D and J Vapors LLC d/b/a D and J Vapors, DAB TB8624 (2024)

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

On November 21, 2023, the Center for Tobacco Products (CTP) served a Complaint on D and J Vapors LLC d/b/a D and J Vapors (Respondent), at 115 South Dixie Street, Horse Cave, Kentucky 42749, and filed a copy of the Complaint with the Food and Drug Administration’s (FDA) Division of Dockets Management. In its Complaint, CTP seeks to impose a $19,192 civil money penalty against Respondent for being a manufacturer and retailer of new tobacco products that lack the premarketing authorization, thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq.

Respondent filed a timely Answer to CTP’s Complaint. However, over the past several months since filing its Answer, Respondent failed to comply with multiple judicial orders

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and directives, and failed to defend its case, 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 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, strike Respondent’s Answer, and issue this default decision, pursuant to the provisions of 21 C.F.R. § 17.35(c)(3).

I. Procedural History

On November 21, 2023, CTP served an Administrative Complaint on Respondent by United Parcel Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. See Civil Remedies Division (CRD) Docket (Dkt.) Entry No. 1b. On January 18, 2024, Administrative Law Judge (ALJ) Debbie K. Nobleman1 issued an Initial Decision and Default Judgment in this matter because Respondent did not file an Answer. However, on March 4, 2024, Respondent’s Answer was uploaded onto the docket with a date stamp showing it was received by the Departmental Appeals Board (DAB) on December 26, 2023. In its Answer, Respondent denied the allegations, posed two questions in the section of the answer form designated for asserting defenses, and contested the civil money penalty. See CRD Dkt. Entry No. 4.

On March 5, 2024, an Order Withdrawing Initial Decision and Acknowledgment and Pre- Hearing Order (APHO) was issued stating:

Because the Respondent timely filed an Answer and should not be harmed by the DAB’s error, and the Complainant will not be prejudiced because it will be provided an opportunity to prove its case, the ends of justice require the Initial Decision and Default Judgment entered on January 18, 2024, be withdrawn. 21 C.F.R. § 17.19(b)(17), (19).

CRD Dkt. Entry No. 5 (APHO) at 1.

The APHO also set deadlines for the parties’ filings and exchanges, including a schedule for discovery. The parties were instructed that a party receiving a discovery request must provide the requested documents within 30 days of the request. CRD Dkt. Entry 5 (APHO) ¶ 4; see also 21 C.F.R. § 17.23(a). ALJ Nobleman warned:

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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. 5 (APHO) ¶ 21.

On April 2, 2024, CTP filed a Joint Status Report indicating that the parties were unable to reach a settlement in this case, and, absent an executed settlement agreement, intended to proceed to a hearing. CRD Dkt. Entry No. 7.

On May 14, 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 at 2. On that same date, CTP also filed an Unopposed Motion to Extend Deadlines requesting a 30-day extension of “any deadlines, including the May 28, 2024 due date for CTP’s pre-hearing exchange . . . .” CRD Dkt. Entry No. 9 at 2. On May 15, 2024, ALJ Nobleman issued an Amended Order advising Respondent that it had until June 7, 2024, to file a response to CTP’s Motion to Compel Discovery. CRD Dkt. Entry No. 11 at 2. The Order also warned that if Respondent failed to respond CTP’s motion may be granted in its entirety. Id.; see also CRD Dkt. Entry No. 5 (APHO) ¶¶ 20-21; 21 C.F.R. § 17.32(c). In the same Order, ALJ Nobleman held the pre-hearing exchange deadlines “in abeyance pending the resolution of CTP’s Motion to Compel Discovery.” CRD Dkt. Entry No. 11 at 2.

Respondent failed to respond to CTP’s Motion to Compel Discovery or the May 15, 2024 Order, or otherwise comply with CTP’s Request for Production of Documents.

On June 11, 2024, an Order granting CTP’s Motion to Compel Discovery was issued and instructed Respondent to produce documents responsive to CTP’s Request for Production of Documents by July 12, 2024. The Order warned:

Failure to [comply] may result in sanctions, including the issuance of an Initial Decision and Default Judgment finding Respondent liable for the violations listed in the Complaint. . .

CRD Dkt. Entry No. 12 at 1-2 (emphasis in the original).

On July 26, 2024, CTP filed a Status Report and Motion to Impose Sanctions (Motion to Impose Sanctions). CRD Dkt. Entry No. 14 (Motion to Impose Sanctions). CTP advised that Respondent had not complied with the APHO or the June 11, 2024 Order Granting CTP’s Motion to Compel. Id. at 1-2. CTP argues that sanctions against Respondent for its repeated non-compliance are an appropriate remedy. Specifically, CTP asks that I

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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 $19,192 civil money penalty. Id. at 2.

On August 2, 2024, I issued an Order giving Respondent until August 22, 2024, to file a response to CTP’s Motion to Impose Sanctions. CRD Dkt. Entry No. 15.

On August 13, 2024, CTP filed a Notice of Correction, UPS NEXT DAY AIR label, and Proof of Delivery. CRD Dkt. Entry Nos. 17, 17a-b. In its Motion to Impose Sanctions, CTP stated it mailed Respondent a copy of its Motion to Impose Sanctions on July 26, 2024. CRD Dkt. Entry No. 15 (Motion to Impose Sanctions) at 4. Due to an office error, made by CTP, the copy was not mailed until August 7, 2024. CRD Dkt. Entry No. 17 at 1.

On August 16, 2024, after I determined that neither party would be prejudiced by maintaining Respondent’s deadline, I issued an Order that reiterated Respondent’s August 22, 2024 deadline to file a response to CTP’s Motion to Impose Sanctions. CRD Dkt. Entry No. 18 at 1. The August 16, 2024 Order also reaffirmed that the parties’ pre- hearing exchange deadlines would remain in abeyance pending the resolution of CTP’s Motion to Impose Sanctions. Id. at 2.

To date, Respondent has not filed a response to CTP’s Motion to Impose Sanctions or either of my Orders issued on August 2, 2024, and August 16, 2024.

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:

• 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

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• the June 11, 2024 Order, when it failed to submit documents responsive to CTP’s Request for Production of Documents by July 12, 2024.

I also find that 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 the May 15, 2024 Order; and
• Respondent did not file a response to CTP’s Motion to Impose Sanctions, as permitted by the regulations and my August 2, 2024 Order.

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 a regulatory requirement and judicial orders, despite the explicit warnings that its failure could result in sanctions. See, e.g., CRD Dkt. Entry No. 12 at 1-2; see also CRD Dkt. Entry No. 5 (APHO) ¶ 21. 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).

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:

• Respondent manufactures tobacco products, holds the tobacco products for sale at its establishment, and receives at least one component that it uses to manufacture its tobacco products from outside of Kentucky. Complaint ¶¶ 14-15.
• Respondent’s e-liquid products are “new tobacco products” because they were not commercially marketed in the United States as of February 15, 2007. Complaint ¶ 18.

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• Respondent’s e-liquid products do not have a substantial equivalence order or found-exempt order in effect, and, therefore, they are required by 21 U.S.C. 387j(a) to have premarket review. Complaint ¶ 19.
• Respondent did not submit a premarket tobacco product application to FDA for its e-liquid products. Complaint ¶ 20.
• Respondent’s e-liquid products do not have a Marketing Granted Order in effect under 21 U.S.C. § 387j(c)(1)(A)(i). Complaint ¶ 21.
• Neither a substantial equivalence report nor an abbreviated report has been submitted for any of Respondent’s e-liquid products. Complaint ¶ 22.
• In a warning letter dated January 25, 2022, CTP informed Respondent that the new tobacco products that Respondent manufactures, sells and/or distributes are adulterated and misbranded because the tobacco products lack the required FDA marketing authorization. Complaint ¶ 16.
• On July 25, 2023, an FDA-commissioned inspector conducted an inspection of Respondent’s establishment and the inspector observed components used to make e-liquid products that Respondent sells at its establishment. Complaint ¶ 17.

These facts establish that Respondent is liable under the Act. On July 25, 2023, Respondent offered for sale e-liquid products that it manufactured in its establishment from components it received from outside of Kentucky. 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(k). 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). Respondent’s e-liquid products were not commercially marketed in the United States as of February 15, 2007, and Respondent’s e-liquid products did not have an order permitting marketing of a new tobacco product under 21 U.S.C. § 387j(c)(1)(A)(i). Thus, Respondent’s e-liquid products lacked the required premarketing authorization and were adulterated. 21 U.S.C. § 387b(6)(A).

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). Respondent’s e-liquid products do not have an

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order permitting marketing of a new tobacco product under 21 U.S.C. § 387j(c)(1)(A)(i). Neither a substantial equivalence report nor an abbreviated report has been submitted for Respondent’s e-liquid products making them misbranded under 21 U.S.C. § 387c(a)(6). As a result, Respondent’s tobacco products are misbranded, under the provisions of 21 U.S.C. § 387c(a)(6); see also 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).

Taking the above alleged facts as true, on July 25, 2023, Respondent violated the prohibition against receiving, manufacturing, and offering for sale a new tobacco product that was adulterated and misbranded because Respondent did not submit a premarket tobacco product application to FDA for its e-liquid products and obtain the required premarket authorization. 21 U.S.C. § 331(k); see also 21 U.S.C. § 387b(6)(A), 21 U.S.C. §§ 387j(a)(2)(A), 387e(j)(3)(A).

CTP has requested a civil money penalty of $19,192, which is a permissible penalty under 21 C.F.R. § 17.2 and 21 U.S.C. § 333(f)(9)(A). See also 45 C.F.R. § 102.3. Therefore, I find that a civil money penalty of $19,192 is warranted and order one imposed.

Order

For these reasons, I enter default judgment in the amount of $19,192 against Respondent, D and J Vapors LLC d/b/a D and J Vapors. 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.