Joshi Brothers Inc. d/b/a Xpress Deli, DAB TB5257 (2020)

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

The Center for Tobacco Products (CTP) began this case by serving an Administrative Complaint (Complaint) on Respondent, Joshi Brothers Inc. d/b/a Xpress Deli, and filing a copy of the Complaint with the Civil Remedies Division (CRD) of the Departmental Appeals Board (DAB).  The Complaint alleges that Respondent impermissibly sold cigarettes to minors and failed to verify that the cigarette purchasers were of sufficient age, 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 $285 against Respondent for two violations within a 12-month period. 

Respondent timely answered and requested to settle the Complaint.  I issued an Acknowledgment and Status Report (ASRO) giving the parties 60 days to reach a settlement.  After the parties failed to finalize a settlement agreement, I issued an Acknowledgment and Pre-Hearing Order (APHO) establishing procedural deadlines for this case.  CTP subsequently filed a Motion to Impose Sanctions requesting that I strike Respondent’s Answer as a sanction for failing to respond to CTP’s discovery request and issue a default judgment against Respondent.  As discussed below, Respondent failed to comply with orders and procedures governing this proceeding and failed to defend this

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action.  I, therefore, 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 $285 against Respondent.  21 C.F.R. § 17.35(c)(3).

I.    Background

As provided in 21 C.F.R. §§ 17.5 and 17.7, CTP served the Complaint on Respondent Xpress Deli, located at 600 Montauk Highway, Shirley, New York, 11967, by United Parcel Service (UPS) on December 6, 2019.  DAB E-File Docket (Dkt.) Entry Nos. 1, 1a-1b.  On January 6, 2020, the Immediate Office of the DAB received email correspondence from Sanjeev Joshi, President of Respondent’s business.  In the email correspondence, which identified the case docket number, Mr. Joshi stated:  “I wanted to make a payment for the violations that occurred at my stores from my employees” and “I’ve made several changes to assure such violations do not occur again.”  Dkt. Entry No. 3 (Answer).  I construed this email as the Respondent’s timely filed Answer and a request to settle the Complaint. 

On February 4, 2020, I issued an ASRO acknowledging the timely receipt of Respondent’s Answer and inferring that the parties did not intend to proceed to a hearing.  The ASRO also provided CTP’s settlement contact information, and ordered the parties to provide a joint status report within 60 days.  Dkt. Entry No. 4.  Because Respondent had registered for the DAB Electronic Filing System (DAB E-File), the ASRO was served on Respondent via DAB E-File.1   Id. at 3.

On April 6, 2020, CTP timely filed a Status Report stating that a settlement agreement was reached on February 21, 2020, but CTP’s attempts to contact Respondent regarding payment were unsuccessful.  Dkt. Entry No. 6.  CTP explained that payment was due on February 26, 2020.  Although Respondent confirmed that it intended to make payment on February 26, 2020, Respondent failed to make the payment, and CTP’s attempts to contact Respondent on March 16, 2020, and March 26, 2020, to discuss Respondent’s late payment were unsuccessful.  Id.  Finally, CTP stated that it is “willing to honor the

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settlement agreement but, absent an executed settlement agreement, intends to proceed to a hearing.”  Id. 

On April 14, 2020, I issued an APHO acknowledging receipt of Respondent’s Answer and establishing procedural deadlines for this case.  Dkt. Entry No. 7.  The APHO established a May 13, 2020, discovery deadline and the following pre-hearing exchange deadlines:  July 6, 2020, for CTP’s exchange and July 27, 2020, for Respondent’s exchange.  Id. ¶¶ 4, 12.  The pre-hearing exchange provisions required each party’s exchange to consist of a pre-hearing brief, a list of all proposed exhibits, a copy of each proposed exhibit, a list of proposed witnesses, complete written direct testimony of any proposed witness, a copy of any prior written statement by any proposed witness, and any other mitigating or aggravating evidence.  Id. ¶¶ 4-10.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.”  Id. ¶ 16; see also 21 C.F.R. § 17.35.  The APHO was served on Respondent via DAB E-File.  Dkt. Entry No. 7 at 10.

On May 13, 2020, CTP filed a second Status Report reiterating that, on February 21, 2020, CTP and Respondent reached a settlement agreement with payment due on February 26, 2020, and that CTP received confirmation that Respondent intended to make payment on February 26, 2020.  Dkt. Entry No. 8.  CTP asserted that it attempted to contact Respondent on April 13, 2020, and May 6, 2020, regarding late payment and for the filing of a joint status report, but has been unable to reach Respondent.  Id.  CTP again indicated that it is “willing to honor the settlement agreement but, absent an executed settlement agreement, intends to proceed to a hearing.”  Id.

On June 17, 2020, CTP filed a Motion to Compel Discovery stating that Respondent had failed to respond to CTP’s Request for Production of Documents (RFP) within 30 days after being served on May 14, 2020, by UPS.  Dkt. Entry No. 9; see also id., Exs. A, B.  CTP also filed a Motion to Extend Deadlines, seeking to extend the deadlines set forth in the APHO by 30 days.  Dkt. Entry No. 10.  On June 23, 2020, I issued an Order allowing Respondent until July 8, 2020, to file a response to CTP’s motion to compel discovery and granting CTP’s motion to extend pre-hearing exchange deadlines to August 5, 2020, for CTP and to August 26, 2020, for Respondent.  Dkt. Entry No. 11 [hereinafter “June 23, 2020 Order”].  The June 23, 2020 Order was served on Respondent via DAB E-File.  Id. at 3.

On July 22, 2020, I issued an Order Granting Motion to Compel and Extending Pre-Hearing Exchange Deadlines after Respondent failed to file any response to CTP’s Motion to Compel Discovery or otherwise respond to my June 23, 2020 Order.  Dkt. Entry No. 12 [hereinafter “July 22, 2020 Order”].  As Respondent had not contested CTP’s motion to compel discovery and the requests made in CTP’s RFP were “relevant

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and narrowly tailored to the issues in the case,” I granted CTP’s Motion to Compel Discovery.  July 22, 2020 Order at 2.  I ordered Respondent to comply with CTP’s RFP by August 7, 2020, and again extended pre-hearing exchange deadlines to September 4, 2020, for CTP, and September 25, 2020, for Respondent.  Id.  The July 22, 2020 Order was served on Respondent via DAB E-File.  Id. at 3.

On August 20, 2020, CTP filed a Motion to Impose Sanctions along with a second Motion to Extend Deadlines, seeking to extend the deadlines set forth in the July 22, 2020 Order by 30 days or until the Motion to Impose Sanctions was resolved.  Dkt. Entry Nos. 13-14.  On August 31, 2020, I issued an order allowing Respondent until September 15, 2020, to file a response to CTP’s Motion to Impose Sanctions.  I also extended the pre-hearing exchange deadlines to October 5, 2020, for CTP and to October 26, 2020, for Respondent.  Dkt. Entry No. 15 [hereinafter “August 31, 2020 Order”].  The August 31, 2020 Order was served on Respondent via DAB E-File.  Id. at 3.  Respondent has not responded to CTP’s Motion to Impose Sanctions as required by the August 31, 2020 Order.

On October 1, 2020, I issued an Order Suspending Pre-Hearing Exchange Deadlines pending resolution of CTP’s Motion to Impose Sanctions.  Dkt. Entry No. 18 [hereinafter “October 1, 2020 Order”].  The October 1, 2020 Order was served on Respondent via DAB E-File.  Id. at 2.  To date, Respondent has not responded to CTP’s Motion to Impose Sanctions or any of my Orders.  As the deadline for responding to the motion has passed, CTP’s Motion to Impose Sanctions is 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 judicial orders

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and procedures.  21 C.F.R. § 17.35(a)(1).  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 did not provide the requested documents or request a protective order.  Similarly, Respondent failed to comply with the July 22, 2020 Order, which required Respondent to produce documents to CTP by August 7, 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, I conclude that Respondent failed to defend this action by repeatedly failing to respond to CTP’s motions and my orders.  21 C.F.R. § 17.35(a)(2).  After Respondent failed to respond to CTP’s request for documents pursuant to the discovery deadlines set forth in my APHO, CTP filed a Motion to Compel Discovery and a Motion to Extend Deadlines.  Dkt. Entry No. 9; see also Dkt. Entry No. 10.  Instead of ruling on the Motion to Compel, I gave Respondent until July 8, 2020, which included six extra days, in addition to the regulatory 15 days, to file a response to the Motion to Compel.  I warned that if it failed to respond by July 8, 2020, I may grant CTP’s motion in its entirety.  Dkt. Entry No. 11 at 2; see also APHO ¶ 19 (citing 21 C.F.R. § 17.32(c)).  Yet, Respondent did not file a response.  Similarly, the August 31, 2020 Order gave Respondent additional time to file a response to CTP’s Motion to Impose Sanctions, but Respondent did not file a response to the motion.  See August 31, 2020 Order at 2 (giving Respondent until September 15, 2020, which included 11 extra days in addition to the regulatory 15 days, to file a response to CTP’s Motion to Impose Sanctions).  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 order to provide ample opportunity for Respondent to respond to CTP’s motions and for the parties to prepare their respective pre-hearing submissions, the June 23, 2020, July 22, 2020, and August 31, 2020 Orders also extended the pre-hearing exchange deadlines established in the APHO.  APHO ¶ 4; June 23, 2020 Order at 2; July 22, 2020 Order at 2; August 31, 2020 Order at 2.  I issued each order not only to set response deadlines to motions and to extend the parties’ exchange deadlines, but also to put Respondent on notice that a response to CTP’s motions was required.  Every order was served on Respondent via DAB E-File at the email address registered in DAB E-File.  June 23, 2020 Order at 3; July 22, 2020 Order at 3; August 31, 2020 Order at 3.  In fact, there has been no communication from Respondent since submission of its January 6, 2020, email correspondence.

In the absence of any explanation from Respondent, I find no basis to excuse Respondent’s repeated failure to comply with the judicial orders and regulations in this proceeding.  All deadlines and procedural requirements were explained clearly in

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multiple orders.  Despite explicit warnings that its failure to comply with the orders could result in sanctions, Respondent did not comply with or otherwise respond to at least four orders that I issued in this case.  Accordingly, I find that Respondent failed to comply with orders and procedures governing this proceeding and failed to defend its case.  21 C.F.R. § 17.35(a)(1)-(2). 

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 four of my orders, despite my explicit warnings that its failure could result in sanctions.  APHO ¶¶ 16; June 23, 2020 Order at 2; July 22, 2020 Order at 2; August 31, 2020 Order at 2.  I specified that those sanctions may include “issuance of an Initial Decision and Default Judgment finding Respondent liable for the violations listed in the Complaint and imposing a civil money penalty.”  July 22, 2020 Order at 2.  Respondent also failed to defend this action, despite express reminders of the opportunity to do so in my June 23, 2020 Order and August 31, 2020 Order.  As the DAB has recognized in a similar case involving a party’s failure to comply with 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)(1)-(2), (b), and (c)(3), I strike Respondent’s Answer for failing to comply with judicial orders and procedures governing this proceeding and failing to defend this action. 

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 Xpress Deli, an establishment that sells tobacco products and is located at 600 Montauk Highway, Shirley, New York, 11967.  Complaint ¶¶ 5-6.
• During an inspection Respondent’s establishment on May 7, 2019, at approximately 6:27 PM, an FDA-commissioned inspector documented that “a person younger than 18 years of age was able to purchase a package of Newport Box cigarettes.”  Id. at ¶ 9.

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• On June 20, 2019, CTP issued a Warning Letter to Respondent regarding the documented violation from May 7, 2019.  The Warning Letter explained that the documented violation constituted a violation of regulations, and 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.  Id. at ¶ 10.
• During a subsequent inspection of Respondent’s establishment on September 8, 2019, at approximately 12:47 PM, an FDA-commissioned inspector documented that “a person younger than 18 years of age was able to purchase a package of Newport Box cigarettes.”  Id. ¶ 7. 

These facts establish Respondent Xpress Deli’s liability 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. § 387f(d); see also 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 cigarettes to any person younger than 18 years of age.2   21 C.F.R. § 1140.14(a)(1).

Taking the above-alleged facts as true, Respondent violated the prohibition against selling cigarettes to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a)(1), on May 7, 2019, and September 8, 2019.  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). 

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Therefore, Respondent’s actions constitute two violations of law within a 12-month period that merit a civil money penalty.

CTP has requested a civil money penalty of $285, 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 $285 is warranted and so order one imposed.

1. The email address Respondent provided at the time he registered for DAB E-File was joshibrothersinc@gmail.com.  However, Respondent’s January 6, 2020, email communication to the DAB Immediate Office was sent from a different email address, joshi5398@gmail.com.  Dkt. Entry No. 3.  All DAB CRD correspondence contain instructions on how to access and register for DAB E-File and my orders state that “Any party that uses DAB E-File consents to be served with documents electronically through DAB E-File.”  Dkt. Entry Nos. 2 at 4 (GEP), 4 at 2 (ASRO), 7 at 3 (APHO); see also Dkt. Entry No. 2 at 1-2, 8 (GEP served by U.S. Mail at Respondent’s address).  Therefore, Respondent is deemed as being served electronically at the DAB E-File email address he provided at the time of DAB E-File registration.
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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.”)  However, each of the violations at issue in this case occurred before these statutory changes.  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”).
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