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

(FDA No. FDA-2017-R-3134)
Complainant
v.

Mansour Brothers Enterprises, Inc.
d/b/a Hyde Park Food Mart / Metro Market,

Respondent.
Docket No. T-17-4293
Decision No. TB2508
Date: March 19, 2018
INITIAL DECISION

I hereby impose a No-Tobacco-Sale Order (“NTSO”) against Respondent, Mansour
Brothers Enterprises, Inc. d/b/a Hyde Park Food Mart / Metro Market (“Respondent”),
for a period of 30 calendar days, for five repeated violations of federal tobacco
regulations over a period of 36 months.

I. Background

The Center for Tobacco Products (“CTP”) seeks to impose an NTSO, for a period of 30
calendar days, against Respondent, located at 900 West Kennedy Boulevard, Tampa,
Florida 33606, for five repeated violations of the Federal Food, Drug, and Cosmetic Act
(the Act), 21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R. pt. 1140,
within a 36-month period. CTP’s Complaint alleges that Respondent’s staff
impermissibly sold cigarettes to minors, thereby violating the Act, 21 U.S.C. § 301 et
seq., and its implementing regulations, Cigarettes and Smokeless Tobacco, 21 C.F R. pt.
1140.

The complaint likewise alleges that Respondent previously admitted to violations of
regulations found at 21 C.F.R. pt. 1140. Specifically, CTP alleges that Respondent
committed: (1) One original violation and three repeated violations of sale to a minor, in
violation of 21 C.F.R. § 1140.14(a)(1)!, on January 26, 2015, June 21, 2015, December
30, 2015, and October 4, 2016; and (2) One original violation and two repeated violations
of failure to verify the age of a person purchasing cigarettes or smokeless tobacco by
means of photographic identification containing the bearer’s date of birth, in violation of
21 CFR. § 1140.14(a)(2)(i), on January 26, 2015, June 21, 2015, and December 30,
2015. See Complaint at JJ 1,9, 10; see also, Informal Brief of Complainant at 1-2.
Therefore, CTP seeks the imposition of an NTSO against Respondent for a period of 30
consecutive calendar days.

Il. Procedural History

CTP began this matter by serving an administrative complaint, seeking an NTSO for a
period of 30 calendar days, on Respondent at 900 West Kennedy Boulevard, Tampa,

Florida 33606, and by filing a copy of the complaint with the Food and Drug
Administration’s (FDA) Division of Dockets Management. DAB E-File Docket (Dkt.)
#2b.

On May 23, 2017, Respondent timely filed an Answer (“Answer”). Dkt. #1. On May 31,
2017, I issued an Acknowledgment and Pre-Hearing Order (“APHO”) that set out the
deadlines for the parties’ submissions in this case, and issued informal briefs for the
parties to complete and submit. Dkt. #4.

On August 21,2017, CTP filed its pre-hearing exchange. CTP’s pre-hearing exchange
included an Informal Brief of Complainant, a list of proposed witnesses and exhibits, and
19 numbered exhibits. CTP’s exhibits included the declaration of one witness, Inspector
Jose Ceballos. Dkt. #8-8t. On August 24, 2017, Respondent filed its pre-hearing
exchange. Respondent’s exchange included an Informal Brief, a list of witnesses and
exhibits, and four marked exhibits which included five video clips at Exhibit 2.
Respondent’s exhibits included the written direct testimony of two witnesses, Jihad
(Joseph) Mansour and Mutlu Kalinlioglu. Dkt. #9-9i.

On September 19, 2017, I held a pre-hearing conference in this case. During the
prehearing conference, I explained that the sole purpose of a hearing under the applicable

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

regulations was to allow for the cross-examination and re-direct of any witnesses who
had provided sworn testimony in pre-hearing exchanges, and only if the opposing party
elected to cross-examine the witness. CTP advised of its intent to cross-examine
Respondent’s witnesses Mansour and Kalinlioglu. Respondent communicated her desire
to cross-examine CTP’s witness, Inspector Ceballos. See Dkt. #12.

On November 9, 2017, I held a hearing in this case. During the course of the hearing, I
admitted the parties’ exhibits. Respondent cross-examined Inspector Ceballos. See
Hearing Transcript (Tr.) at 11-21. CTP then conducted a re-direct examination of
Inspector Ceballos. See Tr. at 21-22. CTP waived cross-examination of Respondent’s
witnesses Mansour and Kalinlioglu. Id. at 22.

On November 20, 2017, I informed the parties that the Court had received the transcript
of the hearing, and set the deadline for the parties’ post-hearing brief submissions as
December 19, 2017. Also, the parties were given until December 19, 2017 to file any
corrections to the transcript. Dkt. #15. On December 19, 2017, CTP and Respondent
filed their respective post-hearing briefs. Dkt. ##16, 16a, and 17.

On December 19, 2017, by email transmission, CTP filed a request to seal and withhold
from public disclosure Respondent’s Exhibit 2, video clips 1-5. See Dkt. #18.
Specifically, CTP requested “that all of these videos be placed ‘under seal’ and be
withheld from public disclosure because they contain sensitive information and to protect
the identity of CTP’s undercover minor.” Id.; citing, CTP v. Beach Steil Inc. d/b/a 7-
Eleven Store 32781, CRD Docket No. T-17-221, FDA Docket No. FDA-2017-H-0835.
On January 2, 2018, a letter by my direction was issued giving Respondent until January
17, 2018 to file a response to CTP’s Motion to File Under Seal. Dkt. #19. On January 3,
2018, by email transmission, Respondent submitted its response, advising

“.. we have no objection to Complainant’s request... .” Dkt. #20. On January 19,
2018, I issued an Order granting CTP’s motion and sealed from public disclosure
Respondent’s Exhibit 2, video clips 1-5 “until further order.” Dkt. #21. As the briefing
period is over, I now render my decision.

III. Issues

A. Whether Respondent Hyde Park Food Mart / Metro Market sold cigarettes to a
minor, on October 4, 2016, in violation of 21 C.F.R. § 1140.14(a)(1).

B. Whether an NTSO for a period of 30 calendar days is reasonable.
IV. Applicable Regulations and Guidelines

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

The Act provides for civil money penalties (“CMPs”’) and NTSOs. NTSOs are
authorized at 21 U.S.C. § 333(f)(8). The section allows for the imposition of an NTSO
against a person who has committed “repeated violations” of restrictions on the sale of
tobacco products. The term “repeated violations” is defined to mean “at least 5 violations
of particular requirements over a 36-month period at a particular retail outlet....” See
FDA Civil Money Penalties and No-Tobacco-Sale Orders For Tobacco Retailers:
Guidance for Industry (revised December 2016) at 3,5-6, available at
https://www.fda.gov/TobaccoProducts/Labeling/RulesRegulationsGuidance/ucm447308.
htm.

I find that under 21 U.S.C. § 333(f)(8), I have the authority to impose an NTSO.
Vv. Analysis
A. Violations

CTP alleges that Respondent committed five repeated violations of the Act and its
implementing regulations over a 36-month period. See Complaint at § 1. CTP states that
it did not include any repeated violations that occurred outside of the 36-month periods
and any violations of other Act sections that are not at issue in this case. Id. at footnote 1.
In its Complaint, CTP alleged that at approximately 6:18 PM on October 4, 2016, at
Respondent’s business establishment, 900 West Kennedy Boulevard, Tampa, Florida
33606, an FDA-commissioned inspector documented Respondent’s staff selling a
package of Marlboro cigarettes to a person younger than 18 years of age. Complaint at

§ 6; see also, Informal Brief of Complainant at 5.

Respondent concedes the past violations that were at issue in the two prior CMP actions
against Respondent. See Answer at §§ 8-10. Respondent denies the current violation,
and denies that it allegedly “committed a total of five repeated violations within a 36-
month period.” Id. §§ 1, 4,6, 11.
As Respondent has acknowledged that “there have been past violations,” (see Answer at
9¥ 8-10), I find that the only issue before me, concerning violations, is whether
Respondent sold cigarettes to a minor, on October 4, 2016, in violation of 21 C.F.R.

§ 1140.14(a)(1), as alleged in the Complaint.

CTP’s case against Respondent relies on the testimony of Inspector Ceballos who
“conducted a follow-up undercover buy inspection at Respondent’s establishment located
at 900 West Kennedy Boulevard, Tampa, Florida 33606, on October 4, 2016.” Informal
Brief of Complainant at 5. According to Inspector Ceballos’ testimony, he “was
accompanied by a confidential state-contracted minor, identified as FL-UP-16-41 (‘Minor
FL-UP-16-41”).” Id. As evidence CTP provided a sworn declaration of Inspector
Ceballos. See CTP Ex. 15, Ceballos Declaration. Inspector Ceballos is an FDA-
commissioned officer with the Information Systems and Networks Corporation, a third-
party contractor with the state of Florida. His duties include conducting “undercover buy
(‘UB’) and advertising and labeling (‘A&L’) inspections required under FDA’s Tobacco
Retail Inspection Contract with the state of Florida.” Id. at 1, §§ 1-2. CTP provided
Inspector Ceballos’ Narrative Report of the undercover inspection. CTP Ex. 4, Narrative
Report. CTP also provided a redacted copy of the Minor FL-UP-16-41’s identification
(“ID”). See CTP Ex. 5. Finally, Respondent cross-examined Inspector Ceballos at the
November 9, 2017 hearing. See Tr. at 11-21.

During the November 9, 2017 hearing, counsel for Respondent challenged the integrity of
the undercover inspection by attacking the credibility of Minor FL-UP-16-41.
Respondent’s primary argument focused on verification of the minor’s ID and assertions
that FDA cannot prove that Minor FL-UP-16-41 was not carrying two IDs, the real one
showing her actual age, and a second “fake” one showing that she was age 18 or older.
See Tr. at 12-14, 21; see also, Respondent’s Final Brief at 2. Accordingly, Respondent
argues that Complainant failed to establish that Respondent violated 21 C.F.R.

§ 1140.14(a)(1), because “[t]here is, in fact, no acknowledgment that the sale took place
only after scrutiny of the identification until admitted in Complainant’s Post Hearing
Brief.” Respondent’s Final Brief at 2.

I find that Respondent’s argument is speculative and misguided. First and foremost,
CTP’s Complaint did not allege a violation for failure to verify, by means of
photographic identification, the age of a person purchasing cigarettes or smokeless
tobacco (21 C.F.R. § 1140.14(a)(2)(i)) for the inspection conducted on October 4, 2016.
The Complaint alleged only that, on October 4, 2016, “Respondent committed a violation
of selling cigarettes or smokeless tobacco to a minor, in violation of 21 C.F.R.

§ 1140.14(a)/1140.14(a)(1) ... .” Complaint at § 6. Inspector Ceballos testified credibly
and comprehensively about his observations during the October 4, 2016, inspection at
which he observed Respondent selling cigarettes to Minor FL-UP-16-41. See Tr. at 14-

2? The evidence discussed in this paragraph is not exhaustive.
15,
wil

17-18; CTP Ex. 4, at 1, Narrative Report; CTP Ex. 15, at 3, Ceballos Declaration. I
not recite every detail of Inspector Ceballos’ testimony but will highlight the points

relevant to Respondent’s contention regarding the possibility that the minor was carrying

a“

Ins

fake ID.”

pector Ceballos testified that before the inspection at Hyde Park Food Mart / Metro

Market, he confirmed that Minor FL-UP-16-41 had photographic identification showing
her actual date of birth. See CTP Ex. 4, at 1, Narrative Report; CTP Ex. 15, at 3,
Ceballos Declaration; Tr. at 11-12, 13. During the cross-examination, Inspector Ceballos
testified that he “verified” Minor FL-UP-16-41’s identification. Tr. at 13, 14. Inspector
Ceballos explained that inspectors do not search the undercover minors. Id. at 14.

Ins
UP.
the

pector Ceballos also testified that he went into the establishment behind Minor FL-
-16-41, that he “always say[sic] 10-15 feet away from where the minor is conducting
purchase so I have a good angle in order for me to of course, witness that purchase

100%.” Id. Inspector Ceballos testified that he observed Respondent’s sales clerk ask for
identification, and that he observed Minor FL-UP-16-41 provide the sales clerk with
identification. Id. at 18.

This is the relevant excerpt of Inspector Ceballos’ testimony during the cross-
examination:

Q. Okay and when you pick her up what information do you provide to
her?

A. The information is mostly I request that from her. Number one she is

supposed to have an ID with her and no tobacco products whatsoever on
her possession at the time before we go to conduct the inspection.

Q. And are you still working with her?
A. No, she’s already — we call it aged out. She is already 18.

Q. And in fact on the day of the incident she was just a few months shy of
her 18th birthday on that date, correct?

A. Based on the identification that’s correct.

Q. And you confirmed that she had some sort of identification on her,
correct?
A. That’s the first thing I do when I pick [up] my minors, yes.
Q. Okay. And so how exactly do you do that? Do you just ask?
A. Lask the minors do you have your ID with you, and I see it yes.

Q. And is it possible that an informant can have more than one
identification on them?

A. ...1 know at the time she had a driver’s license, she was already
driving.

Q. Is it possible that an informant can have more than one ID on their
person? I mean you don’t search them or anything right?

A. No ma’am. I don’t do that. I ask them to and I have them of course
show me the ID.

Q. Okay, and in that period of time again do you do any verification to see
if there’s any additional identification on the person?

A. No ma’am, because as I said before we do this before we go to do the
inspections.

Tr. at 11-14, 21.

Again, I find Inspector Ceballos’ testimony to be credible. I find that CTP has provided
an abundance of evidence to support its allegation that Respondent sold cigarettes to
Minor FL-UP-16-41 on October 4, 2016, in violation of 21 C.F.R. § 1140.14(a)(1). I
find that Respondent has failed to provide evidence to rebut CTP’s allegation. As part of
its pre-hearing exchange, Respondent submitted the written Declarations of Jihad
Mansour, Vice President, Secretary, and a Director of Mansour Brothers Enterprises,
Inc.; and Mutlu Kalinlioglu, Respondent’s Manager. Respondent Exs. 3 and 4. The
Declarations submitted by Respondent do not address the October 4, 2016, inspection.
Further, Respondent has failed to submit sufficient evidence which rebuts the allegation
that Respondent sold cigarettes to Minor FL-UP-16-41 on October 4, 2016.

The facts as outlined above, establish that Respondent Mansour Brothers Enterprises, Inc.
d/b/a Hyde Park Food Mart / Metro Market is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if sold or distributed in violation of regulations issued under section 906(d) of the Act.
21 USC. § 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
C.F.R. § 1140.14(a)(1), no retailer may sell cigarettes or smokeless tobacco to any person
younger than 18 years of age.

B. No-Tobacco-Sale-Order Penalty

I now address the second issue before me -- whether an NTSO for a period of 30 calendar
days is a reasonable penalty. The undisputed facts of this case show that Respondent is a
repeated violator of FDA’s tobacco regulations. Respondent has been the subject of two
prior CMP actions. See FDA Docket Number FDA-2015-H-3651; CRD Docket Number
T-16-1108, FDA Docket Number FDA-2016-H-1800. Between January 26, 2015 and
October 4, 2016, Respondent sold cigarettes or smokeless tobacco to minors on four
occasions. See Complaint at JJ 1, 8-10. On three of those occasions, Respondent failed
to 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. Id.
For the purposes of the instant NTSO action, CTP counted the violations that occurred on
June 21,2015, and December 30, 2015.

As previously mentioned, Respondent has conceded that the past violations occurred.
Because Respondent already conceded the violations underlying the two previous CMPs,
and as part of the settlement processes that concluded the prior CMPs, expressly waived
its right to contest them in subsequent actions, there is no basis for questioning whether
the current allegation is a repeat violation. Thus, Respondent committed a total of five
repeated violations of FDA’s tobacco regulations over a 36-month period.

CTP imposed two CMPs on Respondent but the CMPs did not deter Respondent from
unlawfully selling tobacco products to minors. CTP now believes that, for Respondent’s
five repeated violations in a 36-month period, an assessment of a 30-day NTSO is
appropriate. Informal Brief of Complainant at 11. Respondent’s counsel argues for
mitigation of the NTSO because, following the second CMP action:

Respondent acknowledged its responsibility and paid the requested penalty.
This time, however, [Respondent] invested a significant amount of time,
energy and money into assuring this would never happen again.
[Respondent] completely changed its day to day operations and
implemented the strongest, surest methods available to protect both its
customers and itself from any errors in the future and safeguards were
introduced to assure compliance ....

Respondent’s Final Brief at 4. Respondent further argues that in the alternative, “[e]ven
if this Court finds the Respondent liable based on the evidence, it still does not meet the
level of the requested sanction and Respondent should be permitted to operate in the
responsible way it is required to operate, continue to upgrade when new safeguards
become available and Petitioner go hence without a day.” Id. at 5.

When determining the period to be covered by an NTSO, 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).

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

Ihave found that Respondent committed a total of five repeated violations of FDA
tobacco regulations within a 36-month period. The repeated inability of Respondent to
comply with federal tobacco regulations and its “unwillingness or inability to correct its
violative actions” is serious in nature. See Informal Brief of Complainant at 12. Thus, I
find that an NTSO of 30 calendar days is a reasonable penalty.

2. Respondent’s Ability to Pay

This factor does not apply to the circumstances here because the penalty sought is
exclusion (NTSO) and not a monetary penalty.

3. Effect on Ability to do Business

Respondent has not presented any evidence about the effect of a 30-day NTSO on its
ability to conduct its business. I am not persuaded that the NTSO would severely hinder
Respondent Hyde Park Food Mart / Metro Market’s ability to continue other lawful retail
operations during the NTSO period. Moreover, “the need to protect the [minors]
outweighs the adverse effects that an NTSO may have on an individual retailer’s
business, especially in light of the fact that imposition of this remedy is reserved only for
those retailers who demonstrate indifference to the requirements of law.” Kat Party
Store, Inc., d/b/a Mr. Grocer Liquor Store, CRD No. T-16-1684, at 3-4 (2016).

4. History of Prior Violations

It is undisputed that Respondent is a repeated violator of FDA’s tobacco regulations
prohibiting the sale of tobacco products to minors. The current action is the first NTSO
action against Respondent for violations of the Act and its implementing regulations. As
noted previously, Respondent has been the subject of two prior CMP actions. In addition
to the original violations on January 26, 2015, and the current violation on October 4,
2016, Respondent has twice violated the prohibition against selling cigarettes or
smokeless tobacco to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a)(1),
10

and twice violated the requirement that retailers verify, by means of photo identification
containing a purchaser’s date of birth, that no cigarette or smokeless tobacco purchasers
are younger than 18 years of age, 21 C.F.R. § 1140.14(a)(2)(i). See Complaint at JJ 1, 8-
Il.

5. Degree of Culpability

Based on my finding that Respondent committed the most recent violation as alleged in
the current complaint, I hold it fully culpable for all five repeated violations of the Act
and its implementing regulations.

6. Additional Mitigating Factors

I do not find any mitigating factors. Respondent has not provided any evidence that it
has implemented new policies for its employees about when to verify the age of tobacco
product purchasers. Respondent’s counsel asserts, among other things, that Hyde Park
Food Mart / Metro Market’s policy requires “every individual hired since December 2015
. . .to view the Compliance Training for Tobacco Retailers video, read the relevant
requirements and sign a document acknowledging the employee’s understanding of his or
her responsibilities regarding tobacco sales before being added to the work schedule.”
Respondent’s Final Brief at 3. While Hyde Park Food Mart / Metro Market may indeed
have training programs that attempt to eliminate the illegal sale of cigarettes or smokeless
tobacco to minors, these training programs have proven ineffective in Respondent’s
establishment. Because Respondent is a habitual violator of the FDA tobacco
regulations, I find that a 30-day NTSO is necessary.

VI. Conclusion

For these reasons, I impose a No-Tobacco-Sale Order against Respondent Mansour
Brothers Enterprises, Inc. d/b/a Hyde Park Food Mart / Metro Market, for a period of 30
consecutive calendar days. During this period of time, Respondent shall stop selling
cigarettes, cigarette tobacco, roll-your-own tobacco, smokeless tobacco, and covered
tobacco products regulated under the Federal Food, Drug, and Cosmetic Act. Pursuant to
21 CFR. § 17.11(b), this order becomes final and binding upon both parties after 30
days of the date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Alkram Grocery Mart LLC
d/b/a Snack Shop,

Respondent.

Docket No. T-17-4922
FDA No. FDA-2017-H-3816

Decision No. TB2535
Date: March 16, 2018
INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Alkram Grocery Mart LLC d/b/a Snack Shop, that alleges facts and
legal authority sufficient to justify the imposition of a civil money penalty of $559. CTP
began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent impermissibly sold cigarettes to
minors and failed to verify, by means of photo identification containing a date of birth,
that cigarette purchasers were 18 years of age or older, thereby violating the Federal
Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing
regulations, 21 C.F.R. pt. 1140. CTP seeks a civil money penalty of $559.

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 June 29, 2017, CTP served the
Complaint on Respondent Snack Shop by United Parcel Service. Respondent timely
answered CTP’s Complaint on July 31,2017. On August 18, 2017, I issued an
Acknowledgement and Pre-Hearing Order (APHO) that 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. APHO at § 12; 21 C.F.R. § 17.23(a). I warned that I may impose sanctions
if a party failed to comply with any order, including the APHO. APHO at § 16.

In accordance with the deadlines set forth in the APHO, CTP served Respondent with its
Request for Production of Documents on September 28, 2017. On November 3, 2017,
CTP filed a Motion to Compel Discovery asserting that Respondent had not responded to
its discovery request. Pursuant to 21 C.F.R. § 17.32(c), Respondent had 15 days in which
to respond to CTP’s motion. APHO at § 19. Respondent did not respond.

On November 29, 2018, I issued an Order to Compel Discovery granting CTP’s motion
and ordering Respondent to comply with CTP’s Request for Production of Documents by
December 8, 2017. I warned Respondent that:

If Respondent fails to comply, I will impose sanctions,
which may include striking Respondent's filings and
issuing an Initial Decision and Default Judgment finding
Respondent liable for the violations listed in the
Complaint and imposing a civil money penalty.
21 CFR. § 17.35.

(Emphasis in original.)

In my APHO, as amended by my November 1, 2017, and November 29, 2017, orders, I
required CTP to file its pre-hearing exchange by January 8, 2018, and Respondent to file
its pre-hearing exchange by January 29, 2018. CTP timely filed its exchange including a
brief and 19 proposed exhibits. Respondent did not file its exchange as required.

On February 5, 2018, I issued an Order to Show Cause, in which I required Respondent
to show cause for its failure to comply with my order and its failure to defend its case,
citing 21 C.F.R. § 17.35(a). I provided Respondent until February 20, 2018, to respond.
I warned Respondent that:

Failure to [comply] may result in sanctions, including striking
Respondent’s Answer and issuing an Initial Decision and
Default Judgment finding Respondent liable for the violations
listed in the Complaint and imposing the $559 civil money
penalty CTP seeks.

(Emphasis in original.)

To date, Respondent has not responded to my Order to Show Cause.! Indeed,
Respondent has been silent since its July 31,2017 Answer.

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 August 18,2017, APHO, as amended by my November 1, 2017,
and November 29, 2017, orders when it failed to file its pre-hearing exchange by
January 29, 2018; and

¢ Comply with my February 5, 2018, Order to Show Cause when it failed to show
cause for its failure to comply with my order and its failure to defend its case.

Respondent failed to comply with two judicial orders, despite 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 action, 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.

' All orders and guidance were mailed to Respondent at its address of record. However,
the US Postal Service returned the APHO and Order to Compel Discovery, noting
“VACANT.” To date, the US Postal Service has not returned the other guidance or
orders issued.
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 could result
in sanctions and I specified that those sanctions may include “striking Respondent’s
Answer and issuing an Initial Decision and Default Judgment finding Respondent liable
for the violations listed in the Complaint and imposing the $559 civil money penalty CTP
seeks.” (Emphasis in original.) I find that Respondent’s misconduct 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). Pursuant to 21 C.F.R. § 17.11(a), lam required
to “assume the facts alleged in the [C]omplaint to be true” and, if those facts establish
liability under the Act, issue a default judgment and impose a civil money penalty.
Accordingly, I must determine whether the allegations in the Complaint establish
violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Snack Shop, an establishment that sells tobacco products and is
located at 801 North Woodington Road, Baltimore, Maryland 21229.
Complaint §§ 7-8.

e During an inspection of Respondent’s establishment on October 20, 2016, at
approximately 2:48 PM, an FDA-commissioned inspector documented that “a
person younger than 18 years of age was able to purchase a package of Newport
Box 100s cigarettes ....” The inspector also documented that “the minor’s
identification was not verified before the sale ....” Complaint § 11.

e¢ On February 16,2017, CTP issued a Warning Letter to Respondent regarding the
inspector’s documented violations from October 20, 2016. The letter explained
that the documented violations constituted violations of regulations, and that the
named violations were not necessarily intended to be an exhaustive list of all
violations at the establishment. The Warning Letter went on to state that if
Respondent failed to correct the violations, regulatory action by the FDA or a civil
money penalty action could occur and that Respondent is responsible for
complying with the law. Complaint §§ 11-12.
e During a subsequent inspection of Respondent’s establishment on May 5, 2017, at
approximately 4:28 PM, an FDA-commissioned inspector documented that “a
person younger than 18 years of age was able to purchase a package of Newport
Box cigarettes ....” The inspector also documented that “the minor’s
identification was not verified before the sale ....” Complaint § 9.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 CFR. 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). The regulations prohibit the sale of cigarettes to any person younger
than 18 years of age. 21 C.F.R. § 1140.14(a)(1). The regulations also require retailers to
verify, by means of photo identification containing a purchaser’s date of birth, that no
cigarette purchasers are younger than 18 years of age. 21 C.F.R. § 1140.14(a)(2)(i).

Taking the above alleged facts as true, Respondent violated the prohibition against selling
cigarettes to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a)(1), on
October 20, 2016, and May 5, 2017. On those same dates, Respondent also violated the
requirement that retailers verify, by means of photo identification containing a
purchaser’s date of birth, that no cigarette purchasers are younger than 18 years of age.
21 CFR. § 1140.14(a)(2)(i). Therefore, Respondent’s actions constitute violations of
law that merit a civil money penalty.

CTP has requested a civil money penalty of $559, which is a permissible penalty under
the regulations. 21 C.F.R. § 17.2. Therefore, I find that a civil money penalty of $559 is
warranted and so order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


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

Center for Tobacco Products,
(FDA No. FDA-2017-H-0690)

Complainant
v.

South Preston Jiffy Mart LLC
d/b/a South Preston Jiffy Mart,

Respondent.
Docket No. T-17-2088
Decision No. TB2513
Date: March 14, 2018
INITIAL DECISION

The Center for Tobacco Products (CTP) seeks to impose a civil money penalty (CMP)
against Respondent, South Preston Jiffy Mart LLC d/b/a South Preston Jiffy Mart, 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. CTP alleges that Respondent
violated the Act by selling cigarettes to a minor, and by failing to verify the purchasers
were 18 years of age or older. For the reasons discussed below, I find in favor of CTP
and impose a $275 CMP against Respondent.

PROCEDURAL HISTORY

CTP began this matter by serving an administrative complaint seeking a $275 civil
money penalty on Respondent, South Preston Jiffy Mart, at 2073 North Mountaineer
Highway, Newburg, West Virginia 26410, and by filing a copy of the complaint with the
Food and Drug Administration’s (FDA) Division of Dockets Management. On

March 29, 2017, Respondent timely answered CTP’s complaint. On March 31, 2017, I
issued an Acknowledgment and Pre-Hearing Order (APHO) that set out the deadlines for
the parties’ submissions in this case.
On April 25, 2017, Respondent requested an unredacted copy of the photo identification
used by the undercover minor CTP utilized to conduct the July 30, 2016 inspection
described in CTP’s complaint. CTP sought a protective order, to which Respondent
objected. After considering the parties’ arguments, I issued a limited protective order
directing CTP to produce a redacted copy of the identification used by the minor during
the July 30, 2016 inspection.

On June 19, 2017, CTP filed its pre-hearing exchange which included its informal brief, a
list of proposed witnesses and exhibits, and 34 marked exhibits. CTP’s exhibits included
the declarations of two witnesses.' Respondent filed an informal brief, but did not submit
any exhibits. Respondent also filed a letter and supporting documents responsive to
CTP’s discovery request.

On August 23, 2017, I held a pre-hearing conference in this case. I explained the limited
purpose of a hearing under the applicable regulations: to allow for cross- and re-direct
examination of any witnesses who had provided sworn testimony in pre-hearing
exchanges, where the opposing party elected to cross-examine the witness. During the
conference, Respondent, through its principal, Paul Frederick, conceded the violation that
CTP alleged occurred on January 16, 2016. However, Mr. Frederick disputed the
violation that CTP alleged took place on July 30, 2016. Mr. Frederick also indicated his
intent to cross-examine both CTP witnesses, Laurie Sternberg and Inspector Dayton
Whitt.

Accordingly, I held a hearing in this case on September 27, 2017 by telephone to address
the July 30, 2016, violation alleged by CTP. During the course of the hearing, I admitted
CTP’s exhibits into evidence. Hearing Transcript (Tr.) at 9. Respondent waived cross-
examination of CTP witness Laurie Sternberg, thus stipulating to her testimony, id. at 11,
and conducted cross-examination of Inspector Whitt, who I duly swore in. Jd. at 19-20,
23-25.

The hearing transcript became available to the parties on October 19, 2017, and I allowed
them until December 5, 2017 to submit post-hearing briefs. I also afforded the parties an
opportunity to file response briefs by January 9, 2018. On December 5, 2017, CTP
electronically forwarded Respondent’s post-hearing brief dated November 28, 2017, to
my office. CTP did not file a post-hearing brief. Neither party submitted a response
brief. The record is therefore now closed, and the matter ripe for adjudication.
APPLICABLE REGULATIONS AND GUIDELINES

' CTP subsequently filed a Motion to Amend the Declaration of Laurie Sternberg, along with an
amended declaration, to correct a typographical error in the original submission. At the September 27,
2017 hearing, I granted CTP’s motion to amend the declaration, and struck CTP Exhibit (Ex.) 3 (Docket
No. 15d) from the record. See Hearing Tr. at 8. Ms. Sternberg’s amended declaration, also identified as
CTP Ex. 3, is found at Docket No. 23a.
CTP determined to impose a CMP 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). The Food and Drug Administration and its subordinate 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. § 333(£)(9). The sale of tobacco products to
an individual who is under the age of 18 and the failure to verify the photographic
identification of an individual who is not over the age of 26 are violations of
implementing regulations. 21 C.F.R. §§ 1140.14(a)(1), (a)(2).7

ANALYSIS

I. Preponderance of the evidence leads me to conclude Respondent committed
two violations of the Act as alleged by CTP.

A. The January 16, 2016 Violations.

Respondent concedes the violations alleged to have taken place January 16, 2016.
Respondent’s Inf. Br. at 9; Hearing Tr. at 7. Therefore, I find that Respondent: (1) sold
cigarettes to a minor on January 16, 2016; and (2) failed to verify that the cigarette
purchaser was of sufficient age, in violation of 21 C.F.R. § 1140.14(a)(1) and 21 C.F.R.
§ 1140.14(a)(2)(i).

B. The July 30, 2016 Violation.

Respondent maintains that it did not sell cigarettes to a minor during the July 30, 2016
inspection. Answer at 6; Respondent’s Inf. Br. at 9. CTP alleged it sold a package of
Marlboro cigarettes to a minor on that date at approximately 9:32 a.m. Complaint at { 8.
Respondent asserted that the clerk on duty during the July 30, 2016 inspection “clearly
can be seen, on film, checking month, day and year, not once, but twice, to the Alcohol
Compliance Calendar, which is updated daily.” Answer at 6.

CTP’s case against Respondent relies on the declaration of Inspector Dayton Whitt, who
with the assistance of an undercover minor (Minor A), conducted a follow-up compliance
check inspection at South Preston Jiffy Mart, on July 30, 2016 that included an attempt
by Minor A to purchase cigarettes. Complainant’s Inf. Br. at 7; CTP Ex. 4 (Whitt
Declaration). At the time of the inspection, Inspector Whitt was a commissioned officer
in FDA’s compliance check program. CTP Ex. 4 at 1. His duties include conducting
undercover inspections to assess retailers’ compliance with the age and photographic

On August 8, 2016, the citations to certain tobacco violations changed. See
https://federalregister.gov/a/2016-10685.

identification requirements relating to the sale of tobacco. /d. at 1-2. They also included
recruitment, hiring, and training of the minors used to make purchases during undercover
inspections. Jd. at 2.

Inspector Whitt declared that he conducted an inspection of Respondent’s establishment,
accompanied by a Minor A, on July 30, 2016. CTP Ex. 4 at 4. Inspector Whitt stated
that prior to initiating the inspection, he confirmed Minor A’s possession of her
photographic identification, and that she did not possess any tobacco products. Jd. The
inspector then entered Respondent’s establishment, followed by Minor A. /d. Inspector
Whitt asserted that he obtained an unobstructed view of the sales counter and directly
observed Minor A purchasing a package of cigarettes from Respondent’s clerk. Id.
Inspector Whitt noted that the sales clerk did check Minor A’s identification but did not
provide a receipt after the sale. Jd.

Beyond Inspector Whitt’s declaration, CTP also provided evidence corroborating his
testimony, including: photographs of the pack of cigarettes Respondent unlawfully sold
cigarettes to Minor A (CTP Exs. 24-28); a copy of the Compliance Check Inspection
Notice (CTP Ex. 32); Inspector Whitt’s Narrative Report of the undercover inspection
(CTP Ex. 22); the TIMS Form (CTP Ex. 23); and a redacted copy of the Minor A’s
identification establishing her age at the time of the sale (CTP Ex. 5).

Respondent’s principal, Mr. Frederick, denied the events resulting in the alleged
violation, and asserted Inspector Whitt’s testimony is simply false. Respondent’s Post-
hearing Br. at 1-2. However he has provided no proof to corroborate that claim, but
instead relies on inconsistencies he attempted to elicit during the September 27, 2017
hearing. Specifically, he established that Inspector Whitt, in memorializing a subsequent
inspection that took place on August 4, 2016, mistakenly indicated the date of the
inspection to be “July 4, 2016” on the form which he used to record the event:

Q: Okay. Mr. Whitt, you said you [were] here on this paper on July 4". Is
that true?

A: That is an incorrect date, yes.

Q: Thank you. Have you misstated other things in the past?

A: You need to restrict that question to a time frame.

Q: During this case at any time.

A: No.

Hearing Tr. at 23.

But this scrivener’s error, made by the inspector concerning an inspection that occurred
after the violations at issue here, is largely irrelevant and fails to undermine the
inspector’s credibility. Respondent did not establish any errors made by Inspector Whitt
during the inspection at issue in this case.
Similarly, Respondent failed to establish any inconsistencies in Inspector Whitt’s report
based on the number of people that could allegedly fit in his vehicle, or that the inspector
colluded with Respondent’s employee who made the sale. Hearing Tr. at 23-25. By
contrast, Inspector Whitt established that aside from his commissioned work for the FDA,
he had a combined 27 years of law enforcement employment. While not dispositive, his
long years of employment enforcing the law cannot be dismissed in the light of a
conspiracy theory with no corroborating evidence. In sum, I find no basis in
Respondent’s cross-examination to find Inspector Whitt less than credible.

Respondent’s primary basis for questioning Inspector Whitt’s version of events is the
video footage it submitted showed that the employee who sold Minor A cigarettes did in
fact check her identification prior to the sale. See Docket at 13d (Resp.’s Ex. 2), 13e
(video), 13f (video), 13g (video), 13h (video). Review of the four clips, specifically
Docket 13e at 00:00-00:26, does in fact show a sales clerk checking the identification of a
customer prior to the sale of a package of cigarettes. However, I note that there are no
date or time markers to indicate when this video was actually taken. During the hearing,
I provided an additional opportunity for Respondent to provide date- and time-stamped
version of these videos. Hearing Tr. at 26-27. Mr. Frederick indicated he did not possess
them. /d. Lacking such basic authentication, it is difficult to conclude the videos
provided by Respondent are in fact those pertaining to the transaction that forms the basis
of the alleged violation here.

However, even assuming the video in question is accurate and pertains to the transaction
at issue, Respondent’s claim is not actually inconsistent with Inspector Whitt’s report.
Concerning the July 30, 2016 inspection, Inspector Whitt explicitly stated “. . . | observed
Minor A purchase a package of cigarettes from an employee at the establishment. I also
observed that the clerk did check the minor’s identification.” CTP Ex. 4 at 4 (emphasis
added).

Respondent appears to conclude that the only inference I can draw from this fact is that
Minor A must have provided a false identification to its employee; Mr. Frederick went so
far as to assert that seconds before Inspector Whitt and Minor A entered, his manager had
instructed the store clerk to make sure and check Minor A’s identification. Respondent’s
Post-Hearing Br. at 1.

But even if this were true, I need not conclude Inspector Whitt colluded with
Respondent’s employee (with no apparent motive), or that he provided Minor A false
identification prior to the inspection. The other more reasonable conclusion I can reach is
that Respondent’s employee simply made an error of calculation when she examined
Minor A’s identification and determined she was over 18. Mr. Frederick indeed seems to
allow for this conclusion; he first states that if his clerk made a mistake, it was without
criminal intent. /d. at 2. He then lays blame for such a mistake on his employee, arguing
that she should be fined, not Respondent. /d. But this argument is without merit; as the
Board has observed, employers are clearly liable for the actions of their employees who
act in the course of their employment. TOH, Inc. d/b/a Ridgeville Service Center, DAB
2668 (Dec. 10, 2015) at 16-17. The Board noted that the mere fact employees are
instructed to not sell tobacco to minors is insufficient where employees plainly act in the
course of their employment, and are held out to the public as cashiers. Jd. at 17. Liability
was intended to motivate the retailer, not the individual sales clerk, to take measures to
prevent illegal sales and ensure compliance. Jd. at 18, citing 21 C.F.R. § 1140.14.

I find facts sufficient to conclude Respondent’s employee who sold Minor A cigarettes
was held out to the public as a cashier, and acted in the normal course of employment
when she improperly sold cigarettes to Minor A. I also find, based on the preponderance
of the evidence before me, that Respondent’s clerk did check Minor A’s identification
prior to the sale, but mistakenly concluded she was over 18.

Based on the record as a whole, I conclude that CTP has established by a preponderance
of the evidence that Respondent sold cigarettes to Minor A on July 30, 2016, in violation
of 21 C.F.R. § 1140.14(a)(1).

Therefore, I find that CTP has met its burden to establish Respondent South Preston Jiffy
Mart’s liability under the Act for two violations* within a 12-month period.

Il. Civil Money Penalty

Pursuant to 21 U.S.C. § 333(f)(9), Respondent South Preston Jiffy Mart LLC d/b/a South
Preston Jiffy Mart is liable for a civil money penalty not to exceed the amounts listed in
FDA’s civil money penalty regulations at 21 C.F.R. § 17.2. In its complaint, CTP sought
to impose the maximum penalty amount, $275, against Respondent for two violations of
the Act and its implementing regulations within a 12-month period. Complaint at { 1.

As discussed above, I have found that Respondent committed two violations of the Act
and its implementing regulations within a 12-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(£)(5)(B).

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

> Two violations were documented on January 16, 2016 and one on July 30, 2016. In accordance with
customary practice, CTP counted the violations at the initial inspection as a single violation, and all
subsequent violations as separate individual violations.
Respondent committed three violations of selling cigarettes to minors in a twelve-month
period, though it has only been held liable for two of those violations. The violations at
issue involve sales of tobacco to minors and are thus serious in nature. The relatively low
civil money penalty amount sought by CTP reflects the first-time nature of these
violations.

B. Respondent’s Ability to Pay and Effect on Ability to Do Business

Respondent has not presented any evidence that it does not have the ability to pay the
$275 penalty sought by CTP.

C. History of Prior Violations

The current action is the first civil money penalty action brought against Respondent for
violations of the Act and its implementing regulations. As noted above, Respondent has
twice violated the prohibition against selling cigarettes to persons younger than 18 years
of age, and failing to verify the age of a person purchasing cigarettes by means of
photographic identification containing the bearer’s date of birth. 21 C.F.R.

§§ 1140.14(a)(1); 1140.14(a)(2)(i).

D. Degree of Culpability

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

E. Additional Mitigating Factors

Respondent has asserted it provided training to its employees regarding sale of tobacco to
minors, and that the employee who made the sale at issue here did so mistakenly.
However, the fact that Respondent did in fact attempt to check identification for the
minor prior to the sale is not in itself a mitigating factor, since Respondent through its
employee failed to actually prevent the sale. Moreover, CTP’s proposed penalty takes
into account the fact that Respondent attempted to check identification during the second
inspection, and is based on only two violations, not the three it proved. Finally,
Respondent made no effort to take responsibility for the violation, instead blaming its
employee and urging me to fine that individual directly. And rather than make
assurances as to reinforced training or other procedures that could promote compliance,
Respondent simply notes receipt of a compliance calendar and hopes it will make a
difference. Respondent’s Post-hearing Br. at 2. Accordingly, I have no basis in the
record before me to find mitigating factors that would allow me to reduce the penalty
requested by CTP, which I find proportional and appropriate in this case.
F. Penalty

For the foregoing reasons, I find the $275 penalty sought by CTP to be appropriate and

impose such penal

ty against Respondent. See 21 U.S.C. §§ 333(£)(5)(B), (f)(9).

CONCLUSION

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $275 against

Respondent, Sout
violations of the F

Preston Jiffy Mart LLC d/b/a South Preston Jiffy Mart, for two
ederal 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 12-month period. Pursuant

to 21 C.F.R. § 17.

11(b), this order becomes final and binding upon both parties after 30

days of the date o

its issuance.

/s/
Bill Thomas
Administrative Law Judge


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

Center for Tobacco Products,
(FDA No. FDA-2017-H-3572)

Complainant
v.

Action Convenience Service Inc.
d/b/a Marathon 113,

Respondent.
Docket No. T-17-4701
Decision No. TB2472

Date: March 1, 2018

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) seeks to impose a civil money penalty against
Respondent, Action Convenience Service Inc. d/b/a Marathon 113, located at 1930 Opa
Locka Boulevard, Opa Locka, Florida 33054, for five violations of the Federal Food,
Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations,
21 CFR. pt. 1140, within a 36-month period. Specifically, CTP alleges that Marathon
113 violated the Act by impermissibly selling cigarettes and/or smokeless tobacco to
minors, and failing to verify, by means of photographic identification containing a date of
birth, that the purchasers were 18 years of age or older. CTP seeks to impose a $5,591
civil money penalty against Respondent Marathon 113. During the hearing process,
Respondent failed to comply with judicial directions and failed to appear for a pre-
hearing conference. I, therefore, strike Respondent’s filings and issue this decision of
default judgment.

Procedural History

CTP began this matter on June 15, 2017, by serving an administrative complaint, seeking
a $5,591 civil money penalty, on Respondent Action Convenience Service Inc. d/b/a
Marathon 113, at 1930 Opa Locka Boulevard, Opa Locka, Florida 33054, and by filing a
copy of the Complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. After being properly served with CTP’s Complaint in this matter,
Respondent filed a timely Answer on June 27, 2017. I issued an Acknowledgment and
Prehearing Order (APHO) on July 3, 2017, that set deadlines for the parties’ submissions
including the discovery deadlines.

On September 18, 2017, CTP filed a Motion to Extend Deadlines. In its Motion, CTP
indicated that Respondent is located in Opa Locka, Florida, an area affected by Hurricane
Irma. CTP’s Motion also stated that it sent Respondent a Request for Production of
Documents on July 28, 2017 but, due to the hurricane, had been unable to contact
Respondent regarding its request.!

Before I ruled on the Motion, CTP filed its pre-hearing exchange on September 19, 2017.
On September 20, 2017, I issued an Order granting the Motion and extending the parties’
pre-hearing deadlines. Respondent did not file a pre-hearing exchange.

On December 5, 2017, I issued an Order scheduling a pre-hearing telephone conference.
The pre-hearing conference was scheduled for December 12, 2017, at 10:00 AM Eastern
Time. The parties were provided with a call in telephone number and passcode.
However, Respondent did not appear at the pre-hearing conference call or otherwise
provide any response to the Order that scheduled the pre-hearing conference.

On December 20, 2017, I issued an Order giving Respondent until January 4, 2018 to
show cause for its failure to appear at the pre-hearing conference. Respondent was
informed that failure to respond to the Order could result in sanctions including the
issuance of a default judgment. As of the date of this Decision, a response to my
December 20, 2017 Order has not been received.

Striking Respondent’s Filings
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.

' Respondent filed a single page Store Issues and Appeal Issues document on August 10,
2017 in response to CTP’s Request for Production of Documents.
Here, Respondent failed to appear at the December 12, 2017 pre-hearing conference call
and did not comply with my December 20, 2017 Order. Respondent has not participated
in the hearing process since it filed its August 10, 2017 Store Training and Appeal Issues
document. Respondent has failed to comply with orders and procedures governing this
proceeding, and failed to defend the action. 21 C.F.R. § 17.35(a). Respondent’s
misconduct has interfered with the speedy, orderly, and fair conduct of this proceeding.
Id. Therefore, 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 its June 27, 2017
Answer and its Store Issues and Appeal Issues document, and issuing a decision without
further proceeding. 21 C.F.R. §§ 17.35(a), 17.11(a).

Default Decision

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

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

e On January 26, 2017, CTP initiated a previous civil money penalty action, CRD
Docket Number T-17-1673, FDA Docket Number FDA-2017-H-0244, against
Respondent for three? violations of 21 C.F.R. pt. 1140. CTP alleged those
violations to have occurred at Respondent’s business establishment, 1930 Opa
Locka Boulevard, Opa Locka, Florida 33054, on January 13, 2016, and July 6,
2016;

e The previous action concluded when Respondent admitted the allegations
contained in the Complaint issued by CTP, and paid the agreed upon monetary
penalty in settlement of that claim. Further, “Respondent expressly waived its
right to contest such violations in subsequent actions”;

2 Two violations were documented on January 13,2016, and two on July 6, 2016. In
accordance with customary practice, CTP counted the violations at the initial inspection
as a single violation, and all subsequent violations as separate individual violations.
e At approximately 8:45 PM on April 10, 2017, at Respondent’s business
establishment, 1930 Opa Locka Boulevard, Opa Locka, Florida 33054, an
FDA-commissioned inspector documented Respondent’s staff selling a package of
Newport 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 Marathon 113’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 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.

A $5,591 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $5,591 against Respondent
Action Convenience Service Inc. d/b/a Marathon 113. 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

3 These conclusions are supported by an unrebutted written declaration of the inspector.
CTP Ex. 4. The inspector testified that he maintained an unobstructed view of the sales
counter while seated in his car. Id. at 3. The inspector also testified that he observed the
minor purchase a package of cigarettes and did not present any identification to the
employee at the establishment. Id. Further, the inspector testified that the employee did
not provide the minor with a receipt. Id.

+ 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-5286)

Complainant,
v.

Fakin Jacks LLC
d/b/a Holy Smoke,

Respondent.
Docket No. T-17-6189
Decision No. TB2476

Date: March 1, 2018

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Fakin Jacks LLC d/b/a Holy Smoke, that alleges that Holy Smoke
impermissibly sold cigarettes or smokeless tobacco products 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 seg., and its implementing regulations, 21 C.F.R. pt. 1140.
The complaint likewise alleges that Respondent Holy Smoke was previously found liable
for four violations of regulations found at 21 C.F.R. PT. 1140 and, therefore, CTP seeks
to impose an $11,182 civil money penalty against Respondent Holy Smoke. Respondent
filed an Answer to the Complaint, but has failed to comply with multiple judicial
directions and orders during the hearing process. I therefore strike Respondent’s answer
and issue this decision of default judgment.
I. Procedural History

On August 31, 2017, CTP began this matter by serving a Complaint on Respondent Holy
Smoke, seeking an $11,182 civil money penalty. On October 1, 2017, Respondent timely
filed its answer to CTP’s Complaint in the DAB E-File system. On October 17, 2017, I
issued an Acknowledgment and Pre-Hearing Order (APHO). The APHO generally
explained to the parties what they must do to present evidence and arguments in this case.
Specifically, it explained that the parties may request copies of documents relevant to this
case and that the requesting party must serve the request for documents no later than
November 20, 2017. As indicated in the APHO, a party who received such a request was
required to provide the requested documents no later than 30 days after the request had
been made. CTP served a Request for Production of Documents (RFP) on Respondent
on October 20, 2017.

On November 28, 2017, pursuant to 21 C.F.R. § 17.23(a), CTP filed a Motion to Compel
Discovery indicating that CTP had not received a response to its request for production of
documents. On November 28, 2017, CTP also filed a Motion to Extend Deadlines. A
December 4, 2017 letter issued by my direction allowed Respondent until December 18,
2017 to file a response to CTP’s motion to compel discovery. On December 4, 2017, I
also issued an Order that extended the parties’ pre-hearing exchange deadlines.

On December 22, 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. In that Order, I ordered Respondent to comply with CTP’s RFP by January
22, 2018. I warned that “[fJailure 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.” The December 22, 2017
Order also extended the parties’ pre-hearing exchange deadlines.

On January 23, 2018, CTP filed a Status Report and Motion to Impose Sanctions advising
me that Respondent had not complied with my December 22, 2017 Order and asking me
to strike the Respondent’s answer and issue a default judgment in this case. On January
23, 2018, CTP also filed a second motion to extend the pre-hearing exchange deadlines.
Ina January 25, 2018 letter issued by my direction, Respondent was given until February
7, 2018 to file a response to CTP’s motion.! The January 25, 2018 letter also extended
the parties’ pre-hearing exchange deadlines. To date, Respondent has not filed a
response to CTP’s Motion to Impose Sanctions.

' A February 5, 2018 letter further allowed Respondent until February 9, 2018 to respond
to CTP’s motion.
Il. Striking Respondent’s Answer

Pursuant to 21 C.F.R. § 17.35, 1am granting CTP’s Motion to Impose Sanctions, and
striking Respondent’s answer for failing to comply with multiple judicial orders and
directions. Specifically, Respondent has not complied with: (1) the deadline set forth in
the Acknowledgment and Pre-Hearing Order for responding to any discovery request and
(2) the order granting CTP’s motion to compel discovery issued on December 22, 2017.
Additionally, Respondent did not respond to the letter issued by my direction on February
5, 2018 soliciting a response to CTP’s motion to impose sanctions. The harshness of the
sanctions I impose upon either party must relate to the nature and severity of the
misconduct or failure to comply, and I find here that Respondent’s repeated failure to
comply with my orders and directions is sufficiently egregious to warrant striking the
answer and issuing a decision without further proceedings. See 21 C.F.R. § 17.35(b).

Ill. Default Decision

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

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

e¢ On November 17, 2016, CTP initiated a previous civil money penalty action, CRD
Docket Number T-17-416, FDA Docket Number FDA-2015-H-4751 (see also,
CRD Docket Number C-15-933, FDA Docket Number FDA-2015-H-0127),
against Respondent for four violations of 21 C.F.R. pt. 1140. CTP alleged those
violations to have occurred at Respondent’s business establishment, 1556 East
Olive Way, Seattle, Washington 98102, on May 2, 2014, August 21, 2014, and
September 2, 2015. Complaint § 9.

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.” Complaint § 10.

e At approximately 12:19 PM on May 30, 2017, at Respondent’s business
establishment, 1556 East Olive Way, Seattle, Washington 98102, an
FDA-commissioned inspector documented Respondent’s staff selling a package of
Camel Blue 99’s 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. Complaint § 7.

These facts establish Respondent Holy Smoke’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 C.F.R. § 1140.14(a)(1)’, no retailer may
sell cigarettes and/or smokeless tobacco to any person younger than 18 years of age.
Under 21 C.F.R. § 1140.14(a)(2)(), retailers must verify, by means of photographic
identification containing a purchaser’s date of birth, that no cigarette and/or smokeless
tobacco purchasers are younger than 18 years of age.

Under 21 C.F.R. § 17.2, an $11,182 civil money penalty is permissible for six violations
of the regulations found at 21 C.F.R. pt. 1140.

ORDER

For these reasons, I enter default judgment in the amount of $11,182 against Respondent
Fakin Jacks LLC d/b/a Holy Smoke. 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

> 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-3321)

Complainant
v.

Shih Noble
d/b/a 7 Eleven Store 32409A,

Respondent.
Docket No. T-17-4467
Decision No. TB2464

Date: February 22, 2018

INITIAL DECISION

The Center for Tobacco Products (CTP) seeks to impose a civil money penalty against
Respondent, Shih Noble d/b/a 7 Eleven Store 32409A, located at 2980 South Highway
AIA, Melbourne Beach, Florida 32951, for five 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 thirty-six month period. Specifically, CTP alleges that 7 Eleven Store
32409A violated the Act by impermissibly selling cigarettes and smokeless tobacco to
minors, and failing to verify, by means of photographic identification containing a date of
birth, that the purchasers were 18 years of age or older.

Procedural History

CTP began this matter by serving an administrative complaint seeking a $5,591 civil
money penalty on Respondent 7 Eleven Store 32409A, at 2980 South Highway AlA,
Melbourne Beach, Florida 32951, and by filing a copy of the Complaint with the Food
and Drug Administration’s (FDA) Division of Dockets Management. After being
properly served with CTP’s Complaint in this matter, Respondent filed a timely Answer
on July 3, 2017. The answer was submitted by Respondent’s counsel, who had filed a
Notice of Appearance three days earlier, on June 30, 2017. I issued an Acknowledgment
and Pre-hearing Order (APHO) on July 6, 2017. I explained that the parties may request
copies of documents relevant to this case and that the requesting party must serve the
request for documents no later than August 14, 2017. The APHO also established a
deadline of September 25, 2017 for all pre-hearing exchanges from CTP to Respondent,
and a deadline of October 16, 2017 for all pre-hearing exchanges from Respondent to
CTP. I warned the parties that failure to comply with my orders, including the APHO,
could subject them to sanctions. APHO § 16, citing 21 C.F.R. § 17.35.

On September 21, 2017, CTP filed a Motion to Extend Deadlines. In its Motion, CTP
indicated that Respondent is located in Melbourne Beach, Florida, and counsel for
Respondent is located in St. Petersburg, Florida, both areas that were affected by
Hurricane Irma. CTP also indicated that it could not file the Motion as unopposed
because they were unable to reach Respondent’s counsel. Accordingly, on September 22,
2017, I issued an Order granting the Motion, extending the parties’ pre-hearing deadlines.

On October 13, 2017, CTP filed an Unopposed Motion to Extend Deadlines and Notice
of Pending Settlement. The October 13, 2017 Motion indicated that the parties had
reached an agreement to settle the matter and requested that I extend the deadlines for the
parties’ pre-hearing exchanges. On October 16, 2017, I issued an Order granting the
Motion, again extending the parties’ pre-hearing deadlines.

CTP filed its pre-hearing exchange on November 22, 2017. CTP’s pre-hearing exchange
included an Informal Brief of Complainant, a list of proposed witnesses and exhibits, and
fifteen (15) numbered exhibits. CTP’s exhibits included the declarations of two
witnesses. Respondent did not file a pre-hearing exchange or offer any witnesses.

On December 28, 2017, I held a telephonic pre-hearing conference in this case. Both
parties were present on the call. I explained to the parties that the sole purpose of an
administrative hearing under the applicable regulations is to afford the parties an
opportunity for cross-examination of exchange witnesses.' Respondent indicated that it
would like to cross-examine one of CTP’s witnesses, Mr. Castiello, the FDA designated
inspector for the State of Florida who conducted the disputed inspection at Respondent’s
place of business on February 27, 2017 in this matter. Subsequently, on December 29,
2017, I issued an order scheduling a telephone hearing in this matter for January 22, 2018
at 11:00 a.m.

On January 22, 2018, at 12:50 a.m., Respondent’s counsel submitted an email stating that
he had a family medical emergency and would be unable to attend the hearing that

' Respondent’s counsel also indicated that he was unsure what happened to the
settlement agreement that the parties had executed prior to CTP’s October 13, 2017
Notice of Pending Settlement.
morning. Respondent’s counsel did not submit a formal Motion to Continue, nor did he
provide evidence of the family medical emergency. On that same date, at 11:00 a.m.,
Respondent failed to appear.

On February 2, 2018, I issued an Order requiring Respondent to show cause for its failure
to appear at the January 22, 2018 hearing. In my February 2, 2018 Order, I required
Respondent’s counsel to “provide a detailed explanation for his non-appearance at the
hearing and provide documentation of the family medical emergency.” I warned counsel
that failure to show good cause may result in sanctions, including the issuance of an
Initial Decision finding Respondent liable for the violations listed in the Compliant and
imposing a civil money penalty. On February 9, 2018, Respondent submitted a Response
to Order to Show Cause. In the response, Respondent’s counsel generally described the
alleged family emergency, but did not submit any documentation as was specifically
required by my February 2, 2018 Order.

Decision on the Record

Pursuant to 21 C.F.R. § 17.35(e), if a party fails to defend an action after service of a
notice of hearing, I may impose sanctions and issue an initial decision imposing penalties
and assessments. Here, Respondent was served with notice regarding the January 22,
2018 hearing by order dated December 29, 2017. See 21 C.F.R. § 17.35(e).

Despite that notice, Respondent failed to appear at the scheduled hearing. In addition,
Respondent did not file a hearing exchange or any other documentation since it filed its
July 6, 2017 Answer. At the pre-hearing conference held on December 12, 2017,
Respondent’s counsel stated that he was not representing Respondent at the time a
settlement agreement was reached with CTP and thus was not sure why payment of the
agreed-upon penalty was not made.

The documentation of record establishes that counsel filed an entry of appearance in this
case on June 30, 2017, and filed the answer on Respondent’s behalf on July 3, 2017. The
APHO was sent to counsel on July 6, 2017, as was CTP’s status report dated October 13,
2017 regarding the settlement agreement reached by the parties. These documents belie
counsel’s assertion that he did not represent Respondent at the time settlement
discussions occurred, and the joint status report was issued. In fact, the record clearly
shows that counsel had already been the sole representative for Respondent for more than
three months when these events transpired, and that he actively participated in the
settlement process. He, and he alone, is fully accountable for all actions taken or not
taken in this case since he filed a Notice of Appearance on June 30, 2017 and answer on
July 3, 2017. 21 CFR. § 17.35(a)(3).

Although Respondent’s counsel submitted a Response to the Order to Show Cause, the
response did not include documentation as required by my February 22, 2018 Order.
Counsel’s failure to produce the required documentation in support of his stated reasons
for being unable to appear at the scheduled hearing reflects a repeated inability to comply
with judicial orders, and a failure to defend this action. Furthermore, his previous
attempt to disclaim any knowledge of or participation in the earlier settlement discussions
in the face of documentary evidence to the contrary, casts considerable doubt on the
veracity of his assertions in general. Accordingly, I find that Respondent has not
established good cause for failure to appear at the January 22, 2018 hearing. 21 C.F.R.

§ 17.35(a)(2), (e). The conduct of Respondent’s counsel in connection with the
proceedings in this case since the Answer was filed warrants severe sanctions. 21 C.F.R.
§ 17.35(a)(2), (a)(3), (e). I find that Respondent has lost the right to a hearing to cross-
examine CTP’s witness as he chose to do at the pre-hearing conference. 21 C.F.R.

§ 17.35(b). Therefore, I will decide this case on the basis of the written record. 21
CFR. § 17.35(e).

Analysis
I. Violations

In its Complaint, CTP alleges that Respondent 7 Eleven Store 32409A committed five
violations of the Act and its implementing regulations within a thirty-six month period.
CTP makes the following allegations:

e¢ On December 13, 2016, CTP initiated a previous civil money penalty action, CRD
Docket Number T-17-1135, FDA Docket Number FDA-2016-H-4256, against
Respondent for three” violations of 21 C.F.R. pt. 1140 within a twenty-four month
period. CTP alleged those violations to have occurred at Respondent’s business
establishment, 2980 South Highway A1A, Melbourne Beach, Florida 32951, on
February 28, 2016 and May 27, 2016;

e The previous action concluded when Respondent admitted the allegations
contained in the Complaint issued by CTP, and agreed to pay a monetary penalty
in settlement of that claim. Further, “Respondent expressly waived its right to
contest such violations in subsequent actions”;

e At approximately 7:47 p.m. on February 27, 2017, at Respondent’s business
establishment, 2980 South Highway A1A, Melbourne Beach, Florida 32951, an

2 Two violations were documented on February 28, 2016 (sale of a tobacco product to a
minor and failure to verify identification), and two on May 27, 2016 (sale of smokeless
tobacco to a minor and failure to verify 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.
FDA-commissioned inspector documented Respondent’s staff selling a package of
Newport 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.

Complaint; Informal Brief of Complainant. CTP supports its allegations with a number
of evidentiary exhibits; of particular relevance is the written declaration of the FDA-
commissioned inspector who conducted the February 27, 2017 inspection. CTP Ex. 8;
see CTP Exs. 9, 10, 12; 21 C.F.R. § 17.33(b).

In its Answer, Respondent 7 Eleven Store 32409A denied CTP’s allegations. Respondent
did not provide any evidence to refute CTP’s allegations, nor did Respondent provide any
evidence to support any defenses.

In order to prevail, Complainant must prove Respondent’s liability by a preponderance of
the evidence. See 21 C.F.R. § 17.33(b). As such, I as the factfinder must assess whether,
on the whole, I am convinced that the greater weight of the evidence supports
Complainant’s account. See Sec'y of Labor v. Keystone Coal Min. Corp.,151 F.3d 1096,
1103 (D.C. Cir. 1998). Since Respondent provided no evidence to refute any of the
allegations, I have only Respondent’s Answer to consider. Respondent’s Answer denied
the allegations in paragraphs 9, 10, 11, and 12 of the Complaint. The Answer did not
contain any evidence or explanation as to why the allegations were denied.

Therefore, I find that the facts as set forth in the Complaint establish Respondent 7
Eleven Store 32409A’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),3 no retailer may sell cigarettes or smokeless
tobacco to any person younger than 18 years of age. Under 21 C.F.R. § 1140.14(a)(2)(i),
retailers must verify, by means of photographic identification containing a purchaser’s
date of birth, that no purchasers are younger than 18 years of age.

Il. Civil Money Penalty

Pursuant to 21 U.S.C. § 333(f)(9), Respondent 7 Eleven Store 32409A is liable for a civil
money penalty not to exceed the amounts listed in FDA’s civil money penalty regulations

3 On August 8, 2016, the citations to certain tobacco violations changed. For more
information see: https://federalregister.gov/a/2016-10685.
at 21 C.F.R. § 17.2. In its Complaint, CTP sought to impose the maximum penalty
amount, $5,591, against Respondent for five violations of the Act and its implementing
regulations within a thirty-six month period. Complaint J 1. In its Answer, Respondent
did not specify if it believed the civil money penalty CTP requested is too high.

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. § 303(f)(5)(B).

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

Respondent 7 Eleven Store 32409A has failed to comply with the Act and its
implementing regulations on three separate occasions, on February 28, 2016, May 27,
2016, and February 27, 2017. I found that Respondent committed a violation of selling
cigarettes to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a)(1), anda
violation for failing to verify, by means of photo identification containing a purchaser’s
date of birth, that no cigarette purchasers are younger than 18 years of age, 21 C.F.R.

§ 1140.14(a)(2)(i). I also found that Respondent had admitted to three previous
violations of the Act and its implementing regulations. Thus, Respondent has been
charged by CTP with five violations in accordance with its customary practice to charge
only one violation for the initial inspection, even though the applicable regulations would
permit charging for more than one. 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.

il. Respondent’s Ability to Pay

CTP is seeking a $5,591 civil money penalty against Respondent 7 Eleven Store 32409A.
Respondent has not provided any argument or evidence that it lacks the ability to pay the
$5,591 civil money penalty.

iii. Effect on Ability to do Business
CTP is seeking a $5,591 civil money penalty against Respondent 7 Eleven Store 32409A.
Respondent has not provided any argument or evidence that such a penalty will affect its
ability to do business.

Iv. History of Prior Violations

Respondent Shih Noble d/b/a 7 Eleven Store 32409A is a repeated violator of FDA’s
tobacco regulations prohibiting the sale of tobacco products to minors. Respondent has
been the subject of a prior civil money penalty action. See CRD Docket Number T-17-
1135, FDA Docket Number FDA-2016-H-4256. This is the second civil money penalty
action brought against Respondent within the past thirty-six months for violations of the
Act and its implementing regulations, bringing the total number of violations to five. See
Complaint §§ 1, 11-12. Specifically, Respondent’s violation count includes three sales to
a minor in violation of 21 C.F.R. § 1140.14(a)(1), and three failures to verify
identification in violation of 21 C.F.R. § 1140.14(a)(2)(i).

v. Degree of Culpability
Ihave concluded that Respondent is liable for five violations of the Act and its

implementing regulations within thirty-six months. I hold Respondent fully culpable for
each of those violations.

vi. Additional Mitigating Factors

Mitigation is an affirmative defense for which Respondent bears the burden of proof. 21
C.F.R. § 17.33(c). Respondent has provided no evidence in support of mitigation.

vii. Penalty

Based on the foregoing reasoning, I find a penalty amount of $5,591 to be reasonable and
appropriate under 21 U.S.C. §§ 303(f)(5)(B) and 333(f)(9).

Conclusion

For the foregoing reasons, I enter judgment in the amount of $5,591 against Respondent
Shih Noble d/b/a 7 Eleven Store 32409A. Pursuant to 21 C.F.R. § 17.11(b), this order
becomes final and binding upon both parties after 30 days of the date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Twin Cities Care Services, LLC
(OI File No. H-17-40622-9),

Petitioner,
v.
The Inspector General.
Docket No. C-17-976
Decision No. CR5027

Date: February 16, 2018

DECISION

Petitioner, Twin Cities Care Services, LLC (Twin Cities), was enrolled as a Personal
Care Provider Organization (PCPO) in the Minnesota Medicaid program. Twin Cities
was convicted on four felony counts of theft of public funds by false representation.
Based on this, the Inspector General (I.G.) has excluded Twin Cities for five years from
participating in Medicare, Medicaid, and all federal health care programs, as authorized
by section 1128(a)(1) of the Social Security Act (Act). Twin Cities appeals the
exclusion. For the reasons discussed below, I find that the I.G. properly excluded Twin
Cities and that the statute mandates a minimum five-year exclusion.

Background

In a letter dated May 31, 2017, the I.G. notified Twin Cities that it was excluded from
participating in Medicare, Medicaid, and all federal health care programs for a period of
five years because it had been convicted of a criminal offense related to the delivery of an
item or service under Medicare or a state health care program, including the performance
of management or administrative services relating to the delivery of items or services
under any such program. I.G. Ex. 1. The letter explained that section 1128(a)(1) of the
Act authorizes the exclusion. Id. Twin Cities timely requested review. I convened a
telephone prehearing conference and issued an Order and Schedule for Filing Briefs and
Documentary Evidence.

Pursuant to that order, the I.G. submitted a written argument (I.G. Br.) and four proposed
exhibits (I.G. Exs. 1-4). Twin Cities filed a response (P. Br.) and three proposed exhibits
(P. Exs. 1-3). The I.G. filed a reply to Twin Cities’ response (I.G. Reply). Neither party
objected to the proposed exhibits offered by the opposing party. Therefore, in the
absence of objection, I admit into evidence I.G. Exs. 1-4 and P. Exs. 1-3.

The parties agree that this case may be resolved without an in-person hearing. I.G. Br. at
4; P. Br. at 2; see also Order and Schedule for Filing Briefs and Documentary Evidence §
6. I therefore decide this case based on the written record.

Discussion

1. Twin Cities is subject to a mandatory exclusion from program
participation for a minimum period of five years because it was convicted
of a criminal offense related to the delivery of an item or service under
Medicare or a state health care program, within the meaning of section
1128(a)(1) of the Act.!

Under section 1128(a)(1) of the Act, the Secretary of Health and Human Services must
exclude an individual or entity that has been convicted under federal or state law of a
criminal offense related to the delivery of an item or service under Medicare or a state
health care program. 42 C.F.R. § 1001.101(a).

As a PCPO, Twin Cities coordinated the provision of personal care attendant services to
Medicaid beneficiaries. I.G. Ex. 2. Twin Cities overbilled the Minnesota Medicaid
program by claiming reimbursement for the number of hours of service beneficiaries
were entitled to receive, rather than billing for the number of hours its employees actually
provided. I.G. Ex. 2 at 4-5. Following a bench trial, Twin Cities was found guilty of four
felony counts of Theft by False Representation (Public Funds) in violation of Minn. Stat.
§ 609.52. LG. Ex. 2 at 9.

The I.G. argues that these facts establish that Twin Cities was “convicted” of a crimina
offense as that term is defined in section 1128(i) of the Act, and that the conviction was
related to the delivery of items or services under the Minnesota Medicaid program within
the meaning of section 1128(a)(1) of the Act. I.G. Br. at 2-3. Twin Cities does not

dispute that it was convicted and that its conviction is program-related. P. Br. at 1. I
therefore conclude that Twin Cities was convicted of a program-related crime for which
section 1128(a)(1) mandates exclusion. An exclusion brought under section 1128(a)(1)

' My findings of fact/conclusions of law appear as numbered headings in bold italic type.
must be for a minimum period of five years. Act § 1128(c)(3)(B); 42 CFR.
§ 1001.2007(a)(2).

While it acknowledges that it was convicted of a crime for which exclusion is required,

Twin Cities nevertheless argues that I should overturn the exclusion because Twin Cities
was no longer a functioning corporate entity at the time the exclusion was imposed. As I
explain in the following section of this decision, Twin Cities’ argument is without merit.

2. Twin Cities’ status as a dissolved corporation is not a bar to exclusion.

Twin Cities argues that it cannot be excluded because it has been dissolved. P. Br. at 3. I
take Twin Cities’ argument to be that, because it is dissolved, it is no longer an “entity”
subject to exclusion under section 1128(a)(1) of the Act. Twin Cities cites to Oklahoma
Natural Gas Co. v. Oklahoma, 273 U.S. 257 (1927), among other cases, for the
proposition that dissolution of a corporation is analogous to the death of a natural person
and, for that reason, “the dissolution of a corporation abates all litigation in which the
corporation is appearing either as plaintiff or defendant.” P. Br. at 3, citing 273 U.S. at
259. Twin Cities’ argument is based on an incomplete reading of the Oklahoma Natural
Gas Co. decision.

In arguing that, as a dissolved corporation, it cannot sue or be sued, Twin Cities
overlooks the Supreme Court’s explanation that, while common law held that a dissolved
corporation ceased to exist, the question before the Court turned on the law of the state of
incorporation. Oklahoma Natural Gas Co., 273 U.S. at 260. Significantly, the Court
refused to permit a successor corporation to appear as a substitute party for the dissolved
corporation. Id. Rather, the Court reasoned that, under Oklahoma law, the dissolved
corporation “is still in being, and continues to be a party before this Court.” Id.

Thus, as the I.G. argues in his reply, it is appropriate to look to the law of Minnesota,
under which Twin Cities was incorporated, to determine whether Twin Cities completely
ceased to exist once it was dissolved as a corporation. See I.G. Reply at 2. The I.G. cites
Minn. Stat. § 322B.866 for the proposition that Minnesota law permits a dissolved
corporation to “assert or defend any claim by or against” the company. I.G. Reply at 2.
However, as the I.G. indicates, section 322B.866 has been repealed. Id.n.1.
Nevertheless, what appears to be the statute currently in force, at Minn. Stat.

§ 322C.0702, contains substantially similar provisions.? Section 322C.0702 provides that
a limited liability company continues after dissolution “only for the purposes of winding

2 The I.G. argues that Minn. Stat. § 322B.866 is applicable in this case, because the
provision was still in force on the date Twin Cities was excluded. I.G. Reply at 2 n.1. It
appears that Minn. Stat. § 322C.0702 was effective August 15,2015. See 2014 Minn. Laws
ch. 157, available at https://www.revisor.mn.gov/laws/?id=157&year=2014&type=0.
Therefore, it seems likely that section 322C.702 controls. However, I need not decide this
issue, as the result is the same under either statute.
up.” Minn. Stat. § 322C.0702, Subdivision 1. The statute goes on to specify actions a
dissolved company must and may take as part of the winding up process. Minn. Stat.

§ 322C.0702, Subdivision 2. Under this subdivision, a dissolved limited liability
company may “prosecute and defend actions and proceedings, whether civil, criminal, or
administrative” among other permitted winding up activities. Id. Therefore, under
Minnesota law, Twin Cities’ corporate identity continues after dissolution to the extent
necessary to defend administrative actions against it. As such, dissolution does not serve
to insulate Twin Cities from the exclusion provisions of section 1128(a) of the Act.

Nor does Twin Cities’ argument regarding the I.G.’s treatment of other dissolved
corporations provide a basis for disturbing Twin Cities’ exclusion. To the contrary, I find
irrelevant Twin Cities’ attempt to cast doubt on its exclusion by suggesting that the I.G.
has refrained from excluding other entities based on their status as dissolve
corporations. See P. Br. at 4-7. Whatever actions the I.G. may have taken or not taken
with regard to other entities, those actions are not factors I may consider in deciding
whether or not the I.G. properly excluded Twin Cities. Even if the I.G. decided, in some
other set of circumstances, not to exclude a particular entity that was a dissolved
corporation, that fact has no bearing on this case. The facts of other cases involving other
entities are not before me.

The issue I must decide is expressly limited by 42 C.F.R. § 1001.2007(a) to whether the
IG. has a basis for excluding Twin Cities. As I have explained in the previous section of
this decision, Twin Cities agrees that it was convicted of a criminal offense for which
section 1128(a)(1) mandates exclusion. Therefore, the I.G. had a legal basis to exclude
Twin Cities.

Conclusion

For the reasons explained above, I conclude that the I.G. properly excluded Twin Cities
from participation in Medicare, Medicaid, and all federal health care programs, and I
sustain the five-year exclusion.

/s/
Leslie A. Weyn
Administrative Law Judge