On February 7, the U.S. Drug Enforcement Administration (DEA) announced that it has entered into a settlement requiring opioid distributor Morris & Dickson Co. to forfeit $19 million to resolve a years-long administrative proceeding related to alleged violations of the Controlled Substances Act (CSA).

Why it Matters

DEA has no authority to impose monetary penalties in its administrative proceedings. The multimillion dollar settlement against Morris & Dickson – which DEA touted as the first administrative forfeiture for the failure to report suspicious opioid orders – raises the question whether DEA intends to use negotiated forfeiture as a tool to obtain monetary recoveries in future administrative cases.

Dig Deeper

The administrative proceeding stemmed from an Order to Show Cause DEA issued to Morris & Dickson in 2018, seeking to revoke the company’s DEA registrations.

  • As in the case against Morris & Dickson, DEA administrative proceedings usually seek the suspension or revocation of a DEA registration.
  • If DEA believes monetary penalties are warranted, it typically will refer the case to the U.S. Department of Justice (DOJ) for civil or criminal prosecution in federal court.
  • DEA can initiate a separate administrative forfeiture action against proceeds traceable to CSA violations. But DEA typically has not used administrative forfeiture proceedings to impose monetary liability.
  • There is no indication DEA filed a separate administrative forfeiture action against Morris & Dickson. DEA appears to have used its leverage in the administrative proceeding to obtain a negotiated forfeiture as part of its resolution with the company.

Zoom Out

The settlement also highlights the complexities DEA registrants face in being subject to regulation – and potential enforcement actions – from multiple federal and state agencies for the same underlying conduct.

  • Separate from the DEA settlement, Morrison & Dickson entered into a settlement with DOJ in 2019 under which it agreed to pay $22 million to resolve similar allegations.
  • When negotiating CSA resolutions, DEA registrants must consider the scope of the settlement and of the government’s waiver of claims. Morris & Dickson’s settlement with DOJ does not appear to have precluded the company’s potential liability with DEA.

The Big Picture

It remains to be seen whether DEA will treat the Morris & Dickson settlement as a one-off or will increasingly seek monetary forfeiture in its administrative enforcement actions. Still, the settlement is another poignant example of the heightened enforcement environment in which DEA registrants operate.

  • DEA registrants should remain vigilant about improving internal systems to prevent and detect potential CSA violations.
  • Experienced legal counsel can help DEA registrants identify CSA compliance issues before they arise and effectively negotiate with government regulators when needed.

The Bass, Berry & Sims Controlled Substances Enforcement & Diversion team routinely works with DEA registrants to improve their CSA compliance programs and advises DEA registrants in government investigations and enforcement actions.

If you have any questions about how this issue may impact your business, please contact the authors.