Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Henry McCloyn
(OI File No. H-13-4-2457-9),

Petitioner,
v.

The Inspector General.

Docket No. C-14-878

Decision No. CR3550

Date: January 6, 2015
DECISION

The Inspector General (IG) of the United States Department of Health and Human
Services excluded Petitioner, Henry McCloyn, for eight years from participation in
Medicare, Medicaid, and all other federal health care programs based on Petitioner’s
conviction of a felony related to the unlawful manufacture, distribution, prescription, or
dispensing of a controlled substance. Petitioner sought review of the exclusion. For the
reasons stated below, I conclude that the IG has a basis for excluding Petitioner because
Petitioner was convicted of a felony offense related to the unlawful distribution of a
controlled substance as defined under state law. Further, I affirm the length of the
exclusion because the IG proved that two aggravating factors exist to justify the eight-
year exclusion. Finally, the March 20, 2014 exclusion effective date is governed by
regulation and I have no authority to alter that date.

I. Background
By letter dated February 28, 2014, the IG notified Petitioner that he was being excluded

from Medicare, Medicaid, and all federal health care programs pursuant to 42 U.S.C.
§ 1320a-7(a)(4) for a period of eight years. IG Exhibit (Ex.) 1 at 1-2. The IG advised
Petitioner that the exclusion was based on his felony conviction “in United States District
Court, District of Utah, of a criminal offense related to the unlawful manufacture,
distribution, prescription, or dispensing of a controlled substance as defined under
Federal or State law.” IG Ex. | at 1. Further, the IG imposed a length of exclusion in
excess of the five-year statutory minimum because “[t]he court sentenced [Petitioner] to
34 months of incarceration . . .” and because “[Petitioner] surrendered [his] clinical social
worker license to the Utah Division of Occupational and Professional Licensing.” IG Ex.
1 at 1-2.

Petitioner timely filed a request for hearing. I was assigned to hear and decide this case.
On June 11, 2014, I convened a prehearing conference by telephone, the substance of
which is summarized in my Order and Schedule for Filing Briefs and Documentary
Evidence (Order) of the same date. See 42 C.F.R. § 1005.6. Pursuant to the Order, the
IG submitted a brief (IG Br.) together with five exhibits (IG Exs. 1-5), Petitioner
submitted a response brief (P. Br.), and the IG submitted a reply brief.

II. Decision on the Record

Petitioner did not object to any of the IG’s proposed exhibits. Therefore, I admit IG Exs.
1-5 into the record. Order § 5. Petitioner did not submit any proposed exhibits.

The decision in this case will be based on the written record. See Order § 6. I ordered the
parties to complete and submit short form briefs. The IG filed a completed short form
brief and indicated that he did not believe an in-person hearing was necessary and that he
did not have any testimony to offer at a hearing. IG Br. at 5. Petitioner only completed
one page of the short form brief. In his submission, he did not indicate that an in-person
hearing was necessary or that he had testimony to offer. I previously informed Petitioner
that he had the right to request a video hearing and that the request must explain why a
video hearing is necessary. Order § 4. Petitioner did not request a video hearing or
explain why a video hearing was needed. Therefore, I issue this decision based on the
written record.

III. Issue

The issues in this case are limited to determining if there is a basis for exclusion and, if
so, whether the length of the exclusion imposed by the IG is unreasonable. 42 C.F.R.
§ 1001.2007(a)(1)-(2).

IV. Jurisdiction

Ihave jurisdiction to adjudicate this case. 42 U.S.C. § 1320a-7(f)(1); 42 C.F.R. § 1005.2.
V. Findings of Fact, Conclusions of Law, and Analysis’

A. The IG proved each of the required elements under 42 U.S.C. § 1320a-
7(a)(4); therefore, there is a basis to exclude Petitioner.

The IG cites 42 U.S.C. § 1320a-7(a)(4) as the basis for Petitioner’s mandatory exclusion.
IG Ex. |. The statute provides:

(a) Mandatory exclusion

The Secretary shall exclude the following individuals and
entities from participation in any Federal health care program
(as defined in section 1320a—7b(f) of this title):

(4) Felony conviction relating to controlled substance

Any individual or entity that has been convicted for an
offense which occurred after August 21, 1996, under
Federal or State law, of a criminal offense consisting
of a felony relating to the unlawful manufacture,
distribution, prescription, or dispensing of a controlled
substance.

Thus, the elements the IG must prove to sustain Petitioner’s exclusion pursuant to section
1320a-7(a)(4) in this case are: (1) Petitioner was convicted of a criminal offense
consisting of a felony which occurred after August 21, 1996, and (2) Petitioner’s offense
was related to the unlawful manufacture, distribution, prescription, or dispensing of a
controlled substance.

1. Petitioner pled guilty in the U.S. District Court, District of
Utah, to Distribution of Oxycodone, a felony violation under
21 U.S.C. § 841(a)(1), and the federal court entered a
Judgment in Criminal Case.

On July 20, 2011, a grand jury of the United States District Court, District of Utah,
Central Division, indicted Petitioner on nine counts of criminal conduct. IG Ex. 4.

' My findings of fact and conclusions of law are set forth in italics and bold font.

> The Indictment included a total of ten counts and involved both Petitioner and a co-
defendant. However, Count Nine of the Indictment was only related to Petitioner’s co-
Count Two of the Indictment states that, on or about March 14, 2011, Petitioner, “did
knowingly and intentionally distribute oxycodone, a schedule II controlled substance
within the meaning of 21 U.S.C. § 812, in violation of 21 U.S.C. § 841(a)(1) and
punishable pursuant to 21 U.S.C. § 841(b)(1)(C).” IG Ex. 4 at 2. On April 22, 2012,
Petitioner pled guilty to Count Two of the Indictment. IG Ex. 2. Petitioner stipulated to
the facts describing his criminal conduct: between December 2010 and March 2011,
Petitioner sold oxycodone to an individual who later became an informant for the police;
thereafter, on four occasions, Petitioner sold 533 oxycodone 30 mg tablets to an
undercover federal agent. IG Ex. 2 at 5. On July 16, 2012, the District Court entered a
Judgment in Criminal Case in which it: accepted Petitioner’s guilty plea to Count Two of
the Indictment; adjudicated defendant guilty of “Distribution of Oxycodone” under

21 U.S.C. § 841(a)(1); and dismissed the other counts in the Indictment related to
Petitioner. IG Ex. 3 at 1. The District Court sentenced Petitioner to a 45-month term of
imprisonment. IG Ex. 3 at 2. Subsequently, on March 7, 2013, the District Court issued
an Amended Judgment in Criminal Case in which the District Court reduced Petitioner’s
term of imprisonment to 34 months. IG Ex. 3 at 8.

2. Petitioner must be excluded under 42 U.S.C. § 1320a-7(a)(4)
because he was convicted of a felony criminal offense related to
the unlawful distribution of a controlled substance.

The IG must exclude an individual from participation in all federal health care programs
if the individual has been convicted of a criminal offense consisting of a felony that
occurred after August 21, 1996, and which related to the unlawful manufacture,
distribution, prescription, or dispensing of a controlled substance. 42 U.S.C. § 1320a-
7(a)(4).

An individual is “convicted” of a criminal offense “when a judgment of conviction has
been entered against the individual . . . by a Federal, State, or local court... .” Id.

§ 1320a-7(i)(1). Further, an individual is also “convicted” of a criminal offense when “a
plea of guilty . . . by the individual . . . has been accepted by a Federal, State, or local
court.” Id. § 1320a-7(i)(3). As previously discussed, Petitioner pled guilty to a criminal
offense, and the District Court accepted his plea and issued a judgment of conviction.

IG Exs. 2-3. Further, Petitioner concedes he was convicted of a felony. P. Br. at 1.
Accordingly, for purposes of exclusion, Petitioner was “convicted” of a criminal offense.

Count Two of the Indictment, to which Petitioner pled guilty, states that the criminal
conduct occurred “on or about March 14, 2011.” IG Ex. 4 at 2. Further, Petitioner
stipulated that the conduct occurred “between December 2010 and March 2011” and
concedes that he was convicted a felony occurring after August 21, 1996. IG Ex. 2 at 5;

defendant. The remaining counts were brought against either both defendants or
Petitioner only.
P. Br. at 1. Therefore, Petitioner was convicted of an offense that occurred after August
21, 1996.

Petitioner’s conviction constituted a felony offense. Petitioner was convicted of violating
21 U.S.C. § 841(a)(1), punishable pursuant to 21 U.S.C. § 841(b)(1)(C). IG Ex. 4 at 2.
Any offense that is not specifically classified in the section defining it is classified as a
class C felony, if the maximum term of imprisonment authorized is less than twenty-five
years but ten or more years. 18 U.S.C. § 3559(a)(3). Although 21 U.S.C. § 841(a)(1) is
not specifically classified as a felony, section 841(b)(1)(C) states that the maximum term
of imprisonment is 20 years. Therefore, Petitioner’s conviction of violating 21 U.S.C.

§ 841(a)(1) constitutes a felony conviction for purposes of exclusion.

Finally, Petitioner’s conviction was related to the unlawful distribution of a controlled
substance. As previously noted, Petitioner pled guilty that he “did knowingly and
intentionally distribute oxycodone, a schedule II controlled substance within the meaning
of 21 U.S.C. § 812, in violation of 21 U.S.C. § 841 (a)(1)....” IG Ex. 4 at 2. The statute
at 21 U.S.C. § 812 delineates schedules of controlled substances, and ascribes oxycodone
as a schedule II controlled substance. Petitioner stipulated that he knowingly unlawfully
sold oxycodone. The statute, Petitioner’s stipulations during his guilty plea, and the
District Court’s Judgment of Criminal Conviction make it clear that Petitioner unlawfully
distributed oxycodone, a controlled substance. Therefore, I conclude that each element
under 42 U.S.C. § 1320a-7(a)(4) is satisfied and that Petitioner must be excluded.

B. The presence of two aggravating factors and the absence of any mitigating
factors justify excluding Petitioner for a period of eight years.

Because I have concluded that a basis exists to exclude Petitioner pursuant to 42 U.S.C.
§ 1320a-7(a)(4), Petitioner must be excluded for a minimum period of five years.

42 U.S.C. § 1320a-7(c)(3)(B). While the IG must impose the five-year minimum
mandatory term of exclusion, the IG is authorized to lengthen that term if certain
aggravating factors exist. See 42 C.F.R. § 1001.102. Those aggravating factors are
detailed at 42 C.F.R. § 1001.102(b)(1)-(9). The IG added three years to Petitioner’s
exclusion based on the presence of two aggravating factors: 42 C.F.R. § 1001.102(b)(5)
(the sentence imposed by the court in this case included incarceration) and (b)(9) (an
adverse action taken by a State board, based on the same circumstances that serve as the
basis for imposing the exclusion.) I must uphold the IG’s determination as to the length
of exclusion so long as it is not unreasonable. 42 C.F.R. § 1001.2007(a)(1)(ii).

1. The U.S. District Court, District of Utah, sentenced Petitioner
to 34 months of incarceration.

I conclude that an enlargement of Petitioner’s exclusion is not unreasonable given the
presence of the aggravating factor that Petitioner’s sentence included incarceration.
42 CFR. § 1001.102(b)(5). The District Court sentenced Petitioner to 34 months of
imprisonment. IG Ex. 3 at 8. A prison sentence of as little as nine months is considered
to be relatively substantial for exclusion purposes. Jason Hollady, M.D., DAB No. 1855,
at 12 (2002). Petitioner’s sentence is almost four times longer than that and represents a
substantial period of time, which indicates the seriousness of his offense. This length of
imprisonment is probably sufficient, by itself, to justify the 8-year exclusion.

2. The Utah Department of Commerce, Division of Occupational
Licensing, entered a disciplinary order accepting Petitioner’s
surrender of all residual and reinstatement rights to his expired
license to practice as a licensed clinical social worker.

I conclude that an enlargement of Petitioner’s exclusion is not unreasonable given the
presence of the aggravating factor that Petitioner stipulated to the surrender of his
residual and reinstatement rights to his Utah license to practice as a licensed clinical
social worker and the Utah Department of Commerce, Division of Occupational
Licensing (Utah Division of Occupational Licensing), entered a disciplinary order
accepting that stipulation. 42 C.F.R. § 1001.102(b)(9).

Petitioner was licensed to practice in Utah as a licensed clinical social worker in January
2008, and his license expired on or about September 30, 2012. CMS Ex. 5 at 2.
However, it appears that at some time following his criminal conviction, the Utah
Division of Occupational Licensing issued a Notice of Agency Action. See CMS Ex. 5 at
2-3. Although Petitioner’s Utah license expired on or about September 30, 2012,
Petitioner stipulated that the Utah Division of Occupational Licensing had jurisdiction
over him and the subject matter of the action that had been commenced. CMS Ex. 5 at 1.
Respondent stipulated to the same set of facts in his criminal case (i.e., Petitioner illegally
sold over 500 tablets of oxycodone and pled guilty to Count Two of the Indictment) and
that his conduct constituted “unprofessional conduct” under Utah law justifying
disciplinary action. CMS Ex. 5 at 3. Petitioner stipulated to the surrender of all residual
and reinstatement rights pertaining to his expired license as a licensed clinical social
worker in Utah and agreed not to reapply for licensure for four years. IG Ex. 5 at 3. The
Utah Division of Occupational Licensing issued an order on February 13, 2013, in which
it approved Petitioner’s stipulations. CMS Ex. 5 at 6. That order is considered a
disciplinary action under Utah law. CMS Ex. 5 at 6.

Based on these facts, I conclude that the IG proved that Petitioner was subject to an
adverse action by a state agency that was based on the same set of circumstances that
formed the basis for the IG’s exclusion. 42 C.F.R. § 1001.102(b)(9). Accordingly, the
presence of this additional aggravating factor further justifies Petitioner’s exclusion for
an extended period of eight years.
3. Petitioner did not prove the existence of any mitigating factors
that would justify a reduction in the length of exclusion
imposed by the IG.

In his brief, Petitioner details his career path and dedication to the field of social work,
and explains that he dedicated his professional life to providing social and mental health
services, often for underserved populations. P. Br. at 1-4. Petitioner asserts that I ought
to use my discretion to reduce the length of exclusion to five years because: Petitioner’s
crime did not relate to the services he provided to his clients; his professional
competence, professional performance, and financial integrity are not in question;
obtaining employment in the field of social services is the best way for Petitioner to
return to being a productive citizen; and Utah will permit Petitioner to reapply for his for
his license as a licensed clinical social worker in 2017. P. Br. at 4-5.

Iam unable to reduce the length of exclusion in this case. Under the regulations, I may
reduce the length of exclusion to no less than five years if one or more mitigating factors
are present; however, I may only reduce the length of exclusion based on the mitigating
factors specified in the regulations. 42 C.F.R. § 1001.102(c). While Petitioner’s career
path, as expressed in his brief, is laudable, Petitioner does not present any mitigating
factors cognizable under the regulations. 42 C.F.R. § 1001.102(c) (1) — (3). Ihave
limited discretion to reduce the length of exclusion. See 57 Fed. Reg. 3,298, 3,321 (Jan.
29, 1992). Therefore, I must uphold the IG’s eight-year exclusion because it is not
unreasonable under the regulations.

C. The effective date of exclusion is March 20, 2014, and I have no authority to
modify that effective date.

Petitioner requests that the effective date of exclusion be retroactively commenced to the
date of his conviction “and not at the time of [this] decision.” P. Br at 4.

Exclusions are effective 20 days after the date of the notice. 42 C.F.R. § 1001.2002(b);
see also 42 U.S.C. § 1320a-7(c)(1). When an exclusion is effective before a decision is
issued by an administrative law judge, as it is in this case, that exclusion is “deemed to
commence on the date such exclusion originally went into effect.” 42 C.F.R.

§ 1005.20(b).

In the present matter, the IG issued the exclusion notice on February 28, 2014. IG Ex. 1
at 1. Therefore, Petitioner’s exclusion commenced 20 days later on March 20, 2014.
Ihave no authority to change the effective date. See 42 C.F.R. § 1005.4(c)(1).
VI. Conclusion

For the foregoing reasons, I affirm the IG ’s determination to exclude Petitioner for eight
years from participating in Medicare, Medicaid, and all federal health care programs
pursuant to 42 U.S.C. § 1320a-7(a)(4).

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant,
v.

J and E Superette, Inc. / James Jones
d/b/a J and E Superette,

Respondent.

Docket No. C-15-231
FDA Docket No. FDA-2014-H-1754

Decision No. CR3549

Date: January 5, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, J and E Superette, Inc. / James Jones d/b/a J and E Superette that
alleges facts and legal authority sufficient to justify the imposition of a civil money
penalty of $500. Respondent did not answer the Complaint, nor did Respondent request
an extension of time within which to file an answer. Therefore, I enter a default
judgment against Respondent and assess a civil money penalty of $500.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent impermissibly sold cigarettes to
minors and failed to verify that a cigarette purchaser was 18 years of age or older, thereby
violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and
its implementing regulations, Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140
(2013). CTP seeks a civil money penalty of $500.
On November 5, 2014, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days, Respondent should pay the proposed
penalty, file an answer, or request an extension of time within which to file an answer.
CTP warned Respondent that if it failed to take one of these actions within 30 days, an
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering Respondent to pay the full amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Pursuant to 21 C.F.R. § 17.11(a), Iam required to “assume the
facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the
Act, issue a default judgment and impose a civil money penalty. Accordingly, I must
determine whether the allegations in the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns J and E Superette, an establishment that sells tobacco products
and is located at 2626 M W Rickenbaker Road, Manning, South Carolina 29102.
Complaint 3.

e During an inspection of Respondent’s establishment on December 10, 2013, at
approximately 3:43 PM, an FDA-commissioned inspector observed that “‘a person
younger than 18 years of age was able to purchase a package of Newport Kings
cigarettes.” Complaint § 10.

¢ On February 27, 2014, CTP issued a Warning Letter to Respondent regarding the
inspector’s observation from December 10, 2013. The letter explained that the
observation constituted a violation of regulations found at 21 C.F.R. § 1140.14(a)
and that the named violation was not necessarily intended to be an exhaustive list
of all violations at the establishment. The Warning Letter went on to state that if
Respondent failed to correct the violations, regulatory action by the FDA or a civil
money penalty action could occur and that Respondent is responsible for
complying with the law. Complaint 4 10.

e Although FDA did not receive a response to the Warning Letter, United Parcel
Service records indicate the Warning Letter was received on February 28, 2014 by
“Jayshawn.” Complaint § 11.

e During a subsequent inspection of Respondent’s establishment on May 7, 2014, at
approximately 3:54 PM, FDA-commissioned inspectors documented that “a
person younger than 18 years of age was able to purchase a package of Newport
Box cigarettes ... [.]” The inspector also observed that “the minor’s
identification was not verified before the sale... .” Complaint § 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of cigarettes to any person younger than 18 years of age. 21 C.F.R. § 1140.14(a).
The regulations also require retailers to verify, by means of photo identification
containing a purchaser’s date of birth, that no cigarette purchasers are younger than

18 years of age. 21 C.F.R. § 1140.14(b)(1).

Taking the above alleged facts as true, on December 10, 2013 and May 7, 2014, the
Respondent violated the prohibition against selling tobacco products to persons younger
than 18 years of age, 21 C.F.R. § 1140.14(a). On May 7, 2014 the Respondent also
violated the requirement that retailers verify, by means of photo identification containing
a purchaser’s date of birth, that no cigarette purchasers are younger than 18 years of age.
21 C.F.R. § 1140.14(b)(1). Therefore, Respondent’s actions constitute violations of law
that merit a civil money penalty.

CTP has requested a fine of $500, which is a permissible fine under the regulations.
21 C.F.R. § 17.2. Therefore, I find that a civil money penalty of $500 is warranted and so
order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1789)

Complainant,
v.

Highland Lakes Gas LLC
d/b/a Delta,

Respondent.
Docket No. C-15-276
Decision No. CR3547
Date: January 2, 2015
INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Highland Lakes Gas LLC d/b/a Delta, at 189 Breakneck Road,
Highland Lakes, New Jersey 07422 and by filing a copy of the complaint with the Food
and Drug Administration’s (FDA) Division of Dockets Management. The complaint
alleges that Delta unlawfully sold tobacco products to minors and failed to verify, by
means of photo identification containing a date of birth, that tobacco purchasers were

18 years of age or older, thereby violating the Federal Food, Drug, and Cosmetic Act
(Act), 21 U.S.C. § 301 et seg., and its implementing regulations, 21 C.F.R. pt. 1140.

CTP seeks to impose a $500 civil money penalty against Respondent Delta.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on November 6, 2014, CTP served the
complaint on Respondent Delta by United Parcel Service. In the complaint and
accompanying cover letter, CTP explained that, within 30 days, Respondent should pay
the penalty, file an answer, or request an extension of time in which to file an answer.
CTP warned Respondent that, if it failed to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

Respondent Delta has neither filed an answer within the time prescribed, nor requested an
extension of time within which to file an answer. Pursuant to 21 C.F.R.

§ 17.11, Lassume that the facts alleged in the complaint (but not its conclusory
statements) are true. Specifically:

e At Respondent’s business establishment, 189 Breakneck Road, Highland Lakes,
New Jersey 07422, on November 16, 2013, at approximately 4:13 PM, an FDA-
commissioned inspector observed Respondent’s staff sell a package of
Copenhagen Long Cut Wintergreen smokeless tobacco to a person younger than
18 years of age. The inspector also observed that Respondent’s staff failed to
verify, by means of photo identification containing the bearer’s date of birth, that
the tobacco purchaser was 18 years of age or older;

e Ina warning letter issued on January 30, 2014, CTP informed Respondent of the
inspector’s observations from November 16, 2013, and that such actions violate
federal law, 21 C.F.R. § 1140.14(a) and (b)(1). The letter further warned that if
Respondent failed to correct its violations, the FDA could impose a civil money
penalty or take other regulatory action;

e At Respondent’s business establishment, 189 Breakneck Road, Highland Lakes,
New Jersey 07422, on May 12, 2014, at approximately 6:32 PM, FDA-
commissioned inspectors documented Respondent’s staff selling a package of
Kodak Premium Wintergreen smokeless tobacco to a person younger than 18
years of age. The inspectors also observed that Respondent’s staff failed to verify,
by means of photo identification containing the bearer’s date of birth, that the
tobacco purchaser was 18 years of age or older;

These facts establish Respondent’s liability under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if sold or distributed in violation of regulations issued under section 906(d) of the Act.

21 US.C. § 387f(d); see 21 U.S.C. § 387¢(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21 C.F.R.

§ 1140.14(a), no retailer may sell cigarettes or smokeless tobacco to any person younger
than 18 years of age.
Under 21 C.F.R. § 1140.14(b)(1), retailers must verify, by means of photo identification
containing the bearer’s date of birth, that no cigarette or smokeless tobacco purchaser is
younger than 18 years of age.

A $500 civil money penalty is permissible under 21 C.F.R. § 17.2.

Order

For these reasons, I enter default judgment in the amount of $500 against Respondent
Highland Lakes Gas LLC d/b/a Delta. Pursuant to 21 C.F.R. § 17.11(b), this order
becomes final and binding upon both parties after 30 days of the date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1787)

Complainant
v.

Alcantar Enterprises, Inc. / Maria Alcantar
and Jose Alcantar
d/b/a Su Mercadito 2,

Respondent.
Docket No. C-15-268
Decision No. CR3545

Date: January 2, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Alcantar Enterprises, Inc. / Maria Alcantar and Jose Alcantar
d/b/a Su Mercadito 2, at 108 Main Street, Granger, Washington 98932, and by filing a
copy of the complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. The complaint alleges that Su Mercadito 2 impermissibly sold
cigarettes to minors and failed to verify, by means of photo identification containing a
date of birth, that the purchasers were 18 years of age or older, thereby violating the
Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its
implementing regulations, 21 C.F.R. pt. 1140. CTP seeks to impose a $500 civil money
penalty against Respondent Su Mercadito 2.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on November 6, 2014, CTP served the
complaint on Respondent Su Mercadito 2 by United Parcel Service. In the complaint and
accompanying cover letter, CTP explained that, within 30 days, Respondent should pay
the penalty, file an answer, or request an extension of time in which to file an answer.
CTP warned Respondent that, if it failed to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

Respondent Su Mercadito 2 has neither filed an answer within the time prescribed, nor
requested an extension of time within which to file an answer. Pursuant to 21 C.F.R.

§ 17.11, Lassume that the facts alleged in the complaint (but not its conclusory
statements) are true. Specifically:

e At approximately 9:37 a.m. on December 17, 2013, at Respondent’s business
establishment, 108 Main Street, Granger, Washington 98932, an
FDA-commissioned inspector observed Respondent’s staff selling a package of
Marlboro 100’s cigarettes to a person younger than 18 years of age. The inspector
also observed that staff failed to verify, by means of photographic identification
containing a date of birth, that the purchaser was 18 years of age or older;

e Ina warning letter dated March 13, 2014, CTP informed Respondent of the
inspector’s December 17, 2013 observations, and that such actions violate federal
law, 21 C.F.R. § 1140.14(a) and (b)(1). The letter further warned that
Respondent’s failure to correct its violations could result in a civil money penalty
or other regulatory action;

e At approximately 12:54 p.m. on May 8, 2014, at Respondent’s business
establishment, 108 Main Street, Granger, Washington 98932, FDA-commissioned
inspectors documented Respondent’s staff selling a package of Marlboro
cigarettes to a person younger than 18 years of age. The inspectors also
documented that staff failed to verify, by means of photographic identification
containing a date of birth, that the purchaser was 18 years of age or older.

These facts establish Respondent Su Mercadito 2’s liability under the Act. The Act
prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section 906(d)
of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).
The Secretary of the U.S. Department of Health and Human Services issued the
regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1;
see 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21
C.F.R. § 1140.14(a), no retailer may sell cigarettes to any person younger than 18 years
of age.
Under 21 C.F.R. § 1140.14(b)(1), retailers must verify, by means of photographic
identification containing a purchaser’s date of birth, that no cigarette purchasers are
younger than 18 years of age.

A $500 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $500 against Respondent
Alcantar Enterprises, Inc. / Maria Alcantar and Jose Alcantar d/b/a Su Mercadito 2.
Pursuant to 21 C.F.R. § 17.11(b), this order becomes final and binding upon both parties
after 30 days of the date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Luisa Deli and Grocery, Inc. / Juan G. Rivas
d/b/a Luisa Grocery,

Respondent.

Docket No. C-15-112
FDA Docket No. FDA-2014-H-1614

Decision No. CR3513

Date: January 27, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Luisa Deli and Grocery, Inc. / Juan G. Rivas d/b/a Luisa Grocery,

that alleges facts and legal authority sufficient to justify the imposition of a civil money
penalty of $10,000. Respondent did not answer the Complaint, nor did Respondent
request an extension of time within which to file an answer. Therefore, I enter a default
judgment against Respondent and assess a civil money penalty of $10,000.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent impermissibly sold cigarettes to
minors, failed to verify that cigarette purchasers were 18 years of age or older and
distributed individual cigarettes, thereby violating the Federal Food, Drug, and Cosmetic
Act (Act), 21 U.S.C. § 301 et seg., and its implementing regulations, Cigarettes and
Smokeless Tobacco, 21 C.F.R. pt. 1140 (2013). CTP seeks a civil money penalty of
$10,000.

On October 22, 2014, CTP served the Complaint on Respondent by United Parcel

Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint

and accompanying

cover letter, CTP explained that within 30 days, Respondent should pay the proposed
penalty, file an answer, or request an extension of time within which to file an answer.
CTP warned Respondent that if it failed to take one of these actions within 30 days, an
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering Respondent to pay the full amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Pursuant to 21 C.F.R. § 17.11(a), Iam required to “assume the
facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the

Act, issue a default judgment and impose a civil money penalty. A

ccordingly, I must

determine whether the allegations in the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Luisa Grocery, an establishment that sells

tobacco products and

is located at 123 Elizabeth Avenue, Newark, New Jersey 07108. Complaint { 3.

e CTP previously initiated a civil money penalty action, CRD

Docket Number C-13-

1208, FDA Docket Number FDA-2013-H-1003, against Respondent for four
violations of 21 C.F.R. pt. 1140 within a 24-month period. Specifically,

Respondent violated 21 C.F.R. § 1140.14(a) on June 12, 201

3 by selling tobacco

products to a minor. On June 12, 2013, Respondent also violated 21 C.F.R.

§ 1140.14(b) by failing to verify, by means of photographic identification
containing the purchaser’s date of birth, that the purchaser of cigarettes was not
younger than 18 years of age. Respondent also violated 21 C.F.R. § 1140.14(d) by

selling individual cigarettes on June 12, 2013 and February
Complaint § 10.

e The previous civil money penalty action concluded when on

1, 2013.

November 15, 2013

an administrative law judge issued an Initial Decision and Default Judgment

against Respondent. This decision, which became final and
15, 2013, found Respondent liable for the four violations. C

binding on December
omplaint Jj 11-12.

e During a subsequent inspection of Respondent’s establishment conducted on May

1, 2014, FDA-commissioned inspectors documented that “a
18 years of age was able to purchase an individual cigarette.

person younger than
. . at approximately

7:03 PM[.]” The inspectors also noted that “the minor’s identification was not

verified before the sale. . . [.]” Complaint { 1.

These facts establish that Respondent is liable under the Act. The Act prohibits

misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco

product is misbranded

if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of cigarettes to any person younger than 18 years of age. 21 C.F.R. § 1140.14(a).
The regulations also require retailers to verify, by means of photo identification
containing a purchaser’s date of birth, that no cigarette purchasers are younger than 18
years of age. 21 C.F.R. § 1140.14(b)(1). The regulations also prohibit the sale of
individual cigarettes. 21 C.F.R. § 1140.14(d).

Taking the above alleged facts as true, Respondent violated the prohibition against selling
cigarettes to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a), on June 12,
2013, and May 1, 2014. On those same dates, Respondent also violated the requirement
that retailers verify, by means of photo identification containing a purchaser’s date of
birth, that no cigarette purchasers are younger than 18 years of age. 21 C.F.R.
§1140.14(b)(1). On June 12, 2013, February 11, 2013 and May 1, 2014 Respondent also
violated the prohibition against selling individual cigarettes. 21 C.F.R. § 1140.14(d).
Therefore, Respondent’s actions constitute violations of law that merit a civil money
penalty.

CTP has requested a fine of $10,000, which is a permissible fine under the regulations.
21 C.F.R. § 17.2. Therefore, I find that a civil money penalty of $10,000 is warranted
and so order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2015-H-2921)

Complainant
v.
East End Kitchen and Market, LLC,
Respondent.
Docket No. C-15-3738
Decision No. CR4765

Date: December 29, 2016

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, East End Kitchen and Market, LLC, at 1159 Stratford Avenue,
Bridgeport, Connecticut 06607, and by filing a copy of the complaint with the Food and
Drug Administration’s (FDA) Division of Dockets Management. The complaint alleges
that East End Kitchen and Market, LLC impermissibly sold cigarettes to minors and
failed to verify, by means of photo identification containing a date of birth, that the
purchasers were 18 years of age or older, thereby violating the Federal Food, Drug, and
Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R.
pt. 1140. The complaint likewise alleges that an Initial Decision and Default Judgment
was previously entered against Respondent East End Kitchen and Market, LLC on March
6, 2015. The prior Default Judgment found Respondent liable for three violations of
regulations found at 21 C.F.R. pt. 1140 and, therefore, CTP seeks to impose a $5,000
civil money penalty against Respondent East End Kitchen and Market, LLC.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on August 27, 2015, CTP served the
complaint on Respondent East End Kitchen and Market, LLC by United Parcel Service.
In the complaint and accompanying cover letter, CTP explained that, within 30 days,
Respondent should pay the penalty, file an answer, or request an extension of time in
which to file an answer. CTP warned Respondent that, if it failed to take one of these
actions within 30 days, the Administrative Law Judge could, pursuant to 21 C.F.R.
§ 17.11, issue an initial decision ordering it to pay the full amount of the proposed
penalty.

I. Procedural History

On September 14, 2015, Respondent timely requested an extension of time to file an
answer. I granted Respondent’s request on September 18, 2015, and extended
Respondent’s answer deadline to October 28, 2015. Subsequently, Respondent timely
filed an answer.

On November 9, 2016, I scheduled this matter for a prehearing conference. The
prehearing conference was scheduled for December 7, 2016 at 1:00 PM (Eastern). Both
parties were notified of the time and date. The prehearing conference was held as
scheduled on December 7, 2016. Representatives for CTP appeared on the call, however,
Respondent failed to appear.

On December 7, 2016, I issued an Order requiring Respondent to show cause for its
failure to appear at the prehearing conference. Respondent was warned that failure to
respond to the December 7, 2016 Order could result in sanctions, including the issuance
of an Initial Decision and Default Judgment finding Respondent liable for the violations
in the complaint and imposing a civil money penalty. Respondent was given until
December 21, 2016 to show cause. To date, Respondent has not responded to the
December 7, 2016 Order. Therefore, pursuant to 21 C.F.R. § 17.35, I am striking
Respondent’s answer for failing to appear at the prehearing conference and failing to
respond to my Order to show cause.

I. Default Decision

Striking Respondent’s answer leaves the complaint unanswered. Pursuant to 21 C.F.R.
§ 17.11, Lassume that the facts alleged in the complaint (but not its conclusory
statements) are true. Specifically:

e On January 13, 2015, CTP initiated a previous civil money penalty action, CRD
Docket Number C-15-904, FDA Docket Number FDA-2015-H-0103, against
Respondent' for three’ violations of 21 C.F.R. pt. 1140 within a twenty-four
month period. CTP alleged those violations to have occurred at Respondent’s

In the previous action, Respondent was identified as East End Kitchen and Market, LLC
/ Tageldin Banaga d/b/a East End Kitchen and Market.

2 Two violations were documented on September 24, 2013, and two on July 28, 2014. 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.
business establishment, 1159 Stratford Avenue, Bridgeport, Connecticut 06607, on
September 24, 2013, and July 28, 2014;

e The previous action concluded when an Initial Decision and Default Judgment
was entered on March 6, 2015, finding Respondent liable under the Act for the
violations as alleged;

e At approximately 10:57 a.m. on May 13, 2015, at Respondent’s business
establishment, 1159 Stratford Avenue, Bridgeport, Connecticut 06607,
FDA-commissioned inspectors documented Respondent’s staff selling a package
of Newport Box cigarettes to a person younger than 18 years of age. The
inspectors also documented that staff failed to verify, by means of photographic
identification containing a date of birth, that the purchaser was 18 years of age or
older.

These facts establish Respondent East End Kitchen and Market, LLC’s liability under the
Act. The Act prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A
tobacco product is misbranded if sold or distributed in violation of regulations issued
under section 906(d) of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B);

21 C.F.R. § 1140.1(b). The Secretary of the U.S. Department of Health and Human
Services issued the regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act.

21 U.S.C. § 387a-1; see 21 U.S.C. § 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19,
2010); 81 Fed Reg. 28,974, 28975-76 (May 10, 2016). Under 21 C.F.R.

§ 1140.14(a)(1)°, no retailer may sell cigarettes to any person younger than 18 years of
age. Under 21 C.F.R. § 1140.14(a)(2)(i), retailers must verify, by means of photographic
identification containing a purchaser’s date of birth, that no cigarette purchasers are
younger than 18 years of age.

Under 21 C.F.R. § 17.2, a $5,000 civil money penalty is permissible for five violations of
the regulations found at 21 C.F.R. pt. 1140.

Order

For these reasons, I enter default judgment in the amount of $5,000 against Respondent
East End Kitchen and Market, LLC. Pursuant to 21 C.F.R. § 17.11(b), this order
becomes final and binding upon both parties after 30 days of the date of its issuance.

/s/
Margaret G. Brakebusch
Administrative Law Judge

> On August 8, 2016, the citations to certain tobacco violations changed. For more
information see: https://federalregister.gov/a/2016-10685.


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Karen Ingrid Hunt, M.D.
(NPI: 1891799524; PTAN: A3378101),

Petitioner,
v.
Centers for Medicare & Medicaid Services,
Respondent.
Docket No. C-16-746
ALJ Ruling No. 2017-6

Date: December 22, 2016

DISMISSAL

Karen Ingrid Hunt, M.D. (Dr. Hunt or Petitioner) seeks money allegedly owed to her
under the provisions in 42 U.S.C. § 1395/(x) regarding incentive payments for primary
care physicians (incentive payments). The Centers for Medicare & Medicaid Services
(CMS) did not pay Dr. Hunt the money she seeks because Dr. Hunt incorrectly identified
her medical specialty as infectious diseases on a CMS-855I Medicare enrollment
application filed in 2008, and not as one of the specialties related to primary care
physicians. CMS Exhibit (Ex.) 1 at 2, 5; Petitioner (P.) Ex. 10 at 1; P. Ex. 14 at 2.

Dr. Hunt filed another CMS-855I on May 27, 2014, to correct her medical specialty to
family practice. CMS Ex. 5 at 1, 10. On June 25, 2014, a CMS administrative contractor
made that correction retroactively effective to December 1, 2011. CMS Ex. 6 at 1.

During 2014 and 2015, Dr. Hunt requested incentive payments. CMS Ex. 10 at 3-6.
On December 9, 2014, the CMS administrative contractor confirmed Dr. Hunt’s change
of medical specialty. CMS Ex. 7. On May 6, 2015, the CMS administrative contractor
stated that Dr. Hunt was eligible for incentive payments starting in 2013. P. Ex. 11.
However, on July 7, 2015, the CMS administrative contractor indicated that Dr. Hunt
would not receive incentive payments until 2016. P. Ex. 12.
Following the July 7, 2015 letter, Dr. Hunt continued to request incentive payments.
CMS Exs. 8, 10; P. Exs. 13, 14. The CMS administrative contractor construed one of Dr.
Hunt’s letters as a request for reconsideration of the initial determination setting the
December 1, 2011 effective date for Dr. Hunt’s change in her medical specialty;
however, the CMS administrative contractor dismissed the request as untimely. CMS
Exs. 8,9. Dr. Hunt disputed the dismissal and the CMS Administrative contractor issued
a reconsidered determination on May 26, 2016, upholding its previous effective date
determination concerning Dr. Hunt’s medical specialty.! CMS Exs. 10, 11.

Dr. Hunt subsequently requested a hearing before an administrative law judge (ALJ).
However, Dr. Hunt’s purpose in doing so was to obtain incentive payments to which Dr.
Hunt believes she is entitled. Hearing Request at 2,6. CMS moves for dismissal of the
hearing request asserting that Dr. Hunt does not have a right to an ALJ hearing on CMS’s
decision regarding eligibility for incentive payments. CMS Pre-Hearing Brief with
Incorporated Motion to Dismiss at 9-10. In response, Dr. Hunt clearly states that she is
not disputing the effective date of the change in her enrolled medical specialty; however,
Dr. Hunt asserts she has a right to appeal CMS’s decision related to incentive payments.
Petitioner’s Pre-Hearing Brief with Incorporated Motion for Summary Judgment at 4-5.

The question before me is whether Dr. Hunt has the right to ALJ review of CMS’s
decision not to pay her incentive payments for services provided prior to 2016.

By statute, on or after January 1, 2011, CMS pays primary care practitioners ten percent
more than the amount normally payable under Medicare rules for primary care services.
For a physician to receive these incentive payments, he or she must have a primary
specialty in family medicine, internal medicine, geriatric medicine, or pediatric medicine.
Further, the physician’s primary care services must have accounted for at least 60 percent
of allowed Medicare charges for a certain period of time (as determined by the Secretary
of Health and Human Services) before receiving incentive payments. Significantly,
“{t]here shall be no administrative or judicial review under section 1395ff of [title 42
U.S.C.], 139500 of [title 42 U.S.C.], or otherwise, respecting the identification of primary
care practitioners under this subsection.” 42 U.S.C. § 1395/(x); see 42 C.F.R. § 414.80.

The main reasons that CMS will not make incentive payments to Dr. Hunt until 2016 are
that Dr. Hunt incorrectly designated her medical specialty on her 2008 enrollment
application and the fact that she did not correct that error until 2014. See CMS Ex. 5;

P. Ex. 12. Although Dr. Hunt’s enrollment issue (i.e., the effective date of the change in
medical specialty) is connected to CMS’s decision concerning Dr. Hunt’s incentive

' The reconsidered determination indicates that the initial determination was the CMS
administrative contractor’s December 9, 2014 letter to Dr. Hunt confirming a change in
enrollment records regarding her medical specialty; however, the actual initial
determination was dated June 25, 2014. CMS Exs. 6, 7, 11.
payments, 42 U.S.C. § 1395/(x) clearly prohibits administrative review of the latter
decision. This is consistent with 42 C.F.R. § 498.3(b), which does not include decisions
related to incentive payments as initial determinations that are appealable to ALJs.

An ALJ may dismiss a hearing request when the party who made the hearing request
does not have a right to a hearing or withdraws a request for a hearing. 42 C.F.R.
§§ 498.68, 498.70(b). In the present case, Dr. Hunt has no right to an ALJ hearing to
contest CMS’s decision not to make incentive payments to her until 2016. Further, to the
extent that the hearing request could have been construed as appealing CMS’s
determination of the effective date of Dr. Hunt’s correction of her medical specialty (i.e.,
the issue in the reconsidered determination), I consider Dr. Hunt to have withdrawn the
request in regard to that issue based on her clear statement that she is not appealing that
matter. Petitioner’s Pre-Hearing Brief with Incorporated Motion for Summary Judgment
at 4-5. Therefore, I dismiss Dr. Hunt’s hearing request. As a result, the reconsidered
determination upholding the December 1, 2011 effective date for the correction of Dr.
Hunt’s medical specialty is binding.* 42 C.F.R. § 498.25(b).

It is so ordered.

/s/
Scott Anderson
Administrative Law Judge

2 Within 60 days of receiving this Dismissal, either party may request that I vacate this
Dismissal. A party must provide good cause to support its request. 42 C.F.R. § 498.72.

3 On August 5, 2016, the CMS administrative contractor issued a “Corrected Letter”
modifying the effective date of Dr. Hunt’s change of her medical specialty to June 13,
2014. P. Ex. 19 at 1. Like the initial determination, the “Corrected Letter” provided a
right to reconsideration. CMS Ex. 6 at 2; P. Ex. 19 at 2. However, to modify an initial
determination upheld in a reconsidered determination, the CMS administrative contractor
needed to reopen and revise the May 26, 2016 reconsidered determination or request that
I change the effective date in my decision. 42 C.F.R. § 498.25(b). But, by August 5,
2016, CMS could not reopen and revise the reconsidered determination because that was
more than one year after it issued the June 25, 2014 initial determination. 42 C.F.R.

§ 498.30. Further, since CMS has sought and received dismissal of this case, I will not
issue a decision on the merits. Therefore, the reconsidered determination upholding the
earlier effective date is binding. 42 C.F.R. § 498.25(b).


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Shadow Creek Medical Clinic,
(CLIA ID: 45D2050056),
Docket No. C-17-40
and
Fairway Medical Clinic,
(CLIA ID: 45D1087988)
Docket No. C-17-41
Petitioners,

Vv.

Centers for Medicare & Medicaid Services.

ALJ Ruling No. 2017-5

Date: December 20, 2016

RULING DISMISSING REQUESTS FOR HEARINGS

I dismiss the hearing requests of Petitioners Shadow Creek Medical Clinic (Shadow
Creek) and Fairway Medical Clinic (Fairway).' I do so because both Petitioners filed
untimely hearing requests and they have not demonstrated good cause for me to extend
their respective deadlines for filing a hearing request.

' Petitioners filed separate hearing requests and their requests were docketed as C-17-40
(Shadow Creek) and C-17-41 (Fairway). I did not consolidate the hearing requests into a
single docket number. However, I am issuing a consolidated ruling in these cases
inasmuch as both Petitioners have the same owner, Murtaza Mussagi, D.O., and also
because these cases involve very similar facts, identical legal issues, and identical
arguments by the parties.
I. Background

Each of these cases involves a determination by the Centers for Medicare & Medicaid
Services (CMS) to revoke the Petitioner’s laboratory certificate pursuant to the Clinical
Laboratory Improvements Amendments (CLIA). Each Petitioner filed a hearing request
challenging CMS’s determination. CMS moved to dismiss each case on the ground that
Petitioner in each case filed an untimely hearing request. Each Petitioner opposed CMS’s
motion.

In Shadow Creek, CMS filed exhibits that it identified as CMS Ex. 1-CMS Ex. 10. In
that case, Petitioner filed exhibits that it identified as P. Ex. 1-P. Ex. 5. It also filed two
unidentified declarations by Dr. Mussagi, the first dated October 12, 2016, and the
second dated December 5, 2016. In Fairway, CMS filed exhibits that it identified as
CMS Ex. 1-CMS Ex. 7. Petitioner filed exhibits that it identified as P. Ex. 1-P. Ex. 5,
plus two unidentified declarations by Dr. Mussagi dated October 12, 2016, and December
5, 2016. Subsequently, by letter dated December 6, 2016, Petitioner requested that I
disregard P. Exs. 1-5 in Fairway because those exhibits were erroneously filed.

I receive all of CMS’s proposed exhibits into the record. Additionally, I receive P. Ex. 1-
P. Ex. 5 in Shadow Creek and Dr. Mussagi’s declarations in Fairway and Shadow Creek.
In Shadow Creek, | identify Dr. Mussagi’s first declaration as P. Ex. 6 and his second
declaration as P. Ex. 7. In Fairway, | identify Dr. Mussagi’s first declaration as P. Ex. 1
and his second declaration as P. Ex. 2. In order to avoid confusion, to the extent that I
refer to a party’s exhibits in this ruling, I do so with the case docket number as a prefix,
ice. 17-40, P. Ex..

IL. Issues, Findings of Fact and Conclusions of Law
A. Issues

The issues are whether Petitioners filed untimely hearing requests and whether either
Petitioner established good cause for its untimely filing.

B. Findings of Fact and Conclusions of Law

Administrative hearings in cases involving challenges to determinations to impose
sanctions pursuant to CLIA, including revocation of a CLIA certificate, are governed by
regulations at 42 C.F.R. Part 498. These regulations allow a party affected by an adverse
determination 60 days within which to file a request for hearing. 42 C.F.R.

§ 498.40(a)(2). A party loses its right to a hearing if it does not file its request timely and
an administrative law judge does not find good cause for the party’s late filing. See 42
C.F.R. § 498.40(c). An administrative law judge may dismiss a hearing request that is
untimely, absent a showing of good cause for the untimely filing. 42 C.F.R. § 498.70(c).

The critical facts in these two cases are, for the most part, undisputed. In each case, CMS
sent notices to Petitioner by fax of its intent to impose sanctions. In neither case did
Petitioner file a request for a hearing within 60 days of its receiving notice of CMS’s
intent to revoke its CLIA certificate. Petitioner Shadow Creek filed a hearing request
more than a year after receiving notice from CMS of its intent to revoke. Petitioner
Fairway filed a hearing request more than six months after receiving notice from CMS of
its intent to revoke.

The parties dispute the legal significance of the manner in which CMS notified
Petitioners of its determinations. In these cases, CMS faxed its notices of adverse
determinations to Petitioners. Petitioners assert that this method of notification is not
permissible, contending that the only valid form of notification would have been by
United States mail. Therefore, Petitioners claim CMS’s notifications are without legal
significance and did not establish deadlines for Petitioners to request hearings.

Petitioners argue also that in each case, they did not receive one of CMS’s notifications
and that this notification was critical to establishing each Petitioner’s right to a hearing
and a deadline for requesting a hearing. Petitioner Shadow Creek asserts that it never
received CMS’s notice of its findings of immediate jeopardy condition level
noncompliance with CLIA, a notice stating CMS’s intent to impose intermediate
sanctions and apprising Petitioner Shadow Creek of its hearing rights. 17-40 P. Ex. 7; see
17-40 CMS Ex. 5. Petitioner Fairway makes the same assertion concerning the notice
CMS sent to it in that case. 17-41 P. Ex. 2; see 17-41 CMS Ex. 2.

CMS asserts that it has proof that Petitioners Shadow Creek and Fairway actually
received the two faxes in question. 17-40 CMS Ex. 5; 17-41 CMS Ex. 3. I find CMS’s
evidence to be persuasive, consisting of a record of fax transmissions showing that the
two faxes in question actually were received. However, I find it unnecessary to resolve
the dispute between the Petitioner in each case and CMS as to whether the Petitioner
received the fax in question. In each case, Petitioner knew that CMS had imposed the
final sanction against it of revocation of its CLIA certificate. In each case, CMS mailed a
copy of the allegedly non-received fax to the Petitioner after Petitioner asserted that it
hadn’t received it.

But, in neither case did that knowledge prompt Petitioner to request a hearing. Neither
Petitioner requested a hearing for months, notwithstanding its knowledge that CMS had
imposed sanctions against it including revocation of its CLIA certificate. 17-40 CMS
Ex. 6; CMS Ex. 7; 17-41 CMS Ex. 5; CMS Ex. 6.
I find to be unpersuasive Petitioners’ assertions that CMS’s notices are invalid because
they were not sent to Petitioners by United States mail. Petitioners rest their argument on
the language of 42 C.F.R. § 498.20(a), which provides that CMS “mails” notice of its
initial determination to an affected party. Petitioners argue that CMS contravened the
plain meaning of the regulation and that, therefore, its notices are invalid. Petitioners’
arguments exalt form over substance. The issue here is not whether CMS jumped
through all of the regulatory hoops in order to provide Petitioners with notice. Rather,
the issue is whether Petitioners actually had notice of CMS’s determinations. Clearly,
they did. The knowledge that Petitioners obtained should have motivated them to act.
They failed to do so and so, forfeited their hearing rights.

I note also that 42 C.F.R. § 498.20(a) does not limit CMS to providing notice by United
States mail. The term “mail” does not suggest that the only form of “mail” is United
States mail, especially when read in the context of all of the forms of reliable electronic
communications that are now available to CMS and to private parties. For example, one
could easily find that e-mail is a form of “mail” perfectly consistent with the regulation’s
plain meaning. I do not find that anything in the regulation’s language precludes faxing
documents in lieu of dropping them into a mail slot.

Neither Petitioner established good cause for filing late. The term “good cause” is not
defined by regulation, but it has been interpreted universally to mean a circumstance
beyond a party’s ability to control that prevents it from filing a timely hearing request.

In these cases, there is nothing to suggest that either Petitioner was prevented from filing
timely by circumstances that were beyond its ability to control. Indeed, what neither
Petitioner explains is why it waited so long — months beyond the 60-day deadline in each
case — to file a hearing request. Neither Petitioner offered a credible explanation for its
procrastination.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Dr. Sheri Stein-Blum, MS, CCC-SLP
Petitioner,
v.
Department of Health and Human Services.
Docket No. C-17-149
ALJ Ruling No. 2017-4
Date: December 20, 2016
DISMISSAL

On December 2, 2016, Petitioner filed documents to the Departmental Appeals Board
Electronic Filing System (DAB E-File), contesting a debt she purportedly owed to the
Indian Health Service Loan Repayment Program. The Civil Remedies Division
construed the documents to be a request for hearing, docketed the case, and assigned it
to me.

On December 15, 2016, I held a telephone pre-hearing conference in this case. In
attendance were Jay Blum, representing Petitioner, and Ann Slacter, Esq. and Michael
Wolf, Esq. from the Office of the General Counsel, representing the Department of
Health and Human Services (HHS).

I noted that, prior to the conference, HHS had filed a motion to dismiss for lack of
jurisdiction, and Petitioner had filed an opposition. I stated that I am able to adjudicate
appeals only if I have been given the specific authority to hear those cases. I noted that
Petitioner had not cited any legal authority to support her position that her debt dispute
with the Indian Health Service Loan Repayment Program fell under the jurisdiction of the
Departmental Appeals Board. Although Petitioner cited 45 C.F.R. § 16.3(a) in her brief,
she cited only a portion of the regulation. Section 16.3 lists three circumstances that must
be present before the Departmental Appeals Board will take an appeal, and the complete
text of section 16.3(a) states: “The dispute must arise under a program which uses the
2

Board for dispute resolution, and must meet any special conditions established for that
program. An explanation is contained in appendix A.” Emphasis added. Appendix A
sets forth a list of HHS programs “which use the Board for dispute resolution, the types
of disputes covered, and any conditions for Board review of final written decisions
resulting from those disputes.” Petitioner’s dispute is not among the programs cited.

I advised the parties that, based on my review of the documents filed by Petitioner, it
appears a tax refund offset was involved. Therefore, the regulation applicable to
Petitioner’s situation is 45 C.F.R. § 31.7(b), which states:

(b) Review. Upon the timely submission of evidence by the debtor, the
Department shall review the dispute and shall consider its records and any
documentation and evidence submitted by the debtor. The Department
shall make a determination based on the review of the written record, and
shall send a written notice of its decision to the debtor. There is no
administrative appeal of this decision.

45 C.F.R. § 31.7(b) (emphasis added). Petitioner thus has no right to an administrative
appeal under the regulation. If Petitioner so chooses, Petitioner may file an appeal in
federal district court, and the court will decide whether it has jurisdiction.

I do not have jurisdiction over Petitioner’s debt dispute. Accordingly, I order that this
case be dismissed. The parties may request that an order dismissing a case be vacated
pursuant to 42 C.F.R. § 498.72.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


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

Center for Tobacco Products,
(FDA No. FDA-2016-H-1642)

Complainant
v.

Mi Tiendita, LLC
d/b/a Mi Tiendita Mini Mart,

Respondent.
Docket No. T-16-992
Decision No. TB625

Date: December 19, 2016

ORDER ON MOTION TO IMPOSE SANCTIONS AND INITIAL DECISION
AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Mi Tiendita, LLC d/b/a Mi Tiendita Mini Mart, that alleges facts and
legal authority sufficient to justify the imposition of a civil money penalty of $500. For
the reasons outlined below, CTP’s Motion to Impose Sanctions is granted and
Respondent’s answer to the Complaint is stricken. I therefore enter a default judgment
against Respondent and assess a civil money penalty of $500.
I. Procedural History

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management.'

CTP served the Complaint on Respondent by United Parcel Service on July 6, 2016,
pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying cover letter,
CTP explained that within 30 days, Respondent should pay the proposed penalty, file an
answer, or request an extension of time within which to file an answer. CTP warned
Respondent that if it failed to take one of these actions within 30 days, an Administrative
Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision ordering
Respondent to pay the full amount of the proposed penalty.

On August 1, 2016, Respondent timely filed an answer to the complaint. On August 12,
2016, I issued an Acknowledgment and Pre-Hearing Order establishing a deadline of
September 9, 2016 for both parties to serve requests for production of documents. CTP
served Respondent with a Request for Production of Documents on September 9, 2016.
Respondent failed to comply with the request.

On October 18, 2016, CTP filed Motions to Compel Discovery and Extend Deadlines. I
granted these motions on November 7, 2016, and ordered Respondent to comply with
CTP’s request for production of documents by December 5, 2016. That Order
specifically warned Respondent that failure to comply with its provisions could result in
sanctions, including the issuance of an Initial Decision and Default Judgment finding
Respondent liable for the violations in the complaint.

On December 14, 2016, CTP filed a Motion to Impose Sanctions indicating that
Respondent had not produced any documents as requested, and had failed to comply with
the November 7, 2016 Order. CTP requested I strike the Respondent’s answer and issue
a default judgment against Respondent. Respondent has failed to comply with the orders
issued in this case, provide discovery responses, or otherwise participate in the defense of
this civil action. I am therefore granting CTP’s motion for sanctions and striking
Respondent’s answer. 21 C.F.R. § 17.35 (c)(3).

' The Complaint alleges that Respondent impermissibly sold cigarettes to minors and
failed to verify that cigarette purchasers were 18 years of age or older, thereby violating
the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its
implementing regulations, Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140. CTP
seeks a civil money penalty of $500.
I. Default Decision

Striking Respondent’s answer leaves the complaint unanswered. Therefore, pursuant to
21 C.F.R. § 17.11(a), Lam required to “assume the facts alleged in the [C]omplaint to be
true” and, if those facts establish liability under the Act, issue a default judgment and

impose a civil money penalty. Accordingly, I must determine whether the allegations in
the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:
e Respondent owns Mi Tiendita Mini Mart, an establishment that sells tobacco

products and is located at 1131 College Park Road, Unit B, Summerville, South
Carolina 29486. Complaint § 6-7.

e During an inspection of Respondent’s establishment on April 17, 2015, at
approximately 5:40 PM, an FDA-commissioned inspector observed that “a person
younger than 18 years of age was able to purchase a package of Newport Box
100s cigarettes . . . [.]” Complaint § 10.

e On May 21, 2015, CTP issued a Warning Letter to Respondent regarding the
inspector’s observation from April 17, 2015. The letter explained that the
observation constituted a violation of regulations, and that the named violation
was not necessarily intended to be an exhaustive list of all violations at the
establishment. The Warning Letter went on to state that if Respondent failed to
correct the violation, regulatory action by the FDA or a civil money penalty action
could occur and that Respondent is responsible for complying with the law.
Complaint § 10-11.

e During a subsequent inspection of Respondent’s establishment on December 19,
2015, at approximately 9:52 AM, an FDA-commissioned inspector documented
that “‘a person younger than 18 years of age was able to purchase a package of
Newport Box cigarettes . . . [.]” The inspector also documented that “the minor’s
identification was not verified before the sale... .” Complaint § 8.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010); 81 Fed Reg. 28,974, 28975-
76 (May 10, 2016). The regulations prohibit the sale of cigarettes to any person younger
than 18 years of age. 21 C.F.R. § 1140.14(a)(1).

The regulations also require retailers to verify, by means of photo identification
containing a purchaser’s date of birth, that no cigarette purchasers are younger than 18
years of age. 21 C.F.R. § 1140.14(a)(2)(i).

Taking the above alleged facts as true, Respondent violated the prohibition against selling
cigarettes to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a)(1), on April
17, 2015, and December 19, 2015. On December 19, 2015, Respondent also violated the
requirement that retailers verify, by means of photo identification containing a
purchaser’s date of birth, that no cigarette purchasers are younger than 18 years of age.

21 C.F.R. § 1140.14(a)(2)(i). Therefore, Respondent’s actions constitute violations of
law that merit a civil money penalty.

ORDER

For these reasons, I grant CTP’s Motion to Impose Sanctions in full, and enter default
judgment in the amount of $500 against Respondent Mi Tiendita, LLC d/b/a Mi Tiendita
Mini Mart. Pursuant to 21 C.F.R. § 17.11(b), this order becomes final and binding upon
both parties after 30 days of the date of its issuance.

/s/
Bill Thomas
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Azaan Petro Inc.
d/b/a Crown,

Respondent.

Docket No. T-16-848
FDA No. FDA-2016-H-1508

Decision No. TB586

Date: December 8, 2016

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) initiated a $500 civil money penalty (CMP)
action against Respondent for unlawfully selling cigarettes to minors, and failing to
verify, by means of photo identification containing a date of birth, that the purchasers
were 18 years of age or older, in violation of the Federal Food, Drug, and Cosmetic Act
(Act), 21 U.S.C. § 301 et seg., and its implementing regulations, 21 C.F.R. pt. 1140.
During the hearing process, Respondent failed to comply with a judicial direction. I
therefore strike Respondent’s answer and issue this decision of default judgment.

I. Procedural History

CTP served its complaint on Respondent on June 23, 2016. Respondent answered the
complaint, and I issued an Acknowledgement and Prehearing Order (APHO) that set
deadlines for parties’ submissions, including the September 2, 2016 deadline to request
that the opposing party provide copies of documents relevant to this case. Additionally,
the APHO stated that a party receiving such a request must provide the requested
documents no later than 30 days after the request.

CTP served Respondent with its Request for Documents on September 2, 2016. On
October 12, 2016, CTP filed a Motion to Compel Discovery indicating that CTP had not
received a response to its request for production of documents. See 21 C.F.R. § 17.23(a).
On October 13, 2016, a letter was issued by my direction that gave Respondent until
October 27, 2016 to file a response to CTP’s Motion to Compel Discovery.

On November 1, 2016, I issued an Order that granted CTP’s Motion to Compel
Discovery. In that Order, I stated that Respondent shall comply with CTP’s Request for
Production of Documents by November 10, 2016. On November 18, 2016, CTP filed a
Status Report and Motion to Impose Sanctions, stating that “[a]s of the date of this filing,
Respondent has neither produced any of the requested documents, nor contacted
Complainant or Counsel for Complainant regarding the matter.”

Il. Striking Respondent’s Answer

Due to noncompliance with my order granting CTP’s Motion to Compel Discovery, I am
striking Respondent’s Answer, issuing this default decision, and assuming the facts
alleged in CTP’s complaint to be true. See 21 C.F.R. § 17.35(c) (3), 17.11(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, and I find the failure to comply here
sufficiently egregious to warrant striking the answer and issuing a decision without
further proceedings. See 21 C.F.R. § 17.35(b).

Ill. Default Decision

Striking Respondent’s answer leaves the Complaint unanswered. Therefore, I am
required to issue an initial decision by default if the complaint is sufficient to justify a
penalty. 21 C.F.R. § 17.11(a). Accordingly, I must determine whether the allegations in
the Complaint establish violations of the Act.

For purposes of this decision, I assume the facts alleged in the Complaint are true and
conclude that default judgment is merited based on the allegations of the Complaint and
the sanctions imposed on Respondent for failure to comply with my order. 21 C.F.R.

§ 17.11. Specifically:

e Respondent owns Crown, an establishment that sells tobacco products and is
located at 5101 York Road, Baltimore, Maryland 21212. Complaint § 6-7.

e During an inspection of Respondent’s establishment on February 25, 2015, at
approximately 2:55 PM, an FDA-commissioned inspector documented that “a
person younger than 18 years of age was able to purchase a package of Newport
Box cigarettes . . . [.]” The inspector also documented that “the minor’s
identification was not verified before the sale... .” Complaint § 10.

© On April 16, 2015, CTP issued a Warning Letter to Respondent regarding the
inspector’s observations from February 25, 2015. The letter explained that the
observations constituted violations of regulations, and that the named violations
were not necessarily intended to be an exhaustive list of all violations at the
establishment. The Warning Letter went on to state that if Respondent failed to
correct the violations, regulatory action by the FDA or a civil money penalty
action could occur and that Respondent is responsible for complying with the law.
Complaint § 11.

e During a subsequent inspection of Respondent’s establishment on December 9,
2015, at approximately 2:42 PM, an FDA-commissioned inspector documented
that “a person younger than 18 years of age was able to purchase a package of
Newport Box cigarettes . . . [.]” The inspector also documented that “the minor’s
identification was not verified before the sale... .” Complaint § 8.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of cigarettes to any person younger than 18 years of age. 21 C.F.R. § 1140.14(a)(1)’.
The regulations also require retailers to verify, by means of photo identification
containing a purchaser’s date of birth, that no cigarette purchasers are younger than 18
years of age. 21 C.F.R. § 1140.14(a)(2)(i).

Taking the above alleged facts as true, Respondent violated the prohibition against selling
cigarettes to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a)(1), on
February 25, 2015, and December 9, 2015. On those same dates, Respondent also
violated the requirement that retailers verify, by means of photo identification containing
a purchaser’s date of birth, that no cigarette purchasers are younger than 18 years of age.
21 C.F.R. § 1140.14(b)(1). Therefore, Respondent’s actions constitute violations of law
that merit a civil money penalty.

‘ On August 8, 2016, the citations to certain tobacco violations changed. For more
information see: https://federalregister.gov/a/2016-10685.

CTP has requested a fine of $500, which is a permissible fine under the regulations.
21 C.F.R. § 17.2. Therefore, I find that a civil money penalty of $500 is warranted and so
order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Kat Party Store, Inc.
d/b/a Mr. Grocer Liquor Store,

Respondent.
Docket No. T-16-1684
FDA Docket No. FDA-2015-R-3482
Decision No. TB509

Date: November 22, 2016

INITIAL DECISION

I impose a No Tobacco Sale Order (NTSO) against Respondent, Kat, Party Store, Inc.
d/b/a/ Mr. Grocer Liquor Store for a period of 30 consecutive calendar days based on
Respondent’s repeated violations of federal tobacco regulations over a period of 36
months.

I. Background

This case was assigned originally to another administrative law judge and then
transferred to me. Respondent conceded that it sold tobacco products in violation of
federal regulations but challenged the Center for Tobacco Products’ (CTP) request that I
impose an NTSO against it for 30 consecutive calendar days. The parties briefed the
issue of whether the request is reasonable in light of the undisputed facts.
CTP offered four proposed exhibits in support of its position. These exhibits, CTP Ex. |
—CTP Ex. 4, consist of copies of decisions in other cases involving violations of federal
tobacco regulations. It is unnecessary that I receive these exhibits into evidence
inasmuch as they comprise material that is on the public record.

II. Issues, Findings of Fact and Conclusions of Law
A. Issue

The issue is whether an NTSO of 30 consecutive days’ duration is a reasonable remedy.
B. Findings of Fact and Conclusions of Law

CTP asserts that I should impose an NTSO against Respondent pursuant to the authority
conferred by the Federal Food, Drug, and Cosmetic Act (Act) and implementing
regulations at Part 21 of the Code of Federal Regulations (C.F.R.). The Act prohibits the
misbranding of tobacco products while they are held for sale after shipment in interstate
commerce. 21 U.S.C. § 331(k). The Food and Drug Administration (FDA) and its
agency, CTP, may seek the imposition of remedies against any person who violates the
Act’s requirements as they relate to the sale of tobacco products. 21 U.S.C. § 331(£)(9).
The sale of tobacco products to an individual who is under the age of 18 and the failure to
verify the photographic identification of an individual who is not over the age of 26 are
violations of implementing regulations. 21 C.F.R. §§ 1140.14(a)(1), (2).

Remedies may consist of civil money penalties and NTSOs. NTSOs are authorized at
21 U.S.C. § 333(f)(8). The section allows for the imposition of an NTSO against a
person who has committed “repeated violations” of restrictions on the sale of tobacco
products. The term “repeated violations” is defined to mean “at least 5 violations of
particular requirements over a 36-month period at a particular retail outlet ....”

21 USC. § 333.

The Act establishes factors that must be considered in deciding on the length of an
NTSO, but it does not specify specific time NTSO periods:

In determining the . . . period to be covered by a no-tobacco-sale order, the
Secretary shall take into account the nature, circumstances, extent, and
gravity of the . . . violations and, with respect to the violator, . . ., effect on
ability to continue to do business, any history of prior such violations, the
degree of culpability, and such other matters as justice may require ....

21 USC. § 333(£)(5)(B).
CTP developed policy guidelines that establish maximum NTSO durations. For a first
NTSO, CTP recommends that the maximum duration be 30 calendar days. NTSO
Guidance (Guidance) at 4. CTP’s policy is to, in general, seek the maximum duration for
an NTSO established by the guidelines. It explains its rationale for establishing these
recommended maximum NTSO durations as follows:

First, if there are grounds for imposing an NTSO, the retailer has already
engaged in repeated violations of the law and regulations restricting the sale
and distribution of tobacco products, and therefore has a prior history of
violations. Second, the restrictions codified at Part 1140 [of the
regulations] are intended to protect the public health, especially children
and adolescents, and FDA therefore considers repeated violations of these
restrictions to be very serious. Nearly 9 out of 10 adult smokers smoked
their first cigarette by age 18 (87 percent). If the current trajectory of
smoking rates continues, 5.6 million children alive today will die
prematurely as a result of smoking. Third, FDA believes that imposing
NTSOs where the periods of time gradually increase, starting with a
maximum of 30 days and then a maximum of 6 months before issuing an
order permanently prohibiting the sale of tobacco products, strikes an
appropriate balance between considerations related to the number, extent,
and gravity of the violations on one hand, and the retailer’s ability to do
business on the other hand. The increasing periods of time for which FDA
intends to impose NTSOs are also consistent with the scheme of increasing
[civil money penalties]... .

Id.

I find CTP’s guidelines to be entirely reasonable when they are read in the context of the
Act’s language and purpose. They are not written as regulations and are not, therefore,
binding as a matter of law. But, they are persuasive, and I accord CTP deference in view
of its expertise in administering the Act and implementing regulations. I find especially
persuasive the guidelines’ reliance on statistics showing the terrible consequences of
smoking on our population and the strong linkage between tobacco addiction and
commencement of smoking at an early age.

Iam mindful also that an NTSO may have a profound effect on a retailer’s business and
even on that retailer’s ability to stay in business. However, this remedy is reserved only
for the most egregious offenders — individuals and entities that have repeatedly violated
the law despite the imposition against them of escalating civil money penalties — and is
necessary if for no other reason than to protect the public against these offenders’
inability to comply with law and regulations governing tobacco sales. Generally
speaking, the need to protect the public outweighs the adverse effects that an NTSO may
have on an individual retailer’s business, especially in light of the fact that imposition of
this remedy is reserved only for those retailers who demonstrate indifference to the
requirements of law.

The undisputed facts of this case establish that Respondent is a repeated violator of law
and regulations. CTP’s Complaint; Respondent’s Answer. Between August 2, 2012 and
April 26, 2015, Respondent sold tobacco products to minor purchasers on four occasions.
On three of these occasions Respondent failed to verify the photographic identification of
the minor purchasers. Thus, Respondent committed a total of five repeated violations of
regulations governing tobacco sales in a period of less than 36 months. CTP imposed
civil money penalties against Respondent twice, but those civil money penalties did not
deter Respondent from continuing to sell tobacco products to minor purchasers.

These undisputed facts render entirely reasonable CTP’s request that I impose an NTSO
of 30 consecutive calendar days against Respondent. It is evident that multiple civil
money penalties have not deterred Respondent from continuing to sell tobacco products
in violation of law. I impose the remedy because something other than a civil money
penalty plainly is needed here. Moreover, I do so because, if for no other reason, the
public needs to be insulated from Respondent’s business practices for a reasonable period
of time.

I have considered Respondent’s arguments in opposing the imposition of an NTSO of 30
consecutive calendar days and I find them to be without merit. First, Respondent argues
that it is not a repeated violator of applicable regulations. Effectively, it contends that
CTP is double-counting those instances in which Respondent both sold tobacco products
to minors in violation of law and failed to check those minors’ photographic
identifications. Respondent’s assertion notwithstanding, it committed seven distinct
violations of law within a 36-month period.

According to Respondent, a sale/failure to check identification should count only as one
violation and not as two. Based on that logic, according to Respondent, it committed
only four violations in a 36-month period, and not seven, as CTP contends. And, from
that, Respondent argues that its violations were only sporadic and not repeated as defined
by the Act.

I find this argument to be unpersuasive. An appellate panel of the Departmental Appeals
Board recently decided the issue of whether failure to check identifications and unlawful
sales to minors are separate violations, holding that they are separate. Orton Motor Co.
d/b/a Orton’s Bagley, DAB No. 2717 (2016).

The law defines selling tobacco products to minors and failing to check minors’
identifications as separate violations, and with good reason. Failure to check
identification must be considered to be separate from an unlawful sale because it
constitutes a separable problem. Conceivably, a retailer that fails to check identifications
might not actually sell tobacco products to minors if all of the purchasers whose
identifications aren’t checked are actually 18 years old or older. But, nevertheless, the
potential for selling tobacco products remains very high in such an instance because
production of identification is an essential safeguard against making such sales.

Second, Respondent contends that as a matter of equity and fairness it should not be
subject to an NTSO that applies for 30 consecutive calendar days. It argues that the
NTSO should be applicable on non-consecutive days, which would allow Respondent to
continue to function as an ongoing business. In support of this argument Respondent
contends that, as a matter of its own policy, it has always sought to comply with the
requirements of law. It asserts that unlawful sales and failures to check identification
occurred only because certain of Respondent’s employees acted in an unauthorized and
improper manner.

I find this argument to unpersuasive for several reasons. Imposing an NTSO on non-
consecutive days would render its purpose to be meaningless. The intent of an NTSO is
to deter Respondent from continuing to engage in unlawful sales of tobacco products.
Diluting that order by applying it only on non-consecutive days diminishes the deterrence
effect to the extent that the order might become meaningless. Furthermore, CTP would
find it very difficult to enforce such an order. An order that applies on consecutive days
can be checked for effectiveness by visiting Respondent’s retail establishment at random
during the period that the order is in effect. However, an order that applies on non-
consecutive days can only be checked on those announced days when the order is in
effect, thus giving the retailer advance notice of likely inspection dates. Moreover, CTP
runs a vast enforcement program that applies to many thousands of retailers, nationwide.
Requiring CTP to calendar the nonconsecutive days when an NTSO is in effect would
require an unreasonable expenditure of resources by CTP.

I am not swayed by Respondent’s assertion that the fault for its repeated transgressions
lies with its employees. Respondent’s employees are its agents and Respondent bears the
onus for assuring that these employees comply with legal requirements.

/s/
Steven T. Kessel
Administrative Law Judge


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

East Tennessee Pulmonary Associates, PC
(NPI: 1992717599, PTAN: 103G700928)

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-16-906
Decision No. CR4763
Date: December 16, 2016
DECISION
1 affirm the reconsideration determination, ratified by the Centers of Medicare &
Medicaid Services (CMS), of the Medicare contractor to assign an effective date of
March 14, 2016, for reactivation of the Medicare billing privileges of Petitioner, East
Tennessee Pulmonary Associates, PC.
I. Background
Petitioner filed a hearing request in order to challenge the determination of the effective
date of reactivation of its billing privileges. CMS moved for summary judgment and
Petitioner opposed the motion. With its motion, CMS filed 11 proposed exhibits that it
identified as CMS Ex. 1-CMS Ex. 11. In opposition, Petitioner filed three proposed
exhibits that it identified as P. Ex. 1-P. Ex. 3.
I receive CMS Ex. 1-CMS Ex. 11 into the record. I receive P. Ex. 1- P. Ex. 3 into the
record as well. P. Ex. | is a Medicare policy statement that is part of the public record.
P. Exs. 2 and 3 are letters from CMS to Petitioner that, if not part of the public record, are

noncontroversial.

It is unnecessary for me to decide whether the criteria for summary judgment are met in
this case even though CMS styled its motion as a motion for summary judgment. Neither
CMS nor Petitioner offered witness testimony. Consequently, there is no need to
convene an in-person hearing. I decide the case based on the parties’ arguments and their
exchange of exhibits.

IL. Issue, Findings of Fact and Conclusions of Law
A. Issue

The issue is whether a Medicare contractor correctly assigned an effective date of March
14, 2016, to Petitioner for reactivation of its Medicare billing privileges.

B. Findings of Fact and Conclusions of Law

This case addresses the consequences of deactivation of a Medicare supplier’s billing
privileges. A Medicare contractor deactivated Petitioner’s billing privileges effective
February 4, 2016, because the contractor found that Petitioner had not supplied requested
information within 90 days of the request in compliance with Medicare participation
requirements. CMS Ex. 8 at 1.

Deactivation is not an appealable initial determination made pursuant to 42 C.F.R. §
498.3 and no hearing rights arise from deactivation. In opposing CMS’s motion,
Petitioner argues at some length that the deactivation of its billing privileges was
improper and that it can prove that it was at all times in compliance with Medicare
participation requirements. Petitioner’s response to CMS’s motion for summary
judgment at 4-10 (Response). These arguments are irrelevant, as I have no authority to
hear and decide them.

Section 424.540 of Title 42 of the Code of Federal Regulations provides for deactivation
of a Medicare supplier or provider’s billing privileges. In relevant part the regulation
states:

(a) Reasons for deactivation. CMS may deactivate the Medicare billing
privileges of a provider or supplier for any of the following reasons: .. .

(3) The provider or supplier does not furnish complete and accurate
information and all supporting documentation within 90 calendar
days of receipt of notification from CMS to submit an enrollment
application and supporting documentation, or resubmit and certify to
the accuracy of its enrollment information.

(b) Reactivation of billing privileges. (1) When deactivated for any reason

other than nonsubmission of a claim, the provider or supplier must

complete and submit a new enrollment application to reactivate its
Medicare billing privileges or, when deemed appropriate, at a minimum,
recertify that the enrollment information currently on file with Medicare is
correct.....

The regulation plainly tells a provider or supplier that it will be deactivated by CMS if
CMS requests information from it and the provider or supplier fails to provide the
requested information within 90 calendar days. Additionally, it puts the onus on the
leactivated provider or supplier to submit a new Medicare enrollment application if it
lesires to reactivate its participation.

Here, the contractor deactivated Petitioner’s Medicare billing privileges because
Petitioner failed to submit requested information to it within 90 days of the contractor’s
request for information. CMS Ex. 6-CMS Ex. 8. That non-appealable deactivation put
the burden squarely on Petitioner to submit a new Medicare enrollment application.

CMS has published guidance to its contractors concerning what effective participation
late to assign to a supplier or provider that seeks to reactivate its participation. That date
shall be the date when that the contractor receives a re-enrollment application that the
contractor processes to completion. Medicare Program Integrity Manual (MPIM), §
15.27.1.2. That guidance is consistent with regulatory requirements governing the
effective date of participation of newly participating suppliers and providers. 42 C.F.R. §
424.520(d). In this case, Petitioner submitted a re-enrollment application to the
contractor on March 14, 2016, and the contractor reactivated Petitioner’s billing

privileges effective that date. That is entirely consistent with regulatory requirements as
interpreted by the MPIM.

Petitioner doesn’t deny that the contractor’s effective date determination is consistent
with the manual. Rather, it contends that the manual contradicts an applicable regulation
and is therefore invalid guidance. Petitioner cites 42 C.F.R. § 524.540(c), which states:

Effect of deactivation. Deactivation of Medicare billing privileges is
considered an action to protect the provider or supplier from misuse of its
billing number and to protect the Medicare Trust Fund from unnecessary
overpayments. The deactivation of Medicare billing privileges does not
have any effect on a provider or supplier’s participation agreement or on
any conditions of participation.

Petitioner argues that this regulation means that a provider or supplier that is remiss in
providing requested information to CMS or its contractor gets a free pass. It argues, in
effect, that even if it is deactivated for failing to provide requested information, it is
entitled to continue filing claims for services provided during the period of its
deactivation, just so long as it eventually provides the contractor or CMS with the
information requested originally.
I disagree with that interpretation. The section cited by Petitioner means only that a
deactivated provider or supplier is not required to start the application process over again
by going through all of the steps necessary to qualify as a participant. That part of its
participation agreement that is valid remains valid during a period of deactivation. The
deactivated supplier or provider must, in order to become reactivated, provide the
information whose absence led to the deactivation.

But, this regulation says nothing about a claimed right to keep billing for services during
a period of deactivation. I see no language in this regulation that offers a supplier or a
provider a free pass for failing to provide requested information to a contractor or to
CMS. Indeed, if I were to read this regulation to mean that, it would render deactivation
meaningless. The Secretary has determined that it is important that providers and
suppliers render requested information to CMS or its contractor within 90 days of a
request. It makes no sense to undercut that requirement by allowing a provider or
supplier to nonetheless claim reimbursement for its services during the period of
deactivation that results from its failure to provide requested information timely.

/s/
Steven T. Kessel
Administrative Law Judge