Pflash Stop LLC d/b/a Kwick Stop 40 / Sinclair, DAB TB4293 (2019)

ORDER GRANTING COMPLAINANT’S MOTION FOR SANCTIONS AND INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this case by serving the Complaint on Respondent, Pflash Stop LLC d/b/a Kwick Stop 40 / Sinclair, and filing a copy of the Complaint with the Civil Remedies Division.  The Complaint alleges that Respondent impermissibly sold cigarettes or smokeless tobacco to minors and failed to verify that one of the purchasers was 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.  CTP seeks a civil money penalty of $11,410 against the Respondent for six violations of the tobacco regulations within a 48-month period.  Respondent timely requested a hearing by filing an Answer, which denied liability and the appropriateness of the civil money penalty.

Currently, Complainant’s Status Report and Motion to Impose Sanctions (Motion to Impose Sanctions) is pending before me.  CTP’s Motion to Impose Sanctions requests

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that I strike Respondent’s Answer as a sanction for failing to comply with CTP’s discovery requests and issue a default judgment against Respondent.  For the reasons stated below, I grant CTP’s Motion to Impose Sanctions, strike the Respondent’s Answer, and issue an initial decision and default judgment imposing a civil money penalty in the amount of $11,410 against Respondent.  21 C.F.R. § 17.35(c)(3).

I. Background and Procedural History

As provided in 21 C.F.R. §§ 17.5 and 17.7, CTP served the Complaint on Respondent Kwick Stop 40 / Sinclair located at 407 East Broadway Avenue, McLoud, Oklahoma 74851, by United Parcel Service on April 2, 2019.  Respondent registered for the Departmental Appeals Board Electronic Case Filing (DAB E-File) system, and on May 2, 2019, timely filed its Answer to the Complaint. 

On May 7, 2019, I issued an Acknowledgment and Pre-Hearing Order (APHO) acknowledging receipt of Respondent’s Answer and establishing procedural deadlines for this case.  The APHO set a deadline of June 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 the parties to file a joint status report within 30 days, CTP to file its pre-hearing exchange by July 29, 2019, and Respondent to file its pre-hearing exchange by August 19, 2019.  APHO ¶¶ 3-4.  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 May 20, 2019, CTP served a timely Request for Production of Documents on Respondent.  Respondent did not file a motion for protective order within 10 days of receiving the Request for Production of Documents.  On July 12, 2019, 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.

On July 15, 2019, I issued an Order setting a July 29, 2019 deadline for Respondent to file a response to CTP’s Motion to Compel Discovery, and extending the pre-hearing exchange deadlines by 30 days.  Respondent failed to file a response to CTP’s Motion to Compel Discovery or otherwise respond to the July 15, 2019 Order.  Therefore, on July 31, 2019, I issued an Order Granting Complainant’s Motion to Compel Discovery and ordering Respondent to produce documents responsive to CTP’s Request for Production

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of Documents by August 9, 2019.  I noted that if Respondent had no responsive documents to produce, then it must submit a written response to CTP stating so by the August 9, 2019 deadline.  I also warned Respondent that its failure to comply with the 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. 

On August 13, 2019, CTP filed a Motion to Impose Sanctions stating that Respondent had not produced documents as ordered.  CTP requested that I strike Respondent’s Answer and issue a default judgment imposing a civil money penalty in the amount of $11,410 against Respondent.  On August 14, 2019, I issued an Order establishing a deadline of August 28, 2019, for Respondent to file a response to CTP’s Motion to Impose Sanctions and further extending the pre-hearing exchange deadlines by 30 days.  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.  To date, Respondent has not filed a response to CTP’s Motion to Impose Sanctions or the August 14, 2019 Order.  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 multiple judicial orders and procedures governing this proceeding.  As such, Respondent has failed to defend this action, which has interfered with the speedy, orderly, and fair conduct of this proceeding.  21 C.F.R. § 17.35(a).  Specifically, Respondent failed to comply with the discovery requirements of the applicable regulations and my May 7, 2019 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

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provided the requested documents or requested a protective order.  Additionally, Respondent did not file a response to CTP’s Motion to Compel Discovery, as required by the regulations and my July 15, 2019 Order.  21 C.F.R. § 17.32(c).  Respondent also failed to comply with the July 31, 2019 Order Granting Complainant’s Motion to Compel Discovery, which required Respondent to produce documents to CTP by August 9, 2019.  Furthermore, Respondent did not respond to CTP’s Motion to Impose Sanctions, again in contravention of the regulations and the August 14, 2019 Order. 

In the absence of any explanation from Respondent, I find no basis to excuse Respondent’s repeated failure to comply with the various judicial orders and regulations in this proceeding.  Despite explicit warnings that its failure to comply with the orders could result in sanctions, Respondent did not comply with four orders that I issued in this case.  Likewise, Respondent did not respond to any of CTP’s motions.  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 orders, regulations governing discovery, and other procedures in this case necessitated extending the pre-hearing exchange deadlines two times, which delayed the hearing.  See July 15, 2019 Order and August 14, 2019 Order.  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 judicial 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 Kwick Stop 40 / Sinclair, an establishment that sells tobacco products and is located at 407 East Broadway Avenue, McLoud, Oklahoma 74851.  Complaint ¶¶ 4-5.
• On December 23, 2016, CTP initiated a previous civil money penalty action, CRD Docket Number T-17-1301, FDA Docket Number FDA-2016-H-4456, see also CRD Docket T-16-182, FDA Docket FDA-2016-H-0484, against Respondent for violations of 21 C.F.R. pt. 1140.  Specifically, CTP alleged violations for selling tobacco products to a minor on May 11, 2015, October 26, 2015, and June 4, 2016, and a violation for failing to verify the age of a person with photographic identification on June 4, 2016.  Complaint ¶ 10. 
• 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 ¶ 11.
• During a subsequent inspection of Respondent’s establishment on July 12, 2018, at approximately 3:10 PM, “a person younger than 18 years of age was able to purchase a package of Marlboro Menthol cigarettes . . . [.]”  Complaint ¶ 8. 
• On November 1, 2018, CTP issued a Warning Letter to Respondent regarding the documented violation from July 12, 2018.  The letter explained that the named violation was not necessarily intended to be an exhaustive list of all violations at the establishment.  The Warning Letter also stated that if Respondent failed to correct the violation, regulatory action by the FDA or a civil money penalty action could occur and that Respondent is responsible for complying with the law.  Complaint ¶¶ 8-9.
• An FDA-commissioned inspector conducted another inspection of Respondent’s establishment on March 6, 2019, at approximately 6:29 PM.  During that inspection, “a person younger than 18 years of age was able to purchase a package of Marlboro Gold Pack cigarettes . . . [.]”  Complaint ¶ 6. 

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

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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 cigarettes or smokeless tobacco to any person younger than 18 years of age.  21 C.F.R. § 1140.14(a)(1).1   The regulations also require retailers to 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).

Taking the above-alleged facts as true, Respondent violated the prohibition against selling cigarettes or smokeless tobacco to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a)(1), on May 11, 2015, October 26, 2015, June 4, 2016, July 12, 2018, and March 6, 2019.  On June 4, 2016, 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).  Therefore, Respondent’s actions constitute six violations of law within a 48-month period that merit a civil money penalty. 

CTP has requested a civil money penalty of $11,410, 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 $11,410 is warranted and so order one imposed.

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