Merrimack Village Variety, LLC d/b/a Reeds Ferry Market, DAB TB8495 (2024)

INITIAL DECISION

The Food and Drug Administration’s Center for Tobacco Products (CTP) seeks a $19,192 civil money penalty against Respondent, Merrimack Village Variety, LLC d/b/a Reeds Ferry Market, for violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq. Specifically, CTP seeks to impose a $19,192 civil money penalty against Respondent for impermissibly receiving 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. For the reasons discussed below, I find Respondent liable for the violations alleged, and conclude that a CMP of $19,192 is not appropriate.

I.     Background

CTP began this case by serving an administrative complaint (Complaint) on Respondent, Merrimack Village Variety, LLC d/b/a Reeds Ferry Market, at its establishment located at 601 Daniel Webster Highway, Merrimack, New Hampshire 03054, and by filing a copy

Page 2

of the complaint with the Food and Drug Administration’s (FDA) Division of Dockets Management.

Respondent timely requested a hearing by filing an Answer. On October 20, 2023, I issued an Amended Acknowledgement and Pre-Hearing Order (APHO) in which I set a schedule of prehearing exchanges and deadlines for submissions.

On December 15, 2023, CTP filed a Motion to Compel Discovery asserting that Respondent did not respond to its discovery request as required by my APHO and regulations. Civil Remedies Division (CRD) Docket (Dkt.) Entry No. 8. Also, on December 15, 2023, CTP filed a Motion to Extend Deadlines.

On December 18, 2023, I issued an Order extending the parties’ pre-hearing exchange deadlines and set a deadline for January 2, 2024, for Respondent to respond to CTP’s Motion to Compel Discovery. On December 18, 2023, Respondent filed a Motion to Extend Time to Produce Documents (Respondent’s Motion for Extension), stating it was focused on reaching an amicable resolution and preparing documents in efforts to preserve its resources. Respondent’s Motion for Extension, CRD Dkt. Entry No. 11 at 1. On December 19, 2023, a letter by my direction issued, giving both parties until December 27, 2023, to advise whether Respondent’s motion was unopposed. On December 21, 2023, CTP filed a Response to the By Direction Letter, stating it does not object to Respondent’s Motion for Extension to respond to “CTP’s November 9, 2023 Request for Production of Documents…” Later that same day, I issued an Order granting Respondent’s motion and extending the deadline to respond to CTP’s November 9, 2023, request for documents to January 20, 2024.

On January 2, 2024, Respondent filed a Notice of No Objection to providing CTP with the requested documents. On January 19, 2024, Respondent filed its Response to Request for Documents. On January 23, 2024, I issued an Order finding CTP’s Motion to Compel documents moot by Respondent providing the requested documents.

CTP timely filed its pre-hearing exchange, containing a pre-hearing brief (CTP’s Br.), a list of proposed witnesses and exhibits, and nine proposed exhibits (CTP Exs. 1-9), including the written direct testimony of two proposed witnesses, CTP’s Senior Regulatory Counsel Loretta Chi (CTP Ex. 1) and Inspector Michelle Soares (CTP Ex. 2). Respondent timely filed its pre-hearing exchange, consisting of a pre-hearing brief, a list

Page 3

of proposed witnesses and exhibits ¹, and five proposed exhibits (R. Exs. 1-5)², including the written testimony of the Managing Member of Reeds Ferry Market, Sam Safa (R. Ex. 1).

On May 1, 2024, I held a pre-hearing conference in this case. During the pre-hearing conference, I explained that the purpose of a hearing was to allow for the cross‑examination of any witnesses who have provided sworn testimony. Respondent declined to cross-examine either of CTP’s proposed witnesses. The parties agreed to waive a formal hearing and agreed to proceed to a decision based on the written record.

Both parties were given the opportunity to object to the other’s proposed exhibits. Once the issue of duplicate exhibits was resolved, neither party objected to any of the exhibits. Accordingly, CTP’s Exhibits 1-9 and Respondent’s Exhibits 1-2, absent objections, are admitted into evidence. The parties were given the opportunity to submit final briefs. Neither party filed final briefs. The administrative record is now complete, and this matter is ready for a decision.

II.     Issues

• Whether Respondent violated 21 U.S.C. § 331(c) of the Act, as alleged in the Complaint; and if so,
• Whether the CMP of $19,192 that CTP seeks is an appropriate amount in violation of 21 U.S.C. § 333(f)(9); and if so,
• Whether the $19,192 civil money penalty amount sought by CTP should be reduced, considering any aggravating and mitigating factors.

Page 4

III.     Analysis, Findings of Fact, and Conclusions of Law

To prevail, CTP must prove Respondent’s liability by a preponderance of the evidence. The United States Supreme Court has described the preponderance of the evidence standard as requiring that the trier-of-fact believe that the existence of a fact is more probable than not before finding in favor of the party that had the burden to persuade the judge of the fact’s existence. In re Winship, 397 U.S. 358, 371-72 (1970); Concrete Pipe and Prods. of Cal., Inc. v. Constr. Laborers, 508 U.S. 602, 622 (1993).

CTP has the burden to prove Respondent’s liability and appropriateness of the penalty by a preponderance of the evidence. 21 C.F.R. § 17.33(b). Likewise, Respondent has the burden to prove any affirmative defenses and any mitigating factors by a preponderance of the evidence. 21 C.F.R. § 17.33(c).

CTP seeks a civil money penalty against Respondent pursuant to the authority conferred by the Act and implementing regulations at Part 21 of the Code of Federal Regulations. The Act prohibits the receipt in interstate commerce of any tobacco product that is adulterated or misbranded, and the delivery or proffered delivery thereof for pay or otherwise. 21 U.S.C. § 331(c). A tobacco product is adulterated if it has not obtained the required premarket authorization. 21 U.S.C. § 387b(6)(A). Under 21 U.S.C. § 387j(a)(2)(A), premarket authorization is required for a “new tobacco product.” 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 exempt from this premarket authorization requirement only if there is a substantial equivalence (SE) or a found exempt order (found-exempt order) in effect for such product. 21 U.S.C. §§ 387j(a)(2)(A), 387e(j)(3)(A). Absent an approval from the FDA, the new tobacco products are considered adulterated and misbranded if they lack the required FDA marketing authorization order (Marketing Granted Order or MGO), substantial equivalence order, or an exemption order.  21 U.S.C. §§ 387b(6) and 387c(6).

The FDA, through CTP, has the authority to seek civil money penalties from any person who violates the Act’s requirements as they relate to the sale of tobacco products. 21 U.S.C. § 333(f)(9)(A). Retailers who violate a requirement of the Act that relates to tobacco products may incur a civil money penalty up to the maximum amounts provided for by law, $19,192 for each such violation, not to exceed $1,279,448 for all violations adjudicated in a single proceeding. 21 U.S.C. § 333(f)(9)(A); 21 C.F.R. § 17.2; 45 C.F.R. § 102.3.

Page 5

As detailed below, I find that based on the evidence of record, CTP’s imposed civil money penalty amount of $19,192, for Respondent’s violation on August 20, 2023, is inappropriate and should be reduced by $6,192.

1. Violation of 21 U.S.C. § 331(c) of the Act

i.    Respondent’s ENDS Tobacco Product

In a warning letter dated June 13, 2023, CTP notified Respondent that on May 27, 2023, an inspector representing the FDA completed an inspection of Respondent’s facility and found Respondent in violation of federal tobacco laws and regulations. Specifically, Respondent’s facility was in violation because it offered for sale electronic nicotine delivery system (ENDS) products that lack the required marketing authorization. CTP Ex. 7 at 1. The warning letter further explained that the violation stemmed from Respondent’s offering for sale Elfbar Gumi and Elfbar Passion Fruit Orange Guava ENDS products. The warning letter also directed Respondent to take prompt action to address the violation. Id. at 3.

CTP’s case against Respondent rests heavily on the testimony of CTP’s Senior Regulatory Counsel in the Office of Compliance and Enforcement, Loretta Chi and Inspector Michelle M. Soares. Inspector Soares is an FDA-commissioned officer with the state of New Hampshire, whose duties include performing retailer’s compliance with Advertising and Labeling (A&L) inspections. Soares Declaration, CRD Dkt. Entry No. 18c at 1. Both parties agree that Respondent does business under the name, Reeds Ferry Market, and is located at 601 Daniel Webster Highway, Merrimack, New Hampshire 03054. Complaint, CRD Dkt. Entry No. 1 at 3, ¶ 13; see also CTP’s Informal Brief, CRD Dkt. Entry No. 18 at 2-3; Answer, CRD Dkt. Entry No. 4 at 1.

CTP alleges that on August 20, 2023, Inspector Michelle M. Soares conducted an inspection at Respondent’s establishment located at 601 Daniel Webster Highway, Merrimack, New Hampshire 03054. Complaint, CRD Dkt. Entry No. 1 at 4,
¶ 15; see also Soares Declaration, CTP Ex. 2 at 2; CRD Dkt. Entry No. 18c at 2, ¶ 4. Paragraph 15 of the Complaint states, “On August 20, 2023, an FDA-commissioned inspector conducted an inspection of Reeds Ferry Market. During this inspection, the inspector observed an Elfbar Mango Peach Apricot ENDS product for sale at Respondent’s establishment.” Complaint, CRD Dkt. Entry No. 1 at 4, ¶ 15. Inspector Soares issued Sam Safa, the manager of Reeds Ferry Market, an Inspection Notice at the onset of the inspection. See CRD Dkt. Entry Nos. 18c, 19. Mr. Safa testified that he acknowledges that an inspection occurred on August 20, 2023, by stating “I left one unit of Elfbar on display which went unnoticed until the August 20, 2023 inspection occurred.” Safa Declaration, R Ex. at 3; CRD Dkt. Entry No. 22b at 3, ¶ 14. Mr. Safa further testified, “I have substantially complied with the June 13, 2023 warning letter and removed approximately three (3) dozen Elfbar products from display for sale.

Page 6

Therefore, Respondent does not dispute that Inspector Soares conducted an inspection of Respondent’s establishment on August 20, 2023, but rejects the inspector’s interpretation of what was observed during the inspection.

Based on the evidence provided by CTP, Respondent receives tobacco products, including an Elfbar Mango Peach Apricot ENDS product, in interstate commerce. Complaint, CRD Dkt. Entry No. 1 at 3, ¶ 14. Respondent disputes whether it engaged in interstate commerce when it purchased and received the Elfbar Mango Peach Apricot ENDS product. Respondent contends that it did not purchase the Elfbar Mango Peach Apricot ENDS product directly from the manufacturer, but purchased the product from a third party. R.’s Informal Brief Statement of Defenses, CRD Dkt. Entry No. 19 at 3, ¶ 11. According to Respondent, a third-party imports the tobacco product from outside the United States, transports it to a third-party wholesaler, who pays the taxes on the tobacco product, who then gives the tobacco products to a third-party distributor who delivers the product to retailers like Respondent. Id. Respondent maintains that these are mitigating circumstances that should be taken into consideration. Thus, Respondent argues that it did not intentionally “deliver or proffer delivery of an adulterated or misbranded tobacco product for pay or otherwise after shipment and receipt of said product in ‘interstate commerce’.” Safa Declaration, CRD Dkt. Entry No. 22b at 4-5, ¶ 19; R Ex. 1 at 4-5.

CTP correctly addresses Respondent’s assertion. CTP reasoned:  

“Interstate commerce” means, among other things, “commerce between any State or Territory and any place outside thereof.” 21 U.S.C. § 321(b). The Elfbar Mango Peach Apricot ENDS product observed for sale during the August 20, 2023 inspection was manufactured in China, see Chi Decl., CTP Ex. 1 at 3, ¶ 9; August 2023 Photographs of Elfbar Mango Peach Apricot ENDS Product, CTP Ex. 6 (including photograph of label showing manufacture in China), which is outside of the state in which Respondent operates. Thus, the Elfbar Mango Peach Apricot ENDS product traveled in interstate commerce before the Respondent delivered or proffered delivery of such tobacco products for pay or otherwise.

CTP’s Informal Brief, CRD Dkt. Entry No. 18 at 4.

I note, in United States v. Sullivan, the Court addressed a similar issue, even though, the case was dealing with a manufacturer and not a retailer, the issue surrounding “interstate commerce” is relevant. The Supreme Court held, that the interpretation of the Act aids to extend coverage to each component, article, product that goes through interstate commerce until it reaches the desired consumer.

But the language used by Congress broadly and unqualifiedly prohibits misbranding articles held for sale after shipment in interstate commerce,

Page 7

without regard to how long after the shipment the misbranding occurred, how many intrastate sales had intervened, or who had received the articles at the end of the interstate shipment.

United States v. Sullivan, 332 U.S. 689 (1948).

As in Sullivan, the Respondent disputes whether its purchase denotes interstate commerce when it acquired the product from an instate party. In the case before me, Respondent was the desired consumer. The amount of stops taken prior to arriving at Respondent’s establishment does not shift the status of the product nor does it transfer Respondent’s responsibility. The unit of Elfbar Peach Mango Apricot ENDS product present during the inspection on August 20, 2023, was received via interstate commerce.

Inspector Soares testified that she conducted an A&L compliance check inspection of Respondent’s establishment, located at 601 Daniel Webster Highway, Merrimack, New Hampshire 03054, on August 20, 2023, at approximately 11:31 AM, during which she observed FDA-regulated tobacco products on display, including an Elfbar Mango Peach Apricot ENDS product, available for sale at Respondent’s establishment. Soares Declaration, CRD Dkt. Entry No. 18c at 2; CTP Ex. 2 at 2.

In Ms. Chi’s testimony, she confirmed that the Elfbar Mango Peach Apricot ENDS product, observed during the August 20, 2023, inspection at Respondent’s establishment, was manufactured by Guangdong Qisitech Co., Ltd. Chi Declaration, CRD Dkt. Entry No. 18b at 2-3, ¶¶ 6, 9; CTP Ex. 1 at 2-3. During Ms. Chi’s evaluation, she “did not find any registered establishments containing the name ‘Elfbar Mango Peach Apricot’, or any listed product containing the name ‘Elfbar Mango Peach Apricot’.” Id. at 2, ¶ 6. While inspecting Respondent’s establishment, Inspector Soares took several photographs of the tobacco products, one of which captures the label showing, “Made in China.” Photographs of Elfbar Mango Peach Apricot ENDS Product, CRD Dkt. Entry No. 18g at 2. According to 21 U.S.C. § 387e(h), every foreign country establishment engaged in manufacturing tobacco products is required to register its establishment. Based on Ms. Chi’s review of the FDA databases, the product was not registered with the FDA as required by regulation. Further, Ms. Chi confirmed that there is no FDA record of the Elfbar Mango Peach Apricot ENDS product ever being commercially marketed in the United States as of February 15, 2007, nor a record of this product having an FDA premarket authorization order in effect as required by 21 U.S.C. § 387jI(1)(A)(i). Chi Declaration, CRD Dkt. Entry No. 18b at 3 ¶¶ 11-13; CTP Ex. 1 at 3. Therefore, this product is adulterated under 21 U.S.C. § 387b(6)(A).

In addition, after reviewing the FDA databases, Ms. Chi testified:  

[I] can confirm that on August 20, 2023, the day on which FDA observed

Page 8

an Elfbar Mango Peach Apricot ENDS product at Respondent’s establishment FDA had no record of Respondent submitting a report requesting a Substantial Equivalence Order under 21 U.S.C. § 387e(j) and no record of the products having a Substantial Equivalence Order in effect under 21 U.S.C. § 387j(a)(2)(A)(i). I can also confirm that on August 20, 2023, Respondent had not submitted an abbreviated report requesting a Found-Exempt Order under 21 U.S.C. § 387e(j)(1), and Respondent did not have a Found-Exempt Order in effect under 21 U.S.C. § 387e(j)(3)(A).

Chi Declaration, CRD Dkt. Entry No. 18b at 4, ¶ 1CTP Ex. 1 at 4.

Thus, this product is misbranded under 21 U.S.C. § 387c(a)(6) because a notice or other information regarding this product was not provided as required by 21 U.S.C. § 387e(j).

Respondent also questions whether it intentionally delivered or proffered delivery of an adulterated or misbranded tobacco product for pay or otherwise. R.’s Informal Brief Statement of Defenses, CRD Dkt. Entry No. 22 at 4, ¶ 12. I will now turn to discuss this.

ii.    Sale of Adulterated and Misbranded Tobacco Product

Inspector Soares noted and photographed during the August 20, 2023 inspection of Reeds Ferry Market that the “establishment signage was advertising Elfbar Vape.” TIMS Report, CRD Dkt. Entry No. 18e at 1; CTP Ex. 4 at 1; Photographs of Elfbar Peach Mango Apricot ENDS Product, CRD Dkt. Entry No. 18g at 3; CTP Ex. 6 at 3; Soares Declaration, CRD Dkt. Entry No. 18c at 2; CTP Ex. 2 at 2. Based on this signage alone, Reeds Ferry Market is purporting to its customers that it not only carries Elfbar products in its inventory, but that the Elfbar products are currently for sale. Respondent argues that after receiving the June 2023 Warning Letter, it “took immediate action to remove the products from the display and for sale….” Safa Declaration, CRD Dkt. Entry No. 22b at 5, ¶ 22; Respondent Ex. 1 at 5. Respondent contends that “[t]he display of the product unit was made in error.” Id. at 4, ¶ 18. Moreover, Respondent maintains its position that it “did not intentionally offer Elfbar for sale after receiving the warning letter” and “no sales of Elfbar occurred since June 2023.” See Safa Declaration, CRD Dkt. Entry No. 22b at 5, ¶ 20; R Ex. 1 at 5; see also R.’s Informal Brief Statement of Defenses, CRD Dkt. Entry No. 22 at 4, ¶ 15. Respondent does not dispute that prior to receiving the June 2023 Warning Letter, it was in violation of 21 U.S.C. § 331(c) when it held an Elfbar Mango Peach Apricot ENDS product for sale at its Reeds Ferry Market establishment on August 20, 2023. Id. at 2, ¶ 5. In essence, Respondent’s defense, is that it was not holding the tobacco product for sale on August 20, 2023, because it believed it had “removed all of the Elfbar products from display for sale” and it was unaware of the one unit left behind after it removed “a total of three dozen units.” Id. Respondent also defends that the Elfbar Peach Mango Apricot ENDS product was not “misbranded” because Respondent displayed the tobacco products “‘as is’ from the distributor.” Id. at 3, ¶ 11.

Page 9

Based on the photograph showing the display of tobacco products at Respondent’s establishment, it is understandable that Respondent may argue that the Elfbar Mango Peach Apricot ENDS product is indistinguishable from the other tobacco products. Photographs of Elfbar Peach Mango Apricot ENDS Product, CRD Dkt. Entry No. 18g at 3. I can also understand that a unit could be inadvertently left behind when quickly pulling three (3) dozen units from its shelves. However, Respondent’s argument is diminished by the fact that it failed to remove the signage advertising the sale of the Elfbar product. One of the photographs taken by Inspector Soares during the August 20, 2023 inspection, clearly shows two neon-colored signs with “ELF BAR $19.99” handwritten on each, hanging on the shelf that contained the single unit of Elfbar Peach Mango Apricot ENDS product. Id. Respondent’s assertions that it immediately complied with CTP’s June 13, 2023 directive is undermined by the fact that for two months Respondent did not remove the signs that advertised the very product noted in the Warning Letter. Respondent had approximately 60 days, between the June 13, 2023 Warning Letter and the date of the August 20, 2023 inspection, to remove the signage and to do a thorough check of its tobacco products inventory. If Respondent had conducted a check, it would have discovered the unit of Elfbar Peach Mango Apricot ENDS product. In not doing so, Respondent continued to purport itself as a seller of the Elfbar Peach Mango Apricot ENDS product on display.

Also, Respondent’s interpretation of misbranded is limited; a tobacco product can become misbranded even if the product is not tampered with but by having it for sale when it does not have the proper authorization, as is the case here.

Based on the preponderance of evidence, it is reasonable that Respondent had no intention of selling Elfbar products after receiving the June 2023 Warning Letter, and that Respondent believed that it removed all the Elfbar products from its display and sales floor. However, it is unlikely that Respondent did not see the Elfbar signage with the dollar amounts hanging on its display case for approximately 60 days. Considering no sales of Elfbar products were made after receiving the warning letter in June 2023, it is reasonable that Respondent was not intentionally holding the Elfbar Peach Mango Apricot ENDS product for sale during the August 20, 2023 inspection. However, the regulations do not consider the mind state of the retailer but look to the actions. Based on the actions of Respondent on August 20, 2023, that involve Respondent’s having a unit of Elfbar Peach Mango Apricot ENDS product on its display shelf, and having two signs displaying the $19.99 sale price for Elfbar, Respondent is in violation of 21 U.S.C.
§ 331(c).

During Mr. Safa’s testimony, and in Respondent’s Brief, Respondent questioned why CTP permitted products like the Elfbar product to enter the United States if it cannot be held for sale. See Safa Declaration, CRD Dkt. Entry No. 22b at 3, ¶ 14; see also R.’s Informal Brief Statement of Defenses, CRD Dkt. Entry No. 22 at 3, ¶ 8. Products like the one in question before me, are permitted into the United States because CTP, through

Page 10

FDA, has in place an authorization process that creates pathways for retailers to market and sell tobacco products in their establishments.

Taking the above alleged facts as true, I find that Respondent’s receipt of the new tobacco product—Elfbar Mango Peach Apricot ENDS product which failed to have either an SE report, or an abbreviated report, and did not have an effective MGO in interstate commerce caused the new tobacco product to become adulterated and misbranded while it was held for sale in Respondent’s establishment. 21 U.S.C. § 387b(6)(A); 21 U.S.C. § 387c(a)(6). Therefore, Respondent is in violation of 21 U.S.C. § 331(c) for the Elfbar Mango Peach Apricot ENDS product held for sale at its Reeds Ferry Market establishment on August 20, 2023. Thus, Respondent’s actions constitute a violation of law that merits a civil money penalty.

2. Civil Money Penalty

In its complaint, CTP sought the maximum penalty amount for a single violation, $19,192, against Respondent. Complaint, CRD Dkt. Entry No. 1, at ¶¶ 1, 12. CTP, may seek civil money penalties from any person who violates the Act’s requirements as they relate to the sale of regulated tobacco products. 21 U.S.C. § 333(f)(9). Accordingly, I now turn to whether a $19,192 civil money penalty is appropriate.

1. Determining Amount of Civil Money Penalty

When determining the amount of a civil money penalty, I am required to consider “the nature, circumstances, extent, and gravity of the violation or violations and, with respect to the violator, ability to pay, effect on ability to continue to do business, any history of prior such violations, the degree of culpability, and such other matters as justice may require.” 21 U.S.C. § 333(f)(5)(B); see also 21 C.F.R. § 17.34.

1. Nature, Circumstances, Extent, and Gravity of the Violations

The Family Smoking Prevention and Tobacco Control Act was enacted for the purpose of authorizing regulation of tobacco products for the “protection of the public health.” 21 USC 387f(d). Respondent was in the business of selling this highly regulated and potentially dangerous product. It received a written warning on June 13, 2023, that the “FDA has determined that your establishment markets new tobacco products lacking premarket authorization in the United States...” which is a prohibited act under 21 U.S.C. 331(c). June 2023 Warning Letter, CRD Dkt. Entry No. 18h at 3. Yet, less than two months after receiving this warning that it was in violation of federal law, Respondent continued to market Elfbar products with signage stating, “Elfbar $19.99” and having on its display shelf a unit of Elfbar Peach Mango Apricot ENDS product. As discussed above, Respondent argues it was unaware of the one unit on the display shelf in its establishment. Yet, Respondent is solely responsible for ensuring all the tobacco products

Page 11

in its possession comply with tobacco regulations. Whether Respondent was aware or unaware is under Respondent’s control. The Act was designed to protect consumers from dangerous products that lack the premarketing authorization required under the Federal Food, Drug, and Cosmetic Act. Therefore, the CMP appropriately sought by CTP cannot be waived solely because Respondent did not know a unit of Elfbar Mango Peach Apricot ENDS product was still on display for sale in its establishment.

2. Respondent’s Ability to Pay and Effect on Respondent’s Ability to Continue to Do Business

I have considered Respondent’s arguments that the proposed civil money penalty is disproportionate in comparison to the purchase price of the product, that the establishment is well respected in its community for the last twenty years, and it has no prior violations with FDA. See Safa Declaration, CRD Dkt. Entry No. 22b at 3, ¶¶ 13-14; see also R.’s Informal Brief Statement of Defenses, CRD Dkt. Entry No. 22 at 3, ¶ 15; at 4, ¶ 19. Respondent also states that this penalty will interfere with how he supports his family. Id. at 5, ¶ 23; Id. at 5, ¶ 18. Respondent has provided copies of its Tax Returns and Income Statements to support its arguments. CTP Ex. 9, CRD Dkt. Entry 18j; R. Ex. 2, CRD Dkt. Entry 22f. However, CTP argues, “Respondent’s 2023 Income Statement shows Respondent took in nearly $1 million in revenues for tobacco products, and had a net operating income of over $65,000, more than three times the penalty sought here….” and “[i]n order to establish inability to pay the penalty, Respondent should provide evidence as to assets, for example, “proof as to its cash reserves, its credit worthiness, or other potential sources of capital, all of which are highly relevant to the issue of ability to pay a penalty.” See CTP’s Informal Brief, CRD Dkt. Entry No. 18 at 10. Considering all the documentary evidence, I do not find Respondent’s arguments persuasive. Accordingly, I cannot find that Respondent has established an inability to pay.

When considering the impacts of the civil money penalty on Respondent’s ability to continue to do business, Respondent offered no argument. Respondent has not indicated that its establishment is at risk of closure or that its establishment cannot continue as is. Therefore, there is no apparent reason why Respondent could not continue to do business.

3. History of Prior Violations

There is no indication in the record of any prior violations of Section 331(c) resulting in a civil money penalty. However, Respondent received a warning letter dated June 13, 2023, advising that it was in violation of federal law for selling new tobacco products (Elfbar Gumi and Elfbar Passion Fruit Orange Guava ENDS products) without required premarketing authorization or exemption. June 2023 Warning Letter, CRD Dkt. Entry No. 18h. Outside of this warning letter, Respondent has apparently conducted business within its community for 20 years without incident with CTP.

Page 12

4. Degree of Culpability

Respondent contends that it had ceased selling misbranded and adulterated products.
Respondent maintains that during the last inspection on August 20, 2023, he was not aware that the Elfbar Peach Mango Apricot ENDS product was in the display case in his establishment. Respondent further maintains that it quickly complied with the June 2023 Warning Letter and removed three (3) dozen products of Elfbar from its display shelf. It is Respondent’s responsibility to ensure that it complies with the regulations and that it stays abreast of all regulations that impact its business.

As stated above, Respondent argues that it did not receive the product via interstate commerce, that FDA should not allow the products to enter the United States, and that at the time of the inspection, the Elfbar Peach Mango Apricot ENDS product was not being held for sale because Respondent was not aware it was there. SeeSafa Declaration; CRD Dkt. Entry No. 22b; R.’s Informal Brief Statement of Defenses, CRD Dkt. Entry No. 22. These arguments are insufficient. Respondent received a warning letter which contained numerous resources to aid in its understanding of the law; one of which was a list of approved products. Respondent could also have accessed the FDA website and sought out information on how to ensure its business complied with the regulations. Based on the evidence, Respondent did not fully comply with the regulations after receiving the June 2023 Warning Letter.

As noted above, Respondent received written notice that it was in violation of federal law by selling “new tobacco products” without obtaining a marketing authorization order. June 2023 Warning Letter, CRD Dkt. Entry No. 18h. Respondent attempted to comply with the letter by removing approximately three (3) dozen units from its sales floor and what it believed at the time was the entirety of the tobacco products in violation. Safa Declaration; CRD Dkt. Entry No. 22b at 4, ¶ 19.

However, Respondent did not remove the sale signage for the Elfbar products. See Photographs of Elfbar Peach Mango Apricot ENDS Product, CRD Dkt. Entry No. 18g at 3. Respondent has repeatedly asserted that this was done in error and was a complete oversight on its part. See Safa Declaration; CRD Dkt. Entry No. 22b; R.’s Informal Brief Statement of Defenses, CRD Dkt. Entry No. 22. Respondent’s accountability and the action it took after receiving the June 2023 Warning Letter is noteworthy. Thus, I must find that this degree of responsibility merits a reduction in the civil money penalty.

5. Additional Mitigating Factors and Other Matters as Justice May Require

Respondent must prove any mitigating factors by a preponderance of the evidence. 21 C.F.R. § 17.33(c). Respondent has participated in this matter from its onset. Further, Respondent has provided, what it deemed, as sufficient evidence and testimony to

Page 13

support its position. These civil money penalties are in place to ensure retailers uphold the regulations that aid in keeping the American people safe. However, these tobacco regulations are not here to unjustly penalize retailers who made an earnest attempt to comply with the regulations. When a retailer earnestly tries to correct its wrongdoing, imposing the maximum civil money penalty for a single violation does not encourage compliance and accountability.

2. Penalty

Based on the foregoing reasoning, I find a penalty amount of $13,000 appropriate under 21 U.S.C. §§ 333(f)(5)(B) and 333(f)(9).

IV.     Conclusion

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $13,000 against Respondent, Merrimack Village Variety, LLC d/b/a Reeds Ferry Market, for its violation of the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 331(c), by receiving via interstate commerce adulterated and misbranded tobacco products and offering the products for sale in its establishment. Pursuant to 21 C.F.R. § 17.45(d), this order becomes final and binding upon both parties after 30 days of the date of its issuance.

Endnotes

¹  On February 15, 2024, Respondent filed its Informal Brief Statement of Defenses and a List of Pre-Hearing Witnesses and Exhibits. On March 13, 2024, Respondent filed another Informal Brief Statement of Defenses and another Pre-Hearing List of Witness and Exhibits. The documents filed on March 13, 2024, will be used in the decision.

²  During the May 1, 2024 pre-hearing conference, I addressed Respondent’s exhibits. During the discussions concerning exhibits, Respondent moved to withdraw its proposed exhibits marked R Ex B, R Ex C, and R Ex D, as they appeared to duplicate three of CTP’s proposed exhibits: CTP Ex. 6, CTP Ex. 7, and CTP Ex. 9. CTP confirmed, without objection, that the documents appeared to be duplications. I then informed Respondent, per my instructions, I would relabel Respondent’s proposed exhibits A and E as exhibits 1 and 2.