Mount Rainier Dollar and Food Mart Inc. d/b/a Alife Dollar Food Mart, DAB TB5250 (2020)

INITIAL DECISION AND DEFAULT JUDGMENT

Found:

1) Respondent violated 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(b)(1) and 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(a)(1), 1140.14(b)(1), and 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.

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Glossary:

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

The Center for Tobacco Products (CTP/Complainant) filed a Complaint on September 24, 2019, against Mount Rainier Dollar and Food Mart Inc. d/b/a Alife Dollar Food Mart (Respondent or Alife Dollar Food Mart), located at 3847 34th Street, Mount Rainier, Maryland 20712, alleging that FDA documented seven violations within a 48-month period.

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Respondent was served with process on September 23, 2019, by United Parcel Service.  Respondent, through counsel, filed a timely an answer on November 22, 2019.

On November 26, 2019, I issued a Pre-Hearing Order in which I established a schedule for discovery and exchanges of evidence and argument.  Pursuant to that order, CTP sent counsel for Respondent a Request for Production of Documents on December 5, 2019, which counsel for Respondent received on December 6, 2019.  Counsel for Respondent had 10 days to file a motion for a protective order or 30 days to provide responsive documents.  21 C.F.R. § 17.23(a), (d); Pre-Hearing Order ¶ 3.

On January 9, 2020, CTP filed a Motion to Compel Discovery in which CTP averred that counsel for Respondent failed to respond to CTP’s Request for Production of Documents.  On January 14, 2020, counsel for Respondent filed a Motion to Strike or Withdraw counsel’s appearance on behalf of Respondent in this matter.  By Order of January 31, 2020, I granted counsel for Respondent’s Motion to Strike or Withdraw as counsel and provided Respondent until March 16, 2020, to file a status report indicating whether it retained new counsel or will be proceeding without an attorney and also to file a response to CTP’s Motion to Compel Discovery.  Respondent did not file a status report or respond to CTP’s Motion. 

Due to circumstances surrounding the COVID-19 pandemic, I stayed this case on March 31, 2020.  However, on June 16, 2020, I lifted the stay and provided Respondent until July 16, 2020, to file a status report indicating whether it retained new counsel and to file a response to CTP’s Motion to Compel Discovery.  Respondent did not file a status report or respond to CTP’s Motion.

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On July 31, 2020, I issued an Order on Discovery and Order to Show Cause to Respondent (July 31, 2020 Order).  I explained that Respondent failed to comply with my Pre-Hearing Order and the procedural rules of 21 C.F.R. Part 17, when it failed to respond to CTP’s Request for Production of Documents within 30 days.  Further, I explained that Respondent also failed to comply with my January 31, 2020, and June 16, 2020, orders when it failed to file a status report indicating whether it retained new counsel or would be proceeding without an attorney.  I instructed Respondent to show cause why I should not strike its answer as a sanction for failing to comply with my orders, rules and procedures governing the proceeding on or before August 28, 2020.  I warned:

. . . failure to comply will result in sanctions, which 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.  21 C.F.R. § 17.35.

July 31, 2020 Order (emphasis in original).

Respondent did not show cause or otherwise submit a response to my July 31, 2020 Order.

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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 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 November 26, 2019 Pre-Hearing Order and 21 C.F.R. § 17.23(a), when it failed to provide documents responsive to CTP’s Request for Production of Documents within 30 days.  Respondent failed to defend its action when it did not file a response to CTP’s Motion to Compel Discovery, despite multiple opportunities to do so.  Respondent also failed to comply with my January 31, 2020, and June 16, 2020, orders when it failed to file a status report indicating whether it retained new counsel or intended to proceed without an attorney.  Respondent failed to comply with my July 31, 2020 Order when it failed to show cause by August 28, 2020. 

I find that Respondent has failed to comply with my orders and procedures governing this proceeding and failed to defend its actions.  Respondent’s misconduct has interfered with the speedy, orderly, or fair conduct of this proceeding.  21 C.F.R. § 17.35(a).  I find 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

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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 sufficient 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.

V.  LAW

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

VII.  DEFAULT

I find Respondent was served and is subject to the jurisdiction of this forum, as established by the UPS Delivery Notification and Notice of Filing filed by CTP and by Respondent’s answer seeking relief. 

Striking Respondent’s answer leaves the Complaint unanswered.

It is Respondent’s right to participate in the legal process.

It is Respondent’s right to request a hearing or to waive a hearing. 

I find Respondent waived its right to a hearing pursuant to 21 C.F.R. § 17.11(b).

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VIII. ALLEGATIONS

A. Agency’s recitation of facts

CTP alleged that Respondent owns an establishment, doing business under the name Alife Dollar Food Mart, located at 3847 34th Street, Mount Rainier, Maryland 20712.  Respondent’s establishment receives tobacco products in interstate commerce and holds them for sale after shipment in interstate commerce.

During an inspection of Alife Dollar Food Mart conducted on June 5, 2019, an FDA-commissioned inspector documented the following violations:

1. Selling 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 five Black & Mild Wood Tip cigars on June 5, 2019, at approximately 3:05 PM; and
2. Failing to verify the age of a person purchasing 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 June 5, 2019, at approximately 3:05 PM.

B. Respondent’s recitation of facts

I struck Respondent’s answer from the record.  21 C.F.R. § 17.35(a).

Accordingly, Respondent filed no responsive pleadings that I may consider.

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IX.  PRIOR VIOLATIONS

On May 9, 2018, CTP initiated a previous civil money penalty action, CRD Docket Number T-18-2158, FDA Docket Number FDA-2018-H-1786, against Respondent for violations of 21 C.F.R. Part 1140, five3 of which occurred within the 48-month period relevant in the current Complaint.  See also CRD Docket Number T-18-245, FDA Docket Number FDA-2017-H-6299.  CTP alleged those violations to have occurred at Respondent’s business establishment, 3847 34th Street, Mount Rainier, Maryland 20712, on January 4, 2017, October 23, 2017, and April 10, 2018.

The previous action concluded when an Initial Decision and Default Judgment was entered by an Administrative Law Judge, “finding that all of the violations alleged in the Complaint occurred.” 

I find and conclude Respondent committed seven violations of 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(a)(1), 1140.14(b)(1), and 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

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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 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

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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 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 & FDA Staff, Civil Money Penalties & No-Tobacco-Sale Orders for Tobacco Retailers, Responses to Frequently Asked Questions (Revised), at 13-14 (Dec. 2016), available at http://www.fda.gov/downloads/TobaccoProducts/Labeling/ RulesRegulationsGuidance/UCM447310.pdf.  So, for instance, if a retailer sells a covered tobacco product on a particular occasion to a minor without checking for photographic identification, in violation of 21 C.F.R. § 1140.14(b)(1) and 1140.14(b)(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

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implementing regulations.  See Orton Motor Co. d/b/a Orton’s Bagley v. HHS,884 F.3d 1205 (D.C. Cir. 2018).

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. 

As detailed above, I find Respondent 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 an Order to Show Cause, an ALJ must assume as true all factual allegations in the complaint and issue an initial decision, 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).

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Two aspects of Rule 17.11 are important in default cases. 

First, the Complainant benefits from a regulatory presumption (the ALJ shall 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).4

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.

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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. § 17.11(a).

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(a)(1) and 1140.14(b)(1), in that a person younger than 18 years of age was able to purchase a regulated tobacco product on January 4, 2017, October 23, 2017, April 10, 2018, and June 5, 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 October 23, 2017, April 10, 2018, and June 5, 2019, in that Respondent also violated the requirement that retailers verify, by means of photo identification containing a purchaser’s date of birth, that no regulated tobacco product purchasers are younger than 18 years of age.

The conduct set forth above on January 4, 2017, October 23, 2017, April 10, 2018, and June 5, 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

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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 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.  I have no reason to mitigate the penalty.

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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:

1. I find Respondent has been served with process herein and is subject to this forum.
2. I find Respondent failed to respond to my Order to Show Cause (July 31, 2020 Order).
3. I find Respondent failed to comply with my orders and procedures governing this proceeding and failed to defend its actions, constituting 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 find striking Respondent’s answer leaves the Complaint unanswered.  21 C.F.R. § 17.11.
6. I find Respondent is in default.
7. I assume the facts alleged in the Complaint to be true.  21 C.F.R. § 17.11.
8. I find the facts set forth in the Complaint establish liability under the relevant statute.
9. 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, 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. One violation was documented on January 4, 2017, two on October 23, 2017, and two on April 10, 2018.
• 4. 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).