Forty Liquor Inc. d/b/a Forty Liquors, DAB TB5263 (2020)

ORDER IMPOSING SANCTIONS AND INITIAL DECISION AND DEFAULT JUDGMENT

The Food and Drug Administration’s (FDA) Center for Tobacco Products (CTP) began this case by serving an Administrative Complaint (Complaint) on Respondent, Forty Liquor Inc. d/b/a Forty Liquors, and filing a copy of the Complaint with the Civil Remedies Division (CRD) of the Departmental Appeals Board (DAB).  The Complaint alleges that Respondent committed at least five violations of the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R. pt. 1140, within a 36-month period.  CTP seeks a civil money penalty (CMP) in the amount of $5,849 from Respondent.  Respondent timely requested a hearing by filing an Answer. 

For the reasons stated below, I strike Respondent’s Answer, and issue an initial decision and default judgment imposing a civil money penalty in the amount of $5,849 against Respondent.  21 C.F.R. § 17.35(c)(3).

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I.     Background

On February 25, 2020, CTP served the Complaint on Respondent, Forty Liquor Inc. d/b/a Forty Liquors, located at 1203 South Philadelphia Boulevard, Aberdeen, Maryland 21001, by United Parcel Service (UPS), as required by 21 C.F.R. §§ 17.5 and 17.7.  See Docket Entry No. 1 (Complaint) and Docket Entry No. 1b (UPS Delivery Notification).  On March 26, 2020, Respondent registered for the DAB E-File system, and timely filed its Answer.  Docket Entry No. 3.

On March 27, 2020, I issued an Acknowledgment and Pre-Hearing Order (APHO) acknowledging receipt of Respondent’s Answer and establishing procedural deadlines for this case.  Docket Entry No. 4.  The APHO ordered CTP to file its pre-hearing exchange by June 19, 2020, and Respondent to file its pre-hearing exchange by July 10, 2020.1  APHO ¶ 4.  Further, the APHO warned the parties that “I may impose sanctions including, but not limited to, dismissal of the complaint or answer, if a party fails to comply with any order (including this order), fails to prosecute or defend its case, or engages in misconduct that interferes with the speedy, orderly, or fair conduct of the hearing.”  APHO ¶ 16 (citing 21 C.F.R § 17.35).

CTP timely filed its pre-hearing exchange, consisting of a pre-hearing brief, list of proposed witnesses and exhibits, and 13 exhibits (CTP Exs. 1-13), including the written direct testimony of two proposed witnesses, CTP Regulatory Counsel Adriana Gibson (CTP Ex. 3) and Inspector Janet Reaves (CTP Ex. 4).  Docket. Entry Nos. 9, 9a -9n.  Respondent did not file a pre-hearing exchange.

On September 15, 2020, I issued an Order Scheduling Pre-Hearing Conference.  Docket Entry No. 10 [hereinafter “September 15, 2020, Order”].  I informed the parties of the date and time of the pre-hearing conference call as well as the procedures to attend.  I instructed the parties to file a written motion for a continuance if the date or time of the pre-hearing conference call was not feasible.  Id. at 1.  I also warned the parties that “failure to appear at the telephone pre-hearing conference or failure to otherwise comply with this Order may result in sanctions, including, but not limited to, dismissing the Complaint, striking the Answer, or issuing a decision against the opposing party.”  Id. at 2.  On October 1, 2020, I held the pre-hearing conference call as scheduled.  Representatives for CTP appeared at the pre-hearing conference.  However, Respondent failed to appear as ordered.

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On October 1, 2020, I issued an Order to Show Cause for Failure to Appear (OSC) giving Respondent until October 9, 2020, to show cause for its failure to appear at the prehearing conference and failure to defend this case.  Docket Entry No. 11.  Respondent was warned that failure to respond to the OSC 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.  Id.  To date, Respondent has failed to respond to the OSC.

II.     Sanctions

The regulations authorize me to impose sanctions on any party for:

(1) Failing to comply with an order, subpoena, rule, or procedure governing the proceeding;
(2) Failing to prosecute or defend an action; or
(3) Engaging in other misconduct that interferes with the speedy, orderly, or fair conduct of the hearing. 

21 C.F.R. § 17.35(a).  During the course of this administrative proceeding, Respondent failed to comply with at least two orders and procedures governing this proceeding.  Specifically, Respondent failed to comply with my September 15, 2020, Order requiring it to appear at the pre-hearing conference, and Respondent failed to comply with my OSC requiring it to show cause for its failure to appear at the pre-hearing conference. 

Additionally, Respondent has failed to defend this action.  21 C.F.R. § 17.35(a)(2).  Respondent failed to file a pre-hearing exchange as directed by my APHO, failed to appear at the pre-hearing conference, and failed to respond to my OSC.  This leads me to conclude that Respondent has abandoned its defense of this case.

In the absence of any explanation from Respondent, I find no basis to excuse Respondent’s repeated failure to comply with the various orders in this administrative proceeding.  Despite explicit warnings that its failure to comply with my orders could result in sanctions, Respondent did not comply with two orders.  See September 15, 2020, Order at 2; OSC at 2.  Accordingly, I find that Respondent failed to comply with orders and procedures governing this proceeding, failed to defend its case, and, as a result, engaged in a pattern of misconduct that interfered with the speedy, orderly, and fair conduct of the hearing. 

The harshness of the sanctions I impose must relate to the nature and severity of the misconduct or failure to comply.  21 C.F.R. § 17.35(b).  I find that Respondent’s actions are sufficient to warrant striking its Answer and issuing a decision by default, without further proceedings.  21 C.F.R. § 17.35.  The DAB has held that an Administrative Law Judge (ALJ) did not abuse his discretion in striking a respondent’s answer and entering

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default judgment in favor of CTP as a sanction for its failure to respond to the ALJ’s procedural order and a subsequent order to show cause.  Joshua Ranjit Inc. d/b/a 7-Eleven 10326, DAB No. 2758, at 8 (2017).  Accordingly, I conclude that striking the Respondent’s Answer is an appropriate sanction in this case for Respondent’s failure to appear at the pre-hearing conference call, as directed by my September 15, 2020, Order, and failure to respond to my OSC.

III.     Default Decision

Striking Respondent’s Answer leaves the Complaint unanswered.  Pursuant to 21 C.F.R. § 17.11(a), I am required to “assume the facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the Act, issue a default judgment and impose a civil money penalty.  Accordingly, I must determine whether the allegations in the Complaint establish violations of the Act. 

Specifically, CTP alleges the following facts in its Complaint:

• Respondent owns Forty Liquors, an establishment that sells tobacco products after shipment in interstate commerce and is located at 1203 South Philadelphia Boulevard, Aberdeen, Maryland, 21001.  Complaint ¶¶ 5-6.
• On April 5, 2019, CTP initiated a previous CMP action, CRD Docket Number T-19-2332, FDA Docket Number FDA-2019-H-1604, against Respondent for violations of 21 C.F.R. pt. 1140.  Specifically, CTP alleged one violation for selling tobacco products to a minor and a second violation for failing to verify the age of a person with photographic identification on each of the following dates: July 26, 2018, and January 16, 2019.  Complaint ¶ 9. 
• The previous action concluded when an Initial Decision and Default Judgment (CRD Decision TB3914) was entered by an Administrative Law Judge, “finding that all of the violations alleged in the Complaint occurred.”  Complaint ¶ 10.
• During a subsequent inspection of Respondent’s establishment conducted on January 29, 2020, an FDA-commissioned inspector documented that “a person younger than 18 years of age was able to purchase a package of Marlboro Gold Pack cigarettes . . . at approximately 3:20 PM.”  The inspector also documented that “the minor’s identification was not verified before the sale . . . .”  Complaint ¶ 7.  

These facts establish that Respondent is liable under the Act.  The Act prohibits misbranding of a tobacco product.  21 U.S.C. § 331(k).  A tobacco product is misbranded if distributed or offered for sale in any state in violation of section 387f(d) of the Act or regulations issued under section 387f(d) of the Act.  21 U.S.C. § 387c(a)(7)(B); 21 C.F.R.

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§ 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 387f(d) of the Act.  21 U.S.C. § 387a-1; see also 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010); 81 Fed. Reg. 28,974, 28,975-76 (May 10, 2016).  The Act and regulations prohibit the sale of cigarettes or smokeless tobacco to any person younger than 18 years of age.2  21 U.S.C. § 387f(d)(5); 21 C.F.R. § 1140.14(a)(1).   The regulations also require retailers to verify, by means of photographic identification containing the purchaser’s date of birth, that no cigarette or smokeless tobacco purchaser is younger than 18 years of age.  21 C.F.R. § 1140.14(a)(2)(i). 

Taking the above-alleged facts as true, Respondent is liable for five violations of regulations found at 21 C.F.R. pt. 1140 within a 36-month period.  Respondent violated the prohibition against selling cigarettes or smokeless tobacco to persons younger than 18 years of age on July 26, 2018, January 16, 2019, and January 29, 2020.  21 C.F.R. § 1140.14(a)(1).  On those same dates, Respondent also violated the requirement that retailers verify, by means of photo identification containing a purchaser’s date of birth, that no cigarette or smokeless tobacco purchasers are younger than 18 years of age.  21 C.F.R. § 1140.14(a)(2)(i).  All violations observed during the initial failed inspection are counted as a single violation, and each separate violation observed during subsequent failed inspections count as a discrete violation.  Orton Motor, Inc., d/b/a Orton’s Bagley v. U.S. Dep’t of Health & Human Serv.,884 F.3d 1205 (D.C. Cir. 2018).  Accordingly, Respondent had three violations from the previous CMP action, and an additional two violations on January 29, 2020.  Therefore, Respondent’s actions constitute five violations of law within a 36-month period that merit a civil money penalty. 

CTP has requested a civil money penalty of $5,849, which is a permissible penalty under the regulations.  21 C.F.R. §§ 17.2, 17.11; see also 45 C.F.R. § 102.3.  Therefore, I find that a civil money penalty of $5,849 is warranted and so order one imposed.

• 1. On May 29, 2020, I issued an order granting CTP’s Unopposed Motion to Extend Deadlines and Notice of Pending Settlement, and extended the parties’ pre-hearing exchange deadlines. Docket Entry No. 8. CTP was ordered to file its pre-hearing exchange by August 18, 2020, and Respondent was ordered to file its pre-hearing exchange by September 8, 2020.
• 2. On December 20, 2019, the legal age to purchase tobacco products changed to 21.  Further Consolidated Appropriations Act, 2020, Pub. L. 116–94, div. N, title I, subtitle F, § 603(a)(1) (substituting "21 years" for "18 years") and § 603(a)(2) (adding subsection 387f(d)(5), which states “[i]t shall be unlawful for any retailer to sell a tobacco product to any person younger than 21 years of age”).  The corresponding regulations have not been updated yet.  See Id. § 603(b) (authorizing the Secretary to “to update all references to persons younger than 18 years of age in subpart B of part 1140 of title 21, Code of Federal Regulations, and to update the relevant age verification requirements under such part 1140 to require age verification for individuals under the age of 30”).