## Facts

- AbTox, Inc. manufactured low-temperature medical sterilizers called “Plazlyte,” designed by company president Ross A. Caputo; Robert M. Riley was vice president.
- AbTox pursued FDA clearance through the 510(k) “substantial equivalence” process and obtained clearance in 1994 for a “small” Plazlyte, limited to sterilizing solid stainless-steel instruments.
- The cleared small device had a roughly one–cubic foot chamber, used diluted peracetic acid from two bottles, and employed a two-cycle procedure.
- AbTox also produced and marketed a “large” Plazlyte with a substantially larger chamber, different peracetic-acid concentration and delivery, a one-cycle protocol, and different operating pressure.
- The company marketed and sold the large device in the United States without separate FDA clearance and promoted uses broader than the small device’s limited indication.
- The evidence permitted findings that AbTox selectively submitted favorable testing to the FDA while concealing unfavorable results and that the company persisted after FDA warning letters and directives stating the large device was unapproved and misbranded.
- Federal authorities ultimately pursued enforcement actions and prosecuted Caputo and Riley for FDCA offenses, fraud, and false statements to the FDA.
- A jury convicted both defendants on multiple counts; the district court ordered restitution of $17.2 million based on the list price of all units sold.

## Issues

1. Whether 21 C.F.R. § 807.81 (requiring a new 510(k) for significant design changes or major changes in intended use) was unconstitutionally vague as applied to marketing the large Plazlyte.
2. Whether sufficient evidence supported that the large Plazlyte was a “new device” requiring separate clearance and that defendants knowingly misled the FDA and customers.
3. Whether defendants’ asserted “good faith” belief in safety and legality defeated fraud-based convictions.
4. Whether restitution could be based on the full purchase price of devices sold, rather than a reduced amount accounting for any value received.

## Decision

- The Seventh Circuit affirmed the convictions.
- The court rejected the as-applied vagueness challenge to § 807.81.
- The court held the evidence supported that the large Plazlyte was materially different in ways bearing on safety/effectiveness and intended use, triggering the requirement of separate FDA clearance.
- The court concluded the fraud and FDCA counts were supported by evidence of concealment, misrepresentations, and continued sales and promotion despite FDA warnings.
- The court largely affirmed restitution tied to the purchase price of units sold, while allowing limited adjustment and remand on discrete calculation matters.

## Legal Principles

- A medical device that is significantly changed in design, components, manufacturing method, or intended use in a way that can affect safety or effectiveness may constitute a “new device” requiring separate premarket notification/clearance under 21 C.F.R. § 807.81.
- An as-applied vagueness claim fails where regulated parties—particularly sophisticated industry actors with direct FDA communications—had adequate notice that their conduct crossed the regulatory line.
- “Good faith” is not an independent affirmative defense to fraud; it is relevant only insofar as it negates the required knowledge or intent, and it does not defeat liability where knowing deception is proven.
- In fraud-based sales of misbranded or unapproved medical devices, restitution may be measured by the purchase price paid when the product was obtained through material misrepresentations, subject to supported offsets.

## Conclusion

The Seventh Circuit upheld criminal liability for marketing and promoting an unapproved, materially modified sterilizer and for related fraud and false statements, holding that the FDA’s “significant change” regulation provided adequate notice as applied and that generalized claims of good faith did not overcome evidence of knowing deception; restitution could largely reflect the price paid for the devices.


United States v. Caputo, 517 F.3d 935 (7th Cir. 2008)