Ace Tobacco Outlet Burnt Mill Rd LLC d/b/a Ace Tobacco Outlet, DAB TB7479 (2024)

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

The Center for Tobacco Products (CTP) began this matter by serving an administrative complaint¹ on Respondent, Ace Tobacco Outlet Burnt Mill Rd LLC d/b/a Ace Tobacco Outlet, at 213 South Burnt Mill Road, Voorhees, New Jersey 08043, and by filing a copy of the complaint with the Food and Drug Administration’s (FDA) Division of Dockets Management.  The complaint alleges that Ace Tobacco Outlet impermissibly sold regulated tobacco products to underage purchasers and failed to verify, by means of photo identification containing a date of birth, that the purchasers were 21 years of age or older, thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C.

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§ 301 et seq., and its implementing regulations, 21 C.F.R. pt. 1140.²  CTP seeks a $638 civil money penalty against Respondent Ace Tobacco Outlet for at least three³ violations within a 24-month period.

During the course of this administrative proceeding, 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.

I. Procedural History

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on February 22, 2023⁴, CTP served the complaint on Respondent Ace Tobacco Outlet by United Parcel Service Next Day Air. Civil Remedies Division (CRD) Docket (Dkt.) Entry No. 1b (Proof of Service).  On March 1, 2023, Respondent filed a timely Answer to CTP’s complaint.  CRD Dkt. Entry No. 3 (Answer).  As Respondent admitted to all Complaint allegations and confirmed that the penalty being sought by the Center for Tobacco Products (CTP) is appropriate, I issued an Acknowledgment and Status Report Order (ASRO) on March 2, 2023.  CRD Dkt. Entry No. 4.  Subsequently, a Joint Status Report (JSR) was filed by CTP on May 2, 2023, in which the parties acknowledged that a settlement agreement had been reached and that “CTP will file a Notice of Settlement Agreement after Respondent fulfills the terms of the agreement.” CRD Dkt. Entry No. 10.  However, no such action was taken.  Consequently, on June 13, 2023, I issued an Acknowledgment and Pre-Hearing Order

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(APHO) that set deadlines for the parties’ filings and exchanges, including a schedule for discovery.  CRD Dkt. Entry No. 11.

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 that I may impose sanctions if a party failed to comply with any order, including the APHO.  APHO ¶ 21.  In accordance with the deadlines set forth in the APHO, CTP served Respondent with its Request for Production of Documents (RFP) on July 13, 2023.  CRD Dkt. Entry No. 13 a. and 13 b.  CTP Exhibits A and B - Supporting Documents/Exhibits.  On August 18, 2023, CTP filed a Motion to Compel Discovery, asserting that Respondent did not respond to its discovery request, as required by the APHO and regulations.  CRD Dkt. Entry No. 13.  Motion to Compel Discovery at 1-2.

On August 22, 2023, I issued an Order giving Respondent a deadline of September 6, 2023 to respond to CTP’s Motion to Compel Discovery as provided by 21 C.F.R. § 17.32(c).  CRD Dkt. Entry No. 15.  Respondent did not respond to CTP’s Motion to Compel Discovery or to my August 22, 2023 Order.  On October 5, 2023, I issued an Order Granting Complainant’s Motion to Compel Discovery, in which I ordered Respondent to produce documents responsive to CTP’s discovery request by October 20, 2023.  Respondent was also ordered to notify CTP in writing if it did not have documents responsive to CTP’s request.  In this Order, Respondent was also warned that:

[F]ailure to comply with this Order 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.

Order to Compel Discovery at 2. CRD Dkt. Entry No. 18.

On October 26, 2023, CTP filed a Motion to Impose Sanctions (Motion to Impose Sanctions) stating that, as of its filing, Respondent had not produced documents in response to CTP’s request for production of documents.  CRD Dkt. Entry No. 19.  CTP argued that sanctions against Respondent for its repeated non-compliance were an appropriate remedy.  Motion to Impose Sanctions at 2.  Specifically, CTP asked that I strike the 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 the requested civil money penalty of $638.  Id.

By Order of November 3, 2023, I informed Respondent that it had until November 17, 2023 to file a response to CTP’s Motion to Impose Sanctions.  CRD Dkt. Entry No. 21. Respondent was warned that if it failed to file a response, CTP’s Motion to Impose

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Sanctions may be granted and the requested civil money penalty of $638 would be imposed, pursuant to 21 C.F.R. § 17.35.  Order at 2, Nov. 3, 2023.

Respondent did not respond to the said 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).

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

• Respondent failed to comply with 21 C.F.R. § .23(a) and paragraph 4 of the APHO, when Respondent failed to respond to CTP’s Request for Production of Documents within 30 days; and
• Respondent failed to comply with the Order to Compel Discovery when it failed to produce documents responsive to CTP’s Request for Production of Documents by October 20, 2023.

Respondent also failed to defend its action, despite the August 22, 2023 Order and the November 3, 2023 Order informing Respondent that it may file responses to CTP’s motions and warning Respondent of the consequences if it failed to do so.

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).  When a party fails to comply with a discovery order, including the discovery provisions under the regulations, I may strike any pleadings or submissions of the party failing to comply.  21 C.F.R. § 17.35(c)(3).  Here, Respondent failed to comply with a procedural rule (21 C.F.R. § 17.23(a)), and two orders (APHO ¶ 4; Order Granting Motion to Compel Discovery) under 21 C.F.R. § 17.35(a)(1), despite numerous explicit warnings that its failure could

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result in sanctions (APHO ¶ 21; Order Granting Motion to Compel Discovery at 2).  Respondent was twice specifically warned that failure to comply with orders 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.”  Order Granting Motion to Compel Discovery at 2; Order at 2, November 3, 2023.

Respondent also failed to defend its actions, under 21 C.F.R. § 17.35(a)(2), despite the orders expressly reminding Respondent that it may file a response.  Order at 2, August 22, 2023; Order at 2, November 3, 2023.   In fact, Respondent has not participated in this action in any meaningful fashion since filing its Answer.  Respondent’s repeated misconduct interfered with the speedy, orderly, or fair conduct of this proceeding, under 21 C.F.R. § 17.35(a)(3).

I find that imposing the sanction of striking Respondent’s Answer and issuing a decision by default, without further proceedings, reasonably relates to the severity and nature of Respondent’s misconduct.  21 C.F.R. § 17.35(b), (c)(3).  Accordingly, I strike Respondent’s Answer.  21 C.F.R. § 17.35(c)(3).

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 complaint 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:

• At approximately 6:22 PM on April 5, 2022, at Respondent’s business establishment, 213 South Burnt Mill Road, Voorhees, New Jersey 08043, an FDA-commissioned inspector conducted an inspection.  During this inspection, a person younger than 21 years of age was able to purchase a Black & Mild Wood Top cigar.  Additionally, Respondent’s staff failed to verify, by means of photographic identification containing a date of birth, that the purchaser was 21 years of age or older;
• In a warning letter dated May 17, 2022, CTP informed Respondent of the inspector’s April 5, 2022 documented violations, and that such actions violate federal law.  The letter further warned that Respondent’s failure to correct its violations could result in a civil money penalty or other regulatory action;

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• An FDA-commissioned inspector conducted a subsequent inspection on November 16, 2022, at approximately 5:17 PM, at Respondent’s business establishment located at 213 South Burnt Mill Road, Voorhees, New Jersey 08043.  During this inspection, a person younger than 21 years of age was able to purchase a Black & Mild cigar.  Additionally, Respondent’s staff failed to verify, by means of photographic identification containing a date of birth, that the purchaser was 21 years of age or older.⁵

These facts establish Respondent Ace Tobacco Outlet’s liability under the Act.  The Act prohibits misbranding of a regulated tobacco product.  21 U.S.C. § 331(k).  A regulated 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 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); see also 21 U.S.C. § 387f (note) (directing the Secretary to change references to persons younger than 18 to younger than 21, and to change the age verification requirements from individuals under the age of 26 to under the age of 30, in 21 C.F.R. subpart B of part 1140).  Under section 906(d)(5) of the Act, no retailer may sell regulated tobacco products to any person younger than 21 years of age and retailers must verify, by means of photographic identification containing a purchaser’s date of birth, that no regulated tobacco product purchasers are younger than 21 years of age.

A $638 civil money penalty is permissible under 21 C.F.R. § 17.2.

Order

For these reasons, I enter default judgment in the amount of $638 against Respondent, Ace Tobacco Outlet Burnt Mill Rd LLC d/b/a Ace Tobacco Outlet.  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.

Endnotes

¹ On April 13, 2023, I granted CTP’s motion to amend the complaint to correctly identify Respondent’s name as “Ace Tobacco Outlet Burnt Mill Rd LLC d/b/a Ace Tobacco Outlet.” In the original complaint filed on February 3, 2023, Respondent’s name was improperly identified as “ABC Tobacco Outlet Burnt Mill Rd LLC d/b/a Ace Tobacco Outlet”.

² On December 20, 2019, the Act was amended by the Further Consolidated Appropriations Act, 2020, Pub. L. No. 116–94, § 603(a)-(b), to raise the federal minimum age for sale of tobacco products to 21, and directed the Secretary of the U.S. Department of Health and Human Services (Secretary) 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.”  21 U.S.C. § 387f (note).

³ The complaint alleges two violations on April 5, 2022, and two violations on November 16, 2022.  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).

⁴ CTP served Respondent with the original complaint on February 22, 2023 but was subsequently served with the amended complaint reflecting its correct name on April 18, 2023, after Respondent filed an answer.

⁵ The identification violations alleged by CTP on April 5, 2022, and on November 16, 2022, are governed by section 906(d) of the Act, which went into effect as of December 20, 2019, although CTP cites 21 C.F.R. § 1140.14(b)(2)(i), which has not been updated to reflect the age change.  See Complaint ¶¶ 13.b, 15.b; see also supra fn.2.