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                              Xin Wu Chen d/b/a Li Lai Chinese Restaurant, DAB TB4345 (2019)
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Xin Wu Chen d/b/a Li Lai Chinese Restaurant, DAB TB4345 (2019)








  
  
    

  
      
Department of Health and Human Services 
    DEPARTMENTAL APPEALS BOARD
          Civil Remedies Division





Center for Tobacco Products,
	Complainant,
v.
Xin Wu Chen
	d/b/a Li Lai Chinese Restaurant,
	Respondent.
Docket No. T-19-2131FDA Docket No. FDA-2019-H-1367Decision No. TB4345September 26, 2019

        
              
    

      INITIAL DECISION AND DEFAULT JUDGMENT
Found:
Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(b)(1) and 21 C.F.R. § 1140.14(b)(2)(i) as charged in the Complaint; and
	Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(a)(1), 21 C.F.R. § 1140.14(a)(2)(i), and 21 C.F.R. § 1140.14(a)(4) as charged in the prior complaint1
; and
	Respondent committed six violations in a 48-month period as set forth hereinabove.
	Respondent is hereby assessed a civil penalty in the amount of $11,410.Glossary:
ALJ
	administrative law judge2
Page 2
CMP
	civil money penalty
CTP/Complainant
	Center for Tobacco Products
DJ
	Default Judgment
FDCA
	Federal Food, Drug, and Cosmetic Act (21 U.S.C.A. Chap. 9)
FDA
	Food and Drug Administration
HHS
	Department of Health and Human Services
Respondent
	Xin Wu Chen d/b/a Li Lai Chinese Restaurant
TCA
	The Family Smoking Prevention and Tobacco Control Act, Pub. L. No. 111-31, 123 Stat. 1776 (2009)
I. JURISDICTION
I have jurisdiction to hear this case pursuant to my appointment by the Secretary of Health and Human Services and my authority under the Administrative Procedure Act (5 U.S.C. §§ 554-556), 5 U.S.C.A. § 3106, 21 U.S.C. § 333(f)(5), 5 C.F.R. §§ 930.201 *et* *seq*. and 21 C.F.R. Part 17.3
II. PROCEDURAL BACKGROUND
The Center for Tobacco Products (CTP/Complainant) filed a Complaint on March 27, 2019, against Xin Wu Chen d/b/a Li Lai Chinese Restaurant (Respondent or Li Lai Chinese Restaurant), located at 5609 Walnut Street, Philadelphia, Pennsylvania 19139, alleging that FDA documented six violations within a 48-month period.
Respondent was served with process on March 26, 2019, by United Parcel Service.  Respondent filed an answer on April 24, 2019.
Page 3
On May 22, 2019, I issued a Pre-Hearing Order in which I set a schedule for discovery and pre-hearing exchanges.  Pursuant to that order, CTP sent Respondent a Request for Production of Documents on June 6, 2019, which Respondent received on June 7, 2019.  On July 30, 2019, CTP filed a Motion to Compel Discovery in which CTP averred that Respondent failed to respond to CTP’s Request for Production of Documents in its entirety.  Respondent did not file a response to CTP’s Motion to Compel Discovery.  *See* 21 C.F.R. § 17.32(c).
On July 31, 2019, I issued an Order to Compel Discovery and Order to Show Cause to Respondent.  I explained that Respondent failed to comply with the procedural rules in failing to respond to CTP’s Request for Production of Documents and the procedures and directives governing these proceedings.  I instructed Respondent to show cause and produce the documents requested in CTP’s Request for Production of Documents on or before August 16, 2019.  I warned that “[f]ailure to comply will result in sanctions, which may include issuance of an Initial Decision and Default Judgment finding Respondent liable for the violations listed in the Complaint and imposing a civil money penalty.    21 C.F.R. § 17.35.”  To date, Respondent has not responded to my Order to Compel Discovery and Order to Show Cause to Respondent.
III. STRIKING RESPONDENT’S ANSWER
Pursuant to 21 C.F.R. § 17.35(a), I may sanction a person, including any party or counsel for:
(1) Failing to comply with an order, subpoena, rule, or procedure governing the proceeding;
(2) Failing to prosecute or defend an action; or
Page 4
(3) Engaging in other misconduct that interferes with the speedy, orderly, or fair conduct of the hearing.
Here, Respondent failed to comply with my May 22, 2019 Pre-Hearing Order and 21 C.F.R. § 17.23(a), when it failed to provide documents responsive to CTP’s Request for Production of Documents within 30 days.  Respondent also failed to comply with my July 31, 2019 Order to Compel Discovery and Order to Show Cause to Respondent, requiring Respondent to show cause and comply with CTP’s Request for Production of Documents by August 16, 2019.  Respondent, therefore, has failed to comply with my orders and procedures governing this proceeding.  Respondent’s misconduct has interfered with the speedy, orderly, or fair conduct of this proceeding.  I find sanctions are appropriate pursuant to 21 C.F.R. § 17.35(a).
The harshness of the sanctions I impose upon either party must relate to the nature and severity of the misconduct or failure to comply.  21 C.F.R. § 17.35(b).  I find and conclude that Respondent’s misconduct is sufficient to warrant striking its answer and issuing a decision without further proceedings.  21 C.F.R. § 17.35(c); *see* 21 C.F.R. § 17.11(a).
IV. BURDEN OF PROOF
CTP as the petitioning party has the burden of proof.  21 C.F.R. § 17.33.
V. LAW
21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(b)(1) and 21 C.F.R. § 1140.14(b)(2)(i).
Page 5
VI. ISSUE
Did Respondent violate 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(b)(1) and 21 C.F.R. § 1140.14(b)(2)(i) as alleged in the Complaint?
VII. DEFAULT
I find Respondent was served and is subject to the jurisdiction of this forum, as established by the UPS Delivery Notification and Notice of Filing filed by CTP and by Respondent’s answer seeking relief.
Striking Respondent’s answer leaves the Complaint unanswered.
It is Respondent’s right to participate in the legal process.
It is Respondent’s right to request a hearing or to waive a hearing.
I find Respondent waived its right to a hearing pursuant to 21 C.F.R. § 17.11(b).
VIII. ALLEGATIONS
**A. Agency’s recitation of facts**
CTP alleged that Respondent owns an establishment, doing business under the name Li Lai Chinese Restaurant, located at 5609 Walnut Street, Philadelphia, Pennsylvania 19139.  Respondent's establishment receives tobacco products in interstate commerce and holds them for sale after shipment in interstate commerce.
During an inspection of Li Lai Chinese Restaurant conducted on November 30, 2018, an FDA-commissioned inspector documented the following violations:
a. Selling regulated tobacco products to a minor, in violation of 21 C.F.R. § 1140.14(b)(1).  Specifically, a person younger than 18 years of age was able
Page 6
to purchase a package of two Dutch Java Fusion cigars on November 30, 2018, at approximately 1:44 PM; and
b. Failing to verify the age of a person purchasing tobacco products by means of photographic identification containing the bearer's date of birth, as required by 21 C.F.R. § 1140.14(b)(2)(i).  Specifically, the minor’s identification was not verified before the sale, as detailed above, on November 30, 2018, at approximately 1:44 PM.
**B. Respondent’s recitation of facts**
I struck Respondent’s Answer from the record.  21 C.F.R. § 17.35(a).  Accordingly, Respondent filed no responsive pleadings that I may consider.
IX. PRIOR VIOLATIONS
On February 7, 2018, CTP initiated a previous civil money penalty action, CRD Docket Number T-18-1208, FDA Docket Number FDA-2018-H-0576, against Respondent for violations of 21 C.F.R. pt. 1140, four of which occurred during the 48-month period relevant in the current Complaint.  CTP alleged those violations to have occurred at Respondent ’s business establishment, located at 5609 Walnut Street, Philadelphia, Pennsylvania 19139, on April 12, 2016 and January 3, 2018.4
The previous action concluded when Respondent admitted the allegations contained in the Complaint issued by CTP, and agreed to pay a monetary penalty in
Page 7
settlement of that claim.  Further, “Respondent expressly waived its right to contest such violations in subsequent actions.”
I find and conclude Respondent committed six violations of 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(a)(1), 21 C.F.R. § 1140.14(a)(2)(i), 21 C.F.R. § 1140.14(a)(4), 21 C.F.R. § 1140.14(b)(1), and 21 C.F.R. § 1140.14(b)(2)(i) within a 48‐month period as set forth in the Complaint.
X. FAMILY SMOKING PREVENTION AND TOBACCO CONTROL ACT
The “relevant statute” in this case is actually a combination of statutes and regulations:  The Family Smoking Prevention and Tobacco Control Act, Pub. L. No. 111‐31, 123 Stat. 1776 (2009) (TCA), amended the Food, Drug, and Cosmetic Act (21 U.S.C.A. Chap. 9) (FDCA) and created a new subchapter of that Act that dealt exclusively with tobacco products, (21 U.S.C. §§ 387-387u), and it also modified other parts of the FDCA explicitly to include tobacco products among the regulated products whose misbranding can give rise to civil, and in some cases criminal, liability.  The 2009 amendments to the FDCA contained within the TCA also charged the Secretary of Health and Human Services with, among other things, creating regulations to govern tobacco sales.  The Secretary’s regulations on tobacco products appear in Part 1140 of Title 21, Code of Federal Regulations.
Under the FDCA, “[a] tobacco product shall be deemed to be misbranded if, in the case of any tobacco product sold or offered for sale in any State, it is sold or distributed in violation of regulations prescribed under section 387f(d).”  21 U.S.C. § 387c(a)(7)(B)
Page 8
(2012).  Section 387a‐1 directed FDA to re-issue, with some modifications, regulations previously passed in 1996.  21 U.S.C. § 387a-1(a) (2012).  These regulations were passed pursuant to section 387f(d), which authorizes FDA to promulgate regulations on the sale and distribution of tobacco products; 75 Fed. Reg. 13,225 (Mar. 19, 2010), codified at 21 C.F.R. Part 1140 (2015); 21 U.S.C. § 387f(d)(1) (2012).  Accordingly, 21 C.F.R. § 1140.1(b) provides that “failure to comply with any applicable provision in this part in the sale, distribution, and use of cigarettes and smokeless tobacco renders the product misbranded under the act.”
Under 21 U.S.C. § 331(k), “[t]he alteration, mutilation, destruction, obliteration, or removal of the whole or any part of the labeling of, or the doing of any other act with respect to, a food, drug, device, tobacco product, or cosmetic, if such act is done while such article is held for sale (whether or not the first sale) after shipment in interstate commerce and results in such article being adulterated or misbranded” is a prohibited act under 21 U.S.C. § 331.  Thus, when a retailer such as Respondent misbrands a tobacco product by violating a requirement of 21 C.F.R. Part 1140, that misbranding in turn violates the FDCA, specifically 21 U.S.C. § 331(k).  FDA may seek a civil money penalty from “any person who violates a requirement of this chapter which relates to tobacco products.”  21 U.S.C. § 333(f)(9)(A) (2012).  Penalties are set by 21 U.S.C. § 333 note and 21 C.F.R. § 17.2.  Under current FDA policy, the first time FDA finds violations of 21 C.F.R. Part 1140 at an establishment, FDA only counts one violation regardless of the number of specific regulatory requirements that were actually violated, but if FDA finds violations on subsequent occasions, it will count violations of specific
Page 9
regulatory requirements individually in computing any civil money penalty sought.  This policy is set forth in detail, with examples to illustrate, at *U.S. Food & Drug Admin., Guidance for Industry and FDA Staff, Civil Money Penalties and No-Tobacco-Sale Orders for Tobacco Retailers, Responses to Frequently Asked Questions (Revised)**(2016), available at**http://www.fda.gov/downloads/TobaccoProducts/Labeling/ RulesRegulationsGuidance/UCM447310.pdf*, at 13-14.  So, for instance, if a retailer sells a regulated tobacco product on a particular occasion to a minor without checking for photographic identification, in violation of 21 C.F.R. § 1140.14(a)(1) and (a)(2)(i), this will count as two separate violations for purposes of computing the civil money penalty, unless it is the first time violations were observed at that particular establishment.  This policy of counting violations has been determined by the HHS Departmental Appeals Board to be consistent with the language of the FDCA and its implementing regulations.  *See Orton Motor Co. d/b/a Orton’s Bagley v. HHS*,884 F.3d 1205 (D.C. Cir. 2018).
XI. LIABILITY
When a retailer such as Respondent is found to have “misbranded” a tobacco product in interstate commerce, it can be liable to pay a CMP.  21 U.S.C. §§ 331, 333.  A retailer facing such a penalty has the right, set out in statute, to a hearing under the Administrative Procedure Act.  21 U.S.C. § 333(f)(5)(A).  A retailer can forfeit its rights under the statute and regulations by failing to participate in the process, a failure known as a “default.”  21 C.F.R. § 17.11.
Page 10
As set forth above, it is Respondent’s right to decide whether to participate in the legal process.  It is Respondent’s right to decide to request a hearing and it is Respondent’s right to waive a hearing.
As detailed above, I find Respondent waived its right to a hearing.
XII. IMPACT OF RESPONDENT’S DEFAULT
Because striking a Respondent’s answer leaves the complaint unanswered, an ALJ must assume as true all factual allegations in the complaint and issue an initial decision, imposing “the maximum amount of penalties provided for by law for the violations alleged” or “the amount asked for in the complaint, whichever is smaller” if “liability under the relevant statute” is established.  21 C.F.R. § 17.11(a)(1), (2). *Compare* 21 C.F.R. § 17.45 (initial decision must state the “appropriate penalty” and take into account aggravating and mitigating circumstances).
Two aspects of Rule 17.11 are important in default cases.
First, CTP benefits from a regulatory presumption (the ALJ shall assume that the facts alleged in the complaint are true) that relieves it from having to put on evidence.
The presumption affords a party, for whose benefit the presumption runs, the luxury of not having to produce specific evidence to establish the point at issue.  When the predicate evidence is established that triggers the presumption, the further evidentiary gap is filled by the presumption.  *See* 1 Weinstein's Federal Evidence § 301.02[1], at 301‐7 (2d ed. 1997); 2 McCormick on Evidence § 342, at 450 (John W. Strong ed., 4th
Page 11
ed. 1992); *Routen v. West*, 142 F.3d 1434, 1440 (Fed. Cir. 1998).5
Second, as far as the penalty is concerned, my discretion is limited by the language of the regulation.  I may not tailor the penalty to address any extenuation or mitigation, for example, nor, because of notice concerns, may I increase the penalty beyond the smaller of (a) CTP’s request or (b) the maximum penalty authorized by law.
XIII. LIABILITY UNDER THE RELEVANT STATUTE
Taking the CTP’s allegations as set forth in the Complaint as true, the next step is whether the allegations make out “liability under the relevant statute.”  21 C.F.R. § 17.11(a).
I assume all the allegations in the Complaint to be true.
I find and conclude that the evidentiary facts, by a preponderance of the evidence standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(a)(1) and 21 C.F.R. § 1140.14(b)(1), in that a person younger than 18 years of age was able to purchase regulated tobacco products on April 12, 2016, January 3, 2018, 2017, and November 30, 2018.
Page 12
I find and conclude that the evidentiary facts, by a preponderance of the evidence standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(a)(2)(i) and 21 C.F.R. § 1140.14(b)(2)(i), on the same dates, in that Respondent also violated the requirement that retailers verify, by means of photo identification containing a purchaser’s date of birth, that no regulated tobacco products purchasers are younger than 18 years of age.
I find and conclude that the evidentiary facts, by a preponderance of the evidence standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(a)(4), on January 3, 2018, in that Respondent also violated the prohibition against the sale of individual cigarettes.
The conduct set forth above on April 12, 2016, January 3, 2018, and November 30, 2018 counts as six violations for purposes of computing the civil money penalty.
XIV. PENALTY
There being liability under the relevant statute, I must now determine the amount of penalty to impose.  My discretion regarding a penalty is constrained by regulation.  I must impose either the maximum amount permitted by law or the amount requested by the Center, whichever is lower.  21 C.F.R. § 17.11(a)(1), (a)(2).
In terms of specific penalties available, the legislation that provides the basis for assessing civil monetary penalties divides retailers into two categories:  those that have “an approved training program” and those that do not.  Retailers with an approved program face no more than a warning letter for their first violation; retailers without such
Page 13
a program begin paying monetary penalties with their first.  TCA § 103(q)(2), 123 Stat. 1839, *codified at* 21 U.S.C. § 333 note.  *See* 21 C.F.R. § 17.2.  The FDA has informed the regulated public that “at this time, and until FDA issues regulations setting the standards for an approved training program, all applicable CMPs will proceed under the reduced penalty schedule.”  FDA Regulatory Enforcement Manual, Aug. 2015, ¶ 5-8-1.  Because of this reasonable exercise of discretion, the starting point for punishments and the rate at which they mount are clear – the lower and slower schedules.
XV. MITIGATION
It is incumbent upon Respondent to present any factors that could result in mitigation of CTP’s proposed penalty.  Specifically, it is Respondent’s burden to provide mitigating evidence.  In a default, a respondent has failed to participate and has failed to present any evidence regarding potential mitigation.  I have no reason to mitigate the penalty.
XVI. CONCLUSION
Respondent committed six violations in a 48-month period and so, Respondent is liable for a civil money penalty of $11,410. *See*21 C.F.R. § 17.2.
Page 14
WHEREFORE, evidence having read and considered it be and is hereby ORDERED as follows:
I find Respondent has been served with process herein and is subject to this forum.
	I find Respondent failed to comply with my May 22, 2019 Pre-Hearing Order and my July 31, 2019 Order to Compel Discovery and Order to Show Cause to Respondent.
	I find Respondent failed to comply with my orders and procedures governing this proceeding, constituting misconduct that has interfered with the speedy, orderly, or fair conduct of this proceeding.  21 C.F.R. § 17.35(a).
	I find Respondent’s misconduct warrants striking its answer as a sanction.  21 C.F.R. § 17.35(c).
	I find striking Respondent’s answer leaves the Complaint unanswered.  21 C.F.R. § 17.11.
	I find Respondent is in default.
	I assume the facts alleged in the Complaint to be true.  21 C.F.R. § 17.11.
	I find the facts set forth in the Complaint establish liability under the relevant statute.
	I assess a monetary penalty in the amount of $11,410./s/
        Richard C. Goodwin

                      Administrative Law Judge
      1. On August 8, 2016, the citations to certain tobacco violations changed. For more information see: https://federalregister.gov/a/2016-10685. back to note 1
                      2. See 5 C.F.R. § 930.204. back to note 2
                      3. See also Butz v. Economou, 438 U.S. 478, 513 (1978); Marshall v. Jerrico, Inc., 446 U.S. 238 (1980); Federal Maritime Com’n v. South Carolina State Ports Authority, 535 U.S. 743, 744 (2002). back to note 3
                      4. Two violations were documented on April 12, 2016, and three on January 3, 2018. In accordance with customary practice, CTP counted the violations at the initial inspection as a single violation, and all subsequent violations as separate individual violations. back to note 4
                      5. However, when the opposing party puts in proof to the contrary of that provided by the presumption, and that proof meets the requisite level, the presumption disappears. See Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248, 254-55 (1981); A.C. Aukerman, 960 F.2d at 1037 (“[A] presumption . . . completely vanishes upon the introduction of evidence sufficient to support a finding of the nonexistence of the presumed fact.”); see also Weinstein’s Federal Evidence § 301App.100, at 301App.-13 (explaining that in the “bursting bubble” theory once the presumption is overcome, then it disappears from the case); 9 Wigmore on Evidence § 2487, at 295-96 (Chadbourn rev. 1981). See generally Charles V. Laughlin, In Support of the Thayer Theory of Presumptions, 52 Mich. L. Rev. 195 (1953); Routen v. West, 142 F.3d 1434, 1440 (Fed. Cir. 1998). back to note 5 Back to top
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