Smokers Haven 3 LLC d/b/a Smoker’s Haven, DAB TB8497 (2024)

INITIAL DECISION

The Center for Tobacco Products (CTP), United States Food and Drug Administration (FDA), seeks a $19,192 civil money penalty against Respondent, Smokers Haven 3 LLC d/b/a Smoker’s Haven, for violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq. Specifically, CTP alleges that Respondent violated the Act by impermissibly receiving in interstate commerce an electronic nicotine delivery system (ENDS) product that lacked the required premarketing authorization and offering such product for sale. For the reasons discussed below, I find Respondent liable for the violations alleged, and conclude that a civil money penalty of $16,313 is appropriate.

I.     Background

CTP began this case by serving an administrative complaint (complaint) on Respondent at its establishment, located at 13592 River Road, Suite 4, Destrehan, Louisiana 70047, and by filing a copy of the complaint with FDA’s Division of Dockets Management. Civil Remedies Division (CRD) Docket (Dkt.) Entry No. 1, 1a-1b (Complaint, Cover

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Letter, and Proof of Service). On November 30, 2023, Respondent filed a motion for an extension of time to file an Answer. CRD Dkt. Entry Nos. 3, 4 (Email and Motion for Extension). I found good cause for this extension on December 7, 2023, and issued an order granting the 30-day extension. CRD Dkt. Entry No. 5 (Order Granting Motion for Extension). On December 20, 2023, Respondent timely requested a hearing by filing an Answer. CRD Dkt. Entry Nos. 6, 7 (Answer). On December 21, 2023, I issued an Acknowledgement and Pre-Hearing Order (APHO) in which I set a schedule of prehearing exchanges and deadlines for submissions. CRD Dkt. Entry No. 8 (APHO).

On March 11, 2024, CTP timely filed its prehearing exchange. The prehearing exchange consisted of a pre-hearing brief, a list of proposed witnesses and exhibits, and 8 proposed exhibits (CTP Exs. 1-8), including the written direct testimony of two proposed witnesses, James Bowling, Deputy Division Director, Office of Compliance and Enforcement, CTP, FDA (CTP Ex. 1) and Rosa Alexander, an FDA-commissioned officer with the state of Louisiana (CTP Ex. 2). CRD Dkt. Entry Nos. 10, 10a-10i. Respondent did not submit any exhibits or written direct testimony.

On April 22, 2024, I held a telephone pre-hearing conference in this case. During the pre-hearing conference, Respondent raised no objection to the admission of Complainant’s proffered exhibits. As a result, I admitted into evidence CTP Exs. 1-8. Also, 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 proceed to a decision based on the written record. See CRD Dk. Entry No. 14 (Post Prehearing Conference Order).

The parties were given the opportunity to submit final briefs. On May 20, 2024, Respondent timely filed its final brief (R. Brief). CRD Dkt. Entry Nos. 16, 17. CTP did not file a final brief. Instead, on May 24, 2024, CTP filed a Motion to Exclude Evidence not Exchanged in Accordance with C.F.R. §§ 17.25 and 17.37(b) (CTP’s Motion to Exclude). CRD Dkt. Entry No. 18. On June 20, 2024, I denied CTP’s Motion to Exclude Respondent’s final brief. CRD Dkt. Entry No. 20. The administrative record is now complete and this matter is ready for a decision on the record.

II.     Issues

A. Whether as alleged in the Complaint, Respondent received in interstate commerce an ENDS product that lacked premarketing authorization required under the Act, and offered such product for sale on August 25, 2023, in violation of 21 U.S.C. § 331(c); and if so,

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B. Whether the $19,192 civil money penalty amount sought by CTP is appropriate, considering any aggravating and mitigating factors.

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

In order 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). Respondent has the burden to prove any affirmative defenses and any mitigating factors likewise 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. 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 or a 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, substantial equivalence order, or an exemption order.  21 U.S.C. §§ 387b(6), 387c(6).

As detailed below, I find that based on the evidence of record, on August 25, 2023, Respondent’s establishment received in interstate commerce, and had for sale, adulterated and misbranded tobacco products, including an Elfbar Crazi Berry ENDS product, in violation of 21 U.S.C. § 331(c).

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

1. Respondent’s ENDS Tobacco Products

In its Complaint, CTP alleges that Respondent does business under the name of Smoker’s Haven, located at 13592 River Road, Suite 4, Destrehan, Louisiana 70047. CRD Dkt. Entry No. 1 ¶ 13; see also CRD Dkt. Entry No. 10 at 3. In its Answer, Respondent does not specifically deny this allegation, yet Respondent identifies its address as 13592 River Road, Unit 4, Destrehan, Louisiana 70047. CRD Dkt. Entry No. 7. Since Respondent did not specifically deny this allegation, it is deemed admitted. 21 C.F.R. § 17.9(b)(1). In its Complaint, CTP alleges that on August 25, 2023, Inspector Rosa Alexander conducted an inspection at Respondent’s establishment located at 13592 River Road, Suite 4, Destrehan, Louisiana 70047. CRD Dkt. Entry No. 1 ¶ 13; CRD Dkt. Entry 10c,
¶ 5 (Alexander Declaration). Respondent does not dispute that Inspector Alexander conducted an inspection of Respondent’s establishment on August 25, 2023. CRD Dkt. Entry No. 16 at 1.

The record is clear that the Elfbar Crazi Berry ENDS product observed and photographed during the inspection on August 25, 2023, traveled in interstate commerce. CTP has established that the Elfbar Crazi Berry ENDS product observed during the August 25, 2023, was manufactured in China, outside the state of which Respondent’s establishment is located, stating that “the ENDS products previously traveled in interstate commerce before the Respondent’s receipt and delivery or proffered delivery of such tobacco products for pay or otherwise.” CRD Dkt. Entry No. 10 at 4; CRD Dkt. Entry No. 10b, ¶¶ 7-10 (Bowling Declaration); CRD Dkt. Entry No. 10f (Photographs of Elfbar Crazi Berry ENDS Product). Moreso, Mr. Bowling confirmed that the China manufacturer of the Elfbar Berry ENDS product, “does not have any registered tobacco production facilities in the state of Louisiana.” CRD Dkt. Entry No. 10b, ¶ 10.

In its Brief, Respondent admits that the ENDS product it held for sale on August 25, 2023, was purchased from China. R’s Brief, CRD Dkt. Entry No. 16 at 1. Respondent has not denied purchasing ENDS products from a China manufacturer, nor denied selling said products in its establishment during the August 25, 2023 inspection. Thus, the issue at hand is not whether Respondent received in interstate commerce an ENDS product in which it sold at its establishment but whether this product was adulterated and/or misbranded at the time of the inspection on August 25, 2023.

2. Sale of an Adulterated and/or Misbranded Tobacco Product

 CTP’s case against Respondent rests on the testimony of Deputy Division Director James Bowling and Inspector Rosa Alexander. Inspector Alexander is an FDA-commissioned officer with the state of Louisiana, whose duties include performing tobacco compliance inspections. CRD Dkt. Entry No. 10c,¶ 3. Inspector Alexander

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testified that she conducted a compliance check inspection of Respondent’s establishment, located at 13592 River Road, Suite 4, Destrehan, Louisiana 70047, on August 25, 2023, at approximately 10:16 AM, during which she observed FDA-regulated tobacco products, including an Elfbar Crazi Berry ENDS product, available for sale at Respondent’s establishment. Id. at ¶¶ 5, 7.

In Mr. Bowling’s testimony, he confirmed that the Elfbar Crazi Berry ENDS product, observed during the August 25, 2023 inspection at Respondent’s establishment, was manufactured by Guangdong Qisitech Co., Ltd. CRD Dkt. Entry No. 10b, ¶ 7. During Mr. Bowling’s evaluation, he “did not find any registered manufacturers containing the name ‘Elfbar’, in Louisiana or elsewhere in the United States…” Id., ¶ 6. While inspecting Respondent’s establishment, Inspector Alexander took several photographs of the tobacco products, one of which captures the label showing, “Made in China.” CRD Dkt. Entry No. 10f at 4. Further, Mr. Bowling confirmed that there is no FDA record of the Elfbar Crazi Berry ENDS product ever being commercially marketed in the United States as of February 15, 2007, nor a record of this product having an FDA marketing granted order in effect as required by 21 U.S.C. § 387j(c)(1)(A)(i). Bowling Declaration, CRD Dkt. Entry No. 10b, ¶¶ 12-13.

Mr. Bowling further testified:  

. . . [I] can confirm that on August 25, 2023, the day on which FDA observed the Elfbar Crazi Berry ENDS product being offered for sale at Smoker’s Haven, there was no record of this product having a substantial equivalence order in effect under 21 U.S.C. § 387j(a)(2)(A)(i), and the manufacturer of the Elfbar Crazi Berry ENDS product had not submitted a report requesting a substantial equivalence order under 21 U.S.C. § 387e(j). I can also confirm that on August 25, 2023, the Elfbar Crazi Berry ENDS product did not have a found-exempt order in effect under 21 U.S.C. § 387e(j)(3)(A) (SE pathway under 21 U.S.C. § 387j(a)(2)(A)(ii)), and that the manufacturer of the Elfbar Crazi Berry ENDS product had not submitted an abbreviated report requesting a found-exempt order for such product(s) under 21 U.S.C. § 387e(j)(1).

Id., ¶ 14.

In its final Brief, Respondent argues that it complied with the Warning Letter it received on June 8, 2023, by moving the identified Elfbar Beach Day and Esco Bars Cotton Candy ENDS products–from the sales floor to the back room of the establishment. CRD Dkt. Entry No. 16 at 1; see also CRD Dkt. Entry No. 10h at 1 (June 8, 2023 Warning Letter). Respondent further states, when referring to the Elfbar Crazi Berry ENDS product observed on August 25, 2023, “[a]lmost all [] of the disposables sold in the US are made in China, and as of now, none are approved by the FDA, but are sold in stores and

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online.” CRD Dkt. Entry No. 16 at 1. Respondent’s statement shows an awareness that the ENDS products at issue was not FDA approved. By receiving new tobacco products that lack the required premarket authorization in shipment via interstate commerce and having the products for sale, such products are adulterated. 21 U.S.C. § 387b(6)(A). Yet, in its Answer, Respondent argues it was not “made aware” or “informed about any issues with the product” to prevent it from selling the ENDS products in its establishment. CRD Dkt. Entry No. 7, ¶¶ 1, 2. As a retailer of tobacco products, Respondent holds sole responsibility for complying with the regulations. Respondent’s lack of awareness does not negate the evidence CTP provided to establish the Elfbar Crazi Berry ENDS product sold at Respondent’s establishment is adulterated and misbranded. What it does show is Respondent’s awareness of where most “disposables” are manufactured prior to entering the United States market and that it was aware that these same products lacked the required FDA approval. See CRD Dkt. Entry No. 16 at 1. This contradicts Respondent’s earlier assertion that it was not “informed about any issues with the product,” and displays Respondent’s direct knowledge regarding violating the regulation by accepting a tobacco product, without FDA approval, and holding it for sale. Respondent’s bare assertions, without something more to substantiate the arguments presented, does not rebut the sworn testimony of Deputy Division Director Bowling and Inspector Alexander.

Based on the uncontroverted testimony of Deputy Division Director Bowling and Inspector Alexander, as well as the supporting evidence submitted by CTP, I find that Respondent’s receipt of the new tobacco product—Elfbar Crazi Berry ENDS product—failed to have either an substantial equivalence (SE) report, or an abbreviated report, and did not have an effective (Marketing Granted Order) MGO, in interstate commerce caused the new tobacco product to become adulterated and misbranded while they were 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 Crazi Berry ENDS product held for sale at its Smoker’s Haven establishment on August 25, 2023. Thus, Respondent’s actions constitute violations of law that merit a civil money penalty.

3. Harm

In its final Brief, Respondent posed the following question: “how am I being fined for over 19k for a product that costs me less than $60 for a box of ten?” CRD Dkt. Entry No. 16 at 1. Also, in its Brief, Respondent asserts that FDA should have initiated its inspections with the “top” wholesalers and distributors instead of conducting an “Inspection Blitz” with the “small shops” who will face financial strains as a result. Id. at 2. Tobacco products are highly addictive and dangerous to the health of those who consume them. They may have lethal long-term effects on consumers. It is for these reasons that the regulations herein exist. Attempts to circumvent the regulatory process result in highly dangerous products being offered to the public which is in defiance of the law. I must remind Respondent that compliance inspections are conducted to ensure the

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safety of the public’s health. By imposing civil money penalties on retailers who violate regulations put in place to protect the public at large from adulterated and misbranded tobacco products, it will reinforce the severity of the policies.

B. Civil Money Penalty

I have found that Respondent committed a violation of the Act and its implementing regulations. 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. In its complaint, CTP sought the maximum penalty amount for a single violation, $19,192, against Respondent. Complaint, CRD Dkt. Entry No. 1 at 3, ¶ 12. 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 take into account “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.

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

Respondent was in the business of selling highly regulated and dangerous tobacco products. It received a written warning dated June 8, 2023, stating “FDA has determined that your establishment markets new tobacco products lacking premarket authorization in the United States,” which was a prohibited act under 21 USC 331(k). CRD Dkt. Entry No. 10h at 3. Yet, less than three months later, after it received the warning that it was in violation of federal law, Respondent continued to market and sell this and other “new tobacco products.” See CRD Dkt. Entry No. 1, ¶¶ 15, 20-21. The inability of Respondent to comply with federal tobacco law is serious in nature and demands a proportional CMP amount.

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

I have weighed Respondent’s arguments that the proposed civil money penalty is disproportionate in comparison to the purchase price of the product, that the establishment is a small business employing three employees whose hours and

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employment status will be negatively impacted, and this penalty has impacted Respondent’s mental health. CRD Dkt. Entry No. 7 at 2; CRD Dkt. Entry No. 16 at 1-2

c. 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. Further, in its filings, Respondent argues that it makes efforts to ensure that it follows the proper regulations and that it struggled to understand the initial guidance received from the FDA.

d. Degree of Culpability

Respondent’s representative contends that during the last inspection on August 25, 2023, he was not present and that it is difficult to stay informed of the rules because they are constantly evolving. CRD Dkt. Entry No. 16 at 1. In its final brief, Respondent ultimately takes responsibility for the violations. It is Respondent’s responsibility to ensure that its staff complies with the regulations and that it stays abreast of all regulations that impact its business. Respondent was given a warning letter which contained a multitude of resources to aid in its understanding of the law, one of which was a list of approved products. Respondent could have accessed the FDA website and sought out information on how to ensure its business complied with the regulations.

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. CRD Dkt. Entry No. 10h. Yet, Respondent continued to sell similar products, without any apparent modification to its business practices or attempts to contact the FDA for information or assistance, until it received notice of the civil money penalty amount after the last inspection on August 25, 2023. CRD Dkt. Entry No. 16 at 1. Therefore, I find Respondent culpable for the violation of the Act and its implementing regulations.

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

In its Brief, Respondent stated that this matter has taken “a toll on [his] mental health” and takes full responsibility for the violations. CRD Dkt. Entry No. 16 at 2. While I do appreciate Respondent taking accountability, I must protect the public health. Moreover, Respondent has not submitted any exhibits or witness testimony for me to consider.

2. Penalty

Based on the foregoing discussion, and after considering the record, applicable law, and aggravating and mitigating circumstances in this case, I find that a reduced penalty amount of $16,313 is appropriate under 21 U.S.C. §§ 333(f)(5)(B) and 333(f)(9).

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IV.     Conclusion

For the reasons set forth above, I impose a reduced civil money penalty of $16,313 against Respondent, Smokers Haven 3 LLC d/b/a Smoker’s Haven, 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.