Casino Center 61, LLC d/b/a Casino Center II / Exxon, DAB TB5103 (2020)

ORDER GRANTING COMPLAINANT’S MOTION TO IMPOSE 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, Casino Center 61, LLC d/b/a Casino Center II / Exxon, and filing a copy of the Complaint with the Civil Remedies Division (CRD) of the Departmental Appeals Board (DAB).  Docket Entry Nos. 1, 1b (Complaint and UPS Delivery Notification [hereinafter “Proof of Service”], respectively).  The Complaint alleges that Respondent impermissibly sold covered tobacco products to minors and failed to verify 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, Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140.  Complaint ¶¶ 9, 11-12.  CTP seeks a civil money penalty of $5,705 against Respondent for five violations of the tobacco regulations within a 36-month period.  Complaint ¶ 1.  Respondent timely requested a hearing by filing an

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Answer, which admitted liability but asserted some defenses and disputed the appropriateness of the civil money penalty.  Docket Entry No. 4 (Answer).

Currently, Complainant’s Status Report and Motion to Impose Sanctions (Motion to Impose Sanctions) is pending before me.  Docket Entry No. 12 (Motion to Impose Sanctions).  CTP’s Motion to Impose Sanctions requests that I strike Respondent’s Answer as a sanction for failing to respond to CTP’s discovery requests and issue a default judgment against Respondent.  Motion to Impose Sanctions at 2.  For the reasons stated below, I grant CTP’s Motion to Impose Sanctions, strike Respondent’s Answer, and issue an initial decision and default judgment imposing a civil money penalty in the amount of $5,705 against Respondent.  21 C.F.R. § 17.35(c)(3).

I.    Background and Procedural History

On September 25, 2019, CTP served the Complaint on Respondent Casino Center 61, LLC d/b/a Casino Center II / Exxon, located at 13336 Highway 61 North, Robinsonville, Mississippi 38664, by United Parcel Service, as required by 21 C.F.R. §§ 17.5 and 17.7.  See Complaint, Proof of Service.  On November 1, 2019, CRD received and docketed Respondent’s Answer dated October 24, 2019, and in an envelope postmarked October 25, 2019, the day Respondent’s Answer was due.  See Answer.  On October 28, 2019, the FDA Division of Dockets Management forwarded a copy of Respondent’s Answer, which it received by email from Respondent on October 24, 2019.

On November 6, 2019, I issued an Acknowledgment and Pre-Hearing Order (APHO), acknowledging receipt of Respondent’s Answer, concluding the Answer was timely, and establishing procedural deadlines for this case.  See Docket Entry No. 5 (APHO, at 1 n.1).  The APHO set a deadline of December 13, 2019, for the parties to request documents from the opposing party and explained that a party must provide the requested documents no later than 30 days after the request has been made, pursuant to 21 C.F.R. § 17.23(a).  APHO ¶ 12.  The APHO also stated that a party may file a motion for a protective order within 10 days of receiving a request for the production of documents.  Id.; 21 C.F.R. §§ 17.23(d), 17.28.  Additionally, the APHO ordered CTP to file its pre-hearing exchange by January 27, 2020, and Respondent to file its pre-hearing exchange by February 18, 2020.  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; see also 21 C.F.R. § 17.35.

On November 26, 2019, CTP served a timely Request for Production of Documents on Respondent.  See Docket Entry No. 8a (Exhibit A to Motion to Compel Discovery).  Respondent did not file a motion for protective order within 10 days of receiving the Request for Production of Documents on November 27, 2019.  See Docket Entry No. 8b

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(Exhibit B to Motion to Compel Discovery).  On January 3, 2020, CTP filed a Motion to Compel Discovery stating that it had not received a response to its Request for Production of Documents and requesting that I issue an order compelling Respondent to respond to CTP’s Request for Production of Documents.  Docket Entry No. 8 (Motion to Compel Discovery at 2.).  On January 3, 2020, CTP also filed a Motion to Extend Deadlines.  Docket Entry No. 9 (Motion to Extend Deadlines).

On January 7, 2020, I issued an order setting a January 21, 2020, deadline for Respondent to file a response to CTP’s Motion to Compel Discovery, and extending the pre-hearing exchange deadlines by 30 days.  Docket Entry No. 10 (Order Setting Respondent’s Deadline to Respond to Complainant’s Motion to Compel Discovery and Extending Pre-Hearing Exchange Deadlines [hereinafter “January 7, 2020, Order”]); see also 21 C.F.R. § 17.32(c); APHO ¶ 19.  I warned Respondent that I may grant CTP’s Motion to Compel Discovery if Respondent failed to respond.  January 7, 2020, Order at 2.  Respondent failed to file a response to CTP’s Motion to Compel Discovery or otherwise respond to the January 7, 2020, Order.  Therefore, on January 24, 2020, I issued an Order Granting Complainant’s Motion to Compel Discovery and ordered Respondent to produce documents responsive to CTP’s Request for Production of Documents by January 31, 2020.  Docket Entry No. 11 (Order Granting Complainant’s Motion to Compel Discovery [hereinafter “January 24, 2020, Order”] at 2).  I noted that if Respondent had no responsive documents to produce, then it must submit a written response to CTP stating so by the January 31, 2020, deadline.  Id.  I also warned Respondent that its failure to comply with the January 24, 2020, order might result in sanctions, including the issuance of a default judgment finding Respondent liable for the violations alleged in the Complaint and imposing a civil money penalty.  Id.

On February 13, 2020, CTP filed a Motion to Impose Sanctions stating that Respondent had not produced documents as ordered.  Motion to Impose Sanctions at 2.  CTP requested that I strike Respondent’s Answer and issue a default judgment imposing a civil money penalty in the amount of $5,705 against Respondent.  Id.  On that same date, CTP also filed a Motion to Extend Deadlines.  Docket Entry No. 13 (Motion to Extend Deadlines).  On February 14, 2020, I issued an order establishing a deadline of February 28, 2020, for Respondent to file a response to CTP’s Motion to Impose Sanctions and further extending the pre-hearing exchange deadlines by 30 days.  Docket Entry No. 14 (Order Setting Respondent’s Deadline to Respond to Complainant’s Motion to Impose Sanctions and Extending Pre-Hearing Exchange Deadlines [hereinafter “February 14, 2020, Order”]).  I warned Respondent that if it failed to respond to the Motion to Impose Sanctions, I may grant the motion and impose the requested civil money penalty.  February 14, 2020, Order at 2.  To date, Respondent has not filed a response to CTP’s Motion to Impose Sanctions or the February 14, 2020, Order.  On March 2, 2020, I issued an Order Suspending Pre-Hearing Exchange Deadlines pending resolution of CTP’s Motion to Impose Sanctions.  Docket Entry No. 15 (Order

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Suspending Pre-Hearing Exchange Deadlines).  CTP’s Motion to Impose Sanctions is now ripe for a ruling.

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).  When a party “fails to comply with a discovery order,” I may draw an inference in favor of the opposing party, may prohibit the non-complying party from introducing or relying on evidence related to the discovery request, and may “[s]trike any part of the pleadings or other submissions of the party failing to comply with [the discovery] request.”  21 C.F.R. § 17.35(c).  Any sanction “shall reasonably relate to the severity and nature of the failure or misconduct.”  21 C.F.R. § 17.35(b).

I conclude that sanctions against Respondent are warranted.  During the course of this administrative proceeding, Respondent repeatedly failed to comply with at least two orders and procedures governing this proceeding.  Specifically, Respondent failed to comply with the discovery requirements of the applicable regulations and the APHO, both of which require the parties to produce documents within 30 days of a discovery request or to seek a protective order.  21 C.F.R. § 17.23(a); APHO ¶ 12.  Respondent has not provided the requested documents or requested a protective order.  Similarly, Respondent failed to comply with the January 24, 2020, Order, which required Respondent to produce documents to CTP by January 31, 2020.  Respondent did not produce any documents or indicate that it did not have any responsive documents by the deadline.  Accordingly, Respondent has failed to fulfill its discovery obligations and to comply with the regulations and orders governing this case.  21 C.F.R. § 17.35(a)(1).

Additionally, Respondent has failed to defend this action.  21 C.F.R. § 17.35(a)(2).  Respondent did not file a response to CTP’s Motion to Compel Discovery, as permitted by the regulations and my January 7, 2020, Order.  21 C.F.R. § 17.32(c).  Likewise, Respondent did not respond to CTP’s Motion to Impose Sanctions, as permitted by the regulations and my February 14, 2020, Order.  Respondent’s failure to respond to CTP’s motions and fulfill its discovery obligations suggests that it 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 and regulations in this

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administrative proceeding.  Despite explicit warnings that its failure to comply with the orders could result in sanctions, Respondent did not comply with two orders and corresponding regulations.  See APHO; January 24, 2020, Order.  Likewise, Respondent did not respond to any of CTP’s motions.  See generally, CTP’s Motion to Compel Discovery; Motion to Impose Sanctions.  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.  Notably, Respondent’s failure to comply with the orders, regulations governing discovery, and other procedures in this case necessitated extending the pre-hearing exchange deadlines at least twice, which delayed the hearing process.  See January 7, 2020, Order at 2; February 14, 2020, Order at 3. 

The harshness of the sanctions I impose must relate to the nature and severity of the misconduct or failure to comply.  21 C.F.R. § 17.35(b).  I find that Respondent’s actions are sufficient to warrant striking its Answer and issuing a decision by default, without further proceedings.  21 C.F.R. § 17.35(b), (c)(3).  Here, Respondent failed to comply with two of my orders, despite my explicit warnings that its failure could result in sanctions.  APHO ¶ 16; January 24, 2020, Order at 2.  I specified that those sanctions may include striking its Answer and “issuance of an Initial Decision and Default Judgment finding Respondent liable for the violations listed in the Complaint and imposing a civil money penalty.”  January 24, 2020, Order at 2. 

Respondent also failed to defend this action, despite express reminders of the opportunity in my January 7, 2020, Order and February 14, 2020, Order.  Respondent’s repeated misconduct interfered with the speedy, orderly, or fair conduct of this proceeding.  As the Departmental Appeals Board has recognized in a similar case involving a party’s failure to comply with discovery orders, this conduct is sufficiently egregious to warrant striking Respondent’s Answer and issuing an initial decision by default.  See, e.g., KKNJ, Inc. d/b/a Tobacco Hut 12, DAB No. 2678, at 10 (2016)(concluding that “the ALJ did not abuse her discretion in sanctioning Respondent’s ongoing failure to comply with the ALJ’s directions by striking Respondent’s answer to the Complaint”).  Therefore, pursuant to 21 C.F.R. § 17.35(a) and (c)(3), I grant CTP’s Motion to Impose Sanctions, and strike Respondent’s Answer for failing to comply with various orders and procedures governing this proceeding, failing to defend this action, and engaging in a pattern of misconduct that has interfered with the speedy, orderly, and fair conduct of the hearing. 

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.

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Specifically, CTP alleges the following facts in its Complaint:

• Respondent owns Casino Center II / Exxon, an establishment that sells tobacco products and is located at 13336 Highway 61 North, Robinsonville, Mississippi 38664.  Complaint ¶¶ 7-8.
• On July 17, 2017, CTP initiated a previous civil money penalty action, CRD Docket Number T-17-5298, FDA Docket Number FDA-2017-H-4230, against Respondent for violations of 21 C.F.R. pt. 1140.  Specifically, CTP alleged a violation for selling covered tobacco products to a minor and a violation for failing to verify the age of a person with photographic identification on each of the following dates:  October 18, 2016, and February 21, 2017.  Complaint ¶ 11.
• The previous action concluded when Respondent “admitted all of the allegations in the Complaint and paid the agreed upon penalty.”  Further, “Respondent expressly waived its right to contest such violations in subsequent actions.” Complaint ¶ 12.
• During a subsequent inspection of Respondent’s establishment on June 18, 2019, at approximately 5:56 PM, “a person younger than 18 years of age was able to purchase a package of two White Owl Sweets cigars . . .” and “the minor’s identification was not verified before the sale . . . .”  Complaint ¶ 9.

These facts establish that Respondent is liable under the Act.  The Act prohibits misbranding of a tobacco product.  21 U.S.C. § 331(k).  A tobacco product is misbranded if distributed or offered for sale in any state in violation of regulations issued under section 906(d) of the Act.  21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).  The Secretary of the U.S. Department of Health and Human Services issued the regulations at 21 C.F.R. pt. 1140 under section 906(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 regulations prohibit the sale of covered tobacco products to any person younger than 18 years of age.  21 C.F.R. § 1140.14(b)(1).  The regulations also require retailers to verify, by means of photo identification containing a purchaser’s date of birth, that no covered tobacco product purchasers are younger than 18 years of age.  21 C.F.R. § 1140.14(b)(2)(i).

Taking the above-alleged facts as true, Respondent had five violations of regulations found at 21 C.F.R. pt. 1140 within a 36-month period.  Respondent violated the prohibition against selling covered tobacco products to persons younger than 18 years of age, 21 C.F.R. § 1140.14(b)(1), on October 18, 2016, February 21, 2017, and June 18, 2019.  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

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covered tobacco product purchasers are younger than 18 years of age.  21 C.F.R. § 1140.14(b)(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 civil money penalty action and two additional violations on June 18, 2019.  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 $5,705, 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 $5,705 is warranted and so order one imposed.