Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
Center for Tobacco Products,

(FDA No. FDA-2016-H-3831)
Complainant
v.

HK 32216, Inc.
d/b/a 7-Eleven 32216A,

Respondent.
Docket No. T-17-737
Decision No. TB2446

Date: February 14, 2018

INITIAL DECISION

The Center for Tobacco Products (CTP) seeks to impose a civil money penalty
against Respondent, HK 32216, Inc. d/b/a 7-Eleven 32216A , located at 12902
South John Young Parkway, Orlando, Florida 32837, for two violations of 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, within a twelve-month period.
Specifically, CTP alleges that Respondent violated the Act by impermissibly
selling cigarettes to minors, on two separate occasions.

Procedural History

CTP began this matter by serving an administrative complaint seeking a $275 civil
money penalty on Respondent, at 12902 South John Young Parkway, Orlando,
Florida, 32837, and by filing a copy of the complaint with the Food and Drug
Administration’s (FDA) Division of Dockets Management. Respondent timely
answered CTP’s complaint denying the allegations in the Complaint. Answer at 2.
On January 10, 2017, I issued an Acknowledgment and Pre-Hearing Order
(APHO) acknowledging receipt of Respondent’s Answer and establishing
procedural deadlines for this case.

On June 15, 2017, CTP filed its pre-hearing exchange which included its informal
brief (CTP Br.), a list of proposed witnesses, and thirty (30) exhibits (CTP Exs.
1-30). CTP’s exhibits included the declarations of two witnesses, Laurie
Sternberg, Senior Regulatory Counsel in CTP’s Office of Compliance and
Enforcement, and FDA-commissioned Inspector Shaun Griffin.

On October 5, 2017, Respondent filed its pre-hearing exchange which included its
informal brief (Resp. Br.), a list of proposed witnesses, and eight (8) exhibits
(Resp. Ex. 1 and Resp. Exs. A-G). Respondent’s exhibits included the declaration
of one witness, Bablir Singh, the business owner.

On November 1, 2017, I held a prehearing conference in this case. During the
prehearing conference call, the parties agreed to waive their right to cross examine
witnesses. The parties were allowed an opportunity to file a motion opposing any
of the exhibits submitted as evidence. Neither party has filed such a motion. In
the absence of any objections, CTP Exs. 1-30, Resp. Ex. 1, and Resp. Exs. A-G
are admitted into the record. The parties were also allowed to submit final briefs.
On December 1, 2017, CTP filed its final brief (CTP Final Br.). Respondent filed
its final brief (Resp. Final Br.) on the same date. As indicated at the pre-hearing
conference, an oral hearing is not necessary in this matter, and I will decide this
case based on the written record.

Analysis
I. Violations

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. 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). FDA and its agency, CTP,
may seek civil money penalties from any person who violates the Act’s
requirements as they relate to the sale of tobacco products. 21 U.S.C. § 331(£)(9).
The sale of tobacco products to an individual who is under the age of 18 is a
violation of implementing regulations. 21 C.F.R. §§ 1140.14(a)(1)!.

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

In its Complaint, CTP alleges that Respondent committed two violations of the
Act and its implementing regulations within a twelve month period. Complaint
41. In its Answer, Respondent has denied the allegations. Answer at 2.

CTP’s case against Respondent rests on the testimony of Inspector Griffin and Ms.
Sternberg, plus corroborating evidence. CTP Exs. 3, 4. Inspector Griffin is an
FDA-commissioned officer whose duties include determining whether retail
outlets are unlawfully selling tobacco products to minors. CTP Ex. 4, at 1-2.
Inspector Griffin’s inspections entail accompanying minors who attempt to
purchase tobacco products from retail establishments such as the one operated by
Respondent. Id.

Inspector Griffin testified that he went to Respondent’s place of business with a
minor to conduct compliance check inspections. CTP Ex. 4, at 2-4. The initial
inspection took place on February 13, 2016, and a follow-up inspection took place
on April 16, 2016. Jd. Prior to each inspection, Inspector Griffin confirmed that
the minor was carrying his photographic identification, and that he did not have
tobacco products in his possession. /d. During both inspections, Inspector Griffin
witnessed the minor enter the establishment, and purchase a package of cigarettes
from an employee at the establishment. Id. at 3, 4.

Inspector Griffin stated that after each purchase, both he and the minor exited the
establishment and returned to his vehicle, where the minor immediately gave him
the pack of cigarettes. Both purchases were observed to be a package of Camel
cigarettes. Jd. Inspector Griffin testified that, on February 13, 2016 and April 16,
2016, he labeled the cigarettes as evidence, and took photographs of the packages.
Id. Inspector Griffin then testified that shortly after the inspections, he recorded
the inspections in the FDA’s Tobacco Inspection Management System. Id.

Ms. Sternberg is a Senior Regulatory Counsel with the Center for Tobacco
Products. CTP Ex. 3, at 1. Ms. Sternberg testified that in her official capacity she
has knowledge of the processes used by the FDA regarding the establishment
registration and product listing requirements. Jd. at 1-2. She further testified that
the Camel cigarettes purchased on February 13, 2016 and April 16, 2016 at
Respondent’s establishment were manufactured by RJ Reynolds Tobacco
Company in the State of North Carolina. Jd. at 2-3. Ms. Sternberg confirmed that
the cigarettes were not manufactured in Florida. Jd. at 3.

CTP argues the testimonies of Inspector Griffin and Ms. Sternberg plus the
corroborating evidence consisting of photographs of the pack of cigarettes that
were obtained from the minor on February 13, 2016 and April 16, 2016, are proof
that Respondent unlawfully sold tobacco products to a minor in violation of the
Act. See CTP Final Br. at 10-13.
Respondent does not dispute Ms. Sternberg’s testimony, but attempts to attack the
credibility of Inspector Griffin. Respondent’s defense focuses on Inspector
Griffin’s narrative report from the April 16, 2016 inspection. Particularly,
Respondent argues CTP has not met its burden of proof that the April 16, 2016
violation occurred because Inspector Griffin’s narrative report lists “Mohammed”
as the name of the employee that sold tobacco products to a minor. Resp. Final
Br. at 2; Declaration of Bablir Singh § 18; Resp. Ex. F. Respondent argues that it
does not employ anyone with that name. /d. Therefore, Respondent contends
Inspector Griffin’s entire testimony regarding the April 16, 2016 is false, and this
calls into question his testimony regarding the February 13, 2016 inspection as
well. Resp. Final Br. at 3. Respondent argues “there is no reliable evidence upon
which the Court should find that the CTP has established any violation
whatsoever.” Jd. at 9.

I have considered Respondent’s arguments, but find them unpersuasive.
Respondent has continued to assert that the tobacco sales to minors never
occurred, but it has not provided any evidence to that effect, other than the
unsubstantiated claim that Inspector Griffin has provided false testimony.
Inspector Griffin testified under oath that he observed Respondent sell tobacco
products to a minor on February 13, 2016 and April 16, 2016. In his April 16,
2016 narrative report, Inspector Griffin provided the following description of the
employee who sold tobacco products to the minor:

Name: Mohammed

Name observed on: Tag
Gender: Male

Age: Senior

Hair: Gray/White
Characteristics: Beard, Glasses

CTP Ex. 19, at 2.

Respondent argues that the employee time records for the Pay Period April 15,
2016 through April 21, 2016 reflect that no person named Mohammed worked at
the Respondent’s store during that time period. Resp. Final Br. at 3; Resp. Ex. 1,
at 2; Resp. Ex. F. CTP argues that the various employment and training records
submitted by Respondent reflect that the employee working on April 16, 2016 at
approximately 3:29 PM? is referred to inconsistently. CTP Final Br. at 12; see
also, Resp. Ex. F at 4. On the “Store Employee Summary” for the pay period

2 The identified employee is documented as clocking in at 2:56 PM and clocking
out at 6:00 PM on April 16, 2016.
ending April 21, 2016, as well as his individual “Store Employee Timecard”, this
individual’s name is shown as “Khan H. Abdul.” Resp. Ex. F at 1, 4. On his most
recent “Come of Age Completion Course Certificate,” his name is printed as
“MDABDUL KHAN”, but signed as “HAMID.” Resp. Ex. D at 6. In another
form submitted by Respondent to show employees’ acknowledgment of age
restricted sales policies, the employee is identified simply as “HAMID.” Resp.
Ex. E.

CTP additionally points out that in additional employment records submitted by
Respondent, this same employee is identified by the first name “MD ABDUL,
middle initial “H,” and last name “KHAN.” See Respondent’s Response to
Complainant’s Motion to Compel Discovery and Extend Deadlines, Ex. A at 21.
This document indicates Mr. Khan is a 70-year old male sales associate. Id.

Mr. MD Abdul H. Khan, who was working at the date and time of the sale to a
minor, fits the gender and age of the employee listed on Inspector Griffin’s April
16, 2016 narrative report. None of the other employees working at the time of the
violation meet the gender or age description. Additionally, as CTP noted, “MD” is
a commonly used abbreviation for the name “Mohammed” in the Indian
subcontinent which could have led to the confusion, or at least demonstrates that
Respondent’s employees use names at work other than the ones on their payment
records. CTP Final Br. at 13; citing, Chowdhury v. Ashcroft, 241 F.3d 848, 854,
n.1 (7th Cir. 2001). CTP makes a compelling argument that this individual may
have used a name tag reading “HAMID” or some variation of these names such as
“MD HAMID”, which could have easily been read as Mohammed.

Respondent’s entire defense rests on the slight confusion with the name listed in
Inspector Griffin’s April 16, 2016 narrative report. Respondent, who is
represented by counsel, chose to waive cross-examination of Inspector Griffin and
focus on the name discrepancy, as opposed to questioning Inspector Griffin and
attacking his credibility at a hearing. While Respondent makes the variation in the
name tag the focal point of its argument, Respondent does not deny that the
employee working at 3:29 PM on April 16, 2016 meets the physical description
detailed in Inspector Griffin’s narrative report. Furthermore, Respondent has
provided no evidence concerning the lettering on the name tag that was, in fact,
worn by this individual on April 16, 2016. Respondent’s attention to the
confusion with the name listed on the April 16, 2016 narrative report appears to be
more of a distraction than a significant source of evidence, and it does not lead me
to disregard Inspector Griffin’s testimony.

Inspector Griffin’s sworn testimony establishes to my satisfaction that the
violations charged in this case in fact took place on the dates in question.
Therefore, I find that the facts as outlined above establish Respondent HK 32216,
Inc. d/b/a 7-Eleven 32216A’s liability under the Act.
II. Civil Money Penalty

Pursuant to 21 U.S.C. § 333(f)(9), Respondent 7-Eleven 32216A 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 a
$275 civil money penalty against Respondent for two violations of the Act and its
implementing regulations within a twelve-month period. Complaint § 14. In both
its Answer and its Final Brief, Respondent denied any obligation to pay a civil
money penalty, asserting that it did not violate the regulations.

Ihave found that Respondent committed two violations of the Act and its
implementing regulations within a twelve 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).

i. Nature, Circumstances, Extent and Gravity of the Violations

Ihave found that Respondent committed two violations of selling tobacco
products to minors. 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.

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

Respondent has stipulated it has the ability to pay the $275 civil money penalty
sought by CTP. Respondent’s Response to Motion to Compel, Ex. B.

However, Respondent claims that “[a] finding of a violation itself will have an
extremely negative effect on Respondent’s ability to do business.” Resp. Final Br.
at 12. Respondent states, as a 7-Eleven franchisee, its franchise agreement
contains an “obey all laws provision that subjects Respondent to termination of its
right to operate the franchise if it is found to have violated the law.” Id.
Respondent argues “a finding [that Respondent] violated 21 C.F.R. 1140.14 may
constitute a breach of the franchise agreement, which would jeopardize its
contractual right to continue its business.” Jd.

This, however, is a contractual matter between Respondent and 7-Eleven and
Respondent’s obligations under this agreement are independent of this proceeding.
Furthermore, Respondent had an obligation to be mindful of that provision prior to
allowing repeated violations to occur. Accordingly, such contractual obligations
do not weigh upon my decision. Additionally, it is unclear whether Respondent
could continue to operate as a business regardless of its status as a 7-Eleven
franchise. Based on the available evidence, I cannot conclude that a $275 civil
monetary penalty would severely hinder Respondent’s ability to continue lawful
retail operations.

iii. 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. However,
Respondent has violated the Act on two separate occasions. Following the
February 13, 2016 inspection, CTP issued a warning letter to Respondent
informing it of Inspector Griffin’s documented violation. Complaint § 11. That
letter warned that Respondent’s failure to correct its violation might result in a
civil money penalty or other regulatory action. /d. Despite that warning letter,
however, Respondent was found to have committed the exact same violation
during an inspection only two months later on April 16, 2016. Jd. 4 8.

iv. Degree of Culpability

Based on my finding that Respondent committed the violations in the Complaint, I
hold it fully culpable for two violations of the Act and its implementing
regulations.

vy. Additional Mitigating Factors

Respondent has detailed some of the steps it takes to prevent violations of the Act.
Resp. Final Br. at 10-11. Respondent mandates its employees to complete a
training program regarding the restrictions for tobacco sales. Jd. Respondent 7-
Eleven 32216A participates in the 7-Eleven Bars Program, a program that tests its
employees by sending investigators to the store to conduct age restricted product
sales. Id. at 11. Respondent also utilizes a point of sale (“POS”) system to
complete transactions involving age restricted products such as tobacco products.
Id. at 10-11. The system requires an employee to either (a) manually enter a
compliant date of birth provided by the customer or (b) swipe an identification
with a compliant date of birth provided by the customer. Jd. at 10.

vi. Penalty

Based on the foregoing reasoning, I find a penalty amount of $275 to be
appropriate under 21 U.S.C. §§ 303(f)(5)(B) and 333(f)(9).
Conclusion

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $275 against
Respondent, HK 32216, Inc. d/b/a 7-Eleven 32216A, for two violations of 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, within a twelve-month period.

/s/
Margaret G. Brakebusch
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Homestead Manor A Palace Community,
(CCN: 10-5541),

Petitioner,
v.
Centers for Medicare & Medicaid Services
Docket No. C-16-685
Decision No. CR5025

Date: February 13, 2018

DECISION

The Centers for Medicare & Medicaid Services (CMS) alleges that Petitioner Homestead
Manor A Palace Community, a skilled nursing facility, failed to comply with seven
Medicare conditions of participation, for which it seeks civil money penalties of $1000
per day against Petitioner for a period that began on January 26, 2016 and that ran
through May 4, 2016. I find that the preponderance of the evidence establishes that
Petitioner failed to comply with four conditions of participation set forth at: 42 C.F.R.

§ 483.75(1)(1); 42 CFR. § 483.25(b); 42 C.F.R. § 483.60(b), (d), (e); and 42 C.F R.

§ 483.65.' I find that the preponderance of the evidence sustains Petitioner’s assertion
that it complied with the other conditions of participation that CMS alleges Petitioner
failed to comply with. As a remedy for Petitioner’s noncompliance I impose civil money

' Federal nursing home regulations substantially changed beginning on November 28,
2016. 81 Fed. Reg. 68,688 (Oct. 4, 2016). Based on the date of the survey, which
preceded the regulatory revisions, I refer to the regulations that were in effect at the time
of the survey.
2

penalties of $200 per day for each day of a period that began on April 7, 2016 and that
ran through May 4, 2016.

I. Background

This case was assigned originally to another administrative law judge. It was transferred
to me at the beginning of February of this year.

The parties completed pre-hearing exchanges consisting of briefs and proposed exhibits.
CMS’s pre-hearing exchange included 26 proposed exhibits, identified as CMS Ex. 1-
CMS Ex. 26. Petitioner’s exchange included 14 proposed exhibits, identified as P. Ex. 1-
P. Ex. 14.

CMS did not include written direct witness testimony. Petitioner filed affidavits by 11
proposed witnesses at: P. Ex. 1-P. Ex. 9; P. Ex. 11; and P. Ex. 13. CMS did not request
to cross-examine any of these witnesses. Neither CMS nor Petitioner filed objections to
my receiving exhibits into the record.

There is no need for me to convene an in-person hearing inasmuch as none of the exhibits
are objected to and also because CMS did not request to cross-examine Petitioner’s
witnesses. Consequently, I decide this case based on the parties’ exchanges. I receive
into evidence CMS Ex. 1-CMS Ex. 26 and P. Ex. 1-P. Ex. 14.

II. Issues, Findings of Fact and Conclusions of Law

A. Issues

The issues are whether Petitioner failed to comply substantially with Medicare
participation requirements and what remedies are reasonable.

B. Findings of Fact and Conclusions of Law

CMS’s principal allegations are that Petitioner did not comply substantially with the
requirements of 42 C.F.R. § 483.20(k)(3)(ii) and 42 C.F.R. § 483.25(h). CMS Brief (Br.)
at 3-5. The first of these two regulations requires a skilled nursing facility to provide
services to its residents by qualified persons in accordance with each resident’s plan of
care. The second regulation requires a skilled nursing facility to provide each of its
residents with adequate supervision and assistive devices in order to prevent residents
from sustaining accidents.

CMS contends that Petitioner contravened these two regulations in providing care to a
resident who is identified as Resident 62. CMS Br. at 4. This resident was a very obese
individual (she weighed 262 pounds) who suffered from a variety of serious maladies
3

including muscle weakness, difficulty walking, chronic obstructive pulmonary disease,
and heart failure. CMS Ex. 10.

Petitioner’s staff assessed the resident and found her to be highly dependent on assistance
for her activities of daily living. The staff determined that she needed the assistance of
two persons for all activities involving ambulation, including transfers, walking, and
using the bathroom. CMS Ex. 10 at 11-12.

On January 26, 2016, Resident 62 requested assistance from Petitioner’s staff in order to
use the bathroom. Two certified nursing assistants (CNAs) came to the resident’s aid.
CMS Ex. 8 at 1. When the CNAs entered the resident’s room they found her seated in a
wheelchair that was too wide to pass through the bathroom door. CMS Ex. | at 4. The
CNAs transferred the resident from her wheelchair to a rolling walker so that she could
pass through the door. They assisted Resident 62 to a standing position, supported by the
walker. The resident then decided that she did not wish to use the bathroom and so, the
CNAs decided to change the resident’s incontinence brief while she stood. CMS Ex. 8 at
. The resident stood with the assistance of the walker as the CNAs changed her brief.

Then, as one of the CNAs (Emithe Dore) reached for the resident’s wheelchair, which
had been placed in front of the resident, the resident released her grip on the walker and
ell backwards onto the other CNA (Julia Jones). P. Ex. 1; P. Ex. 2. As a consequence of
her fall the resident sustained a small laceration on her head. Petitioner called
Emergency Medical Services to attend to the resident. However, the resident became
nonresponsive and died within a half hour of sustaining her fall. The fall was not the
cause of the resident’s death. The probable cause of her death was cardiac arrest
precipitated by her congestive heart failure. CMS Ex. 9.

The preponderance of the evidence plainly establishes that when Resident 62 fell,
Petitioner’s staff was providing her with the two-person assistance called for by the
resident’s assessment and plan of care. The resident’s plan called for her to be assisted
by two staff members with all activities that involved ambulation and that is precisely
what Ms. Dore and Ms. Jones were doing when she sustained her fall.

Nothing in the plan of care called for two staff members to have their hands on the
resident at all times when she ambulated or stood. It was not inconsistent with the
resident’s assessment or with her plan of care that one of the CNAs assisting the resident
turn momentarily in order to reposition the resident’s wheelchair. Indeed, had the plan of
care required two persons to remain in actual physical contact with Resident 62 at all
times, then providing care for the resident would have required the assistance of at least
three individuals, inasmuch as someone had to reposition the resident’s wheelchair
moments before the resident fell. That is not what the plan stated.
4

Furthermore, the preponderance of the evidence proves that Petitioner’s staff was taking
all reasonable measures to prevent Resident 62 from sustaining a fall when she fell. The
requirements of 42 C.F.R. § 483.25(h) do not impose strict liability on a skilled nursing
facility. It has been held many times that a facility must take all reasonable measures to
prevent an accident from occurring to a resident. A facility may not be held liable for
accidents that cannot reasonably be anticipated. Here, the two CNAs were acting
reasonably given what they knew about Resident 62. The resident was an individual who
had been ambulatory with assistance prior to her fall. She had used a rolling walker
previously and had never previously sustained a fall. P. Ex. 8; P. Ex. 9. Given that, the
two CNAs attending to the resident on the day of her fall had a reasonable basis for
assuming that one of them could turn momentarily to reposition a wheelchair while the
resident stood supported by the walker and by the second CNA.

Indeed, the most likely cause of the resident’s fall was not the failure by two CNAs to
support her constantly, but cardiac arrest or some other sudden event precipitated by the
resident’s congestive heart failure. Petitioner’s staff had no reason to anticipate that an
event such as that would occur.

CMS contends that Petitioner also failed to comply with another regulation, 42 C.F.R.

§ 483.20(e), (m). CMS Br. at 5-6. This regulation requires a skilled nursing facility to
screen a new resident for possible mental illness (“second-level screen’) if the resident is
admitted to the facility with a diagnosis of a mental illness that meets the criteria and
standards referred to as “PASARR” (pre-admission screening and annual resident
review).

CMS contends that Petitioner failed to comply with regulatory requirements because it
failed to perform a second level screen of a resident who is identified as Resident 33.
CMS Br. at 6. It asserts that a PASSARR form completed at another facility prior to the
resident’s admission identified the resident as suffering from schizophrenia. CMS Ex. 17
at 5. CMS contends that this notation triggered a requirement that the resident perform a
second-level screen but that Petitioner failed to do so.

I find that the preponderance of the evidence does not support this allegation. As
Petitioner asserts, although the PASSARR form recorded a diagnosis of schizophrenia, it
also stated that the resident did not require a second-level screen. CMS Ex. 17 at 5.
None of the indicia of mental illness that would have triggered the requirement for a
second-level screen were noted on the PASARR form. See id. at 3-4. In light of that,
Petitioner was not legally required to perform a second-level screen.

CMS alleges additionally that Petitioner failed to comply with the requirements of

42 CFR. § 483.75(1)(1) and 42 C.F.R. § 483.25(b). CMS Br. at 6-7. The former
regulation requires a skilled nursing facility to maintain complete and accurate clinical
records for each resident. The latter regulation requires a skilled nursing facility to assist
5

a resident who suffers from hearing or vision impairments in making appointments and
arranging for transportation to and from the office of a practitioner specializing in hearing
or vision impairments so that the resident may receive proper care. CMS alleges that
Petitioner failed to perform these duties as respects a resident who is identified as
Resident 29.

The evidence sustains this allegation. On admission to Petitioner’s facility Resident 29
was identified as having a moderate hearing deficit. CMS Ex. 16 at 8, 10, 17, 28.
Despite identifying that issue, Petitioner failed to evaluate the resident’s hearing deficit
and failed to make an appointment with a specialist in order to evaluate or treat the
resident’s hearing deficiency. The evidence shows also that Petitioner did not maintain
accurate records of residents with hearing loss. CMS Ex. | at 14-16.

Petitioner does not rebut this evidence directly. Rather, it contends that the resident’s
hearing loss was moderate at most and that Petitioner’s staff was solicitous of the
resident’s needs. P. Br. at 9-10. But, that assertion begs the question. Petitioner had an
obligation to arrange for the resident to see a hearing specialist and it failed to comply
with that obligation.

CMS also alleges that Petitioner failed to comply with the requirements of 42 C.F.R.

§ 483.60(b), (d), and (e). CMS Br. at 7-8. The regulation governs a facility’s storage of
drugs and biological substances. 42 C.F.R. § 483.60(e) explicitly requires that narcotic
medications be stored in a separately locked, permanently affixed cabinet. CMS
presented persuasive evidence showing that Petitioner failed to comply with this
requirement in that it failed to have a permanently affixed narcotics storage cabinet.
CMS Ex. | at 28-30. It presented additional persuasive evidence showing that the
refrigerator that Petitioner used to store narcotic medications did not have a double
locking device as is required by Petitioner’s own policy. CMS Ex. | at 28-30; CMS Ex.
21.

Petitioner offers evidence that it contends shows that it stored its narcotics medication
securely. P. Br. at 10-11; P. Ex. 6. However, Petitioner failed to prove that it complied
with regulatory requirements. It offered no proof that it stored narcotics in an affixed
cabinet nor did it prove that its refrigerator had the double locking device required by
Petitioner’s policy.

CMS contends also that Petitioner failed to comply with the requirements of 42 C.F.R.

§ 483.65. CMS Br. at 8-9. This regulation mandates a skilled nursing facility to establish
an infection control program that helps prevent the transmission of disease. CMS
presented convincing evidence — not rebutted by Petitioner — that a housekeeper stored a
water bottle, a purse, and a notebook on shelves that were designated for storage of clean
resident clothing protectors, in direct contravention of the facility’s own policy. CMS
Ex. 1 at 32; CMS Ex. 25. In response, Petitioner asserts a sort of “no harm, no foul”
6

defense, contending that the housekeeper’s items were not in contact with other, stored
items. P. Br. at 11-12. I find that argument to be unpersuasive. Petitioner was not
following its own infection control policy and a potential for more than minimal harm
existed.

CMS determined that Petitioner’s noncompliance began on January 26, 2016. That is
predicated on Petitioner’s alleged failures to protect Resident 62 from falling, allegations
that I find to be rebutted by the preponderance of the evidence. Surveyors identify the
deficiencies that I sustain at a survey conducted on April 7, 2016. I find that to be the
initiation date of these deficiencies for purposes of imposing a remedy. Petitioner did not
prove that it corrected these three deficiencies prior to May 4, 2016. Therefore, the
duration of Petitioner’s noncompliance is from April 7, 2016 through May 4, 2016.

I find no basis to sustain civil money penalties of $1000 per day as CMS originally
determined to impose. Those penalties are based on the most egregious alleged failures
to comply with regulatory requirements. I have found that the preponderance of the
evidence supports Petitioner’s contention that it complied with these requirements. The
remedies may be based solely on the four findings of noncompliance that I have
sustained. CMS determined that these instances of noncompliance all were at a
minimally severe level of severity.

Regulations governing the imposition of civil money penalties establish a framework for
deciding on penalty amount. 42 C.F.R. §§ 488.438(f)(1)-(4), 488.404 (incorporated by
reference into 42 C.F.R. § 488.438(f)(3)). In determining penalty amounts I may
consider factors including the severity of a facility’s noncompliance, its compliance
history, its culpability, and its financial condition. CMS has not addressed these factors
except to assert that Petitioner’s alleged noncompliance with the requirements of

42 CFR. § 483.20(k)(3)(ii) and 42 C.F.R. § 483.25(h) caused actual harm to residents
and to assert that Petitioner was culpable for its noncompliance. But, the record does not
sustain these allegations, leaving only the minimally severe instances of noncompliance
that I sustain. I impose penalties of $200 per day for each day of the noncompliance
period to remedy this noncompliance. The low penalty amount fully reflects the low
level of scope and severity of these deficiencies.

/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.

J.A.C. Fine Wine and Spirits, Inc.
d/b/a Friendly Liquors,

Respondent.

Docket No. T-17-5813
FDA No. FDA-2017-H-4844

Decision No. TB2447
Date: February 12, 2018
INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, J.A.C. Fine Wine and Spirits, Inc. d/b/a Friendly Liquors, at
1567 Acushnet Avenue, New Bedford, Massachusetts 02746, and by filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Friendly Liquors impermissibly sold cigarettes
or smokeless tobacco to minors and failed to verify, by means of photo identification
containing a date of birth, that the purchasers were 18 years of age or older, thereby
violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and
its implementing regulations, 21 C.F.R. pt. 1140. The complaint likewise alleges that an
Initial Decision and Default Judgment was entered against Respondent Friendly Liquors
for three previous violations. Therefore, CTP seeks to impose a $5,591 civil money
penalty against Respondent Friendly Liquors.

During the course of the administrative proceedings, Respondent failed to comply with
two judicial orders and failed to defend its case, which interfered with the speedy,
orderly, or fair conduct of this proceeding. 21 C.F.R. § 17.35(a). Accordingly, pursuant
to 21 C.F.R. § 17.35(c)(3), I strike Respondent’s Answer and issue this decision of
default judgment.

I. Procedural History

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on August 14, 2017, CTP served the
Complaint on Respondent Friendly Liquors by United Parcel Service. Respondent timely
answered CTP’s Complaint on September 8, 2017. On September 14, 2017, I issued an
Acknowledgement and Pre-Hearing Order (APHO) that set deadlines for the parties’
filings and exchanges and warned that I may impose sanctions if a party failed to comply
with any order, including the APHO. APHO at §§ 4, 16. In the APHO I set a deadline of
October 23, 2017, for party discovery requests; December 5, 2017, for CTP’s pre-hearing
exchange; and December 26, 2017, for Respondent’s pre-hearing exchange. Id. at § 4.
On December 5, 2017, CTP timely filed its pre-hearing exchange.

On October 24, 2017, Respondent filed a letter and five pages of unmarked documents,
presumably in response to CTP’s discovery request. However, Respondent did not file a
pre-hearing exchange by the December 26, 2017 deadline, or at any time thereafter.

On January 3, 2018, I issued an Order Scheduling Pre-Hearing Conference. In this order,
I set a pre-hearing conference by telephone for January 23, 2018, at 1:00 PM Eastern
Time, to resolve certain issues and schedule a hearing for this case. Respondent was
reminded of the conference by telephone message on January 22, 2018, and by emails on
January 22, 2018, and January 23, 2018. However, Respondent did not appear at the
scheduled pre-hearing conference call, nor did Respondent respond to the order,
telephone message, or email communications.

Accordingly, on January 24, 2018, I issued an Order to Show Cause, in which I provided
Respondent until February 6, 2018, to show cause for its failure to appear at the pre-
hearing conference. I warned Respondent that:

Failure 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.

(Emphasis in original.)

To date, Respondent has not responded to my Order to Show Cause. Indeed, Respondent
has been silent since its October 24, 2017 filing.
Il. 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) Engaging in other misconduct that interferes with the speedy,
orderly, or fair conduct of the hearing.

21 CFR. § 17.35(a).
Here, Respondent failed to:

¢ Comply with my January 3, 2018, Order Scheduling Pre-Hearing Conference
when it failed to appear at the January 23, 2018, pre-hearing conference; and

¢ Comply with my January 24, 2018, Order to Show Cause when it failed to show
cause for its failure to appear at the pre-hearing conference.

Respondent failed to comply with two judicial orders — despite multiple reminders and
warning of sanctions if it failed to comply. I find that Respondent failed to comply with
orders and procedures governing this proceeding 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 repeatedly
ailed to comply with my orders, despite my explicit warning that its failure could result
in sanctions and I specified that those sanctions may include “issuance of an Initial
Decision and Default Judgment finding Respondent liable for the violations listed in the
Complaint and imposing a civil money penalty.” I find that Respondent’s repeated

ailure 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).

III. Default Decision

Striking Respondent’s answer leaves the Complaint unanswered. Therefore, I am
required to issue an initial decision by default, provided that the complaint is sufficient to
justify a penalty. 21 C.F.R. § 17.11(a). Accordingly, I must first 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 (but not
its conclusory statements) and I conclude that default judgment is merited based on the
allegations of the Complaint. 21 C.F.R. § 17.11. Specifically:

e¢ On April 21, 2016, CTP initiated a previous civil money penalty action, CRD
Docket Number T-16-170, FDA Docket Number FDA-2016-H-0454, against
Respondent for three! violations of 21 C.F.R. pt. 1140 within a 24-month period.
CTP alleged those violations to have occurred at Respondent’s business
establishment, 1567 Acushnet Avenue, New Bedford, Massachusetts 02746, on
August 1, 2015, and November 22, 2015;

e The previous action concluded when an Initial Decision and Default Judgment
was entered by an Administrative Law Judge, “finding that all of the violations
alleged in the Complaint occurred”;

e At approximately 5:37 PM on June 14, 2017, at Respondent’s business
establishment, 1567 Acushnet Avenue, New Bedford, Massachusetts 02746, an
FDA-commissioned inspector documented Respondent’s staff selling a package of
Marlboro cigarettes to a person younger than 18 years of age. 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.

These facts establish Respondent Friendly Liquors’ liability under the Act. The Act
prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section 906(d)
of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).
The Secretary of the U.S. Department of Health and Human Services issued the
regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1;
see 21 U.S.C. § 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010); 81 Fed. Reg.

' An FDA-commissioned inspector documented two violations on August 1, 2015 (sale
to a minor and failure to verify the age of a purchaser through photographic
identification), and two violations on November 22, 2015 (sale to a minor and failure to
verify the age of a purchaser through photographic identification). 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.
28,974, 28,975-76 (May 10, 2016). Under 21 CFR. § 1140.14(a)(1),? no retailer may
sell cigarettes or smokeless tobacco to any person younger than 18 years of age. Under
21 CFR. § 1140.14(a)(2)(i), retailers must verify, by means of photographic
identification containing a purchaser’s date of birth, that no cigarette or smokeless
tobacco purchasers are younger than 18 years of age.

Under 21 C.F R. § 17.2,a $5,591 civil money penalty is permissible for five violations of
the regulations found at 21 C.F.R. pt. 1140.

Order

For these reasons, I enter default judgment in the amount of $5,591 against Respondent
J.A.C. Fine Wine and Spirits, Inc. d/b/a Friendly Liquors. 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/
Wallace Hubbard
Administrative Law Judge

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


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2017-H-4558)

Complainant
v.

Sylvester J. Colligan
d/b/a Colligans Groceries,

Respondent.
Docket No. T-17-5589
Decision No. TB2439

Date: February 12, 2018

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Sylvester J. Colligan d/b/a Colligans Groceries, at

114 Fontenot Road, Opelousas, Louisiana 70570, and by filing a copy of the complaint
with the Food and Drug Administration’s (FDA) Division of Dockets Management. The
complaint alleges that Colligans Groceries impermissibly sold cigarettes to minors and
failed to verify, by means of photo identification containing a date of birth, that a
purchaser was 18 years of age or older, thereby violating the Federal Food, Drug, and
Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R.
pt. 1140. CTP seeks to impose a $559 civil money penalty against Respondent Colligans
Groceries.

During the course of the administrative proceedings in this case, Respondent has failed to
comply with two separate judicial orders, failed to comply with a procedure governing
this proceeding, and did not respond to two judicial directions. 21 C.F.R. § 17.35(a)(1).
Accordingly, pursuant to 21 C.F.R. § 17.35(c)(3), I strike Respondent’s answer and issue
this decision of default judgment.

I. Procedural History

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on August 3, 2017, CTP served the
Complaint on Respondent Colligans Groceries by United Parcel Service. Respondent
timely answered CTP’s Complaint by letter dated August 8, 2017. In its answer,
Respondent denied the allegations made in the Complaint and took exception to the
penalty. Respondent stated that it reviewed store security camera footage and did not see
evidence of the purported violations. Respondent asserted that the descriptions of the
sales clerks did not match that of its staff. Respondent anticipated that, had the inspector
noted a violation, the inspector would have notified Respondent immediately.
Respondent explained that it was skeptical of the procedures and processes followed for
the inspections and notices. Respondent stated that it surmised that the Warning Letter
was part of a scam and that only upon receipt of this Complaint was Respondent given an
opportunity to file a form challenging the results of the inspection. On August 23, 2018,
Respondent sent a completed form Answer, denying the allegations in the Complaint,
objecting to the penalty, and reiterating its prior assertions.

On August 15, 2017, I issued an Acknowledgement and Pre-Hearing Order (APHO), in
which I acknowledged Respondent’s Answer and request for hearing. 21 C.F.R.

§ 17.9(a). Also in the APHO, I set deadlines for the parties’ filings and exchanges,
including a schedule for discovery. I directed that a party receiving a discovery request
must provide the requested documents within 30 days of the request or request a
protective order from doing so within 10 days of the request. APHO at § 12; 21 C.F.R.
§ 17.23(a), (d).

In accordance with the deadlines set in the APHO, CTP served Respondent with its
Request for Production of Documents on September 18, 2017. Respondent did not
produce the requested documents or seek a protective order. On October 24, 2017, CTP
filed a Motion to Compel Discovery asserting that Respondent had not responded to its
discovery request. In an October 26, 2017, letter issued at my direction, Respondent was
notified that it had until November 9, 2017, to file a response to CTP’s Motion to Compel
Discovery, citing 21 C.F.R. § 17.32(c). Respondent did not file a response.

On November 13, 2017, CTP filed a Status Report indicating that it had not received a
reply or documents in response to its Request for Production of Documents.
Accordingly, on November 14, 2017, I issued an order granting CTP’s motion (Order to
Compel Discovery) and I ordered Respondent to comply with CTP’s Request for
Production of Documents by November 27, 2017. In this order, I explicitly warned
Respondent:
Failure to comply will result in sanctions which may include
issuance of an Initial Decision and Default Judgment finding
Respondent liable for the violations listed in the Complaint
and imposing a civil money penalty. 21 C.F.R. § 17.35.

Order to Compel Discovery (emphasis in original).

On December 6, 2017, CTP filed a Motion to Impose Sanctions and Issue Default
Judgment. CTP advised that Respondent had not complied with my Order to Compel
Discovery and asked that I strike Respondent’s Answer as a sanction and issue default
judgment in its favor. In a December 12, 2017, letter issued at my direction, Respondent
was informed that it had until December 21, 2017, to file a response to CTP’s Motion for
Sanctions, citing 21 C.F.R. § 17.32(c). Again, Respondent did not file a response.

Il. Striking Respondent’s Answer
Respondent failed to:

¢ Comply with a judicial order when it failed to respond to CTP’s Request for
Production of Documents within 30 days in violation of my APHO;

¢ Comply with the procedure governing the proceeding when it failed to respond to
CTP’s Request for Production of Documents within 30 days in violation of
21 C.F.R. § 17.23(a); and

¢ Comply with a second judicial order when it failed to produce the requested
documents by November 27, 2017, in violation of my November 14, 2017, Order
to Compel Discovery.

Additionally, Respondent was provided opportunities to file responses to CTP’s Motion
to Compel Discovery and CTP’s Motion to Impose Sanctions, in letters issued at my
direction on October 26, 2017, and December 12, 2017, respectively. Respondent did not
avail itself of either opportunity.

I find that Respondent has failed to comply with two judicial orders, a procedure
governing the proceeding, and did not respond to two judicial directions. I find that
Respondent’s conduct constitutes a basis for sanctions pursuant to 21 C.F.R. § 17.35(a).
I therefore grant CTP’s Motion to Impose Sanctions.

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 repeatedly
failed to comply with my orders, despite my explicit warning that its failure “will result
in sanctions,” and specified that those sanctions “may include issuance of an Initial
Decision and Default Judgment finding Respondent liable for the violations listed in the
Complaint and imposing a civil money penalty.” I find that Respondent’s repeated
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).

III. Default Decision

Striking Respondent’s answer leaves the Complaint unanswered. Therefore, I am
required to issue an initial decision by default, provided that the complaint is sufficient to
justify a penalty. 21 C.F.R. § 17.11(a). Accordingly, I must first 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 (but not
its conclusory statements) and I conclude that default judgment is merited based on the
allegations of the Complaint. 21 C.F.R. § 17.11. Specifically:

e At approximately 11:55 AM on October 9, 2015, at Respondent’s business
establishment, 114 Fontenot Road, Opelousas, Louisiana 70570, an
FDA-commissioned inspector documented Respondent’s staff selling a package of
Kool Menthol Filter Kings Box cigarettes to a person younger than 18 years of
age;

e Ina warning letter dated October 29, 2015, CTP informed Respondent of the
inspector’s October 9, 2015 documented violation, and that such action violates
federal law. The letter further warned that Respondent’s failure to correct its
violation could result in a civil money penalty or other regulatory action;

e At approximately 12:05 PM on June 6, 2017, at Respondent’s business
establishment, 114 Fontenot Road, Opelousas, Louisiana 70570, an
FDA-commissioned inspector documented Respondent’s staff selling a package of
Kool Menthol Filter Kings Box cigarettes to a person younger than 18 years of
age. 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.

These facts establish Respondent Colligans Groceries’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); 81 Fed. Reg.
28,974, 28,975-76 (May 10, 2016). Under 21 CFR. § 1140.14(a)(1),! no retailer may
sell cigarettes to any person younger than 18 years of age. Under 21 C.FR.

§ 1140.14(a)(2)(i), retailers must verify, by means of photographic identification
containing a purchaser’s date of birth, that no cigarette purchasers are younger than

18 years of age.

A $559 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $559 against Respondent
Sylvester J. Colligan d/b/a Colligans Groceries. 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

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


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
Center for Tobacco Products,

(FDA No. FDA-2017-H-4691)
Complainant
v.

Hollow Mini Market LLC
d/b/a Hollow Mini Market,

Respondent.
Docket No. T-17-5687
Decision No. TB2430

Date: February 7, 2018

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) seeks to impose a civil money penalty of $2,236
against Respondent, Hollow Mini Market LLC d/b/a Hollow Mini Market, located at 359
Harral Avenue, Bridgeport, Connecticut 06604, for four violations of the Federal Food,
Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seqg., and its implementing regulations,
21 C.F.R. pt. 1140, within a twenty-four month period.

CTP alleges that Hollow Mini Market violated the Act by:

Impermissibly selling cigarettes to minors, failing to verify, by means of photo
identification containing date of birth, that a purchaser was 18 years of age or older, and
selling individual cigarettes.

For the reasons discussed below, I impose a civil money penalty of $2,236 against
Respondent, Hollow Mini Market.
I. Procedural History

CTP began this matter by serving an administrative complaint seeking a $2,236 civil
money penalty on Respondent Hollow Mini Market (Respondent) at 359 Harral Avenue,
Bridgeport, Connecticut 06604, and by filing a copy of the complaint with the Food and
Drug Administration’s (FDA) Division of Dockets Management. Respondent filed a
timely Answer on September 5, 2017, in which it denied the allegations in the complaint
as alleged by CTP. On September 12, 2017, I issued an Acknowledgment and Pre-
Hearing Order (APHO). The APHO explained that parties may request copies of
documents relevant to this case and that the requesting party must serve the request for
documents no later than October 19, 2017. The APHO further explained that a party
receiving such a request must provide the requested documents no later than 30 days after
the request has been made. 21 C.F.R. § 17.23(a).

On November 30, 2017, CTP filed a Motion to Compel Discovery. In its motion, CTP
stated that on October 12, 2017, CTP served a Request for Production of Documents on
Respondent, but had not received a response to its request. On that same date, CTP also
filed a Motion to Extend Deadlines. A December 1, 2017 letter issued by my direction
allowed Respondent until December 15, 2017 to file a response to CTP’s Motion to
Compel Discovery. On that same date, I also issued an Order that granted CTP’s Motion
to Extend Deadlines and extended the parties’ pre-hearing exchange deadlines.

On December 21, 2017, I issued an Order that granted CTP’s Motion to Compel
Discovery. I noted that Respondent had not filed a response to CTP’s Motion to Compel
Discovery and ordered Respondent to comply with CTP’s Request for Production of
Documents by January 4, 2018. I further stated that “[f]ailure to comply by this date may
result in sanctions against Respondent, including striking Respondent’s September 5,
2017 Answer and issuing an Initial Decision and Default Judgment finding Respondent
liable for the violations listed in the Complaint and imposing a civil money penalty.” My
December 21, 2017 Order also extended the parties’ pre-hearing exchange deadlines.

On January 8, 2018, CTP filed Complainant’s Status Report and Motion to Impose
Sanctions. In its January 8, 2018 Motion, CTP indicated that Respondent had not
complied with my December 21, 2017 Order and requested that Respondent’s Answer be
struck and that I issue a default judgment. On that same date, CTP also filed a Motion to
Extend the pre-hearing exchange deadlines. In a January 9, 2018 letter issued by my
direction, Respondent was given until January 19, 2018 to file an objection to CTP’s
Motion to Impose Sanctions.

To date, Respondent has not filed a response to CTP’s Motion to Impose Sanctions.
Il. Striking Respondent’s Answer

I grant CTP’s Motion to Impose Sanctions and strike Respondent’s Answer due to a
failure to comply with multiple judicial orders and applicable rules.

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

Here, Respondent did not comply with the deadlines established in my orders on
September 12, 2017 and December 21, 2017. Respondent also failed to respond to the
January 9, 2018 letter, issued by my direction, soliciting a response to CTP’s Motion to
Impose Sanctions. Respondent has failed to comply with my orders and the procedures
governing this proceeding which constitutes misconduct that has interfered with the
speedy, orderly, or fair conduct of this proceeding. 21 C.F.R. § 17.35(a)(1), (a)(3). 1,
therefore, 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 September 5,
2017 Answer and issuing a decision without further proceeding. 21 C.F.R.
§§17.35(c)(3), 17.11(a).

Ill. Default Decision

Striking Respondent’s Answer leaves the Complaint unanswered. I am, therefore,
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 as alleged in the complaint are true. As
such, I conclude that default judgment is merited based on the allegations in the
Complaint and the sanctions imposed on Respondent. 21 C.F.R. § 17.11. Specifically:

e At approximately 12:04 p.m. on December 13, 2016, at Respondent’s business
establishment, 359 Harral Avenue, Bridgeport, Connecticut 06604, an
FDA-commissioned inspector documented Respondent’s staff selling two
individual Newport cigarettes to a person younger than 18 years of age. 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;

In a warning letter dated December 22, 2016, CTP informed Respondent of the
inspector’s December 13, 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;

At approximately 10:43 a.m. on July 25, 2017, at Respondent’s business
establishment, 359 Harral Avenue, Bridgeport, Connecticut 06604, an
FDA-commissioned inspector documented Respondent’s staff selling three
individual Newport cigarettes to a person younger than 18 years of age. 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.

These facts establish Hollow Mini Market’s liability under the Act. The Act prohibits

mis|

branding 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.SC. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The Secretary

of t

ie U.S. Department of Health and Human Services issued the regulations at 21 C.F.R.

pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C. § 387£(d)(1);
75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010); 81 Fed. Reg. 28,974, 28,975-76 (May 10,
2016).

Un

ler 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

ofp

otographic 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)(4), retailers
are prohibited from breaking or otherwise opening any cigarette package to sell or
distribute individual cigarettes.

Under 21 C.F.R. § 17.2, a $2,236 civil money penalty is permissible for four violations of
the regulations found at 21 C.F.R. pt. 1140.
Order

For these reasons, I enter default judgment in the amount of $2,236 against Respondent
Hollow Mini Market LLC d/b/a Hollow Mini Market. 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/
Wallace Hubbard
Administrative Law Judge


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

Joe Figuereo, APRN
(NPI: 1255717344 / PTAN: T400362557),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-17-745
Decision No. CR5022
Date: February 6, 2018

DECISION

The effective date of Medicare enrollment and billing privileges of Petitioner, Joe
Figuereo, APRN, is January 31, 2017, with retrospective billing privileges beginning
January 1, 2017.

I. Background and Procedural History

National Government Services (NGS), a Medicare Administrative Contractor (MAC),
notified Petitioner’s employer by letter dated February 22, 2017, that Petitioner’s
application to reassign benefits (CMS-855R) to the employer, Mental Health Center of
Greater Manchester, was approved effective January 1, 2017. Centers for Medicare &
Medicaid Services (CMS) Exhibit (Ex.) 3.

On March 17, 2017, Petitioner’s employer requested a reconsidered determination
changing the effective date to July 26, 2016, the date Petitioner began his employment.

On March 23, 2017, the MAC issued a reconsidered determination. The reconsidered
determination indicates that Petitioner filed both an application to enroll in Medicare
(CMS-855]) and an application to reassign his right to receive reimbursement from
Medicare for treatment and services provided to Medicare-eligible beneficiaries
(CMS-855R). The reconsidered determination indicates both applications were received
by the MAC on January 31,2017. The reconsidered determination states that the MAC
upheld an “effective date of January 1, 2017,” but as explained hereafter, Petitioner’s
effective date of enrollment was the date his applications were received, i.e., January 31,
2017, with retrospective billing privileges beginning January 1, 2017.

Petitioner requested a hearing (RFH) before an administrative law judge (ALJ) on May
18,2017. This case was assigned to Judge Scott Anderson on June 9, 2017. The case
was reassigned to me on August 25, 2017, upon Judge Anderson’s departure from the
Departmental Appeals Board.

CMS filed a combined prehearing brief and motion to dismiss or for summary judgment
on July 13, 2017, with CMS Exs. | through 5. Petitioner filed a combined prehearing
brief and response in opposition to the CMS motion for summary judgment with
Petitioner’s exhibits (P. Exs.) 1 and 2.

On December 8, 2017, I ordered the parties to respond to specified issues due to
conflicting evidence about Petitioner’s enrollment status when he filed his application to
reassign Medicare benefits to his employer. CMS filed its response on December 18,
2017, with CMS Exs. 6 and 7. Petitioner filed his response on January 9, 2018. The
parties advised me in their filings that they waived oral hearing and requested a decision
on the documentary evidence and the pleadings. Petitioner’s Response to December 8,
2017 Order at 1; CMS’ Response to December 8, 2017 Order at 1.

The parties have not objected to my consideration of CMS Exs. | through 7 or P. Exs. |
and 2, and all are admitted as evidence.

III. Discussion
A. Applicable Law

Section 1831 of the Social Security Act (the Act) (42 U.S.C. § 1395j) establishes the
supplementary medical insurance benefits program for the aged and disabled known as
Medicare Part B. Payment under the program for services rendered to Medicare-eligible
beneficiaries may only be made to eligible providers of services and suppliers.' Act

' Petitioner, a nurse practitioner, is a “supplier” under the Act and the regulations. A
“supplier” furnishes services under Medicare and the term supplier applies to physicians
or other practitioners and facilities that are not included within the definition of the
phrase “provider of services.” Act § 1861(d) (42 U.S.C. § 1395x(d)). A “provider of
services,” commonly shortened to “provider,” includes hospitals, critical access hospitals,
skilled nursing facilities, comprehensive outpatient rehabilitation facilities, home health
(Footnote continued next page.)
§§ 1835(a) (42 U.S.C. § 1395n(a)); 1842(h)(1) (42 U.S.C. § 1395u(h)(1)).
Administration of the Part B program is through contractors such as NGS. Act § 1842(a)
(42 USC. § 1395u(a)).

The Act requires the Secretary of Health and Human Services (the Secretary) to issue
regulations that establish a process for the enrollment of providers and suppliers,
including the right to a hearing and judicial review of certain enrollment determinations.
Act § 1866(j) (42 U.S.C. § 1395cc(j)).

Pursuant to 42 C.F.R. § 424.505,” a provider or supplier must be enrolled in the
Medicare program and be issued a billing number to have billing privileges and to be
eligible to receive payment for services rendered to a Medicare-eligible beneficiary. The
effective date of enrollment in Medicare of a physician, nonphysician practitioner such as
Petitioner, and physician and nonphysician practitioner organizations is governed by

42 CFR. § 424.520(d). The effective date of enrollment for a physician or nonphysician
practitioner may only be the later of two dates: the date of receipt of the application for
enrollment that was subsequently approved by a Medicare contractor charged with
reviewing the application on behalf of CMS; or the date when the physician or
nonphysician practitioner first began providing services at a new practice location. Id.
An enrolled physician or nonphysician practitioner may retrospectively bill Medicare for
services provided to Medicare-eligible beneficiaries up to 30 days prior to the effective
date of enrollment, if circumstances precluded enrollment before the services were
provided. Retrospective billing for up to 90 days prior to the effective date of enrollment
is permitted only in case of a Presidentially-declared disaster pursuant to 42 U.S.C.

§§ 5121-5206; 42 CFR. § 424.521.

The Medicare beneficiary, one who is entitled to benefits under Medicare part A or
enrolled under part B, is the individual covered by Medicare and entitled to request
payment for Medicare-covered health care items and services. Act § 1802. The
assignment of the right to file a claim for Medicare coverage of health care charges from
a Medicare beneficiary to a Medicare-enrolled provider or supplier is limited. The
reassignment of the right to file a Medicare-claim from an enrolled provider or supplier to

(Footnote continued.)

agencies, hospice programs, and a fund as described in sections 1814(g) and 1835(e) of
the Act. Act § 1861(u) (42 U.S.C. § 1395x(u)). The distinction between providers and
suppliers is important because they are treated differently under the Act for some
purposes.

? Citations are to the 2016 revision of the Code of Federal Regulations unless otherwise
stated.
another is very limited. 42 C.F.R. pt. 424, subpt. F. Reassignment to an employer is
permitted from a supplier, such as a physician or nonphysician practitioner, when
reassignment is required as a condition of employment. 42 C.F.R. § 424.80(b)(1).

The Secretary’s regulations do not specify how to determine an effective date for an
authorized reassignment. 42 C.F.R. pt. 424, subpt. F. However, CMS has addressed the
effective date of a reassignment by policy found in the Medicare Program Integrity
Manual (MPIM), CMS Pub. 100-08, chap. 15, § 15.5.20 (rev. 676, eff. Dec. 19, 2016).
MPIM § 15.5.20A requires that a CMS-855R be completed and filed by an individual
that wants to reassign benefits to an eligible entity or to terminate a reassignment. Both
the party seeking to reassign (reassignor) and the party to whom reassignment is intended
(reassignee) must be enrolled in Medicare. A party seeking to reassign that is not
enrolled may submit a CMS-855I concurrently with the CMS-855R to accomplish
enrollment and reassignment. If the party receiving the reassignment is not enrolled, that
party must file the appropriate version of form CMS-855. MPIM § 15.5.20A. The
MPIM in effect on January 31,2017, when NGS received Petitioner’s CMS-855R that
was processed to completion required:

If the Form CMS-855R is accompanied by an initial Form
CMS-855I or submitted as a “stand-alone” form (that is, a
Form CMS-855R is submitted as a new reassignment, such as
when an enrolled physician who is operating as a sole
proprietor joins a group practice and reassigns his benefits to
the group), the effective date of enrollment and the
reassignment shall be consistent with the 30-day rule (i.e., the
later of the date of filing or the date the reassignor first began
furnishing services at the new location) specified in section
15.17 of this chapter.

MPIM § 15.5.20E.3° .

The Secretary has issued regulations that establish the right to a hearing and judicial
review of certain enrollment determinations. Act § 1866(j) (42 U.S.C. § 1395cc(j)).
Pursuant to section 1866(h)(1) and (j)(8), a provider or supplier whose enrollment
application or renewal application is denied is entitled to an administrative hearing and
judicial review. Pursuant to 42 C.F.R. § 498.3(b)(15), a supplier’s effective date of
enrollment is an initial determination that is subject to administrative review by an ALJ
after a reconsidered determination. 42 C.F.R. § 498.5(1)(1)-(2). Appeal and review

3 The latest revision of Chapter 15 § 15.5.20 is revision 717, issued May 12, 2017 and
effective May 15,2017. There was no substantive change to the text.
rights are specified by 42 C.F.R. § 498.5. However, the Secretary has not granted a right
to ALJ review of CMS or MAC determinations related to reassignment, including the
effective date of reassignment. The Secretary has not delegated the authority to conduct
such reviews to ALJs. 42 C.F.R. §§ 424.70-.90, 424.545, 498.3(b), 498.5.

B. Issue

Whether Petitioner’s effective date for Medicare enrollment and billing
privileges is January 31, 2017, with retrospective billing privileges
beginning January 1, 2017.

C. Findings of Fact, Conclusions of Law and Analysis
My conclusions of law are set forth in bold followed by my findings of fact and analysis.

1. The parties have waived oral hearing and decision upon the
documentary evidence and pleadings is appropriate. 42 C.F.R.
§ 498.66.

2. Pursuant to 42 C.F.R. § 424.520(d), Petitioner’s effective date of
Medicare enrollment is January 31, 2017, the date of receipt by the
MAC of a Medicare enrollment application (CMS-855]1) from
Petitioner that the MAC could process to approval.

3. Pursuant to 42 C.F R. § 424.521(a)(1), Petitioner is authorized to bill
Medicare for services provided to Medicare-eligible beneficiaries up to
30 days prior to his effective date of enrollment, that is, beginning on
January 1, 2017.

a. Facts

It is not disputed that Petitioner began working for his employer, Mental Health Center of
Greater Manchester, on or about July 26, 2016. On January 31, 2017, Petitioner’s
employer filed a Medicare enrollment application (CMS-855]) on Petitioner’s behalf and
an application to reassign Petitioner’s entitlement to receive reimbursement from
Medicare to his employer (CMS-855R) using the CMS on-line Provider Enrollment,
Chain, and Ownership System (PECOS). CMS Exs. 2, 6; P. Br. at 2-3. The MAC
received the CMS-855I and CMS-855R on January 31,2017. The MAC was able to
process both applications to completion. CMS Exs. 2-7.
b. Analysis

The regulations controlling the effective date of enrollment of a nonphysician practitioner
and the application of those regulations are clear. The effective date of enrollment in
Medicare of a physician, nonphysician practitioner, and physician and nonphysician
practitioner organizations is governed by 42 C.F.R. § 424.520(d). The effective date of
enrollment for a physician or nonphysician practitioner may only be the later of two
dates: (1) the date when the physician filed an application for enrollment that was
subsequently approved by a MAC charged with reviewing the application on behalf of
CMS; or (2) the date when the physician first began providing services at a new practice
location. 42 C.F.R. § 424.520(d). The date of filing of the enrollment application is the
date on which the Medicare contractor receives a signed enrollment application that the
MAC is able to process to approval. 42 C.F.R. § 424.510(d)(1); 73 Fed. Reg. 69,725,
69,769 (Nov. 19, 2008); Alexander C. Gatzimos, MD, JD, LLC d/b/a Michiana Adult
Medical Specialists, DAB No. 2730 at 1 (2016). The burden is on Petitioner, not the
government, to demonstrate that the MAC or CMS received the requisite enrollment
forms and that Petitioner met all enrollment requirements. 42 C.F.R. § 424.545(c). An
enrolled physician or nonphysician practitioner may retrospectively bill Medicare for
services provided to Medicare-eligible beneficiaries up to 30 days prior to the effective
date of enrollment, if circumstances precluded enrollment before the services were
provided. 42 C.F.R. § 424.521(a)(1).

Petitioner requests that his effective date of enrollment be changed to July 26, 2016,
when he began providing services at his employer. RFH, P. Br. at 3. Petitioner
acknowledges, however, that his employer failed to submit Petitioner’s Medicare
enrollment application (CMS-8551) to the MAC until January 31,2017. Applying the
regulations to the undisputed evidence, I conclude that Petitioner’s effective date of
enrollment is January 31,2017, which is the date the MAC received the Medicare
enrollment application (CMS-855]) that it processed to approval. January 31, 2017 is
clearly later than July 26, 2016, the date Petitioner began providing services at his
employer. The first day of the 30-day period of retrospective billing privileges is January
1, 2017, pursuant to 42 C.F.R. § 424.521(a)(1). Petitioner concedes in his brief that he is
requesting an equitable remedy. Unfortunately, I have no authority to grant Petitioner
equitable relief in the form of an earlier effective date of enrollment, even if I were
inclined to do so. US Ultrasound, DAB No. 2302 at 8 (2010). Iam bound to follow the
Act and regulations and have no authority to declare statutes or regulations invalid or
ultra vires. 1866I1CPayday.com, L.L.C., DAB No. 2289 at 14 (2009).
III. Conclusion

For the foregoing reasons, Petitioner’s effective date of enrollment is January 31, 2017,
with retrospective billing privileges beginning January 1, 2017.

/s/
Keith W. Sickendick
Administrative Law Judge


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

Center for Tobacco Products,
Complainant

v.
Jian Kang Jiang
d/b/a China House Jiang’s Restaurant,

Respondent

FDA Docket No. FDA-2017-R-5844
CRD Docket No. T-17-6677

Decision No. TB2419

Date: February 5, 2018

INITIAL DECISION AND DEFAULT JUDGMENT

Found:
1) Respondent violated 21 C.F.R. §§ 1140.14(a)(1) and 1140.14(a)(2)(i) as
charged in the complaint; and
2) Respondent committed six repeated violations in a 36-month period as set
forth hereinabove.
3) Respondent is hereby assessed No-Tobacco-Sale-Order for a period of 30
consecutive days.
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 Jian Kang Jiang d/b/a China House Jiang’s Restaurant
TCA The Family Smoking Prevention and Tobacco Control

Act, Pub. L. No. 111-31, 123 Stat. 1776 (2009)(TCA)
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(f)(5), 5 C.F.R. §§ 930.201 et
seq. and 21 C.F.R. Part 177
II. PROCEDURAL BACKGROUND

The Center for Tobacco Products (CTP/Complainant) filed a Complaint on
September 28, 2017 alleging that FDA documented six repeated violations within a 36-
month period.

Jian Kang Jiang d/b/a China House Jiang’s Restaurant (Respondent or China
House Jiang’s Restaurant) was served with process on September 25, 2017 by United
Parcel Service. Respondent answered the Complaint on October 6, 2017. I issued an
Acknowledgment and Pre-Hearing Order on October 16, 2017 that set deadlines for
parties’ submissions, including the November 13, 2017 deadline to request that the

opposing party provide copies of documents relevant to this case.

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
On December 15, 2017, CTP filed a Motion to Compel Discovery. CTP indicated
that Respondent had not responded to a Request for Production of Documents that CTP
sent to Respondent on November 9, 2017. On that same date, CTP also filed a Motion to
Extend Deadlines. On December 18, 2017, I issued an Order instructing Respondent to
show cause for its failure to respond to CTP’s Request for Production of Documents by
December 22, 2017. In that Order, I warned Respondent that failure to respond may
result in sanctions. Respondent did not respond to my December 18, 2017 Order.

On January 10, 2017, CTP filed Complainant’s Motion to Impose Sanctions. The
Motion asserted that Respondent failed to defend the action and did not comply with my
December 18, 2017 Order. In its motion, CTP asked that I strike Respondent’s October
6, 2017 Answer and issue a Default Judgment in the form of a No-Tobacco-Sale-Order
for a period of 30 consecutive days. On January 12, 2018, I issued an Order instructing
Respondent to show cause on or before January 20, 2018 why I should not strike
Respondent’s Answer and “issue an Initial Decision and Default Judgment finding
Respondent liable for the violations listed in the Complaint and imposing a No-Tobacco-
Sale-Order for 30 days.” To date, Respondent has not shown cause.

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

Here, Respondent did not respond to CTP’s November 9, 2017 Request for
Production of Documents. Respondent also failed to comply with my Acknowledgment
and Pre-Hearing Order, my December 18, 2017 Order, and my January 12, 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, or
fair conduct of this proceeding. 21 C.F.R. § 17.35(a)(1), (a)(3). 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 October 6, 2017
Answer and issuing a decision without further proceeding. 21 C.F.R. §§ 17.35(c)(3),

17.11 (a).
Iv. LAW

21 CFR. §§ 1140.14(a)(1) and 1140.14(a)(2)(i) 3
V. ISSUE

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

VI. DEFAULT

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

4
Section 17.7(a) provides that service of a complaint may be made in one of two
ways: either by certified or registered mail or similar mail delivery service (i.e., one
which provides a return receipt record reflecting receipt), or by delivery in person. 21
C.F.R. §§ 17.1(a)(1) and (a)(2). Delivery in person must be to either an individual
respondent or to an “officer or managing or general agent in the case of a corporation or
unincorporated business.” 21 C.F.R. §§ 17.7(a)(2)(i) and (a)(2)(ii). If the complaint is
served by certified or registered mail or similar mail delivery service, proof of service,
stating the name and address of the person on whom the complaint was served, and the
manner and date of service must be provided. 21 C.F.R. § 17.7(b). Nothing in the
regulations require me to assume that a UPS Delivery Notification proves that the parcel
delivered to Respondent contained the complaint and not any other printed or non-printed
matter handled by the carrier or nothing at all. See Tand M United Corporation d/b/a BP
Shop, DAB No. 2705 (2016). Respondent may, in its response or answer to the
complaint, raise a challenge to jurisdiction or defective service. However, if Respondent
files a response or answer that does not specifically challenge jurisdiction, then
Respondent is considered served and subject to the jurisdiction of this Court.

I find Respondent was served and is subject to the jurisdiction of this forum, as
established by the UPS Delivery Notification filed by CTP and Respondent’s Answer to
CTP’s Complaint. My January 12, 2018 Order instructed Respondent to show cause on
or before January 20, 2018, why Default Judgment should not be entered for failure to
comply with the applicable rules.

Respondent failed to comply with my Acknowledgment and Pre-Hearing Order,

5
my December 18, 2017 Order, and my January 12, 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.

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, by failing to file a responsive pleading, waived its right to a
hearing.

VI. ALLEGATIONS

A. Agency’s recitation of facts

CTP alleged that Respondent owned an establishment, doing business under the
name China House Jiang’s Restaurant, located at 1441 Snyder Avenue, Philadelphia,
Pennsylvania 19145. CTP further alleged that during an inspection of China House
Jiang’s Restaurant conducted on May 3, 2017, an FDA-commissioned inspector
documented 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 cigarettes on May 3, 2017, at approximately
12:30 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 May 3, 2017, at approximately
12:30 PM.

B. Respondent’s recitation of facts

I struck Respondent’s October 6, 2017 Answer.
Accordingly, Respondent has filed no responsive pleadings that I may consider.
VII. PRIOR VIOLATIONS
On May 19, 2016, CTP initiated its first CMP action against Respondent, * CRD
Docket Number T-16-459, FDA Docket Number FDA-2016-H-0858, for three
violations of 21 C.F.R. pt. 1140 within a 24-month period. CTP alleged those
violations to have occurred at Respondent’s business establishment, 1441 Snyder
Avenue, Philadelphia, Pennsylvania 19145, on March 30, 2015 and November 13,
20155
The first CMP action concluded in settlement where Respondent “admitted all of
the allegations in the Complaint and paid the agreed upon penalty.” Further, “Respondent
expressly waived its right to contest such violations in subsequent actions.”
On March 1, 2017, CTP initiated its second CMP, CRD Docket Number T-17-

2396, FDA Docket Number FDA-2017-H-1030, for five violations of 21 C.F.R. pt. 1140

+ The first CMP and second CMP actions captioned the Respondent as Jian Kang Kiang,
d/b/a China House.

5 An FDA-commissioned inspector documented two original violations on March 30,
2015 for the 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 repeated violations on November 13, 2015, for the 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)). The original violations are not included
in this action.
within a 36-month period. CTP alleged those violations to have occurred at Respondent’s
business establishment, 1441 Snyder Avenue, Philadelphia, Pennsylvania 19145, on
September 7, 2016.°

The second CMP action concluded in settlement where Respondent “admitted all
of the allegations in the Complaint and paid the agreed upon penalty.” Further,
“Respondent expressly waived its right to contest such violations in subsequent actions.”

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, I find and conclude Respondent committed six repeated violations of 21
CFR. pt 1140, specifically three repeated violations of 21 C.F.R. § 1140.14(a)(1) and
three repeated violations of 21 C.F.R. § 1140.14(a)(2)(i) based on the conduct 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

© An FDA-commissioned inspector documented two repeated violations on September 7,
2016 for the 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)).

8
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

9
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)
(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,

10
see CTP v. Orton Motor Company, DAB No. 2717 (2016).
X. LIABILITY

When a retailer such as Respondent is found to have committed six or more
repeated violations of regulations within a 36-month period, a No-Tobacco-Sale-Order
may be imposed. 21 U.S.C. § 333(£)(8); See also FDA Civil Money Penalties and No-
Tobacco-Sale Orders For Tobacco Retailers: Guidance for Industry (December 2016) at
3,5-6, available at

https://www.fda.gov/TobaccoProducts/Labeling/RulesRegulationsGuidance/ucm447308.

htm.

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).

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.

XI. IMPACT OF RESPONDENT’S DEFAULT

Because striking a Respondent’s answer leaves the Complaint unanswered, an ALJ
must assume as true all factual allegations in the complaint and issue an initial decision
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

11
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).”

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

7 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 at 1440 (1998).

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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 committed three repeated violations of 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 November 13, 2015, September 7, 2016, and May 3, 2017.

I find and conclude that the evidentiary facts, by a preponderance of the evidence
standard, support a finding Respondent committed three repeated violations of 21 C.F.R.
§ 1140.14(a)(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 tobacco product purchasers are younger than 18 years of age.

The conduct set forth above on November 13, 2015, September 7, 2016, and

March 3, 2017 counts as six repeated violations.

XIII. PENALTY

There being liability under the relevant statute, I must now determine the
appropriate penalty to impose. NTSOs are authorized at 21 U.S.C. § 333(f)(8). The
section allows for the imposition of an NTSO against a person who has committed

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“repeated violations” of restrictions on the sale of tobacco products, promulgated under
section 387f(d). 21 U.S.C. § 333(f)(8). The term “repeated violations” is defined to
mean “at least 5 violations of particular requirements over a 36-month period at a
particular retail outlet. . . .” See FDA Civil Money Penalties and No-Tobacco-Sale
Orders For Tobacco Retailers: Guidance for Industry (December 2016) at 3,5-6, available
at

https://www.fda.gov/TobaccoProducts/Labeling/RulesRegulationsGuidance/ucm447308.

htm.
In its Complaint, CTP sought a thirty day NTSO against Respondent for six
repeated violations of the Act and its implementing regulations within a 36-month period.
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 six repeated violations in a 36-month period and so,
Respondent is liable for a thirty consecutive day NTSO. 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 comply with my Acknowledgment and Pre-
Hearing Order, my December 18, 2017 Order, and my January 12, 2018
Order.

14
oa

I strike Respondent’s October 6, 2017 Answer as a sanction pursuant to 21
CFR. § 17.35(c)(3).

I find Respondent is in default.

I assume the facts alleged in the Complaint to be true.

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

L assess a 30 consecutive day No Tobacco Sale Order.

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

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