United States v. Jack Watkins, United States of America v. Cap Tab Nutritional Formulating and Manufacturing Inc.

278 F.3d 961 UNITED STATES of America, Plaintiff-Appellee, v. Jack WATKINS, Defendant-Appellant. United States of America, Plaintiff-Appellee, v. Cap Tab Nutritional Formulating and Manufacturing Inc., Defendant-Appellant. No. 00-50656. No. 00-50682. United States Court of Appeals, Ninth Circuit. Argued and Submitted September 14, 2001. Filed January 29, 2002. COPYRIGHT MATERIAL OMITTED Eugene G. Iredale, Bethany O'Neill, San Diego, CA, for the defendant-appellant. Patrick K. O'Toole, United States Attorney, Melanie K. Pierson, Assistant United States Attorney, United States Attorney's Office, San Diego, CA, for the plaintiff-appellee. Appeal from the United States District Court for the Southern District of California; Napoleon A. Jones, District Judge, Presiding. D.C. Nos. CR-99-00024-J, CR-99-00024-NAJ. Before: FERNANDEZ, KLEINFELD, and McKEOWN, Circuit Judges. Opinion by Judge McKEOWN; Dissent by Judge FERNANDEZ. McKEOWN, Circuit Judge. 1 Section 303 of the Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. § 333 (a)(2), imposes felony liability for misbranding "with the intent to defraud or mislead." The question presented is whether this provision requires proof of…

Opinion by Judge McKEOWN; Dissent by Judge FERNANDEZ.

Section 303 of the Food, Drug, and Cosmetic Act (“FDCA”), 21 U.S.C. § 333 (a)(2), imposes felony liability for misbranding “with the intent to defraud or mislead.” The question presented is whether this provision requires proof of materiality. We hold that materiality must be proven as an element of the offense under either a theory of intent to defraud or a theory of intent to mislead.

BaCkground

Jack Watkins is the president and majority owner of Cap Tab Nutritional Formulating and Manufacturing, Inc., a company that manufactures vitamins and nutritional supplements (collectively, ‘Watkins”). The subject of this appeal arises from Watkins’ conditional guilty plea under the FDCA following a nineteen-count indictment. The indictment charged Watkins with conspiracy, mail fraud, wire fraud, and felony mis-branding. According to the indictment, Watkins manufactured nutritional supplements by purposefully omitting, substituting, or using lesser amounts of certain ingredients. Specifically, the government alleged that one product, “C3D,” did not contain acetyl L-carni-tine as labeled. Rather, it contained L-carnitine, which was…

Dissenting:

I disagree with Watkins’ assertion that even though he did intentionally misstate the ingredients of the nutritional substances he was selling, he was improperly convicted because the government did not have evidence to show that the misstatements were material. There can be no doubt that Watkins intended to defraud and mislead purchasers into thinking they were purchasing one item when, in fact, they were purchasing a different, cheaper item. Of course, he did so because he knew that he could improve his own profits by so euchring his victims. That is the usual reason that a person like Watkins acts as he did here. However, he argues that even if he made more money and his victims, thus, not only had less, but also had a different kind of supplement, he cannot be guilty unless materiality is shown as a separate element. That is, he cannot have committed felony food and drug fraud, or even felony misleading, without that element. I do not agree.

Watkins relies on the general rule, set forth in Neder v. United States, 527 U.S. 1 , 119 S.Ct. 1827 , 144 L.Ed.2d 35 (1999), that when the word “fraud” is used, a material misrepresentation or concealment is required because…