82 FR 46525 - Warren B. Dailey, M.D.; Decision and Order

DEPARTMENT OF JUSTICE
Drug Enforcement Administration

Federal Register Volume 82, Issue 192 (October 5, 2017)

[Federal Register Volume 82, Number 192 (Thursday, October 5, 2017)]
[Notices]
[Pages 46525-46527]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-21382]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Warren B. Dailey, M.D.; Decision and Order

    On February 7, 2017, the Assistant Administrator, Diversion Control 
Division, Drug Enforcement Administration (DEA), issued an Order to 
Show Cause to Warren B. Dailey, M.D. (Registrant), of Houston, Texas. 
The Show Cause Order proposed the revocation of Registrant's DEA 
Certificate of Registration, pursuant to 21 U.S.C. 824(a)(3) and (5), 
on two grounds: (1) That he does not have authority to handle 
controlled substances in Texas, the State in which he is registered 
with the Agency; and (2) he has been excluded from participation in a 
program pursuant to section 1320a-7(a) of Title 42. GX 2 (Order to Show 
Cause), at 1.
    With respect to the Agency's jurisdiction, the Show Cause Order 
alleged that Registrant is registered as a practitioner in schedules II 
through V, under Certificate of Registration No. AD9639038, at the 
registered address of 2305 Southmore, Houston, Texas. Id. The Order 
alleged that Registrant's registration expires by its terms on June 30, 
2018. Id.
    As to the substantive grounds for the proceeding, the Show Cause 
Order specifically alleged that ``[o]n October 12, 2016, the Texas 
Medical Board issued an Order of Suspension by Operation of Law, 
suspending [Registrant's] Texas Medical License . . . based on [his] 
felony conviction on March 30, 2016 . . . for health care fraud.'' Id. 
The Show Cause Order then alleged that Registrant is ``currently 
without authority to practice medicine or handle controlled substances 
in the State of Texas, the [S]tate in which he registered with'' the 
Agency, thus subjecting his registration to revocation. Id. at (citing 
21 U.S.C. 824(a)(3); other citations omitted).
    The Show Cause Order also alleged that on December 30, 2016, the 
Office of Inspector General, U.S. Department of Health and Human 
Services (HHS IG), issued a letter to Registrant ``excluding [him] from 
participation in all Federal health care programs based on [his] felony 
conviction on March 30, 2016, in the U.S. District Court for the 
Southern District of Texas for health care fraud.'' Id. at 2. The Show 
Cause Order further alleged that ``[t]he exclusion was effective twenty 
days from the date of the letter and is for a minimum period of twenty 
years.'' Id. The Show Cause Order then asserted that Registrant's ``DEA 
registration is also subject to revocation based on [his] exclusion 
from participation in a program pursuant to section 1320a-7(a) of Title 
42.'' Id. (citing 21 U.S.C. 824(a)(5)).
    The Show Cause Order notified Registrant of his right to request a 
hearing on the allegations, or to submit a written statement in lieu of 
a hearing, the procedure for electing either option, and the 
consequence for failing to elect either option. Id. (citing 21 CFR 
1301.43). The Order also notified Registrant of his right to submit a 
corrective action plan under 21 U.S.C. 824(c)(2)(C). Id. at 3.
    On February 7, 2017, the Show Cause Order was mailed to Registrant, 
via first class mail, addressed to him at his registered address at 
2305 Southmore, Houston, Texas. GX 5. Affidavit of Service by DEA 
Analyst, Office of Chief Counsel. Also, on February 21, 2016, a 
Diversion Investigator (DI) with the Houston Division Office emailed 
the Show Cause Order to an attorney, who represented Registrant in the 
state board proceeding, who accepted service on his behalf. GX 4. In 
his email, the attorney represented that he was ``accepting service 
upon'' Registrant. Id. (copy of email between DI and attorney accepting 
service on Registrant.)
    On April 6, 2017 the Government forwarded a Request for Final 
Agency Action (RFAA) and an evidentiary record to my Office. On review, 
I found the Government's attempts at service insufficient. As for the 
Government's attempt to serve Registrant by mail addressed to his 
registered address, I found this inadequate because it clearly knew 
that Registrant had been convicted of multiple federal felony offenses 
more than a year earlier and was likely incarcerated in a United States 
Penitentiary. See Robinson v. Hanrahan, 409 U.S. 38, 40 (1972) (``[T]he 
State knew that appellant was not at the address to which the notice 
was mailed . . . since he was at that very time confined in . . . jail. 
Under these circumstances, it cannot be said that the State made any 
effort to provide notice which was `reasonably calculated' to apprise 
appellant of the pendency of the . . . proceedings.''); see also Jones 
v. Flowers, 547 U.S. 220, 230 (2006) (citing with approval Robinson and 
noting that its cases ``require[] the government to consider unique 
information about an intended recipient regardless of whether a 
statutory scheme is reasonably calculated to provided notice in the 
ordinary case'').
    I also found the Government's service on the attorney insufficient. 
In holding so, I explained that the CSA states that ``[b]efore taking 
action pursuant to [21 U.S.C. 824(a)] . . . the Attorney General shall 
serve upon the . . . registrant an order to show cause why registration 
should not be . . . revoked[ ] or suspended.'' 21 U.S.C. 824(c) 
(emphasis added). While I explained that the Agency has found that 
service on an attorney may satisfy the CSA's requirement that a Show 
Cause Order be ``serve[d] upon the . . . registrant,'' I noted that the 
Agency has made clear

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that `` [t]he mere relationship between a defendant and his attorney 
does not, in itself, convey authority to accept service.'' David M. 
Lewis, 78 FR 36951 (2013) (quoting Harbinson v. Commonwealth of 
Virginia, 2010 WL 3655980, at *9 (E.D. Va. Aug. 11, 2010) (quoting 
Davies v. Jobs & Adverts Online, Gmbh, 94 F.Supp.2d 719, 722 (E.D. Va. 
2000))). See also United States v. Ziegler Bolt & Parts Co., 111 F.3d 
878, 881 (Fed. Cir. 1997); Grandbouche v. Lovell, 913 F.2d 835, 837 
(10th Cir. 1990); Ransom v. Brennan, 437 F.2d 513, 518-19 (5th Cir. 
1971). ``Rather, the party seeking to establish the agency relationship 
must show ``that the attorney exercised authority beyond the attorney-
client relationship, including the power to accept service.'' 
Harbinson, 2010 WL 3655980, at * 9 (quoting Davies, 94 F.Supp.2d at 722 
(quoting Ziegler, 111 F.3d at 881)).
    I further explained that while an attorney's authority to act as an 
agent for the acceptance of process ``may be implied from surrounding 
circumstances indicating the intent of'' his client, In re Focus Media 
Inc., 387 F.3d 1077, 1082 (9th Cir. 2004) (other citation and internal 
quotations omitted), ``an agent's authority to act cannot be 
established solely from the agent's actions.'' Id. at 1084. ``Rather, 
the authority must be established by an act of the principal.'' Id. 
(citing FDIC v. Oaklawn Apartments, 959 F.2d 170, 175 (10th Cir. 
1992)). Because the Government offered no evidence of an act by the 
Registrant establishing that he granted authority to the attorney to 
accept process on his behalf in this proceeding, I found that the 
Government had not properly served Respondent. Focus Media, 387 F.3d at 
1084.
    Thereafter, the Government reissued the Show Cause Order and on 
July 17, 2017, a Diversion Investigator mailed the Order by certified 
mail addressed to Respondent, at the United States Penitentiary in 
Beaumont, Texas.\1\ GX 7. According to the tracking information 
obtained from the U.S. Postal Service, on July 20, 2017, the mailing 
was delivered to the Penitentiary. Id., see also GX 8. I therefore find 
that the Government accomplished service on July 20, 2017.
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    \1\ There is no evidence in the record as to how the DI obtained 
Registrant's address. However, according to the Bureau of Prisons 
Inmate Locator (of which I take official notice), Registrant is 
incarcerated at USP Beaumont. See 5 U.S.C. 556(e).
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    On September 20, 2017, the Government submitted a new Request for 
Final Agency Action. (Hereinafter, cited as RFFA). Therein, the 
Government represents that ``Registrant has not requested a hearing and 
has not otherwise corresponded or communicated with DEA regarding the 
Reissued Order served on him, including the filing of any written 
statement in lieu of a hearing.'' RFAA, at 2.
    Because more than 30 days have now passed since the date of service 
of the Show Cause Order and that Registrant has not submitted a request 
for a hearing or a written statement, I find that Registrant has waived 
his right to a hearing or to submit a written statement in lieu of a 
hearing. 21 CFR 1301.43(d). I therefore issue this Decision and Final 
Order based on relevant evidence contained in the record submitted by 
the Government. Id. Sec.  1301.43(d) & (e). I make the following 
findings of fact. Id. Sec.  1301.43(e).

Findings

    Registrant is the holder of DEA Certificate of Registration No. 
AD9639038, pursuant to which he is authorized to dispense controlled 
substances in schedules II through V as a practitioner, at the 
registered address of 2305 Southmore, Houston, Texas. GX 1 
(Certification of Registration History). He is also authorized to 
dispense Suboxone and Subutex as a Data-Waiver practitioner pursuant to 
the Drug Addiction Treatment Act of 2000 (DATA), for the purpose of 
treating up to 100 opiate-addicted patients. Id.; see 21 U.S.C. 
823(g)(2). His registration does not expire until June 30, 2018. Id.
    On October 12, 2016, the Texas Medical Board (Board) issued an 
Order of Suspension by Operation of Law, suspending Registrant's Texas 
Medical License No. F-8454, based on Registrant's felony conviction on 
March 30, 2016 for health care fraud in the U.S. District Court for the 
Southern District of Texas.\2\ GX 3, at 2. The Board found that on or 
about March 30, 2016, Registrant was convicted of one count of 
conspiracy to commit healthcare fraud, two counts of false statements 
related to healthcare matters, one count of conspiracy to pay and 
receive healthcare kickbacks, and one count of payment and receipt of 
healthcare kickbacks. Id. at 1-2 (citing 18 U.S.C. 1349, 1035, 371, 2; 
42 U.S.C. 1320a-7b(b)(1) and (b)(2)).
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    \2\ The Board's Disciplinary Panel issued the Order following a 
hearing on October 7, 2016, at which it considered the Board's 
Application for Suspension by Operation of Law. GX 3, at 1. While 
Registrant was provided with notice of the hearing, neither he nor 
his attorney appeared. Id.
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    The Government provided evidence that the Texas Medical Board Web 
site shows that Registrant's medical license remained suspended as of 
September 20, 2017, and according to the Board's Web site, his license 
remains suspended as of the date of this Decision and Order. GX 9. See 
also http://reg.tmb.state.tx.us/OnLineVerif/Phys_ReportVerif_new.asp. 
The Board's Order states that the suspension is to remain in effect 
until superseded by a subsequent Order of the Board. GX 3, at 2. I 
therefore find that Registrant does not possess authority to dispense 
controlled substances under the laws of Texas, the State in which he is 
registered with the Agency.

Discussion

    Pursuant to 21 U.S.C. 824(a)(3), the Attorney General is authorized 
to suspend or revoke a registration issued under section 823 of Title 
21, ``upon a finding that the registrant . . . has had his State 
license . . . suspended [or] revoked . . . by competent State authority 
and is no longer authorized by State law to engage in the . . . 
dispensing of controlled substances.'' With respect to a practitioner, 
DEA has long held that the possession of authority to dispense 
controlled substances under the laws of the State in which a 
practitioner engages in professional practice is a fundamental 
condition for obtaining and maintaining a registration. See, e.g., 
James L. Hooper, 76 FR 71371 (2011) (collecting cases), pet. for rev. 
denied, 481 Fed. Appx. 826 (4th Cir. 2012); see also Frederick Marsh 
Blanton, 43 FR 27616 (1978) (``State authorization to dispense or 
otherwise handle controlled substances is a prerequisite to the 
issuance and maintenance of a Federal controlled substances 
registration.'').
    This rule derives from the text of two provisions of the CSA. 
First, Congress defined ``the term `practitioner' [to] mean[] a . . . 
physician . . . or other person licensed, registered or otherwise 
permitted, by . . . the jurisdiction in which he practices . . . to 
distribute, dispense, [or] administer . . . a controlled substance in 
the course of professional practice.'' 21 U.S.C. 802(21). Second, in 
setting the requirements for obtaining a practitioner's registration, 
Congress directed that ``[t]he Attorney General shall register 
practitioners . . . if the applicant is authorized to dispense . . . 
controlled substances under the laws of the State in which he 
practices.'' Id. Sec.  823(f). Because Congress has clearly mandated 
that a practitioner possess state authority in order to be deemed a 
practitioner under the Act, DEA has held repeatedly that revocation of 
a practitioner's registration is the appropriate sanction whenever he 
is no longer authorized to dispense controlled

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substances under the laws of the State in which he practices medicine. 
See, e.g., Calvin Ramsey, 76 FR 20034, 20036 (2011); Sheran Arden 
Yeates, M.D., 71 FR 39130, 39131 (2006); Dominick A. Ricci, 58 FR 
51104, 51105 (1993); Bobby Watts, 53 FR 11919, 11920 (1988); see also 
Frederick Marsh Blanton, 43 FR 27616 (1978).
    Because Registrant is no longer currently authorized to dispense 
controlled substances in Texas, the State in which he is registered 
with the Agency, I will order that his registration be revoked.\3\ 21 
U.S.C. 824(a)(3).
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    \3\ The Show Cause Order also proposed revocation pursuant to 21 
U.S.C. 824(a)(5), which provides that a registration may be revoked 
``upon a finding that the registrant has been excluded or directed 
to be excluded from participation in a program pursuant to section 
1320a-7(a) of Title 42.'' GX 2, 1-2. While the Show Cause Order 
alleged that the HHS IG has issued a letter to Registrant excluding 
him from participation in federal health care programs pursuant to 
42 U.S.C. 1320a-7(a), the Government has provided no evidence to 
support the allegation, and it does not raise this ground in its 
Request for Final Agency Action. I therefore dismiss the allegation.
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Order

    Pursuant to the authority vested in me by 21 U.S.C. 824(a), as well 
as 28 CFR 0.100(b), I order that DEA Certificate of Registration 
AD9639038 and Data-Waiver Identification No. XD9639038, issued to 
Warren B. Dailey, M.D., be, and they hereby are, revoked. Pursuant to 
the authority vested in me by 21 U.S.C. 823(f), I further order that 
any pending application of Warren B. Dailey, M.D., to renew or modify 
his registration, be, and it hereby is, denied. This Order is effective 
November 6, 2017.

    Dated: September 27, 2017.
Chuck Rosenberg,
Acting Administrator.
[FR Doc. 2017-21382 Filed 10-4-17; 8:45 am]
 BILLING CODE 4410-09-P