Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2016-R-2796)

Complainant
v.

Atty’s Parti Expo, Inc.
d/b/a Parti Expo,

Respondent.
Docket No. T-16-1990
Decision No. TB2906

Date: July 6, 2018

DECISION

This case is before me on remand from the Department of Health and Human Services,
Departmental Appeals Board, Appellate Division (“the Board”). I have complied with
the Board’s instructions set forth in full on page 3 of this decision. After careful review
and consideration of the entire the record as presently constituted, I sustain the
determination of the Center for Tobacco Products (“CTP”) of the United States Food and
Drug Administration (“FDA”) to impose a 30-day prohibition on the sale of tobacco
products, No-Tobacco-Sale-Order (““NTSO”), against Respondent Atty’s Parti Expo, Inc.
d/b/a Parti Expo. Accordingly, I again impose an NTSO against Respondent Parti Expo
for a period of 30 calendar days, for five repeated violations of federal tobacco
regulations over a period of 36 months.

I. Background and Procedural History

On September 26, 2016, CTP filed an administrative complaint against Respondent
alleging that Respondent’s staff impermissibly sold tobacco products to minors and failed
to verify that tobacco product 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. The
complaint likewise alleges that Respondent Parti Expo previously admitted to violations
of regulations found at 21 C.F.R. pt. 1140.

On October 19, 2016, Respondent’s counsel timely filed an Answer to Complaint and
Request for Hearing (““Answer’”). On November 15, 2016, I issued an Acknowledgment
and Pre-Hearing Order (“APHO”) that set out the deadlines for the parties’ submissions
in this case, and informal briefs for the parties to submit.

On April 7, 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
twenty-five numbered exhibits. CTP’s exhibits included the declarations of two
witnesses. On May 1, 2017, Respondent filed its pre-hearing exchange. Respondent’s
pre-hearing exchange included an Informal Brief, a list of proposed witnesses and
exhibits, and seven exhibits marked A-G. Respondent’s exhibits included a document
entitled “Johnny Atty Statement.” Respondent described that statement in its proposed
witness list as “Sworn Statement by Johnny Atty,” and on the electronic docket as
“Exhibit C-Sworn Statement by Johnny Atty.”

On May 17, 2017, CTP filed a Motion to Exclude Evidence not Exchanged in
Accordance with 21 C.F.R. §§ 17.25 and 17.37(b) (“Motion to Exclude Evidence”). In
that motion, CTP asked that I exclude the testimony of two of Respondent’s proposed
witnesses, Muhsin Atty and Issam Atty, because Respondent failed to include their sworn
statements with its exchange. On May 24, 2017, Respondent filed an opposition to
CTP’s motion.

Prehearing Conference and Hearing

On June 9, 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 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. Respondent’s counsel communicated his desire to cross-
examine only one of CTP’s witnesses, Inspector Timothy Shafto, and declined to cross-
examine Ms. Laurie Sternberg. CTP’s counsel communicated her desire to cross-
examine Mr. Johnny Atty.

During the prehearing conference, I also informed the parties of my ruling on the
arguments presented in CTP’s May 17, 2017 Motion to Exclude Evidence, and
Respondent’s May 24, 2017 opposition. I noted that Respondent’s exchange only
included “written testimony under oath from one witness, Johnny Atty, the third co-
owner of the business, and none from the two other co-owners who were named on
Respondent’s witness list.” Accordingly, I ruled that Mr. Johnny Atty was the only
witness for Respondent eligible to appear at the hearing. On June 14, 2017, I

memorialized my ruling in an order scheduling a hearing and granting CTP’s Motion to
Exclude Evidence.

On August 17, 2017, I held a hearing in during which I admitted the parties’ exhibits.
Respondent’s counsel cross-examined Inspector Shafto. See Hearing Transcript at 10-40.
CTP then conducted a redirect examination of Inspector Shafto. See Hearing Transcript
at 40-45. Although I administered the oath to Inspector Shafto and Mr. Atty, CTP’s
Counsel declined to cross-examine Mr. Atty.

On September 8, 2017, I informed the parties that the Court had received the transcript of
the hearing, and set the deadline of October 5, 2017, for the parties’ post-hearing brief
submissions. Respondent filed a post-hearing brief (“Respondent’s Post-hearing Brief”).

Initial Decision and Appeal

On November 30, 2017, I issued an Initial Decision imposing a No-Tobacco-Sale Order
against Respondent Parti Expo for a period of 30 consecutive calendar days, for five
repeated violations of federal tobacco regulations over a period of 36 months. In the
Initial Decision, I noted that Mr. Johnny Atty’s statement is not, in fact, a “sworn
statement,” but rather, an offer to provide one. See Initial Decision at 3 n. 3.
Accordingly, I declined to accord it the same weight as a written declaration that is
“signed by a witness under penalty of perjury for false testimony.” Jd. at 9. Respondent
appealed the Initial Decision.

On May 24, 2018, the Board issued a Remand of Administrative Law Judge Decision
(“Remand Decision”). While the Board did not “reach the merits” of the Initial Decision,
see Remand Decision at 1, the Board explained:

We conclude that the ALJ’s inconsistent treatment of the Atty statement was
harmful error because it “affect[ed] the substantial right” of Parti Expo to a
fair hearing and it would “be inconsistent with substantial justice” for the
Board to decline to act to remedy this error. 21 C.F.R. § 17.48. Accordingly,
we have decided to remand the case to the ALJ with instructions to provide
Parti Expo with an opportunity to refile a statement of Johnny Atty (with the
same text as the statement currently in the record as Respondent exhibit C)
that complies with 21 C.F.R. §§ 17.25(a), 17.37(b) and the ALJ’s APHO.
Assuming Parti Expo uses this opportunity, the ALJ shall then determine
whether the refiled statement meets the requirements of 21 C.F.R. §§
17.25(a), 17.37(b) and the ALJ’s APHO. If the ALJ concludes that the
refiled statement does meet those requirements, she shall conduct such
further proceedings as necessary to reach a decision that treats the statement
as written direct testimony, weighs it against the other evidence of record and
is otherwise consistent with “substantial justice.”
Remand Decision at 9 (footnotes omitted). On May 30, 2018, I issued an order allowing
Respondent until June 8, 2018, to refile a statement of Johnny Atty, as specified in the
Remand Decision. On June 8, 2018, Respondent’s Counsel filed a Declaration of Johnny
Atty, Co-Owner of Artty’s Parti Expo and the Johnny Atty Statement (“Atty
Declaration”).

I. Issues

A. Whether the Atty Declaration meets the requirements of 21 C.F.R. §§ 17.25(a),
17.37(b) and the November 15, 2016 APHO.

B. Whether the evidence on the record, including the Atty Declaration, supports a
finding that Respondent sold tobacco products to a minor and failed to verify that
the tobacco product purchaser was of sufficient age on November 13, 2015, in
violation of 21 C.F.R. § 1140.14(a)(1) and 21 C.F.R. § 1140.14(a)(2)(i).

C. Whether the NTSO for a period of 30 calendar days is reasonable.
Til. Analysis

A. Atty Declaration

I find that the June 8, 2018 Atty Declaration meets the requirements of 21 C.F.R.

§§ 17.25(a), 17.37(b) and the November 15, 2016 APHO. At the prehearing conference
and hearing, the court understood the Johnny Atty Statement to be a sworn declaration
because it was described as “Exhibit C-Sworn Statement by Johnny Atty.” The court
became aware of the oversight during a final review of the evidence on the record prior to
issuing the decision and noted it in the Initial Decision. See Initial Decision at 3 n.3.

Under 21 C.F.R. § 17.25(a), “[a]t least 30 days before the hearing . . . the parties shall
exchange witness lists, copies of prior written statements of proposed witnesses, and
copies of proposed hearing exhibits, including written testimony.” Under 21 C.F.R.

§ 17.25(a). The regulations further provide:

Direct testimony shall be admitted in the form of a written declaration
submitted under penalty of perjury. Any such written declaration must be
provided to all other parties along with the last known address of the witness.
Any prior written statements of witnesses proposed to testify at the hearing
shall be exchanged as provided in §17.25(a).

21 C.F.R. § 17.37(b). My November 15, 2016 APHO contained instructions regarding a
party’s submission of written direct testimony, including the following:

A party must exchange as a proposed exhibit the complete written direct
testimony of any proposed witness. Generally, I will accept that witness’
written direct testimony as a statement in lieu of in-person testimony. A
witness statement must be submitted in the form of a written declaration
that is signed by the witness under penalty of perjury for false testimony.
See 21 C.F.R. § 17.25(a), 17.37(b).

APHO 49. I find that the Atty Declaration appears to contain the same text as the
statement currently in the record as Respondent Exhibit (Ex.) C. Because Respondent
attached the statement to a declaration signed by Mr. Johnny Atty under penalty and
perjury for false testimony, I hereby admit the Atty Declaration as written direct
testimony in lieu of in-person testimony.! See APHO 4 9.

B. Alleged Violations and Evidence on the Record

After according the Atty Declaration the same weight as written direct testimony and
weighing it against the other evidence of the record, I find that Respondent failed to
provide sufficient evidence to refute CTP’s evidence. The Board did not make a finding
regarding my treatment of CTP’s evidence or my determinations regarding the credibility
or weight to be “accorded either party’s evidence.” Remand Decision at 9. Accordingly,
the factual findings in the Initial Decision are incorporated herein and I will restate or
refer to the Initial Decision as appropriate.

Current Allegations

This is the third enforcement complaint filed by CTP against Respondent. Respondent
has conceded that the past violations occurred. Answer {J 12-14; Initial Decision at 4,
10, 11-12. The two prior complaints are administratively final and uncontested.

CTP alleges that Respondent committed five repeated violations of the Act and its
implementing regulations over a 36-month period. See Complaint § 1. CTP states that it
did not include any repeated violations that occurred outside of the 36-month period or
any violations of other Act sections that are not at issue in this case. Id. n.1.

Specifically, CTP alleged that at approximately 2:07 p.m. on November 13, 2015, at
Respondent’s business establishment, 15201 West 7 Mile Road, Detroit, Michigan
48235, 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.
Complaint § 10; see Informal Brief of Complainant at 3. 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. Jd.

Respondent’s Rebuttal

Respondent denied the “allegations stated in the Complaint, including the latest alleged
violation.” Answer {J 1, 10, 15. Respondent also denied having violated the enumerated
statutes “in a manner that authorizes the FDA to impose the NTSO.” Answer § 2-7.

' CTP declined to cross-examine Mr. Atty during the hearing and the Board did not
require a new hearing. See Remand Decision at 9 n.9.
Respondent declined to admit or deny that an “FDA -commissioned inspector conducted
an inspection of Parti Expo on [November 13, 2015], as no notification of inspection was
provided that day, nor was any notice of violation.”? Answer § 10. Respondent admits
that it has been the subject of two prior CTP Civil Money Penalty (“CMP”) actions based
on its violations of the Act; and appears to concede that the record is correct “regarding
any past violations and previous settlements.” Answer {fj 12-14.

Respondent has submitted the Atty Declaration for consideration “as rebuttal and counter
evidence.” See Respondent’s Post-Hearing Brief VII. In the Atty Declaration, Mr. Atty
testified that his business provides strict training to employees to prevent unlawful
alcohol and tobacco sales and that his business has signs all over the store to reinforce
this policy. Mr. Atty denies that the November 13, 2015 violations occurred because no
one that worked in the store then or at the time of the statement has a beard. Mr. Atty
testified that he requires the employees to shave their face clean at all times. Mr. Atty
testified that he reviewed the footage and that he did not see the alleged transaction. Mr.
Atty testified that he informed his attorney that the CTP could send someone to review
the tapes. Mr. Atty testified that the video footage disappeared after about 60 days and
that he would have preserved the video if he knew that CTP would seek to impose an
NTSO. Mr. Atty stated that his attorney sent a response letter to CTP and that he
followed up with his attorney for several months to find out if his attorney had heard
from CTP. Mr. Atty testified that he received the current Complaint at the end of
September 2016, almost a year “after the ticket.” Finally, Mr. Atty testified that the
NTSO would permanently destroy his business and would embarrass them “in the
community, where [they]” have operated for over 20 years.

After a careful review of the Atty Declaration, I find that it states the same arguments and
defenses that Respondent already raised in its Answer, pre-hearing brief, Parti Expo
Letter to FDA (“Respondent’s Ex. B”), and post-hearing brief. I thoroughly addressed
the parties’ contentions in the Initial Decision. See Initial Decision at 5 -10. Mr. Atty’s
main argument in rebuttal remains “that the current violations did not occur and thus, a
30-day NTSO is inappropriate.” Initial Decision at 6. As discussed in the Initial
Decision, CTP offered the testimony of Inspector Shafto, an FDA-commissioned officer
with the Michigan Department of Health and Human Services. /d. Inspector Shafto
testified that on November 13, 2015, he, accompanied by a confidential state-contracted
minor, conducted an undercover buy portion of a follow-up compliance check inspection
at Parti Expo. Jd. at 6-7. On August 17, 2017, Respondent’s counsel cross-examined
Inspector Shafto about his written direct testimony (“Shafto Declaration”). See id. at 7. I

2 As in the Initial Decision, I note a discrepancy between Respondent’s assertion that it
did not receive any notice of violation, and Respondent’s later assertion that on
December 2, 2015, it issued a response to CTP’s November 18, 2015 Notice of
Compliance Check Inspection. See Answer at 4; Parti Expo Letter to FDA
(“Respondent’s Ex. B”).
also noted that Respondent’s counsel asked questions that were outside the scope of the
Shafto Declaration. Jd. at 7 n.8.

Inspector Shafto testified credibly during the hearing. While Respondent’s counsel
attempted to discredit Inspector Shafto’s testimony, I am convinced that Inspector Shafto
testified truthfully about his November 13, 2015 documented observations. See Initial
Decision at 7-9. I find the Atty Declaration to be a reiteration of Respondent’s arguments
and defenses presented elsewhere on the record. I stand by the analysis, findings of fact,
and NTSO penalty determination that I made in the Initial Decision. See Initial Decision
at 7-12. Even after admitting the Atty Declaration into evidence and giving it the
appropriate weight, I find that Respondent failed to rebut the sworn testimony of
Inspector Shafto and CTP’s corroborating evidence. Accordingly, I find that CTP has
established that on November 13, 2015, Respondent Atty’s Party Expo, Inc. d/b/a Parti
Expo, sold tobacco products to a minor and failed to verify that the tobacco product
purchaser was of sufficient age, and Respondent is therefore liable under the Act. For
these and the reasons previously set forth in the November 30, 2017 Initial Decision, I
find that an NTSO is an appropriate penalty.

IV. Conclusion

For these reasons, I hereby impose a No-Tobacco-Sale Order against Respondent Atty’s
Parti Expo, Inc. d/b/a Parti Expo, 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/
Catherine Ravinski
Administrative Law Judge


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

Center for Tobacco Products,
Complainant

v.
Beach Steil Inc.
d/b/a 7-Eleven Store 32781,

Respondent.

Docket No. T-17-2221
FDA Docket No. FDA-2017-H-0835

Decision No. TB2866

Date: July 6, 2018

DECISION
Found:
1) Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(a)(1)! on February 1, 2016, and August 15, 2016, as charged in
the complaint; and
2) Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(a)(2)(i) on August 15, 2016, as charged in the complaint; and
3) Respondent committed three (3) violations in a twenty-four (24) month
period as set forth hereinabove; and
4) Respondent is hereby assessed a civil money penalty in the amount of
$275.
Glossary:
ALJ administrative law judge”
CTP/Complainant Center for Tobacco Products
FDCA Federal Food, Drug, and Cosmetic Act (21 U.S.C.A. Chap. 9)

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

FDA Food and Drug Administration

HHS Dept. of Health and Human Services

OSC Order to Show Cause

PO Procedural Order

POS UPS Proof of Service

Respondent Beach Steil Inc. d/b/a 7-Eleven Store 32781

TCA The Family Smoking Prevention and Tobacco Control Act,

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

L 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 17.3

Il. PROCEDURAL BACKGROUND.

The Center for Tobacco Products (CTP/Complainant) filed a complaint dated
February 13, 2017, alleging that the FDA documented three (3) violations within a
twenty-four (24) month period. CTP seeks a civil money penalty in the amount of $550.

Beach Steil Inc., d/b/a 7-Eleven Store 32781 (Respondent) was served with
process on February 23, 2017, and Respondent filed an answer on March 22, 2017.
Respondent admitted that it owns 7-Eleven Store 32781, which sells tobacco products,
and it acknowledged that the Compliance Check Inspections occurred. Answer {ff 5-8.

However, Respondent “denie[d] that the alleged violations giving rise to such actions

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

2
ever took place,” and, alternatively, asserted several affirmative defenses. Answer at {J
6, 8.

I conducted a hearing on March 6, 2018. The parties filed post-hearing briefs on
May 18, 2018.

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

Il. BURDEN OF PROOF

As the petitioning party, CTP has the burden to prove, by a preponderance of the

evidence, that Respondent is liable and that the proffered penalty is appropriate. 21

C.F.R. § 17.33.

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

2. Ifso, is a civil money penalty in the amount of $550 appropriate?

VI. ALLEGATIONS

A. Complainant’s recitation of facts

In its complaint, CTP alleged that Respondent owns an establishment doing
business under the name 7-Eleven Store 32781, located at 6100 Daniels Parkway, Fort

Myers, Florida 33912. CTP also alleged that Respondent’s establishment received
tobacco products in interstate commerce and held them for sale after shipment in
interstate commerce.
CTP’s complaint further alleged that on February 11, 2016, CTP issued a Warning
Letter to Respondent, alleging that Respondent committed the following violation:
a. Selling tobacco products to a minor, in violation of 21 C.F.R.
§ 1140.14(a)(1). Specifically, a person younger than 18 years of age was
able to purchase a package of Newport Box cigarettes on February 1, 2016,
at approximately 6:50 PM.
During a subsequent inspection of 7-Eleven Store 32781, an FDA-commissioned
inspector documented the following violations:
a. Selling tobacco products to a minor, in violation of 21 C.F.R.
§ 1140.14(a)(1). Specifically, a person younger than 18 years of age was
able to purchase a package of 305’s Full Flavor King’s cigarettes on August
15, 2016, at approximately 7:50 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(a)(2)(i). Specifically, the minor’s
identification was not verified before the sale, as detailed above, on August

15, 2016, at approximately 7:50 PM.
B. Respondent’s recitation of facts

In its answer, Respondent admitted that it owns an establishment that does
business under the name 7-Eleven Store 32781, and that it is located at 6100 Daniels
Parkway, Fort Myers, Florida 33912. Answer at 2. Respondent also admitted that it
receives tobacco products in interstate commerce, including 305’s Full Flavor Kings
cigarettes and Newport Box cigarettes, and holds them for sale. Jd. Respondent further
admitted that CTP issued the Notices of Compliance Check Inspection on February 3,
2016, and August 17, 2016, but it denied that all of the alleged violations occurred. Id.

Respondent further offered twelve affirmative defenses in its answer. Id. at 3-4.

VIL. 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 (CFR).
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 CF.R. Part 1140 (2015); 21 U.S.C. § 387f(d)(1) (2012). Accordingly, 21 C.F.R.

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

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

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

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

§ 333 note and 21 C.F.R. § 17.2. Under current FDA policy, the first time FDA finds
6
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.
If FDA finds violations on subsequent occasions, it will count violations of specific
regulatory requirements individually in computing any civil money penalty sought. This
policy is set forth in detail, with examples to illustrate, at U.S. Food & Drug Admin.,
Guidance for Industry and FDA Staff, Civil Money Penalties and No-Tobacco-Sale
Orders for Tobacco Retailers, Responses to Frequently Asked Questions (Revised)
(2015), available at

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

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

that the FDCA permits multiple violations where multiple regulations were breached. Jd.
at 14. The regulations authorize the FDA to impose penalties for each violation of the
tobacco sale restrictions arising during a single inspection. Jd. at 11.
VII. HEARING
A hearing was held on March 6, 2018, by telephone. Michael D. Helbing,
Esquire, appeared on behalf of Complainant, and Alaina B. Karsten, Esquire, appeared on

behalf of Respondent.

IX. SUMMARY OF TESTIMONY AND EVIDENCE
i. Complainant’s case
Complainant submitted CTP Exhibits 1-37, which included photos, witness
testimony, and two videos.* Respondent did not object to the admission of any of
Complainant’s exhibits. I admit Complainant’s Exhibits 1 through 37, inclusive.
Complainant also presented Witnesses, Eric Galloway and Daryl Sherley, for cross-

examination during the hearing on March 6, 2018.

a. Inspector Eric Galloway
Complainant provided the written direct testimony of Witness Eric Galloway, the
FDA-commissioned Inspector who conducted the inspection of Respondent’s
establishment on February 1, 2016, as CTP Ex. 5. During the hearing, Respondent’s

counsel cross-examined Mr. Galloway.

4 These videos were submitted to CTP by Respondent during discovery and document
the February 1, 2016 investigation of Respondent’s establishment. See CTP Ex. 37.
Pursuant to my Order dated October 27, 2017, Exhibit 37 has been sealed and marked
“Confidential — No Disclosure,” so as to protect the identity of the minor.

8
During Respondent’s cross-examination, Mr. Galloway testified regarding the
events of the February 1, 2016 Compliance Check Inspection. He stated that prior to the
inspection that day, he verified the identity of the minor who accompanied him on the
inspection by looking at the date of birth printed on the minor’s driver’s license. Hearing
Transcript (Tr.) at 9. On cross-examination, Mr. Galloway testified that the minor’s
driver’s license was issued by the state of Florida and confirmed that the minor was under
the age of 18 at the time of the inspection. /d. He could not recall whether the minor’s
identification was in the minor’s hand or in his wallet at the time of verification. Jd. Mr.
Galloway stated that he did not pat the minor down or otherwise verify that the minor did
not have an alternative form of identification which could have been used to purchase
tobacco products during the investigation. Jd. at 9-10. He further testified that prior to
the inspection on February 1, 2016, he verified that the minor did not have any tobacco

products in his possession. /d. at 14.

When asked to describe the events of the February 1, 2016 Compliance Check
Inspection, Mr. Galloway testified that he arrived at Respondent’s business establishment
to begin the inspection at approximately 6:50 PM. Tr. at 11. He stated that he parked at
a gas pump and waited in his car while the minor went into the store. Jd. at 15. Mr.
Galloway stated that he could see the sales counter and observed the transaction from the
exterior window of his vehicle, which was parked approximately 100 feet away. Jd. at
15-16. Mr. Galloway testified that after the transaction was complete, the minor returned

to his vehicle, and he then drove across the street to the hospital parking lot to take
photographs of the purchased merchandise and log the evidence of the transaction. Jd. at

22-23; see CTP Exhibits (Exs.) 9-18.

b. Inspector Daryl Sherley

Complainant provided the written direct testimony of Inspector Daryl Sherley, the
FDA-commissioned Inspector who conducted the inspection of Respondent’s
establishment on August 15, 2016, as CTP Ex. 21. During the March 6, 2018 hearing,

Respondent cross-examined Witness Daryl Sherley.

Mr. Sherley testified that prior to the inspection of Respondent’s business
establishment on August 15, 2016, he verified that the minor had photographic
identification showing the minor’s actual date of birth by examining his state-issued
driver’s license. Tr. at 30-31. He recalled that the identification was inside of the
minor’s wallet at the time of verification. Jd. He stated that he did not confirm whether
the minor had any other forms of identification in the minor’s possession, as he had no

reason to suspect that the minor had any other form of identification. Jd. at 32.

Mr. Sherley testified that the inspection on August 15, 2018, began at
approximately 7:50 PM, when he parked his vehicle in the parking lot of Respondent’s
business establishment, exited his vehicle, and accompanied the minor into the store. Id.
at 33; CTP Ex. 21 at 3. He testified that when he conducts inspections, he generally
stands approximately 10 to 15 feet from the counter so that he is able to see the store
clerk, the minor, the counter, and the point of sale system. Tr. at 35. During the
inspection on August 15, 2018, Mr. Sherley testified that he observed the minor asking

10
for and purchasing a package of cigarettes and that the clerk did not verify the minor’s
identification. /d. at 37. Mr. Sherley testified that after the inspection, both he and the
minor returned to his vehicle, where he documented the evidence and took pictures of the

cigarettes purchased by the minor. Jd. at 40-41; see CTP Exs. 25-32.
ii. Respondent’s case
Respondent submitted eleven exhibits marked 1, 2, and A through J,° which
included witness testimony, a store policy manual, and evidence of previous store-
sponsored compliance check inspection results. Complainant did not object to any of
Respondent’s exhibits. I admit Respondent’s Exhibits 1, 2, and A through J, inclusive.

Respondent also presented Witness Amanda Steil for cross-examination during the

March 6, 2018 hearing.
a. Amanda Steil

Witness Amanda Steil, Respondent’s owner, submitted written testimony as

Respondent’s Ex. 1, and CTP cross-examined Ms. Steil during the hearing.

Ms. Steil testified that in order to complete a transaction for the sale of tobacco,
the point of sale system used by her store requires that either the purchaser’s
identification be scanned or that the store clerk manually enter the purchaser’s date of
birth from the purchaser’s identification. Respondent’s (Resp.) Ex. 1 at 2. She stated
that the point of sale system will not complete a tobacco sale unless the identification of

the purchaser is verified in one of these two ways. Jd. She further testified that her store

5 Respondent purposefully omitted an Exhibit I.
11
participates in the Bars Program, wherein she pays a fee and 7-Eleven sends out
anonymous investigators to conduct age restrictive sales in order to ensure that the store

is complying with applicable laws. Jd. at 5; Tr. at 46.
b. Frank Macon

Respondent also offered the written testimony of Witness Frank Macon,
Respondent’s employee, as Respondent’s Exhibit 2. Mr. Macon testified that he was
working as an employee at Respondent’s store during the time of the inspection on
August 15, 2016. Resp. Ex. 2 at 1. Mr. Macon stated that after he was hired as an
employee, he took a computer based training course regarding tobacco sales, wherein he
learned, among other things, how to check for a purchaser’s identification and how to
determine whether the identification presented is fraudulent. Jd. He further stated that
Ms. Steil constantly reminded him of the store’s policies on tobacco restrictions, and that
“without exception,” he required a person who appeared younger than the age of 30 to
present an identification card prior to purchasing a tobacco product. Jd. at 2. Mr. Macon
maintained that he always used the store’s point of sale system in order to ring up tobacco
product purchases, and he stated that the system would not allow him to complete a
tobacco sale unless the purchaser scanned his or her identification or he manually entered
the purchaser’s date of birth into the system. Jd. He stated that after Ms. Steil notified
him of the August 15, 2016 investigation, he began asking “any and all customers for

identification if they wanted to purchase cigarettes.” Jd.

12
iii. Credibility Determinations
I find and conclude the testimony and evidence presented by both parties was
credible.
X. | ANALYSIS OF EVIDENCE AND TESTIMONY
a. Complainant’s case
Complainant offered and I admitted into evidence Exhibits 1 through 37, inclusive.
Pursuant to 21 C.F.R. § 17.33(b), in order to prevail, CTP must prove Respondent’s

liability and the appropriateness of the penalty under the applicable statute by a

preponderance of the evidence.

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

§ 14.45(b)(1).

b. Respondent’s case

Respondent offered and I admitted into evidence Exhibits 1, 2, and A through J,
inclusive. Pursuant to 21 C.F.R. § 17.33(c), Respondent must prove any affirmative

defenses and any mitigating factors by a preponderance of the evidence.

13
c. Analysis

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

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

impermissibly sold cigarettes to a minor on February 1, 2016, at

approximately 6:50 PM.

On February 1, 2016, Inspector Galloway and the confidential state-contracted
minor conducted an undercover buy compliance check inspection of Respondent’s
establishment at approximately 6:50 PM. CTP Ex. 7 at 1. Prior to beginning the day’s
inspections, Inspector Galloway confirmed that the minor possessed a driver’s license
issued by the State of Florida bearing his correct date of birth and that the minor did not
possess any tobacco products on his person before the inspection. /d.; see also CTP Ex. 6

at 1.

The inspector testified that he had a clear, unobstructed view of the service
counter from the exterior window of his vehicle, which was parked approximately 100
feet away at a gas pump. CTP Ex. 7 at 1; Tr. at 15-16. He further stated that the minor
showed the clerk his photo identification and purchased a package of Newport Box
cigarettes. CTP Ex. 7 at 1; Tr. at 16. Video evidence submitted by CTP also confirms
these events. CTP Ex. 37. I find Inspector Galloway’s testimony to be credible and
unbiased. | find that, in conjunction with the corroborating documentary evidence (e.g.
the contemporaneous report) and physical evidence (e.g. the photographs of the Newport

Box cigarettes purchased on that date), CTP has satisfied its burden of proving that

14
Respondent violated 21 C.F.R. §1140.14(a)(1) on February 1, 2016, at 6:50 PM, bya

preponderance of the evidence.

ii. Respondent did not offer sufficient evidence to rebut the evidence of

noncompliance on February 1, 2016, presented by CTP.

In its post-hearing brief, Respondent maintained that the evidence CTP presented

does not establish that the February 1, 2016 violation occurred. Respondent pointed out
that Inspector Galloway did not have a specific recollection of the sale, and he never
confirmed whether the minor carried a secondary, false identification which could have
been used during the transaction. Resp. Post-Hearing Br. at 2. Respondent also argues
that the video evidence submitted by CTP as Exhibit 37 is evidence that the February 1,

2016 violation did not occur. Resp. Informal Brief (Br.) at 3.

With respect to Respondent’s first argument, the fact that Inspector Galloway did
not have a specific recollection of the February 1, 2016 sale during his cross examination
during the hearing on March 6, 2018, is of no consequence. Inspector Galloway’s
contemporaneous records made at the time of the February 1, 2016 transaction are the
most persuasive evidence of the events that took place that day. At the time of the
hearing, two years had passed since the February 1, 2016 inspection, and Inspector
Galloway testified that he conducted many inspections before and since. Thus, it is

unsurprising that he was unable to recall the exact details of the inspection.

Moreover, Inspector Galloway testified that he had worked with the minor on
several previous occasions. Respondent did not submit any affirmative evidence showing

15
that the minor had or could have had a secondary, fake identification which was used
during the February 1, 2016 investigation. CTP also filed a photocopy of the minor’s
state-issued driver’s license, showing he was under the age of 18 at the time of the
investigation. CTP Ex. 6 at 1. The mere speculation that the minor could have been

carrying a secondary, false identification card is not sufficient to rebut CTP’s evidence.

Respondent also pointed to video evidence of the February 1, 2016 transaction at
its store and argues that the video supports its argument that the violation on that date did
not occur. See CTP Ex. 37. The relevant portion of the video footage shows the minor
attempting to purchase cigarettes at the sales counter of Respondent’s establishment. The
minor hands the store clerk his photo identification, the store clerk types in a date of birth
into the point of sale system, and the minor pays for the cigarettes and exits the store.
Respondent argues that the video presents a “gaping hole” in CTP’s evidence, because
the point of sale system used in Respondent’s store will not allow a tobacco sale to be
completed unless the photographic identification of the purchaser is either scanned or the
purchaser’s date of birth is manually entered into the point of sale system. Respondent
maintains that the clerk followed proper protocol, because the video shows that the clerk
verified the identification of the purchaser prior to the sale and entered a date of birth into
the point of sale system. Because the tobacco sale went forward after the clerk entered
the purchaser’s date of birth, Respondent argues that the sale was lawful because the

minor’s identification demonstrated that he was over the age of eighteen.

16
I find that the video evidence of the February 1, 2016 transaction is insufficient to
rebut CTP’s evidence of noncompliance for several reasons. First, Inspector Galloway
testified that he verified that the minor carried a Florida driver’s license bearing his
correct date of birth prior to the sale. Respondent did not present any evidence, aside
from mere speculation, that the minor was carrying a second, fake identification. Second,
although the video shows that the store clerk asked for the minor’s identification prior to
the sale on February 1, 2016, the footage does not show the date of birth that
Respondent’s sales clerk actually entered into the point of sale system. Respondent thus
assumes not only that the minor was over 18, but also that the clerk entered the minor’s
correct date of birth into the point of sale system and that the system did not malfunction.
However, Respondent did not file any evidence showing the actual date of birth that the
clerk entered into the system. Respondent’s clerk could have typed in the minor’s
incorrect date of birth, thus allowing the sale to move forward despite the point of sale
system’s precaution. Moreover, Respondent did not provide any evidence that the system
was working correctly on the date of the sale and that it did not malfunction to

inadvertently allow the sale.

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

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

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

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

identification on August 15, 2016, at approximately 7:50 PM.

17
On August 15, 2016, Inspector Sherley and the confidential state-contracted
minor conducted a follow-up undercover buy compliance check inspection of
Respondent’s establishment at approximately 7:50 PM. CTP Ex. 21 at 2. Prior to the
sale that evening, Inspector Sherley confirmed that the minor carried a state issued
photographic identification and that the minor did not possess any tobacco products. Id.
at 2; CTP Ex. 22 at 1.

The inspector accompanied the minor into Respondent’s establishment and
observed the minor purchase a package of 305’s Full Flavor Kings cigarettes. CTP Ex.
21 at 3. The store clerk did not verify the minor’s identification. Jd. After the sale, the
minor and Inspector Sherley exited the store and returned to Inspector Sherley’s vehicle,
whereupon the minor immediately gave the package of cigarettes to Inspector Sherley.
Id. \ find Inspector Sherley’s testimony to be credible and unbiased. I find that his
testimony, in conjunction with the corroborating documentary evidence (e.g. the
contemporaneous report) and physical evidence (e.g. the photographs of the 305’s Full
Flavor Kings cigarettes purchase on that date), CTP has satisfied its burden of proving
that Respondent violated 21 C.F.R. §§ 1140.14(a)(1) and 1140.14(a)(2)() on August 15,
2016, at 7:50 PM by a preponderance of the evidence.

iv. Respondent did not offer affirmative proof to rebut the evidence of

noncompliance on August 15, 2016, presented by CTP.

Similar to its response to the February 1, 2016 violations, Respondent first
maintains that the August 15, 2016 violation did not occur. Respondent makes three

essential points in its argument that CTP did not meet its preponderant burden. First,

18
Respondent offers the written direct testimony of Frank Macon, a former employee of
Respondent who was working at Respondent’s store on August 15, 2016, during the time
of the sale. Second, Respondent argues that CTP did not meet its burden of proving the
violation occurred, because Inspector Sherley did not have a specific recollection of the
violation and did not confirm whether the minor had a second, fake identification in his
possession. Third, Respondent argues that CTP has no affirmative proof that the sales
clerk did not ask the minor to provide identification prior to the sale, because the minor
did not submit a report summarizing the transaction, and CTP thus relies only on
Inspector Sherley’s observations, which it states are insufficient to satisfy preponderant
evidence.

With regard to Respondent’s first point, Mr. Macon testified that the violation
could not have occurred without a valid photographic identification showing that a
purchaser was over the age of 18, as Respondent’s point of sale system will not permit
the sale of tobacco products unless the purchaser’s identification is scanned or the date of
birth is otherwise manually entered into the system. However, Respondent did not
provide any evidence of what date of birth was actually entered into the point of sale
system during the August 15, 2016 inspection. Without this evidence, Respondent’s
argument does not overcome the preponderant evidence put forth by CTP, as set forth in
the contemporaneous records. For example, Respondent’s store clerk could have entered
a different date of birth into the system so that the sale could go forward, or the system

could have malfunctioned. Thus, although I find Witness Frank Macon’s testimony to be

19
credible, I find CTP’s evidence, especially the contemporaneous records and
photographs, to be more persuasive.

I similarly find the other arguments put forth by Respondent to be unpersuasive.
As discussed above, Inspector Sherley, like Inspector Galloway, has completed many
investigations as part of his contract with CTP. That he could not specifically recall the
investigation conducted at Respondent’s establishment on August 15, 2016, at the
hearing nearly 19 months later is of no consequence, because he documented the
investigation in the contemporaneously created records. See CTP Ex. 23. Moreover,
Inspector Sherley testified that he did not verify whether the minor had a second, false
identification on his person because the inspector had no reason to believe that he did.
Respondent did not file any affirmative evidence to suggest that the minor could have or
did actually possess a secondary, false identification.

I further find that CTP presented preponderant proof that the sales clerk did not
verify the minor’s identification prior to the August 15, 2016 sale. Consistent with his
written testimony and the contemporaneously created records, Inspector Sherley testified
that he observed the entire transaction while standing approximately 10 to 15 feet from
the sales counter. The inspector stated that while he had a clear view of the minor, the
clerk, and the sales counter, he did not observe the minor present his identification to the
store clerk. CTP Ex. 21 at 3. The minors involved in CTP’s investigations are trained to
follow directives from store clerks, such as showing identification or stating their age, if

prompted to do so. CTP Ex. 5 at 2. I thus find that it was reasonable for Inspector

20
Sherley to conclude that the store clerk did not request identification prior to the sale
because he did not observe the minor present identification to the clerk.®
XI. LIABILITY

When a retailer such as Respondent is found to have “misbranded” a tobacco
product in interstate commerce, it can be liable to pay a civil money penalty. 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)(1), on February 1, 2016, and August 15, 2016, in that a person younger than
18 years of age was able to purchase cigarettes as set forth in the complaint.

I find and conclude that the evidentiary facts, by a preponderance of the evidence
standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R.
§ 1140.14(a)(2)(i), on August 15, 2016, in that Respondent failed to verify, by means of
photo identification containing a purchaser’s date of birth, that no cigarette purchasers are

younger than 18 years of age.

© | further note that in its Answer, Respondent put forward a number of other arguments,
many of which were unsupported by the evidence. Respondent argued that CTP used
improper and deceitful investigatory methods, that the purchases were made in good faith
based upon a purchaser’s verbal representation, that the narratives were written by biased
individuals, and that proper notice was not provided so that Respondent could preserve
evidence. Answer at 3-4. Respondent also argued that CTP’s investigation was
deceitful, that it constitutes entrapment, and that the unclean hands doctrine should apply.
Because Respondent did not file any evidence or case law supporting these cursory
statements, I find them unpersuasive and do not address them here.

21
The conduct set forth above on February 1, 2016, and August 15, 2016, counts as
three (3) violations under FDA policy for purposes of computing the civil money penalty.
See Guidance for Industry, at 13-15.

XII. PENALTY

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

Since I found that CTP met its burden by a preponderance of the evidence and
concluded that Respondent committed three (3) violations of the Act and its
implementing regulations within a twenty-four (24) month period, the next step is to
determine the amount of the civil money penalty. When making that determination, 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. § 33(f)(5)(B).

a. The nature, circumstances, extent, and gravity of the violation

I have found that Respondent specifically committed two (2) violations of selling
tobacco products to minors, and one (1) violation for failure to verify, by means of photo

identification containing a purchaser’s date of birth, that no tobacco product purchasers

22
are younger than 18 years of age, totaling three (3) violations of the tobacco regulations.
The repeated inability of Respondent to comply with federal tobacco regulations is
serious in nature and the civil money penalty amount should be set accordingly.

b. Respondent’s ability to pay and effect on ability to do business

Respondent argues that a violation of the federal tobacco regulations would
jeopardize its franchise agreement and could have a significant impact on its ability to do
business. Resp. Informal Br. at 7. Although a finding of liability could jeopardize
Respondent’s franchise agreement, I find and conclude that Respondent has not proven
how mitigation of the penalty would extricate Respondent from a breach of its franchise
agreement.

c. History of prior violations

The current action is the first civil money penalty action brought against

Respondent for violations of the Act and its implementing regulations.
d. Degree of culpability

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

e. Additional mitigating factors

Mitigation is an affirmative defense for which Respondent bears the burden of
proof. 21 C.F.R. § 17.33(c). Respondent’s establishment uses a point of sale system
which requires employees to solicit identification prior to the sale of any tobacco product.

Resp. Informal Br. at 4. In order to complete a tobacco sale transaction, the system

23
requires that the clerk either scan the identification of the purchaser or manually input his
or her date of birth. /d. Upon hire, Respondent also requires all of its employees to
enroll in and pass a training regarding tobacco sales, and employees are frequently
reminded of both the laws restricting tobacco sales to minors and the store’s policy to
request identification from anyone who appears under the age of thirty. Jd. Respondent
also voluntarily participates in a 7-Eleven program known as “Bars,” wherein
Respondent pays a yearly fee and the company sends undercover investigators to its
participating stores to attempt to purchase tobacco products. Jd. at 4-5. Although
Respondent frequently passes the Bars inspections, when it does not, it takes immediate
action to counsel the employee on how to prevent future violations. Id. at 5; see also
Resp. Exs. | and H.

For these reasons, I find and conclude that the penalty should be mitigated by

alf, or $275.

f. Penalty
Based on the foregoing reasoning, I conclude a reduced penalty amount of $275
to be appropriate under 21 U.S.C. §§ 333(£)(5)(B) and 333(f)(9).
XIII. CONCLUSION
Respondent committed three (3) violations in a twenty-four (24) month period, as

set forth in the complaint.

Respondent is liable for a civil money penalty of $275. See 21 C.F.R. § 17.2.

24
WHEREFORE, evidence having been read
ORDERED as follows:

a. I find Respondent was served with process

and considered it be and is hereby

erein and is subject to t

is 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)(1) on February 1, 2016, and August 15, 2016, in that a person

younger than 18 years of age was able to purchase cigarettes as set

complaint.

orth in the

c. I find and conclude that the evidentiary facts, by a preponderance of the evidence
standard, support a finding Respondent violated 21 C.F.R. §1140.14(a)(2)(i) on

August 15, 2016, in that Respondent failed to verify, by means of p!

oto

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 twenty-four (24) month period; and
e. Lassess a civil money penalty in the amount of $275.

/s/

Richard C. Goodwin
U.S. Administrative Law Judge

25


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
KeriAnn C. Carlson,
(OI File No. H-17-41903-9),
Petitioner,
v.
The Inspector General
Docket No. C-18-627
ALJ Ruling No. 2018-7
Date: July 5, 2018
DISMISSAL
The Inspector General (IG) has excluded Petitioner, KeriAnn C. Carlson, from
participation in Medicare, Medicaid, and all federal health care programs because she
surrendered her nursing license while a formal disciplinary proceeding was pending for
reasons bearing on her professional competence, professional performance, or financial
integrity. Petitioner challenges the exclusion, but, contrary to the explicit instructions set

forth in the IG’s notice letter, she filed her appeal 69 days after receiving it. The IG
moves to dismiss her appeal as untimely filed.

lagree, and, for the reasons discussed below, I dismiss Petitioner’s appeal.
Background

In a letter dated December 29, 2017, the IG advised Petitioner that, because her license to
provide healthcare as a registered nurse was “revoked, suspended, or otherwise lost, or
was surrendered while a formal disciplinary proceeding was pending before the [state
licensing entity] for reasons bearing on [her] professional competence, professional
performance, or financial integrity,” she was excluded from participation in Medicare,
Medicaid, and all federal health care programs. With the notice letter, the 1G. sent
Petitioner an explanation of her appeal rights: she was entitled to a hearing before an
administrative law judge if she filed a written request for review within sixty days after
receiving the notice. IG Exhibit (Ex.) 1.

Petitioner filed her hearing request electronically through the Departmental Appeals
Board’s electronic filing system on March 8, 2018.

The IG moves to dismiss Petitioner’s hearing request because it is untimely.
Discussion

Petitioner’s hearing request must be dismissed pursuant to
42 C.F.R. § 1005.2(e)(1) because it was not timely filed."

The regulations governing these appeals provide that an aggrieved party must request a
hearing within sixty days after receiving notice of the exclusion. 42 C.F.R.

§ 1001.2007(b). The date of receipt is presumed to be five days after the date of the
notice unless there is a reasonable showing to the contrary. 42 C.F.R. § 1005.2(c). The
regulations include no good-cause exceptions for untimely filing, providing that the ALJ
will dismiss a hearing request that is not filed in a timely manner. 42 C.F.R.

§ 1005.2(e)(1); Maiorano v. Thompson, Civil Action No. 04-2279, at 6 (D.N.J. 2008).

The IG sent copies of the December 29, 2017 notice letter to Petitioner at two addresses,
including 2147 East Borg Drive, Sandy, Utah. IG Ex. 1. Based on the regulatory
presumption, we assume that Petitioner received the notice no later than January 3, 2018,
so her hearing request was due on or before March 5, 2018 (the 60" day, March 4, having
fallen on a weekend). 42 C.F.R. § 1005.12(a). But Petitioner did not file her hearing
request until March 8, 2018.

Petitioner now denies ever receiving the IG’s notice. P. Ex. 1.

By itself, Petitioner’s assertion of non-receipt is insufficient to overcome the regulatory
presumption. To rebut that presumption, Petitioner must make a “reasonable showing”
that she did not receive the notice. Kenneth Schrager, DAB No. 2366 at 4-5 (2011);
Gary Grossman, DAB No. 2267 at 5-6 (2009). Petitioner concedes that 2147 East Borg
Drive is her correct address. P. Ex. 1. She must have received the notice at some point
prior to the date she filed her appeal because she filed a copy of it along with her hearing
request. She has not explained how or when she obtained it, and the most reasonable
explanation is that she received the notice that the IG mailed to her.

' T make this one finding of fact/conclusion of law.
Moreover, Petitioner’s denial contradicts statements she made during our April 4, 2018
prehearing conference. At that time, she admitted receiving the notice letter “sometime
in January 2018” at the East Borg Drive Address. I incorporated her admission into my
summary of the prehearing conference and gave her the opportunity to object. Order
Summarizing Prehearing Conference (April 4, 2018). She did not.

Because Petitioner has not made a “reasonable showing” of non-delivery, I have no

discretion and must dismiss her hearing request pursuant to 42 C.F.R. § 1005.2(e)(1).
Petitioner’s hearing request is therefore dismissed.

/s/

Carolyn Cozad Hughes
Administrative Law Judge


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

(FDA No. FDA-2017-H-6965)
Complainant
v.

Ise Grocery, Inc.
d/b/a Samoset Grocery,

Respondent.
Docket No. T-18-731
Decision No. TB2840

Date: June 26, 2018

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Ise Grocery, Inc. d/b/a Samoset Grocery, located at 3011 15th
Street East, Bradenton, Florida 34208, and by filing a copy of the complaint with the
Food and Drug Administration’s (FDA) Division of Dockets Management. The
complaint alleges that Samoset Grocery impermissibly sold covered tobacco products to
minors, thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C.

§ 301 et seq., and its implementing regulations, 21 C.F.R. pt. 1140. CTP seeks to impose
a $279 civil money penalty against Respondent Samoset Grocery.

During the course of this administrative proceeding, Respondent has failed to comply
with two separate judicial orders and failed to prosecute its case. See 21 C.F.R.

§ 17.35(a). Accordingly, pursuant to 21 C.F.R. §§ 17.35(a)(1), (2), I strike Respondent’s
Answer and issue this decision of default judgment.
I. Procedural History

CTP began this matter by serving an administrative complaint, seeking a $279 civil
money penalty, on Respondent Ise Grocery, Inc. d/b/a Samoset Grocery on December 27,
2017. Respondent filed an Answer to CTP’s complaint on January 11, 2018. I issued an
Acknowledgment and Prehearing Order (APHO) on January 11, 2018, that set deadlines
for parties’ submissions, including the February 13, 2018 deadline to request that the
opposing party provide copies of documents relevant to this case. Additionally, the
APHO stated that a party receiving such a request must provide the requested documents
no later than 30 days after the request. On February 6, 2018, Respondent served CTP
with its request for documents, seeking a copy of the driver’s license used by the alleged
minor who purchased tobacco products.

On February 14, 2018, CTP filed a Motion for a Protective Order, seeking to limit
discovery. On March 8, 2018, CTP filed a Memorandum of Law in Support of
Complainant’s Motion for a Protective Order. In a March 8, 2018 letter issued by my
direction, Respondent was given until March 23, 2018 to file a response to CTP’s Motion
for a Protective Order. Respondent did not file a response to CTP’s Motion for a
Protective Order.

On March 26, 2018, CTP filed a Motion to Compel Discovery, indicating that
Respondent did not respond to its request for documents within the time limit. See 21
C.F.R. § 17.23(a). On the same date, CTP also filed a Motion to Extend Deadlines
requesting that all pre-hearing exchange deadlines be extended for 30 days. In a March
26, 2018 letter issued by my direction, Respondent was given until April 10, 2018, to
object to CTP’s Motion to Compel Discovery. Respondent did not file an objection to
CTP’s motion.

On April 12, 2018, I granted CTP’s Motion for a Protective Order and ordered CTP to
serve redacted copies of the minors’ photographic identification on Respondent. On the
same date, I granted CTP’s Motion to Compel Discovery and extended the pre-hearing
exchange deadlines. The Order Granting CTP’s Motion to Compel allowed Respondent
until April 26, 2018 to comply with CTP’s discovery request. CTP subsequently filed a
Status Report and Motion to Impose Sanctions, on May 3, 2018, indicating that
Respondent had not responded to its Request for Production of Documents. In a May 3,
2018 letter issued by my direction, Respondent was allowed until May 18, 2018 to
respond to CTP’s Motion to Impose Sanctions. To date, Respondent has not filed a
response.
Il. Striking Respondent’s Answer
Pursuant to 21 C.F.R. § 17.35(a), I may sanction a party for:
() Failing to comply with an order, subpoena, rule, or procedure
governing the proceeding;

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

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

Here, Respondent failed to:

¢ Comply with my January 11, 2018 Acknowledgment and Pre-Hearing Order that
set deadlines for parties’ submissions, including the February 13, 2018 deadline to
request that the opposing party provide copies of documents relevant to this case;

¢ Comply with my April 12, 2018 Order Granting CTP’s Motion to Compel; and

e Prosecute or defend its case.

I find that Respondent failed to comply with two judicial orders and failed to defend its

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

The harshness of the sanctions I impose must relate to the nature and severity of the
misconduct or failure to comply. 21 C.F.R. § 17.35(b). Here, Respondent failed to
comply with two orders, despite having been warned that failure to comply could result
in sanctions including issuance of an Initial Decision and Default Judgment.
Additionally, Respondent has not communicated with the Court since February 6, 2018.

I note that Respondent did not take the opportunity to respond to two separate letters
issued by my direction on March 26, 2018, and May 3, 2018. I find that Respondent’s
failure to comply is sufficient to warrant striking its Answer and issuing a decision by
default, without further proceedings. 21 C.F.R. §§ 17.35(b), (c)(3). Accordingly, I strike
Respondent’s Answer, and issue this Initial Decision and Default Judgment, assuming the
facts alleged in CTP’s complaint to be true. 21 C.F.R. §§ 17.35(c)(3), 17.11 (a).
Ill. Default Decision

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

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

e At approximately 6:33 p.m. on February 2, 2017, at Respondent’s business
establishment, 3011 15th Street East, Bradenton, Florida 34208, an
FDA-commissioned inspector documented Respondent’s staff selling a Black &
Mild cigar to a person younger than 18 years of age.;

e Ina warning letter dated February 16, 2017, CTP informed Respondent of the
inspector’s February 2, 2017 documented violation, and that such action violates
federal law. The letter further warned that Respondent’s failure to correct its
violation could result in a civil money penalty or other regulatory action;

e At approximately 6:33 p.m. on December 8, 2017, at Respondent’s business
establishment, 3011 15th Street East, Bradenton, Florida 34208, an
FDA-commissioned inspector documented Respondent’s staff selling a package of
two Game Garcia y Vega Grape cigars to a person younger than 18 years of age.

These facts establish Respondent Samoset Grocery’s liability under the Act. The Act
prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section 906(d)
of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).
The Secretary of the U.S. Department of Health and Human Services issued the
regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1;
see 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21
C.F.R. § 1140.14(b)(1), no retailer may sell covered tobacco products to any person
younger than 18 years of age.
Order

For these reasons, I enter default judgment in the amount of $279 against Respondent Ise
Grocery, Inc. d/b/a Samoset Grocery. 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


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2017-H-6412)

Complainant
v.

Mike’s Food and Fuel, Inc.
d/b/a Citgo,

Respondent.
Docket No. T-18-349
Decision No. TB2833

Date: June 22, 2018

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Mike’s Food and Fuel, Inc. d/b/a Citgo, at 4702 West Gandy
Boulevard, Tampa, Florida 33611, and by filing a copy of the complaint with the Food
and Drug Administration’s (FDA) Division of Dockets Management. The complaint
alleges that Citgo impermissibly sold covered 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.
CTP seeks to impose a $559 civil money penalty against Respondent Citgo.

During the course of the administrative proceedings, Respondent failed to comply with a
judicial order 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 November 14, 2017, CTP served the
Complaint on Respondent Citgo by United Parcel Service. On December 13, 2017, Mike
Sabbah, on behalf of Respondent, timely answered CTP’s Complaint. On December 19,
2017, I issued an Acknowledgement and Pre-Hearing Order (APHO) that set deadlines
for the parties’ filings and exchanges and warned that I may impose sanctions if a party
failed to comply with any order, including the APHO. APHO 4§ 4, 16. In the APHO, I
set a deadline of March 12, 2018, for CTP’s pre-hearing exchange and April 2, 2018, for
Respondent’s pre-hearing exchange. APHO 4 4. On March 12, 2018, CTP timely filed
its pre-hearing exchange. Respondent did not file a pre-hearing exchange by the April 2,
2018 deadline, or at any time thereafter.

On April 9, 2018, I issued an Order Scheduling Pre-Hearing Conference. In this order, I
set a pre-hearing conference by telephone for May 23, 2018, at 1:00 PM Eastern Time, to
resolve certain issues and schedule a hearing for this case. Respondent did not respond to
my Order Scheduling Pre-Hearing Conference indicating that it was unable to appear at
the scheduled pre-hearing conference call, nor did Respondent appear at the pre-hearing
conference as scheduled.

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

. . . failure to do so may result in sanctions, including
striking Respondent’s Answer and issuing an Initial Decision
and Default Judgment finding Respondent liable for the
violations listed in the Complaint and imposing a civil money
penalty.

(Emphasis in original.)

Subsequently, on May 24, 2018, Mr. Sabbah, on behalf of Respondent, contacted the
Civil Remedies Division hotline for assistance. Mr. Sabbah indicated that he did not
check his email regularly and stated that he forgot his Departmental Appeals Board
Electronic Filing System (DAB E-File) username and password. The attorney assigned
to assist me with this case provided Respondent with instructions to remedy, a technical
contact, and explained his responsibilities to respond to my Order to Show Cause by
June 6, 2018. On June 4, 2018, Respondent filed a response to my Order to Show
Cause. In its response, Respondent indicates that it experienced problems logging into its
DAB E-File account. As such, Respondent had not seen the April 9, 2018 Order
Scheduling Pre-Hearing Conference.

However, this explanation fails. I find it an implausible coincidence that the Respondent
called the office almost immediately after I issued the Order to Show Cause, the day after
the scheduled pre-hearing conference, to inform our office that it had difficulty logging
into the account. Had Respondent experienced difficulty with accessing the file,
Respondent should have sought assistance at that point to rectify the problem. It is also
noted that the system sends an email notification when an item has been added to the file.
Here, in the phone call to the office, Respondent indicated that it did not regularly check
the email account associated with Respondent’s file.

Although not defined by the regulations, good cause must mean something more than a
simple error or omission. Good cause would normally constitute some event or events
beyond Respondent’s ability to control that acted to prevent Respondent from taking a
required action- in this case, appearing at the scheduled pre-hearing conference. Here,
Respondent asserts that it had issues logging onto DAB E-File system and thus was
precluded from reviewing the April 9, 2018 Order Scheduling Pre-Hearing Conference.
However, it was incumbent upon Respondent to timely and promptly resolve any issues
with his account, and particularly vital after he received an email notice of a filing.

I do not find that Respondent has shown good cause under any reasonable definition of
the term.

I. Striking Respondent’s Answer
Pursuant to 21 C.F.R. § 17.35(a), I may sanction a party for:
() Failing to comply with an order, subpoena, rule, or procedure
governing the proceeding;

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

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

21 C.F. § 17.35(a).

Here, Respondent failed to comply with my April 9, 2018, Order Scheduling Pre-Hearing
Conference, when it failed to appear at the May 23, 2018, pre-hearing conference, 21
C.F.R. § 17.35(a)(1); and failed to demonstrate good cause for its failure to appear at the
pre-hearing conference 21 C.F.R. § 17.35(a)(2).

I find that Respondent failed to comply with an order and procedure 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.

The harshness of the sanctions I impose must relate to the nature and severity of the
misconduct or failure to comply. 21 C.F.R. § 17.35(b). Here, Respondent failed to
comply with my order, 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 a civil money penalty.” Respondent also
failed to defend its action of failing to appear. I find that Respondent’s actions are
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).

Til. Default Decision

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

For purposes of this decision, I assume the facts alleged in the Complaint are true (but not
its conclusory statements) and I conclude that default judgment is merited based on the
allegations of the Complaint. 21 C.F.R. § 17.11. Specifically:

e At approximately 11:13 AM on February 4, 2017, at Respondent’s business
establishment, 4702 West Gandy Boulevard, Tampa, Florida 33611, an

FDA-commissioned inspector documented Respondent’s staff selling a package of

two Swisher Sweets Cherry Dynamite cigars 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;

e Ina warning letter dated April 27, 2017, CTP informed Respondent of the
inspector’s February 4, 2017 documented violations, and that such actions violate
federal law. The letter further warned that Respondent’s failure to correct its
violations could result in a civil money penalty or other regulatory action;

e At approximately 12:48 PM on August 3, 2017, at Respondent’s business
establishment, 4702 West Gandy Boulevard, Tampa, Florida 33611, an
FDA-commissioned inspector documented Respondent’s staff selling a Black &
Mild cigar 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 Citgo’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(b)(1), no retailer may sell covered
tobacco products to any person younger than 18 years of age. Under 21 C.F.R.

§ 1140.14(b)(2)(), retailers must verify, by means of photographic identification
containing a purchaser’s date of birth, that no covered tobacco product purchasers are
younger than 18 years of age.

A $559 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order
For these reasons, | enter default judgment in the amount of $559 against Respondent

Mike’s Food and Fuel, Inc. d/b/a Citgo. Pursuant to 21 C.F.R. § 17.11(b), this order
becomes final and binding upon both parties after 30 days of the date of its issuance.

/s/
Wallace Hubbard
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2017-H-5716)

Complainant
v.

W.B.P. Enterprises, Inc.
d/b/a Holden’s Party Store,

Respondent.
Docket No. T-17-6576
Decision No. TB2783

Date: June 6, 2018

INITIAL DECISION

The Center for Tobacco Products (CTP) seeks to impose a civil money penalty
(CMP) against Respondent, W.B.P. Enterprises, Inc. d/b/a Holden’s Party Store,
located at 2055 South Milford Road, Milford, Michigan 48381, for six violations
of the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seqg., and
its implementing regulations, 21 C.F.R. pt. 1140, within a 48-month period.
Specifically, CTP alleges that Respondent violated the Act by impermissibly
selling cigarettes or smokeless tobacco to minors, on three separate dates, failing
to verify, by means of photo identification containing a date of birth, that a
purchaser was 18 years of age or older, on one of those dates, and utilizing a self-
service display in a non-exempt facility, on two separate dates. For the reasons
discussed below, I find in favor of CTP and impose an $11,182 CMP against
Respondent.
L BACKGROUND AND PROCEDURAL HISTORY

CTP began this matter by serving an administrative complaint, seeking an $11,182
CMP, on Respondent at 2055 South Milford Road, Milford, Michigan 48381, and
by filing a copy of the complaint with the Food and Drug Administration’s (FDA)
Division of Dockets Management. Respondent timely filed an answer and denied
the allegations.

On October 19, 2017, I issued an Acknowledgment and Pre-Hearing Order setting
forth case procedures and exchange deadlines. On January 8, 2018, CTP filed its
pre-hearing exchange, which included an Informal Brief of Complainant, and 20
exhibits (CTP Exs. 1-20). The 20 exhibits included the direct testimony, in the
form of declarations, for two witnesses — Senior Regulatory Counsel Laurie
Sternberg and Inspector Hiram Harris. Respondent did not file a pre-hearing
exchange.

On March 19, 2018, I held a pre-hearing conference in this case. I explained to
the parties that the purpose of an administrative hearing under the applicable
regulations is to afford the parties an opportunity for cross-examination o:
exchange witnesses. I further explained that I must determine whether
Respondent is liable for the violations alleged in the complaint as well as the
appropriate penalty.

At the pre-hearing conference, Respondent declined to cross-examine CTP’s
witnesses, and admitted to the violations alleged in the complaint. However,
Respondent requested a reduced penalty. I informed the parties that a hearing
would not be required in this matter and I would make a decision based on the
evidence of record. I also informed the parties that the decision, along with the
parties’ appeal rights, would be issued and sent to the parties, who could then
appeal the decision to the Departmental Appeals Board if desired. I also admitted
CTP’s exhibits into the record.

The parties were given the opportunity to submit final briefs with any arguments
they wish for me to consider. On April 16, 2018, Respondent filed its final brief
(Resp. Final Brief). CTP did not file a final brief. As the briefing period is over, I
now render my decision.

IL. ISSUES

A. Whether Respondent sold cigarettes to a minor on August 11, 2017, in
violation of 21 C.F.R. § 1140.14(a)(1); and
B. Whether the penalty amount sought by CTP is reasonable.
I. 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
ULS.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, the failure to verify the photographic
identification of an individual who is not over the age of 26, and the use of a self-
service display in a non-exempt facility are violations of implementing
regulations. 21 C.F.R. §§ 1140.14(a)(1), (a)(2)(i), and § 1140.16(c).

CTP alleges that Respondent committed six violations of the Act and its
implementing regulations within a 48-month period. Complaint at { 1.
Specifically, CTP alleges that, on August 11, 2017, Respondent sold cigarettes to a
minor, and previously admitted to five violations of regulations found at 21 C.F.R.
pt. 1140. Id. at 447, 10.

As indicated above, Respondent has admitted to the violation as alleged at the pre-
hearing conference. As a result, I find Respondent is liable for six violations
under the Act.

B. Civil Money Penalty

Pursuant to 21 U.S.C. § 333(f)(9), Respondent W.B.P. Enterprises, Inc. d/b/a
Holden’s Party Store 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, $11,182,
against Respondent for six violations of the Act and its implementing regulations
within a 48-month period. Complaint at J 1. Respondent has requested the
penalty to be reduced to $1,000. Resp. Final Brief at 2.

I find that Respondent committed six violations of the Act and its implementing
regulations within a 48-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 cigarettes or
smokeless tobacco to minors, one violation for failing to verify, by means of photo
identification containing a date of birth, that the purchasers were 18 years of age
or older, and two violations for utilizing a self-service display in a non-exempt
facility. 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 egregious. Answer at 2; Resp.
Final Brief at 2. However, Respondent has not presented any evidence that it does
not have the ability to pay the $11,182 CMP sought by CTP.

ec. History of Prior Violations

The current action is the fourth civil money penalty action that CTP has brought
against Respondent. On March 6, 2017, CTP initiated the most recent CMP
action, CRD Docket Number T-17-2439, FDA Docket Number FDA-2017-H-
1082, against Respondent for five violations! of 21 C.F.R. pt. 1140 within a 36-
month period. Complaint at § 9. The previous action concluded when Respondent
admitted the allegations contained in the Complaint issued by CTP, and paid the
agreed upon penalty. Jd. 4 10. 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
Respondent suggests its employees should be held responsible for violations.

Answer at 2; Resp. Final Brief at 2. Though I understand Respondent cannot be at
its business all the time, it is Respondent’s responsibility to ensure its employees

' Respondent’s prior violations include violations for sale to a minor on July 15,
2015 and September 8, 2016, failure to verify identification on September 8, 2016,
and use of a self-service display in a non-exempt facility on December 20, 2013
and May 1, 2014.
comply with the law. I find that Respondent committed the six violations as
alleged in the complaint, and I hold it fully culpable for all six violations of the
Act and its implementing regulations.

e. Additional Mitigating Factors

Respondent has taken responsibility for its actions by admitting the violations.
Respondent acknowledges that it “should be fined” but argues the penalty is
egregious. Resp. Final Brief at 2. To prevent future violations, Respondent states
it has upgraded its register system which now requires cashiers to enter the date of
birth or scan newer licenses, it requires a manager/owner to double check all
persons that are not 21 or older that wish to purchase cigarettes, it increased the
signage around its establishment, and it has more frequent communication
concerning its expectations with all register clerks. Jd.

Respondent’s attempts to train employees and deter tobacco sales to minor are
commendable. However, this is Respondent’s fourth CMP action, and
Respondent has had ample opportunity to correct its violations and come into
compliance, I find that a civil money penalty of $11,182 is appropriate.

IV. PENALTY

Based on the foregoing reasoning, I find a penalty amount of $11,182 to be
appropriate under 21 U.S.C. §§ 333(f)(5)(B) and 333(f)(9).

Vv. CONCLUSION

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $11,182 against
Respondent, W.B.P. Enterprises, Inc. d/b/a Holden’s Party Store, for six 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 48-month period.

/s/
Catherine Ravinski
Administrative Law Judge