Zafri LLC d/b/a Pasha's Collection Tobacco Outlet, DAB TB8458 (2024)

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

The Center for Tobacco Products (CTP) began this matter by serving an Administrative Complaint (Complaint) on Respondent, Zafri LLC d/b/a Pasha's Collection Tobacco Outlet, at 3807 Ventnor Avenue, Atlantic City, New Jersey 08401, 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 impermissibly received in interstate commerce an electronic nicotine delivery system (ENDS) product lacking the required premarketing authorization and offering such product for sale, thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq. CTP seeks a civil money penalty of $20,678.

Respondent filed a timely Answer to CTP's Complaint. However, 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). Currently, CTP's Status Report and Motion to Impose Sanctions (Motion to Impose Sanctions) is

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pending before me. CTP's Motion to Impose Sanctions requests 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. After carefully considering the entire record, I grant CTP's Motion to Impose Sanctions. 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 February 12, 2024, CTP served an Administrative Complaint on Respondent by United Parcel Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. See CRD Docket (Dkt.) Entry Nos. 1 (Complaint), No. 1b (Proof of Service). On March 15, 2024, Respondent filed a timely Answer to CTP's Initial Complaint. See CRD Dkt. Entry No. 4.

On March 18, 2024, I issued an Acknowledgment and Pre-Hearing Order (APHO) setting deadlines for the parties' filings and exchanges, including a schedule for discovery. CRD Dkt. Entry No. 5. The APHO informed that a party receiving a discovery request must provide the requested documents within 30 days of the request. Id.; APHO ¶ 4; see also 21 C.F.R. § 17.23(a). The APHO 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.

On April 18, 2024, in compliance with the APHO, CTP filed a timely joint status report. See APHO at 3; CRD Dkt. Entry No. 6. The status report indicated that the parties had been unable to reach a settlement, CTP intended to proceed to a hearing, and that CTP attempted to contact Respondent who authorized CTP to file the report. Id.

On May 24, 2024, CTP filed a Motion to Compel Discovery, asserting that Respondent had not responded to CTP's discovery request as required by the APHO and the regulations. CRD Dkt. Entry No. 8. On that same date, CTP also filed an Unopposed Motion to Extend Deadlines requesting a 30-day extension of "any deadlines, including the June 10, 2024 due date for CTP's pre-hearing exchange . . . ." CRD Dkt. Entry No. 7 at 2. On May 29, 2024, I issued an Order advising Respondent that it had until June 10, 2024, to file a response to CTP's Motion to Compel Discovery. CRD Dkt. Entry No. 9.  I also warned that if Respondent failed to respond, "I may grant CTP's motion in its entirety." Id.; see also APHO ¶¶ 20-21; 21 C.F.R. § 17.32(c). In my Order, I also extended the pre‑hearing exchange deadlines as the parties requested. CRD Dkt. Entry No. 9 at 2. Respondent failed to respond to CTP's Motion to Compel Discovery and my

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May 29, 2024 Order, or otherwise comply with CTP's Request for Production of Documents.

On June 12, 2024, 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 June 18, 2024. I warned:

Failure to do so 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.

CRD Dkt. Entry No. 10 at 1.

On June 27, 2024, CTP filed a Motion to Impose Sanctions. CRD Dkt. Entry No. 12. CTP advised that Respondent had not complied with my APHO or my May 29, 2024 Order Granting CTP's Motion to Compel. Id. at 1-2. CTP argued that sanctions against Respondent for its repeated non-compliance are an appropriate remedy. Id. 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 $20,678 civil money penalty. Id. at 2. On June 27, 2024, CTP also filed a Motion to Stay Deadlines. CRD Dkt. Entry No. 11.

On June 28, 2024, I issued an Order giving Respondent until July 12, 2024, to file a response to CTP's Motion to Impose Sanctions. CRD Dkt. Entry No. 13. My June 28, 2024 Order also stayed the parties' pre-hearing exchange deadlines. Id. at 2.

To date, Respondent has not filed a response to CTP's Motion to Impose Sanctions or my June 27, 2024 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).

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Respondent failed to comply with multiple judicial orders and directives. Specifically:

• the regulation at 21 C.F.R. § 17.23(a) and paragraph 4 of the APHO, when Respondent failed to respond to CTP's Request for Production of Documents within 30 days; and
• my June 12, 2024 Order, when it failed to submit documents responsive to CTP's Request for Production of Documents by June 18, 2024.

Additionally, Respondent failed to defend this action. 21 C.F.R. § 17.35(a)(2).

Specifically:

• Respondent did not file a response to CTP's Motion to Compel Discovery, as permitted by the regulations and my May 29, 2024, Order; and
• Respondent did not file a response to CTP's Motion to Impose Sanctions, as permitted by the regulations and my June 28, 2024, Order.

Respondent's failure to respond to CTP's motions, to comply with my multiple orders, and to fulfill its discovery obligations suggests that it has abandoned its defense in this case.

Therefore, in the absence of any explanation from Respondent, 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, 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 regulatory requirements and two judicial orders, despite my explicit warnings that its failure to do so could result in sanctions. See CRD Dkt. Entry Nos. 9 at 1-2; 10 at 1-2; 13 at 2; see also APHO ¶ 21. Respondent's repeated misconduct interfered with the speedy, orderly, or fair conduct of this proceeding. Accordingly, I find that Respondent's actions are sufficiently egregious to warrant striking its Answer and issuing a decision by default, without further proceedings. 21 C.F.R. § 17.35(b), (c)(3); see also KKNJ, Inc. d/b/a Tobacco Hut 12, DAB No. 2678 at 8 (2016) (concluding that "the ALJ [Administrative Law Judge] 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.").

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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). Accordingly, I must determine whether the allegations in the Complaint establish violations of the Act.

For the purposes of this decision, I assume the facts alleged in the Complaint to be true, pursuant to the provisions of 21 C.F.R. § 17.11(a). Specifically, CTP alleges the following facts in its Complaint:

• Respondent owns Pasha's Collection Tobacco Outlet, located at 3807 Ventnor Avenue, Atlantic City, New Jersey 08401. The establishment receives tobacco products, including an Elfbar Clear ENDS product (Respondent's ENDS product), in interstate commerce and delivers or proffers delivery of these products for pay or otherwise. Complaint ¶¶ 13-14.
• In a Warning Letter dated August 8, 2023, CTP informed Respondent that the new tobacco products that Respondent sells and/or distributes are adulterated and misbranded because they lack the required FDA marketing authorization. The Warning Letter also stated that if Respondent failed to correct these violations, regulatory action by the FDA or a civil money penalty action could occur and that it is Respondent's responsibility to comply with the law. Complaint ¶¶ 20-21.  
• On December 7, 2023, an FDA-commissioned inspector conducted an inspection of Respondent's establishment. During this inspection, the inspector observed an Elfbar Clear ENDS product for sale at Respondent's establishment. Complaint¶ 15 .
• Respondent's ENDS product is a "new tobacco product" because it was not commercially marketed in the United States as of February 15, 2007. Complaint ¶ 16.
• Respondent's ENDS product does not have a Marketing Granted Order (MGO) in effect. Complaint ¶ 17.
• Neither a substantially equivalent (SE) report nor an abbreviated report has been submitted for Respondent's ENDS product. Complaint ¶ 18.

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These facts establish that Respondent is liable under the Act. The Act prohibits the receipt in interstate commerce of any tobacco product that is adulterated or misbranded and the delivery or proffered delivery of any tobacco product that is adulterated or misbranded for pay or otherwise. 21 U.S.C. § 331(c); see also 21 U.S.C. § 321(b).  Premarket authorization from the FDA is required for all "new tobacco products."  21 U.S.C. § 387j(a)(2)(A). A "new tobacco product" is defined as any tobacco product that was not commercially marketed in the United States as of February 15, 2007, or any modification of a tobacco product where the modified product was commercially marketed in the United States after February 15, 2007. 21 U.S.C. § 387j(a)(1). A "new tobacco product" is required to have premarket review with a Marketing Granted Order (MGO) unless it has a substantial equivalence or substantial equivalence exemption order (found-exempt order) in effect for such product. 21 U.S.C. §§ 387j(a)(2)(A), 387e(j)(3)(A). A new tobacco product is adulterated if it has not obtained the required premarket authorization. 21 U.S.C. § 387b(6)(A). A new tobacco product for which a "notice or other information respecting it was not provided as required" under the substantial equivalence or substantial equivalence pathway is misbranded. 21 U.S.C. § 387c(a)(6).

Taking the above alleged facts as true, Respondent violated the prohibition against receiving and offering for sale a new tobacco product that was adulterated and misbranded. 21 U.S.C. § 331(c). On December 7, 2023, Respondent offered for sale an ENDS product that was adulterated because it lacked the required FDA marketing authorization and was not exempt from this requirement. 21 U.S.C. §§ 387j(a)(2)(A), 387e(j)(3)(A). Under 21 U.S.C. § 387c(a)(6), Respondent's ENDS product is also misbranded because it has no substantially equivalent determination as required by 21 U.S.C. § 387e(j). Therefore, Respondent's actions constitute violations of law that merit a civil money penalty.

Order

For these reasons, I enter default judgment in the amount of $20,678 against Respondent, Zafri LLC d/b/a Pasha's Collection 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.