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

Vv.

Edwards Oil, Inc.
d/b/a Lucky Seven A-1 Corner 23 / BP,

Respondent

FDA Docket No. FDA-2015-H-4327
CRD Docket No. T-17-398

Decision No. TB2701

Date: May 9, 2018

DECISION
Found:
1) Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R. §§ 1140.14(a)!
and 1140.14(b)(1) as charged in the complaint; and
2) Respondent committed three (3) violations in a 24-month period as set forth
hereinabove.
3) Respondent is hereby assessed a civil penalty in the amount of $500.
Glossary:
ALJ administrative law judge”
CMP civil money penalty
CTP/Complainant Center for Tobacco Products
DJ Default Judgment
FDCA Federal Food, Drug, and Cosmetic Act (21 U.S.C.A.

Chap. 9)

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

DN UPS Delivery Notification

FDA Food and Drug Administration

HHS Dept. of Health and Human Services

OSC Order to Show Cause

POS UPS Proof of Service

SOP Service of Process

Respondent Edwards Oil, Inc. d/b/a Lucky Seven A-1 Corner 23 /
BP

TCA The Family Smoking Prevention and Tobacco Control

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

I. JURISDICTION

I have jurisdiction to hear this case pursuant to my appointment by the Secretary
of Health and Human Services and my authority under the Administrative Procedure Act
(5 U.S.C. §§ 554-556), 5 U.S.C.A. § 3106, 21 U.S.C. § 333(£)(5), 5 CER. §§ 930.201 et
seq. and 21 C.F.R. Part 17.3
Il. PROCEDURAL BACKGROUND

The Center for Tobacco Products (CTP/Complainant) issued a Complaint dated
November 30, 2015, alleging that FDA documented three (3) violations within a 24-
month period. Edwards Oil, Inc. d/b/a Lucky Seven A-1 Corner 23 / BP (Respondent or
Lucky Seven A-1 Corner 23 / BP) was served with process on December 3, 2015 by
United Parcel Service. Respondent filed an Answer dated December 31, 2015 in which it
admitted the allegations in the complaint but contended that CTP counted “multiple

penalties for the same violation.”

3 See also Butz v. Economou, 438 U.S. 478 at 513, 98 S.Ct. 2894, 57 L.Ed.2d 895
(1978); Marshall v. Jerrico, Inc., 446 U.S. 238 (1980); Federal Maritime Com’n v. South
Carolina State Ports Authority, 535 U.S. 743, 744 (2002).
On May 3, 2016, the parties submitted Stipulations of Fact in which Respondent
again admitted to the violations and indicated it did not intend to contest the facts alleged
in the complaint. See Stipulation of Fact, Docket (Dkt.) No. 10. Respondent also
stipulated that it has the financial means to pay $500 if liability is assessed in this matter,
and the payment of $500 will not constitute a financial hardship for Respondent. Jd. The
parties agreed the sole remaining issue in this matter is a purely legal question related to
CTP’s method of counting violations. See Joint Motion to Stay Proceedings, Dkt. No. 9.

On September 14, 2016, Respondent filed a Motion to Stay Proceedings pending
the United States Court of Appeals for the District of Columbia Circuit’s decision in
Orton Motor, Inc. v. U.S. Dep’t of Health and Human Serv., No. 16-1299 (D.C. Cir. filed
Aug. 24, 2016), aff'd, 884 F.3d 1205 (D.C. Cir. 2018). On October 4, 2016, I granted
Respondent’s Motion and stayed the proceedings pending the resolution of Orton. Order
on Respondent’s Motion to Stay Proceedings, Dkt. No 19. On March 20, 2018, the Court
of Appeals upheld CTP’s methodology for counting violations of the tobacco regulations.
Orton Motor, Inc. v. U.S. Dep’t of Health and Human Serv., 884 F.3d 1205 (D.C. Cir.
2018).

The pending issue regarding CTP’s method of counting violations is resolved, and
this matter is now ready for decision (21 C.F.R. § 17.45(c)).

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

21 U.S.C. § 331, specifically 21 C.F.R. §§ 1140.14(a) and 1140.14(b)(1).
V. ISSUE
Did Respondent violate 21 U.S.C. § 331, specifically 21 C.F.R. §§ 1140.14(a) and
1140.14(b)(1) as alleged in the complaint?
VI. ALLEGATIONS

A. Agency’s recitation of facts

CTP alleged that Respondent owned an establishment, doing business under the
name Lucky Seven A-1 Corner 23 / BP, located at 1501 East Howard Street, Hibbing,
Minnesota 55746. Respondent's establishment received tobacco products in interstate
commerce and held them for sale after shipment in interstate commerce.

CTP’s complaint alleged that on August 14, 2014, CTP issued a Warning Letter
to Respondent, alleging that Respondent committed the following violations:

a. Selling tobacco products to a minor, in violation of 21 C.F.R. § 1140.14(a).
Specifically, a person younger than 18 years of age was able to purchase
tobacco products on July 21, 2014; and

b. Failing to verify the age of a person purchasing tobacco products by means of
photographic identification containing the bearer's date of birth, as required by
21 C.F.R. § 1140.14(b)(1). Specifically, the minor's identification was not
verified before the sale, as detailed above, on July 21, 2014.

Because no opportunity for a hearing was provided before the Warning Letter was

issued, Respondent had a right to challenge the allegations in the Warning Letter in the
instant case. See Orton Motor, Inc. v. U.S. Dep’t of Health and Human Serv., 884 F.3d

1205, 1215 (D.C. Cir. 2018).
Further, during an inspection of Lucky Seven A-1 Corner 23 / BP conducted on
August 13, 2015, an FDA-commissioned inspector documented the following violations:

a. Selling tobacco products to a minor, in violation of 21 C.F.R. § 1140.14(a).
Specifically, a person younger than 18 years of age was able to purchase a
package of Marlboro cigarettes on August 13, 2015, at approximately
11:21 AM; and

b. Failing to verify the age of a person purchasing tobacco products by means of
photographic identification containing the bearer's date of birth, as required by
21 C.F.R. § 1140.14(b)(1). Specifically, the minor's identification was not
verified before the sale, as detailed above, on August 13, 2015, at
approximately 11:21 AM.

B. Respondent’s recitation of facts

In its Answer, Respondent admitted the allegations in the complaint.

Therefore, as I will detail later, the violations described in the Complaint counts as
three (3) violations for purposes of computing the civil money penalty in the instant case.
See Guidance for Industry, at 13-15.

I find and conclude Respondent committed three (3) violations of 21 U.S.C.

§ 331, specifically 21 C.F.R. § 1140.14(a) and 21 C.F.R. § 1140.14(b)(1) within a
24-month period as set forth in the Complaint.
VII. FAMILY SMOKING PREVENTION AND TOBACCO CONTROL ACT

The “relevant statute” in this case is actually a combination of statutes and

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

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

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

Under 21 U.S.C. § 331(k), “[t]he alteration, mutilation, destruction, obliteration, or

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

§ 333 note and 21 C.F.R. § 17.2. Under current FDA policy, the first time FDA finds
violations of 21 C.F.R. Part 1140 at an establishment, FDA only counts one violation
regardless of the number of specific regulatory requirements that were actually violated,
but if FDA finds violations on subsequent occasions, it will count violations of specific
regulatory requirements individually in computing any civil money penalty sought. This
policy is set forth in detail, with examples to illustrate, at U.S. Food & Drug Admin.,
Guidance for Industry and FDA Staff, Civil Money Penalties and No-Tobacco-Sale
Orders for Tobacco Retailers, Responses to Frequently Asked Questions (Revised)
(2016), available at

http://www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulations Guidance/U

CM447310.pdf [hereinafter Guidance for Industry], at 13-14. So, for instance, if a
retailer sells a tobacco product on a particular occasion to a minor without checking for
photographic identification, in violation of 21 C.F.R. §§ 1140.14(a) and (b)(1), this will

count as two separate violations for purposes of computing the civil money penalty,
unless it is the first time violations were observed at that particular establishment. This

policy of counting violations has been determined by the HHS Departmental Appeals

Board (Board) to be consistent with the language of the FDCA and its implementing

regulations, see CTP v. Orton Motor Company, Departmental Appeals Board Decision

number 2717 of June 30, 2016. The Board’s decision was upheld on appeal. See Orton

Motor, Inc. v. U.S. Dep’t of Health and Human Serv., 884 F.3d 1205 (D.C. Cir. 2018).
Vill. LIABILITY

When a retailer such as Respondent is found to have “misbranded” a tobacco
product in interstate commerce, it can be liable to pay a CMP. 21 U.S.C. §§ 331, 333.

I find and conclude that the evidentiary facts, by a preponderance of the evidence
standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(a) in that a person younger than 18 years of age was able to purchase tobacco
products on July 21, 2014 and August 13, 2015.

I find and conclude that the evidentiary facts, by a preponderance of the evidence
standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(b)(1) on those same dates in that Respondent also violated the requirement that
retailers verify, by means of photo identification containing a purchaser’s date of birth,
that no tobacco product purchasers are younger than 18 years of age.

The conduct set forth above on July 21, 2014 and August 13, 2015 counts as three
(3) violations under FDA policy for purposes of computing the civil money penalty. See

Guidance for Industry, at 13-15.
IX. PENALTY

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

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

{| 5-8-1. Because of this reasonable exercise of discretion, the starting point for
punishments and the rate at which they mount are clear — the lower and slower
schedules.

X. MITIGATION

It is incumbent upon Respondent to present any factors that could result in
mitigation of CTP’s proposed penalty. Specifically, it is Respondent’s burden to provide
mitigating evidence. Respondent has not presented any mitigating factors for me to

consider. Additionally, Respondent stipulated that it has the financial means to pay the
10

civil money penalty, and the payment will not constitute a financial hardship. See
Stipulation of Fact, Dkt. No. 10.
XI. CONCLUSION
Respondent committed three (3) violations in a 24-month period and so,
Respondent is liable for a civil money penalty of $500. See 21 C.F.R. § 17.2.
WHEREFORE, evidence having read and considered it be and is hereby
ORDERED as follows:

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

b. I find and conclude that the evidentiary facts, by a preponderance of the
evidence standard, support a finding Respondent violated 21 U.S.C. § 331,
specifically 21 C.F.R. § 1140.14(a) on July 21, 2014 and August 13, 2015,
in that a person younger than 18 years of age was able to purchase tobacco
products as set forth in the complaint;

c. I find and conclude that the evidentiary facts, by a preponderance of the
evidence standard, support a finding Respondent violated 21 U.S.C. § 331,
specifically 21 C.F.R. § 1140.14(b)(1) on July 21, 2014 and August 13,
2015, in that Respondent failed to verify, by means of photo identification
containing a purchaser’s date of birth, that no cigarette purchasers are
younger than 18 years of age;

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

e. [assess a monetary penalty in the amount of $500.

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


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

KCP, Inc.
d/b/a KC Mart 7,

Respondent.

FDA Docket No. FDA-2017-H-6725
CRD Docket No. T-18-559

Decision No. TB2694

Date: May 3, 2018

INITIAL DECISION AND DEFAULT JUDGMENT

Found:

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

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

3) Respondent committed six violations in a 48-month period as set forth
hereinabove.

4) Respondent is hereby assessed a civil penalty in the amount of $11,182.
Glossary:

ALJ administrative law judge!

CMP civil money penalty

CTP/Complainant Center for Tobacco Products

DJ Default Judgment

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

DN UPS Delivery Notification

FDA Food and Drug Administration

HHS Dept. of Health and Human Services

OSC Order to Show Cause

POS UPS Proof of Service

SOP Service of Process

Respondent KCP, Inc. d/b/a KC Mart 7

TCA The Family Smoking Prevention and Tobacco Control

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

I. JURISDICTION

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

seq. and 21 C.F.R. Part 17.7

II. PROCEDURAL BACKGROUND
The Center for Tobacco Products (CTP/Complainant) filed a complaint on
December 7, 2017, alleging that FDA documented six violations within a 48-month

period.

' See 5 C.F.R. § 930.204.

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

2
KCP, Inc. d/b/a KC Mart 7 (Respondent or KC Mart 7) was served with process
on December 6, 2017, by United Parcel Service. Respondent, through counsel, filed an
Answer on December 21, 2018.

On December 29, 2017, I issued an Acknowledgment and Pre-Hearing Order
(Pre-Hearing Order) in which I set a schedule for exchanges of evidence and argument.
Pursuant to that order, CTP served Respondent with a Request for Production of
Documents on January 11, 2018. Respondent had until January 22, 2018, to file a motion
for a protective order or until February 12, 2018, to provide responsive documents. 21
C.F.R. § 17.23(a), (d); Pre-Hearing Order at § 3. On February 26, 2018, CTP filed a
Motion to Compel Discovery in which CTP averred that Respondent failed to respond to
its Request for Production of Documents in its entirety. Respondent did not file a

response to CTP’s Motion to Compel Discovery.

On March 14, 2018, I issued an Order Denying Motion to Compel Discovery and
Order to Show Cause to Respondent. I explained that Respondent failed to comply with
the procedural rules in responding to CTP’s Request for Production of Documents and
the procedures and directives named in my Pre-Hearing Order and in 21 C.F.R. Part 17. I
construed CTP’s Motion to Compel Discovery as a request for an Order to Show Cause
and instructed Respondent to show cause why I should not strike its answer as a sanction

for failing to comply with my orders, rules and procedures governing the proceeding.
I warned:

Failure to comply will result in sanctions, which may include
issuance of an Initial Decision and Default Judgment finding
Respondent liable for the violations listed in the Complaint and
imposing a civil money penalty. 21 C.F.R. § 17.35.
March 14, 2018 Order (Emphasis in original).
I ordered Respondent to show cause no later than March 26, 2018, why I should
not strike its answer as a sanction for failing to comply with my orders, rules and

procedures governing the proceeding. Jd., citing 21 C.F.R. § 17.35.

Ill. STRIKING RESPONDENT’S ANSWER

Pursuant to 21 C.F.R. § 17.35(a), I may sanction a person, including any party or
counsel for:

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

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

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

Here, Respondent failed to comply with my December 29, 2017,
Acknowledgment and Pre-Hearing Order. Respondent did not file a response to CTP’s
Motion to Compel Discovery. Respondent failed to comply with my March 14, 2018,
Order to Denying Motion to Compel Discovery and Order to Show Cause to Respondent

4
requiring Respondent to show cause. Respondent has failed to comply with my orders
and procedures governing this proceeding and failed to defend its actions. Respondent’s
misconduct has interfered with the speedy, orderly, or fair conduct of this proceeding.
21 C.F.R. § 17.35(a). I find sanctions are appropriate pursuant to 21 C.F.R. § 17.35(a).
The harshness of the sanctions I impose upon either party must relate to the nature
and severity of the misconduct or failure to comply. 21 C.F.R. § 17.35(b). I find and
conclude that Respondent’s misconduct is sufficient to warrant striking the answer and
issuing a decision without further proceedings. 21 C.F.R. § 17.35(c); see 21 C.F.R.

§ 17.11 (a).

IV. BURDEN OF PROOF
CTP as the petitioning party has the burden of proof. 21 C.F.R. § 17.33).
Vv. LAW
21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(a)(1), (a)(2)(i), (b)(1) and
(b)(2)(i).
VI. ISSUE
Did Respondent violate 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(b)(1)
and (b)(2)(i) as alleged in the complaint?
Vil. DEFAULT
I find Respondent was served and is subject to the jurisdiction of this forum, as
established by the UPS Delivery Notification / Certification of Filing filed by CTP and by

Respondent’s Answer seeking relief.
Striking Respondent’s Answer leaves the complaint unanswered.
It is Respondent’s right to participate in the legal process.
It is Respondent’s right to request a hearing or to waive a hearing.

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

VII. ALLEGATIONS

A. Agency’s recitation of facts

CTP alleged that Respondent owned an establishment, doing business under the
name KC Mart 7, located at 303 Lee Vaughn Road, Simpsonville, South Carolina 29681.
Respondent's establishment received tobacco products in interstate commerce and held
them for sale after shipment in interstate commerce.

During an inspection of KC Mart 7 conducted on November 6, 2017, an FDA-

commissioned inspector documented the following violations:

a. Selling tobacco products to a minor, in violation of 21 C.F.R. § 1140.14(b)(1).
Specifically, a person younger than 18 years of age was able to purchase a
package of two Swisher Sweets White Grape cigars on November 6, 2017, at
approximately 6:08 PM; and

b. Failing to verify the age of a person purchasing tobacco products by means of
photographic identification containing the bearer's date of birth, as required by
21 C.F.R. § 1140.14(b)(2)(i). Specifically, the minor's identification was not
verified before the sale, as detailed above, on November 6, 2017, at

approximately 6:08 PM.
B. Respondent’s recitation of facts

I struck Respondent’s Answer from the record. 21 C.F.R. § 17.35(a).

Accordingly, Respondent filed no responsive pleadings that I may consider.

IX. PRIOR VIOLATIONS

On May 5, 2017, CTP initiated its most recent civil money penalty action,
CRD Docket Number T-17-3850, FDA Docket Number FDA-2017-H-2641,> against
Respondent for four* violations of 21 C.F.R. pt. 1140 within a 24-month period. CTP
alleged those violations to have occurred at Respondent’s business establishment,

303 Lee Vaughn Road, Simpsonville, South Carolina 29681, on April 24, 2015,
December 28, 2015, and December 29, 2016.

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

I find and conclude Respondent committed six violations of 21 U.S.C. § 331,
specifically 21 C.F.R. § 1140.14(a)(1), (a)(2)(), (b)(1) and (b)(2)() within a 48-month

period as set forth in the complaint.

3 See also CRD Docket Number T-16-1048, FDA Docket Number FDA-2016-H-1750.

4 One violation was documented on April 24, 2015 (sale of cigarettes or smokeless
tobacco to a minor), one violation on December 28, 2015 (sale of cigarettes or smokeless
tobacco to a minor), and two violations on December 29, 2016 (sale of cigarettes or
smokeless tobacco to a minor and failure to verify identification).

7
X. FAMILY SMOKING PREVENTION AND TOBACCO CONTROL ACT

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

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

§ 1140.1(b) provides that “failure to comply with any applicable provision in this part in

the sale, distribution, and use of cigarettes and smokeless tobacco renders the product

8
misbranded under the act.”

Under 21 U.S.C. § 331(k), “[t]he alteration, mutilation, destruction, obliteration, or
removal of the whole or any part of the labeling of, or the doing of any other act with
respect to, a food, drug, device, tobacco product, or cosmetic, if such act is done while

such article is held for sale (whether or not the first sale) after shipment in interstate

commerce and results in such article being adulterated or misbranded” is a prohibited act
under 21 U.S.C. § 331. Thus, when a Retailer such as Respondent misbrands a tobacco
product by violating a requirement of 21 C.F.R. Part 1140, that misbranding in turn
violates the FDCA, specifically 21 U.S.C. § 331(k). FDA may seek a civil money
penalty from “any person who violates a requirement of this chapter which relates to
tobacco products.” 21 U.S.C. § 333(f)(9)(A) (2012). Penalties are set by 21 U.S.C.

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

(2016), available at http://www.fda.gov/downloads/TobaccoProducts/Labeling/Rules

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

So, for instance, if a retailer sells a covered tobacco product on a particular occasion to a

9
minor without checking for photographic identification, in violation of 21 C.F.R.

§ 1140.14(b)(1) and (b)(2)(i), this will count as two separate violations for purposes of
computing the civil money penalty, unless it is the first time violations were observed at
that particular establishment. This policy of counting violations has been determined by
the HHS Departmental Appeals Board to be consistent with the language of the FDCA
and its implementing regulations. See Orton Motor Co. d/b/a Orton’s Bagley,
Departmental Appeals Board (DAB) No. 2717, at 25 (2016); pet. for rev. denied, No.

2018 WL 1386141 (D.C. Cir., Mar. 20, 2018).

XI. LIABILITY
When a retailer such as Respondent is found to have “misbranded” a tobacco
product in interstate commerce, it can be liable to pay a CMP. 21 U.S.C. §§ 331, 333.
A retailer facing such a penalty has the right, set out in statute, to a hearing under the
Administrative Procedure Act (21 U.S.C. § 333(f)(5)(A)). A retailer can forfeit its
rights under the statute and regulations by failing to participate in the process, a failure
known as a “default.” 21 C.F.R. § 17.11.
As set forth above, it is Respondent’s right to decide whether to participate in the
legal process. It is Respondent’s right to decide to request a hearing and it is
Respondent’s right to waive a hearing.

I find Respondent waived its right to a hearing.

XI. IMPACT OF RESPONDENT’S DEFAULT

When a Respondent defaults by failing to answer the complaint or respond to an

10
Order to Show Cause, an ALJ must assume as true all factual allegations in the complaint
and issue an initial decision within 30 days of the answer’s due date, imposing “the
maximum amount of penalties provided for by law for the violations alleged” or “the
amount asked for in the complaint, whichever is smaller” if “liability under the relevant
statute” is established. 21 C.F.R. § 17.11(a)(1), (a)(2); but see 21 C.F.R. § 17.45 (initial
decision must state the “appropriate penalty” and take into account aggravating and
mitigating circumstances).

Two aspects of Rule 17.11 are important in default cases.

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

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

1992). Routen v. West, 142 F.3d 1434, 1440 (Fed. Cir. 1998).5

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

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

11
Second, as far as the penalty is concerned, my discretion is limited by the language
of the regulation. I may not tailor the penalty to address any extenuation or mitigation,
for example, nor, because of notice concerns, may I increase the penalty beyond the

smaller of (a) the Complainant's request or (b) the maximum penalty authorized by law.

XIII. LIABILITY UNDER THE RELEVANT STATUTE

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

§ 17.11 (a).

I find and conclude that the evidentiary facts, by a preponderance of the evidence
standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(a)(1) and (b)(1) in that a person younger than 18 years of age was able to
purchase cigarettes, smokeless tobacco, or covered tobacco products on April 24, 2015,
December 28, 2015, December 29, 2016, and November 6, 2017.

I find and conclude that the evidentiary facts, by a preponderance of the evidence
standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(a)(2)(i) and (b)(2)(i) on December 29, 2016, and November 6, 2017, in that
Respondent also violated the requirement that retailers verify, by means of photo
identification containing a purchaser’s date of birth, that no cigarette, smokeless tobacco,

or covered tobacco product purchasers are younger than 18 years of age.

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

12
The conduct set forth above on April 24, 2015, December 28, 2015, December 29,
2016, and November 6, 2017, counts as six violations under FDA policy for purposes of

computing the civil money penalty. See Guidance for Industry, at 13-15.

XIV. PENALTY

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

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

{| 5-8-1. Because of this reasonable exercise of discretion, the starting point for
punishments and the rate at which they mount are clear — the lower and slower

schedules.

13
XV. MITIGATION

It is incumbent upon Respondent to present any factors that could result in

mitigation of CTP’s proposed penalty. Specifically, it is Respondent’s burden to

provide mitigating evidence. In a default, Respondent has failed to participate and has

failed to present any evidence that I may consider regarding potential mitigation.

Accordingly, I have no reason to mitigate the penalty.

XVI. CONCLUSION

Respondent committed six violations in a 48-month period and so, Respondent is

liable for a civi

money penalty of $11,182. See 21 C.F.R. § 17.2.

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

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

b. I find Respondent failed to respond to my Order to Show Cause.

c. I find Respondent failed to comply with my orders and procedures
governing this proceeding and failed to defend its actions, constituting
misconduct that has interfered with the speedy, orderly, or fair conduct of
this proceeding. 21 C.F.R. § 17.35(a).

d. I find Respondent’s misconduct warrants striking its answer as a sanction.
21 CFR. § 17.35(c).

e. I find striking Respondent’s answer leaves the complaint unanswered.

21 CFR. § 17.11.

f. I find Respondent is in default.

g. Lassume the facts alleged in the complaint to be true. 21 C.F.R. § 17.11.

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

I assess a monetary penalty in the amount of $11,182.

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

14


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

(FDA No. FDA-2017-H-1382)
Complainant
v.

State Oil Fuel Center, Inc.
d/b/a State Oil,

Respondent.
Docket No. T-17-2706
Decision No. TB2650

Date: April 18, 2018

INITIAL DECISION

I sustain the determination of the Center for Tobacco Products (CTP) of the United States
Food and Drug Administration (FDA) to impose a civil money penalty against
Respondent, State Oil Fuel Center, Inc. d/b/a State Oil, for two violations of the Federal
Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing
regulations, 21 C.F.R. pt. 1140, within a 12-month period. Specifically, Respondent
violated the Act by impermissibly selling cigarettes to minors on January 27, 2016, and
September 30, 2016. However, I conclude that reducing the civil money penalty from
$275 to $175, is appropriate.

I. Background

CTP began this matter by serving an administrative complaint seeking a $275 civil
money penalty on Respondent, at 7124 Highway 23, Belle Chasse, Louisiana 70037, and
by filing a copy of the complaint with the FDA Division of Dockets Management.
Respondent timely answered CTP’s complaint, denying the allegations.

The parties filed pre-hearing exchanges. CTP filed a pre-hearing brief (CTP Br.) and

23 exhibits (CTP Exs. 1-23), including the written direct testimony of two proposed
witnesses (CTP Exs. 3-4). Respondent filed a pre-hearing brief (R. Br.) and 18 exhibits
(R. Exs. 1-18), including the written direct testimony of four proposed witnesses (R. Exs.
1-4). CTP did not seek to cross-examine any of Respondent’s proposed witnesses.
Respondent asked to cross-examine CTP’s witness, Cole Sisung, an FDA-commissioned
inspector.

On December 14, 2017, I conducted a hearing for the purpose of cross-examination and
for the admission of the parties’ proffered exhibits. During the hearing, I received into
evidence CTP’s 23 exhibits and Respondent’s 18 exhibits. Transcript (Tr.) at 8-9.
Respondent filed a post-hearing brief (R. Post-Hrg. Br.).

Il. Analysis, Findings of Fact and Conclusions of Law
A. Violations

CTP determined to impose a civil money penalty against Respondent pursuant to the
authority conferred by the Act and implementing regulations at Part 21 of the Code of
Federal Regulations. The Act prohibits the misbranding of tobacco products while they
are held for sale after shipment in interstate commerce. 21 U.S.C. § 331(k). FDA and its
agency, CTP, may seek civil money penalties from any person who violates the Act’s
requirements as they relate to the sale of tobacco products. 21 U.S.C. § 331(f)(9). The
sale of tobacco products to an individual who is under the age of 18 is a violation of
implementing regulations. 21 C.F.R. § 1140.14(a)(1).

CTP premises its case on the results of inspections of Respondent’s establishment,
conducted on January 27, 2016, and September 30, 2016.

CTP’s case against Respondent rests on the testimony of Inspector Sisung and Laurie
Sternberg; which are supported by corroborating evidence. CTP Exs. 3-7, 10-12, 14-18,
22-23. Inspector Sisung is an FDA-commissioned officer for the state of Louisiana
whose duties include determining whether retail outlets unlawfully sell tobacco products
to minors. CTP Ex. 4 at 1-2. Inspector Sisung’s inspections entail accompanying minors
who attempt to purchase tobacco products from retail establishments such as the one
operated by Respondent. Jd. Inspector Sisung testified that he conducted such an
inspection of Respondent’s establishment on January 27, 2016, and September 30, 2016.
CTP Ex. 4 at 2-4.
Inspector Sisung testified that on both occasions he went to Respondent’s establishment
accompanied by a minor who was employed for the purpose of attempting to purchase
tobacco products from business establishments under inspection. CTP Ex. 4. Inspector
Sisung testified that on each occasion he verified that the minor carried photographic
identification that included the minor’s true age and that the minor did not have any
tobacco products in his possession. CTP Ex. 4 97, 12; Tr. 22-23. During each
inspection, Inspector Sisung did not exit the vehicle because he felt his presence would
compromise the undercover nature of the inspection, but watched events from his vehicle.
CTP Ex. 4 ¥§ 8, 13. On both occasions, Inspector Sisung watched the minor enter
Respondent’s establishment, exit the establishment, and return with a package of
cigarettes. After each inspection, the minor reported that he provided a valid state issued
identification, showing his true date of birth, to the employee. Jd.

Inspector Sisung stated that after each purchase, the minor immediately gave him the
pack of cigarettes. He labeled the cigarettes as evidence, photographed all of the panels
of the package, and processed the evidence in accordance with standard procedures. CTP
Ex. 499 9, 13. Shortly after each inspection, Inspector Sisung recorded the inspection in
the FDA’s Tobacco Inspection Management System and created a Narrative Report.

Id. § 10, 14.

CTP corroborated Inspector Sisung’s testimony by offering as evidence photographs that
Inspector Sisung made of the cigarettes that the minor purchased on the dates in question.
CTP Exs. 10-12, 16-18. CTP also submitted narrative reports by Inspector Sisung
created contemporaneously with each inspection. CTP Exs. 6, 14.

Respondent offered no evidence to rebut Inspector Sisung’s testimony. Instead,
Respondent argues that CTP failed to meet its burden of proof in this case. Tr. 11; R.
Post-Hrg. Br. at 9. Respondent asserts that that there is no eyewitness testimony to the
transactions at issue. R. Post-Hrg. Br. at 9. This is true. It is undisputed that Inspector
Sisung did not directly witness the alleged transactions on either January 27, 2016 or
September 30, 2016. Tr. 23. However, the regulations do not require such a direct
eyewitness. Rather, I must determine whether — based on a preponderance of the
evidence — the allegations in the complaint are true, and, if so, whether these actions
constitute a violation of law. 21 C.F.R. §§ 17.33, 17.45. As I detail below and based on
the evidence of record, I find that it is more likely than not that the minor purchased
cigarettes at Respondent’s establishment on both January 27, 2016, and September 30,
2016. 21 C.F.R. § 17.33.

Respondent does not dispute that three of the employees who were working at the time of
either sale were adult females with dark hair. R. Post-Hrg. Br. at 10-11. Respondent
asserts, however, that the employees working at the time of the alleged purchases did not
fit the minor’s physical description of the employee who sold the tobacco products.

R. Br. at 7; R. Post-Hrg. Br.at 10. Although Respondent acknowledges that the minor
described the employees as being female, adult, with dark hair, Respondent relies on the
fact that the minor does not identify either employee as wearing glasses.

Respondent provides that Sherry Sylve and Petra Warren were working at the time of the
alleged sale on January 27, 2016, and provided the written direct testimony of both
employees. R. Exs. 2-3. Ms. Warren, an adult female with dark hair, testified that she
did not knowingly sell the tobacco product and that she wears glasses when checking
ID’s. R. Ex. 2. Ms. Sylve, an adult female with dark hair, also testified that she did not
knowingly sell the tobacco product and that she wears glasses at work. R. Ex. 3.

Respondent asserts that Bruni Comeaux and Tamara Chase were working at the time of
the alleged sale on September 30, 2016. Respondent submitted only the written direct
testimony of Ms. Comeaux. R. Ex. 4. Ms. Comeaux testified that she has red hair and
that she did not knowingly sell the product on September 30, 2016. She also testified that
Ms. Chase, an adult female with dark hair, wears glasses at work. R. Ex. 4.

On cross-examination, Inspector Sisung admitted that the minors are instructed to look
for the physical characteristics of the employee involved in the purchase, including such
physical characteristics as glasses. Tr. 32. Although probative, this testimonial evidence
is not crucial based on the entire record evidence. It is clear from the record that on both
January 27, 2016 and September 30, 2016, an adult female with dark hair, consistent with
the minor’s description, was working at Respondent’s establishment.

Respondent argues that because CTP did not cross-examine its witnesses, I must deem
their testimony “credible and uncontradicted.” R. Post-Hrg. Br. at 8. Contrary to
Respondent’s argument, finding Respondent’s witnesses to be credible does not undercut
CTP’s case. In point of fact, I find the witness testimony credible, particularly that of
Ms. Warren (R. Ex. 2), Ms. Sylve (R. Ex. 3), and Ms. Comeaux (R. Ex. 4). Each testified
that they “did not knowingly sell tobacco products to any minor.” R. Exs. 2-4 at § 8.
However, these clerks not knowingly selling a tobacco product to a minor is not
inconsistent with a finding that they in fact sold tobacco products to a minor. Intent is not
a necessary element to prove a violation of this regulation.

With respect to the alleged sale on January 27, 2016, both Ms. Warren and Ms. Sylve are
adult females with dark hair. Ms. Warren testified that she wears reading glasses when
she checks identification. R. Ex. 2 9. While this may be her custom, there is nothing in
the record to support a finding that she always uses her glasses to check an ID or that she
did so on January 27, 2016. In fact, had she used her glasses during the sale on January
27, 2016, she would likely have determined the minor’s true age. Accordingly, her
failure to use her reading glasses in this instance may explain why she failed to notice the
minor’s age when viewing his identification.
With respect to the alleged sale on September 30, 2016, CTP’s case is stronger. The fact
that Respondent presented the testimony of all clerks on staff, yet did not present Ms.
Chase’s testimony or explain why it was not offered, is telling. Respondent relies on Ms.
Comeaux to make its argument that Ms. Chase wears glasses. But, as Ms. Chase does not
testify, there is no direct testimony to rebut the premise that she was the employee
involved in the unlawful sale on September 30, 2016.

Respondent also makes the argument that the minor obtained the cigarettes from a third
party in the store or that the minor presented a second or fake identification to the cashier
to obtain the cigarettes. R. Post-Hrg. Br. at 9. I find it incredible that the minor obtained
the cigarettes from a third party in the establishment or presented false identification.
Based on the record evidence, there is no reason for him to do so. Inspector Sisung
testified that the minors do not receive any type of financial bonus or incentive for
successfully purchasing tobacco products. CTP Ex. 446. There is simply no evidence
to support that the minor had an incentive to plant false evidence or to trick Respondent’s
staff. I would also note that it would be highly unlikely that this same minor devised a
plan to obtain the cigarettes from a third party on each of these purchases; occurring
approximately 8 months apart. Additionally, I found Inspector Sisung’s testimony
regarding the character of this specific minor particularly convincing. Namely, Inspector
Sisung testified that this minor worked on a lot of inspections, that he found the minor
“very consistent, conscientious,” and “of high character and integrity.” Tr. 40. Finally, I
credit the Inspector’s testimony that the minor was in the store each time for an
appropriate amount of time to accomplish the sale as described. Tr. 29.

Simply, the minor entered the establishment without cigarettes and returned with them.
Based on the evidence of record, the most reasonable explanation for the minor to emerge
from the establishment with cigarettes is that he purchased them in the establishment.

The testimony of Inspector Sisung supported by corroborating evidence is sufficient to
establish that it is more likely than not that Respondent unlawfully sold cigarettes to a
minor in violation of 21 C.F.R. § 1140.14(a)(1). 21 C.F.R. § 17.33(b); see CTP Exs. 3-7,
10-12, 14-18, 22-23. Further, Respondent failed to establish any affirmative defense by a
preponderance of the evidence. 21 C.F.R. § 17.33(c).

Accordingly, I find that the facts as outlined above establish Respondent’s liability under
the Act.

II. Civil Money Penalty

I have found that Respondent committed two violations of the Act and its implementing
regulations within a 12-month period. 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 § 1. 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 US.C. § 333(£)(5)(B).

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

Respondent has failed to comply with the Act and its implementing regulations on two
occasions. The repeated inability of Respondent to comply with federal tobacco
regulations is serious in nature and the civil money penalty amount should be set
accordingly.

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

Respondent has not provided any evidence with regard to its ability or inability to pay the
$275 civil money penalty.

iii. History of Prior Violations

l agree with CTP that “[t]hese...violations show an unwillingness or inability to sell
tobacco products in accordance with federal tobacco regulations.” CTP Br. at 12.
Respondent’s continued inability to comply with the federal tobacco regulations calls for
a penalty in this instance.

iv. Degree of Culpability
Respondent is culpable for both violations of the Act and its implementing regulations.
v. Additional Mitigating Factors

After the first violation, Respondent retrained its employees on its tobacco policy to not
sell tobacco to minors and check photo identification of all persons under 30 years old.
After the second alleged violation, Respondent updated its equipment to allow scanning
of identifications, modified its tobacco policy to require employees to scan tobacco
customers’ identifications with an electronic scanning device, and trained its employees
on the modified tobacco policy. R. Br. at 7-8.

I find Respondent’s subsequent actions persuasive and conclude that a reduced penalty is
appropriate.
vi. Penalty

I acknowledge that Respondent has taken responsible measures in order to prevent future
violations. Based on the foregoing reasoning, I find a penalty amount of $175 to be
appropriate under 21 U.S.C. §§ 303(f)(5)(B) and 333(f)(9).

Conclusion

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $175 against
Respondent, State Oil Fuel Center, Inc. d/b/a State Oil, for two violations of the Federal
Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing
regulations, 21 C.F.R. pt. 1140, within a 12-month period.

/s/
Margaret G. Brakebusch
Administrative Law Judge


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

(FDA No. FDA-2017-R-4669)
Complainant
v.

US Liberty Inc.
d/b/a Loch Raven Gulf,

Respondent.
Docket No. T-17-5661
Decision No. TB2642

Date: April 17, 2018

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, US Liberty Inc. d/b/a Loch Raven Gulf, that alleges facts and legal
authority sufficient to justify the imposition of a No-Tobacco-Sale Order against
Respondent for a period of 30 consecutive calendar days.

During the course of these administrative proceedings, Respondent repeatedly failed to
comply with orders and directives and failed to defend its case. Furthermore,
Respondent’s misconduct has interfered with the speedy and orderly conduct of the
hearing process. 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 therefore
enter default judgment against Respondent and impose a No-Tobacco-Sale Order against
Respondent for a period of 30 consecutive calendar days.
I. Procedural History

CTP began this case by serving a Complaint on Respondent on August 7, 2017. The
Complaint alleges that Respondent’s staff impermissibly sold cigarettes or smokeless
tobacco to minors and failed to verify that the purchasers were of sufficient age, thereby
violating the Federal Food, Drug, and Cosmetic Act (the Act), 21 U.S.C. § 301 et seq.,
and its implementing regulations, Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140.
CTP seeks a No-Tobacco-Sale Order against Respondent for a period of 30 consecutive
calendar days.

In the Complaint and accompanying cover letter, CTP explained that within 30 days,
Respondent should file an answer or request an extension of time within which to file an
answer. CTP warned Respondent that if it failed to take one of these actions within 30
days an Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial
decision imposing a No-Tobacco-Sale-Order against Respondent. Respondent failed to
file an answer to the Complaint. Accordingly, on September 28, 2017, I issued an Initial
Decision and Default Judgment against Respondent in the form of a No-Tobacco-Sale
Order for a period of 30 consecutive calendar days. See CTP v. US Liberty Inc. d/b/a
Loch Raven Gulf , DAB No. TB1999 (2017).

On October 27, 2017, before the Initial Decision and Default Judgment became final and
binding upon the parties, 21 C.F.R. § 17.11(b), our office received Respondent’s Motion
to Reopen. Absent objection from CTP, I found that extraordinary circumstances
prevented Respondent from timely filing an answer. On November 3, 2017,! I granted
Respondent’s motion, withdrew my September 28, 2017, Initial Decision and Default
Judgment, Decision No. TB1999, and I granted Respondent an opportunity to answer
CTP’s Complaint pursuant to 21 C.F.R. § 17.11(d). On December 4, 2017, Respondent
filed an answer to CTP’s Complaint, within the time I permitted. On December 6, 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).

In accordance with the deadlines set forth in the APHO, CTP served Respondent with its
Request for Production of Documents on December 20, 2017. On January 26, 2018, CTP
filed a Motion to Compel Discovery asserting that Respondent had not responded to its
discovery request. By Order of January 29, 2018, I informed Respondent that it had until
February 12, 2018, to file a response to CTP’s Motion to Compel Discovery. 21 C.F.R.

§ 17.32(c). Respondent did not respond.

' Although the order was dated November 4, 2017, it was issued on November 3, 2017.
Accordingly, on February 15, 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 February 26, 2018. I warned Respondent that:

[F]ailure to comply may result in sanctions which may
include striking its filings and issuing an Initial Decision and
Default Judgment finding Respondent liable for the violations
listed in the Complaint and imposing the requested No-
Tobacco-Sale order. 21 C.F.R. § 17.35.

Emphasis in original.

On March 6, 2018, CTP filed a Motion to Impose Sanctions. CTP advised that
Respondent had not complied with my Order to Compel Discovery. CTP requested that I
strike Respondent’s answer and issue a default judgment in its favor. On March 7, 2018,
at my direction, Respondent was advised that it had until March 21, 2018, to file a
response to CTP’s Motion to Impose Sanctions.” Again, Respondent was warned that if
it failed to file a response, I “may grant CTP’s Motion to Impose Sanctions in its
entirety.” Respondent did not respond.

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).

Respondent failed to comply with the following orders and procedures governing this
proceeding:

e Respondent failed to respond to CTP’s December 20, 2017, Request for
Production of Documents within 30 days in violation of 21 C.F.R. § 17.23(a) and
my December 6, 2017, APHO; and

2 Although Respondent is participating in this administrative proceeding through our
internet-based electronic case file system, I directed that a courtesy copy of this letter be
sent to Respondent by US Mail.
e Respondent failed to comply with my February 15, 2018, Order to Compel
Discovery requiring a response by February 26, 2018.

Respondent failed to defend its action despite the following opportunities:

e By Order of January 29, 2018, I informed Respondent that it had until
February 12, 2018, to file a response to CTP’s Motion to Compel Discovery.
Respondent did not defend its action.

¢ On March 7, 2018, Respondent was advised at my direction that it had until
March 21, 2018, to file a response to CTP’s Motion to Impose Sanctions.
Respondent did not defend its action.

I find that Respondent has failed to comply with orders and procedures governing this
proceeding, has failed to defend its case, and, as a result, has interfered with the speedy,
orderly, and fair conduct of this proceeding. I therefore grant CTP’s Motion to Impose
Sanctions. 21 C.F.R. § 17.35(a)(1)-(3).

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). I find Respondent’s repeated
failures to comply, despite multiple warnings, is sufficiently egregious to warrant striking
the answer and issue a decision by default, without further proceedings. 21 C.F.R.

§§ 17.35(c)(3), 17.11(a). Due to Respondent’s noncompliance, I strike Respondent’s
answer, and issue this Initial Decision and Default Judgment, assuming the facts alleged
in CTP’s complaint to be true. 21 C.F.R. §§ 17.35(c)(3), 17.11(a).

Ill. Default Decision

Striking Respondent’s answer leaves the Complaint unanswered. Therefore, I am
required to “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 No-Tobacco-Sale-
Order. 21 C.F.R. § 17.11(a). Accordingly, I must determine whether the allegations in
the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

¢ On December 17, 2014, CTP initiated the first civil money penalty action, CRD
Docket Number C-15-686, FDA Docket Number FDA-2014-H-2208, against
Respondent for three* violations of 21 C.F.R. pt. 1140 within a 24-month period.
CTP alleged those violations to have occurred at Respondent’s business

3 Respondent’s original violations occurred on February 26, 2014 (selling tobacco
products to a minor and failing to verify identification).
establishment, 8623 Loch Raven Boulevard, Baltimore, Maryland 21286, on
February 26, 2014 and July 9, 2014;

e The first action concluded when an Initial Decision and Default Judgment was
entered by an Administrative Law Judge, “finding Respondent liable for the
February 26, 2014 and July 9, 2014 violations”;

¢ On July 20, 2015, CTP initiated the second civil money penalty action, CRD
Docket Number C-15-3183, FDA Docket Number FDA-2015-H-2350, against
Respondent for five violations of 21 C.F.R. pt. 1140 within a 36-month period.
CTP alleged those violations to have occurred at Respondent’s business
establishment, 8623 Loch Raven Boulevard, Baltimore, Maryland 21286, on
February 26, 2014, July 9, 2014, and April 22, 2015;4

e The second action concluded when an Initial Decision and Default Judgment was
entered by an Administrative Law Judge on September 16, 2015, “finding
Respondent liable for the April 22, 2015 violations”;

¢ On September 6, 2016, CTP initiated the third civil money penalty action, CRD
Docket Number T-16-1821, FDA Docket Number FDA-2016-H-2571, against
Respondent for six violations of 21 C.F.R. pt. 1140 within a 48-month period.
CTP alleged those violations to have occurred at Respondent’s business
establishment, 8623 Loch Raven Boulevard, Baltimore, Maryland 21286, on
February 26, 2014, July 9, 2014, and April 22, 2015; and January 12, 2016;

e The third action concluded when an Initial Decision and Default Judgment was
entered by an Administrative Law Judge on November 3, 2016, “finding
Respondent liable for the January 12, 2016 violation[]”;

e At approximately 1:44 PM on January 19, 2017, at Respondent’s business
establishment, 8623 Loch Raven Boulevard, Baltimore, Maryland 21286, an
FDA-commissioned inspector documented Respondent’s staff selling a package of
Newport Box 100s 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 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

4 Although the Complaint states that the inspection was conducted on April 22, 2014, it
subsequently states, and it is clear from the record that the inspection was conducted on
April 22, 2015. See Complaint {ff 1, 10, 12(a)-(b).
if sold or distributed in violation of regulations issued under section 906(d) of the Act.

21 U.S.C. § 387c(a)(7)(B); 21 C.F.R § 1140.1(b). The Secretary of the U.S. Department
of Health and Human Services issued the regulations at 21 C.F.R. pt. 1140 under section
906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225,
13,229 (Mar. 19, 2010); 81 Fed. Reg. 28,974, 28,975-76 (May 10, 2016). Under

21 C.F.R. § 1140.14(a)(1),° no retailer may sell tobacco products 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 tobacco
product purchasers are younger than 18 years of age.

Taking the above alleged facts as true, Respondent had seven repeated violations of
regulations found at 21 C.F.R. pt. 1140 within a 36-month period. Respondent 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), on February 26, 2014, and repeated those
violations on July 9, 2014, April 22, 2015, January 12, 2016, and January 19, 2017.
Respondent also 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), on
February 26, 2014, and repeated those violations on July 9, 2014, April 22, 2015, and
January 19, 2017. Therefore, Respondent’s actions constitute violations of law that merit
a No-Tobacco-Sale Order.

Under 21 U.S.C. § 333(£)(8), a No-Tobacco-Sale Order is permissible for seven repeated
violations of the regulations found at 21 C.F.R. pt. 1140. The maximum period for the
first No-Tobacco-Sale Order received by a retailer is 30 consecutive calendar days. See
Pub. L. 111-31, div. A, title I, § 103(q)(1)(A), June 22, 2009, 123 Stat. 1838, 1839; Food
& Drug Admin., Determination of the Period Covered by a No-Tobacco-Sale Order and
Compliance with Order at 3-4, available at https://www.fda.gov/downloads/
TobaccoProducts/Labeling/RulesRegulationsGuidance/UCM446547.pdf (last updated
Aug. 2015); Civil Money Penalties and No-Tobacco-Sale Orders For Tobacco Retailers
at 5-6, available at http://www.fda.gov/TobaccoProducts/Labeling/RulesRegulations
Guidance/ucm447308.htm (last updated Dec. 15, 2016).

Order

For these reasons, I enter default judgment against Respondent US Liberty Inc. d/b/a
Loch Raven Gulf, in the form of a No-Tobacco-Sale Order, 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

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

21 C.F.R. § 17.11(b), this order becomes final and binding upon both parties after
30 days of the date of its issuance.

/s/
Margaret G. Brakebusch
Administrative Law Judge


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

Center for Tobacco Products,
(FDA No. FDA-2017-H-3534)

Complainant
v.

Tower Petroleum Corporation
d/b/a BP,

Respondent.
Docket No. T-17-4665
Decision No. TB2628

Date: April 12, 2018

INITIAL DECISION

The Center for Tobacco Products (CTP) seeks to impose a civil money penalty
(CMP) against Respondent, Tower Petroleum Corporation d/b/a BP, located at
35025 Harper Avenue, Clinton Township, Michigan 48035, 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 36-month period.
Specifically, CTP alleges that Respondent violated the Act by impermissibly
selling cigarettes to minors, on three separate dates, and failing to verify, by means
of photo identification containing a date of birth, that the purchasers were 18 years
of age or older, on two of those dates.

IL. BACKGROUND AND PROCEDURAL HISTORY
CTP began this matter by serving an administrative complaint, seeking a $5,591

civil money penalty, on Respondent at 35025 Harper Avenue, Clinton Township,
Michigan 48035, and by filing a copy of the complaint with the Food and Drug
Administration’s (FDA) Division of Dockets Management. Respondent timely
answered CTP’s complaint denying the violations as alleged.

On July 20, 2017, I issued an Acknowledgment and Pre-Hearing Order setting
forth case procedures and exchange deadlines. On October 11, 2017, CTP filed its
pre-hearing exchange, which included an Informal Brief of Complainant, and 14
exhibits (CTP Ex. 1-14). The 14 exhibits included the direct testimony, in the form
of declarations, for two witnesses — Senior Regulatory Counsel Laurie Sternberg
and Inspector Justin Bishop. On October 30, 2017, Respondent filed its pre-
hearing exchange, which included an Informal Brief of Respondent (Resp.
Informal Brief) and three exhibits (Resp. Ex. 1-3). Respondent did not offer any
direct testimony.

On November 28, 2017, I held a pre-hearing conference in this case. I explained
to the parties that the sole purpose of an administrative hearing is to afford the
parties an opportunity for cross-examination of the witnesses. Respondent
communicated its desire to cross-examine Inspector Bishop. On January 10, 2018,
Theld a hearing in this case. During the course of the hearing, Respondent cross-
examined Inspector Bishop, and I admitted each party’s exhibits into evidence.

On January 30, 2018, I made the hearing transcript available to the parties and set
a March 1, 2018 deadline for the parties to submit their post-hearing briefs. CTP
did not file a post-hearing brief. Respondent timely filed its post-hearing brief
(Resp. Post-hearing Brief). As the briefing period is over, I now render my
decision.

IL. ISSUES

A. Whether Respondent BP sold cigarettes to a minor and failed to verify
that the tobacco product purchaser was of sufficient age, on April 6,
2017, in violation of 21 C.F.R. §§ 1140.14(a)(1) and 1140.14(a)(2)(i).

B. Whether the penalty amount sought by CTP is reasonable.

Il. ANALYSIS
A. Violations

CTP determined to impose a civil money penalty against Respondent pursuant to
the authority conferred by the 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
USS.C. § 331(k). FDA and its agency, CTP, may seek civil money penalties from
any person who violates the Act’s requirements as they relate to the sale of
tobacco products. 21 U.S.C. § 331(£)(9). The sale of tobacco products to an
individual who is under the age of 18 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)().

CTP alleges that Respondent committed five violations of the Act and its
implementing regulations within a 36-month period. Complaint at 1. Specifically,
CTP alleges that, on April 6, 2017, Respondent sold cigarettes to a minor and
failed to verify, by means of photo identification containing a date of birth, that the
purchaser was 18 years of age or older. Jd. at 4. The complaint also alleges that
Respondent previously admitted to three violations of regulations found at 21
C.F.R. pt. 1140. Jd. at 4-5. CTP’s case against Respondent rests on the
testimonies of Ms. Sternberg and Inspector Bishop, and the corroborating
evidence.

Inspector Bishop is an FDA-commissioned officer with the state of Michigan
whose duties include determining a retailer’s compliance with the age

and photo identification requirements relating to the sale of tobacco products.
CTP Ex. 4 at 1-2. His inspections entail accompanying trained undercover minors
who attempt to purchase tobacco products from retail establishments such as the
one operated by Respondent. Id.

Inspector Bishop testified that on April 6, 2017, he and a minor conducted a
follow-up undercover buy compliance check inspection at Respondent’s place of
business, located at 35025 Harper Avenue, Clinton Township, Michigan 48035.
Id. at 2. Before the inspection, Inspector Bishop confirmed that the minor
possessed his/her true and correct photographic identification and that the minor
did not have any tobacco products in his/her possession. Id. 2-3.

Inspector Bishop parked his car near Respondent’s establishment. He watched the
minor enter Respondent’s establishment first, and he entered the establishment
moments after. Jd. at 3. He took a position where he had a clear, unobstructed
view of the sales counter and the minor. Jd. Inspector Bishop observed the
employee of the establishment sell the minor a package of cigarettes. Jd. He also
observed that prior to the purchase the minor did not present any identification to
the employee. /d. After the transaction, Inspector Bishop and the minor returned
to the vehicle where immediately upon entering, the minor handed the inspector
the package of cigarettes. Jd. Inspector Bishop observed that the package of
cigarettes were Marlboro cigarettes. Jd. Inspector Bishop processed the evidence
according to procedure and completed a narrative report. Jd.

Ms. Sternberg, Senior Regulatory Counsel for CTP’s Office of Compliance and
Enforcement, testified that the Marlboro brand cigarettes purchased during the
April 6, 2017 inspection, were manufactured or processed for commercial
distribution at facilities in Virginia. CTP Ex. 3 at 2-3. The manufacturer of
Marlboro brand cigarettes does not have any production facilities in Michigan,
where the cigarettes were purchased. Id. at 3.

Respondent has denied the allegations arguing that it “did not purposely or
intentionally sell tobacco to a minor.” Resp. Post-hearing Brief at 1. 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. A violation of §1140.14(a)(1) only requires
that a sale to a minor occurred, and does not take into account a retailer’s intent to
determine liability. Here, Respondent does not dispute that a sale to a minor
occurred but argues that its clerk “thought the purchaser was at least 27 years old,
so she did not think that an ID was necessary.” Under 21 C.F.R.

§ 1140.14(a)(2)(i), retailers must verify, by means of photographic identification
containing a purchaser’s date of birth, that no cigarette or smokeless tobacco
purchasers are younger than 18 years of age. This verification is not required for
any person over the age of 26. Section 1140.14(a)(2)(i) is purely objective, it does
not consider a retailer’s subjective inquiry about the appearance of tobacco
product purchasers.

Respondent further argues that “it is unfair to charge a violation for both selling to
a minor and failing to ask for ID as if they were two separate incidents.” Resp.
Post-hearing Brief at 2. CTP’s method of calculating the number of violations is
permissible under the regulations. See Orton Motor, Inc. d/b/a Orton’s Bagley v.
United States Department of Health and Human Services, No. 16-1299, WL
1386141, (D.C. Cir. Mar. 20, 2018).

Respondent has not offered any evidence or testimony to rebut CTP’s allegations,
or refute the sworn testimony of Inspector Bishop and Ms. Sternberg that it sold
tobacco products to a minor and failed to verify the minors’ identification on
April 6, 2017. As a result, I find that the facts as outlined above establish
Respondent Tower Petroleum Corporation d/b/a BP is liable for five (5) violations
under the Act.

B. Civil Money Penalty

Pursuant to 21 U.S.C. § 333(f)(9), Respondent Tower Petroleum Corporation d/b/a
BP 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, $5,591, against Respondent for five
violations of the Act and its implementing regulations within a 36-month period.
Complaint § 1-2.
I find that Respondent committed five violations of the Act and its implementing
regulations within a 36-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

I find that Respondent committed three violations of selling tobacco products to
minors, and two violations for failing to verify, by means of photo identification
containing a date of birth, that the purchasers were 18 years of age or older. The
repeated inability of Respondent to comply with federal tobacco regulations is
serious in nature and the civil money penalty amount should be set accordingly.

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

Respondent has stated that the penalty amount is too high. Answer at 2.
However, Respondent has not presented any evidence that it does not have the
ability to pay the $5,591 Civil Money Penalty sought by CTP.

ec. History of Prior Violations

The current action is the second civil money penalty action that CTP has brought
against Respondent. On January 10, 2017, CTP initiated a previous CMP action,
CRD Docket Number T-17-1305, FDA Docket Number FDA-2016-H-4464,
against Respondent for three violations of 21 C.F.R. pt. 1140 within 24-month
period. Complaint at 4-5. 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. Jd. While Respondent has
already paid a civil money penalty for its previous violations, its continued
inability to comply with the federal tobacco regulations calls for a more severe
penalty.

d. Degree of Culpability
I find that Respondent committed the five violations as alleged in complaint, and I

hold it fully culpable for all five violations of the Act and its implementing
regulations.
e

Additional Mitigating Factors

Respondent has not expressed any remorse for its repeated violations and has
suggested that the violations should be directed to its employees, and not the

business owner.

Resp. Informal Brief at 4. Respondent states “[w]hen an

employee violates the law it is the business that suffers and there is nothing that
occurs to the person that actually violated the law. Resp. Post-Hearing Brief at 1.
Though I understand Respondent cannot be at its business all the time, it is
Respondent’s responsibility to assure its employees comply with the law.

It appears Respondent recognizes this responsibility as it conducts employee

training and hold

Is weekly meetings to assure employees are aware that they are

not to sell tobacco products to minors. Resp. Informal Brief at 2. Respondent also
has established procedures to “educate our employee to check ID and card every
customer.” Answer at 2. Respondent assured that it will “continue to train my
employees to prevent the sale of tobacco to minors, and I will look for new ways

to help prevent t

Though Respond

e sale of tobacco to minors.” Resp. Post-Hearing Brief at 1.

ent’s attempts to train employees and deter tobacco sales to

minor are commendable, they have been ineffective, and I do not find any

mitigating factor:

s. 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. Because this is Respondent’s second CMP action,

and Respondent

as had ample opportunity to correct its violations and come into

compliance, I find that a civil money penalty of $5,591 is appropriate.

IV. PENALTY

Based on the foregoing reasoning, I find a penalty amount of $5,591 to be

appropriate unde

Vv. CONCLUSION

Pursuant to 21 C

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

-F.R. § 17.45, I enter judgment in the amount of $5,591 against

Respondent, Tower Petroleum Corporation d/b/a BP, 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 36-month period.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2017-R-6098)

Complainant,
v.

Alkathi, Inc.
d/b/a Spirit,

Respondent.
Docket No. T-18-102
Decision No. TB2602

Date: April 6, 2018

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Alkathi, Inc. d/b/a Spirit, that alleges facts and legal authority
sufficient to justify imposition of a No-Tobacco-Sale Order against Respondent for a
period of 30 consecutive calendar days. Respondent, through counsel, filed an answer to
the Complaint, but has failed to comply with multiple judicial directions and orders
during the administrative proceedings. | therefore strike Respondent’s answer and issue
this decision of default judgment.

I. Procedural History

Respondent timely answered CTP's Complaint opposing the No-Tobacco-Sale Order and
requested a hearing. On November 17, 2017, I issued an Acknowledgment and Pre-
Hearing Order that explained to the parties what they must do to present evidence and
arguments in this case. 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 December 18, 2017. I further explained that “a party receiving such a request
must provide the requested documents no later than 30 days after the request has been
made.” As part of the discovery process, CTP served a Request for Production of
Documents (RFP) on Respondent on December 7, 2017.

On January 24, 2018, 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 January 24, 2018, CTP also filed a Motion to Extend Deadlines. A
February 2, 2018 letter issued by my direction allowed Respondent until February 9,

2018 to file a response to CTP’s motion to compel discovery. On February 2, 2018, I
also issued an Order that extended the parties’ pre-hearing exchange deadlines.

On February 12, 2018, 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 directed Respondent to comply with CTP’s RFP by February 28, 2018. I
warned that “[flailure 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 ....”' The February 12, 2018 Order also extended the parties’ pre-hearing
exchange deadlines.

On March 5, 2018, CTP filed a Motion to Impose Sanctions advising me that Respondent
had not complied with my February 12, 2018 Order and asking me to strike the
Respondent’s answer and issue a default judgment in this case. In a March 8, 2018 letter
issued by my direction, Respondent was given until March 20, 2018 to file a response to
CTP’s motion. The March 8, 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.

Il. Striking Respondent’s Answer

As outlined above, Respondent has repeatedly failed to comply with my Orders or
otherwise participate in the defense of its case. See 21 C.F.R. § 17.35(a). Specifically,
Respondent has not complied with the deadline set forth in the Acknowledgment and Pre-
Hearing Order for responding to any discovery request, or the order granting CTP's
motion to compel discovery issued on February 12, 2018. Further, I note that
Respondent did not avail itself of the opportunity to respond to CTP’s motion to impose
sanctions pursuant to the letter issued at my direction on March 8, 2018. 21 C.F.R.

§ 17.35(a)(2) provides that, in addition to a party’s failure to comply with an order,
subpoena, rule, or procedure governing the proceedings, a presiding officer may impose

'T note that the February 12, 2018 Order inadvertently referenced imposition of “a civil
money penalty.” It should correctly reference imposition of “a no-sale-tobacco order.”
See February 12, 2018 Order at 2.
sanctions for a party’s failure to prosecute or defend an action. Respondent has not only
failed to act in response to my orders of November 17, 2017 and February 12, 2018,
Respondent has failed to take any action in response to CTP’s motions, or to otherwise
defend its November 13, 2017 answer. Therefore, sanctions are appropriate in this case.
The issue is whether CTP’s proposed sanction — striking Respondent’s answer and
issuing a default judgment — is the appropriate one. The harshness of the sanctions I
impose upon either party must relate to the nature and severity of the misconduct or
failure to comply. I find here that Respondent's repeated failure to comply is sufficiently
egregious to warrant striking the answer and issuing a decision without further
proceedings. See 21 C.F.R. § 17.35(b).

Accordingly, I am striking Respondent’s answer, issuing this default judgment, and
assuming the facts alleged in CTP’s Complaint to be true. 21 C.F.R. § 17.1 1(a).

Ill. Default Decision

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

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

e On November 19, 2015, CTP initiated its first civil money penalty action, FDA
Docket Number FDA-2015-H-4181, against Respondent for three? violations of 21
C.F.R. pt. 1140 within a 24-month period. CTP alleged those violations to have
occurred at Respondent's business establishment, 15303 Fenkell Street, Detroit,
Michigan 48227, on June 28, 2014, and August 3, 2015;

e The first action concluded when Respondent admitted the allegations contained in
the Complaint issued by CTP, and paid the agreed upon monetary penalty in

2 Two violations were documented on June 28, 2014, and two on August 3, 2015. When
determining the number of violations for a civil money penalty, CTP counted the
violations at the initial inspection as a single violation, and all subsequent violations as
separate individual violations, in accordance with customary practice. When determining
the number of violations for a No-Tobacco-Sale Order, CTP counted both the June 28,
2014 violations (sale to a minor and failure to verify identification) as Respondent’s
original violations.
settlement of that claim. Further, “Respondent expressly waived its right to
contest such violations in subsequent actions”;

e On September 19, 2016, CTP initiated its second civil money penalty action, CRD
Docket Number T-16-1891, FDA Docket Number FDA-2016-H-2660, against
Respondent for two additional violations of 21 C.F.R. pt. 1140. CTP alleged those
violations to have occurred at Respondent's business establishment, 15303 Fenkell
Street, Detroit, Michigan 48227, on February 20, 2016;

e The second action concluded when an Initial Decision and Default Judgment was
entered by the administrative law judge, “finding Respondent liable for the
February 20, 2016 violations”;

e At approximately 12:39 PM on June 16, 2017, at Respondent's business
establishment, 15303 Fenkell Street, Detroit, Michigan 48227, an FDA-
commissioned inspector documented Respondent's staff selling a package of
Marlboro Gold Pack 100’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.

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 sold or distributed in violation of regulations issued under section 906(d) of the Act.

21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The Secretary of the U.S. Department
of Health and Human Services issued the regulations at 21 C.F.R. pt. 1140 under section
906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C. § 387£(d)(1); 75 Fed. Reg. 13,225,
13,229 (Mar. 19, 2010); 81 Fed. Reg. 28,974, 28, 975-76 (May 10, 2016). The
regulations prohibit the sale of cigarettes or smokeless tobacco 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 photographic identification containing the purchaser's date of birth,
that no cigarette or smokeless tobacco purchaser is younger than 18 years of age. 21
C.F.R. § 1140.14(a)(2)(i).

Under 21 U.S.C. § 333(£)(8), a No-Tobacco-Sale Order is permissible for six repeated
violations of the regulations found at 21 C.F.R. pt. 1140. The maximum period of time
for the first No-Tobacco-Sale Order received by a retailer is 30 calendar days. See Pub.
L. 111-31, div. A, title I, § 103(q)(1)(A), June 22, 2009, 123 Stat. 1838, 1839; Food &
Drug Admin., Determination of the Period Covered by a No-Tobacco-Sale Order and
Compliance with Order at 3-4, available at https://www.fda.gov/downloads/Tobacco
Products/Labeling/RulesRegulationsGuidance/UCM446547.pdf (last updated Aug.
2015); Civil Money Penalties and No-Tobacco-Sale Orders For Tobacco Retailers at 5-
6, available at

http://www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/U
CM252955.pdf (last updated Dec. 15, 2016).

ORDER

For these reasons, | enter default judgment against Respondent Alkathi, Inc. d/b/a Spirit,
in the form of a No-Tobacco-Sale Order, 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 C.F.R. § 17.11(b), this order
becomes final and binding upon both parties after 30 days of the date of its issuance.

/s/
Margaret G. Brakebusch
Administrative Law Judge