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

Center for Tobacco Products,
Complainant

Vv.

Amir, Inc.
d/b/a Wild Bill’s Tobacco / Smokers Outlet of New Hudson,
Respondent

FDA Docket No. FDA-2017-H-6024
CRD Docket No. T-18-28

Decision No. TB2588

Date: April 4, 2018

INITIAL DECISION AND DEFAULT JUDGMENT

Found:

1) Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(b)(1); 21 C.F.R. § 1140.14(b)(2)(i); and 21 C.F.R. § 1140.16(c)
as charged in the complaint; and
2) Respondent committed four (4) violations in a 24-month period as set forth
hereinabove.
3) Respondent is hereby assessed a civil penalty in the amount of $2,236.

Glossary:

ALJ administrative law judge!

CMP civil money penalty
CTP/Complainant Center for Tobacco Products

DJ Default Judgment

' See 5 CFR. § 930.204.
FDCA Federal Food, Drug, and Cosmetic Act (21 U.S.C.A.

Chap. 9)
DN UPS Delivery Notification
FDA Food and Drug Administration
HHS Dept. of Health and Human Services
OSC Order to Show Cause
POS UPS Proof of Service
SOP Service of Process
Respondent Amir, Inc. d/b/a Wild Bill’s Tobacco / Smokers Outlet

of New Hudson

TCA The Family Smoking Prevention and Tobacco Control
Act, Pub. L. No. 111-31, 123 Stat. 1776 (2009)

I. JURISDICTION

Ihave jurisdiction to hear this case pursuant to my appointment by the Secretary
of Health and Human Services and my authority under the Administrative Procedure Act
(5 U.S.C. §§ 554-556), 5 U.S.C.A. § 3106, 21 U.S.C. § 333(£)(5), 5 C.F.R. §§ 930.201 et
seq. and 21 C.F.R. Part 172
Il. PROCEDURAL BACKGROUND

The Center for Tobacco Products (CTP/Complainant) filed a Complaint on
October 10, 2017 alleging that FDA documented four (4) violations within a 24-month

period.

2 See also Butz v. Economou, 438 U.S. 478 at 513, 98 S.Ct. 2894, 57 L.Ed.2d 895
(1978); Marshall v. Jerrico, Inc., 446 U.S. 238 (1980); Federal Maritime Com’n v. South
Carolina State Ports Authority, 535 U.S. 743, 744 (2002).

2
Amir, Inc. d/b/a Wild Bill’s Tobacco / Smokers Outlet of New Hudson
(Respondent or Wild Bill’s Tobacco / Smokers Outlet of New Hudson) was served with
process on October 6, 2017 by United Parcel Service. On November 1, 2017,
Respondent answered the Complaint. I issued an Acknowledgment and Pre-Hearing
Order (APHO) on November 2, 2017 that set deadlines for parties’ submissions,
including a December 4, 2017 deadline to request that the opposing party provide copies
of documents relevant to this case. The APHO further set forth that, pursuant to 21
C.F.R. § 17.23(a), any documents requested must be provided to the opposing party
within 30 days of the request.

On December 1, 2017, CTP served Respondent with a Request for Production of
Documents (RFP). On January 3, 2018, Respondent filed a Request to Extend
Discovery, requesting that its deadline to respond to CTP’s RFP be extended to January
31,2018. Respondent’s request for an extension noted that CTP did not oppose such an
extension. On January 3, 2018, I issued an order granting Respondent’s request.

On February 2, 2018, Respondent filed a Second Request to Extend Discovery,
requesting that its deadline to respond to CTP’s December 1, 2017 RFP be extended
further to February 13, 2018. Respondent’s request noted that CTP did not oppose such
an extension. On February 5, 2018, I issued an order granting Respondent’s request.

On February 20, 2018, CTP filed a Motion to Compel Discovery. CTP indicated
that, despite being provided with two extensions of time to respond, Respondent had not

responded to CTP’s December 1, 2017 RFP. Also, on February 20, 2018, CTP filed a
separate Motion to Stay Deadlines pending the resolution of the discovery dispute.* On
February 21, 2018, I issued an Order granting CTP’s Motion to Compel Discovery and
ordering Respondent, by February 27, 2018, to: 1) show cause for its failure to respond
to CTP’s RFP; and 2) to produce the documents requested by CTP. The Order warned
Respondent that failure to comply with my order may result in the imposition of
sanctions.

On March 14, 2018, CTP filed a Motion to Impose Sanctions. The Motion
asserted that Respondent failed to defend the action and did not comply with my Order.
In its motion, CTP asked that I strike Respondent’s November 1, 2017 Answer and issue
a Default Judgment in the amount of $2,236.

On March 16, 2018, Respondent submitted a response to CTP’s December 1,
2017 Request for Production of Documents, 17 days after the deadline established in my
Order. To date, Respondent has not provided any response to CTP’s Motion to Impose
Sanctions, nor has it provided any response my Order as to why it failed to provide CTP
with timely discovery.

Ill. SANCTIONS (STRIKING RESPONDENT’S ANSWER)
Pursuant to 21 C.F.R. § 17.35(a), I may sanction a party for:
(1) Failing to comply with an order, subpoena, rule, or procedure governing
the proceeding;

(2) Failing to prosecute or defend an action; or

3 Pursuant to the February 5, 2018 Order granting Respondent’s second extension
request, that deadline had been extended to March 19, 2018.

4
(3) Engaging in other misconduct that interferes with the speedy, orderly, or
fair conduct of the hearing.

Here, Respondent did not provide a timely response to CTP’s December 1, 2017
Request for Production of Documents, even though it was granted two extensions in
order to do so. Respondent also failed to comply with my Acknowledgment and Pre-
Hearing Order and my February 21, 2018 Order. Respondent has failed to comply with
my orders and procedures governing this proceeding which constitutes misconduct that
has interfered with the speedy, orderly, and fair conduct of this proceeding. 21 C.F.R.

§ 17.35(a)(1), (a)(3). Accordingly, I find that sanctions are appropriate under 21 C.F.R.
§ 17.35.

The harshness of the sanctions I impose upon either party must relate to the nature
and severity of the misconduct or failure. 21 C.F.R. § 17.35(b). I find and conclude that
Respondent’s misconduct is sufficiently egregious to warrant striking the November 1,
2017 answer and issuing a decision without further proceeding. 21 C.F.R.

§§ 17.35(c)(3), 17.11 (a).
IV. BURDEN OF PROOF

The Center for Tobacco Products (CTP/Complainant) as the petitioning party has

the burden of proof (21 C.F.R. § 17.33).
Vv. LAW
21 USC. § 331, specifically 21 C.F.R. § 1140.14(b)(1); 21 C.F.R.

§ 1140.14(b)(2)@); and 21 C.F.R. § 1140.16(c).
VI. ISSUE

Did Respondent violate 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(b)(1);

21 C.F.R. § 1140.14(b)(2)(i); and 21 C.F.R. § 1140.16(c) as alleged in the complaint?
VII. DEFAULT

I find Respondent was served and is subject to the jurisdiction of this forum, as
established by the UPS Delivery Notification and Notice of Filing filed by CTP and
Respondent’s answer to CTP’s complaint. My Order Granting Motion to Compel, dated
February 21, 2018, instructed Respondent to show cause on or before February 27, 2018
why it failed to respond to CTP’s Request for Production of Documents.

Respondent failed to comply with my Acknowledgment and Pre-Hearing Order
and my February 21, 2018 Order. Thus, I struck Respondent’s Answer as a sanction
pursuant to 21 C.F.R. § 17.35(c)(3).

Striking Respondent’s Answer leaves the Complaint unanswered.

VII. ALLEGATIONS

A. Agency’s recitation of facts

CTP alleged that Respondent owned an establishment, doing business under the
name Wild Bill’s Tobacco / Smokers Outlet of New Hudson, located at 30436 Milford
Road, New Hudson, Michigan 48165. Respondent's establishment received tobacco
products in interstate commerce and held them for sale after shipment in interstate
commerce.

CTP’s complaint alleged that, on December 8, 2016, CTP issued a Warning

Letter to Respondent, alleging that Respondent committed the following violations:

6
a. Selling covered tobacco products to a minor, in violation of 21 C.F.R.
§ 1140.14(b)(1). Specifically, a person younger than 18 years of age was able
to purchase a package of two Swisher Sweets Tropical Fusion cigars on
November 30, 2016, at approximately 6:32 p.m.; and

b. Failing to verify the age of a person purchasing covered tobacco products by
means of photographic identification containing the bearer's date of birth, as
required by 21 C.F.R. § 1140.14(b)(2)(i). Specifically, the minor's
identification was not verified before the sale, as detailed above, on November
30, 2016, at approximately 6:32 p.m.

Because no opportunity for a hearing was provided before the Warning Letter was
issued, Respondent had a right to challenge the allegations in the Warning Letter in the
instant case. See Orton Motor Co., Departmental Appeals Board (DAB) No. 2717, at 25
(2016), pet. for rev. denied, 2018 WL 1386141 (D.C. Cir., Mar. 20, 2018).

Further, during a two-part inspection of Wild Bill’s Tobacco / Smokers Outlet of
New Hudson conducted on September 13 and 20, 2017, an FDA-commissioned inspector
documented the following violations:

a. Selling covered tobacco products to a minor, in violation of 21 C.F.R.

§ 1140.14(b)(1). Specifically, a person younger than 18 years of age was able
to purchase a package of five Swisher Sweets Grape cigars on September 13,
2017, at approximately 4:50 p.m.;

b. Failing to verify the age of a person purchasing covered tobacco products by

means of photographic identification containing the bearer's date of birth, as

7
required by 21 C.F.R. § 1140.14(b)(2)(i). Specifically, the minor's
identification was not verified before the sale, as detailed above, on September
13, 2017, at approximately 4:50 p.m.; and

c. Using a self-service display in a non-exempt facility, in violation of 21 C.F.R.
§ 1140.16(c). Specifically, on September 20, 2017, the inspector observed
Starr smokeless tobacco, Red Man smokeless tobacco, Bowies smokeless
tobacco, Bugler cigarette tobacco, Tube Cut Gambler cigarette tobacco, Rave
cigarette tobacco, and Natural American Spirit cigarette tobacco, for sale from
customer-accessible displays on the main sales floor. Additionally, on
September 13, 2017, a person younger than 18 years of age was able to enter
the establishment and purchase a regulated covered tobacco product.
Therefore, this facility does not qualify as one where minors are not permitted
to enter at any time.

B. Respondent’s recitation of facts

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 the default judgment is merited based on the allegations of the Complaint
and the sanctions imposed on Respondent for failure to comply with my orders. 21

CFR. § 17.11, 17.35(a)(1).
Therefore, under FDA’s current policy, the violations described in the Complaint
counts as four (4) violations for purposes of computing the civil money penalty in the
instant case. See U.S. Food & Drug Admin., Guidance for Industry and FDA Staff, Civil
Money Penalties and No-Tobacco-Sale Orders for Tobacco Retailers, Responses to
Frequently Asked Questions (Revised) (2016), available at

http: //www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/

UCM447310.pdf [hereinafter Guidance for Industry], at 13-14.

I find and conclude Respondent committed four (4) violations of 21 U.S.C.
§ 331, specifically 21 C.F.R. § 1140.14(b)(1); 21 C.F.R. § 1140.14(b)(2)(i); and 21
C.F.R. § 1140.16(c) within a 24-month period as set forth in the Complaint.

IX. FAMILY SMOKING PREVENTION AND TOBACCO CONTROL ACT

The “relevant statute” in this case is actually a combination of statutes and
regulations: The Family Smoking Prevention and Tobacco Control Act, Pub. L. No.
111-31, 123 Stat. 1776 (2009) (TCA), amended the Food, Drug, and Cosmetic Act (21
U.S.C.A. Chap. 9) (FDCA) and created a new subchapter of that Act that dealt
exclusively with tobacco products, (21 U.S.C. §§ 387-387u), and it also modified other
parts of the FDCA explicitly to include tobacco products among the regulated products
whose misbranding can give rise to civil, and in some cases criminal, liability. The 2009
amendments to the FDCA contained within the TCA also charged the Secretary of Health
and Human Services with, among other things, creating regulations to govern tobacco
sales. The Secretary’s regulations on tobacco products appear in Part 1140 of title 21,

Code of Federal Regulations.
Under the FDCA, “[a] tobacco product shall be deemed to be misbranded if, in the
case of any tobacco product sold or offered for sale in any State, it is sold or distributed
in violation of regulations prescribed under section 387f(d).” 21 U.S.C. § 387c(a)(7)(B)
(2012). Section 387 a-1 directed FDA to re-issue, with some modifications, regulations
previously passed in 1996. 21 U.S.C. § 387 a-1(a)(2012). These regulations were passed
pursuant to section 387f(d), which authorizes FDA to promulgate regulations on the sale
and distribution of tobacco products; 75 Fed. Reg. 13,225 (March 19, 2010), codified at
21 CFR. Part 1140 (2015); 21 U.S.C. § 387f(d)(1) (2012). Accordingly, 21 C.F.R.

§ 1140.1(b) provides that “failure to comply with any applicable provision in this part in
the sale, distribution, and use of cigarettes and smokeless tobacco renders the product
misbranded under the act.”

Under 21 U.S.C. § 331(k), “[t]he alteration, mutilation, destruction, obliteration, or
removal of the whole or any part of the labeling of, or the doing of any other act with
respect to, a food, drug, device, tobacco product, or cosmetic, if such act is done while
such article is held for sale (whether or not the first sale) after shipment in interstate
commerce and results in such article being adulterated or misbranded” is a prohibited act
under 21 U.S.C. § 331. Thus, when a Retailer such as Respondent misbrands a tobacco
product by violating a requirement of 21 C.F.R. Part 1140, that misbranding in turn
violates the FDCA, specifically 21 U.S.C. § 331(k). FDA may seek a civil money
penalty from “any person who violates a requirement of this chapter which relates to
tobacco products.” 21 U.S.C. § 333(f)(9)(A) (2012). Penalties are set by 21 U.S.C.

§ 333 note and 21 C.F.R. § 17.2. Under current FDA policy, the first time FDA finds

10
violations of 21 C.F.R. Part 1140 at an establishment, FDA only counts one violation
regardless of the number of specific regulatory requirements that were actually violated,
but if FDA finds violations on subsequent occasions, it will count violations of specific
regulatory requirements individually in computing any civil money penalty sought. This
policy is set forth in detail, with examples to illustrate, at Guidance for Industry, at 13-14.
So, for instance, if a retailer sells a tobacco product on a particular occasion to a minor
without checking for photographic identification, in violation of 21 C.F.R.

§ 1140.14(a)(1) and (a)(2)(i), this will count as two separate violations for purposes of
computing the civil money penalty, unless it is the first time violations were observed at

that particular establishment. This policy of counting violations has been determined by

the HHS Departmental Appeals Board to be consistent with the language of the FDCA
and its implementing regulations, see Orton Motor Co., DAB No. 2717 (2016); pet. for
rev. denied, 2018 WL 1386141 (D.C. Cir., Mar. 20, 2018).
X. LIABILITY
When a retailer such as Respondent is found to have “misbranded” a tobacco
product in interstate commerce, it can be liable to pay a CMP. 21 U.S.C. §§ 331, 333.
A retailer facing such a penalty has the right, set out in statute, to a hearing under the
Administrative Procedure Act (21 U.S.C. § 333(f)(5)(A)).
As Respondent failed to respond to my orders, I strike Respondent’s answer, and
find Respondent waived its right to a hearing.
XI. IMPACT OF RESPONDENT’S DEFAULT

Because striking a Respondent’s answer leaves the Complaint unanswered, an

11
ALJ must assume as true all factual allegations in the complaint and issue an initial
decision within thirty (30) days of the answer’s due date, imposing “the maximum
amount of penalties provided for by law for the violations alleged” or “the amount asked
for in the complaint, whichever is smaller” if “liability under the relevant statute” is
established (21 C.F.R. § 17.11(a)(1) and (2)). But see 21 C.F.R. § 17.45 (initial decision
must state the “appropriate penalty” and take into account aggravating and mitigating
circumstances).

Two aspects of Rule 17.11 are important in default cases.

First, the Complainant benefits from a regulatory presumption (the ALJ shall
assume that the facts alleged in the complaint are true) that relieves it from having to put
on evidence:

The presumption affords a party, for whose benefit the presumption runs, the
luxury of not having to produce specific evidence to establish the point at issue. When
the predicate evidence is established that triggers the presumption, the further evidentiary
gap is filled by the presumption. See 1 Weinstein's Federal Evidence § 301.02[1], at
301-7 (2d ed.1997); 2 McCormick on Evidence § 342, at 450 (John W. Strong ed., 4th ed.

1992). Routen v. West, 142 F.3d 1434, 1440 (Fed. Cir. 1998).4

4 However, when the opposing party puts in proof to the contrary of that provided by the
presumption, and that proof meets the requisite level, the presumption disappears. See
Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248, 254-55, 101 S.Ct. 1089,
1094-95, 67 L.Ed.2d 207 (1981); A.C. Aukerman, 960 F.2d at 1037 (“[A] presumption ...
completely vanishes upon the introduction of evidence sufficient to support a finding of
the nonexistence of the presumed fact.”); see also Weinstein’s Federal Evidence

§ 301App.100, at 301 App—13 (explaining that in the “bursting bubble” theory once the
presumption is overcome, then it disappears from the case); 9 Wigmore on Evidence

12
Second, as far as the penalty is concerned, my discretion is limited by the language
of the regulation. I may not tailor the penalty to address any extenuation or mitigation,
for example, nor, because of notice concerns, may I increase the penalty beyond the
smaller of (a) the Complainant's request or (b) the maximum penalty authorized by law.

XII. LIABILITY UNDER THE RELEVANT STATUTE

Taking the CTP’s allegations as set forth in the complaint as true, the next step is
whether the allegations make out “liability under the relevant statute” (21 C.F.R.

§ 17.11(a)).

Based on Respondent’s failure to answer, I assume all the allegations in the
complaint to be true.

I find and conclude that the evidentiary facts, by a preponderance of the evidence
standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(b)(1) in that a person younger than 18 years of age was able to purchase
covered tobacco products on November 30, 2016 and September 13, 2017.

I find and conclude that the evidentiary facts, by a preponderance of the evidence
standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(b)(2)(i) on those same dates in that Respondent also violated the requirement
that retailers verify, by means of photo identification containing a purchaser’s date of

birth, that no covered tobacco product purchasers are younger than 18 years of age.

§ 2487, at 295-96 (Chadbourn rev.1981). See generally Charles V. Laughlin, In Support
of the Thayer Theory of Presumptions, 52 Mich. L.Rev. 195 (1953). Routen v. West, 142
F.3d 1434, 1440 (Fed. Cir. 1998).

13
Finally, I also find and conclude that the evidentiary facts, by a preponderance of
the evidence standard, support a finding that Respondent violated 21 U.S.C. § 331,
specifically 21 C.F.R. § 1140.16(c), in that, on September 20, 2017, Respondent was
documented using a self-service display in a non-exempt facility.

The conduct set forth above on November 30, 2016, September 13, 2017 and,
September 20, 2017 counts as four (4) violations under FDA policy for purposes of
computing the civil money penalty. See Guidance for Industry, at 13-14.

XII. PENALTY

There being liability under the relevant statute, I must now determine the amount
of penalty to impose. My discretion regarding a penalty is constrained by regulation. I
must impose either the maximum amount permitted by law or the amount requested by
the Center, whichever is lower. 21 C.F.R. § 17.11(a)(1), (a)(2).

In terms of specific punishments available, the legislation that provides the basis
for assessing civil monetary penalties divides retailers into two categories: those that
have “an approved training program” and those that do not. Retailers with an approved
program face no more than a warning letter for their first violation; retailers without
such a program begin paying monetary penalties with their first. TCA § 103(q)(2), 123
Stat. 1839, codified at 21 U.S.C. § 333 note. See 21 C.F.R. § 17.2. The FDA has
informed the regulated public that “at this time, and until FDA issues regulations setting
the standards for an approved training program, all applicable CMPs will proceed under
the reduced penalty schedule.” FDA Regulatory Enforcement Manual, Aug 2015,

§ 5-8-1. Because of this reasonable exercise of discretion, the starting point for

14
punishments and the rate at which they mount are clear — the lower and slower
schedules.
XIV. MITIGATION
Because Respondent is found to be in default I am required to impose the
maximum amount of penalties provided for by law for the violations alleged.
Therefore, no mitigation is considered.
XV. CONCLUSION
Respondent committed four (4) violations in a 24-month period and so,
Respondent is liable for a civil money penalty of $2,236. See 21 CFR. § 17.2.

WHEREFORE, evidence having read and considered it be and is hereby
ORDERED as follows:

a. I find Respondent has been served with process herein and is subject to
this forum.

b. I find Respondent failed to comply with my Acknowledgment and Pre-
Hearing Order and my February 21, 2018 Order.

c. I find Respondent is in default.

d. Iassume the facts alleged in the complaint to be true.

e. I find the facts set forth in the complaint establish liability under the
relevant statute.

f. Lassess a monetary penalty in the amount of $2,236.

/s/
Richard C. Goodwin
U.S. Administrative Law Judge

15


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2017-H-2609)

Complainant
v.

Three “T”s in Pensacola, Inc.
d/b/a Red Baron Lounge and Package,

Respondent.
Docket No. T-17-3819
Decision No. TB2587

Date: April 3, 2018

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Three “T”s in Pensacola, Inc. d/b/a Red Baron Lounge and
Package, located at 8961 Pensacola Boulevard, Pensacola, Florida 32534, and by filing a
copy of the complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. The complaint alleges that Red Baron Lounge and Package
impermissibly sold cigarettes to minors, failed to verify, by means of photo identification
containing a date of birth, that the purchasers were 18 years of age or older, and used a
vending machine in a non-exempt facility, 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 $2,236 civil money penalty against Respondent Red
Baron Lounge and Package.

During the course of this administrative proceeding, Respondent has failed to comply
with two separate judicial orders and failed to appear at the pre-hearing conference. See
21 C.F.R. § 17.35(a). Accordingly, pursuant to 21 C.F.R. §§ 17.35(a)(1), (2), I strike
Respondent’s Answer and issue this decision of default judgment.

I. Procedural History

CTP began this matter by serving an administrative complaint, seeking a $2,236 civil
money penalty, on Respondent Three “T”s in Pensacola, Inc. d/b/a Red Baron Lounge
and Package on May 9, 2017. Respondent filed an Answer to CTP’s complaint on May
24, 2017. Lissued an Acknowledgment and Prehearing Order (APHO) on July 3, 2017,
that set deadlines for parties’ submissions, including the August 2, 2017 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 August 2, 2017. On September 19, 2017, CTP filed an
Unopposed Motion to Extend Deadlines due to Hurricane Irma. On September 20, 2017,
lissued an Order Granting CTP’s Motion to Extend Deadlines that extended the deadline
for the parties to serve requests for documents to October 2, 2017.

On October 10, 2017, CTP filed a Motion to Compel Discovery, indicating that
Respondent did not respond to its request within the time limit. See 21 C.F.R. § 17.23(a).
On the same date, CTP also filed a Motion to Extend Deadlines requesting that all pre-
hearing exchange deadlines be extended for 30 days. In a letter issued by my direction,
Respondent was given until October 27, 2017, to object to CTP’s Motion to Compel
Discovery. Respondent did not file an objection to CTP’s motion.

In an October 30, 2017 Order, I granted CTP’s Motion to Compel Discovery and
extended the pre-hearing exchange deadlines. The Order allowed Respondent until
November 15, 2017 to comply with CTP’s discovery request. CTP subsequently filed a
Status Report, indicating that Respondent had provided the requested documents. On
December 22, 2017, CTP timely filed its pre-hearing exchange. Respondent did not file a
pre-hearing exchange.

On January 18, 2018, I issued an Order Scheduling Pre-Hearing Conference, setting a

pre-hearing conference by telephone for January 30, 2018, at 11:00 a.m. Eastern Time.
On January 30, 2018, I convened the previously scheduled Pre-Hearing Conference by
telephone. CTP’s counsel joined the pre-hearing conference, but Respondent failed to
appear.

On January 30, 2018, I issued an Order to Show Cause, allowing Respondent until
February 9, 2018 to provide an explanation for failure to appear at the pre-hearing
conference. My Order to Show Cause warned Respondent that “[f]ailure to do so may
result in sanctions, including the issuance of an Initial Decision and Default Judgment
finding Respondent liable for the violations listed in the Complaint and imposing a civil
money penalty pursuant to 21 C.F.R. § 17.35(a).” To date, Respondent has not
responded to my Order to Show Cause.

Il. Striking Respondent’s Answer
Pursuant to 21 C.F.R. § 17.35(a), I may sanction a party for:

() Failing to comply with an order, subpoena, rule, or procedure
governing the proceeding;

(2) Failing to prosecute or defend an action; or

(3) Engaging in other misconduct that interferes with the speedy,
orderly, or fair conduct of the hearing.

Here, Respondent failed to:

¢ Comply with my January 18, 2018, Order Scheduling Pre-Hearing Conference
when it failed to appear at the January 30, 2018, pre-hearing conference; and

¢ Comply with my January 30, 2018, Order to Show Cause when it failed to show
cause for its failure to appear at the pre-hearing conference.

I find that Respondent failed to comply with two judicial orders and failed to defend its
actions, which has interfered with the speedy, orderly, or fair conduct of this proceeding.
21 C.F.R. § 17.35(a). I conclude that Respondent’s conduct establishes a basis for
sanctions pursuant to 21 C.F.R. § 17.35 and that sanctions are warranted.

The harshness of the sanctions I impose must relate to the nature and severity of the
misconduct or failure to comply. 21 C.F.R. § 17.35(b). Here, Respondent failed to
comply with two orders, despite being warned that failure to comply could result in
sanctions including issuance of an Initial Decision and Default Judgment; Respondent
also failed to appear for a previously scheduled pre-hearing conference. I find that
Respondent’s failure to comply is sufficient to warrant striking its Answer and issuing a
decision by default, without further proceedings. 21 C.F.R. §§ 17.35(b), (c)(3).
Accordingly, I strike Respondent’s Answer, and issue this Initial Decision and Default
Judgment, assuming the facts alleged in CTP’s complaint to be true. 21 C.F.R.

§§ 17.35(c)(3), 17.11(a).

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 the default judgment is merited based on the allegations of the Complaint and
the sanctions imposed on Respondent for failure to comply with the orders. 21 C.F.R.
§ 17.11. Specifically:

e At approximately 6:51 p.m. on April 2, 2016, at Respondent’s business
establishment, 8961 Pensacola Boulevard, Pensacola, Florida 32534, an
FDA-commissioned inspector documented a person younger than 18 years of age
purchase a package of Marlboro Gold Pack 100’s cigarettes from a vending
machine. The inspector 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. Additionally, the inspector documented the use of a vending
machine in a non-exempt facility;

e Ina warning letter dated April 14, 2016, CTP informed Respondent of the
inspector’s April 2, 2016 documented violations, and that such actions violate
federal law. 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 5:07 p.m. on December 28, 2016, at Respondent’s business
establishment, 8961 Pensacola Boulevard, Pensacola, Florida 32534, an
FDA-commissioned inspector documented a person younger than 18 years of age
purchase a package of Marlboro cigarettes from a vending machine. The inspector
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.
Additionally, the inspector documented the use of a vending machine in a non-
exempt facility.

These facts establish Respondent Red Baron Lounge and Package’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)(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

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

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. § 1140.14(a)(3), no
retailer may use a vending machine to sell cigarettes in a non-exempt facility.

Order

For these reasons, I enter default judgment in the amount of $2,236 against Respondent
Three “T’’s in Pensacola, Inc. d/b/a Red Baron Lounge and Package. 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.

Sharps Discount Liquors, Inc.
d/b/a Sharps Discount Liquors,

Respondent.

Docket No. T-17-2235
FDA Docket No. FDA-2017-H-0850

Decision No. TB2573

Date: March 29, 2018

INITIAL DECISION

I sustain the determination of the Center for Tobacco Products (““CTP”) of the United
States Food and Drug Administration (“FDA”) to impose a civil money penalty of $275
against Respondent, Sharps Discount Liquors, Inc. d/b/a Sharps Discount Liquors.

I. Background

Respondent requested a hearing in order to challenge CTP’s determination to impose a
civil money penalty. I held a hearing by telephone on December 18, 2017. At the
hearing, I received into evidence 19 exhibits from CTP, identified as CTP Ex. 1 —

CTP Ex. 19. These exhibits include the written direct testimony of two witnesses, Senior
Regulatory Counsel Laurie Sternberg (CTP Ex. 3) and FDA-commissioned Inspector
Mella Baxter (CTP Ex. 4). Respondent offered no exhibits. Prior to the hearing, I
received a brief from CTP and Respondent. Respondent also filed a post-hearing brief.
IL. Issues, Findings of Fact and Conclusions of Law
A. Issues
The issues are whether:

1. Respondent sold tobacco products to minor purchasers in violation of
federal regulations governing the sale of tobacco products; and

2. A civil money penalty of $275 is a reasonable remedy.
B. Findings of Fact and Conclusions of Law

CTP determined to impose a civil money penalty 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 sale of tobacco products to an
individual who is under the age of 18 is a violation of implementing regulations.

21 C.F.R. § 1140.14(a)(1).

CTP premises its case on the results of inspections of Respondent’s facility, conducted on
May 11, 2016, and August 13, 2016. Ms. Baxter, an FDA-commissioned inspector,
testified that on both occasions she went to Respondent’s establishment accompanied by
a minor who was employed for the purpose of attempting to purchase tobacco products
from business establishments under inspection. CTP Ex. 4. Ms. Baxter testified that on
each occasion she verified that the minor carried photographic identification that stated
his or her age. Jd. at J 8, 13. On each occasion, Ms. Baxter watched the minor enter
Respondent’s establishment. Jd. at {§9, 14. Ms. Baxter testified that on each occasion
she entered the establishment moments after, took a position from which she could
observe the activities at the establishment’s sales counter, and watched the minor
purchase a pack of cigarettes from the clerk. Jd.

CTP corroborated Ms. Baxter’s testimony by offering as evidence photographs that Ms.
Baxter made of the cigarettes that the minors purchased on the dates in question.

CTP Exs. 8-9, 15-16. CTP also submitted narrative reports by Ms. Baxter created
contemporaneously with each inspection. CTP Exs. 6, 13. Respondent offered no
evidence to rebut Ms. Baxter’s testimony.

Respondent argues that there is no evidence of a violation, that a photograph of cigarettes
and the front of his store is not proof of a violation, and claims that it does not employ a
clerk that meets the description provided by the inspector. Answer § 3; R. Pre-Hearing
Brief at 4; R. Post-Hearing Brief at 1.
However, Respondent’s assertion that there is not sufficient evidence is a legal
conclusion rather than an affirmative defense supported by evidence. Respondent’s
assertion that it does not employ a clerk that meets the description provided by the
inspector is unsupported by any evidence of record. I afforded Respondent the
opportunity to present evidence and that evidence could have included photographic or
documentary exhibits or the written direct testimony of any supporting witnesses.
Respondent did not avail itself of the opportunity that I gave it. I find no basis to
conclude that any of Respondent’s allegations are credible. Instead, I find evidence to
support CTP’s position. The contemporaneous narratives describes Respondent’s clerk
as being an adult female with black/dark brown hair for the May 11, 2016 inspection
(CTP Ex. 6 at 2), and an adult female with blonde hair and glasses for the August 13,
2016 inspection (CTP Ex. 13 at 2). Although Respondent asserts, without support, that
its clerks do not meet that description, Respondent concedes that one of its female clerks
is “a brunette.” R. Post-Hearing Brief.

CTP has proven that Respondent violated regulations governing the sale of tobacco
products to minors, committing two violations during a period of less than one year. That
is egregious conduct. Regulations authorize a penalty of up to $275 for the violations
committed by Respondent. 45 C.F.R. § 102.3; 21 U.S.C. § 333(f)(9).

The egregiousness of Respondent’s conduct must amply justify the penalty amount. On
two occasions within about three months, Respondent sold tobacco products to minor
purchasers in violation of the law. It did so despite being warned by CTP after the

May 11, 2016 violation that penalties would be imposed against Respondent for future
unlawful sales. CTP Ex. 10.

I take notice that tobacco products are highly addictive and dangerous to the health of
those who consume them. They may have lethal long-term effects on consumers.
Younger purchasers are highly susceptible to becoming addicted. A penalty of $275 is
plainly reasonable given the dangers of tobacco products and Respondent’s repeated
unlawful sales of these products to minor purchasers.

/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.
Auto Valet, Inc.
d/b/a Finest Car Wash,

Respondent.

Docket No. T-17-3153
FDA Docket No. FDA-2017-H-1867

Decision No. TB2571

Date: March 29, 2018

DECISION
Found:
1) Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(a)(1) ! on July 21, 2015 and October 23, 2016 as charged in the
complaint; and
2) Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(a)(2)(i) on July 21, 2015 and October 23, 2016 as charged in the
complaint; and
3) Respondent committed three (3) violations in a twenty-four (24) month
period as set forth hereinabove.
4) Respondent is hereby assessed a civil penalty in the amount of $550.
Glossary:
ALJ administrative law judge?
CTP/Complainant Center for Tobacco Products
FDCA Federal Food, Drug, and Cosmetic Act (21 U.S.C.A. Chap. 9)
FDA Food and Drug Administration

' On August 8, 2016, the citations to certain tobacco violations changed. For more
information see: https://federalregister.gov/a/2016-10685.
2 See 5 C.F.R. § 930.204.

HHS Dept. of Health and Human Services

OSC Order to Show Cause

PO Procedural Order

POS UPS Proof of Service

Respondent Auto Valet, Inc. d/b/a Finest Car Wash

TCA The Family Smoking Prevention and Tobacco Control Act,

Pub. L. No. 111-31, 123 Stat. 1776 (2009)

I. JURISDICTION

Ihave jurisdiction to hear this case pursuant to my appointment by the Secretary
of Health and Human Services and my authority under the Administrative Procedure Act
(5 U.S.C. §§ 554-556), 5 U.S.C.A. § 3106, 21 U.S.C. § 333(£)(5), 5 C.F.R. §§ 930.201 et

seq. and 21 C.F. R. Part 173

Il. PROCEDURAL BACKGROUND

The Center for Tobacco Products (CTP/Complainant) filed a complaint dated
April 3, 2017 alleging that FDA documented three (3) violations within a twenty-four
(24) month period.

Auto Valet, Inc. d/b/a Finest Car Wash was served with process on April 6, 2017
by United Parcel Service. Respondent filed an Answer dated May 5, 2017 in which it
denied the allegations.

I conducted a hearing on December 5, 2017. The parties filed post-hearing briefs
on February 16, 2017.

The matter is now ready for decision (21 C.F.R. § 17.45 (c)).

3 See also Butz v. Economou, 438 U.S. 478 at 513, 98 S.Ct. 2894, 57 L.Ed.2d 895
(1978); Marshall v. Jerrico, Inc., 446 U.S. 238 (1980); Federal Maritime Com’n v. South
Carolina State Ports Authority, 535 U.S. 743, 744 (2002).

2
Ill. | BURDEN OF PROOF

CTP as the petitioning party has the burden of proof (21 C.F.R. § 17.33).
IV. LAW

21 USC. § 331, specifically 21 C.F.R. §§ 1140.14(a)(1) and 1140.14(a)(2)(i).
V. ISSUES

Did Respondent violate 21 U.S.C. § 331, specifically 21 C.F.R. §§ 1140.14(a)(1)
and 1140.14(a)(2)(i) as alleged in the complaint?

If so, is a civil money penalty in the amount of $550 appropriate?
VI. ALLEGATIONS

A. Complainant’s Recitation of facts

CTP alleged that Respondent owned an establishment, doing business under the
name Finest Car Wash, located at 36 Pleasant Valley Parkway, Providence, Rhode Island
02908. Respondent’s establishment received tobacco products in interstate commerce
and held them for sale after shipment in interstate commerce.

CTP’s complaint further alleged that on August 27, 2015, CTP issued a Warning
Letter to Respondent *, alleging that Respondent committed the following violations:

a. Selling tobacco products to a minor, in violation of 21 C.F.R. § 1140.14(a)(1).

Specifically, a person younger than 18 years of age was able to purchase a
package of Newport Box 100s on July 21, 2015, at approximately 2:43 PM;

and

4 In the Warning Letter, Respondent was identified as Irving #1 Finest Car Wash.
3
b. Failing to verify the age of a person purchasing tobacco products by means of

photographic identification containing the bearer's date of birth, as required by
21 CFR. § 1140.14(a)(2)(i). Specifically, the minor's identification was not
verified before the sale, as detailed above, on July 21, 2015, at approximately

2:43 PM.

Further, during a subsequent inspection of Finest Car Wash conducted on October

23, 2016, an FDA-commissioned inspector documented the following violations:

B.

a. Selling tobacco products to a minor, in violation of 21 C.F.R. § 1140.14(a)(1).

Specifically, a person younger than 18 years of age was able to purchase a
package of Marlboro cigarettes on October 23, 2016, at approximately

11:51 AM; and

. Failing to verify the age of a person purchasing tobacco products by means of

photographic identification containing the bearer's date of birth, as required by
21 CFR. § 1140.14(a)(2)(i). Specifically, the minor's identification was not
verified before the sale, as detailed above, on October 23, 2016, at

approximately 11:51 AM.

Respondent’s recitation of facts

In its Answer, Respondent denied the allegations contained in the complaint.

Respondent argued that its actions were not intentional, that it promptly took remedial

measures, and it discharged the employee in question.
VII. FAMILY SMOKING PREVENTION AND TOBACCO CONTROL ACT

The “relevant statute” in this case is actually a combination of statutes and
regulations: The Family Smoking Prevention and Tobacco Control Act, Pub. L. No. 111
31, 123 Stat. 1776 (2009) (TCA), amended the Food, Drug, and Cosmetic Act
(21 U.S.C.A. Chap. 9) (FDCA) and created a new subchapter of that Act that dealt
exclusively with tobacco products, (21 U.S.C. §§ 387-387u), and it also modified other
parts of the FDCA explicitly to include tobacco products among the regulated products
whose misbranding can give rise to civil, and in some cases criminal, liability. The 2009
amendments to the FDCA contained within the TCA also charged the Secretary of Health
and Human Services with, among other things, creating regulations to govern tobacco
sales. The Secretary’s regulations on tobacco products appear in Part 1140 of title 21,
Code of Federal Regulations.

Under the FDCA, “[a] tobacco product shall be deemed to be misbranded if, in the
case of any tobacco product sold or offered for sale in any State, it is sold or distributed
in violation of regulations prescribed under section 387f(d).” 21 U.S.C. § 387c(a)(7)(B)
(2012). Section 387 a-1 directed FDA to re-issue, with some modifications, regulations
previously passed in 1996. 21 U.S.C. § 387 a-1(a)(2012). These regulations were passed
pursuant to section 387f(d), which authorizes FDA to promulgate regulations on the sale
and distribution of tobacco products. 75 Fed. Reg. 13,225 (March 19, 2010), codified at
21 CFR. Part 1140 (2015); 21 U.S.C. § 387f(d)(1) (2012). Accordingly, 21 C.F.R.

§ 1140.1(b) provides that “failure to comply with any applicable provision in this part in
the sale, distribution, and use of cigarettes and smokeless tobacco renders the product
misbranded under the act.”

Under 21 U.S.C. § 331(k), “[t]he alteration, mutilation, destruction, obliteration, or
removal of the whole or any part of the labeling of, or the doing of any other act with
respect to, a food, drug, device, tobacco product, or cosmetic, if such act is done while
such article is held for sale (whether or not the first sale) after shipment in interstate
commerce and results in such article being adulterated or misbranded” is a prohibited act
under 21 U.S.C. § 331. Thus, when a Retailer such as Respondent misbrands a tobacco
product by violating a requirement of 21 C.F.R. Part 1140, that misbranding in turn
violates the FDCA, specifically 21 U.S.C. § 331(k). FDA may seek a civil money
penalty from “any person who violates a requirement of this chapter which relates to
tobacco products.” 21 U.S.C. § 333(f)(9)(A) (2012). Penalties are set by 21 U.S.C.

§ 333 note and 21 C.F.R. § 17.2. Under current FDA policy, the first time FDA finds
violations of 21 C.F.R. Part 1140 at an establishment, FDA only counts one violation
regardless of the number of specific regulatory requirements that were actually violated,
but if FDA finds violations on subsequent occasions, it will count violations of specific
regulatory requirements individually in computing any civil money penalty sought. This
policy is set forth in detail, with examples to illustrate, at U.S. Food & Drug Admin.,
Guidance for Industry and FDA Staff, Civil Money Penalties and No-Tobacco-Sale
Orders for Tobacco Retailers, Responses to Frequently Asked Questions (Revised)
(2015), available at

http: //www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/U

6
CM447310.pdf [hereinafter Guidance for Industry], at 13-15. So, for instance, if a
retailer sells a tobacco product on a particular occasion to a minor without checking for
photographic identification, in violation of 21 C.F.R. §§ 1140.14(a)(1) and (a)(2)(i), this
will count as two separate violations for purposes of computing the civil money penalty,
unless it is the first time violations were observed at that particular establishment. This
policy of counting violations has been determined by the HHS Departmental Appeals
Board (Board) to be consistent with the language of the FDCA and its implementing
regulations, see CTP v. Orton Motor Company, Departmental Appeals Board Decision
number 2717 of June 30, 2016. The Board’s decision was upheld on appeal. see Orton
Motor, Inc. d/b/a Orton’s Bagley v. United States Department of Health and Human
Services, No. 16-1299, WL 1386141, (D.C. Cir. Mar. 20, 2018). In Orton, the court held
that the FDCA permits multiple violations where multiple regulations were breached. Id.
at 14. The regulations authorize the FDA to impose penalties for each violation of the
tobacco sale restrictions arising during a single inspection. Id. at 11.
VIII. HEARING

A hearing was held on December 5, 2017 by telephone as set forth in my October
3, 2017 Order of the Court. Samantha Hong, Esquire, appeared on behalf of

Complainant. Scott J. Summer, Esquire, appeared on behalf of Respondent.
IX. SUMMARY OF TESTIMONY AND EVIDENCE

A. Complainant’s case

Complainant submitted evidence and testimony in form of written declarations and
photographs. Complainant offered CTP Exhibits | through 21, inclusive, the exhibits
were marked for identification. Respondent did not object to any of Complainant’s
exhibits. I admit Complainant’s Exhibits | through 21, inclusive.

i. Inspector David Tejada

Witness David Tejada, the FDA-commissioned Inspector who conducted the
inspection of Respondent’s establishment on July 21, 2015 testified on behalf of
Complainant. Complainant provided Inspector Tejada’s written direct testimony as CTP
Ex. 4.

Inspector Tejada testified that on July 21, 2015, at approximately 2:43 PM, he and
a minor conducted an undercover buy (UB) compliance check inspection at Respondent’s
establishment, Finest Car Wash, located at 36 Pleasant Valley Parkway, Providence,
Rhode Island 02908. CTP Ex. 4 at 2. Before the inspection, Inspector Tejada confirmed
that the minor left his/her photographic identification (ID) in the car and that the minor
did not have any tobacco products in his/her possession. CTP Ex. 4 at 2.

According to his testimony, Inspector Tejada parked his car near Respondent’s
establishment and he and the minor exited the vehicle. He took a position where he had a
clear, unobstructed view of the service window and the minor, and watched the minor
approach the transaction kiosk at Respondent’s establishment. CTP Ex. 4 at 2. Inspector

Tejada testified that he observed the minor purchase a package of cigarettes from an

8
employee at Respondent’s establishment, and prior to the purchase the minor did not
present any identification to the employee. CTP Ex. 4 at 3. The employee did not
provide the minor with a receipt after the purchase. Id.

After the transaction, Inspector Tejada and the minor returned to the vehicle where
immediately upon entering, the minor handed the inspector the package of cigarettes.
Inspector Tejada observed that the package of cigarettes were Newport Box 100s
cigarettes. Inspector Tejada processed the evidence according to procedure and
completed a narrative report. CTP Ex. 4 at 3; see CTP Exs. 7-8. Inspector Tejada also
testified that CTP Exhibits 7 and 10 were true and accurate copies. CTP Ex. 4 at 3.

ii. Inspector Derek Shields

Witness Derek Shields, the FDA-commissioned Inspector who conducted the
inspection of Respondent’s establishment on October 23, 2016 testified on behalf of
Complainant. Complainant provided Inspector Shields’ written direct testimony as CTP
Ex. 5.

Inspector Shields testified that on October 23, 2016, at approximately 11:51 AM,
he and a minor conducted the follow-up UB compliance check inspection at
Respondent’s establishment. CTP Ex. 5 at 2. Before the inspection, Inspector Shields
confirmed that the minor left his/her photographic identification (ID) in the car and that
the minor did not have any tobacco products in his/her possession. CTP Ex. 5 at 2.

According to his testimony, Inspector Shields parked his car near Respondent’s
establishment and the minor exited the vehicle. Inspector Shields remained inside his

vehicle and watched the minor approach the transaction kiosk window at Respondent’s

9
establishment. CTP Ex. 5 at 2. The minor completed the transaction, returned to the
Inspector’s vehicle, and handed Inspector Shields a package of cigarettes. Inspector
Shields observed that the package of cigarettes were Marlboro cigarettes. The minor
reported to Inspector Shields that during the inspection, the minor was able to purchase a
package of cigarettes from an employee at the establishment. The minor also reported to
Inspector Shields that prior to the purchase the minor did not present any identification to
the employee, and the employee did not provide a receipt to the minor after the purchase.
CTP Ex. 5 at 3.

Inspector Shields processed the evidence according to procedure and completed a
narrative report. CTP Ex. 5 at 3; see CTP Exs. 14-15. Inspector Shields also testified
that CTP Exhibits 14 and 17 were true and accurate copies. CTP Ex. 5 at 3.

iii. Ms. Laurie Sternberg

Witness Laurie Sternberg, Senior Regulatory Counsel, Office of Compliance and
Enforcement, CTP, FDA, testified on behalf of Complainant. Complainant provided Ms.
Sternberg’s written direct testimony as CTP Ex. 3.

Ms. Sternberg testified that Newport brand cigarettes, the tobacco product
purchased during the July 21, 2015 inspection, were manufactured or processed for
commercial distribution at facilities in North Carolina and Virginia. CTP Ex. 3 at 2-3.
The manufacturer of Newport brand cigarettes does not have any production facilities in
Rhode Island, where the tobacco product at issue was purchased. CTP Ex. 3 at 3. Ms.
Sternberg further testified that Marlboro brand cigarettes, the tobacco product purchased

during the October 23, 2016 inspection, were manufactured or processed for commercial

10
distribution at facilities in Virginia. CTP Ex. 3 at 3. The manufacturer of Marlboro
brand cigarettes does not have any production facilities in Rhode Island, where the

tobacco product at issue was purchased. CTP Ex. 3 at 3.

B. Respondent’s case

Respondent submitted five exhibits marked as R. Ex. | through 5. Complainant
did not object to any of Respondent’s exhibits. I admit Respondent’s Exhibits 1 through
5, inclusive.

i. Peter Montaquila, Jr.

Witness Peter Montaquila, Jr., Respondent’s owner, testified on behalf of
Respondent. Respondent offered Mr. Montaquilia’s written direct testimony as R Ex. 1.

Mr. Montaquila testified that it was his understanding that after receiving the
warning letter regarding the July 21, 2015 violations, Respondent’s General Manager met
with all cashiers and confirmed that they understood the rules regarding tobacco sales to
minors. R. Ex. 1 at 2. The manager also met with the attendant involved in the July 21,
2015 violations and warned that “she could lose her job if she again made the mistake of
selling to a minor.” Id. After receiving the notice regarding the October 23, 2016

violations, Respondent fired the cashier involved. Id.

C. Credibility determinations

I find and conclude testimony and evidence by both parties was credible.

11
X. ANALYSIS OF EVIDENCE AND TESTIMONY

A. Complainant’s case

Complainant offered and I admitted into evidence Exhibits | through 21,
inclusive. Pursuant to 21 C.F.R. § 17.33(b) in order to prevail, CTP must prove
Respondent’s liability and the appropriateness of the penalty under the applicable statute
by a preponderance of the evidence.

I must determine whether the allegations in the complaint are true, and if so,
whether Respondent’s actions identified in the complaint violated the law. 21 C.F.R.

§ 14.45(b)(1).

B. Respondent’s case

Respondent offered and I admitted into evidence Exhibits 1 through 5, inclusive.
Pursuant to 21 C.F.R. § 17.33(c) Respondent must prove any affirmative defenses and
any mitigating factors by a preponderance of the evidence.

C. Analysis

i. I find and conclude that CTP has shown by a preponderance of the

evidence that Respondent violated 21 C.F.R. §§ 1140.14(a)(1) and

1140.14(a)(2)(i) when it impermissibly sold cigarettes to a minor

and failed to verify the minor’s age by means of photographic

identification on July 21, 2015, at approximately 2:43 PM.

On July 21, 2015, Inspector Tejada and the confidential state-contracted minor

conducted an undercover buy compliance check inspection of Respondent’s

12
establishment at approximately 2:43 PM. CTP Ex. 7 at 1. Inspector Tejada confirmed
that the minor left his/her photographic identification in the car, and that the minor did
not possess any tobacco products on his/her person before the inspection. Id.

The inspector had a clear, unobstructed view of the service window and the minor,
and observed the minor approach the transaction kiosk at Respondent’s establishment.
CTP Ex. 4 at 2. Inspector Tejada observed the minor purchase a package of Newport
Box 100s cigarettes from one of Respondent’s employees, and the minor did not provide
an identification to the employee prior to the purchase. CTP Ex. 7 at 1. I find Inspector
Tejada’s testimony to be credible and unbiased. I find that it, in conjunction with the
corroborating documentary evidence (e.g. the contemporaneous report) and physical
evidence (e.g. photographs of the Newport 100s cigarettes purchased on that date), CTP
has satisfied its burden of proving that Respondent violated 21 C.F.R. §§ 1140.14(a)(1)
and 1140.14(a)(2)(i) on July 21, 2015 at 2:43 PM by a preponderance of the evidence.

ii. 1 find and conclude that CTP has shown by a preponderance of the

evidence that Respondent violated 21 C.F.R. §§ 1140.14(a)(1) and

1140.14(a) (2)() when it impermissibly sold cigarettes to a minor

and failed to verify the minor’s age by means of photographic

identification on October 23, 2016, at approximately 11:51 AM.

On October 23, 2016, Inspector Shields and the confidential state-contracted
minor conducted a follow-up undercover buy compliance check inspection of
Respondent’s establishment at approximately 11:51 AM. CTP Ex. 5 at 2. Inspector

Shields confirmed that the minor left his/her photographic identification in the car, and

13
that the minor did not possess any tobacco products on his/her person before the
inspection. Id.

The inspector remained inside his vehicle and observed the minor approach the
transaction kiosk at Respondent’s establishment. CTP Ex. 5 at 2. The minor completed
the transaction, returned to the inspector’s vehicle, and handed Inspector Shields a
package of Marlboro cigarettes. I find Inspector Shield’s testimony to be credible and
unbiased. I find that it, in conjunction with the corroborating documentary evidence (e.g.
the contemporaneous report) and physical evidence (e.g. photographs of the Marlboro
cigarettes purchased on that date), CTP has satisfied its burden of proving that
Respondent violated 21 C.F.R. §§ 1140.14(a)(1) and 1140.14(a)(2)(i) on October 23,
2016 at 11:51 AM by a preponderance of the evidence.

iii. | Respondent offered no affirmative proof to rebut the evidence of

noncompliance presented by CTP.

In its Answer, Respondent stated that its “actions were neither flagrant nor
intentional; [Respondent] took measures, promptly, and discharged the employee in
question.” However, Respondent has not offered anything to rebut CTP’s evidence of
noncompliance, and has not put forth anything to refute the sworn testimony of
Inspectors Tejada and Inspector Shields that it sold tobacco products to minors and failed

to verify the minors’ identification on July 21, 2015 and October 23, 2016.

14
Respondent argues it was denied due process because CTP failed to timely inform
Respondent that the July 21, 2015 violations, which resulted in a Warning Letter, could
be used as a basis to assess civil monetary penalties, therefore, it was denied a fair and
effective opportunity to preserve evidence. R. Informal Brief at 5. A retailer has an
opportunity to challenge the issuance of a first violation upon the later assessment of civil
money penalties. See Orton Motor, Inc. d/b/a Orton’s Bagley v. United States
Department of Health and Human Services, No. 16-1299, WL 1386141, (D.C. Cir. Mar.
20, 2018). CTP’s adjudication of the subsequent violation provides a meaningful
opportunity for a retailer to be heard regarding the first violation. Id at 19. Because no
opportunity for a hearing was provided before the Warning Letter was issued,
Respondent had a right to challenge the July 21, 2015 allegations in the instant case.

Respondent’s defense also focuses on whether it is reasonable for its staff to
request identification. Respondent argues “there is no way for the Presiding Officer to
determine whether or nor it would be reasonable for the sales clerk to conclude that a
tester “appeared to be” over 26 years old...” R. Post-Hearing Brief at 3. Section
1140.14(a)(2) requires retailers to verify by means of photographic identification that no
person purchasing tobacco products is younger than 18 years of age. This verification is
not required for any person over the age of 26. I am not required to make a determination
whether it is reasonable for a retailer to conclude that a tobacco product purchaser
appears to be over the age of 26. The regulations do not take into account a retailer’s

subjective inquiry about the appearance of tobacco product purchasers.

15
Finally, Respondent takes issue with CTP’s method of counting violations.
Respondent argues “each inspection upon which a sales clerk failed to check ID and sold
to a minor should be counted as one violation, not the two violations that the Government
proposes.” R. Post-Hearing Brief at 3. As stated above, CTP’s policy of counting
violations has been held to be consistent with the language of the FDCA and its
implementing regulations. See Orton Motor, Inc. d/b/a Orton’s Bagley v. United States
Department of Health and Human Services, No. 16-1299, WL 1386141, (D.C. Cir. Mar.
20, 2018).

Though I find Mr. Montaquila’s testimony credible, it does nothing to rebut CTP’s
allegations. Respondent has not provided any affirmative proof to rebut the evidence of
noncompliance presented by CTP. On the other hand, the testimony of Inspector Tejada
and Inspector Shield’s is believable and supported by evidence in the record.

I conclude that Respondent has not proved any affirmative defense by a
preponderance of the evidence.

XI. LIABILITY

When a retailer such as Respondent is found to have “misbranded” a tobacco

product in interstate commerce, it can be liable to pay a civil monetary penalty.
21 USC. §§ 331, 333.
I find and conclude that the evidentiary facts, by a preponderance of the evidence

standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.

16
§ 1140.14(a)(1) on July 21, 2015 and October 23, 2016, in that a person younger than 18
years of age was able to purchase cigarettes as set forth in the complaint.

I find and conclude that the evidentiary facts, by a preponderance of the evidence
standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(a)(2)(i) on those same dates, in that Respondent failed 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

The conduct set forth above on July 21, 2015 and October 23, 2016 counts as three
(3) violations under FDA policy for purposes of computing the civil money penalty. See

Guidance for Industry, at 13-15.

XII. PENALTY

There being liability under the relevant statute, I must now determine the amount
of penalty to impose. Pursuant to 21 U.S.C. § 333(f)(9), Respondent is liable for a civil
money penalty not to exceed the amounts listed in FDA’s civil money penalty regulations
at 21 C.F.R. § 17.2. In its complaint, CTP sought to impose the maximum penalty
amount, $550, against Respondent for three (3) violations of the Act and its
implementing regulations within a twenty-four (24) month period. Complaint § 1-2.
Respondent denies any obligation to pay a civil money penalty arguing that CTP has not
met its burden of proof. Respondent’s Informal Brief at 2.

As discussed, I found that CTP met its burden by a preponderance of the evidence

and concluded that Respondent committed three (3) violations of the Act and its

17
implementing regulations within a twenty-four (24) month period. When determining the
amount of a civil money penalty, I am required to take into account “the nature,
circumstances, extent and gravity of the violations and, with respect to the violator,
ability to pay, 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 U.S.C. § 333(f)(5)(B).

A. The Nature, Circumstances, Extent and Gravity of the Violations

Ihave found that Respondent specifically committed (2) violations of selling
tobacco products to minors, and two (2) violations for failure to verify, by means of
photo identification containing a purchaser’s date of birth, that no tobacco product
purchasers are younger than 18 years of age, totaling three (3) violations® of the tobacco
regulations. The repeated inability of Respondent to comply with federal tobacco
regulations is serious in nature and the civil money penalty amount should be set
accordingly.

B. Respondent’s Ability to Pay And Effect on Ability to do Business

On July 27, 2017, the parties stipulated that Respondent has the financial means to
pay $550, and that payment will not constitute a financial hardship for Respondent. See

Stipulation of Fact, Dkt. No. 10.

> Two violations were documented on July 21, 2015, and two on October 23, 2016. 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.

18
C. History of Prior Violations

The current action is the first civil money penalty action brought against Respondent for
violations of the Act and its implementing regulations.

D. Degree of Culpability

I find Respondent committed three (3) violations as alleged in complaint, and I
hold it fully culpable for all three (3) violations of the Act and its implementing
regulations.

E. Additional Mitigating Factors

Mitigation is an affirmative defense for which Respondent bears the burden of
proof (21 C.F.R. § 17.33(c)). Respondent has posted signage, trained employees, and
“added software that requires a clerk to enter the date of birth of the customer before the
register will allow the sale of cigarettes.” R. Ex. 1 at 1-2. The purpose of the TCA to
prevent unlawful sales of tobacco products to minors. Tobacco is a highly addictive and
dangerous product. The reason that sales of tobacco products to minors is unlawful is
that consumption of these products at an early age can lead to a lifetime of addiction, to
illness, and ultimately to premature death. Sales of tobacco products to minors are
unlawful because younger individuals often lack the maturity and judgment to make
informed decisions about whether to consume such inherently dangerous and addictive
products. Selling tobacco products to these individuals puts them at risk for all of the
adverse consequences that addiction can cause.

I find and conclude there is no reason to consider mitigation of the penalty herein.

19
F. Penalty

Based on the foregoing reasoning, I conclude a penalty amount of $550 to be

appropriate un

XII. CONCL'

Respon

ler 21 U.S.C. §§ 333(£)(5)(B) and 333()(9).

USION

lent committed three (3) violations in a twenty-four (24) month period as

set forth in the complaint.

Respon

ent is liable for a civil money penalty of $550. See 21 C.F.R. § 17.2.

WHEREFORE, evidence having read and considered it be and is hereby

ORDERED as follows:

a. I find Respondent was served with process herein and is subject to this

b.

forum.

I find and conclude that the evidentiary facts, by a preponderance of the
evidence standard, support a finding Respondent violated 21 U.S.C.

§ 331, specifically 21 C.F.R. § 1140.14(a)(1) on July 21, 2015 and
October 23, 2016, in that a person younger than 18 years of age was
able to purchase cigarettes as set forth in the complaint.

. I find and conclude that the evidentiary facts, by a preponderance of the
evidence standard, support a finding Respondent violated 21 U.S.C.

§ 331, specifically 21 C.F.R. § 1140.14(a)(2)(i) on July 21, 2015 and
October 23, 2016, in that Respondent failed 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; and

I find and conclude Respondent committed three (3) violations of the
regulations within a twenty-four (24) month period; and

. Lassess a monetary penalty in the amount of $550.

/s/
Richard C. Goodwin
U.S. Administrative Law Judge

20


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Aadesh, Inc.
d/b/a 7 Eleven Store 25721A,

Respondent.

Docket No. T-17-1672
FDA Docket No. FDA-2017-H-0243

Decision No. TB2552
Date: March 23, 2018
INITIAL DECISION

I sustain the determination of the Center for Tobacco Products (“CTP”’) of the United
States Food and Drug Administration (“FDA”) to impose a civil money penalty of $2,200
against Respondent, Aadesh, Inc., d/b/a 7 Eleven Store 25721A.

I. Background

Respondent requested a hearing in order to challenge CTP’s determination to impose a
civil money penalty. I held a hearing by telephone on January 24, 2018. At the hearing, I
received into evidence 33 exhibits from CTP, identified as CTP Ex. 1-CTP Ex. 33. These
exhibits include CTP Ex. 14 (amended), the amended written declaration of Christopher
Castiello. Respondent offered no exhibits. Prior to the hearing I received a brief from
CTP. Respondent filed a post-hearing brief.
IL. Issues, Findings of Fact and Conclusions of Law

A. Issues
The issues are whether:

1. Respondent sold tobacco products to minor purchasers and failed to
check those purchasers’ photographic identifications, in violation of
federal regulations governing the sale of tobacco products; and

2. A civil money penalty of $2,200 is a reasonable remedy.
B. Findings of Fact and Conclusions of Law

CTP determined to impose a civil money penalty 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 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) and (a)(2)(i).

CTP premises its case on the results of inspections of Respondent’s facility, conducted on
December 14, 2014, April 8, 2016, and June 22, 2016. Mr. Castiello, an FDA-
commissioned inspector, testified that on all three occasions he went to Respondent’s
establishment accompanied by a minor who was employed for the purpose of attempting
to purchase tobacco products from business establishments under inspection. CTP Ex. 14
(amended). Mr. Castiello testified that on each occasion he verified that the minor
carried photographic identification that stated his or her age. On each occasion, Mr.
Castiello watched the minor enter Respondent’s establishment. Mr. Castiello testified
that on each occasion he entered the establishment, took a position from which he could
observe the activities at the establishment’s sales counter, and watched the minor
purchase a pack of cigarettes from the clerk. He testified that on December 14, 2014 and
on April 8, 2016, the store clerk did not verify the minor’s identification. He made no
observation on June 22, 2016 as to whether the clerk verified the minor’s identification.
Id.

CTP corroborated Mr. Castiello’s testimony by offering as evidence photographs that he
made of the cigarettes that the minors purchased on the dates in question. CTP Ex. 20;
CTP Ex. 25; CTP Ex. 30.

Respondent offered no evidence to rebut Mr. Castiello’s testimony. In its post-hearing
brief Respondent claims that there are “discrepancies” in Mr. Castiello’s testimony that
impeach his credibility. Respondent’s post-hearing brief at 2. However, Respondent did
not identify these alleged discrepancies. I discern no discrepancies between Mr.
Castiello’s written direct testimony and his cross-examination testimony that he gave at
the January 24, 2018 hearing.

Respondent also made other assertions in its brief for which it failed to provide any
evidence. It asserts that the video recording of the June 22, 2016 transaction shows that it
was “done as per the proper procedure including the purchaser’s ID check.” It asserts
also that Mr. Castiello was not in the store (apparently, on June 22, 2016) as he
contended. It contends that, on June 22, 2016, Mr. Castiello had already left the store
before the transaction completed. Respondent’s post-hearing brief at 2-3.

These assertions are mere allegations unsupported by any evidence of record. I afforded
Respondent the opportunity to present evidence and that evidence could have included
the video recording that allegedly rebuts Mr. Castiello’s testimony about the

June 22, 2016 sale. Respondent did not avail itself of the opportunity that I gave it, nor
did Respondent submit the written direct testimony of any supporting witnesses. I find
no basis to conclude that any of Respondent’s allegations are credible.

The evidence proves that Respondent repeatedly violated regulations governing the sale
of tobacco products to minors, committing a total of four violations during a period of
less than two years.! That is egregious conduct. Regulations authorize a penalty of up to
$2,200 for the violations committed by Respondent. 45 C.F.R. § 102.3

The egregiousness of Respondent’s conduct amply justify the penalty amount. On
multiple occasions Respondent sold tobacco products to minor purchasers in violation of
the law. It did so despite being warned by CTP after the December 14, 2014 violations
that penalties would be imposed against Respondent for future unlawful sales.

I take notice that tobacco products are highly addictive and dangerous to the health of
those who consume them. They may have lethal long-term effects on consumers.

' As a matter of administrative discretion CTP opted to count the sale of cigarettes to a
minor purchaser on December 14, 2014 and the failure to check the purchaser’s
identification on that date as a single violation of the regulations governing tobacco sales.
CTP issued a warning to Respondent based on the December 14, 2014 inspection results.
Younger purchasers are highly susceptible to becoming addicted. A penalty of $2,200 is
plainly reasonable given the dangers of tobacco products and Respondent’s repeated
unlawful sales of these products to minor purchasers.

/s/
Steven T. Kessel
Administrative Law Judge


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

Center for Tobacco Products,
Complainant

Vv.

Action Convenience Store Inc.
d/b/a Shell Food Mart,
Respondent

FDA Docket No. FDA-2017-H-3738
CRD Docket No. T-17-4848

Decision No. TB2537

Date: March 21, 2018

INITIAL DECISION AND DEFAULT JUDGMENT

Found:

1) Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§§ 1140.14(a)(1) and 1140.14(a)(2)(i) as charged in the complaint; and

2) Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R
§§ 1140.14(a)(1) and 1140.14(a)(2)(i) as charged in the prior complaint;
and

3) Respondent committed five (5) violations in a 36-month period as set forth
hereinabove.

4) Respondent is hereby assessed a civil penalty in the amount of $5,591.

Glossary:

ALJ Administrative Law Judge!

CMP civil money penalty

CTP/Complainant Center for Tobacco Products

DJ Default Judgment

FDCA Federal Food, Drug, and Cosmetic Act (21 U.S.C.A.
Chap. 9)

' See 5 CFR. § 930.204.
DN UPS Delivery Notification

FDA Food and Drug Administration

HHS Dept. of Health and Human Services

OSC Order to Show Cause

POS UPS Proof of Service

SOP Service of Process

Respondent Action Convenience Store Inc. d/b/a Shell Food Mart
TCA The Family Smoking Prevention and Tobacco Control

Act, Pub. L. No. 111-31, 123 Stat. 1776 (2009)

I. JURISDICTION

Ihave jurisdiction to hear this case pursuant to my appointment by the Secretary
of Health and Human Services and my authority under the Administrative Procedure Act
(5 U.S.C. §§ 554-556), 5 U.S.C.A. § 3106, 21 U.S.C. § 333(£)(5), 5 C.F.R. §§ 930.201 et
seq. and 21 C.F. R. Part 172
Il. PROCEDURAL BACKGROUND

The Center for Tobacco Products (CTP/Complainant) filed a Complaint dated
June 19, 2017, alleging that FDA documented five (5) violations within a 36-month
period.

Action Convenience Store Inc. d/b/a Shell Food Mart (Respondent or Shell Food
Mart) was served with process on June 22, 2017 by United Parcel Service. Respondent
filed an Answer dated June 27, 2017. On July 11, 2017, I issued an Acknowledgement
and Pre-Hearing Order (APHO) setting a schedule for filings and procedures. Pursuant to

my APHO, CTP served Respondent’s counsel with a Request for Production of

2 See also Butz v. Economou, 438 U.S. 478 at 513, 98 S.Ct. 2894, 57 L.Ed.2d 895
(1978); Marshall v. Jerrico, Inc., 446 U.S. 238 (1980); Federal Maritime Com’n v. South
Carolina State Ports Authority, 535 U.S. 743, 744 (2002).

2
Documents on August 9, 2017. On September 20, 2017, CTP requested an extension of
the pre-hearing deadlines set forth in the APHO. On September 28, 2017, I issued an
Order extending all deadlines in this case, including the deadline to request documents.

On October 30, 2017, CTP filed Motions to Compel Discovery and Extend
Deadlines averring Respondent failed to comply with its request for production of
documents. On November 13, 2017, CTP filed its pre-hearing exchange. On
November 24, 2017, a letter by my direction was issued giving Respondent until
December 1, 2017 to file a response to CTP’s Motion to Compel Discovery. Respondent
did not file a response to CTP’s Motion to Compel. On December 15, 2017, I issued an
Order granting CTP’s Motion to Compel Discovery and Motion to Extend Deadlines, and
ordered Respondent to comply with CTP’s Request for Production of Documents by
January 16,2018. I warned Respondent that its “[f]ailure to [comply] may result in
sanctions, including the issuance of an Initial Decision and Default Judgment finding
Respondent liable for the violations listed in the Complaint and imposing a civil money
penalty.”

On January 17, 2018, CTP filed a Motion to Impose Sanctions against Respondent
asserting that Respondent failed to respond to CTP’s request for production of documents
or comply with my December 15, 2017 Order. In its motion, CTP asked that I strike
Respondent’s Answer and issue a Default Judgment against Respondent as a sanction for

failure to comply with my orders. On January 25, 2018, I issued an Order, directing

3 My Order also granted CTP leave to file a supplemental pre-hearing exchange upon
receipt of Respondent’s document production.

3
Respondent to comply with CTP’s Request for Production of Documents by January 31,
2018. I again warned Respondent that: “Failure to comply may result in sanctions,
including the issuance of an Initial Decision and Default Judgment finding Respondent
liable for the violations listed in the Complaint and imposing a civil money penalty.” 4
To date, Respondent has failed to respond.
Pursuant to 21 C.F.R. § 17.35(a), I may sanction a person, including any party or
counsel for:
(1) Failing to comply with an order, subpoena, rule, or procedure
governing the proceeding;
(2) Failing to prosecute or defend an action; or
(3) Engaging in other misconduct that interferes with the speedy,
orderly, or fair conduct of the hearing.
In this case, Respondent failed to comply with my orders and procedures
governing this proceeding.
Il. STRIKING RESPONDENT’S ANSWER

Respondent failed to comply with my July 11,2017 APHO, did not respond to the

November 24, 2017 by direction letter, failed to comply with my December 15, 2017

4 In my January 25, 2018 Order, I explained: “In sum, CTP has filed a Motion to Extend
Deadlines based on Respondent’s failure to comply with the rules and my Orders. Based
on [CTP’s] representations above, CTP should have filed a Motion for Default Judgment
based on Respondent’s failure to comply. I will deny CTP’s request to extend deadlines
and treat CTP’s Motion to Extend Deadlines as a Motion for Default Judgment, denying
the request for extension and instructing Respondent to comply as set forth below or risk
the consequences of its failure to comply.”

4
Order Granting Motion to Compel, did not respond to CTP’s January 17, 2018 Motion to
Impose Sanctions, and failed to comply with my January 25, 2018 Order. In fact,
Respondent has not made any contact with this Court since Respondent’s June 27, 2017
Answer.

Due to Respondent’s noncompliance, I am striking Respondent’s Answer, issuing
this default decision, and assuming the facts alleged in CTP’s complaint to be true. 21
CFR. §§ 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. 21
C.F.R. § 17.35(b). Respondent failed to comply with my July 11,2017 APHO, my
December 15, 2017 Order and my January 25, 2018 Order.

I find and conclude Respondent’s repeated failure to comply with my orders is
sufficiently egregious to warrant striking Respondent’s Answer and issuing a decision
without further proceedings. 21 C.F.R. §§ 17.35(b), (c)(3), 17.11 (a).

IV. BURDEN OF PROOF

CTP as the petitioning party has the burden of proof. 21 C.F.R. § 17.33.
Vv. LAW

21 U.S.C. § 331, specifically 21 C.F.R. §§ 1140.14(a)(1) and 1140.14(a)(2)(i).
VI. ISSUE

Did Respondent violate 21 U.S.C. § 331, specifically 21 C.F.R. §§ 1140.14(a)(1)
and 1140.14(a)(2)(i) as alleged in the complaint?

VII. DEFAULT

I find Respondent was served and is subject to the jurisdiction of this forum, as

5
established by the UPS Delivery Notification and Notice of Filing filed by CTP.

Striking Respondent’s Answer leaves the Complaint unanswered.

My January 25, 2018 Order is incorporated herein by reference. My Order
instructed Respondent to comply with CTP’s request for document production on or
before close of business on January 31,2018. Respondent failed to file any pleading in
response or otherwise comply with my January 25, 2018 Order.

Pursuant to 21 C.F.R. § 17.35(c)(3), I struck Respondent’s Answer as a sanction.

It is Respondent’s right to participate in the legal process.

It is Respondent’s right to request a hearing or to waive a hearing.

I find Respondent waived its right to a hearing pursuant to 21 C.F.R. § 17.11(b).

VII. ALLEGATIONS

A. Agency’s recitation of facts

CTP alleged that Respondent owned an establishment, doing business under the

name Shell Food Mart, located at 12500 Northwest 7th Avenue, North Miami, Florida

33168. Respondent's establishment received tobacco products in interstate commerce and

held them for sale after shipment in interstate commerce.
During an inspection of Shell Food Mart conducted on April 29, 2017, an FDA-
commissioned inspector documented the following violations:
a. Selling cigarettes to a minor, in violation of 21 C.F.R. § 1140.14(a)(1).
Specifically, a person younger than 18 years of age was able to purchase a
package of Newport Box cigarettes on April 29, 2017, at approximately

1:38 PM; and
b. Failing to verify the age of a person purchasing tobacco products by means of
photographic identification containing the bearer's date of birth, as required by
21 CFR. § 1140.14(a)(2)(i). Specifically, the minor's identification was not
verified before the sale, as detailed above, on April 29, 2017, at approximately
1:38 PM.

B. Respondent’s recitation of facts

I struck Respondent’s Answer dated June 27, 2017.
Accordingly, Respondent filed no responsive pleadings that I may consider.
IX. PRIOR VIOLATIONS

On January 19, 2017, CTP initiated a previous civil money penalty action, CRD
Docket Number T-17-1601, FDA Docket Number FDA-2017-H-0163, against
Respondent for three? violations of 21 C.F.R. pt. 1140. CTP alleged those violations to
have occurred at Respondent’s business establishment, 12500 Northwest 7th Avenue,
North Miami, Florida 33168, on March 5, 2016, and August 13, 2016.

The previous action concluded when Respondent admitted the allegations

contained in the Complaint issued by CTP, and paid the agreed upon monetary penalty

5 An FDA-commissioned inspector documented two violations on March 5, 2016, (sale
of tobacco products to a minor (21 C.F.R. § 1140.14(a)(1)) and failure to verify the age of
the person purchasing tobacco products (21 C.F.R. § 1140.14(a)(2)(i))), and two
violations on August 13, 2016, (sale of tobacco products to a minor (21 C.F.R.

§ 1140.14(a)(1)) and failure to verify the age of the person purchasing tobacco products
(21 C.F.R. § 1140.14(a)(2)(i))). 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.
in settlement of that claim. Further, “Respondent expressly waived its right to contest
such violations in subsequent actions.”

I find and conclude Respondent committed five violations of 21 U.S.C. § 331,
specifically 21 C.F.R. §§ 1140.14(a)(1) and 1140.14(a)(2)(i) within a 36-month period
as set forth in the Complaint.

X. FAMILY SMOKING PREVENTION AND TOBACCO CONTROL ACT

The “relevant statute” in this case is actually a combination of statutes and
regulations: The Family Smoking Prevention and Tobacco Control Act, Pub. L. No.
111-31, 123 Stat. 1776 (2009) (TCA), amended the Food, Drug, and Cosmetic Act (21
U.S.C.A. Chap. 9) (FDCA) and created a new subchapter of that Act that dealt
exclusively with tobacco products, (21 U.S.C. §§ 387-387u), and it also modified other
parts of the FDCA explicitly to include tobacco products among the regulated products
whose misbranding can give rise to civil, and in some cases criminal, liability. The 2009
amendments to the FDCA contained within the TCA also charged the Secretary of Health
and Human Services with, among other things, creating regulations to govern tobacco
sales. The Secretary’s regulations on tobacco products appear in Part 1140 of
Title 21, Code of Federal Regulations.

Under the FDCA, “[a] tobacco product shall be deemed to be misbranded if, in the
case of any tobacco product sold or offered for sale in any State, it is sold or distributed
in violation of regulations prescribed under section 387f(d).” 21 U.S.C. § 387c(a)(7)(B)
(2012). Section 387 a-1 directed FDA to re-issue, with some modifications, regulations

previously passed in 1996. 21 U.S.C. § 387 a-1(a)(2012). These regulations were passed
8
pursuant to section 387f(d), which authorizes FDA to promulgate regulations on the sale
and distribution of tobacco products; 75 Fed. Reg. 13,225 (March 19, 2010), codified at
21 CFR. Part 1140 (2015); 21 U.S.C. § 387f(d)(1) (2012). Accordingly, 21 C.F.R.

§ 1140.1(b) provides that “failure to comply with any applicable provision in this part in
the sale, distribution, and use of cigarettes and smokeless tobacco renders the product
misbranded under the act.”

Under 21 U.S.C. § 331(k), “[t]he alteration, mutilation, destruction, obliteration, or
removal of the whole or any part of the labeling of, or the doing of any other act with
respect to, a food, drug, device, tobacco product, or cosmetic, if such act is done while
such article is held for sale (whether or not the first sale) after shipment in interstate
commerce and results in such article being adulterated or misbranded” is a prohibited act
under 21 U.S.C. § 331. Thus, when a Retailer such as Respondent misbrands a tobacco
product by violating a requirement of 21 C.F.R. Part 1140, that misbranding in turn
violates the FDCA, specifically 21 U.S.C. § 331(k). FDA may seek a civil money
penalty from “any person who violates a requirement of this chapter which relates to
tobacco products.” 21 U.S.C. § 333(f)(9)(A) (2012). Penalties are set by 21 U.S.C.

§ 333 note and 21 C.F.R. § 17.2. Under current FDA policy, the first time FDA finds
violations of 21 C.F.R. Part 1140 at an establishment, FDA only counts one violation
regardless of the number of specific regulatory requirements that were actually violated,
but if FDA finds violations on subsequent occasions, it will count violations of specific
regulatory requirements individually in computing any civil money penalty sought. This

policy is set forth in detail, with examples to illustrate, at U.S. Food & Drug Admin.,

9
Guidance for Industry and FDA Staff, Civil Money Penalties and No-Tobacco-Sale
Orders for Tobacco Retailers, Responses to Frequently Asked Questions (Revised)
(2016), available at

http: //www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/U

CM447310.pdf [hereinafter Guidance for Industry], at 13-14. So, for instance, if a
retailer sells a tobacco product on a particular occasion to a minor without checking for
photographic identification, in violation of 21 C.F.R. §§ 1140.14(a)(1) and (a)(2)(i), this
will count as two separate violations for purposes of computing the civil money penalty,
unless it is the first time violations were observed at that particular establishment. This
policy of counting violations has been determined by the HHS Departmental Appeals
Board to be consistent with the language of the FDCA and its implementing regulations,
see CTP v. Orton Motor Company, Departmental Appeals Board Decision number 2717
of June 30, 2016.

XI. LIABILITY

When a retailer such as Respondent is found to have “misbranded” a tobacco

product in interstate commerce, it can be liable to pay a CMP. 21 U.S.C. §§ 331, 333.
A retailer facing such a penalty has the right, set out in statute, to a hearing under the
Administrative Procedure Act (21 U.S.C. § 333(f)(5)(A)). A retailer can forfeit its
rights under the statute and regulations by failing to participate in the process, a failure

known as a “default” (21 C.F.R. § 17.11).

10
As set forth above, it is Respondent’s right to decide whether to participate in the
legal process. It is Respondent’s right to decide to request a hearing and it is
Respondent’s right to waive a hearing.

I find Respondent, by failing to respond, waived its right to a hearing.

XII. IMPACT OF RESPONDENT’S DEFAULT

When a Respondent defaults by failing to answer the complaint, or respond to a
OSC, an ALJ must assume as true all factual allegations in the complaint and issue an
initial decision within thirty (30) days of the answer’s due date, imposing “the maximum
amount of penalties provided for by law for the violations alleged” or “the amount asked
for in the complaint, whichever is smaller” if “liability under the relevant statute” is
established (21 C.F.R. § 17.11(a)(1) and (2)). But see 21 C.F.R. § 17.45 (initial decision
must state the “appropriate penalty” and take into account aggravating and mitigating
circumstances).

Two aspects of Rule 17.11 are important in default cases.

First, the Complainant benefits from a regulatory presumption (the ALJ shall
assume that the facts alleged in the complaint are true) that relieves it from having to put
on evidence:

The presumption affords a party, for whose benefit the presumption runs, the
luxury of not having to produce specific evidence to establish the point at issue. When
the predicate evidence is established that triggers the presumption, the further evidentiary
gap is filled by the presumption. See 1 Weinstein's Federal Evidence § 301.02[1], at

301-7 (2d ed.1997); 2 McCormick on Evidence § 342, at 450 (John W. Strong ed., 4th ed.

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1992). Routen v. West, 142 F.3d 1434, 1440 (Fed. Cir. 1998).°

Second, as far as the penalty is concerned, my discretion is limited by the language
of the regulation. I may not tailor the penalty to address any extenuation or mitigation,
for example, nor, because of notice concerns, may I increase the penalty beyond the
smaller of (a) the Complainant's request or (b) the maximum penalty authorized by law.

XIII. LIABILITY UNDER THE RELEVANT STATUTE

Taking the CTP’s allegations as set forth in the complaint as true, the next step is
whether the allegations make out “liability under the relevant statute” (21 C.F.R.
§ 17.11(a)).

Based on Respondent’s failure to answer I assume all the allegations in the
complaint to be true.

I find and conclude that the evidentiary facts, by a preponderance of the evidence
standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(a)(1) in that a person younger than 18 years of age was able to purchase

tobacco products on March 5, 2016, August 13, 2016, and April 29, 2017.

© However, when the opposing party puts in proof to the contrary of that provided by the
presumption, and that proof meets the requisite level, the presumption disappears. See
Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248, 254-55, 101 S.Ct. 1089,
1094-95, 67 L.Ed.2d 207 (1981); A.C. Aukerman, 960 F.2d at 1037 (“[A] presumption ...
completely vanishes upon the introduction of evidence sufficient to support a finding of
the nonexistence of the presumed fact.”); see also, Weinstein’s Federal Evidence

§ 301App.100, at 301 App—13 (explaining that in the “bursting bubble” theory once the
presumption is overcome, then it disappears from the case); 9 Wigmore on Evidence

§ 2487, at 295-96 (Chadbourn rev.1981). See generally Charles V. Laughlin, In Support
of the Thayer Theory of Presumptions, 52 Mich. L.Rev. 195 (1953). Routen v. West, 142
F.3d 1434, 1440 (Fed. Cir. 1998).

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I find and conclude that the evidentiary facts, by a preponderance of the evidence
standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(a)(2)(i) on the same dates in that Respondent also violated the requirement that
retailers verify, by means of photo identification containing a purchaser’s date of birth,
that no tobacco product purchasers are younger than 18 years of age.

The conduct set forth above on March 5, 2016, August 13, 2016, and April 29,
2017, counts as five (5) violations under FDA policy for purposes of computing the civil
money penalty. See Guidance for Industry, at 13-14.

XIV. PENALTY

There being liability under the relevant statute, I must now determine the amount
of penalty to impose. My discretion regarding a penalty is constrained by regulation. I
must impose either the maximum amount permitted by law or the amount requested by
the Center, whichever is lower. 21 C.F.R. §§ 17.11(a)(1), (a)(2).

In terms of specific punishments available, the legislation that provides the basis

for ass

sing civil monetary penalties divides retailers into two categories: those that
have “an approved training program” and those that do not. Retailers with an approved
program face no more than a warning letter for their first violation; retailers without
such a program begin paying monetary penalties with their first. TCA

§ 103(q)(2), 123 Stat. 1839, codified at 21 U.S.C. § 333 note. See 21 C.F.R. § 17.2.
The FDA has informed the regulated public that “at this time, and until FDA issues
regulations setting the standards for an approved training program, all applicable CMPs

will proceed under the reduced penalty schedule.” FDA Regulatory Enforcement

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Manual, Aug. 2015, § 5-8-1. Because of this reasonable exercise of discretion, the
starting point for punishments and the rate at which they mount are clear — the lower and
slower schedules.
XV. MITIGATION

Because Respondent is found to be in default I am required to impose the
maximum amount of penalties provided for by law for the violations alleged.
Therefore, no mitigation is considered.

XVI. CONCLUSION

Respondent committed five (5) violations in a 36-month period and thus,

Respondent is liable for a civil money penalty of $5,591. See 21 C.F.R. § 17.2.

WHEREFORE, evidence having read and considered it be and is hereby
ORDERED as follows:

a. I find Respondent has been served with process herein and is subject to
this forum.

b. I find Respondent failed to respond to my January 25, 2018 Order.

c. I strike Respondent’s Answer dated June 27, 2017 as a sanction pursuant
to 21 C.F.R. §§ 17.35(c)(3).

d. I find Respondent is in default.

e. I find the facts alleged in the complaint to be true.

f. I find the facts set forth in the complaint establish liability under the
relevant statute.

g. Lassess a monetary penalty in the amount of $5,591.

/s/
Richard C. Goodwin
U.S. Administrative Law Judge

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