by
the record, and which were either ignored, or discounted by the
ALJ.” Id. The ALJ found that Novelty’s “10 year history of
compliance, as evidenced by the DEA’s continued registration,”
weighed against revocation. ALJ Decision at 100-01. The DA
did not regard Novelty’s registration renewals as “probative of

Constitution—on Novelty’s video and audio recording of DEA
investigators while they conducted their investigation of Novelty,
Pet’r Br. at 43-47. I reject these objections as meritless.
 13

a registrant’s record of compliance,” stating that “[t]here are a
variety of reasons why the Agency may not be prepared to go
forward with a Show Cause Proceeding at a particular time
including, inter alia, a lack of resources, the complexity of the
matters under investigation, and the need to pursue other
enforcement priorities.” Final Order at 52,702 n.53. The ALJ
viewed favorably Novelty’s “willingness to comply with the
laws and regulations,” ALJ Decision at 98, but the DA was not
persuaded by Novelty’s willingness to change because of the
“sustained nature of the violations and [its] failure to voluntarily
cease its misconduct.”11 Final Order at 52,703. I conclude that
the Final Order “reflect[s] attentive consideration to the [ALJ’s]
decision,” Morall, 412 F.3d at 177 (internal quotations omitted)
(alteration in original), and took into account contradictory
evidence.
B.
Novelty argues that the CSA does not require it to register
its rented self-storage units. The CSA requires “[a] separate
registration . . . at each principal place of business or
professional practice where the applicant manufactures,
distributes, or dispenses controlled substances or list I
chemicals.” 21 U.S.C. § 822(e); see also 21 C.F.R. § 1309.23(a)
(“A separate registration is required for each principal place of
business at one general physical location where List I chemicals
are distributed . . . .”). “[D]istribute” means “to deliver (other
than by administering or dispensing) a controlled substance or

11
As noted earlier, after the Suspension Order issued, Novelty
approached an ephedrine manufacturer about acting as the latter’s
sales agent, see supra at 8, rather than either registering each of the
self-storage units or discontinuing their use. At the time of the
hearing, moreover, a Novelty executive testified that the sales agent
proposal was “[s]omething that we’re still continuing to explore.”
Hearing Tr. at 2403.
 14

a listed chemical.” 21 U.S.C. § 802(11). “Deliver” means “the
actual, constructive, or attempted transfer of a controlled
substance or a listed chemical, whether or not there exists an
agency relationship.” Id. § 802(8).
Novelty makes two arguments to support its reading of
section 822(e) not to require the registration of each of the self-
storage units. First, it asserts that each self-storage unit is not a
“place of business . . . where [it] . . . distributes . . . list I
chemicals.” Id. § 822(e) (emphasis added). I disagree. A
Novelty truck driver transports the ephedrine products from the
Greenfield, Indiana facility to the self-storage unit, where the
ephedrine products remain for several hours or days. The sales
representative then transfers the products to his vehicle for
delivery to Novelty’s convenience store customers. The unit is
therefore a “place of business” because it is a “general physical
location” whence Novelty distributes ephedrine products. 21
C.F.R. § 1309.23(a). In other words, the Novelty sales
representative distributes the ephedrine products from the self-
storage units to retailers.12
Second, Novelty argues that each self-storage unit is not a
“principal place of business.” 21 U.S.C. § 822(e) (emphasis
added). The CSA does not define “principal place of business.”
The word “principal” means “most important, consequential, or
influential.” Merriam-Webster’s Third New Int’l Dictionary
Unabridged 1802 (1993); see also United States v. Clinical

12
Both parties note that the DEA excepts from registration “[a]
warehouse where List I chemicals are stored by or on behalf of a
registered person, unless such chemicals are distributed directly from
such warehouse to locations other than the registered location from
which the chemicals were originally delivered.” 21 C.F.R.
§ 1309.23(b)(1) (emphases added). Because Novelty’s list I chemical
products are distributed directly from the self-storage units to
customers, the units do not come within the warehouse exception.
 15

Leasing Serv., Inc., 925 F.2d 120, 123 (5th Cir. 1991) (defining
“principal” in 21 U.S.C. § 822(e) as “important [or]
consequential” (quoting Webster’s New Collegiate Dictionary
908 (1979)) (alteration in original)). While the statute does not
require registration of every place of business whether or not it
is a “principal” one, as the DA correctly noted, the statute
plainly contemplates the existence of more than one “principal
place of business” as manifested by the use of “each” in
requiring “each principal place of business” to be registered.
See Final Order at 52,701. Nevertheless, in my view,
“principal”—as used in section 822(e)—is ambiguous because
the Congress has not supplied criteria, e.g., a minimum
percentage of total products distributed from a location, to guide
the DEA. I am therefore required to reach Chevron step 2. See
Pub. Serv. Co. of Colo. v. FERC, 91 F.3d 1478, 1482 (D.C. Cir.
1996). The DEA must decide which “place[s] of business” are
“principal” in each registrant’s distribution system. I must
examine whether its reading—requiring Novelty to register the
self-storage units—is “based on a permissible construction” of
21 U.S.C. § 822(e). Chevron, 467 U.S. at 843.
Notwithstanding Novelty’s assertion that each self-storage
unit “processes a small fraction of Novelty’s total [list I
chemical] product[s] shipped nationwide,” Pet’r Br. at 49, all of
the list I chemical products it distributes passes through a self-
storage unit. Moreover, as noted earlier, the DA permissibly
found that the products remain at the units for up to several days
at a time. Each storage unit is therefore “important” and
“consequential” to Novelty’s distribution system. The DA’s
interpretation of “principal” also correctly relied on the statutory
context.13 See Pharm. Research & Mfrs. of Am. v. Thompson,

13
The DA noted:

Congress imposed on a registrant the obligation to obtain a
 16

251 F.3d 219, 224-25 (D.C. Cir. 2001) (examining context,
including statutory purpose, in interpreting statute’s wording).
The DA also rejected Novelty’s interpretation because it “would
clearly frustrate the Congressional purpose.” Final Order at
52,701.
In enacting the CSA’s registration provisions,
Congress’ purpose was to protect against diversion by
requiring that those persons who propose to engage in
the legitimate distribution of controlled substances and
listed chemicals apply for a registration, notify this
Agency of the proposed location of their activity, and
submit the facility for inspection by the Agency to
ensure that it has adequate security controls and
procedures. See, e.g., 21 U.S.C. 822(f) (authorizing the
Attorney General “to inspect the establishment of a
registrant or applicant for registration”). Indeed,
inspection by the Agency of a proposed facility is
fundamental to the CSA’s mandate to protect the
public interest. Id. 823(h); see also 21 CFR 1309.41.

separate registration at “each principal place of
business * * * where the applicant * * * distributes * * *
List I chemicals.” 21 U.S.C. 822(e) (emphasis added). . . .
In determining whether a facility is a principal place of
business within the meaning of the CSA, the Act looks to
the nature of the activity that occurs at the particular
location and not at the dollar volume of business that is
transacted out of the facility. See 21 CFR 1309.23(b)(2)
(exempting from registration “[a]n office used by agents of
a registrant where sales of List I chemicals are solicited,
made, or supervised but which neither contains such
chemicals . . . nor serves as a distribution point for filling
sales orders”).

Final Order at 52,701 (alteration of statute and regulation in original).
 17

Id.; see also 21 C.F.R. § 1309.71 (listing factors DA must
consider in evaluating effectiveness of security controls and
procedures). The DEA cannot inspect a facility it either does
not know exists or the location of which it does not know.
The DA also noted the “perverse incentive” created by
interpreting “principal” based on the volume of business at a
particular location instead of the nature of that business. Final
Order at 52,701. An interpretation “which determines whether
a facility must be registered by looking to the amount of
business activity that occurs out of a facility rather than the
nature of the activity that occurs therein, would encourage an
entity to keep adding warehouses or storage facilities so that it
could eventually claim that its warehouses were no longer
principal places of business and were thus not subject to the
registration requirement.” Id.
I conclude that the DA reasonably construed 21 U.S.C.
§ 822(e) to require that each of Novelty’s self-storage units is a
“principal place[s] of business” subject to the registration
requirement.14

14
As my dissenting colleague points out, Dissenting Opinion at 7,
the DA concluded that section 822(b) “requires that a separate
registration be obtained at each location at which List I chemicals are
distributed.” Final Order at 52,700 (emphasis in original). Because,
as the DA found, Novelty’s self-storage units fit within the statutory
language of a “principal place of business . . . where [Novelty] . . .
distributes . . . list I chemicals,” id. § 822(e), I do not reach her more
general pronouncement that every place of business where list I
chemicals are distributed must be registered.
 18

C.
Finally, Novelty challenges the DA’s reliance on several
facts in support of revocation.15 First, Novelty argues that its
failure to enforce its one case of each ephedrine product per
sales visit limit did not violate any statute or regulation but
instead its self-imposed limit. But the DA did not conclude that
Novelty violated any law by not enforcing its limit. Novelty
asserted that its one case limit constituted an effective control
against diversion and the DA rejected the one case limit as an

15
Novelty also challenges the sufficiency of the evidence to
support the DA’s finding that Novelty distributed list I chemical
products in excess of legitimate demand to some convenience stores.
Final Order at 52,699-700. At the hearing, the DEA’s expert witness
testified that the average monthly expected retail value of list I
chemical products to satisfy legitimate demand is $14.39 per
convenience store. Both the ALJ and the DA rejected the DEA
expert’s legitimate demand analysis and his conclusion that any
ephedrine product sale above $14.39 per month was presumably
diverted to methamphetamine manufacturing. Final Order at 52,694.
The DA used a different method to determine excessive distribution.
She compared the average monthly retail value of list I chemical
products distributed to each Novelty customer during the three months
before the Suspension Order issued with the average monthly retail
value of list I chemical products distributed by Novelty to all of its
customers. A Novelty executive testified that, on average, Novelty
distributed list I chemical products with a retail value of
approximately $640 to each customer per month. But the DA found
that within three months of the Suspension Order’s issuance, Novelty
distributed list I chemical products with an average monthly retail
value in excess of $2,000 to approximately 120 customers, in excess
of $4,000 to 9 customers and in excess of $7,000 to one customer. Id.
at 52,699. While I question the probative value of looking at sales that
“greatly exceed[]” the average without statistical analysis, id. at
52,700, I need not reach the issue because I conclude that the Final
Order is supported on other grounds, see infra note 17.
 19

effective control because Novelty did not enforce it, a finding
the evidence supports. See Final Order at 52,693 (Novelty sales
representatives violated one case limit 85 times between January
and July 2007).
Second, Novelty argues that it should not be penalized for
continuing to use self-storage units while its challenge to the
Raber Letter was pending in the Southern District of Indiana.
See id. at 52,703 (“[Novelty]’s disregard of the letter and
continuation of its practices for some forty-four months makes
its conduct especially egregious.”). Novelty stopped distributing
list I chemical products—and thus stopped using the self-storage
units for the products—once the Suspension Order issued on
January 17, 2008. The Indiana district court rejected Novelty’s
challenge to the Raber Letter on August 7, 2008. In revoking
Novelty’s registration, the DA relied on Novelty’s failure to
register the self-storage units following the Raber Letter and its
failure to enforce its one case limit as evidence that compliance
conditions alone would not protect the public interest. Id.
Novelty argues that its failure to register the self-storage units
does not demonstrate its unwillingness to comply because its
non-compliance was based on its good faith belief that the Raber
Letter was invalid, as evidenced by its legal action challenging
the letter.16 Who was responsible for Novelty’s continued use
of self-storage units pendente lite—whether Novelty because it
did not seek to stay the Raber Letter or the DEA because it did
not attempt to enforce the Raber Letter until some forty months
after issuance—we do not decide inasmuch as the DA found that

16
Novelty also asserted that its legal challenge to the Raber Letter
was motivated by its belief that using the common carrier alternative
to deliver list I chemical products to its customers created a higher risk
of diversion than its distribution system. Pet’r Br. at 55; Final Order
at 52,701. The DA rejected Novelty’s assertion, concluding that
Novelty produced no evidence of diversion when products were
shipped by common carrier. Final Order at 52,701-02.
 20

Novelty’s “failure to enforce its own policies [i.e., the one-case
limit] provides reason alone to conclude it cannot be trusted to
adhere to compliance conditions.” Final Order at 52,704. As
the DA’s sanction would have been the same even absent this
factor, I need not review her analysis of it. See PDK Labs. Inc.
v. DEA, 362 F.3d 786, 799 (D.C. Cir. 2004) (“If the agency’s
mistake did not affect the outcome, if it did not prejudice the
petitioner, it would be senseless to vacate and remand for
reconsideration.”). For similar reasons, I need not reach the
question whether the DA erred in finding that Novelty
“attempt[ed] to circumvent the suspension order,” Final Order
at 52,703, by proposing acting as a sales agent.17

17
As noted earlier, between the Suspension Order and the ALJ’s
decision, Novelty proposed to an ephedrine products manufacturer that
Novelty act as its sales agent. The CSA exempts from registration
“[a]n agent or employee of any registered manufacturer, distributor,
or dispenser of any controlled substance or list I chemical if such
agent or employee is acting in the usual course of his business or
employment,” 21 U.S.C. § 822(c)(1), and thus, according to Novelty,
had the manufacturer agreed, Novelty would have been exempt from
registration.
My dissenting colleague believes that I must decide the
circumvention issue and remand if I disagree with the DA, relying on
PDK Laboratories Inc. Dissenting Opinion at 16. Assuming without
concluding that I did in fact disagree with the DA on this point, PDK
Laboratories Inc. would not support remand here. In PDK
Laboratories Inc., we vacated the DA’s decision and remanded for the
DA to reconsider his interpretation of a statute. 362 F.3d at 797-99.
We then noted that even if we had upheld the DA’s statutory
interpretation, we “would still have to vacate the [DA’s] decision and
remand the case” because the DA had failed to distinguish DEA
precedent in finding certain regulatory violations. Id. at 798-99. The
DA made his decision based on “the totality of the circumstances” and
“four of the ‘circumstances’ prominently mentioned were [the
regulatory] . . . violations.” Id. at 799. We found it “impossible to
discern” the “weight he gave to those circumstances” and noted that,
 21

Third, Novelty argues that substantial evidence does not
support the finding that Novelty had “serious recordkeeping
deficiencies.” Final Order at 52,698. A registrant must
“provide effective controls and procedures to guard against theft
and diversion of List I chemicals,” 21 C.F.R. § 1309.71(a),
which includes maintaining “systems for monitoring the receipt,
distribution, and disposition of List I chemicals.” Id.
§ 1309.71(b)(8); see also id. § 1310.03 (list I chemical products
distributors must keep record of all regulated transactions and
file reports with DEA). The records must be “readily retrievable
and available for inspection.” Id. § 1310.04(d). Novelty does

if the DA concluded on remand that the petitioner’s actions were not
regulatory violations, the outcome could change. Id. In contrast, the
DA’s conclusion that Novelty attempted to circumvent the Suspension
Order is not a “prominent” reason for the Final Order revoking
Novelty’s registration. The DA concluded that the first (maintenance
of effective controls against diversion) and second (statutory
compliance) factors under 21 U.S.C. § 823(h) “strongly support[]”
revocation. Final Order at 52,700, 52,702 (emphasis added). She
found that the fourth factor (past distribution experience) and fifth
factor (other considerations) “also support[]” revocation. Id. at
52,702-03 (emphasis added). The sole consideration under the fifth
factor was Novelty’s “attempt to circumvent the suspension order.”
Id. at 52,703. In selecting a sanction, the DA cited, first, Novelty’s
failure to register the self-storage units and, second, Novelty’s failure
to enforce its one case limit, id., concluding, as noted above,
“[Novelty’s] failure to enforce its own policies provides reason alone
to conclude that it cannot be trusted to adhere to compliance
conditions.” Id. at 52,704. She found “further support[]” for
revocation—as opposed to imposing compliance conditions—in
Novelty’s “sustained and flagrant violations of Federal law, as well as
its attempt to circumvent the suspension order.” Id. Accordingly,
Novelty’s alleged attempt to circumvent the Suspension Order was
merely an additional factor supporting revocation and, if incorrect,
would not have altered the outcome. Remand is therefore
unnecessary.
 22

not dispute the fact of the record keeping deficiencies the DA
cited in support of her finding, see Final Order at 52,698-99, but
instead asserts they do not add up to inadequate records. Pet’r
Br. at 57-58. The DA cited the fact that Novelty was missing
invoices for sales of list I chemical products and that its records
contained inadequate and inaccurate information regarding
shipment dates and delivery locations. Final Order at 52,698-99.
I conclude that these deficiencies support the finding that
Novelty’s “failure to maintain adequate records . . .
constitutes . . . a violation of Federal law.” Id. at 52,699; see 21
U.S.C. § 830(a) (record keeping requirements for list I chemical
transactions). I also reject Novelty’s assertion that the DA did
not adequately explain her disagreement with the ALJ’s
description of Novelty’s records as “thorough.” ALJ Decision
at 84. But the ALJ also found several errors in Novelty’s
records, concluding that they were “not adequate to conduct an
effective audit of [Novelty’s list I chemical] products.” Id. at
86, 88. The DA as the ultimate fact-finder is entitled to ascribe
different significance to the deficiencies of Novelty’s records.
Cf. Reckitt & Coleman, Ltd. v. Adm’r, 788 F.2d 22, 26-27 (D.C.
Cir. 1986). Accordingly, I reject Novelty’s sufficiency
challenge to the evidence supporting the DA’s deficient record
keeping finding.
For the foregoing reasons, I conclude that Novelty’s petition
for review should be denied.
 TATEL, Circuit Judge, concurring in the judgment:
Although troubled by several aspects of the Deputy
Administrator’s decision, I concur in the denial of the petition
for review because substantial evidence supports two of her
findings, which together constitute sufficient and independent
grounds for the sanction of revocation.

Unlike Judge Henderson, I believe that the Deputy
Administrator unreasonably construed section 822(e). That
section requires a separate registration for “each principal
place of business . . . where the applicant . . . distributes . . .
list I chemicals.” 21 U.S.C. § 822(e). This provision is
hardly unambiguous as to the “precise question at issue,”
Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S.
837, 842 (1984), i.e., whether the word “principal” can apply
to places such as Novelty’s self-storage units. The word
“each” prevents “principal” from taking its ordinary meaning
of “most important, consequential, or influential: relegating
comparable matters, items, or individuals to secondary rank,”
WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 1802
(1993) (emphasis added). Given this ambiguity, we must
accept the Deputy Administrator’s construction if reasonable.
See Chevron, 467 U.S. at 843.

Judge Henderson reads the Deputy Administrator as
finding that certain characteristics of Novelty’s self-storage
units made them sufficiently “consequential” to the
company’s operations for the units to constitute principal
places of business under section 822(e). Op. at 15–17.
Although I think it quite counterintuitive that anyone would
ever describe a self-storage unit as a “principal place of
business” for a corporation with hundreds of employees and a
nationwide client base, that interpretation might well be
defensible as a reasonable exercise of the Deputy
Administrator’s authority to interpret an ambiguous provision
of the Act. See id. But because it isn’t the interpretation on
which the Deputy Administrator actually relied, we may not
 2
use it to sustain her action. See, e.g., PDK Labs. Inc. v. DEA,
362 F.3d 786, 798 (D.C. Cir. 2004) (“[I]f we find that an
agency’s stated rationale for its decision is erroneous, we
cannot sustain its action on some other basis the agency did
not mention.” (citing SEC v. Chenery Corp., 332 U.S. 194,
200 (1947))).

Instead of determining that the self-storage units were
“consequential” due to their particular status in Novelty’s
business structure, see Op. at 15–16, the Deputy
Administrator determined they were “consequential” (and
thus “principal”) simply because they were locations from
which Novelty distributed list I chemicals, Novelty
Distributors, Inc. (“Final Order”), 73 Fed. Reg. 52,689,
52,700 (Sept. 10, 2008). Making this interpretation quite
clear, she stated that section 822(e) “requires that a separate
registration be obtained at each location at which List I
chemicals are distributed.” Id. at 52,700 (internal quotation
marks and some emphasis omitted); see also id. (explaining
DEA’s position that “[t]he person who distributes List I
chemicals from independently owned warehouses must
register at each location” (internal quotation marks omitted,
alteration in original)).

The Deputy Administrator’s interpretation suffers from a
fatal flaw—it makes surplusage of the word “principal.” If all
locations where an applicant distributes list I chemicals must
be registered, then the phrase “each principal place of
business . . . where the applicant . . . distributes . . . list I
chemicals” would mean exactly the same thing if the word
“principal” disappeared. Although “principal” as used in
section 822(e) could have several permissible readings, any
reasonable interpretation must impose some limitation not
already captured by the term “distributes.” See Dissenting
Op. at 7–8; see also, e.g., Sierra Club v. EPA, 536 F.3d 673,
 3
680 (D.C. Cir. 2008) (“It is a court’s duty to give effect, if
possible, to every clause and word of a statute.” (internal
quotation marks, brackets and ellipsis omitted)).

To be sure, in the course of explaining her interpretation
the Deputy Administrator did say at one point that “[a]
location where List I chemicals are stored and distributed
from, is a principal place of business because it plays a
‘consequential’ part in the registrant’s activity of
distributing.” Final Order, 73 Fed. Reg. at 52,701. Although
a requirement that list I chemicals be “stored” at a location
could supplement the requirement that they be distributed, the
word “stored” instead seems little more than a verbal flourish.
After all, it’s mentioned only in passing during the Deputy
Administrator’s argument for her expansive interpretation and
never makes its way into any narrowing formulation. Clearly,
then, as the Deputy Administrator sees it, “each location at
which List I chemicals are distributed,” id. at 52,700 (some
emphasis omitted), must be registered, not just those locations
at which the chemicals are also stored. Given that the word
“stored” fails to avoid surplusage, the Deputy Administrator’s
interpretation is thus unreasonable under Chevron and cannot
support her conclusion that Novelty failed to comply with
applicable law.

But this does not end the matter, for the Deputy
Administrator placed independent reliance on two findings
unrelated to her flawed statutory interpretation. Each finds
support in the record, and together they form a sufficient basis
for the sanction imposed.

First, the Deputy Administrator found that whether or not
section 822(e) required their registration, the self-storage units
posed a serious risk of diversion. See 21 U.S.C. § 823(h)(1)
(requiring consideration of the registrant’s maintenance of
 4
effective controls against diversion). She stated that it was
“unlikely” that the units would meet DEA’s security
requirements, citing agency precedent finding that the use of
similar units posed “an unacceptable risk of diversion.” Final
Order, 73 Fed. Reg. at 52,698. She also pointed to several
flaws in Novelty’s storage units, such as the fact that the door
of one unit was accessible to the public. Id. Finally, she
noted that even by the time of her decision Novelty had failed
to provide DEA with accurate locations for thirty-four of its
storage units. Id. For all of these reasons, the Deputy
Administrator concluded that Novelty’s “use of these storage
facilities . . . does not provide adequate controls against
diversion and provides reason alone to support the finding
that its continued registration is inconsistent with the public
interest.” Id. (emphasis added, internal quotation marks
omitted). Read in context as part of a discussion of the
adequacy of Novelty’s controls against diversion, this
statement amounts to a finding that the company’s use of the
self-storage facilities posed risks of diversion sufficient to
show that Novelty failed to maintain effective diversion
controls. See id. at 52,700 (finding that this factor supports
revocation). And as Judge Henderson explains, the Deputy
Administrator adequately addressed contrary evidence in
making this finding. See Op. at 12.

Second, and just as important, when turning to the choice
of sanction, the Deputy Administrator stated that Novelty’s
failure to enforce its own diversion control policies “provides
reason alone to conclude that it cannot be trusted to adhere to
compliance conditions,” Final Order, 73 Fed. Reg.
at 52,704 (emphasis added)—the only lesser sanction under
consideration. Substantial evidence supports this conclusion.
The Deputy Administrator found that on 85 occasions during
a six-month period, Novelty violated its policy limiting
customers to one case per sales cycle. Id. at 52,703. Novelty
 5
insists the policy applied only to certain packages and was
thus violated just 35 to 45 times in a one-year period. Petr.’s
Reply Br. 19. But the Deputy Administrator credited
testimony establishing that the policy applied to a wider range
of packages and thus that Novelty in fact committed 85
violations, Hr’g Tr. at 624. Contrary to the dissent, the
Deputy Administrator had no obligation to consider how
many completed transactions were made during that six-
month period, see Dissenting Op. at 14, because many of the
completed transactions may have been ones in which the
customer only demanded one case, and thus would hardly
count as instances of successful enforcement of the one-case
limit. The Deputy Administrator was also skeptical of
Novelty’s failure to issue warnings to its sales force until after
DEA’s administrative inspection warrant, permissibly
discrediting testimony that this delay stemmed from a
computer glitch. Final Order, 73 Fed. Reg. at 52,703; see
also Hr’g Tr. at 1435.

The Deputy Administrator made several additional points
that support her finding that Novelty failed to enforce its own
policies. She observed that the record contained no evidence
that Novelty ever completely cut off any of the stores that
violated the one-case policy (as the company’s CEO promised
he would). Final Order, 73 Fed. Reg. at 52,703; see also
Hr’g Tr. at 159. She also pointed out that Novelty sold
extremely high quantities of list I products to one store even
after the company itself became concerned that the store was
making excessive purchases, inferring from this that
Novelty’s “policy of monitoring unusual sales activity and
cutting off sales if such purchases continue is a sham and not
a legitimate effort to control diversion.” Final Order, 73 Fed.
Reg. at 52,703–04 (internal quotation marks and citation
omitted). This inference is perfectly rational, though I hasten
to add that I wouldn’t necessarily agree with the Deputy
 6
Administrator’s more general treatment of high sales volumes
as prima facie evidence of diversion. It’s one thing to infer,
as the Deputy Administrator did here, id., that Novelty’s high
volume of sales to a store that it had previously found made
excessive purchases indicates that Novelty isn’t serious about
its policy of monitoring suspicious transactions. It’s quite
another to infer, as the Deputy Administrator did elsewhere,
id. at 52,700, that similarly high volumes of sales made to
stores never suspected of suspicious activity signal a high risk
of diversion. But only the former, more sensible inference is
necessary to the sanction imposed.

According to the Deputy Administrator, her finding that
Novelty failed to enforce its own policies provided “reason
alone” to reject sanctions short of revocation. Id. at 52,704.
The dissent believes that the Deputy Administrator couldn’t
have meant what she said given that she spent much of her
opinion enumerating additional factors favoring revocation.
Dissenting Op. at 16 n.10. But agencies often enumerate
multiple grounds for their actions, even when one or more of
the grounds would be adequate standing alone. By referring
to this finding as “reason alone” to reject lesser sanctions, the
Deputy Administrator clearly did so here.

Together, these two findings—that Novelty’s use of self-
storage units rendered its delivery system unsecure and that
its disregard of its own policies required revocation—
provided an independent basis for the Deputy Administrator’s
action. I thus have no need to address Novelty’s objections to
(1) the Deputy Administrator’s treatment of high sales
volumes as prima facie evidence of diversion, (2) its finding
that Novelty attempted to circumvent the order suspending it
from distributing list I chemicals, or (3) its condemnation of
Novelty’s use of the self-storage units while challenging the
Raber letter. Although I am somewhat troubled by the first
 7
two, none of these challenges could possibly affect the
outcome of this petition for review given the Deputy
Administrator’s reliance on independent and sufficient
grounds for revocation. See PDK Labs., 362 F.3d at 799 (“If
the agency’s mistake did not affect the outcome, if it did not
prejudice the petitioner, it would be senseless to vacate and
remand for reconsideration.”).

I agree with Judge Henderson that Novelty’s other
objections to the Deputy Administrator’s decision are without
merit. The Deputy Administrator correctly concluded that
even if DEA agents violated the First Amendment during
their inspection of Novelty’s warehouse, the exclusionary rule
is inapplicable to administrative proceedings of the kind at
issue here. See Pa. Bd. of Prob. & Parole v. Scott, 524 U.S.
357, 363 (1998) (“[W]e have repeatedly declined to extend
the exclusionary rule to proceedings other than criminal
trials.”). Novelty complains that the Deputy Administrator
failed to articulate the level of tolerable risk, but the Raber
letter gave perfectly adequate guidance. Finally, neither
Novelty’s complaint that the Deputy Administrator conducted
a biased campaign of enforcement against independent
distributors of list I chemicals nor its complaint of
unconstitutional prejudgment bias finds support in the record.
Especially given the Deputy Administrator’s rejection of
much of the government’s evidence, my concerns with her
reasoning fall short of the level at which “a disinterested
observer may conclude that [the Deputy Administrator] has in
some measure adjudged the facts as well as the law of a
particular case in advance of hearing it,” Cinderella Career &
Finishing Sch., Inc. v. FTC, 425 F.2d 583, 591 (D.C. Cir.
1970) (internal quotation marks omitted).
 BROWN, Circuit Judge, dissenting: Tellingly called poor
man’s crack (especially telling, as crack is already poor man’s
cocaine), methamphetamine—meth—is a national scourge.
Behind only “alcohol and marijuana as the drug used most
frequently in many Western and Midwestern states,”
Methamphetamine, http://www.usdoj.gov/dea/concern/meth.
html (last visited May 19, 2009), meth addiction can cause
“paranoia, auditory hallucinations, mood disturbances,” and
even “homicidal or suicidal thoughts,” Meth Awareness,
http://www.usdoj.gov/methawareness/ (last visited May 19,
2009). “A fairly common hallucination experienced by meth
users is the so-called crank bug” where a “user gets the
sensation that there are insects creeping on top of, or
underneath, her skin,” causing her to “pick at or scratch her
skin trying to get rid of the imaginary bugs,” “open[ing] sores
that may become infected.” Id. Meth also “reduces the
amount of protective saliva around the teeth,” which, along
with the fact that “users also consume excess sugared,
carbonated soft drinks, tend to neglect personal hygiene, grind
their teeth and clench their jaws,” causes “what is commonly
called ‘meth mouth,’” as addicts’ teeth “fall out” “even as
they do simple things like eating a sandwich.” Id. Meth is a
very bad thing. A monster.

But we don’t toss the law aside in our zeal to eradicate
even an obvious menace. The Deputy Administrator (DA)
here has done just that,1 in the process crippling a successful

1
As the Administrative Law Judge (ALJ) perceptively observed, no
party “dispute[s] that illegal methamphetamine is a major drug
problem in the United States,” but the agency “seems to be trying to
remedy this problem by restricting or eliminating the availability of
such over-the-counter products by removing the distributors of
[these] products to convenience stores from the market place”
altogether, despite lacking sufficient record evidence. In re Novelty
Distrib., No. 08-33, slip op. at 93 (May 21, 2008) (Recommended
Ruling of the Administrative Law Judge) (“ALJ Ruling”).
 2
enterprise and costing many employees their jobs. In
rejecting the ALJ’s recommendation that Novelty be allowed
to retain its registration, the DA transforms a trivial violation
of Novelty’s own rules into an imminent danger to the public
health and shifts the burden to Novelty to explain why some
of the thousands of convenience stores it services are busier
than others. Subject to this perverse alchemy, ordinary
business practices somehow provide proof of rampant
lawlessness. Thus, the DA (1) misreads a statute so any place
used for distribution is a “principal place of business,” even a
padlocked storage shed; (2) uses the average sales of every
convenience store serviced by Novelty as a proxy for
legitimate demand at each location without regard to any
individual characteristics; and (3) finds Novelty’s efforts to
stay in business after its registration was suspended to be
proof of villainy.2 Because “[t]he war on drugs is not an
excuse to violate the norms of fair play and evenhandedness,”
United States v. Cuellar, 478 F.3d 282, 307 (5th Cir. 2007)
(en banc) (Smith, J., dissenting), rev’d 128 S. Ct. 1994
(2008), I respectfully dissent.

I.
To appreciate how poorly supported the DA’s decision
really is, a little history is helpful. This case first came before
us when Novelty challenged the DA’s suspension order, but
the DA mooted that initial challenge by revoking Novelty’s

2
Alas, these are not the only things the Drug Enforcement
Administration (DEA) did wrong. Agents interfered with
Novelty’s understandable efforts to document in real time the
search of the company’s own facility by forbidding the use of and
disabling video and audio recorders. These agents also “requested
12,000 additional pages of documents,” giving only “three hours to
produce them,” and an executive believed he would be arrested
because he could not do the impossible. ALJ Ruling, slip op. at 62–
65. Such tactics do not reflect well on the United States.
 3
registration before oral argument. To justify that initial
suspension, the DA gave five reasons why Novelty’s
continued operations endangered the public. First, Novelty
violated 21 U.S.C. § 822(e) by distributing from unregistered
locations. In re Novelty Distrib., Order to Show Cause &
Immediate Suspension of Registration, slip op. at 1 (Jan. 17,
2008). Second, Novelty sold products to stores in amounts
that “far exceeded what those retail outlets could be expected
to sell for legitimate, therapeutic purposes,” and some drugs
were diverted to a Connecticut meth lab in 2002. Id. at 2.
Third, Novelty “could not account for more than 60,000
dosage units of two ephedrine products,” and there were other
gaps in the company’s records. Id. Fourth, “[f]rom January
1, 2007, through July 9, 2007, Novelty distributed scheduled
listed chemical products on at least 284 occasions to 35 retail
outlets that were not self-certified under” federal law. Id.
Finally, Novelty distributed products in unlawful containers
and in forms that violated state laws. Id. at 2–3.

The case went before an ALJ, who rejected most of these
allegations as factually unsupportable. For instance, it’s just
not true that Novelty distributed drugs to stores that were not
self-certified. ALJ Ruling, slip op. at 91. Nor did Novelty sell
drugs in forms or packages that violated any law. See id. at
37–39. And the DEA’s audit failed to consider all the data it
received from Novelty: “Specifically, the DEA had failed to
take into account dosage units returned to vendors, data that
had been removed from the inventory because of expired or
obsolete inventory, and other unspecified documents
reflecting miscellaneous transfers or adjustments.” Id. at 87–
88. Based on the evidence, the most that could be said about
those “60,000 dosage units” was that Novelty’s recordkeeping
was inadequate. Id. at 88. In her revocation decision, the DA
conceded the ALJ was correct on these points. See Novelty
Distrib., Inc., 73 Fed. Reg. 52689, 52695 (Sept. 10, 2008)
 4
(Revocation of Registration) (“At most, the evidence suggests
that [Novelty] made a single distribution to a single store
before it obtained its certification.”); id. at 52695–96 (form
and packaging); id. at 52696–97 (audit).

The ALJ also debunked the DEA’s argument that
Novelty was selling over-the-counter drugs in amounts that
exceeded legitimate demand. Jonathan Robbin, the DEA’s
expert, concluded “a convenience store is expected to sell no
more than $14.39 worth of . . . products per month,” even
though one 24-count package could cost up to $14.99. ALJ
Ruling, slip op. at 96 & n.40. In other words, selling even one
package per month would be suspicious. The ALJ set forth
the flaws in this analysis. Robbin, for example, used the
wrong denominator, thereby “forcing a lower expected sales
value.” Id. at 55. He did “not provide a detailed breakdown”
of how he determined important inputs in his formula, “other
than providing a narrative of his approach,” and he offered
data about the entire retail industry and just not convenience
stores. Id. He ignored that much of his data relied on self-
reporting, and instead of reporting sales as “cold and cough
products,” some stores used the “general merchandise”
category. Id. at 56–57 n.28. He also did not do a multivariate
analysis to consider “[f]actors such as store hours, store
location, store size, advertising expenditures, and
management practices,” or other “seasonal and environmental
variables.” Id. at 58. Unsurprisingly, the DA did not defend
Robbin’s analysis. 73 Fed. Reg. at 52693–94.3

3
Though the DA did not uphold Robbin in this case, he has been
relied upon in more than twenty other cases, even though his
approach—aside from being internally defective—does not appear
even to yield consistent results. Compare Sunny Wholesale, Inc.,
73 Fed. Reg. 57655, 57658 (Oct. 3, 2008) (“Mr. Robbin explained
. . . that during 2005, ‘[t]he expected average monthly convenience
store sales of nonprescription drug products containing
 5

Thus, all that lingered of the DA’s aggressive allegations
was that Novelty broke the law by using unregistered storage
units; that Novelty’s records were deficient in certain
respects; and that a small amount of product had been
diverted. In revoking Novelty’s registration, the DA also
emphasized Novelty’s letter to one of its suppliers that
supposedly manifested an intent to circumvent the suspension
order, and that Novelty did not comply consistently with its
own anti-diversion rules. Finally, because Robbin’s statistics
were useless, the DA invented, seemingly sua sponte, a new
statistical analysis, placing the burden on Novelty to rebut it.
These grounds, though much less compelling than the grand
claims made in the suspension order, were enough for the DA
to shut down Novelty’s list I chemicals operations for good.

To say the case for revocation is razor thin greatly
exaggerates its sufficiency. As the statute is written, the
storage units are not illegal. The DA’s newly-concocted

pseudoephedrine (hcl) in Georgia were * * * $82.’”) with Holloway
Distrib., 72 Fed. Reg. 42118, 42119 (Aug. 1, 2007) (“Mr. Robbin
explained that a monthly retail sale of $60 of pseudoephedrine
(Hcl) * * * would be expected to occur less than one in 1,000 times
in random sampling, and a monthly retail sale of . . . $100 in
pseudoephedrine (Hcl) . . . would occur about once in a million
times in random sampling.”) with H&R Corp., 71 Fed. Reg. 30168,
30169 (May 25, 2006) (“Mr. Robbin . . . . determined that the
normal expected retail sales of pseudoephedrine tablets in a
convenience store would . . . average . . . about $20.00 and the sales
of more than $100.00 in a month would be expected to occur in a
random sampling about once in one million to the tenth power, a
number he characterized as nearly equivalent to the number of
atoms in the universe.”). How many jobs have been lost and
reputations ruined because of this dubious analysis? One wonders
if the DEA feels remorse for preying on companies that lack the
wherewithal or sophistication to fight back against sloppy statistics.
 6
statistics are just as bad as Robbin’s, and the “smoking gun”
letter is anything but. Moreover, though Novelty did not
always live up to its own policies, mistakes were rare, and the
DA failed to even consider the relevant denominator. True,
company records were somewhat deficient, but no DEA agent
had ever before complained of Novelty’s “thorough” records,
despite multiple inspections, ALJ Ruling, slip op. at 84, 93,
and, in any event, the DA said if the only problem were
recordkeeping, “imposing compliance conditions might well
protect the public interest.” 73 Fed. Reg. at 52703. If
“arbitrary and capricious” is to mean anything in the DEA
context, this decision cannot be allowed to stand.

II.
The heart of the DA’s analysis—that unregistered storage
units always violate federal law—contradicts the statute,
Chevron notwithstanding. Under no reasonable reading does
21 U.S.C. § 822(e) require each link in the distribution chain
to be registered. Nonetheless, in revoking its registration, the
DA gave top billing to Novelty’s supposed lawbreaking:
“First, for more than three and a half years, Respondent
disregarded a DEA letter specifically warning it that its use of
150–180 self-storage units . . . violated Federal law.” 73 Fed.
Reg. at 52703. In fact, not only did the DA lean on this
finding for purposes of 21 U.S.C. § 823(h)(2) (compliance
with law), she double-dipped and used again it for § 823(h)(4)
(past experience). See id. at 52702. But she was wrong; it
was not Novelty that bent the law.

Section 822(e) says a “separate registration shall be
required at each principal place of business or professional
practice where the applicant manufactures, distributes, or
dispenses controlled substances or list I chemicals.” 21
U.S.C. § 822(e). Novelty argued its scores of run-of-the-mill
self-storage units were not “principal places of business,” and
 7
thus did not need to be registered. The DA rejected this
position, determining that federal law “requires that a
separate registration be obtained at each location at which
List I chemicals are distributed.” 73 Fed. Reg. at 52700.

Hogwash. Even with the winds of deference at its back,
this interpretation of § 822(e) is a nonstarter. It reads the
word “principal” out of a statute whose plain language
requires two things: (1) “distribut[ion]” from (2) a “principal
place of business.” The question is simple: if all locations
where distribution occurs must be registered, why would
Congress specifically refer to “each principal place of
business”? To make the word “principal” disappear, the DA
resorted to magic tricks. She determined each “location”
where “List I chemicals are . . . distributed from” is a
“principal” one because it “plays a ‘consequential’ part in the
registrant’s activity of distributing.” Id. at 52701 (quoting
WEBSTER’S THIRD NEW INT’L DICTIONARY 1802 (1976)).4
Hence “principal place of business where a registrant
distributes list I chemicals” = “consequential” place of
business = “each location where list I chemicals are
distributed.” (abracadabra omitted). But after the smoke
fades away, the DA’s approach to the word “principal” causes
§ 822(e) to read like this: “A separate registration shall be
required at each location where list I chemicals are distributed
where the applicant distributes list I chemicals.” That is a
silly way to read a statute. E.g., Reiter v. Sonotone Corp., 442

4
The relevant definition of “principal” is: “1: most important,
consequential, or influential: relegating comparable matters, items,
or individuals to secondary rank.” WEBSTER’S THIRD NEW INT’L
DICTIONARY 1802 (1976) (emphasis added). Though the DA
elected to not even quote it, much less consider it, 73 Fed. Reg. at
52701, the word “most” is particularly meaningful.
 8
U.S. 330, 339 (1979) (“In construing a statute we are obliged
to give effect, if possible, to every word Congress used.”).

To be sure, § 822(e) contains ambiguity, as it invokes a
common term of art in a way that is not consistent with its
ordinary usage. “Principal place of business” is most
prominently used in 28 U.S.C. § 1332(c), relating to corporate
diversity, and it is settled that for diversity jurisdiction there
can only be one “principal place of business.” E.g., Capitol
Indem. Corp. v. Russellville Steel Co., 367 F.3d 831, 835 (8th
Cir. 2004). Section 822(e), by use of the word “each”,
contemplates multiple such places. But just because a statute
is ambiguous does not mean any interpretation of it is
reasonable. See, e.g., Int’l Alliance of Theatrical and Stage
Employees v. NLRB, 334 F.3d 27, 34–35 (D.C. Cir. 2003).
Though the language here cannot mean the exact same thing
as in § 1332(c), it is unreasonable to find that any place where
distribution occurs is per se “principal.” No matter how
defined, “principal place of business” surely means more than
that. If every place is “principal,” no place is.

The DA mused, however, that any other reading than hers
“would clearly frustrate the Congressional purpose,” which
was to prevent “diversion by requiring that those persons who
propose to engage in the legitimate distribution of . . . listed
chemicals apply for a registration, notify this Agency of the
proposed location of their activity, and submit the facility for
inspection . . . to ensure that it has adequate security controls
and procedures.” 73 Fed. Reg. at 52701. For this proposition,
she cited 21 U.S.C. 822(f), which reads: “The Attorney
General is authorized to inspect the establishment of a
registrant or applicant for registration in accordance with the
rules and regulations promulgated by him.” This is not at all
sufficient to support her construction of § 822(e) as
“establishment”—used in § 822(f)—is not the same as
 9
“principal place of business.” The surest Rosetta Stone into
“Congressional purpose” is the language Congress actually
uses, but the DA’s construction of § 822(e) effectively deletes
Congress’s word “principal” from the U.S. Code.

The DA then explained that accepting Novelty’s view
“would also create a perverse incentive” for registrants to
“keep adding warehouses or storage facilities so that it could
eventually claim that its warehouses were no longer principal
places of business and thus were not subject to the registration
requirement.” 73 Fed. Reg. at 52701. Perhaps, but if records
are kept at these hypothetical warehouses, if employees work
there full-time, if they are listed in the phone book, if drugs
are kept there for an indefinite duration, and so on, then there
may be an argument that these warehouses are “principal
places of business.” The DA did not even attempt to offer
such a nuanced test. Instead, she found all storage units must,
as a matter of law, be registered. How is a shed, locked with
a padlock, a “principal place of business” for a company like
Novelty with hundreds of employees and thousands of
customers across the nation?5

What is most aggravating is that reading the statute
correctly would not create the dire dichotomy painted by the
DA, one in which any other view but hers would “render the
Act a nullity.” Id. The DEA still has recourse to the first
factor under 21 U.S.C. § 823(h), relating to the risk of
diversion. If a registrant’s distribution practices are not safe,
that problem can be addressed by the statutory scheme as
written. There is no need to mangle the text to make unsafe

5
As the ALJ found, nearly all Novelty’s sales were to “major retail
convenience store chain customers”—“‘billion dollar companies’”
with “full-time staff” and “legal counsel, to ensure compliance with
state and federal regulations.” ALJ Ruling, slip op at 6.
 10
distribution an independent violation of federal law.
However, instead of simply relying on that first § 823(h)
factor (perhaps because there is almost zero evidence of
actual diversion), the DA adopted an atextual claim of
lawbreaking to bolster the argument in favor of revocation.

III.
The DA also botched her diversion analysis. Let’s be
clear: there is remarkably little evidence of actual diversion in
this record. The best the DA can muster is an event from
2002 when “twenty-two [sixty-count bottles of an ephedrine-
based product] were found at an illicit methamphetamine
laboratory in Thompson, Connecticut.” 73 Fed. Reg. at
52694. Novelty, however, did not produce those bottles, and
it is uncertain whether the company even distributed them.
See ALJ Ruling, slip op. at 74. The DEA, it seems, also never
formally warned Novelty about the diversion until it took
action against the company in 2008. 73 Fed. Reg. at 52702.
But even given the benefit of the doubt, the DA can only
point to one instance of diversion, despite Novelty’s hundreds
of millions of doses sold.6 See, e.g., Pet’r’s Br. at 15 (Novelty
has sold between three and five hundred million doses).

Because proof of actual diversion was paltry, revocation
rested on Novelty’s theoretically ineffective controls against
diversion. There is much in the DA’s reasoning that I
sympathize with; I too wonder whether it is prudent to keep

6
DEA investigators also “visited a number of [Novelty’s]
customers,” and, after looking at the “logbooks” used to record
drug sales, found five stores with questionable patterns (though not
all sales were illegal, they nonetheless were “suspicio[us]”). 73
Fed. Reg. at 52694–95. Novelty, however, “cannot review the
logbooks.” Id. at 52699 n.43. The DEA, it seems, did not
investigate further to see if these drugs were being illicitly used.
 11
drugs in storage sheds or on trucks for over a week.7
Likewise, though her concern about Novelty’s recordkeeping
was overstated, I agree it is important to keep complete
records, and if Novelty had concerns about a particular store,
it should have been especially vigilant. At the same time, as
the ALJ found, Novelty took “a proactive role in ensuring its
customers are self-certified,” made sure its customers used
“lockable, plexiglass display cases for the display and sale of”
drugs, and “when the DEA brought the recordkeeping errors”
to Novelty’s attention, Novelty “identified a reasonable
reason for the errors, and acted to correct those errors by
upgrading its computer system.” ALJ Ruling, slip op. at 98–
99. Novelty also credibly offered to modify its distribution
network to address safety concerns. Id. at 100–01. (The DA
wrongfully rejected the ALJ’s credibility finding based on her
erroneous belief that the storage units were illegal, 73 Fed.
Reg. at 52703). Given the large number of transactions,
moreover, some mistakes will happen; what human endeavor
is done perfectly millions of times in a row? Nonetheless,
there is some reason to conclude Novelty’s protections against
diversion—even if factually “effective,” as the statute
requires, 21 U.S.C. § 823(h)(1)—were imperfect, though such
oversights should be addressed by compliance conditions far
short of the corporate death penalty that is revocation.

But instead of just relying on this theoretical diversion,
the DA went further and reasoned Novelty’s own statistics
“showing its sale of [drugs] in the three months prior to the

7
I am confused, however, about the logic in the Raber Letter.
Registrants are allowed to keep drugs in the truck “overnight” for
“long delivery route[s],” provided the delivery is for “pre-placed
customer specific orders for List I chemical products.” Raber
Letter. But if the concern is “a thief can steal the vehicle’s cargo,”
73 Fed. Reg. at 52698, then why does it matter if the drugs are for
“pre-placed customer specific orders” or for on-site orders?
 12
issuance of the suspension order” demonstrated that Novelty
did not maintain effective controls against diversion. 73 Fed.
Reg. at 52699. The support for that claim is embarrassingly
weak. Despite the almost self-evident fact that not all
convenience stores are created equal (for instance, the
AM/PM next to a major freeway may be a lot busier than
Ma’s Gas-N-Go in Middle-of-Nowhere Alabama), the DA
conjured a very blunt instrument to derive legitimate market
demand: Novelty’s average sales data. Instead of relying on a
multivariate statistical study that could have accounted for
factors affecting sales at individual stores, she operated on an
unstated assumption that every store in the country should
request an amount close to the average, meaning any request
above the average suggests a likelihood of diversion. But
what a store should request is based on legitimate, non-
diversionary demand for the product at its location. Just as a
store selling below the national average might still show a risk
of diversion if it requests many more drugs than non-
diversionary demand would warrant at its location, a store
selling above the average does not show a diversion risk if it
requests the amount which would be expected at its location.
The DA’s approach ignored this basic and obvious point.

Similarly, as Novelty’s expert observed, “if an average
legitimate sales figure was derived from data from both high-
sales revenues stores and low-sales revenues stores, but then
that average legitimate sales figure was used to predict sales
in only the high-sales revenues stores, the prediction would
suffer from aggregation bias.” Instead of accepting this
unassailable logic, the DA said “proof that a distributor is
selling quantities in excess of the national monthly average of
sales of [drugs] by convenience stores would be highly
probative of the distributor’s lack of effective controls against
diversion.” 73 Fed. Reg. at 52700. This tells us very little
 13
about anything; after all, 50% of all convenience stores should
be expected to have sales greater than the average.

The DA then said “[m]ore specifically, a registrant
cannot ignore evidence that some of its customers are
purchasing quantities that greatly exceed what its typical
customer buys from it.” Id. This statement, of course, seems
a little more persuasive (but only a little); if one assumes all
convenience stores are similar, and if a store is receiving
many more drugs than others, that should raise a red flag—
but, of course, not all stores are similar. The DA concluded
by stating Novelty “offered no explanation that was specific
to any store for why it was selling in such quantities.” Id.
But the burden of proof is on the government before it can
take away someone’s livelihood, see 21 C.F.R. § 1309.54(b),
and even if it were otherwise, this is an unfair obligation to
spring on Novelty as the company was responding to the
statistics of DEA’s so-called expert—statistics that even the
DA does not defend, 73 Fed. Reg. at 52693–94. In any event,
there is no basis to shift the burden to Novelty because we
should expect statistical outliers. See id. at 52700 n.45. Of
the thousands of stores serviced by Novelty across the country
in countless different climes and circumstances, is it really
unthinkable that a small subset of them will be much busier
than the others? This statistical inevitability is not something
that a company should have to explain, nor should the DEA
be able to escape its burden of proof so effortlessly.8

8
Novelty, moreover, showed no reluctance to police its own
operations. When Store # BPM55, its largest customer, purchased
noticeably large quantities—although not more than federal law
allowed—Novelty prohibited the sale of 100-count ephedrine to
that store. Perhaps Novelty could have done more, but if a single
debatable judgment call about what extralegal steps must be taken
to avoid diversion can cost a company its registration, then all the
world’s a cage, with every registrant just waiting to be culled.
 14

The DA’s problems with large numbers do not end there.
Ignoring that no complex system can be 100% foolproof, the
DA applied an unreasonable zero-tolerance standard that
Congress surely did not intend.9 She found, for example, that
Novelty “violated its case limit policy [i.e., its own policy that
it would only sell one 24-count package to a store per visit]
some 85 times” during a six-month period, 73 Fed. Reg. at
52699. That sounds pretty bad, but the DA omitted the
denominator; according to the record, the number of
transactions during that year was “approximately 100,000 to
120,000.” The error rate thus may have been less than .2%
(no one knows for sure the exact rate because the DA did not
even attempt to discern it using any methodology whatsoever,
Judge Tatel’s or otherwise, see Tatel Op. at 4–5). Despite the
burden resting with the government, the DA did not explain
how much risk is too much, nor did she give any context to
those “85” violations (a number, by the way, that Novelty
says is at least forty too high). All we know is sales staff may
have mistakenly sold extra packages of product to
convenience stores—not to meth makers, mind you—less
than two times per thousand transactions. Yet somehow
Novelty’s “failure to enforce its own policies provides reason
alone to conclude that it cannot be trusted to adhere to
compliance conditions”? 73 Fed. Reg. at 52704.

IV.
In revoking the registration, the DA also stressed
Novelty’s attempt to find a new way of doing business once
its registration was suspended. Though conceding Novelty
9
Just as “safe” does not mean “risk-free,” Industrial Union Dep’t v.
American Petroleum Inst., 448 U.S. 607, 642 (1980) (Stevens, J.,
plurality), “maintenance by the applicant of effective controls
against diversion” as used in 21 U.S.C. § 823(h) cannot mean
perfect controls, an impossible standard.
 15
did nothing illegal, she nonetheless found Novelty did more
than “merely think[] about a legal option or seek[] legal
advice about the scheme,” but also “affirmatively sought out
one of its suppliers and attempted to induce it to enter the
scheme only to be rebuffed by the supplier.” 73 Fed. Reg. at
52703. The DA concluded “[i]t would fundamentally
undermine the [Controlled Substance Act’s] purpose of
protecting against diversion to allow an entity whose
registration has been revoked to subsequently engage in the
same or related activities as an agent.” Id.

Here are the real facts. In January 2008, the DEA
suspended Novelty’s registration. After receiving the
suspension order, Novelty sent a letter, which I quote,
explaining its “plan to get back in the ephedrine business” to
one of its suppliers. Letter from Novelty, Inc. (under seal).
Under the “plan”—which was “still [being] finaliz[ed] . . .
with the DEA to insure everything can work smoothly and we
do not have any issues” and was awaiting “approval” before
any sales would occur—Novelty’s sales force would “tak[e]
orders” which would be sent “to a third party logistics
company for shipping and handling” to “fill the order . . . via
UPS or similar carrier.” Id. The “costs [to the owner of the
store would] remain the same,” and “[a]ll invoices [would be]
from Novelty.” Id. The owner of the store would “have the
choice of stocking the [drug] cabinet or holding it for
[Novelty’s] sales person.” Id. The effect would be to
“basically keep[] the business the same,” except with “a UPS
box.” Id. The supplier declined to participate, but a Novelty
executive testified during the administrative process that
Novelty was “still continuing to explore” this idea.

The DA’s reading of the letter is unfair. Making tentative
plans—plans contingent upon DEA authorization no less—
suggests nothing nefarious. Novelty, moreover, planned on
 16
substantially changing its business, including no longer using
its own distribution network (i.e., the very network at issue in
this case). Under 21 U.S.C. § 822(c)(1), a sales agent need
not be registered if he “is acting in the usual course of his
business or employment,” which, under this completely new
business model, seemingly would include Novelty. Granted,
Novelty said its plan would “basically keep[] the business the
same,” but, in context, the only plausible reading of the
sentence is the business would remain the same for Novelty’s
customers, not for Novelty itself. How could the business be
unchanged for Novelty which would not longer do the
shipping and handling of these drugs?

Neither of my colleagues reaches this issue (though both
hint they might agree with my analysis). This is a mistake.
The DA employed a totality of the circumstances test, but the
only evidence she relied upon in assessing 21 U.S.C.
§ 823(h)(5)—the statute’s catch-all category—was Novelty’s
letter. See 73 Fed. Reg. at 52702–03. Because the DA erred
as to this factor, and because we do not know how much
weight she gave it in her analysis,10 at a minimum this court
should remand for her to reweigh the evidence. See, e.g.,
PDK Labs., Inc. v. DEA, 362 F.3d 786, 799 (D.C. Cir. 2004)
(“If the agency’s mistake did not affect the outcome, if it did

10
In context, I charitably assume the DA’s otherwise staggering
suggestion that Novelty’s “failure to enforce its own policies
provides reason alone to conclude that it cannot be trusted to adhere
to compliance conditions” was not intended to be taken literally,
particularly as it was not the first reason given for revocation, 73
Fed. Reg. at 52703–04, and if Novelty’s failure to self-police were
intended to be sufficient on its own, then there was no reason for
the rest of the DA’s lengthy opinion. But if the statement was not
hyperbole, then we obviously should vacate this decision because,
as explained, the DA entirely failed to consider the relevant
denominator. What can be more arbitrary and capricious than that?
 17
not prejudice the petitioner, it would be senseless to vacate
and remand for reconsideration. But in this case we cannot
say that the Deputy Administrator’s error was of that sort . . . .
[as he] stated that it was ‘the totality of circumstances’ that
led him to sustain the suspension orders.”).

***
I close with a few words on how easily the administrative
state can slip its leash. A familiar argument for enhanced
administrative authority (and hence diminished judicial
review) is the need for “flexibility,” as old-fashioned courts
are ill-suited to deal with the complexities of the modern
world. E.g., Cass R. Sunstein, Law and Administration After
Chevron, 90 COLUM. L. REV. 2071, 2079 (1990) (citing, inter
alia, J. LANDIS, THE ADMINISTRATIVE PROCESS 6–12 (1938)).
That may be true. But the flipside of flexibility is certainty,
consistency, evenhandedness, and predictability—those Rule
of Law values that mark a free society. E.g., THOMAS PAINE,
COMMON SENSE 31–32 (Dover Thrift ed., 1997) (1776)
(“[L]et a crown be placed thereon, by which the world may
know, that so far as we approve of monarchy, that in America
THE LAW IS KING. For as in absolute governments the king is
law, so in free countries the law ought to be king; and there
ought to be no other.”). If my splintered-on-seemingly-all-
points-but-outcome colleagues are right that despite her many
errors, the DA’s decision to revoke Novelty’s registration still
must be upheld, then I fear we have traded away far too much
law in our bargain for elasticity.

But in the end, because of this “flexibility,” it is probably
for the best that the DA’s decision is upheld today. If the
registration was not revoked this time, it surely would have
happened next time. On this record, I have no confidence that
Novelty would ever receive a fair shake from the DEA.
Indeed, if we were reviewing a district court that acted like
 18
this, I would not remand to that court. But the DEA is the
only game in town for drug registrants, and in deciding
whether to revoke a registration the DA balances a number of
open-ended factors with no requirement “to make findings as
to all of the factors,” and with power to “give each factor the
weight [s]he deems appropriate.” Morall v. DEA, 412 F.3d
165, 173–74 (D.C. Cir. 2005). Add Chevron deference to that
mush and we have a very powerful Deputy Administrator. In
other words, if in the future the DA were to find any errors in
Novelty’s records or operations (and, given that Novelty sells
millions of doses a year, it is inevitable that she would), then
she could revoke the registration by claiming a pattern of
dangerous recordkeeping and distribution errors, knowing full
well that Novelty would face an uphill scramble to persuade a
court that she has abused her overflowing discretion. Given
the law of large numbers, such a pattern could be found in any
registrant’s records, meaning all registrants live by the grace
of the Deputy Administrator.

No, old-fashioned law will not save Novelty and the jobs
of its employees. It does not matter that no Novelty executive
has ever been convicted of a crime. It does not matter that
notwithstanding Novelty’s millions of sales, the best evidence
the DA can point to of diversion is one—one!—instance from
over six years ago. It does not matter that the DEA inspected
Novelty’s records for years and never peeped about a problem
before deciding to bring down the full weight of the Executive
Branch on Novelty’s head. It also is irrelevant that Novelty
has credibly offered to overhaul its internal processes to
comply with the DA’s whims. When an agency has gone
rogue, and when judicial review is gutted, the only thing left
is the Law of the Jungle, the weak versus the strong. And in
this war of all against all, who can withstand the might of the
federal government?