United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 10, 2006 Decided February 24, 2006
No. 04-1432
PDK LABORATORIES INC.,
PETITIONER
v.
UNITED STATES DRUG ENFORCEMENT ADMINISTRATION,
RESPONDENT
On Petition for Review of an Order of the
United States Drug Enforcement Agency
Saul Pilchen argued the cause for petitioner. With him on
the briefs were Joseph L. Barloon and David E. Carney.
Teresa A. Wallbaum, Appellate Counsel, U.S. Department
of Justice, argued the cause for respondent. With her on the
brief were Kenneth L. Wainstein, U.S. Attorney, and Stephen A.
Sola, Trial Attorney.
Before: TATEL and GARLAND, Circuit Judges, and
EDWARDS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge TATEL.
2
TATEL, Circuit Judge: Pursuant to the Chemical Diversion
and Trafficking Act of 1988, the Drug Enforcement Agency
(DEA) “may order the suspension of any importation or
exportation of a listed chemical . . . on the ground that the
chemical may be diverted to the clandestine manufacture
of a controlled substance.” Petitioner, a pharmaceutical
manufacturer, does not dispute that some of its products contain
ephedrine and pseudoephedrine, both “listed chemicals” and
both critical in the manufacture of methamphetamine, a
“controlled substance.” Nor does petitioner dispute that its
ephedrine- and pseudoephedrine-containing products have been
and will continue to be “diverted” to illicit methamphetamine
labs. Instead, petitioner argues that when DEA suspends
shipments of listed chemicals—in this case, the agency
suspended two such shipments—it may act only on the basis of
evidence that the raw listed chemical, not the finished product
containing the listed chemical, “may be diverted.”
Alternatively, petitioner argues that even if DEA may act on the
basis of evidence that the finished product may be diverted, the
suspension orders in this case were unsupported by substantial
evidence. We disagree on both counts and deny the petition for
review. DEA, acting on the basis of its law enforcement
experience and expertise, reasonably interpreted the phrase
“listed chemical” to include ephedrine and pseudoephedrine
contained in finished drug products. Moreover, a series of
letters from DEA warning petitioner that thousands of bottles of
its products had been found in some 140 methamphetamine labs
in at least eighteen states provides more than enough evidence
to support the suspension orders.
I.
A powerful and highly addictive synthetic stimulant,
methamphetamine is a growing problem for law-enforcement
and public-health officials across the country, particularly in
western states. “Chronic methamphetamine abuse can lead to
3
psychotic behavior including intense paranoia, visual and
auditory hallucinations, and out-of-control rages that can result
in violent episodes.” Office of Nat’l Drug Control Policy,
Methamphetamine Fact Sheet 1 (2003). Rooting out the illegal
manufacture and distribution of the drug has proven especially
difficult because it “can be made in a portable cooler with
ingredients bought at the corner drugstore.” Timothy Egan,
Meth Building Its Hell’s Kitchen in Rural America, N.Y. Times,
Feb. 6, 2002, at A14.
Congress’s first major effort to arm the federal government
with adequate authority to stamp out homemade
methamphetamine production came in the Chemical Diversion
and Trafficking Act of 1988 (CDTA), Pub. L. No. 100-690, tit.
VI, subtit. A, 102 Stat. 4312. To discourage the diversion of
“listed chemicals”—including two critical methamphetamine
ingredients, ephedrine and pseudoephedrine, id. § 6054(3)
(codified as amended at 21 U.S.C. § 802(34)(C), (K))—the
CDTA requires companies to report transactions in such
chemicals to DEA, see id. § 6052(a) (codified at 21 U.S.C.
§ 830(b)), and imposes criminal liability on individuals who
import a listed chemical “knowing, or having reasonable cause
to believe, that [it] will be used to manufacture a controlled
substance,” see id. § 6053(c) (codified as amended at 21 U.S.C.
§ 960(d)(2)). Using language central to the issue before us, one
section of the Act, now codified at 21 U.S.C. section 971(c)(1),
also provides that DEA “may order the suspension of any
importation or exportation of a listed chemical . . . on the ground
that the chemical may be diverted to the clandestine
manufacture of a controlled substance.” Id. § 6053(a) (codified
as amended at 21 U.S.C. § 971(c)(1)).
As the CDTA tightened the screws on access to raw listed
chemicals, illicit methamphetamine manufacturers shifted to
extracting ephedrine and pseudoephedrine from common over-
4
the-counter medications, including Sudafed and some types of
Primatene. Since the two listed chemicals are present in such
medications in a chemically unchanged form, the extraction
process is relatively simple. Congress sought to counter this
trend with the Domestic Chemical Diversion Control Act of
1993, which (for the first time) required companies to report all
transactions in FDA-approved drug products containing listed
chemicals. Pub. L. No. 103-200 § 2(a)(6)(C), 107 Stat. 2333,
2333-34 (codified as amended at 21 U.S.C. § 802(39)(A)(iv)).
Still dissatisfied, Congress enacted the Methamphetamine Anti-
Proliferation Act of 2000, Pub. L. No. 106-310, tit. XXXVI, 114
Stat. 1227, which allocated significant funding to combating
methamphetamine production, id. §§ 3623(c), 3624(b)(1),
3625(c), and imposed stiffer penalties on the operators of
methamphetamine laboratories, id. § 3612.
Petitioner PDK Laboratories, Inc., a large manufacturer of
generic drugs containing ephedrine and pseudoephedrine, has
long known that its products have been diverted to clandestine
methamphetamine labs. In March 1998, DEA sent PDK a
“warning letter” documenting the appearance of the company’s
products at fifty-one methamphetamine labs in various states
over an eight-month period. Two years later, another DEA
warning letter informed PDK that its products had been found
at forty-nine additional methamphetamine labs. And over the
subsequent eleven months, DEA sent twenty-one additional
warning letters informing the company that its ephedrine- and
pseudoephedrine-containing products were still showing up at
illicit drug labs across the country. In total, DEA alerted PDK
to the diversion of “thousands of bottles of its previously
imported [listed] chemicals to approximately 140 illicit
methamphetamine laboratory-related sites located in at least 18
states.” See Indace, Inc., Suspension of Shipments, 69 Fed. Reg.
67,951, 67,959 (Nov. 22, 2004).
5
By January 2001, DEA had had enough. Relying on the
string of warning letters, as well as on PDK’s failure to report
several “regulated transactions,” DEA flexed its section
971(c)(1) authority and issued suspension orders to two foreign
manufacturers preparing to ship 6,000 kilograms of raw
ephedrine to PDK. PDK challenged the suspension orders, and
an administrative law judge (ALJ), siding with the company,
concluded that the orders lacked adequate legal and factual
support. In her analysis, the ALJ construed DEA’s authority to
suspend importations of “listed chemicals” to extend only to
cases in which the agency has evidence that bulk listed
chemicals like raw ephedrine—and not finished over-the-
counter drug products that contain listed chemicals—may be
diverted to clandestine drug manufacturers.
On appeal, DEA’s Deputy Administrator disagreed with the
ALJ. Indace, Inc., Suspension of Shipments, 67 Fed. Reg.
77,805 (Dec. 19, 2002). Reading section 971(c)(1) to permit
suspension if DEA finds that finished drug products containing
listed chemicals “may be diverted,” the Deputy Administrator
held that DEA could properly rely on the diversion of PDK
products to justify suspending the ephedrine shipments. Id. at
77,806. Considering the “totality of the circumstances,”
including both the warning letters and the reporting violations,
the Deputy Administrator concluded that substantial evidence
supported the suspension orders. Id. at 77,807.
PDK filed a petition for review in this court. In considering
this first appeal, we saw ambiguity as to “whether, as the
suspension orders assume, [the phrase] ‘the chemical may be
diverted’ [from section 971(c)(1)] includes the prospect that
PDK’s ephedrine-containing pills in retail stores will be sold to,
or shoplifted by, people who then use the pills to produce
methamphetamine.” PDK Labs., Inc. v. DEA, 362 F.3d 786, 794
(D.C. Cir. 2004) (“PDK I”). Reasoning that the Deputy
6
Administrator had therefore improperly concluded that section
971(c)(1) compelled a result that it did not in fact compel, we
vacated and remanded to DEA to “fill in the gap” by “bring[ing]
its experience and expertise to bear in light of competing
interests at stake.” Id. at 797-98. Although then-Judge Roberts
disagreed on this point, he joined in the majority’s alternative
reason for vacating the Deputy Administrator’s order, id. at 799
(Roberts, J., concurring in part and concurring in the judgment),
namely, that it failed to address DEA’s own relevant precedent
in finding that PDK violated the CDTA’s reporting
requirements. See id. at 798-99 (providing the majority’s
reasoning).
On remand, a new Deputy Administrator explained that, in
her view, “the totality of [Congress’s] progressive enactments”
reflected its “intent to provide DEA the regulatory means to
monitor the domestic production, manufacture and distribution
of [listed] chemicals and prevent their illicit use in
manufacturing methamphetamine.” 69 Fed. Reg. at 67,955.
Therefore, while acknowledging that these chemicals are often
found in products that have “legitimate therapeutic uses,” id. at
67,954, the Deputy Administrator held that section 971(c)(1)
permits suspension of imports of listed chemicals based on
evidence that finished drug products containing such chemicals
“may be diverted,” id. at 67,957. Because “[s]ection 971(c)(1)
is considered by DEA to be a significant component of the
regulatory arsenal given it by Congress to combat this immense
and growing problem,” and because “using precursor
chemicals[] obtained by theft or purchase of listed chemical
products” poses an acute law-enforcement challenge, id. at
67,956, the Deputy Administrator concluded that a narrow
interpretation of the statute would unnecessarily hamper the
agency’s efforts to prevent the diversion of listed chemicals. Id.
at 67,595-96.
7
Defending her interpretation of section 971(c)(1), the
Deputy Administrator asserted that her approach comported
with the statute’s text, reasoning that “[i]f Congress wanted to
make an express distinction between a bulk listed chemical and
a finished product . . . it could have done so.” Id. at 67,955. She
further explained that “listed chemical . . . should be construed
broadly in light of that term’s use in other parts of the same
statute . . . enacted by Congress in 1988,” id. at 67,954, and
pointed out that the Ninth Circuit had already interpreted “listed
chemical” as used in one of the CDTA’s criminal provisions to
cover the ephedrine and pseudoephedrine in finished drug
products, id. (citing United States v. Daas, 198 F.3d 1167, 1175
(9th Cir. 1999)). The Deputy Administrator also believed that
a narrow interpretation would “create an arbitrary dual
standard,” for if DEA could suspend shipments only if raw
ephedrine were at risk of diversion, then even when DEA “had
facts to show that an importer had reasonable cause to believe
that a listed chemical was to be imported, tableted, and
distributed to a clandestine laboratory,” it could do nothing to
suspend the shipment. Id. at 67,955. Such a result, she
concluded, “is certainly inconsistent with the criminal penalty
provisions of the law involving imports,” which would allow for
the imposition of lengthy prison terms on the importer. Id.
Turning to the second issue—whether substantial evidence
supported the suspension orders—the Deputy Administrator
again looked to the totality of the circumstances. Examining
three categories of evidence—the warning letters and two types
of reporting violations—she concluded that the orders were
adequately supported, emphasizing that “the evidence of
diversion reflected in the series of Warning Letters provides a
sufficient independent basis” for sustaining the suspension
orders. Id. at 67,961 n.9. In reaching this conclusion, the
Deputy Administrator rejected PDK’s argument that DEA’s
failure to compare the rate of diversion of other companies’
8
products to PDK’s diversion rate rendered the suspension orders
invalid. She explained:
DEA recognizes that it and other law enforcement
agencies are aware of and able to take action against
only a small number of the total clandestine
methamphetamine laboratories and dump sites in this
country. Accordingly, the specific universe of PDK
product diverted, vis a vis, all other manufacturers’
products, is a number which cannot be established with
any specificity. . . .
Given the quantities and diverse locations of PDK
listed chemical products discovered at illicit sites
reflected in the Warning Letters, DEA is able to draw a
reasonable inference regarding the likelihood that the
instant shipments may be diverted and to exercise its
discretion as to the need to prohibit their import.
Id. at 67,959. The Deputy Administrator also pointed out that
she had considered warning letters to be adequate grounds for
taking adverse action against other drug manufacturers, and that
in one case she had sustained a suspension order based on fewer
warning letters than DEA had sent to PDK. Id.
Before addressing the two types of reporting violations
(neither of which is relevant to our disposition of this case), the
Deputy Administrator noted “[a]s a collateral matter” that
Michael Lulkin, PDK’s former in-house counsel “responsible
for implementing PDK’s operating procedures for responding to
DEA Warning Letters,” had been convicted of four counts of
felony fraud, one of which involved PDK. Id. Yet after his
conviction, Lulkin remained at PDK, “where his duties include
overseeing the company’s regulatory compliance.” Id. The
Deputy Administrator also observed that PDK’s former
9
president, Michael Krasnoff, had been convicted of similar
charges, yet “continued to serve as a consultant to the
company,” id.—despite his statement that “it’s none of my
business if someone gets high off of this stuff,” id. at 67,960 n.7.
“Neither of these personnel decisions,” she concluded, “but
particularly the retention of Mr. Lulkin as a key overseer of
regulatory matters . . . , generates confidence on the part of the
Deputy Administrator that PDK is sufficiently committed to
complying with the myriad of regulatory requirements designed
to prevent diversion of listed chemicals.” Id. at 67,959.
PDK again petitions for review, challenging the Deputy
Administrator’s interpretation of section 971(c)(1) and arguing
that insufficient evidence supports the suspension orders. We
address each contention in turn.
II.
When considering the legitimacy of an agency’s
interpretation of a statute it is charged with enforcing, we first
ask “whether Congress has directly spoken to the precise
question at issue.” Chevron U.S.A. Inc. v. Natural Res. Def.
Council, Inc., 467 U.S. 837, 842-43 (1984). In this case, PDK I
has already answered this question in the negative: it concluded
that section 971(c)(1) is ambiguous as to whether DEA can issue
suspension orders based on the diversion of finished drug
products that contain listed chemicals. See PDK I, 362 F.3d at
797 (“we do not agree that the meaning of § 971(c)(1) is as plain
as DEA says it is”). This leaves us with the task of resolving at
Chevron’s second step whether the Deputy Administrator’s
resolution of that ambiguity “is based on a permissible
construction of the statute,” Chevron, 467 U.S. at 843, keeping
in mind that “[a] court may not substitute its own construction
of a statutory provision for a reasonable interpretation made by
the administrator of an agency,” id. at 844.
10
Even at Chevron’s second step, we begin with the statute’s
language. Abbott Labs. v. Young, 920 F.2d 984, 988 (D.C. Cir.
1990) (“The ‘reasonableness’ of an agency’s construction
depends on the construction’s ‘fit’ with the statutory language
as well as its conformity to statutory purposes.”). Recall that
section 971(c)(1) provides that DEA “may order the suspension
of any importation or exportation of a listed chemical . . . on the
ground that the chemical may be diverted to the clandestine
manufacture of a controlled substance.” 21 U.S.C. § 971(c)(1).
According to PDK, section 971(c)(1) does not “vest DEA with
the authority to suspend an import based on misuse of a finished
product.” Pet’r’s Br. 23. But nothing in the statute’s spare
language supports that contention. Section 971(c)(1) simply
authorizes DEA to suspend an importation when it finds that a
“listed chemical” may be diverted. While it’s true that under the
Deputy Administrator’s interpretation, the listed chemical
subject to diversion may be part of a finished drug, section
971(c)(1) in no way precludes her view that a listed chemical
remains a listed chemical when, without any change in its
chemical structure, it is incorporated into pills or tablets. As
then-Judge Roberts explained in his PDK I separate opinion, the
Deputy Administrator’s
interpretation comports with common sense. If a
methamphetamine manufacturer steals, for the purpose
of making methamphetamine, a bottle containing pure
ephedrine, or pure ephedrine dissolved in water, or a
bottle containing 50 ephedrine pills and 50 guaifenesin
pills [guaifenesin is another compound present in some
of PDK’s products], we would not hear an argument that
he did not divert a listed chemical because he also
diverted a bottle, some water, or some guaifenesin. The
presence of packaging materials or other extraneous
items does not vitiate the existence of the listed
chemical. Here, a bottle of PDK Mini Two-Way Action
11
contains pills each consisting of 25 mg of ephedrine and
200 mg of guaifenesin and binders. For purposes of
Section 971(c), the decongestant and the binders are
extraneous materials, no more relevant to the analysis
than the bottles and boxes in which the pills are
packaged.
PDK I, 362 F.3d at 801 (Roberts, J., concurring in part and
concurring in the judgment).
Absent anything in section 971(c)(1)’s language suggesting
that the Deputy Administrator’s interpretation is impermissible,
PDK resorts to the assertion that Congress, committed to
ensuring that popular cold medications remain readily available,
could never have intended to give DEA authority to “shutter the
industry.” Although citing nothing in the CDTA’s legislative
history to support this contention, PDK explains that:
Given that some misuse [of ephedrine drug products]
concededly is endemic to the industry, the Deputy
Administrator’s interpretation . . . would allow DEA to
shutter the entire [listed chemicals] industry by using
Section 971 to suspend imports to any and every
manufacturer whose finished goods are misused in some
amount—that is, every manufacturer in the United
States.
Pet’r’s Br. 24-25. Invoking PDK I’s statement that “no one
doubts that Congress did not intend to ban, or to give DEA the
authority to ban, all sales of ephedrine-containing drugs in retail
stores,” PDK I, 362 F.3d at 797 (emphasis added), PDK
contends that the Deputy Administrator’s interpretation must
therefore be unreasonable. We disagree.
12
For starters, the Deputy Administrator has never suggested
that section 971(c)(1) permits DEA to ban drug sales in retail
stores. Nor has she claimed authority “to suspend imports to
any and every manufacturer . . . in the United States.” She has
concluded only that in deciding whether to suspend a particular
shipment of raw ephedrine, DEA may consider evidence that
ephedrine-containing drug products are being diverted. If, as
PDK asserts, DEA can readily amass evidence of diversion
sufficient to warrant suspending any ephedrine shipment, that
attests to the rampant nature of the diversion problem and—
critically for our purposes—to section 971(c)(1)’s breadth, not
to whether the Deputy Administrator’s interpretation is
unreasonable. As we have explained, “the Supreme Court has
consistently instructed that statutes written in broad, sweeping
language should be given broad, sweeping application.”
Consumer Elecs. Ass’n v. FCC, 347 F.3d 291, 298 (D.C. Cir.
2003).
Even under PDK’s narrow interpretation, moreover, DEA
would still have authority, at least in principle, to “shutter the
industry.” After all, there is a risk that every shipment of raw
ephedrine could be diverted before delivery, just as there is a
risk that finished drug products containing ephedrine could be
diverted after delivery. If DEA could amass substantial
evidence to support the inference that all raw ephedrine
shipments “may be diverted”—a big if, of course—then no one
doubts it would have the authority to suspend those shipments,
thus “shuttering the industry.” When even a narrow
interpretation of section 971(c)(1) would authorize DEA to
“shutter the industry,” a more expansive interpretation could
hardly be considered unreasonable on that basis. The relative
ease with which DEA can document diversion of ephedrine- and
pseudoephedrine-containing drugs goes to the quantum of
evidence necessary to justify the inference that a shipment “may
13
be diverted” (a question we shall turn to shortly), but it has little
relevance to the interpretation of “listed chemical.”
Nor do we see any merit to PDK’s charge that the Deputy
Administrator failed to consider the “competing interests at
stake,” as PDK I instructs. PDK I, 362 F.3d at 797-78.
Contrary to PDK’s insistence, nothing in PDK I requires the
Deputy Administrator to weigh the risk that her interpretation
could potentially “shutter the industry” against DEA’s statutory
charge to prevent ephedrine diversion. PDK I merely gives the
boilerplate instruction that the Deputy Administrator, when
interpreting section 971(c)(1), must “bring [her] experience and
expertise to bear in light of competing interests at stake.” Id.
Moreover, as PDK I directs, the Deputy Administrator did
interpret section 971(c)(1) in light of her experience and
expertise. See Cont’l Air Lines, Inc. v. DOT, 843 F.2d 1450,
1452 (D.C. Cir. 1988) (an agency must provide “a reasonable
explanation for its conclusion that the interpretation serves the
statutory objectives” (internal quotation marks and alterations
omitted)). She emphasized not only that DEA considers the
suspension provision a critical weapon in its anti-
methamphetamine arsenal, but also that PDK’s narrow reading
would severely hamper the provision’s usefulness. 69 Fed. Reg.
at 67,956. She reasoned that PDK’s interpretation would lead
to an “arbitrary dual standard,” i.e., an importer who delivered
ephedrine knowing that it would be diverted after being
processed into finished products could be held criminally liable,
yet DEA would lack authority to suspend the shipment itself.
Id. at 67,955. And drawing on DEA’s experience with the
growing problem of homemade methamphetamine, she
concluded that the statute “should be construed broadly to
effectuate its purpose” of protecting the public. Id. at 67,956.
Far from being a case in which an agency has failed to explain
its interpretive decision, see Republican Nat’l Comm. v. FEC, 76
14
F.3d 400, 407 (D.C. Cir. 1996) (“[W]e might determine that
although not barred by statute, an agency’s action is arbitrary
and capricious because the agency has not considered certain
relevant factors or articulated any rationale for its choice.”), the
Deputy Administrator’s reasoning provides a more-than-
adequate justification for her resolution of section 971(c)(1)’s
ambiguity, see Ariz. Pub. Serv. Co. v. EPA, 211 F.3d 1280, 1287
(D.C. Cir. 2000) (“As long as the agency stays within Congress’
delegation, it is free to make policy choices in interpreting the
statute, and such interpretations are entitled to deference.”
(internal quotation marks and alterations omitted)).
In reaching this conclusion, we acknowledge that DEA
could someday abuse its broad section 971(c)(1) authority to
reach an outcome Congress would not have approved. Yet all
congressional delegations of discretionary authority—
particularly broad delegations like this one—carry such a risk.
Without more, the theoretical possibility that an agency might
someday abuse its authority is of limited relevance in
determining whether the agency’s interpretation of a
congressional delegation is reasonable. Should DEA one day
opt to “shutter the industry,” as PDK fears, the courts remain
open to consider a challenge to that action pursuant to the
Administrative Procedure Act.
PDK’s remaining arguments likewise lack merit. The
company rightly points out that PDK I criticizes the Deputy
Administrator for relying on post-CDTA legislative enactments
to explicate what the CDTA plainly meant, reasoning that “the
views of a subsequent Congress form a hazardous basis for
inferring the intent of an earlier one.” PDK I, 362 F.3d at 794
(quoting United States v. Price, 361 U.S. 304, 313 (1960)). But
here, the Deputy Administrator used post-enactment legislative
action for a very different purpose, namely, to help her choose
among several plausible constructions of a statute Congress
15
charged her agency with administering. We see nothing
inappropriate about this. In exercising delegated authority to
resolve statutory ambiguities, agencies can and should consider
policy input from a wide variety of sources, including the views
of private citizens, industry groups, non-governmental
organizations, legal commentators, and, most certainly,
Congress. Our case law supports this. For example, while we
cautioned in Southern California Edison Co. v. FERC, 116 F.3d
507 (D.C. Cir. 1997), against relying on subsequent legislative
history to divine an earlier Congress’s intent, id. at 514, we
nonetheless observed that “[w]ith respect to Congress’s current
policy goals, as distinguished from retrospective legislative
history, we find the [subsequent] committee reports . . . quite
illuminating,” id. at 516; cf. McCreary v. Offner, 172 F.3d 76,
82 (D.C. Cir. 1999) (“[T]o determine whether [a statute] is
reasonably susceptible to more than one meaning . . .
post-enactment legislative commentary offering a plausible
interpretation is certainly relevant, much like plausible
interpretations from litigants, other courts, law review articles,
or any other source would be.”). Indeed, it would be quite
peculiar to bar an agency seeking to fill a statutory gap from
considering strong indications of Congress’s developing
preferences. Here, for example, subsequent congressional action
reflects the severity of the diversion problem, as well as
Congress’s commitment to addressing it aggressively, both of
which clearly support the Deputy Administrator’s broad
interpretation of her statutory authority.
PDK next points to our observation in PDK I that the 1993
Domestic Chemical Diversion Control Act (DCDCA) “drew a
distinction between, on the one hand, the finished product and,
on the other hand, the listed chemical.” PDK I, 362 F.3d at 795.
According to PDK, this “tends to indicate that Congress
intended Section 971 to address diversion of raw, bulk listed
chemicals from their intended destination.” Pet’r’s Br. 28.
16
Even setting aside the hypocrisy of this claim when juxtaposed
with PDK’s previous one—either later congressional enactments
are relevant to interpreting section 971(c)(1) or they’re not—the
argument is without merit. True, the DCDCA does speak of
“drugs” and “drug products” as distinct from “listed chemicals,”
see DCDCA § 2(b)(1) (codified at 21 U.S.C. § 814(a), (e)),
leading us to have reasoned in PDK I that “[o]ne might say . . .
that in the view of a later Congress it is PDK’s ‘drug’ or ‘drug
product,’ not the ‘listed chemical’ mentioned in § 971(c)(1), that
is being diverted,” PDK I, 362 F.3d at 795 (emphasis added).
But the DCDCA’s distinction could just as easily demonstrate
that when Congress wishes to distinguish between “drugs” and
“listed chemicals,” it does so. Indeed, the Deputy Administrator
took just this position, 69 Fed. Reg. at 67,955 (“If Congress
wanted to make an express distinction between a bulk listed
chemical and a finished product in section 971(c), it could have
done so.”), and we have no license to substitute PDK’s preferred
interpretation for the agency’s reasonable one, see Serono Labs.,
Inc. v. Shalala, 158 F.3d 1313, 1321 (D.C. Cir. 1998) (“[U]nder
Chevron, courts are bound to uphold an agency interpretation as
long as it is reasonable—regardless whether there may be other
reasonable, or even more reasonable, views.”).
Finally, PDK argues that the Deputy Administrator
inappropriately relied on the Ninth Circuit’s decision in United
States v. Daas, 198 F.3d at 1175, which held that the phrase
“listed chemical” in one of the CDTA’s criminal provisions
encompasses listed chemicals found in drug products.
Disinclined to read the same phrase in the same act to mean
different things, the Deputy Administrator explained that she
would resolve section 971(c)(1)’s ambiguity to comport with the
Ninth Circuit’s broad interpretation. See 69 Fed. Reg. at 67,954.
Given this explanation, we see no basis for PDK’s assertion that
the “Deputy Administrator did not explain [Daas’s] application
. . . to Section 971,” Pet’r’s Br. 28-29. Nor do we see anything
17
unreasonable about the Deputy Administrator’s adoption of an
approach that we previously found to have “logic” to it. PDK I,
362 F.3d at 796.
In short, as directed in PDK I, the Deputy Administrator
brought her “expertise and experience” to bear in filling the gap
left by Congress when it drafted section 971(c)(1). Finding her
interpretation consistent with the provision’s text, as well as
with its manifest purpose of preventing the diversion of
chemicals used in the illegal manufacture of a controlled
substance, we shall defer to her reasonable, well-considered
interpretation. See Chevron, 467 U.S. at 843.
III.
This leaves us with the question whether substantial
evidence supports the suspension orders. Although the parties
lock horns over all three categories of evidence upon which
DEA rested its suspension orders—the warning letters and the
two types of reporting violations—the Deputy Administrator
made clear that “the evidence of diversion reflected in the series
of Warning Letters provides a sufficient independent basis” for
sustaining the suspension orders. 69 Fed. Reg. at 67,961 n.9.
We agree and shall affirm on that basis. But before explaining
why the warning letters suffice, we must address PDK’s
contention that the Deputy Administrator’s use of a totality-of-
the-circumstances test to decide whether substantial evidence
exists to suspend a shipment is so formless that her conclusion
is “purely results-driven.” Pet’r’s Br. 31.
The Totality-of-the-Circumstances Test
Although we take PDK’s point that, “[i]n the absence of an
explanation, the ‘totality of the circumstances’ can become
simply a cloak for agency whim—or worse,” LeMoyne-Owen
Coll. v. NLRB, 357 F.3d 55, 61 (D.C. Cir. 2004), we disagree
18
that an agency’s use of the test is necessarily arbitrary and
capricious. Agencies routinely employ multi-factor standards
when discharging their statutory duties, and we have never
hesitated to uphold their decisions when adequately explained.
See, e.g., Ark Las Vegas Rest. Corp. v. NLRB, 334 F.3d 99, 105-
106 (D.C. Cir. 2003); ExxonMobil Gas Mktg. Co. v. FERC, 297
F.3d 1071, 1081, 1084-88 (D.C. Cir. 2002). Indeed, we
ourselves use a totality test to make a variety of fact-intensive
determinations. See, e.g., United States v. Moore, 394 F.3d 925,
930 (D.C. Cir. 2005) (whether reasonable suspicion exists for
making a Terry stop); Kingman Park Civic Ass’n v. Williams,
348 F.3d 1033, 1040 (D.C. Cir. 2003) (whether state political
processes “are not equally open to participation by members of
a class of [protected] citizens” under the Voting Right Act). Nor
is this a case, as PDK alleges, where the agency has failed to
explain the basis for its decision or the relative significance of
the evidence before it. See LeMoyne-Owen, 357 F.3d at 61
(“[A] thorough, careful, and consistent application of a
multi-factor test is important to allow relevant distinctions
between different factual configurations to emerge, and . . .
appellate courts depend on it for the performance of their
assigned task of review.” (internal citations, quotation marks,
and alterations omitted)). Quite to the contrary, the Deputy
Administrator explained that the warning-letter evidence was by
itself sufficient to justify suspending the shipments. What better
way for the Deputy Administrator to have acknowledged the
warning letters’ relative importance to her decision?
To support its challenge to the Deputy Administrator’s
application of a totality test, PDK relies on Pearson v. Shalala,
164 F.3d 650 (D.C. Cir. 1999), and Chippewa & Flambeau
Improvement Co. v. FERC, 325 F.3d 353 (D.C. Cir. 2003).
According to PDK, Pearson stands for the proposition that “an
unarticulated standard does not comport with . . . the APA.”
Pet’r’s Br. 33. But that case holds only that an agency
19
proceeding on a case-by-case basis must pour “some definitional
content” into a vague statutory term by “defining the criteria it
is applying.” See Pearson, 164 F.3d at 660. In upholding the
suspension orders on the strength of the warning-letter evidence,
the Deputy Administrator did just that, giving “some definitional
content” to the phrase “may be diverted”: in her view, a string
of warning letters documenting the diversion of thousands of
pills to dozens of illicit methamphetamine labs is sufficient to
warrant a finding that a drug “may be diverted.” Although PDK
is correct that this falls short of an exhaustive definition,
Pearson itself acknowledges that an agency is not “necessarily
required to define [an open-ended] term in its initial general
regulation—or indeed . . . obliged to issue a comprehensive
definition all at once.” Id. at 661. Rather, in fleshing out the
contours of vague statutory terms, agencies are “entitled to
proceed case by case,” id., precisely as DEA did here, see 69
Fed. Reg. at 67,597 (“DEA need not issue an array of
regulations to anticipate every situation where a [listed]
chemical may be diverted. . . . The statute clearly envisions
permitting the agency to proceed by adjudication.”).
Worse still for PDK, Chippewa actually supports the
Deputy Administrator’s decision. That case touched on the
Federal Energy Regulatory Commission’s (FERC) statutory
authorization to require a reservoir operator to procure a license
whenever “necessary or appropriate in the maintenance and
operation” of downstream power plants. 16 U.S.C. § 796(11).
Although FERC considers the totality of the circumstances when
deciding whether a license is “necessary or appropriate,” over
time the agency has identified “a series of relevant factors” that
it “balanc[es] . . . in light of the facts of the [particular] case,”
the most important of which is the percentage by which the
reservoir increases the power generation of downstream plants.
Chippewa, 325 F.3d at 358. Rejecting a reservoir operator’s
claim that this standard’s flexibility doomed a FERC order
20
requiring the operator to obtain a license, we observed that the
reservoir at issue increased downstream power generation more
than other reservoirs FERC had also required to have licenses.
Id. Because “the increase was clearly above the line of
demarcation [at which FERC requires a reservoir to get a
license], wherever it may lie,” id. at 359, we upheld the
order—even though FERC had never articulated the threshold
above which licensing would be required.
Like FERC, DEA applied an all-things-considered standard
to implement a statute that confers broad discretionary authority.
Also like FERC, in applying that standard, DEA relied on its
precedent, namely, Mediplas Innovations, 67 Fed. Reg. 41,256
(June 17, 2002), which upheld a suspension order based on less
evidence of product diversion than DEA amassed against PDK.
See 69 Fed. Reg. at 67,959. And also like FERC, DEA provided
no clear “line of demarcation” to define an open-ended term,
Chippewa, 325 F.3d at 359, instead choosing to establish the
term’s contours through a series of adjudications. Just as we
upheld FERC’s reasonable exercise of its discretion in
Chippewa, so too must we uphold the Deputy Administrator’s
here.
The Warning Letters
This brings us to the question whether the warning-letter
evidence supports DEA’s inference that the ephedrine shipments
“may be diverted.” PDK argues that before suspending the two
ephedrine shipments, the Deputy Administrator should have
compared the percentage of PDK products documented in the
warning letters with the percentage of other companies’ products
that had been diverted. Although never contesting that its
products have been diverted to many illicit methamphetamine
labs, PDK argues that “[t]he Deputy Administrator’s failure to
compare PDK to other companies in the industry . . . prevents
this Court from . . . assess[ing] . . . whether DEA is treating
21
similarly situated parties similarly.” Pet’r’s Br. 35. In other
words, PDK seems to think that DEA may not suspend its
shipments unless the agency also suspends shipments to other
companies whose products are diverted in equal or greater rates.
PDK’s argument lacks merit. Section 971(c)(1) offers no
hint that DEA must undertake a comparative analysis before
issuing a suspension order. Instead, it says that DEA may
suspend “any importation . . . of a listed chemical” based on a
finding that “the chemical may be diverted.” 21 U.S.C.
§ 971(c)(1). The rate at which other companies’ products are
diverted has no bearing on whether PDK’s products “may be
diverted.” As the government nicely puts it, moreover, “[a] law
enforcement agency is not limited to investigating only those
companies or persons who have committed comparatively more
crimes than others. In the law enforcement context, absolute
amounts matter.” Resp’t’s Br. 42. And the “absolute amounts”
of diverted PDK products—thousands of bottles to roughly 140
illicit labs in at least eighteen states, see 69 Fed. Reg. at
67,959—serve as a more-than-adequate foundation for the
Deputy Administrator’s inference that PDK’s two ephedrine
shipments “may be diverted” somewhere down the line. “[A]n
agency’s predictive judgments about areas that are within the
agency’s field of discretion and expertise,” we have held, “are
entitled to particularly deferential review, so long as they are
reasonable.” Milk Indus. Found. v. Glickman, 132 F.3d 1467,
1478 (D.C. Cir. 1998) (internal quotation marks omitted).
PDK challenges the Deputy Administrator’s finding that
“substantial amounts” of PDK products have been diverted. 69
Fed. Reg. at 67,959. According to PDK, the warning letters
document only a “minuscule percentage” of its total distributed
products. Pet’r’s Br. 34. That may be so, but PDK is a large
company, and a minuscule percentage of its products is a large
22
amount—thousands of bottles, according to the warning
letters—and absolute amounts matter.
Moreover, we think that PDK’s dubious personnel decisions
reinforce the Deputy Administrator’s conclusion that the
warning letters support DEA’s finding that the two ephedrine
shipments “may be diverted.” 69 Fed. Reg. at 67,959. Hiring
Krasnoff, a convicted felon who believes “it’s none of my
business if someone gets high off of this stuff,” surely
demonstrates “a cavalier approach toward complying with DEA
regulations.” Id. at 67,960 n.7. And retaining Lulkin, who had
been convicted for fraud against PDK itself, as “a key overseer
of regulatory matters,” hardly demonstrates PDK’s
“commit[ment] to complying with the myriad of regulatory
requirements designed to prevent diversion of listed chemicals.”
Id. at 67,959.
PDK objects to the Deputy Administrator’s consideration
of a DEA employee’s statement that “PDK products were
number one in terms of being seized at methamphetamine labs.”
Id. Although PDK did refer to the employee’s statement as
“hearsay” in the fact section of its opening brief, it waited until
its reply to argue that the Deputy Administrator should have
disregarded it. This is too late, of course, and we will not
consider the claim. See City of Nephi, Utah v. FERC, 147 F.3d
929, 933 n.9 (D.C. Cir. 1998) (“By merely informing the court
in the statement of facts in its opening brief [of the factual basis
for a claim] . . . [petitioner] failed properly to raise this
argument.”); Rollins Envtl. Servs. v. EPA, 937 F.2d 649, 653 n.2
(D.C. Cir. 1991) (“Issues may not be raised for the first time in
a reply brief.”).
In a footnote, PDK argues that the Deputy Administrator
improperly ignored factual inaccuracies that the ALJ identified
in the warning letters. In support, however, PDK cites a portion
23
of the ALJ’s opinion that has nothing to do with factual errors.
To be sure, elsewhere the opinion does contain a vague
reference to some errors in a small number of warning letters.
See In re Indace, Inc., Nos. 01-12, 01-13, slip op. at 38-39 (Apr.
5, 2002) (included at J.A. 59-60). But judging from the
citations, at most six (and probably only four) letters contained
any such errors. We agree with the government that “[a]ny
factual inaccuracies identified by the ALJ, even if true, are de
minimis.” Resp’t’s Br. 41 n.11; see Braniff Airways, Inc. v.
Civil Aeronautics Bd., 379 F.2d 453, 466 (D.C. Cir. 1967) (“A
court will not reject an agency finding that is supported by
substantial evidence merely because the agency also incidentally
mentions incompetent or irrelevant material.”). The Deputy
Administrator’s lapse, if any, thus provides no basis for setting
aside the suspension orders. See 5 U.S.C. § 706 (instructing
courts to take “due account . . . of the rule of prejudicial error”);
Mass. Trs. v. United States, 377 U.S. 235, 248 (1964) (finding
reversal unwarranted “when a mistake of the administrative
body is one that clearly had no bearing on . . . the substance of
decision reached”); Fed. Express Corp. v. Mineta, 373 F.3d 112,
118 (D.C. Cir. 2004) (“No principle of administrative law or
common sense requires us to remand a case in quest of a perfect
opinion unless there is reason to think that the remand might
lead to a different result.”).
In a similar vein, PDK argues that the Deputy Administrator
“failed to address the numerous infirmities in the warning letters
that led the ALJ to conclude ‘it is difficult to determine what, if
any, inference can be drawn from these warning-letter figures.’”
Pet’r’s Br. 32. Viewed in context, however, the ALJ’s statement
makes clear that the only infirmity she had in mind was DEA’s
failure to undertake a comparative analysis, and we have already
explained why we think the Deputy Administrator’s articulated
position that DEA has no obligation to do so is perfectly
reasonable.
24
Finally, PDK alleges that, factual inaccuracies aside, the
Deputy Administrator’s reliance on the warning letters was itself
arbitrary because, according to the company, in deciding
whether to send the letters, DEA “followed no rules, regulations,
or even the most basic informal internal guidelines.” Id. at 37.
PDK explains that
[t]he pertinent point here is not that it was unfair of DEA
to document discoveries of PDK products in warning
letters while ignoring discoveries of competitors’
products. The point is that the inconsistent treatment
regarding the preparation of warning letters shows that
the Deputy Administrator’s reliance on them . . . is
arbitrary and capricious—largely because the record
demonstrates that the decision to document a discovery
of misused product, in a warning letter, is itself arbitrary
and capricious.
Id. at 38. We disagree. Even assuming the standards for issuing
warning letters are arbitrary, that does not automatically
invalidate the suspension orders. To succeed on such a claim,
PDK must identify exactly how defects in the standards for
issuing warning letters tainted the suspension orders. See 5
U.S.C. § 706. A hypothetical shows why. Suppose it were
DEA’s policy, upon discovering a company’s drug product at a
methamphetamine lab, to send warning letters only if a coin toss
came up heads. The arbitrariness of that policy would do
nothing to undermine the evidence that the company’s product
had been diverted to clandestine methamphetamine labs.
Likewise, because PDK nowhere argues that DEA’s allegedly
arbitrary issuance of warning letters impeaches the evidence of
rampant product diversion—indeed, PDK acknowledges the
diversion—any possible arbitrariness in the process for sending
warning letters is of no moment.
25
IV.
In sum, we find the Deputy Administrator’s construction of
“listed chemical” reasonable and her conclusion that the two
ephedrine shipments “may be diverted” supported by substantial
evidence. We realize the interpretation of section 971(c)(1) we
validate gives DEA significant authority over shipments of listed
chemicals, but the provision’s undemanding language invites
such a result. Facing a persistent threat to public health and a
challenging law-enforcement problem, Congress armed DEA
with broad suspension authority, and only Congress, not this
court, can take it away. We deny the petition for review.
So ordered.