JP Investments LLC d/b/a One Shakti Food Mart, DAB TB4735 (2020)

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

Found:

1. Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(b)(1) and 21 C.F.R. § 1140.14(b)(2)(i), as charged in the Complaint; and
2. Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(b)(1) and 21 C.F.R. § 1140.14(b)(2)(i), as charged in the prior complaint; and
3. Respondent committed seven violations in a 48-month period as set forth hereinabove.
4. Respondent is hereby assessed a civil penalty in the amount of $11,410.

Glossary:

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I. JURISDICTION

I have jurisdiction to hear this case pursuant to my appointment by the Secretary of Health and Human Services and my authority under the Administrative Procedure Act (5 U.S.C. §§ 554-556), 5 U.S.C.A. § 3106, 21 U.S.C. § 333(f)(5), 5 C.F.R. §§ 930.201 et seq. and 21 C.F.R. Part 17.2

II. PROCEDURAL BACKGROUND

On May 8, 2019, The Center for Tobacco Products (CTP/Complainant) filed a Complaint against JP Investments LLC d/b/a One Shakti Food Mart (Respondent or One Shakti Food Mart), located at 1675 Raymond Road, Jackson, Mississippi 39204. The Complaint alleges that Respondent violated “FDA’s tobacco regulations promulgated under Section 906(d) of the Federal Food, Drug, and Cosmetic Act (Act) (21 U.S.C. § 387f(d)) at least seven times within a 48-month period.” Complaint ¶ 1. On May 7,

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2019, CTP served an administrative complaint on Respondent by United Parcel Service.

On June 3, 2019, Respondent, through counsel, Martin D. Perkins and the McDaniels Law Offices, PLLC, timely filed an answer denying the current allegations, presenting defenses, and requesting a hearing. See generally Answer.3 On June 10, 2019, I issued a Pre-Hearing Order (PHO) that set out the deadlines for the parties’ submissions in this case. The PHO also provided that “[a] party receiving . . . a discovery request must provide the requested documents no later than 30 days after the request has been made. 21 C.F.R. § 17.23(a).” PHO ¶ 3.

On August 8, 2019, CTP filed a Motion to Compel Discovery requesting “that an order be entered compelling Respondent to respond to CTP’s Request for Production of Documents in its entirety.”4 On that same date, Respondent through counsel, filed Respondent’s Responses to CTP’s First Set of Requests for Production of Documents. On August 13, 2019, CTP filed an Amended Motion to Compel Full Discovery Responses (Amended Motion to Compel). Respondent did not respond to CTP’s Amended Motion to Compel. See 21 C.F.R. § 17.32(c). On August 21, 2019, Respondent’s counsel filed a Motion to Withdraw from representing the respondent.

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On September 6, 2019, I issued an order, addressing all the issues that were pending before me, captioned “Order to Compel Full Discovery Responses, Order to Show Cause to Respondent and Order Granting Motion to Withdraw” (September 6, 2019 Order). In that Order, I construed CTP’s Amended Motion to Compel as a request for an Order to Show Cause, and instructed Respondent to comply with CTP’s Request for Production of Documents on or before November 5, 2019. September 6, 2019 Order at 2. I warned: “[f]ailure to comply will result in sanctions, which may include striking Respondent’s answer resulting in 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. 21 C.F.R. § 17.35.” Id. (Emphasis added.) My September 6, 2019 Order, in its entirety, directed the parties as follows:

1. Martin D. Perkins and the McDaniels Law Offices, PLLC’s Motion to Withdraw is hereby GRANTED.
2. Respondent shall notify the court whether it has retained new counsel or in the alternative, whether it will be proceeding without an attorney by no later than October 7, 2019.
3. Respondent shall comply with CTP’s Request for Production of Documents on or before November 5, 2019.
4. Respondent shall show cause on or before November 12, 2019, why default judgment should not be entered against it for failure to comply with the procedural rules and respond to CTP’s Request for Production of Documents; and
5. If Respondent is able to show cause as set forth above, both parties shall file their pre-hearing exchange no later than November 26, 2019.

September 6, 2019 Order at 2-3 (emphasis in original). To date, Respondent has not

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complied with any of the deadlines that I set out in my September 6, 2019 Order.

On November 12, 2019, CTP filed Complainant’s Status Report and Motion to Impose Sanctions (MTIS). CTP argued that sanctions are appropriate here because Respondent failed to comply with the provisions of the September 6, 2019 Order. Specifically, CTP reported that as of the date of its filing of the motion, “Respondent ha[d] not produced any additional documents to CTP in response to its RFP.” MTIS at 2. CTP also stated that Respondent failed to comply with the order by notifying the court “whether it has retained new counsel or in the alternative, whether it will be proceeding without an attorney by no later than October 7, 2019.” Id. Furthermore,CTP asserted that “Respondent has been provided ample opportunity to respond fully to CTP’s RFP, but has not done so.” Id.Finally, CTPargued that “[s]anctions against Respondent are an appropriate remedy . . . [b]ased on Respondent’s pattern of conduct, it is unlikely that more time or additional orders in this proceeding will change the status quo.” Id. Accordingly, CTP asked that I sanction Respondent by entering an order “(1) striking the Answer entered by Respondent in this case; and (2) issuing an initial decision and default judgment imposing a civil money penalty in the amount of $11,410 against Respondent.” Id. at 2-3. To date, Respondent has not filed a response to CTP’s Motion to Impose Sanctions. See 21 C.F.R. § 17.32(c). I hereby render my decision.

III. STRIKING RESPONDENT’S ANSWER

Pursuant to 21 C.F.R. § 17.35(a), I may sanction a person, including any party or counsel for:

1. Failing to comply with an order, subpoena, rule, or procedure

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governing the proceeding;

2. Failing to prosecute or defend an action; or
3. Engaging in other misconduct that interferes with the speedy, orderly, or fair conduct of the hearing.

Here, Respondent failed to comply with my June 10, 2019 PHO and the regulations at 21 C.F.R. § 17.23(a), when it failed to provide documents responsive to CTP’s RFP within 30 days. As discussed previously, Respondent also failed to comply with my September 6, 2019 Order, requiring Respondent: (1) to notify the court about whether it would retain new counsel or proceed without an attorney; (2) comply with CTP’s RFP by November 5, 2019; and (3) show cause why default judgment should not be entered against it for failure to comply with the procedural rules and respond to CTP’s RFP by November 26, 2019.

I find that Respondent has failed to comply with my orders and directives governing this proceeding. I also find that Respondent’s misconduct has interfered with the speedy, orderly, or fair conduct of this proceeding. Accordingly, I find that sanctions are appropriate pursuant to 21 C.F.R. § 17.35(a).

The harshness of the sanctions I impose upon either party must relate to the nature and severity of the misconduct or failure to comply. 21 C.F.R. § 17.35(b). I find and conclude that Respondent’s misconduct is sufficiently egregious to warrant striking its answer and issuing a decision without further proceedings. 21 C.F.R. § 17.35(c); see 21 C.F.R. § 17.11(a).

IV. BURDEN OF PROOF

CTP as the petitioning party has the burden of proof. 21 C.F.R. § 17.33.

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V. LAW

21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(b)(1) and 21 C.F.R. § 1140.14(b)(2)(i).

VI. ISSUE

Did Respondent violate 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(b)(1) and 21 C.F.R. § 1140.14(b)(2)(i), as alleged in the Complaint?

VII. DEFAULT

I find Respondent was properly served with process on May 7, 2019 and is subject to the jurisdiction of this forum, as established by the May 9, 2019 Notice of Filing filed by CTP. My September 6, 2019 Order instructed Respondent to show cause on or before on or before November 12, 2019, why DJ should not be entered in favor of the Complainant pursuant. Respondent failed to file any responsive pleading or otherwise comply with my September 6, 2019 Order. Accordingly, pursuant to 21 C.F.R. § 17.35(c)(3), I hereby strike Respondent’s Answer as a sanction.

It is Respondent’s right to participate in the legal process. Respondent has the right to request a hearing or, in the alternative, waive its right to a hearing. Striking Respondent’s answer leaves the Complaint unanswered. Therefore, I find Respondent waived its right to a hearing pursuant to 21 C.F.R. § 17.11(b).

VIII. ALLEGATIONS

1. Agency’s recitation of facts

CTP alleged that Respondent owns an establishment, doing business under the name One Shakti Food Mart, located at 1675 Raymond Road, Jackson, Mississippi

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39204. Respondent's establishment receives tobacco products in interstate commerce and holds them for sale after shipment in interstate commerce.

During an inspection of One Shakti Food Mart conducted on February 6, 2019, an FDA-commissioned inspector documented the following violations:

1. Selling covered tobacco products to a minor, in violation of 21 C.F.R. § 1140.14(b)(1). Specifically, a person younger than 18 years of age was able to purchase a package of two Swisher Sweets cigars on February 6, 2019, at approximately 4:36 PM; and
2. Failing to verify the age of a person purchasing covered tobacco products by means of photographic identification containing the bearer's date of birth, as required by 21 C.F.R. § 1140.14(b)(2)(i). Specifically, the minor’s identification was not verified before the sale, as detailed above, on February 6, 2019, at approximately 4:36 PM.

2. Respondent’s recitation of facts

As I have stricken Respondent’s answer, I find that Respondent filed no responsive pleadings.

IX. PRIOR VIOLATIONS

On December 13, 2017, CTP initiated a previous civil money penalty action, CRD Docket Number T-18-637, FDA Docket Number FDA-2017-H-6834 (see also, CRD Docket Number T-17-3898, FDA Docket Number FDA-2017-H-2699), against

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Respondent for five5 violations of 21 C.F.R. pt. 1140 within a 36-month period. CTP alleged those violations to have occurred at Respondent’s business establishment, 1675 Raymond Road, Jackson, Mississippi 39204, on August 9, 2016, November 7, 2016, and December 4, 2017.

The previous action concluded when Respondent admitted the allegations contained in the Complaint issued by CTP, and paid the agreed upon monetary penalty in settlement of that claim. Further, “Respondent expressly waived its right to contest such violations in subsequent actions.”

I find and conclude Respondent committed seven violations of 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(b)(1) and 21 C.F.R. § 1140.14(b)(2)(i) within a 48‑month period as set forth in the Complaint.

X. FAMILY SMOKING PREVENTION AND TOBACCO CONTROL ACT

The “relevant statute” in this case is actually a combination of statutes and regulations: The Family Smoking Prevention and Tobacco Control Act, Pub. L. No. 111‑31, 123 Stat. 1776 (2009) (TCA), amended the Food, Drug, and Cosmetic Act (21 U.S.C.A. Chap. 9) (FDCA) and created a new subchapter of that Act that dealt exclusively with tobacco products, (21 U.S.C. §§ 387-387u), and it also modified other parts of the FDCA explicitly to include tobacco products among the regulated products

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whose misbranding can give rise to civil, and in some cases criminal, liability. The 2009 amendments to the FDCA contained within the TCA also charged the Secretary of Health and Human Services with, among other things, creating regulations to govern tobacco sales. The Secretary’s regulations on tobacco products appear in Part 1140 of Title 21, Code of Federal Regulations.

Under the FDCA, “[a] tobacco product shall be deemed to be misbranded if, in the case of any tobacco product sold or offered for sale in any State, it is sold or distributed in violation of regulations prescribed under section 387f(d).” 21 U.S.C. § 387c(a)(7)(B) (2012). Section 387a‑1 directed FDA to re-issue, with some modifications, regulations previously passed in 1996. 21 U.S.C. § 387 a-1(a) (2012). These regulations were passed pursuant to section 387f(d), which authorizes FDA to promulgate regulations on the sale and distribution of tobacco products; 75 Fed. Reg. 13,225 (Mar. 19, 2010), codified at 21 C.F.R. Part 1140 (2015); 21 U.S.C. § 387f(d)(1) (2012). Accordingly, 21 C.F.R. § 1140.1(b) provides that “failure to comply with any applicable provision in this part in the sale, distribution, and use of cigarettes and smokeless tobacco renders the product misbranded under the act.”

Under 21 U.S.C. § 331(k), “[t]he alteration, mutilation, destruction, obliteration, or removal of the whole or any part of the labeling of, or the doing of any other act with respect to, a food, drug, device, tobacco product, or cosmetic, if such act is done while such article is held for sale (whether or not the first sale) after shipment in interstate commerce and results in such article being adulterated or misbranded” is a prohibited act under 21 U.S.C. § 331. Thus, when a retailer such as Respondent misbrands a tobacco

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product by violating a requirement of 21 C.F.R. Part 1140, that misbranding in turn violates the FDCA, specifically 21 U.S.C. § 331(k). FDA may seek a civil money penalty from “any person who violates a requirement of this chapter which relates to tobacco products.” 21 U.S.C. § 333(f)(9)(A) (2012). Penalties are set by 21 U.S.C. § 333 note and 21 C.F.R. § 17.2. Under current FDA policy, the first time FDA finds violations of 21 C.F.R. Part 1140 at an establishment, FDA only counts one violation regardless of the number of specific regulatory requirements that were actually violated, but if FDA finds violations on subsequent occasions, it will count violations of specific regulatory requirements individually in computing any civil money penalty sought. This policy is set forth in detail, with examples to illustrate, at U.S. Food & Drug Admin., Guidance for Industry and FDA Staff, Civil Money Penalties and No-Tobacco-Sale Orders for Tobacco Retailers, Responses to Frequently Asked Questions (Revised) (2016), available at http://www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/UCM447310.pdf, at 13-14. So, for instance, if a retailer sells a tobacco product on a particular occasion to a minor without checking for photographic identification, in violation of 21 C.F.R. § 1140.14(a)(1) and (a)(2)(i), this will count as two separate violations for purposes of computing the civil money penalty, unless it is the first time violations were observed at that particular establishment. This policy of counting violations has been determined by the HHS Departmental Appeals Board to be consistent with the language of the FDCA and its implementing regulations, see Orton Motor Co. d/b/a Orton’s Bagley v. HHS, 884 F.3d 1205 (D.C. Cir. 2018).

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XI. LIABILITY

When a retailer such as Respondent is found to have “misbranded” a tobacco product in interstate commerce, it can be liable to pay a CMP. 21 U.S.C. §§ 331, 333. A retailer facing such a penalty has the right, set out in statute, to a hearing under the Administrative Procedure Act. 21 U.S.C. § 333(f)(5)(A). A retailer can forfeit its rights under the statute and regulations by failing to participate in the process, a failure known as a “default.” 21 C.F.R. § 17.11.

As set forth above, it is Respondent’s right to decide whether to participate in the legal process. It is Respondent’s right to decide to request a hearing and it is Respondent’s right to waive a hearing.

I find Respondent, by failing to respond, waived its right to a hearing.

XII. IMPACT OF RESPONDENT’S DEFAULT

When a Respondent defaults by failing to answer the complaint, or respond to a OSC, an ALJ must assume as true all factual allegations in the complaint and issue an initial decision within thirty (30) days of the answer’s due date, imposing “the maximum amount of penalties provided for by law for the violations alleged” or “the amount asked for in the complaint, whichever is smaller” if “liability under the relevant statute” is established. 21 C.F.R. § 17.11(a)(1), (2). But see 21 C.F.R. § 17.45 (initial decision must state the “appropriate penalty” and take into account aggravating and mitigating circumstances).

Two aspects of Rule 17.11 are important in default cases.

First, the Complainant benefits from a regulatory presumption (the ALJ shall

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assume that the facts alleged in the complaint are true) that relieves it from having to put on evidence.

The presumption affords a party, for whose benefit the presumption runs, the luxury of not having to produce specific evidence to establish the point at issue. When the predicate evidence is established that triggers the presumption, the further evidentiary gap is filled by the presumption. See 1 Weinstein's Federal Evidence § 301.02[1], at 301‑7 (2d ed.1997); 2 McCormick on Evidence § 342, at 450 (John W. Strong ed., 4th ed. 1992); Routen v. West, 142 F.3d 1434, 1440 (Fed. Cir. 1998).6

Second, as far as the penalty is concerned, my discretion is limited by the language of the regulation. I may not tailor the penalty to address any extenuation or mitigation, for example, nor, because of notice concerns, may I increase the penalty beyond the smaller of (a) the Complainant's request or (b) the maximum penalty authorized by law.

XIII. LIABILITY UNDER THE RELEVANT STATUTE

Taking the CTP’s allegations as set forth in the Complaint as true, the next step is whether the allegations make out “liability under the relevant statute.” 21 C.F.R.

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§ 17.11(a).

Based on Respondent’s failure to answer I assume all the allegations in the Complaint to be true.

I find and conclude that the evidentiary facts, by a preponderance of the evidence standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(b)(1) in that a person younger than 18 years of age was able to purchase covered tobacco products on August 9, 2016, November 7, 2016, December 4, 2017, and February 6, 2019.

I find and conclude that the evidentiary facts, by a preponderance of the evidence standard, support a finding Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(b)(2)(i) on those same dates in that Respondent also violated the requirement that retailers 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.

The conduct set forth above on August 9, 2016, November 7, 2016, December 4, 2017, and February 6, 2019, counts as seven violations for purposes of computing the civil money penalty.

XIV. PENALTY

There being liability under the relevant statute, I must now determine the amount of penalty to impose. My discretion regarding a penalty is constrained by regulation. I must impose either the maximum amount permitted by law or the amount requested by the Center, whichever is lower. 21 C.F.R. § 17.11(a)(1), (a)(2).

In terms of specific punishments available, the legislation that provides the basis

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for assessing civil monetary penalties divides retailers into two categories: those that have “an approved training program” and those that do not. Retailers with an approved program face no more than a warning letter for their first violation; retailers without such a program begin paying monetary penalties with their first. TCA § 103(q)(2), 123 Stat. 1839, codified at 21 U.S.C. § 333 note. See 21 C.F.R. § 17.2. The FDA has informed the regulated public that “at this time, and until FDA issues regulations setting the standards for an approved training program, all applicable CMPs will proceed under the reduced penalty schedule.” FDA Regulatory Enforcement Manual, Aug. 2015, ¶ 5‑8‑1. Because of this reasonable exercise of discretion, the starting point for punishments and the rate at which they mount are clear – the lower and slower schedules.

XV. MITIGATION

It is incumbent upon Respondent to present any factors that could result in mitigation of CTP’s proposed penalty. Specifically, it is Respondent’s burden to provide mitigating evidence. In a default, Respondent has failed to participate and has failed to present any evidence regarding potential mitigation. Accordingly, I have no reason to mitigate the penalty.

XVI. CONCLUSION

Respondent committed seven violations in a 48‑month period and so, Respondent is liable for a civil money penalty of $11,410. See 21 C.F.R. § 17.2.

WHEREFORE, evidence having read and considered it be and is hereby ORDERED as follows:

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1. I find Respondent has been served with process herein and is subject to this forum.
2. I find Respondent failed to respond or otherwise comply with my June 10, 2019 and September 6, 2019 Orders.
3. I find that Respondent’s failure to comply with my orders and procedure governing this proceeding, constitutes misconduct that has interfered with the speedy, orderly, or fair conduct of this proceeding. 21 C.F.R. § 17.35(a).
4. I find Respondent’s misconduct warrants striking its answer as a sanction. 21 C.F.R. § 17.35(c).
5. I hereby GRANT CTP’s Motion to Impose Sanctions and STRIKE Respondent’s Answer.
6. I find that striking Respondent’s answer leaves the Complaint unanswered. 21 C.F.R. § 17.11.
7. I find Respondent is in default.
8. I assume the facts alleged in the Complaint to be true. 21 C.F.R. § 17.11.
9. I find the facts set forth in the Complaint establish liability under the relevant statute.
10. I assess a monetary penalty in the amount of $11,410.

• 1. See 5 C.F.R. § 930.204.
• 2. See also Butz v. Economou, 438 U.S. 478 at 513 (1978); Marshall v. Jerrico, Inc., 446 U.S. 238 (1980); Federal Maritime Com’n v. South Carolina State Ports Authority, 535 U.S. 743, 744 (2002).
• 3. The pages of Respondent’s Answer are unnumbered.
• 4. On June 21, 2019, CTP sent Respondent and Respondent’s attorneys a Request for Production of Documents (RFP). CTP Exhibit A at 6, 7. On June 24, 2019, the UPS delivered the RFP to Respondent’s establishment. CTP Exhibit B. On July 3, 2019, a representative of Respondent’s attorney picked up and signed for the RFP at the at the USPS post office in Jackson, MS, 39225. CTP Exhibit C. On June 21, 2019, CTP also sent Respondent’s attorney a copy of the RFP by e-mail. CTP Exhibit D.
• 5. Two violations were documented on August 9, 2016, two on November 7, 2016, and two on December 4, 2017. 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.
• 6. However, when the opposing party puts in proof to the contrary of that provided by the presumption, and that proof meets the requisite level, the presumption disappears. See Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248, 254–55, 101 S.Ct. 1089, 1094–95, 67 L.Ed.2d 207 (1981); A.C. Aukerman, 960 F.2d at 1037 (“[A] presumption ... completely vanishes upon the introduction of evidence sufficient to support a finding of the nonexistence of the presumed fact.”); see also Weinstein’s Federal Evidence § 301App.100, at 301App.–13 (explaining that in the “bursting bubble” theory once the presumption is overcome, then it disappears from the case); 9 Wigmore on Evidence § 2487, at 295–96 (Chadbourn rev.1981). See generally Charles V. Laughlin, In Support of the Thayer Theory of Presumptions, 52 Mich. L.Rev. 195 (1953); Routen v. West, 142 F.3d 1434, 1440 (Fed. Cir. 1998).