Cape Tobacco Inc. d/b/a Santa Tobacco, DAB TB5283 (2021)

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

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint) against Respondent, Cape Tobacco Inc. d/b/a Santa Tobacco, alleging facts and legal authority sufficient to justify imposition of a No-Tobacco-Sale Order against Respondent for a period of 30 consecutive calendar days.  CTP began this case by serving a Complaint on Respondent and filing a copy of the Complaint with the Food and Drug Administration’s (FDA) Division of Dockets Management.  The Complaint alleges that Respondent’s staff impermissibly sold regulated tobacco products to minors and failed to verify that 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, 21 C.F.R. pt. 1140.

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 respond to CTP’s discovery requests and issue a default judgment against Respondent.  During the course of these administrative proceedings, Respondent failed to comply with orders and procedures governing this proceeding and failed to defend this action, 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

I. Procedural History

On September 29, 2020, CTP served the Complaint on Respondent by United Parcel Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7.  Respondent timely answered CTP’s Complaint.  On October 21, 2020, I issued an Acknowledgment and Pre-Hearing Order (APHO) that set deadlines for the parties’ filings and exchanges, including a schedule for discovery.  I directed that a party receiving a discovery request must provide the requested documents within 30 days of the request.  APHO ¶ 4; see 21 C.F.R.
§ 17.23(a).  I warned:

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. 21 C.F.R. § 17.35.

APHO ¶ 21.

In accordance with the deadlines set forth in the APHO, CTP served Respondent with its Request for Production of Documents on November 23, 2020.  On December 28, 2020, CTP filed a Motion to Compel Discovery asserting that Respondent had not responded to its discovery request.  On December 30, 2020, I issued an Order advising Respondent that it had until January 15, 2021, to file a response to CTP’s Motion to Compel Discovery.  See also 21 C.F.R. § 17.32(c); APHO ¶ 20.  Respondent failed to submit a response to CTP’s Motion to Compel Discovery or the December 30, 2020 Order, or otherwise comply with CTP’s Request for Production of Documents.

On January 21, 2021, I issued an Order granting CTP’s Motion to Compel Discovery and ordered Respondent to produce responsive documents to CTP’s Request for Production of Documents by February 5, 2021.  I warned:

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 . . . .

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January 21, 2021 Order at 1-2.  In the same Order, I also extended the parties’ pre-hearing exchange deadlines.  Id. at 2.

On February 8, 2021, CTP filed a Status Report and Motion to Impose Sanctions.  CTP advised that Respondent had not complied with the APHO or my January 21, 2021 Order requiring Respondent to produce documents responsive to CTP’s Request for Production of Documents by February 5, 2021.  Motion to Impose Sanctions at 1-2.  CTP argued that sanctions against Respondent for its repeated non-compliance are an appropriate remedy.  Specifically, CTP asked that I strike Respondent’s Answer as a sanction and issue an Initial Decision and Default Judgment finding Respondent liable for the violations listed in the Complaint and imposing a No-Tobacco-Sale Order.  Id. at 2.

On February 9, 2021, I issued an Order giving Respondent until February 24, 2021 to file a response to CTP’s Motion to Impose Sanctions.  The February 9, 2021 Order also extended the parties’ pre-hearing exchange deadlines.  To date, Respondent has not filed a response to CTP’s Motion to Impose Sanctions or the February 9, 2021 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 4 of my APHO, when Respondent failed to respond to CTP’s Request for Production of Documents within 30 days;
• Respondent failed to comply with my December 30, 2020 Order, when it failed to file a response to CTP’s Motion to Compel Discovery by January 15, 2021;
• Respondent failed to comply with my January 21, 2021 Order, when it failed to submit documents responsive to CTP’s Request for Production of Documents by February 5, 2021; and
• Respondent failed to comply with my February 9, 2021 Order, when it failed to file a response to CTP’s Motion to Impose Sanctions by February 24, 2021.

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I find that Respondent failed to comply with orders and procedures governing this proceeding, failed to defend this action, and, as a result, interfered with the speedy, orderly, and 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 four of my orders, despite my explicit warnings that its failure could result in sanctions.  APHO ¶ 21; January 21, 2021 Order, at 1-2.  Respondent’s repeated misconduct interfered with the speedy, orderly, or fair conduct of this proceeding.  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, and issue this Initial Decision and Default Judgment, assuming the facts alleged in CTP’s Complaint to be true.  21 C.F.R. §§ 17.35(c)(3), 17.11(a).

III. Default Decision

Striking Respondent’s Answer leaves the Complaint unanswered.  Therefore, I am required to issue an initial decision by default, provided that the Complaint is sufficient to justify a penalty.  21 C.F.R. § 17.11(a).  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:

• On July 26, 2016, CTP initiated its first civil money penalty action, FDA Docket Number FDA-2016-H-1931, CRD Docket Number T-16-1202, against Respondent for two1 violations of 21 C.F.R. pt. 1140 within a 12-month period.  CTP alleged those violations to have occurred at Respondent's business

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establishment, 2708 Santa Barbara Boulevard, Suite 127, Cape Coral, Florida 33914, on October 13, 2015 and January 6, 2016;

• The first action concluded when Respondent “admitted all of the allegations in the Complaint and paid the agreed upon penalty.” Further, “Respondent expressly waived its rights to contest such violations in subsequent actions”;
• On July 13, 2018, CTP initiated its second civil money penalty action, FDA Docket Number FDA-2018-H-2694, CRD Docket Number T-18-2896, against Respondent for four additional violations of 21 C.F.R. pt. 1140.  CTP alleged those violations to have occurred at Respondent's business establishment, 2708 Santa Barbara Boulevard, Suite 127, Cape Coral, Florida 33914, on January 27, 2018, and June 30, 2018;
• The second action concluded when Respondent “admitted all of the allegations in the Complaint and paid the agreed upon penalty.”  Further, “Respondent expressly waived its rights to contest such violations in subsequent actions”;
• On March 13, 2019, CTP initiated its third civil money penalty action, FDA Docket Number FDA-2019-H-1172, CRD Docket Number T-19-1974, against Respondent for one additional violation of 21 C.F.R. pt. 1140.  CTP alleged that violation to have occurred at Respondent's business establishment, 2708 Santa Barbara Boulevard, Suite 127, Cape Coral, Florida 33914, on January 4, 2019;
• The third action concluded when an Initial Decision and Default Judgment was entered by the administrative law judge, “finding Respondent liable for the January 4, 2019 violation”;
• At approximately 3:42 PM on February 28, 2020, at Respondent's business establishment, 2708 Santa Barbara Boulevard, Suite 127, Cape Coral, Florida 33914, an FDA-commissioned inspector documented Respondent's staff selling a package of Marlboro cigarettes 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,

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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)/1140.14(a)(1)2 .  The regulations also require retailers to verify, by means of photographic identification containing the purchaser's date of birth, that no cigarette or smokeless tobacco purchaser is younger than 18 years of age.  21 C.F.R. § 1140.14(b)(1)/1140.14(a)(2)(i).

Under 21 U.S.C. § 333(f)(8), a No-Tobacco-Sale Order is permissible for seven repeated violations of the regulations found at 21 C.F.R. pt. 1140.  The maximum period of time for the first No-Tobacco-Sale Order received by a retailer is 30 calendar days.  See Pub. L. 111-31, div. A, title I, § 103(q)(1)(A), June 22, 2009, 123 Stat. 1838, 1839; Food & Drug Admin., Determination of the Period Covered by a No-Tobacco-Sale Order and Compliance with Order at 3-4, available at https://www.fda.gov/downloads/Tobacco Products/Labeling/RulesRegulationsGuidance/UCM446547.pdf (last updated Aug. 2015); Civil Money Penalties and No-Tobacco-Sale Orders For Tobacco Retailers at 5-6, available at http://www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/UCM252955.pdf (last updated Dec. 15, 2016).

ORDER

Taking the above-alleged facts as true, I enter default judgment against Respondent Cape Tobacco Inc. d/b/a Santa Tobacco, in the form of a No-Tobacco-Sale Order, for a period of 30 consecutive calendar days.  During this period of time, Respondent shall stop selling cigarettes, cigarette tobacco, roll-your-own tobacco, smokeless tobacco, and covered tobacco products regulated under the Federal Food, Drug, and Cosmetic Act.  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. Two violations were documented on October 13, 2015, and one on January 6, 2016. When determining the number of violations for a civil money penalty, CTP counted the violations at the initial inspection as a single violation, and all subsequent violations as separate individual violations, in accordance with customary practice. When determining the number of violations for a No-Tobacco-Sale Order, CTP counted both of the October 13, 2015 violations (sale to a minor and failure to verify identification) as Respondent’s original violations. The NTSO Complaint does not include the January 6, 2016 violation as a “repeated violation” because it falls outside the specified 36-month timeframe. See Complaint ¶ 9 fn.4.
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2. On August 8, 2016, the citations to certain tobacco violations changed. For more information see: https://federalregister.gov/a/2016-10685.
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