Pautsch Investments, Inc. d/b/a Cenex Convenience Store, DAB TB5010 (2020)

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative complaint on Respondent, Pautsch Investments, Inc. d/b/a Cenex Convenience Store, at 512 2nd Avenue Northwest, Arlington, Minnesota 55307, and by filing a copy of the complaint with the Food and Drug Administration’s (FDA) Division of Dockets Management.  The complaint alleges that Respondent sold regulated 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 Act, and its implementing regulations at 21 C.F.R. pt. 1140.  Therefore, CTP seeks an $11,410 civil money penalty against Respondent Cenex Convenience Store for seven violations within a 48-month period.

Respondent timely answered CTP’s complaint; however during the course of these administrative proceedings, Respondent failed to comply with orders and procedures governing this proceeding and failed to defend its actions, which interfered with the speedy, orderly, or fair conduct of this proceeding.  21 C.F.R. § 17.35(a).  Accordingly, pursuant to 21 C.F.R. § 17.35(c)(3), I strike Respondent’s Answer and issue this decision of default judgment.

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I.    Procedural History

On August 31, 2019, Complainant served the complaint on Respondent Cenex Convenience Store by United States Postal Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7.  Respondent timely filed its answer on September 27, 2019, denying the allegations in the complaint.  On October 22, 2019, I issued an Acknowledgment and Pre-hearing Order (APHO) acknowledging receipt of Respondent’s Answer and setting forth case procedures and deadlines.  The APHO contained a provision that set out instructions regarding a party's request for production of documents.  That provision states, in part, that a party had until November 27, 2019, to request the opposing party provide copies of documents relevant to this case.  APHO ¶ 12.  The order also stated that a party receiving such a request must provide the requested documents no later than 30 days after the request has been made, pursuant to APHO ¶ 12; see 21 C.F.R. § 17.23(a).  The parties were warned that failure to comply with any order including the APHO may result in sanctions.

On December 18, 2019, Complainant filed a Motion to Compel Discovery stating that it sent its Request for Production of Documents to Respondent on November 7, 2019, but had not received a response from Respondent.  Complainant requested that I issue an order requiring Respondent to comply with Complainant’s Request for Production of Documents.  In a December 20, 2019 order, extending the APHO deadlines, I gave Respondent until January 3, 2020, to file a response to Complainant’s Motion to Compel Discovery. 

Respondent failed to file a response to Complainant’s Motion to Compel Discovery or my December 20, 2019 order.  Accordingly, in an order dated January 7, 2020, I granted Complainant’s Motion to Compel Discovery and ordered Respondent to comply with Complainant’s Request for Production of Documents by January 23, 2020.  I warned Respondent that:

[F]ailure 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. 

January 7, 2020, Order to Compel Discovery (emphasis added).

On January 30, 2020, Complainant filed a Status Report and Motion to Impose Sanctions indicating that Respondent had not complied with my January 7, 2020 order.  Complainant requested I strike Respondent’s Answer and issue an initial decision and default judgment imposing a money penalty against Respondent.  In a February 3, 2020 order, Respondent was given until February 18, 2020, to file a response to Complainant’s Motion to Impose Sanctions.  The order again warned Respondent that if it failed to file   

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a response, I “may grant CTP’s motion [to impose sanctions] in its entirety.”  February 3, 2020, Order.  To date, Respondent has not responded to Complainant’s Motion to Impose Sanctions or the February 3, 2020 order.

II.    Striking Respondent’s Answer

I may sanction a 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).

Respondent failed to comply with the following orders and procedures governing this proceeding:

• Respondent failed to comply with 21 C.F.R. § 17.23(a) and paragraph 12 of my APHO, when Respondent failed to respond to CTP’s Request for Production of Documents within 30 days; and
• Respondent failed to comply with my January 7, 2020 Order to Compel Discovery, when it failed to produce documents responsive to CTP’s Request for Production of Documents by January 23, 2020.

I find that Respondent failed to comply with orders and procedures governing this proceeding, failed to defend its case, and, as a result, interfered with the speedy, orderly, or fair conduct of this proceeding.  I conclude that Respondent’s conduct establishes a basis for sanctions pursuant to 21 C.F.R. § 17.35, and that sanctions are warranted.

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).  Here, Respondent failed to comply with two of my orders, despite my explicit warnings that its failure could result in sanctions.  I specified that 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.”  January 7, 2020, Order to Compel Discovery.  Respondent also failed to defend its actions, despite my orders and directive expressly reminding Respondent of the opportunity.  Respondent’s repeated misconduct interfered with the speedy, orderly, or fair conduct of this proceeding.

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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).  Accordingly, I strike Respondent’s Answer.  21 C.F.R. § 17.35(c)(3). 

I may sanction a party for failing to comply with an order, subpoena, rule, or procedure governing the proceeding; failing to prosecute or defend an action; or engaging in other misconduct that interferes with the speedy, orderly, or fair conduct of the hearing.  21 C.F.R. § 17.35(a).  Here, Respondent failed to comply with the deadline set forth in the APHO for responding to a discovery request, and the order granting Complainant’s Motion to Compel Discovery issued on January 7, 2020.  Respondent also failed to respond to Complainant’s Motion to Impose Sanctions or my February 3, 2020 order.  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).  This repeated conduct is sufficiently egregious to warrant striking Respondent’s Answer and issuing an initial decision by default.  Therefore, pursuant to 21 C.F.R. § 17.35, I am granting Complainant’s Motion to Impose Sanctions, and striking Respondent’s Answer for failing to comply with multiple judicial orders and directives.

III.    Default Decision

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

• On January 3, 2019, CTP initiated a previous civil money penalty action, CRD Docket Number T-19-1000, FDA Docket Number FDA-2018-H-4915, see also CRD Docket T-18-3070, FDA Docket FDA-2018-H-2903, against Respondent for at least five violations1 of the Act.  CTP alleged those violations to have occurred at Respondent’s business establishment, 512 2nd Avenue Northwest, Arlington, Minnesota 55307, on September 20, 2016, May 30, 2018, and October 8, 2018.
• 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.”
• During a subsequent inspection, at approximately 5:01 PM on April 8, 2019, at Respondent’s business establishment 512 2nd Avenue Northwest, Arlington,

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Minnesota 55307, an FDA-commissioned inspector documented Respondent’s staff selling a package of two Swisher Sweets Swerve Strawberry Margarita cigars 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 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 sold or distributed 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 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(b)(1), no retailer may sell regulated tobacco products to any person younger than 18 years of age.  Under 21 C.F.R. § 1140.14(b)(2)(i), retailers must verify, by means of photographic identification containing a purchaser’s date of birth, that no regulated tobacco product purchasers are younger than 18 years of age.  

An $11,410 civil money penalty is permissible under 21 C.F.R. § 17.2.

Order

For these reasons, I enter default judgment in the amount of $11,410 against Respondent Pautsch Investments, Inc. d/b/a Cenex Convenience Store.  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.

• 1. The complaint alleges two violations were committed on September 20, 2016, two on May 30, 2018, and two on October 8, 2018.  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.  See 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).