This week, DEA announced it has entered into a settlement agreement with Morris & Dickson Co., LLC (“Morris & Dickson”), resolving the protracted dispute born out of a May 2, 2018 Order to Show Cause (“OTSC”) and Immediate Suspension of Registration (“ISO”) issued against the distributor. As discussed in more detail in an alert we published last year, DEA waited five years before it eventually took final agency action on the OTSC and ISO, during which time Morris & Dickson continued to distribute controlled substances under its DEA registrations. During those five years, Morris & Dickson invested significant resources in advancing its compliance program in response to DEA’s concerns. Considering the time that had lapsed and Morris & Dickson’s attempts to bring its business into compliance, DEA’s decision to issue a final order in 2023 was met with much surprise and controversy.

DEA’s belief that it is appropriate for it to wait five years before issuing a final order on an ISO/OTSC raised serious questions regarding the urgency with which DEA should act after issuing an ISO/OTSC once it has discovered that a registrant poses an “imminent danger to the public health or safety.” 21 U.S.C. § 824(d). Moreover, the significant corrective measures adopted by Morris & Dickson (alleged to have been done in close coordination with DEA during those five years) made it all the more concerning that DEA still found it appropriate and reasonable to revoke the registrations in 2023 on the basis of non-compliance and misconduct that only occurred prior to 2019.

In response to DEA’s final order, Morris & Dickson filed a petition for review with the Fifth Circuit Court of Appeals as well as a motion to stay DEA’s revocation of its registrations pending its appeal, which the court promptly granted. Since filing its May 30, 2023 petition to the Court of Appeals, Morris & Dickson proceeded through the appeals process while the court’s stay remained in effect while it simultaneously engaged in settlement discussions with DEA. On January 22, 2024, the parties moved to dismiss the appeal after reaching an agreement to settle the dispute. While Quarles has not yet obtained a copy of the settlement agreement, DEA’s press release indicates that Morris & Dickson has agreed to: (1) admit to all wrongdoing alleged by DEA; (2) surrender one of its two DEA registrations; (3) comply with heightened reporting obligations for five years; and (4) pay a $19 million fine.

While this is the end of the dispute for Morris & Dickson, the industry will likely experience the consequences of this case for years to come. By settling the dispute, DEA prevented the federal court from ruling on the enforceability of an untimely administrative action taken by an agency on the basis of an alleged “imminent danger.” A precedential ruling from the Morris & Dickson matter could have established firm boundaries for DEA’s administrative processes with ISOs and OTSCs that would, among other things, require DEA to take final action on administrative matters in a timely manner. Such a requirement would ensure registrants can more expeditiously seek judicial review on agency action and it would protect the industry against the unnecessary cost and uncertainty created by dilatory agency action, which (apparently) can linger over a registrant’s business for an indefinite period of time. However, with the Morris & Dickson dispute ending in settlement, the industry is instead left with greater uncertainty as DEA’s final action on a five-year old ISO and OTSC remains intact, which the agency will undoubtedly cite to and use as an example going forward.