Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Michael Smith, M.D.
(PTAN: MA4663002; NPI: 1205871035),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-17-735
Decision No. CR5008

Date: January 18, 2018

DECISION

Petitioner’s Medicare billing privileges were deactivated on September 12, 2016, as a
result of his failure to timely comply with a request that he revalidate his Medicare
enrollment. For the reasons discussed below, I conclude that the effective date of
Petitioner’s reactivated Medicare billing privileges remains November 3, 2016, which is
the date that the Medicare administrative contractor received his revalidation application.

I. Background and Procedural History

On April 8, 2016, Wisconsin Physicians Service Insurance Corporation (WPS), a
Medicare administrative contractor, sent Petitioner correspondence requesting that he
revalidate his Medicare enrollment. WPS sent the letter to Petitioner at “Kansas City
Physician Partners, 100 Central St., Chillicothe, MO 64601-1554” (herein

“Chillicothe address”) (Centers for Medicare & Medicaid Services (CMS) Exhibit (Ex.) 1
at 1-2), and it sent a duplicate copy of the letter to Petitioner at “Kansas City Physician
Partners, Inc[.], P.O. Box 843809, Kansas City, MO 64184-3809” (herein “P.O. Box
address”). CMS Ex. 1 at 2-3. In each letter, WPS instructed Petitioner to revalidate his
enrollment no later than June 30, 2016, cautioning:

Failure to respond to this notice will result in a hold on your payments, and
possible deactivation of your Medicare enrollment. If you are a
non-certified provider or supplier, and your enrollment is deactivated, you
will maintain your original PTAN, however [you] will not be paid for
services rendered during the period of deactivation. This will cause a gap
in your reimbursement.

CMS Ex. | at 1, 3.

After Petitioner did not respond to the April 8, 2016 correspondence, WPS sent another
letter to the P.O. Box address, dated July 6, 2016, in which it reported that Petitioner had
“not revalidated by the requested due date of June 30, 2016.” CMS Ex. | at 5. WPS
reiterated that Petitioner needed to revalidate his enrollment record every five years and
“will not be paid for services rendered during the period of deactivation,” which “will
cause a gap in. . . reimbursement.” CMS Ex. | at 5.

On September 12, 2016, after it did not receive a response to its previous correspondence,
WPS informed Petitioner it had deactivated his Medicare enrollment and billing
privileges because he did not comply with the revalidation request. CMS Ex. | at 7.

On November 2, 2016, Petitioner submitted, by mail, inter alia, a completed Form
CMS-855I enrollment application to comply with the revalidation request (CMS Ex. 2 at
40), which WPS received on November 3, 2016.' See
https://tools.usps.com/go/TrackConfirmAction!input.action (tracking

# 9470110200830342169743, last visited January 4, 2018). In a letter dated November
21, 2016, WPS informed Petitioner that it had approved his applications and assigned an
effective date of reactivated billing privileges of November 3, 2016. CMS Ex. | at 9.
WPS explained that the effective date “reflects a gap in coverage from 09/12/2016 to
11/02/2016 for failure to respond to the revalidation requested development.” CMS Ex. 1
at 9.

Petitioner requested reconsideration in a letter dated January 17, 2017, at which time he
contended that WPS mailed the letter requesting that he revalidate his enrollment to the
wrong person and to a clinic “in another city in Missouri” that Petitioner had not been
associated with since 2013. CMS Ex. | at 12. Additionally, Petitioner stated that he had
not seen the letter requesting that he revalidate his enrollment, and he would have timely
revalidated his enrollment if he was aware of the request. CMS Ex. | at 12.

' Petitioner also submitted a Form CMS-855R to reassign Medicare benefits. CMS Ex.
3; see CMS Ex. | at 64.
WPS issued a reconsidered determination on March 9, 2017, in which it explained that it
received the revalidation application “on November 3, 2016, which is beyond the due
date of June 30, 2016, and therefore our files show the gap in billing from September 12,
2016, to November 2, 2016....” CMS Ex. | at 65. WPS further explained that it
“correctly deactivated the provider or supplier’s Medicare billing privileges due to not
receiving the requested information to revalidate [his] Medicare enrollment.” CMS Ex. 1
at 64. WPS explained that it sent the revalidation request to “the correspondence address
on file based on the latest CMS-855I received and signed by Dr. Smith” and that it also
sent the revalidation request to “the billing address of Kansas City Physicians Partners
Inc.” CMS Ex. | at 65.

Petitioner submitted a request for hearing that was received at the Civil Remedies
Division on May 10, 2017. CMS filed a motion for summary judgment, with a
supporting memorandum in support of summary judgment (CMS Br.), along with three
exhibits.? (CMS Exs. 1 to 3). Petitioner filed a response (P. Br.), which included
supporting documents.’ In the absence of any objections, I admit CMS Exhibits 1 to 3
into the record. In light of Petitioner’s inclusion of supporting evidence with his brief, I
also admit P. Br.

Neither party has offered the testimony of any witnesses, and therefore, a hearing for
purpose of cross-examination of witnesses is not necessary. See Acknowledgement and
Prehearing Order §§ 8, 9, and 10. I consider the record in this case to be closed, and the
matter is ready for a decision on the merits.*

II. Issue

Whether CMS had a legitimate basis for establishing November 3, 2016, as the effective
date of Petitioner’s reactivated billing privileges.

> Tnote that CMS Ex. | contains numerous documents. See Order, § 5 (requiring each exhibit
to be filed as a separate document in DAB E-File). Although I have admitted CMS Ex. 1, I
caution that CMS should ensure compliance with all directives.

> Petitioner, too, failed to comply with the requirements set forth in section 5 of the
Order. Because Petitioner’s brief and supporting documents are not paginated, I have
referred to the page numbers that appear in the electronic version of P. Br that is
accessible via DAB E-File.

* It is unnecessary in this instance to address the issue of summary judgment, as neither
party has requested an in-person hearing.
Il. Jurisdiction
I have jurisdiction to decide this case. 42 C.F.R. §§ 498.3(b)(15), 498.5(/)(2).
IV. Findings of Fact, Conclusions of Law, and Analysis

I. On April 8, 2016, WPS mailed a letter to Petitioner directing
him to revalidate his Medicare enrollment record by June 30,
2016, and that the failure to respond could result in
deactivation of his billing privileges, nonpayment for services
rendered during a period of deactivation, and a gap in
reimbursement.

2. On July 6, 2016, WPS mailed another letter to Petitioner
notifying him that he had not revalidated his enrollment prior
to the June 30, 2016 deadline, and that the failure to respond
could result in deactivation of his billing privileges,
nonpayment for services rendered during a period of
deactivation, and a gap in reimbursement.

3. After Petitioner did not revalidate his Medicare enrollment
record in response to the revalidation request, WPS notified
Petitioner on September 12, 2016, that it had deactivated his
Medicare enrollment and billing privileges, effective that same
date.

4. WPS received Petitioner’s signed enrollment application, for
the purposes of revalidating and reactivating Medicare
enrollment, on November 3, 2016.

5. An effective date earlier than November 3, 2016, the date WPS
received Petitioner’s enrollment applications, is not warranted
for the reactivation of Petitioner’s Medicare enrollment and
billing privileges.

As a physician, Petitioner is a “supplier” for purposes of the Medicare program. See

42 U.S.C. § 1395x(d); 42 C.F.R. §§ 400.202 (definition of supplier), 410.20(b)(1); see
also 42 C.F.R. § 498.2. A “supplier” furnishes services under Medicare and the term
applies to physicians or other practitioners that are not included within the definition of
the phrase “provider of services.” 42 U.S.C. § 1395x(d). A supplier must enroll in the
Medicare program to receive payment for covered Medicare items or services. 42 C.F.R.
§ 424.505. The regulations at 42 C.F.R. Part 424, subpart P, establish the requirements
for a supplier to enroll in the Medicare program. 42 C.F.R. §§ 424.510 - 424.516; see
also 42 U.S.C. § 1395cc(j)(1)(A) (authorizing the Secretary of the U.S. Department of
Health and Human Services to establish regulations addressing the enrollment of
providers and suppliers in the Medicare program). A supplier that seeks billing
privileges under Medicare “must submit enrollment information on the applicable
enrollment application.” 42 C.F.R. § 424.510(a)(1). “Once the provider or supplier
successfully completes the enrollment process ... CMS enrolls the provider or supplier
into the Medicare program.” 42 C.F.R. § 424.510(a)(1); see also 42 C.F.R. § 424.510(d)
(listing enrollment requirements). Thereafter, “[t]o maintain Medicare billing privileges,
a... supplier... must resubmit and recertify the accuracy of its enrollment information
every 5 years.” 42 C.F.R. § 424.515.

CMS is authorized to deactivate an enrolled supplier’s Medicare billing privileges if the
enrollee does not provide complete and accurate information within 90 days of a request
for such information. 42 C.F.R. § 424.540(a)(3). If CMS deactivates a supplier’s
Medicare billing privileges, “[n]o payment may be made for otherwise Medicare covered
items or services furnished to a Medicare beneficiary.” 42 C.F.R. § 424.555(b). Further,
and quite significantly, the DAB has unambiguously stated that “[i]t is certainly true that
[the petitioner] may not receive payment for claims for services during any period when
his billing privileges were deactivated.” Willie Gofjney, Jr., M.D., DAB No. 2763 at 6.
The regulation authorizing deactivation explains that “[d]eactivation of Medicare billing
privileges is considered an action to protect the provider or supplier from misuse of its
billing number and to protect the Medicare Trust Funds from unnecessary
overpayments.” 42 C.F.R. § 424.540(c).

The reactivation of an enrolled provider or supplier’s billing privileges is governed by
42 C.F.R. § 424.540(b), and the process for reactivation is contingent on the reason for
deactivation. If CMS deactivates a supplier’s billing privileges due to the supplier’s
failure to respond to a request for updated enrollment information, such as in this case,
the supplier may apply for CMS to reactivate its Medicare billing privileges by
completing and submitting the appropriate enrollment application(s) or recertifying its
enrollment information, if deemed appropriate. 42 C.F.R. § 424.540(a)(3), (b)(1).

On April 8, 2016, WPS mailed to Petitioner a letter notifying him that he was required to
revalidate his Medicare enrollment record by June 30, 2016, and WPS warned him that
the failure to revalidate could result in deactivation of his Medicare enrollment and
billing privileges, with a resulting gap in reimbursement. CMS Ex. 1 at 1-4. On July 5,
2016, WPS mailed to Petitioner a second letter informing him that it had not received a
response to the revalidation request, and again cautioned that his billing privileges could
be deactivated and he would not receive reimbursement for services rendered while
deactivated. CMS Ex. 1 at 5. On September 12, 2016, WPS sent another letter in which
it notified Petitioner that his billing privileges had been deactivated because he failed to
revalidate his Medicare enrollment record. CMS Ex. | at 7.

More than a half year after WPS first requested that Petitioner update or confirm his
enrollment record, Petitioner submitted, inter alia, an enrollment application that was
received on November 3, 2016. CMS Ex. | at 7. WPS approved Petitioner’s application
on November 21, 2016, and reactivated his billing privileges, effective November 3,
2016. CMS Ex. 1 at 9-11.

The pertinent regulation with respect to the effective date of reactivation is 42 C.F.R.

§ 424.520(d). Arkady B. Stern, M.D., DAB No. 2329 at 4 (2010). Section 424.520(d)
states that “[t]he effective date for billing privileges for physicians . . . is the later of — (1)
[t]he date of filing of a Medicare enrollment application that was subsequently approved
by a Medicare contractor; or (2) [t]he date that the supplier first began furnishing services
at a new practice location.” The Departmental Appeals Board (DAB) has explained that
the “date of filing” is the date “that an application, however sent to a contractor, is
actually received.” Alexander C. Gatzimos, MD, JD, LLC, DAB No. 2730 at 5 (2016)
(emphasis omitted). Petitioner’s date of filing was November 3, 2016, the date WPS
received Petitioner’s enrollment applications that were mailed on November 2, 2016. See
CMS Ex. 2 at 40. Based on the November 3, 2016 receipt date of the signed enrollment
application, WPS correctly assigned a November 3, 2016 effective date for reactivated
billing privileges. See Goffney, DAB No. 2763 at 6 (“[iJt is certainly true that [the
petitioner] may not receive payment for claims for services during any period when his
billing privileges were deactivated.”); 42 C.F.R. § 424.520(d).

Petitioner is challenging the assignment of a November 3, 2016 effective date of his
reactivated billing privileges, which resulted in a gap in his billing privileges from
September 12 through November 2, 2016. P. Br. at 1. Petitioner was required to timely
respond to the revalidation request to avoid the prospect of deactivation pursuant to

42 C.F.R. § 424.540(a)(3), and WPS deactivated his billing privileges after he failed to
timely submit a revalidation application. CMS Ex. | at 7-8. The DAB has explained that
a deactivation action is not reviewable, and “[t]he only action in the reconsidered
determination which is appealable is . . . the initial determination of the effective date of
the enrollment application reinstating [the petitioner].”° Goffney, DAB No. 2763 at 3-5.
WPS correctly deactivated Petitioner’s billing privileges because he failed to comply
with the revalidation request in accordance with the time period prescribed by 42 C.F.R.

> The DAB explained: “Moreover, neither [42 C.F.R. §] 424.545(b) nor any other
regulation provides appeal rights from the contractor’s deactivation determination or any
rebuttal determination.” Goffney, DAB No. 2763 at 5; see also Arkady B. Stern, M.D.,
DAB No. 2417 at 3 n.4 (2011) (Petitioner argues on appeal that deactivation was
improper, but the DAB “does not have the authority to review” deactivation under
circumstances of this case, (citing 42 C.F.R. §§ 424.545(b) and 498.3(b)); Andrew J.
Elliott, M.D., DAB No. 2334 at 4 n.4 (2010) (DAB “does not have authority to review” a
deactivation).
§ 424.540(a)(3), and WPS assigned an appropriate effective date for Petitioner’s
reactivated billing privileges, November 3, 2016, based on a correct application of
42 CFR. § 424.520(d).

Petitioner challenges the deactivation of his billing privileges, arguing that he “did not
receive notice of the need to revalidate....” P. Br. at 1. As I previously discussed, the
deactivation of billing privileges cannot be challenged in this forum. Even though I need
not address this argument, I nonetheless observe that Petitioner’s argument is not
supported by the record. Petitioner has not demonstrated that WPS mailed each letter
requesting that he revalidate his enrollment to an address that was not listed in his
then-current enrollment record. See P. Br. at 13 (Petitioner’s copy of his enrollment
record, as of November 15, 2016, reflecting that his “enrollment application contact
person” could be reached at the Chillicothe address (P. Br. at 13), and CMS Ex. | at 1
(revalidation request mailed to the Chillicothe address); CMS Ex. 2 at 20 (November
2016 revalidation application, listing a “special payments” address of the “P.O. Box
address,”), and CMS Ex. | at 3 (revalidation request mailed to the P.O. Box address).

Petitioner also argues that the “initial request was sent to an address for which
credentialing contact of this provider should not have been elected” and that he no longer
provided telemedicine services for that hospital. P. Br. at 1. As previously discussed, to
maintain Medicare billing privileges Petitioner is required to report certain “reportable
events,” including any address changes or updates, to a Medicare contractor within
certain time frames. 42 C.F.R. § 424.516(d)(1)(iii). The burden is on the supplier to
ensure his record is accurate and up to date, and he has not identified any error on the part
of WPS in its mailing of the revalidation request.°

Finally, Petitioner raises arguments that appear to be based in equity, stating:

Truly this was the perfect storm of happenstance...Dr. Smith was providing
a courtesy to their hospital of telemedicine only. In addition, his
telemedicine ended in 2014. When I submitted the initial appeal request,
CMS then sent back a letter dated in April to our correspondence address.
This letter had never been provided to me prior to this. Unfortunately I was
out of the office of medical leave from April through to [sic] June of 2016
with a total hip replacement. If it had been mailed (regular mail) as well, I
might have received it, but the person managing the bank (and
correspondence) at the time, [sic] did not notice the letter.

P. Br. To the extent that Petitioner’s argument can be construed as a request for equitable
relief in the form of an earlier effective date of reactivated billing privileges, I am unable

° T reiterate that I do not have authority to review the deactivation of Petitioner’s billing
privileges. See, e.g., Goffney, DAB No. 2763 at 5.
to grant equitable relief. US Ultrasound, DAB No. 2302 at 8 (2010) (“[nJeither the ALJ
nor the Board is authorized to provide equitable relief by reimbursing or enrolling a
supplier who does not meet statutory or regulatory requirements.”). I cannot grant
Petitioner relief on this basis because I do not have the authority to “[f]ind invalid or
refuse to follow Federal statutes or regulations or secretarial delegations of authority.”
See, e.g., 1866I1CPayday.com, L.L.C., DAB No. 2289 at 14 (2009) (“An ALJ is bound by
applicable laws and regulations and may not invalidate either a law or regulation on any
ground, even a constitutional one.”).

In the absence of any basis to grant an earlier date for the reactivation of billing
privileges, the November 3, 2016 effective date for the reactivation of Petitioner’s billing
privileges must stand.

V. Conclusion

For the foregoing reasons, I uphold the November 3, 2016, effective date of Petitioner’s
reactivated billing privileges.

/s/
Leslie C. Rogall
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2016-H-2739)

Complainant
v.

Ramsajan LLC
d/b/a Avalon Liquors,

Respondent.
Docket No. T-16-1938
Decision No. TB2386

Date: January 17, 2018
INITIAL DECISION

I hereby impose a civil money penalty of $3,500 against Respondent, Ramsajan LLC
d/b/a Avalon Liquors, for five violations of federal tobacco regulations over a period of
36-months.

I. Background

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Ramsajan LLC d/b/a Avalon Liquors, at 3588 Avalon Park
East Boulevard, Suite 3, Orlando, Florida 32828, and by filing a copy of the complaint
with the Food and Drug Administration’s (FDA) Division of Dockets Management. The
complaint alleges that Avalon Liquors impermissibly sold 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 seq., and its implementing regulations, 21 C.F.R.
pt. 1140. The complaint likewise alleges that Respondent Avalon Liquors was previously
found liable for three violations of regulations found at 21 C.F.R. pt. 1140. See
Complaint at JJ 1, 8, 10-11; see also, Informal Brief of Complainant at 1-2. Therefore,
CTP seeks to impose a $5,501 civil money penalty (“CMP”) against Respondent.

Il. Procedural History

On October 4, 2016, Respondent timely filed an Answer (“Answer”) to CTP’s
Complaint. On November 17, 2016, I issued an Acknowledgment and Pre-Hearing Order
(“APHO”) that set out the deadlines for the parties’ submissions in this case, and issued
informal briefs for the parties to complete and submit. !

On April 19, 2017, CTP filed its pre-hearing exchange. CTP’s pre-hearing exchange
included an Informal Brief of Complainant, a list of proposed witnesses and exhibits, and
19 marked exhibits. CTP’s exhibits included the declarations of two witnesses.
Respondent did not file a pre-hearing exchange but did file several tax documents (“2015
Tax Return”) as well as a letter responsive to CTP’s discovery request (“Resp. Letter”).

On June 6, 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- and re-direct examination 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 representative Douglas Markovitz
communicated his desire to cross-examine only one of CTP’s witnesses, Inspector Ivonne
Rodriguez.

On August 30, 2017, I held a hearing in this case.?. During the course of the hearing, I
admitted CTP’s exhibits. Respondent cross-examined Inspector Rodriguez. See Hearing
Transcript at 10-22.

On September 28, 2017, I informed the parties that the Court had received the transcript
of the hearing, and set the deadline for the parties’ post-hearing brief submissions as
October 27, 2017. Neither party filed a post hearing brief. As the briefing period is over,
I now render my decision.

' Tnote the following discovery matters concerning Respondent’s Answer and CTP’s
document requests. On January 27, 2017, CTP filed a Motion to Compel and a Motion to
Extend Deadlines. In a February 3, 2017 letter, Respondent was granted until February
17, 2017, to respond to CTP’s Motion to Compel. CTP’s Motion to Extend Deadlines
was granted on February 3, 2017. On March 1, 2017, Respondent filed a response to
CTP’s Motion and documents related to their request. On March 13, 2017, CTP filed
another Motion to Extend Deadlines which I granted on March 16, 2017.

2 Tnote that on August 8, 2017, Respondent’s representative requested to reschedule the
hearing from August 10, 2017 due to a prescheduled medical procedure.
Til. Issues

A. Whether Respondent Avalon Liquors sold tobacco products to a minor and failed
to verify that the tobacco product purchaser was of sufficient age, on February 26,
2016, in violation of 21 C.F.R. §§ 1140.14(a)(1), (a)(2)().

B. Whether a civil money penalty of $5,501 is reasonable.
IV. Applicable Regulations and Guidelines

CTP determined to impose a CMP against Respondent pursuant to the authority conferred
by the Federal Food, Drug, and Cosmetic Act (Act) and implementing regulations at Part
21 of the Code of Federal Regulations (C.F.R.). The Act prohibits the misbranding of
tobacco products while they are held for sale after shipment in interstate commerce. 21
U.S.C. § 331(k). The Food and Drug Administration 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).

In order to prevail, CTP must prove Respondent’s liability by a preponderance of the
evidence. The Supreme Court has described the preponderance of the evidence standard
as requiring that the trier-of-fact believe that the existence of a fact is more probable than
not before finding in favor of the party that had the burden to persuade the judge of the
fact’s existence. In re Winship, 397 U.S. 358, 371-72 (1970); Concrete Pipe and
Products of California, Inc. v. Construction Laborers, 508 U.S. 602, 622 (1993).

I find that under 21 U.S.C. § 333(f)(9), I have the authority to impose a CMP.
Vv. Analysis
A. Alleged Violations, Parties’ Contentions, and Findings of Fact

CTP alleges that Respondent committed five violations of the Act and its implementing
regulations over a thirty-six month period. Complaint at § 1.

In its Complaint, CTP alleged that at approximately 4:45 p.m. on February 26, 2016, at
Respondent’s business establishment, 3588 Avalon Park East Boulevard, Suite 3,
Orlando, Florida 32828, an FDA commissioned inspector documented Respondent’s staff
selling a package of Newport cigarettes to a person younger than 18 years of age.
Complaint at § 3; see also, 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.

In its Answer, Respondent denies the latest alleged violations. Answer at 2. Respondent
also requests that “the fine imposed be greatly reduced or removed from its record.” Jd.

1. Parties’ Contentions and Evidence

CTP’s case against Respondent relies on the testimony of Inspector Rodriguez, who
accompanied by a confidential state-contracted minor (“Minor FLUP1519”), conducted
an undercover buy portion of a follow-up compliance check inspection at Avalon
Liquors, on February 26, 2016. Informal Brief of Complainant at 3. As evidence,> CTP
provided a sworn declaration from Inspector Rodriguez. See CTP Ex. 3 (Rodriguez
Declaration). Inspector Rodriguez is an FDA-commissioned officer with INS
Corporation. Jd. at ] 2. Her duties include conducting undercover inspections to
determine whether retailers comply with the age and photographic identification
requirements relating to the sale of tobacco. Jd. at fj 1-2. CTP provided a copy of the
Compliance Check Inspection Notice (CTP Ex. 16); Inspector Rodriguez’s Narrative
Report of the undercover inspection, Narrative Report (CTP Ex.7); the TIMS Form (CTP
Ex. 6); and a redacted copy of the Minor FLUP1519’s identification (CTP Ex. 5).
Finally, Respondent cross-examined Inspector Rodriguez at the August 30, 2017 hearing.
See Hearing Transcript at 10-22.

Respondent denies the allegations in its pleadings, but has provided no evidence to refute
that the alleged violations on February 26, 2016, occurred. During the hearing,
Respondent’s cross-examination of Inspector Rodriguez centered on questions regarding
the background and experience of the investigator and the minor; how stores are selected
for inspection; and whether the investigative team have special incentives for reporting
violations. See Hearing Transcript at 10-22.

Regarding the transaction on February 26, 2016, Inspector Rodriguez testified as follows:

Q. Okay. Do you remember how this particular situation went?
A. That I remember, there was a gentleman sitting outside on a bench.
Your business has two entrances and we went into the business in different
doors. So your employee entered one side. I enter [sic] the other side with
the minor. I looked around, you know, for the product, let’s say, and the
minor requested cigarettes to your employee. And that I remember he did
not request an identification and he did not provide a receipt. And after that
we exited the business and the product was given to me so it could be
processed.

3 The evidence discussed in this paragraph is not exhaustive.
Q. What did the clerk look like?

A. That I remember, it’s a tall gentleman, possibly African-American,
brown hair, dark eyes, perhaps slender. But that’s to the extent that I
remember at this moment.

Hearing Transcript at 18-19.
2. Findings of Fact

I find that Inspector Rodriguez testified credibly and comprehensively about her
observations during the February 26, 2016, inspection at which she observed Respondent
selling tobacco products to Minor FLUP1519. See Hearing Transcript at 18 -19; CTP Ex.
3; CTP Ex. 7. Based on the record as a whole, I conclude that CTP has established by a
preponderance of the evidence that Respondent: (1) sold tobacco products to a Minor
FLUP1519 on February 26, 2016; and (2) failed to verify that tobacco product purchaser
was of sufficient age, in violation of 21 C.F.R. § 1140.14(a)(1) and 21 C.F.R.

§ 1140.14(a)(2)(i).

Therefore, I find that CTP has met its burden to establish Respondent Avalon Liquors’
liability under the Act for five violations within a 36-month period.

B. Civil Money Penalty

Pursuant to 21 U.S.C. § 333(f)(9), Respondent Avalon Liquors is liable for a CMP 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, $5,501, against
Respondent for five violations of the Act and its implementing regulations within a
thirty-six month period. Complaint at § 1. When determining the amount of a CMP, I
am required to take into account “the nature, circumstances, extent and gravity of the
violations and, with respect to the violator, ability to pay, effect on ability to continue to
do business, any history of prior such violations, the degree of culpability, and such other
matters as justice may require.” 21 U.S.C. § 333(f)(5)(B).

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

I have found that Respondent committed a total of five violations of FDA tobacco
regulations within a period a 36-month period. The repeated inability of Respondent to
comply with federal tobacco regulations is serious in nature and the CMP should be set
accordingly.
2. Respondent’s Ability to Pay

Respondent asserts that it believes the CMP sought is “unreasonable and will
significantly hurt our business and cash flow.” Resp. Letter at 1. Respondent states that
“any sort of major fine from the FDA would be very detrimental to our business cash
flow and cause us great harm in the near future.” Jd. at 2. As part of the discovery
process, Respondent filed a copy of its 2015 Form 1120S (U.S. Income Tax Return for an

. 2015 Tax Return.

Furthermore, the tax return is for 2015 and not 2016 when the
alleged violations occurred. See 2015 Tax Return. Nonetheless, I will take the
documentation into account when setting the penalty amount.

3. Effect on Ability to do Business

There is nothing in the evidentiary record that clearly establishes the effect a CMP will

have on Respondent’s ability to do business. However, Respondent’s Po
rs is sufficiently compelling to support a finding

that justice requires some reduction of the penalty amount in this particular case.

4. History of Prior Violations

It is undisputed that Respondent is a repeated violator of FDA’s tobacco regulations
prohibiting the sale of tobacco products to minors. The current action is the second civil
money penalty action that CTP has brought against Respondent. While Respondent has
already paid a CMP for its previous violations, its continued inability to comply with the
federal tobacco regulations calls for a more severe penalty. In addition to the two current
violations on February 26, 2016, Respondent has twice before violated the prohibition
against selling tobacco products to persons younger than 18 years of age, 21 C.F.R.

§ 1140.14(a)(1), and twice before violated the requirement that retailers verify, by means
of photo identification containing a purchaser’s date of birth, that no tobacco purchasers
are younger than 18 years of age, 21 C.F.R. § 1140.14(a)(2)(i). The first civil money
penalty action was decided by default when Respondent failed to answer. See Complaint
at Jf 1, 10-11.

5. Degree of Culpability
Based on my finding that Respondent committed the most recent violations as alleged in

the current complaint, I hold it fully culpable for all five violations of the Act and its
implementing regulations.
6. Additional Mitigating Factors

I do not find any mitigating factors. Respondent has not provided any evidence that it
has implemented new polices for its employees about when to verify the age of tobacco
product purchasers. Respondent asserts that it has posted “FDA signage and state
documents...behind the counter... [E]ncouraged employees to check IDS to anyone that
looks in there [sic] 20s and refuse sale if necessary for failure to provide identification,”
and has put “all new employees in place in February 2016.” Resp. Letter at 1. While
Respondent may indeed have hired new employees that it has “encouraged” to check
customer identification, these efforts have proven ineffective in Respondent’s
establishment.

7. Penalty

Based on the foregoing reasoning, I find a reduced penalty amount of $3,500 to be
reasonable and appropriate under 21 U.S.C. §§ 303(f)(5)(B).

VI. Conclusion

For these reasons, | enter judgment in the amount of $3,500 against Respondent,
Ramsajan LLC d/b/a Avalon Liquors, for five violations of the Federal Food, Drug, and
Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R.
pt. 1140, within a thirty-six month period. 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,

(FDA No. FDA-2016-H-3074)
Complainant
v.

Red Sea Service Station, Inc.
d/b/a ARCO AM/PM,

Respondent.
Docket No. T-17-4
Decision No. TB2369

Date: January 16, 2018

INITIAL DECISION

The Center for Tobacco Products (CTP) seeks to impose a civil money penalty
against Respondent, Red Sea Service Station, Inc. d/b/a ARCO AM/PM, located at
3201 20th Avenue West, Seattle, Washington 98199, for two violations of the
Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its
implementing regulations, 21 C.F.R. pt. 1140, within a twelve month period.
Specifically, CTP alleges that Respondent violated the Act by impermissibly
selling cigarettes to minors, on two separate occasions.

Procedural History

CTP began this matter by serving an administrative complaint seeking a $275 civil
money penalty on Respondent, at 3201 20th Avenue West, Seattle, Washington
98199, 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. In its answer, Respondent denied the allegations. On
November 16, 2016, I issued an Acknowledgment and Pre-Hearing Order
(APHO).

On February |, 2017, CTP filed a Motion to Compel Further Responses,
indicating that Respondent had not produced all of the documents in its request for
production of documents, except for a brief letter, receipts, and a sales log. See 21
CFR. § 17.23(a). Ina letter issued by my direction, Respondent was given until
February 17,2017, to object to CTP’s motion. Respondent did not file an
objection to CTP’s motion. On February 28, 2017, I issued an Order granting
CTP’s Motion to Compel Further Responses and extended the pre-hearing
exchange deadlines for 30 days. On March 21, 2017, CTP filed an Updated Status
Report, indicating that CTP had received certain documents from Respondent in
response to CTP’s Request for Production of Documents.

Respondent filed its pre-hearing exchange on December 5, 2016. Subsequently,
on April 7, 2017, CTP filed its pre-hearing exchange. On June 15, 2017, [held a
pre-hearing conference in this case.' During the pre-hearing conference,
Respondent stated that it wanted to cross examine the inspector involved in the
inspections of its establishment. Following the pre-hearing conference, I issued an
Order Scheduling Telephone Hearing for August 23, 2017, noting that Respondent
wished to cross examine Inspector Ilya Kluchnikov.

On August 23, 2017, a hearing was held in this case. The purpose of the hearing
was to allow Respondent to cross examine Inspector Ilya Kluchnikov. During the
hearing, CTP’s exhibits 1 through 21 were admitted into the record without
objection. Hearing Transcript at 7. On October 4, 2017, I informed the parties
that the Court had received the transcript of the hearing, and set the deadline for
the parties’ post-hearing brief submissions as November 3, 2017. On October 27,
2017, CTP filed a Notice of Waiver of Post-Hearing Brief, indicating that it did
not intend to file a post-hearing brief. On November 1, 2017, Respondent filed a
letter, which I will treat as a post-hearing brief.

Analysis
I. Violations
CTP determined to impose a civil money penalty against Respondent pursuant to

the authority conferred by the Federal Food, Drug, and Cosmetic Act (Act) and
implementing regulations at Part 21 of the Code of Federal Regulations. The Act

' A previously scheduled pre-hearing conference for June 1, 2017 was rescheduled
due to a religious holiday.
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 cigarettes to an individual who is under the age of 18 is a violation of
implementing regulations. 21 C.F.R. § 1140.14(a)(1)’.

In its Complaint, CTP alleges that Respondent committed two violations of the
Act and its implementing regulations within a twelve month period. Respondent
filed an answer along with a transaction report and an informal brief, denying that
cigarettes were sold to a minor. Answer; Informal Brief of Respondent.
Specifically, Respondent argues that no cigarettes were sold during the time period
alleged by CTP and that CTP should provide a receipt. Id.

CTP’s case against Respondent rests on the testimony of Mr. Kluchnikov plus
corroborating evidence. CTP Exhibits (Exs.) 4,5, 8, 15. Mr. Kluchnikov is an
FDA-commissioned officer with the state of Washington whose duties include
determining whether retail outlets are unlawfully selling tobacco products to
minors. CTP Ex. 4 at 1-2. Mr. Kluchnikov’s inspections entail accompanying
minors who attempt to purchase tobacco products from retail establishments such
as the one operated by Respondent. Id.

Mr. Kluchnikov’s declaration states that he conducted inspections of Respondent’s
place of business on January 8, 2016 and March 19, 2016. CTP Ex. 4 at 2-4. On
cross-examination, Mr. Kluchnikov testified that he observed the cashier scanning
cigarettes for the minor. Hearing Transcript at 11. Mr. Kluchnikov further
testified that he did not ask for a receipt because it is not a standard practice. Id. at
13. Additionally, Mr. Kluchnikov testified that:

Ido a very thorough post-inspection review. I make sure to have the
correct address. I review all of the documents. I fill out a statement
based on where Iam. The minor as well fills out a statement of
where they are. I know that the location that I went to is the location
that I went to at the end of the inspection.

Id. at 14.

The testimony of Mr. Kluchnikov plus the corroborating evidence consisting of
photographs of the packs of cigarettes that were obtained from each minor on
January 8, 2016 and March 19, 2016, are proof that Respondent unlawfully sold

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

cigarettes to minors. Throughout the case, Respondent has denied that the sale of
cigarettes to minors occurred and has argued that there is insufficient proof
because there are no receipts for the purchases. Answer; Informal Brief of
Respondent.

Ihave considered Respondent’s arguments, but find them unpersuasive.
Respondent has continued to assert that the sale of cigarettes to minors never
occurred. Although the transaction report submitted by Respondent does not show
a sale of tobacco products during the approximate time frame alleged in CTP’s
complaint on March 19, 2016, this report alone is not sufficient to rebut the
allegations. Additionally, there is no provision in the applicable regulations
requiring proof of purchase in the form of a cash register receipt. The evidence of
record sufficiently identifies the cashiers who made the sales to the minors, and
the sworn testimony of the Inspector establishes to my satisfaction that the
violations charged in this case in fact took place on the dates in question.

I find that the facts as outlined above establish Respondent Red Sea Service
Station, Inc. d/b/a ARCO AM/PM’s liability under the Act.

Il. Civil Money Penalty

Pursuant to 21 U.S.C. § 333(f)(9), Respondent Red Sea Service Station, Inc. d/b/a
ARCO AM/PM is liable for a civil money penalty not to exceed the amounts listed
in FDA’s civil money penalty regulations at 21 C.F.R. § 17.2. In its Complaint,
CTP sought to impose the maximum penalty amount, $275, against Respondent
for two violations of the Act and its implementing regulations within a twelve
month period. Complaint § 1.

In both its Answer and its Post-Hearing Brief, Respondent denied any obligation
to pay a civil money penalty because there is insufficient proof it violated the
regulations.

Ihave found that Respondent committed two violations of the Act and its
implementing regulations within a twelve month period. When determining the
amount of a civil money penalty, I am required to take into account “the nature,
circumstances, extent and gravity of the violations and, with respect to the
violator, ability to pay, effect on ability to continue to do business, any history of
prior such violations, the degree of culpability, and such other matters as justice
may require.” 21 U.S.C. § 333(f)(5)(B).
i. Nature, Circumstances, Extent and Gravity of the Violations
Ihave found that Respondent committed two violations of selling cigarettes to
minors. The repeated inability of Respondent to comply with federal tobacco
regulations is serious in nature and the civil money penalty amount should be set
accordingly.

ii. Respondent’s Ability to Pay And Effect on Ability to do Business
Respondent has not presented any evidence that it does not have the ability to pay
the $275 Civil Money Penalty sought by CTP.

iii. History of Prior Violations
The current action is the first civil money penalty action brought against
Respondent for violations of the Act and its implementing regulations. As noted
above, Respondent has twice violated the prohibition against selling cigarettes to
persons younger than 18 years of age, 21 C.F.R. § 1140.14(a)(1).

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

v. Additional Mitigating Factors
Respondent has not presented any evidence to mitigate the civil money penalty
amount. As such, I find no reason to mitigate the penalty amount.

vi. Penalty

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

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $275 against
Respondent, Red Sea Service Station, Inc. d/b/a ARCO AM/PM, for two
violations of the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et

seq., and its implementing regulations, 21 C.F.R. pt. 1140, within a twelve month
period.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Mohammed Asgar, M.D.,
(OI File No. 5-10-4-004-9),
Petitioner,

v.

The Inspector General.
Docket No. C-17-123
ALJ Ruling No. 2018-5

Date: January 12, 2018

RULING DENYING MOTION TO
VACATE ORDER DISMISSING REQUEST FOR HEARING

On June 12, 2017, Petitioner filed a motion to withdraw his hearing request. I granted
that motion in a dismissal order dated June 14, 2017. On November 24, 2017, Petitioner
moved to vacate the dismissal order and reopen the case (Motion to Vacate).! The
Inspector General (I.G.) opposed Petitioner’s application (I.G. Resp.). For the reasons
discussed below, I deny Petitioner’s motion.

I. Background.

The LG. advised Petitioner by letter dated September 30, 2016 that he was excluded for a
five-year period from participation in all federal health care programs. I.G. Exhibit

' Petitioner styled his pleading as a “Request to Vacate Order Dismissing Case.” The governing
regulations describe any application made to me for an order or ruling as a motion, which is further
described as including relief sought, authority relied upon, and facts alleged. 42 C.F.R. § 1005.13(a).
Petitioner’s Request clearly falls within that description. I therefore refer to it as a motion herein.
(Ex.) 1. The LG. cited section 1128(a)(1) of the Social Security Act as the basis for the
five-year exclusion, referring to Petitioner’s conviction in U.S. District Court for “a
criminal offense related to the delivery of an item or service under the Medicare or a
State health care program, including the performance of management or administrative
services relating to the delivery of items or services, under any such program.” Jd. at 1.

Petitioner timely requested an Administrative Law Judge (ALJ) hearing regarding the
exclusion (Request for Hearing). In his request, he argued that the length of the
exclusion was “harsh, unreasonable, and unjust” given his cooperation in thwarting a
Medicare billing scheme. Request for Hearing at 1. Petitioner further cited both
comments by the sentencing judge and the government’s sentencing memorandum in his
criminal case for the proposition that he should be able to return to active medical
practice. Id.

After the I.G. submitted a motion for summary judgment and accompanying exhibits,
Petitioner through counsel submitted a motion to withdraw his hearing request, which I
granted in a dismissal order dated June 14, 2017.

I. The Parties’ Arguments.

On November 7, 2017, Petitioner filed his request to vacate my dismissal order and
reopen his case (Motion to Vacate), citing new information that had come to light that
was unknown to him at the time he withdrew his hearing request. Specifically, he
contends that when he submitted his motion to withdraw, he believed that the State of
Indiana would suspend his license to practice medicine, and that he learned only after
withdrawing his request that Indiana would in fact allow him to continue practicing there.
Motion to Vacate at 2. He further asserted that he believed, at the time of his hearing
request withdrawal, that no harm would befall the community in which he worked, as
other physicians could provide adequate substitute care to his own, but that subsequently,
based on communication with the local hospital, discovered this was not the case. Jd.

In his response opposing Petitioner’s Motion to Vacate, the I.G. argues that the reasons
Petitioner provided for why I should grant his motion are not relevant to Petitioner’s
appeal. I.G. Resp. at 1-2. Specifically, the I.G. argues that pursuant to 42 C.F.R.

§ 1001.2007(a)(1), my review is limited to whether the basis for the exclusion exists and
whether the length of the exclusion is reasonable. Jd. The LG. asserts denial is proper
because Petitioner’s arguments do not have any bearing on whether Petitioner was
convicted of a program-related offense or whether the period of exclusion is
unreasonable. Jd. at 3. He also argues that Petitioner’s Motion should be denied as
untimely because ALJ decisions are final and binding 30 days after service, pursuant to
42 CFR. § 1005.20(d). Id. at 3-4.

Petitioner’s December 7, 2017 reply characterizes the I.G.’s response as an attempt to
argue the merits of the appeal, rebuts the I.G.’s timeliness argument on the ground that
my dismissal order is not a decision as that term is used by the applicable regulations, and
again reiterates the equitable reasons he believes reopening would be appropriate here.
Reply at 1-3.

Til. Discussion.

While I have considered the arguments made by both parties, I note that neither party
actually addressed the critical threshold issue in this matter: whether I have the authority
to reopen a matter that has been dismissed. Petitioner merely asserts, without citing
authority, that “nothing in statute or regulation prohibits this Tribunal from vacating the
Order ....” Motion to Vacate at 4. The I.G. briefly contends the time period for
reopening has passed. See Resp. at 3-4.

A. Ido not have express authority to reopen a dismissal.

In an effort to ground my authority to deny Petitioner’s Motion in the governing
regulations, the I.G cites the 30-day window provided by 42 C.F.R. § 1005.20(d) for
reopening of decisions; his reliance is misplaced. That regulation refers to the time
period after which ALJ decisions become final if not appealed, and characterizes a
decision as being “based only on the record” and “contain[ing] findings of fact and
conclusions of law.” 42 C.F.R. § 1005.20(a). My June 14, 2017 Order Dismissing Case
is not based on the record and does not make findings of fact or law. It simply notes
Petitioner’s withdrawal request and the applicable regulation that required me to dismiss
the matter. Thus, it does not appear the regulations providing for a 30-day window of
reopening are intended to apply to a dismissal.

This view is reinforced by the fact that initial decisions, which are subject to a 30-day
reopening window, are appealable. See 42 C.F.R. § 1005.21(a) (“Any party may appeal
the initial decision of the ALJ to the DAB by filing a notice of appeal with the DAB
within 30 days of the date of service of the initial decision.”). However, there is no
appeal from a dismissal of a hearing request. 55 Fed. Reg. 12,205, 12,213 (Apr. 2, 1990)
(“If [a] party fails to file a timely request for a hearing, or thereafter withdraws or
abandons his or her request for a hearing, the [administrative law judge] is required to
dismiss the hearing request. In such a case, the CMP or exclusion would become final
with no further appeal permitted.”) (emphasis added).

There are no appeal rights attached to my dismissal of Petitioner’s hearing request. It is
therefore not a decision and not subject to the 30-day reopening window provided by

42 C.F.R. § 1005.20(d). There being no other instances in the applicable regulations
where my authority to reopen is discussed, I must conclude I have no express authority to
reopen a dismissal.

B. While I may have the inherent authority to reopen, reopening in this
instance is improper.

Federal courts have uniformly held that agencies have inherent authority to reconsider
their own decisions. See, e.g., Citizens Against Pellissippi Parkway Extension, Inc. v.
Mineta, 375 F.3d 412, 418 (6th Cir. 2004) (citing Belville Mining Co. v. United States,
999 F.2d 989, 997 (6th Cir. 1993)) (“Even where there is no express reconsideration
authority for an agency. . . the general rule is that an agency has inherent authority to
reconsider its decision... .”).

This inherent authority is heightened where agencies act in a quasi-judicial capacity. See
Albertson v. Federal Communications Commission, 182 F.2d 397, 399 (D.C. Cir. 1950)
(“[I]n the absence of statutory prohibition . . . [t]he power to reconsider is inherent in the
power to decide.”); Bookman v. United States, 453 F.2d 1263, 1265 (Ct. Cl. 1972), citing
Kenneth Culp Davis, Administrative Law Treatise § 18.09 (1958) (“Every tribunal,
judicial or administrative, has some power to correct its own errors or otherwise
appropriately to modify its judgment, decree, or order.”).

Consistent with this view, the Departmental Appeals Board has noted that “[g]enerally, a
decision-maker has inherent authority to reopen and reconsider a decision even in the
absence of express authorization in its procedures. Such authority serves the Department
by ensuring fair process and sound decisions.” Henry L. Gupton, DAB Ruling No.
2007-1 at 2 (2007).

However, the Board went on to observe that in circumstances where regulations or
procedure did allow reopening, it was only permitted where “a party promptly alleges a
clear error of fact or law.” Jd. at 3. Thus, in cases where it relied on its inherent authority
to reopen, the Board thought it reasonable to apply the same clear error standard. I find
that reasoning to be persuasive here as well. If I do have the inherent ability to reopen
this matter, it should only be exercised where one party has “promptly allege[d] a clear
error of fact or law.” Jd.; see also Bookman, 453 F.2d at 1265 (“[R]econsideration is
often the sole means of correcting errors of procedure or substance.”).
However, the Board has also made clear that reopening to correct an error of fact or law
is only appropriate where the error is that of the decision-maker, not of the parties. See
Highland Pines Nursing Home, Ltd., DAB No. 2361 at 2 (2011) (denying a request to
reopen based on party error, not an error in the Board’s decision); see also Mimiya
Hospital, DAB No. 1833 at 2 (2002) (observing that “[reopening] is the means for the
parties and the Board to point out and correct any errors that make the decision clearly
wrong.”).

Here, Petitioner’s motion, filed almost five months after the dismissal, can hardly be
characterized as prompt. See Chao v. Russell P. Le Frois Builder, 291 F.3d 219, 230
(2nd Cir. 2002) (reconsideration must be conducted “reasonably promptly”); Belville
Mining Co., 999 F.2d at 1000 (“[A]bsent unusual circumstances, the time period would
be measured in weeks, not years.”).

And, more critically, Petitioner does not argue my dismissal was based on a clear error of
fact or law. He cites no error on my part that could be corrected by reopening. Instead,
he explains that he sought dismissal of his hearing request based on assumptions about
his medical license and the state of his medical community that he subsequently
discovered to be inaccurate. Petitioner’s rationale for seeking reopening is reasonable,
but he attempts to undo his own error, not mine. For the foregoing reasons, Petitioner’s
Motion is denied.

/s/
Bill Thomas
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2016-H-0720)

Complainant
v.

DHS Energy Sales, LLC
d/b/a 7-Eleven,

Respondent.

Docket No. T-16-416

Decision No. TB2327
Date: January 9, 2018
INITIAL DECISION

The Center for Tobacco Products (CTP) seeks to impose a civil money penalty against
Respondent, DHS Energy Sales, LLC d/b/a 7-Eleven, located at 7401 East Broadway
Avenue, Tampa, Florida 33619, for three 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 twenty-four month period. Specifically, CTP alleges that 7-Eleven
violated the Act by impermissibly selling cigarettes to minors, and failing to verify, by
means of photo identification containing a date of birth, that the purchasers were 18 years
of age or older.

Procedural History

CTP began this matter by serving an administrative complaint seeking a $500 civil
money penalty on Respondent 7-Eleven, at 7401 East Broadway Avenue, Tampa, Florida
33619, and by filing a copy of the Complaint with the Food and Drug Administration’s
(FDA) Division of Dockets Management. After being properly served with CTP’s
Complaint in this matter, Respondent filed a timely Answer on June 17, 2016.
Respondent’s former counsel also filed a Notice of Appearance at that time. I issued an
Acknowledgment and Prehearing Order (APHO) on July 7, 2016. I explained that the
parties may request copies of documents relevant to this case and that the requesting
party must serve the request for documents no later than August 8, 2016. On August 8,
2016, Respondent sent CTP a request for the production of documents.

In response to Respondent’s discovery request, CTP filed a Motion for a Protective Order
on August 18,2016. On August 29, 2016, Respondent filed a response to CTP’s Motion
for a Protective Order. Further, on September 8, 2016, Respondent filed a “Motion to
Compel Better Responses to First Request for Production and for Sanctions.” CTP, in
turn, filed its own Motion to Compel Discovery on September 19, 2016, and filed a
response to Respondent’s motion on September 26, 2016. Respondent filed a response to
CTP’s Motion to Compel Discovery on October 4, 2016.

On November 28, 2016, I issued an Order granting in part and denying in part CTP’s
August 18, 2016 Motion for a Protective Order. My Order also denied Respondent’s
“Motion to Compel Better Responses to First Request for Production and for Sanctions”
and granted CTP’s Motion to Compel Discovery. The Order set forth, among other
things, that CTP must submit all documents to Respondent not subject to the protective
order no later than December 28, 2016; that CTP must file any privilege logs by
December 28, 2016; that Respondent had until January 12, 2017 to challenge any
document included in CTP’s privilege log; and that the prehearing exchange deadlines
were to be extended.

On December 28, 2016, CTP filed its privilege log. On January 12, 2017, Respondent
filed a Motion to Compel documents listed in CTP’s privilege log, and CTP filed its
response on January 27, 2017. On February 3, 2017, CTP filed a motion to extend the
prehearing exchange deadlines pending resolution of the parties’ ongoing discovery
dispute. I issued an order on February 6, 2017, granting that motion and extending the
deadlines. On February 17,2017, CTP filed a Second Motion to Compel. On February
23, 2017, I issued an Order again extending the parties’ prehearing deadlines. On
February 27, 2017, CTP withdrew its Second Motion to Compel.

On April 6, 2017, CTP filed another Motion to Extend Deadlines so that discovery issues
could be resolved. I granted that motion on April 12, 2017 and ordered that the
prehearing deadlines be extended.

On April 18, 2017, I issued a Protective Order for the documents set forth in CTP’s
privilege log. My Order also extended CTP’s prehearing exchange deadline to May 22,
2017 and Respondent’s prehearing exchange deadline to June 12, 2017.
CTP filed its prehearing exchange on May 22, 2017. CTP’s pre-hearing exchange
included an Informal Brief of Complainant, a list of proposed witnesses and exhibits, and
thirty-eight (38) numbered exhibits. CTP’s exhibits included the declarations of two
witnesses. On June 1, 2017, Respondent’s counsel submitted a Notice of Appearance,
noting the substitution of two attorneys from the same firm. Respondent filed its
prehearing exchange on June 12, 2017. Respondent’s prehearing exchange included an
Informal Brief of Respondent, a list of proposed witnesses and exhibits, and two (2)
numbered exhibits. Respondent’s exhibits included the declaration of one witness.
Respondent’s exchange also included a request that this case be dismissed and that the
declaration of one of CTP’s witnesses, Laurie J. Sternberg be stricken because the
declaration was unsigned. On July 10, 2017, I issued an Order finding no cause for
dismissal and directed CTP to file a response to Respondent’s objection to Ms.
Sternberg’s declaration by July 31, 2017. Additionally, the Order scheduled a pre-
hearing conference for August 8, 2017 at 10:00 a.m. to resolve any outstanding issues.
On July 28, 2017, CTP filed its response to the Respondent’s request to strike Ms.
Sternberg’s declaration.

On August 8, 2017, I held a telephonic prehearing conference in this case. I explained to
the parties that the sole purpose of an administrative hearing under the applicable
regulations is to afford the parties an opportunity for cross-examination of exchange
witnesses. Respondent indicated that it would like to cross-examine one of CTP’s
witnesses, Mr. Pulliam, the inspector in this matter. CTP declined to cross-examine
Respondent’s sole witness. Consequently, on August 8, 2017, I issued an order
scheduling a telephone hearing in this matter for September 13, 2017 at 1:00 p.m. Due to
Hurricane Irma, which affected the area where Respondent’s business is located, on
September 8, 2017, I postponed the scheduled hearing and requested that the parties
inform me by September 29, 2017 of their availability for future hearing dates.

On September 26, 2017, counsel for Respondent filed a Notice of Withdrawal, stating
that Respondent had retained alternate counsel. On September 29, 2017, attorney Donald
Anderson notified the Departmental Appeals Board by e-mail that he had been retained
by Respondent. After receiving available dates from both counsel for CTP and counsel
for Respondent, on October 10, 2017, I issued an order scheduling a telephone hearing
for November 16, 2017. The order also directed Respondent’s counsel to register with
the Departmental Appeals Board’s Electronic Filing System (DAB E-File) by October
20, 2017. Further, Respondent’s counsel was given until October 27, 2017 to indicate
which of CTP’s exchange witnesses he wished to cross-examine at the November 16,
2017 hearing. That order was e-mailed directly to Respondent’s counsel.

On November 2, 2017, I issued an additional order indicating that the deadlines set forth
in my October 10, 2017 had passed and that, to date, Respondent’s counsel had not
registered for the DAB E-File nor had he indicated which of CTP’s witnesses he wished
to cross-examine at the hearing. My order stated that the hearing would continue as
scheduled on November 16, 2017. That order was also e-mailed directly to Respondent’s
counsel.

Despite being ordered twice to register for and utilize the DAB E-File, on November 10,
2017, six days before the scheduled hearing, Respondent’s counsel submitted a Motion to
Continue by e-mail. Respondent’s counsel’s motion stated that an “unexpected medical
issue” would prevent attendance at the scheduled hearing. Respondent’s counsel also
added that he had “just recently been provided with voluminous discovery” to review.
Despite no documentation being provided attesting to a medical emergency, by order
dated November 14, 2017, 1 granted the Motion to Continue and rescheduled the hearing
for December 5, 2017 at 1:00 p.m. The order indicated if either party was unable to
appear on December 5, 2017 at 1:00 p.m., that the parties could agree to an alternate
hearing date and inform me by November 22, 2017. The order again directed
Respondent’s counsel to register with the DAB E-File by November 20, 2017 and to
submit the names of the witnesses he wished to cross-examine by November 27, 2017.
Again, the order was e-mailed directly to Respondent’s counsel.

Respondent’s counsel failed to register for the DAB E-File or submit the names of the
witnesses that he wished to cross-examine by the date set in the November 14, 2017
Order. Furthermore, the parties did not notify me that they could not attend the
scheduled hearing. On the date and time of the scheduled hearing, December 5, 2017 at
1:00 p.m., both Respondent and Respondent’s counsel failed to appear.

On December 11, 2017, six days after the scheduled hearing, Respondent filed a Motion
for Rehearing and Reconsideration stating that an “inadvertent scheduling error” caused
him to be absent from the hearing, and that Respondent should not be penalized for his
error.

Decision on the Record

Pursuant to 21 C.F.R. § 17.35(e), if a party fails to defend an action after service of a
notice of hearing, I may impose sanctions, and issue an initial decision imposing
penalties and assessments. Here, Respondent was served with notice regarding the
December 5, 2017 hearing by order dated November 14, 2017. Despite that notice,
neither Respondent nor Respondent’s counsel appeared at the scheduled hearing. I note
that Respondent, in his December 11,2017 Motion, tacitly concedes he received notice
given his excuse for non-appearance was an “inadvertent scheduling error.”

In addition to failing to appear at the hearing that it requested, Respondent failed to
respond to three separate orders each of which directed Respondent’s newly-retained
counsel to (1) register for the DAB E-File and (2) identify any witnesses he sought to
cross-examine at the hearing. Thus, the reasons stated in support of Respondent’s
Motion for Rehearing and Reconsideration are simply not credible as Respondent’s
failure to properly defend its case began long before the hearing that it failed to attend.

Respondent’s refusal to minimally participate in a proceeding that it requested in its
Answer, coupled with its flagrant non-compliance with my orders, warrant severe
sanctions. I find that Respondent has lost the right to a hearing to cross-examine CTP’s
witnesses. Therefore, I will decide this case on the basis of the written record. See 21
CFR. § 17.35(e).

Analysis
I. Violations

In its Complaint, CTP alleges that Respondent 7-Eleven committed four violations of the
Act and its implementing regulations within a twenty-four month period, but only
charged Respondent with one (1) violation for the first inspection, and a total of three (3)
violations, in accordance with its customary practice. CTP makes the following
allegations:

e At approximately 5:50 p.m. on December 10, 2014, at Respondent’s business
establishment, 7401 East Broadway Avenue, Tampa, Florida 33619, an FDA
commissioned inspector documented Respondent’s staff selling a package of
Marlboro Special Blend 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;

e Ina warning letter dated January 15,2015, CTP informed Respondent of the
inspector’s December 10, 2014 documented violations, and that such actions
violate federal law. The letter further warned that Respondent’s failure to correct
its violations could result in a civil money penalty or other regulatory action;

e At approximately 5:32 p.m. on November 12, 2015, at Respondent’s business
establishment, 7401 East Broadway Avenue, Tampa, Florida 33619, an FDA
commissioned inspector documented Respondent’s staff selling a package of 305's
Menthol Kings cigarettes to a person younger than 18 years of age. The inspector
also documented that staff failed to verify, by means of photographic identification
containing a date of birth, that the purchaser was 18 years of age or older.

Complaint; Informal Brief of Complainant. CTP supports its allegations with a number
of evidentiary exhibits; of particular relevance is the written declaration of the FDA-
commissioned officer who participated in both inspections.
In both its Answer and its Informal Brief, Respondent 7-Eleven denies all of CTP’s
allegations. The thrust of Respondent’s argument is that Respondent did not employ
individuals matching the descriptions reflected in the December 10, 2014 or the
November 12, 2015 inspection reports. Specifically, Respondent argues that it never
employed a female employee with blonde hair and glasses as alleged in the December 10,
2014 inspection report and that it never employed an employee named “Shelly” with light
brown hair and glasses as alleged in the November 12, 2015 inspection report. Informal
Brief of Respondent at 4-5.

Respondent provides the written declaration of the Respondent’s business owner as
evidence to support this argument. Resp. Ex. 1. In addition, Respondent points to its
payroll register to support that it did not employ anyone with the name “Shelly” on the
date of the November 12, 2015 inspection. Informal Brief of Respondent at 5; CTP Ex.
33.

In order to prevail, Complainant must prove Respondent’s liability by a preponderance of
the evidence. See 21 C.F.R. § 17.33(b). As such, I as the factfinder must assess whether,
on the whole, I am convinced that greater weight of the evidence supports Complainant’s
account. See Sec'y of Labor v. Keystone Coal Min. Corp.,151 F.3d 1096, 1103 (D.C. Cir.
1998). Respondent’s argument largely focuses on its allegation that the Inspector’s
descriptions of its store employees are inaccurate. According to Respondent, the
Inspector’s descriptive inaccuracies should cast doubt upon whether or not the violations
in question actually occurred. However, Respondent has raised no other issue and
provided no other evidence to show that the violations did not occur. Indeed, the
possibility exists that the descriptions provided in evidence by CTP are not wholly
accurate. However, Respondent chose not avail itself of the opportunity to cross-examine
the Inspector at a hearing in order to attempt to impeach his sworn written testimony.

The Inspector was made available and ready to testify at the hearing, at considerable
expenditure of time and effort by Complainant. Furthermore, Respondent’s reliance on
the contents of its payroll registers is misplaced and unpersuasive. The payroll report
does not include physical descriptions of employees, nor does it account for an employee
that may go by a diminutive or augmentative form of their “formal” name. Accordingly,
based upon the entirety of the record in this case, I am convinced that the greater weight
of the evidence supports Complainant’s allegations.

Therefore, I find that these facts establish Respondent 7-Eleven’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. § 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010); 81 Fed. Reg.
28,974, 28,975-76 (May 10, 2016). Under 21 C.F R. § 1140.14(a)(1)!, no retailer may
sell cigarettes 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 cigarette purchasers are younger than 18
years of age.

Il. Civil Money Penalty

Pursuant to 21 U.S.C. § 333(f)(9), Respondent 7-Eleven is liable for a civil money
penalty not to exceed the amounts listed in FDA’s civil money penalty regulations at 21
CFR. § 17.2. In its Complaint, CTP sought to impose the maximum penalty amount,
$500, against Respondent for three violations of the Act and its implementing regulations
within a twenty-four month period. Complaint J 1. In its Informal Brief, CTP continues
to assert that a $500 civil money penalty is appropriate. Informal Brief of Complainant at
14.

Respondent 7-Eleven asserts that it is a franchisee of 7-Eleven, Inc. and that “7-Eleven
franchise agreements contain an ‘obey all laws’ provision that subjects [Respondent] to
termination of its rights to operate the franchise if it is found to have violated the law.”
Respondent asserts that a finding of a violation “may constitute a breach of the franchise
agreement, which would jeopardize its contractual right to continue its business” and that
Respondent “takes violations of this nature very seriously, which is why [Respondent]
has procedures in place to avoid such violations, including its point of sale system and
training.” Informal Brief of Respondent at 7.

When determining the amount of a civil money penalty, I am required to take into
account “the nature, circumstances, extent and gravity of the violations and, with respect
to the violator, ability to pay, effect on ability to continue to do business, any history of
prior such violations, the degree of culpability, and such other matters as justice may
require.” 21 U.S.C. § 303(f)(5)(B).

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

Respondent 7-Eleven has failed to comply with the Act and its implementing regulations
on two separate occasions, in December 2014 and November 2015. I have found that
Respondent committed two violations of selling cigarettes to persons younger than 18
years of age, 21 C.F.R. § 1140.14(a)(1), and two violations for failing to verify, by means
of photo identification containing a purchaser’s date of birth, that no cigarette purchasers
are younger than 18 years of age, 21 C.F.R. § 1140.14(a)(2). Respondent has been
charged by Complainant with three of those violations in accordance with its customary

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

practice to charge only one violation for the initial inspection, even though the applicable
regulations would permit charging for more than one. The repeated inability of
Respondent to comply with federal tobacco regulations is serious in nature and the civil
money penalty amount should be set accordingly.

ii. Respondent’s Ability to Pay

CTP is seeking a $500 civil money penalty against Respondent 7-Eleven. Respondent
has not provided any argument or evidence that it lacks the ability to pay the $500 civil
money penalty. To the contrary, Respondent’s business owner signed a declaration under
penalties of perjury stating that he had “the ability to pay the $500 fine that [CTP] seeks”
in this case. CTP Ex. 38.

iii. Effect on Ability to do Business

Respondent claims that “a finding here of 21 C.F.R. 1140.14...may constitute” a breach
of its franchise contract with 7-Eleven. Informal Brief of Respondent at 7; see also Resp.
Ex. 3. This, however, is a contractual matter between Respondent and 7-Eleven and does
not weigh upon my decision. Respondent, as a party to that agreement, should have kept
that provision in mind prior to allowing repeated violations to occur. Additionally, it is
unclear whether Respondent could continue to operate as a business regardless of its
status as a 7-Eleven franchise. Based on the available evidence, I cannot conclude that a
$500 civil monetary penalty would severely hinder Respondent’s ability to continue
lawful retail operations.

iv. History of Prior Violations

While the current action is the first civil money penalty action that CTP has brought
against Respondent, CTP issued a warning letter to Respondent informing it of the
inspector’s December 10, 2014 documented violations. Complaint J 11. That letter
warned that Respondent’s failure to correct its violations might result in a civil money
penalty or other regulatory action. Id. Despite that warning letter, however, Respondent
was found to have committed the exact same violations during an inspection only 11
months later in November 2015.

v. Degree of Culpability
Ihave concluded that Respondent is liable for three violations of selling tobacco products

to minors, and hold Respondent fully culpable for each of those violations of the Act and
its implementing regulations.
vi. Additional Mitigating Factors

In his declaration, Respondent’s business owner stated that he requires all employees of
Respondent to complete a course regarding restrictions for tobacco sales and watch an
FDA video entitled “Compliance Training for Tobacco Retailers.” R. Ex. | at 2.
However, Respondent did not provide any evidence that these internal requirements were
in place prior to 2015 when the most recent the violations occurred.

vii. Penalty

Based on the foregoing reasoning, I find a penalty amount of $500 to be reasonable and
appropriate under 21 U.S.C. §§ 303(f)(5)(B) and 333(f)(9).

Conclusion

For the foregoing reasons, I enter judgment in the amount of $500 against Respondent
DHS Energy Sales, LLC d/b/a 7-Eleven. 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,
(FDA No. FDA-2017-H-2745)

Complainant
v.

JMGM Enterprises, Inc.
d/b/a Brightmoor Liquor,

Respondent.
Docket No. T-17-3937
Decision No. TB2351
Date: January 8, 2018
INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, JMGM Enterprises, Inc. d/b/a Brightmoor Liquor, at 22002
Lyndon Street, Detroit, Michigan 48223, and by filing a copy of the complaint with the
Food and Drug Administration’s (FDA) Division of Dockets Management. The
complaint alleges that Brightmoor Liquor impermissibly sold cigarettes to minors and
failed to verify, by means of photo identification containing a date of birth, that the
purchasers were 18 years of age or older, thereby violating the Federal Food, Drug, and
Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R.
pt. 1140. The complaint likewise alleges that a final default judgment was previously
entered against Respondent Brightmoor Liquor for five violations of regulations found at
21 C.F.R. pt. 1140 and, therefore, CTP seeks to impose an $11,182 civil money penalty
against Respondent Brightmoor Liquor.

I. Background and Procedural History

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on May 9, 2017, CTP served the
complaint on Respondent Brightmoor Liquor by United Parcel Service. On June 8, 2017,
through counsel, Respondent timely filed an answer. On June 27, 2017, I issued an
Acknowledgment and Pre-Hearing Order (APHO) acknowledging receipt of
Respondent’s answer and establishing procedural deadlines for this case.

On August 28, 2017, counsel for Respondent filed a Motion to Withdraw as Counsel for
Respondent and Extend Deadlines. I granted the motion and extended all the deadlines in
this case including the deadline for parties to serve requests for documents. On August
30, 2017, CTP served its Request for Production of Documents on Respondent. On
November 6, 2017, CTP filed a Motion to Compel Discovery stating it has not received a
response to its Request for Production of Documents and requesting “an order be entered
to require Respondent to comply with the Request for Production in its entirety.”

In a November 7, 2017 letter issued by my direction, Respondent was given until
November 21, 2017, to file a response to CTP’s Motion to Compel Discovery.
Respondent failed to file any response to CTP’s Motion to Compel Discovery or
otherwise respond to the November 7, 2017 letter. Therefore, in a November 29, 2017
order, I granted CTP’s motion and ordered Respondent to comply with CTP’s Request
for Production of Documents by December 11, 2017. Respondent was warned that a
failure to comply may result in sanctions, including the issuance of an Initial Decision
and Default Judgment finding Respondent liable for the violations listed in the complaint
and imposing a civil money penalty.

On December 12, 2017, CTP filed a Status Report and Motion to Impose Sanctions
stating “Respondent has neither produced any of the requested documents, nor contacted
Complainant or Counsel for Complainant regarding this matter.” CTP requested I strike
Respondent’s answer and issue a default judgment imposing a civil money penalty in the
amount of $11,182 against Respondent. In a December 14, 2017 letter issued by my
direction, Respondent was given until December 27, 2017, to file a response to CTP’s
Motion to Impose Sanctions. To date, Respondent has failed to file any response to
CTP’s Motion to Impose Sanctions.

Therefore, pursuant to 21 C.F.R. § 17.35, I grant CTP’s Motion to Impose Sanctions, and
strike Respondent’s answer for failing to comply with two judicial directions.
Specifically, Respondent failed to comply with my July 27, 2017 APHO and Respondent
failed to comply with my November 29, 2017 order to comply with CTP’s Request for
Production of Documents. This conduct is sufficiently egregious to warrant striking
Respondent’s answer and issuing an initial decision by default.
I. Default Decision

Striking Respondent’s answer leaves the complaint unanswered. Pursuant to 21 C.F.R.
§ 17.11, Lassume that the facts alleged in the complaint (but not its conclusory
statements) are true. Specifically:

¢ On June 16, 2016, CTP initiated a previous civil money penalty action, CRD
Docket Number T-16-765, FDA Docket Number FDA-2016-H-1403, against
Respondent for five' violations of 21 C.F.R. pt. 1140 within a thirty-six month
period. CTP alleged those violations to have occurred at Respondent’s business
establishment, 22002 Lyndon Street, Detroit, Michigan 48223, on November 24,
2014, April 8, 2015, and December 6, 2015;

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

e At approximately 5:30 p.m. on December 5, 2016, at Respondent’s business
establishment, 22002 Lyndon Street, Detroit, Michigan 48223, 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 Respondent Brightmoor Liquor’s liability under the Act. The Act
prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section 906(d)
of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).
The Secretary of the U.S. Department of Health and Human Services issued the
regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1;
see 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010); 81 Fed Reg.
28,974, 28,975-76 (May 10, 2016). Under 21 C.F.R. § 1140.14(a)(1),’ no retailer may
sell cigarettes 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 cigarette purchasers are younger than 18

' Two violations were documented on November 24, 2014, two on April 8, 2015, and
two on December 6, 2015. In accordance with customary practice, CTP counted the
violations at the initial inspection as a single violation, and all subsequent violations as
separate individual violations.

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

years of age.

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

Order

For these reasons, I enter default judgment in the amount of $11,182 against Respondent
JMGM Enterprises, Inc. d/b/a Brightmoor Liquor. 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
Iroquois Memorial Hospital,
(CCN: 140167),
Petitioner,
v.
Centers for Medicare and Medicaid Services.
Docket No. C-16-169
Decision No. CR5005

Date: January 8, 2018

DECISION

Petitioner, Iroquois Memorial Hospital, applied to participate as a “critical access
hospital” under the Medicare Rural Hospital Flexibility Program. Initially and on
reconsideration, the Centers for Medicare and Medicaid Services (CMS) denied its
application. Petitioner appeals. The parties agree that no material facts are in dispute and
have filed cross-motions for summary disposition.

l agree that this case presents no genuine dispute of material facts and turns on a question
of law. For the reasons set forth below, I find that CMS is entitled to judgment as a
matter of law. I therefore grant CMS’s motion and deny Petitioner’s.

Background

Section 1820 of the Social Security Act (Act) establishes the Medicare Rural Hospital
Flexibility Program, which requires participating states to develop at least one rural
health network and to have at least one facility in the state designated as a critical access
hospital. Act § 1820(c)(1). A critical access hospital is eligible for higher levels of
reimbursement than other facilities. See Act §§ 1814(1)(1), 1820(g)(1)(D), 1834(),
1861(v). Regulations implementing the statutory provisions are found at 42 C.F.R. Part
485, subpart F. To be designated a critical access hospital, a hospital must meet all
statutory and regulatory requirements. 42 C.F.R. § 485.601(b).

Iroquois Memorial Hospital is an acute care hospital, located in Watseka, Illinois. On
April 29, 2015, it applied for “critical access hospital” (also referred to as a “CAH”)
status. CMS Ex. 6. Ina letter dated July 30, 2015, CMS denied Petitioner’s request, and
Petitioner sought reconsideration. CMS Exs. 7, 8. By letter dated November 2, 2015,
CMS again denied Petitioner’s request, finding that the Iroquois Memorial did not satisfy
the proximity requirements for a critical access hospital because it is within a 35-mile
drive of another hospital. P. Ex. 1.

Petitioner timely requested a hearing before an administrative law judge.

The parties have filed cross-motions for summary disposition. With its motion and brief
(CMS Br.), CMS submits 11 exhibits (CMS Exs. 1-11). With its motion and brief (P.
Br.), Petitioner submits 11 exhibits (P. Exs. 1-11). CMS filed a reply (CMS Reply).
Petitioner filed a sur-reply (P. sur-reply) and three additional exhibits (P. Exs. 12-14).

Issues

The parties agree that no material facts are in dispute and that the case can be decided on
summary disposition.

On the merits, the sole issue before me is whether Petitioner qualifies as a critical access
hospital. Specifically, does Iroquois Memorial satisfy the proximity requirement for a
critical access hospital?

Discussion

CMS is entitled to summary judgment because the undisputed facts establish
that Iroquois Memorial Hospital is less than a 35-mile drive from two other
hospitals and does not otherwise meet the proximity requirement for a critical
access hospital. 42 C.F.R. § 485. 610(c)."

CMS will not designate Iroquois Memorial as a critical access hospital because it is too
close to other hospitals. A critical access hospital must be “located more than a 35-mile
drive (or, in the case of mountainous terrain or in areas with only secondary roads
available, a 15-mile drive) from a hospital or [critical access hospital].” Act

§ 1820(c)(2)(B)(i)(D) (emphasis added); 42 C.F.R. § 485.610(c). In a manual provision,
CMS makes plain that, to qualify, a critical access hospital “must be located more than a

' T make this one finding of fact/conclusion of law.
35-mile drive from any hospital or other [critical access hospital].” State Operations
Manual (SOM) § 2256A (Rev. 90, eff. 08/30/13) (emphasis added), available at
https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/
R90SOMA. pdf; see also CMS Ex. 11 at 4.7

The parties agree that Iroquois Memorial is within a 35-mile drive of three other
hospitals:

e Regional Community Hospital in Hoopeston, Illinois, is about 25 miles from
Iroquois Memorial, but that distance must be traveled over secondary roads. The
parties agree that, if this were the only other hospital in the area, Petitioner would
meet the proximity requirement.

e Presence St. Mary’s Hospital, in Kankakee, Illinois, is 32 to 33 miles from
Iroquois Memorial; two-thirds of that distance can be traveled over primary roads.

e Riverside Medical Center, also in Kankakee (and within a mile of Presence St.
Mary’s) is just under 33 miles from Iroquois Memorial; two thirds of that distance
can be traveled over primary roads.

CMS Exs. 3, 4, 5; P. Exs. 3, 5, 6, 7; see CMS Br. at 3, 5-6; P. Br. at 5, 7. Thus, based on
the plain language of the statute and regulations, CMS must deny Iroquois Memorial’s
request for status as a critical access hospital. It is less than a 35-mile drive from two
other hospitals, traveling mostly over primary roads, and thus does not meet the
proximity requirements set forth in the statute and regulations. Act § 1820(c)(2)(B)(i)();
42 CFR. § 485.610(c).

Petitioner nevertheless argues that I should disregard the two hospitals that are mainly
accessible over primary roads (Presence St. Mary’s and Riverside). In Petitioner’s view,
CMS may consider only the geographically nearest hospital when it determines whether
a hospital qualifies as a critical access hospital.

I reject Petitioner’s position because it is not consistent with the statute and regulations
and because it undermines the legislative goals of the Medicare Rural Hospital Flexibility
Program. The statutory and regulatory language is unambiguous: the applicant cannot
qualify as a critical access hospital if it is located less than 35 miles from “a hospital or
[critical access hospital].” Act § 1820(c)(2)(B)G)(D; 42 C.F.R. § 485.610(c). The word
“nearest” does not appear anywhere in the statute or regulation, and, contrary to

? CMS cited to an earlier version of section 2256A, which was revised on August 30,
2013. SOM § 2256A (Rev. 32, eff. 09/07/07), available at
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads
/som107c02.pdf. However, the revisions were not material to the issue before me.
Petitioner’s repeated suggestions, the word “a” does not mean “nearest.” If the meaning
of “a hospital” were at all ambiguous (which it is not) the State Operations Manual settles
the matter: ‘a hospital” means “any hospital.” SOM § 2256A. I find this a reasonable —
perhaps the only reasonable — interpretation of the statutory language and therefore
entitled to deference. See Baylor Cnty. Hosp. Dist., DAB No. 2617 at 4 (2015), aff'd
Baylor Cnty. Hosp. Dist. v. Price, No. 16-10310 (5th Cir. 2017).

Petitioner points to several administrative and court decisions which, in determining
whether an applicant institution satisfies the proximity requirement, refer to its distance
from “the nearest hospital.” But these cases focus on CMS’s classification of roads as
“primary” versus “secondary” and how CMS calculates distances between the applicant
institution and the nearby hospital that jeopardizes its eligibility. Not one of the cases
cited involved more than one hospital in relatively close proximity to the applicant
institution. And the hospital that disqualified (or threatened to disqualify) the applicant
institution was, not surprisingly, the “nearest.” The adjudicator was simply describing
the location of the relevant hospital, not creating an entirely new standard (inconsistent
with the statute and regulations) for assessing whether an applicant meets the proximity
requirements.’

Indeed, given the purpose of the Medicare Rural Hospital Flexibility program, it would
be very unusual — perhaps unheard of — to find three hospitals within 35 miles of a critical
access hospital. As the Departmental Appeals Board has noted, the funding for critical
access hospitals was “narrowly targeted to a subset of rural hospitals that were /ess
accessible and more isolated from other sources of hospital care than other such
hospitals.” Baylor, DAB No. 2617 at 5 (emphasis added).

Where, as here, two easily-accessible hospitals lie within a relatively short distance of the
applicant institution, the area’s Medicare beneficiaries have access to hospital services
without need for an additional critical access hospital. That a third hospital is technically
closer, but more difficult to get to, does not make the two hospitals any less accessible to

> Petitioner also finds significant some language in CMS’s brief and notice letters that,
rather than referring to the statutory and regulatory term (“a hospital”), say “nearest
hospital.” P. Br. at 8-10. While CMS could certainly have been more precise, such
sloppy language cannot be used to change the statute’s plain meaning. Unfortunately,
CMS’s attempt to justify its use of the word “nearest” is inaccurate and confusing. It
argues that “nearest” applies to hospitals accessible by secondary roads. CMS Reply at 5.
But nothing in the statute, regulations, or manual provisions distinguishes the “nearest”
hospital from any other hospital within the distance requirements, whether the distances
are measured over primary or secondary roads. CMS would have done well to
acknowledge that its use of the word “nearest” was ill-advised.

Medicare beneficiaries. See Cibola Gen. Hosp., DAB No. 2387 at 10 (2011)
(acknowledging the statute’s “overarching goal of preserving the access of rural

Medicare beneficiaries to hospital services”).*

Finally, Petitioner complains that CMS reversed an earlier determination that Iroquois
Medical met the distance requirements for a critical access hospital. Relying on CMS’s
representations, Petitioner purportedly took steps to meet other regulatory requirements,
including arranging for an on-site survey by an accrediting body. P. Br. at 4. Whether
the government can ever be estopped from enforcing a statute and valid regulations is
highly questionable. Heckler v. Cmty. Health Servs. Of Crawford Cnty., 467 U.S. 51, 63
(1984). But estoppel is not even an issue here. In asking CMS for a determination,
Petitioner represented that “our hospital’s location between the Kankakee [Riverside
Medical] and Hoopeston [Regional Community] facilities requires traveling over more
than 15 continuous miles of rural, secondary highway in either direction.” CMS Ex. 1 at
1 (emphasis in original). This is plainly inaccurate: Riverside Medical and one other
hospital (which Petitioner did not mention) were accessible by means of primary roads.
Petitioner can hardly claim that it is entitled to equitable relief when it was responsible
for any errors.

Conclusion

I find that this case presents no genuine dispute of material facts, and that CMS is entitled
to judgment as a matter of law. I therefore grant CMS’s motion for summary disposition.

/s/
Carolyn Cozad Hughes
Administrative Law Judge

* [note that Cibola accurately describes the proximity requirement: “that no other
hospital be located within a 35-mile drive”. DAB No. 2387 at 1 (emphasis added).