Nizamani Inc. d/b/a Crown Mart Food Store, DAB TB8481 (2024)

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

On February 21, 2024, the Center for Tobacco Products (CTP) began this matter by serving an administrative complaint on Respondent, Nizamani Inc. d/b/a Crown Mart Food Store , at 2301 Yorktown Street, Suite 100, Houston, Texas 77056, and by filing a copy of the complaint with the Food and Drug Administration’s (FDA) Division of Dockets Management. The complaint alleges that Crown Mart Food Store 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. § 301 et seq., and its implementing regulations, 21 C.F.R. pt. 1140.¹ CTP seeks a $12,794 civil

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money penalty against Respondent Crown Mart Food Store for at least seven² violations within a 48-month period.

Respondent filed an Answer to the complaint in this matter, but subsequently 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). 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 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. For the reasons stated below, CTP’s motion is granted. Accordingly, I strike Respondent’s Answer and issue this decision of default judgment pursuant to 21 C.F.R. § 17.35(c)(3).

I.     Procedural History

On February 21, 2024, CTP served the complaint on Respondent by United States Postal Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. Civil Remedies Division (CRD) Docket (Dkt.) Entry Nos. 1, 1b. On March 4, 2024, Respondent registered for the Departmental Appeals Board (DAB) E-File system and filed a timely Answer to CTP’s complaint. CRD Dkt. Entry No. 3.

On March 14, 2024, I issued an Acknowledgment and Pre-Hearing Order (APHO) acknowledging receipt of Respondent’s Answer. CRD Dkt. Entry No. 6. The APHO also established deadlines for the parties’ filings and exchanges, including a schedule for discovery.³ In the APHO, I directed that a party receiving a discovery request must

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provide the requested documents within 30 days of the request. Id. at 3, ¶ 4; see also 21 C.F.R. § 17.23(a). I also 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.

CRD Dkt. Entry No. 6 at 11, ¶ 21.

On April 8, 2024, CTP filed a Joint Status Report indicating that the parties had been unable to reach a settlement in this case, and that CTP remained willing to engage in settlement discussions, but, absent an executed settlement agreement, CTP intended to proceed to a hearing. CRD Dkt. Entry No. 7 at 1.

On May 14, 2024, CTP filed a Motion to Compel Discovery, asserting that Respondent had not responded to its discovery request as required by the APHO and the regulations. CRD Dkt. Entry No. 8 (Motion to Compel Discovery). On that same date, CTP also filed a Motion to Extend Deadlines requesting a 30-day extension of “any deadlines, including the June 3, 2024, due date for CTP’s pre-hearing exchange, . . . .” CRD Dkt. Entry No. 9 at 2. On May 16, 2024, I issued an Order advising Respondent that it had until May 31, 2024, to file a response to CTP’s Motion to Compel Discovery. CRD Dkt. Entry No. 10. I also warned that if Respondent failed to respond, “I may grant CTP’s motion in its entirety.” Id. at 2 (emphasis in original); see also CRD Dkt. Entry No. 6 ¶¶ 20-21; 21 C.F.R. § 17.32(c). In my Order, I also extended the pre-hearing exchange deadlines. CRD Dkt. Entry No. 10 at 2. Respondent failed to respond to CTP’s Motion to Compel Discovery, my May 16, 2024 Order, or otherwise comply with CTP’s Request for Production of Documents.

On June 4, 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 14, 2024, or submit a written response if Respondent did not have any documents to produce by the same date. I warned:  

Failure to comply with this Order may result in sanctions, including the issuance of an Initial Decision and Default

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Judgment finding Respondent liable for the violations listed in the Complaint . . . .

CRD Dkt. Entry No. 11 at 2 (emphasis in original).

In the same Order, I also extended the parties’ pre-hearing exchange deadlines. Id.at 3.

On June 17, 2024, CTP filed its Motion to Impose Sanctions. CRD Dkt. Entry No. 12. CTP argues that Respondent had not complied with the APHO, has not provided a response to CTP’s Request for Production of Documents, nor has Respondent complied with my June 4, 2024 Order Granting Motion to Compel Discovery. Id. 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 impose a $12,794 civil money penalty. Id. at 2. On June 17, 2024, CTP also filed a Motion to Stay Deadlines. CRD Dkt. Entry No. 13.

On June 25, 2024, I issued an Order giving Respondent until July 10, 2024, to file a response to CTP’s Motion to Impose Sanctions. CRD Dkt. Entry No. 14 at 2. In my June 25, 2024 Order, I warned Respondent that, “if it fails to timely respond, I may grant CTP’s motion in its entirety.” Id.(emphasis in original). The June 25, 2024 Order also stayed the parties’ pre-hearing exchange deadlines. Id.

To date, Respondent has not filed a response to CTP’s Motion to Impose Sanctions or the June 25, 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).

Respondent failed to comply with multiple judicial orders and directives. Specifically, Respondent has not complied with:  

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• 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 4, 2024 Order, when Respondent failed to submit documents responsive to CTP’s Request for Production of Documents by June 14, 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 16, 2024 Order; and
• Respondent did not file a response to CTP’s Motion to Impose Sanctions, as permitted by the regulations and my June 25, 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.

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 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 two of my orders, despite my explicit warnings that its failure could result in sanctions. CRD Dkt. Entry No. 11 at 2; CRD Dkt. Entry No. 6 ¶ 21. Respondent failed to respond to any of CTP’s motions. CRD Dkt. Entry Nos. 10 at 1-2; 14 at 2. Respondent’s repeated misconduct interfered with the speedy, orderly, or fair conduct of this proceeding. 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.”).

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.

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For the purposes of this decision, I assume the facts alleged in the complaint to be true. Specifically:  

• On August 18, 2023, CTP initiated a previous civil money penalty action, CRD Docket Number T-23-3371, FDA Docket Number FDA-2023-H-3501, against Respondent for at least five violations of the Act. CTP alleged those violations to have occurred at Respondent’s business establishment, 2301 Yorktown Street, Suite 100, Houston, Texas 77056, on August 6, 2022, December 9, 2022, and May 7, 2023;
• The previous action concluded when Respondent admitted the allegations contained in the Complaint issued by CTP and paid the agreed upon monetary penalty in settlement of that claim. Further, “Respondent expressly waived its right to contest such violations in subsequent actions”;
• An FDA-commissioned inspector conducted a subsequent inspection on November 11, 2023, at approximately 9:47 AM at Respondent’s business establishment located at 2301 Yorktown Street, Suite 100, Houston, Texas 77056. During this inspection, a person younger than 21 years of age was able to purchase an Esco Bars H2O Grape electronic nicotine delivery system (ENDS) product. 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.⁴

These facts establish Respondent Crown Mart Food Store’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 of the U.S. Department of Health and Human Services issued the regulations at 21 C.F.R. Part 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

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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 $12,794 civil money penalty is permissible under 21 C.F.R. § 17.2.

Order

For these reasons, I enter default judgment in the amount of $12,794 against Respondent, Nizamani Inc. d/b/a Crown Mart Food Store. 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 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).

²  The complaint alleges two violations on August 6, 2022, two violations on December 9, 2022, two violations on May 7, 2023, and two violations on November 11, 2023. 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).

³  Respondent’s Answer included a discovery request, requesting that discovery include “… all reports in which [the FDA-commissioned inspector] visited [Respondent’s] establishment with intent to initiate a sting operation and showed [Respondent’s] employees asking for identification and denying a sell to a minor” (Respondent’s Discovery Request). CRD Dkt. Entry No. 3. On March 8, 2024, CTP filed a Motion to Strike Respondent’s Request for Production of Documents, or in the alternative, for a Protective Order (CTP’s Motion to Strike). See CRD Dkt. Entry Nos. 5-5a. In the March 14, 2024 APHO, I determined that Respondent’s Discovery Request was premature, and established a schedule for discovery between the parties. See CRD Dkt. Entry No. 6 at 1-2. In the APHO, I also rendered CTP’s Motion to Strike Moot. Id.

⁴  The identification violations alleged by CTP on August 6, 2022, December 9, 2022, May 7, 2023, and November 11, 2023, 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.1.