Lucky Trading Group LLC d/b/a Lucky's Vape & Smoke #2, DAB TB8695 (2024)

ORDER IMPOSING SANCTIONS AND INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint) against Respondent, Lucky Trading Group LLC d/b/a Lucky’s Vape & Smoke #2, alleging facts and legal authority sufficient to justify imposing a civil money penalty of $20,678.  CTP began this case by serving a Complaint on Respondent and 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

Page 2

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).  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 April 5, 2024, CTP served the Complaint on Respondent, located at 3202 Coral Way, Unit B, Coral Gables, Florida 33145, by United Parcel Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. Civil Remedies Division (CRD) Docket (Dkt.) Entry Nos. 1 (Complaint), 1b (UPS Delivery Notification).  On May 6, 2024, Respondent registered for the Departmental Appeals Board (DAB) E-File system and timely filed its Answer.  CRD Dkt. Entry No. 3.

On May 9, 2024, Administrative Law Judge (ALJ) Benjamin Zeitlin1 issued an Acknowledgment and Pre-Hearing Order (APHO) acknowledging receipt of Respondent’s Answer and establishing procedural deadlines for this case.  CRD Dkt. Entry No. 4.  The APHO ordered the parties to serve requests for documents no later than June 12, 2024, and ordered the parties receiving the request to provide the requested documents no later than 30 days after the request was made.  Id. ¶ 4.  Further, the APHO warned the parties that “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 this hearing.”  Id. ¶ 21, citing 21 C.F.R. § 17.35.

On July 18, 2024, CTP filed a Motion to Compel Discovery and an Unopposed Motion to Extend Deadlines.  CRD Dkt. Entry Nos. 6, 7.  CTP stated that it served its Request for Production of Documents on Respondent on May 28, 2024, but CTP had not received a response.  CRD Dkt. Entry No. 6 at 1-2.  On July 19, 2024, an Order was issued instructing Respondent to file a response to CTP’s Motion to Compel Discovery by August 2, 2024.  CRD Dkt. Entry No. 8.  Respondent was warned “that if it fails to respond, I may grant CTP’s motion in its entirety.”  Id. at 2.  The July 19, 2024 Order also extended the parties’ pre-hearing exchange deadlines.  Id.

On August 5, 2024, as Respondent had not responded to CTP’s motion as instructed, an order granting CTP’s Motion to Compel Discovery was issued and gave Respondent until August 15, 2024, to comply with CTP’s Request for Production of Documents.  CRD Dkt. Entry No. 9.  Respondent was again warned that:

Page 3

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.

Id. at 1.

On August 16, 2024, CTP filed Complainant’s Status Report and Motion to Impose Sanctions.  CRD Dkt. Entry No. 10.  In its motion, CTP advised that Respondent did not produce responsive documents in compliance with the August 5, 2024 Order Granting Motion to Compel.  Id. at 1-2.  On August 16, 2024, CTP also filed Complainant’s Motion to Stay Deadlines pending the resolution of its Motion to Impose Sanctions.  CRD Dkt. Entry No. 11.  On August 19, 2024, I issued an Order giving Respondent until September 3, 2024, to respond to CTP’s Motion to Impose Sanctions and stayed all deadlines as requested.  CRD Dkt. Entry No. 13.  My August 19, 2024 Order also warned Respondent that if it failed to file a response, “I may grant CTP’s motion in its entirety.”  Id. at 2.

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 the following orders and procedures governing this proceeding:

• Respondent failed to comply with paragraph 4 of the May 9, 2024 APHO when it failed to respond to CTP’s Request for Production of Documents; and
• Respondent failed to comply with the August 5, 2024 Order Granting Motion to Compel requiring Respondent to comply with CTP’s Request for Production of Documents.

Respondent also failed to defend its action.  21 C.F.R. § 17.35(a)(2).  Specifically, Respondent failed to file a response to the July 19, 2024 Order giving it an opportunity to respond to CTP’s Motion to Compel Discovery and failed to file a response to my

Page 4

August 19, 2024 Order giving it an opportunity to file a response to CTP’s Motion to Impose Sanctions.  This leads me to conclude that Respondent has abandoned its defense of this case.

In the absence of any explanation from Respondent, I find no basis to excuse Respondent’s repeated failure to comply with various orders in this administrative proceeding.  Despite explicit warnings that failure to comply with Orders could result in sanctions, Respondent did not comply with two Orders.  See CRD Dkt. Entry Nos. 4 ¶ 21; 9.  Accordingly, I find that Respondent failed to comply with orders and procedures governing this proceeding, failed to defend its case, and, as a result, engaged in a pattern of misconduct that interfered with the speedy, orderly, and fair conduct of the hearing.  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).  I find that Respondent’s actions are sufficiently egregious and 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). Pursuant to 21 C.F.R. § 17.11(a), I am required to “assume the facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the Act, issue a default judgment and impose a civil money penalty.

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

Specifically, CTP alleges the following facts in its Complaint:

• Respondent owns Lucky’s Vape & Smoke #2, located at 3202 Coral Way, Unit B, Coral Gables, Florida 33145.  The establishment receives tobacco products, including Elfbar Gumi and Elfbar Honeydew Pineapple Orange ENDS products (Respondent’s ENDS products), 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

Page 5

• 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 9, 2023, an FDA-commissioned inspector conducted an inspection of Respondent’s establishment.  During this inspection, the inspector observed Elfbar Gumi and Elfbar Honeydew Pineapple Orange ENDS products 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 products do 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 products.  Complaint ¶ 18.

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 new tobacco products that were adulterated and misbranded.  21 U.S.C. § 331(c).  On December 9, 2023, Respondent offered for sale

Page 6

ENDS products that were adulterated because they lacked the required FDA marketing authorization and were 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 products are also misbranded because they had 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.

CTP has requested a civil money penalty of $20,678, which is a permissible penalty under 21 U.S.C. § 333(f)(9)(A) and 21 C.F.R. § 17.2.  Therefore, I find that a civil money penalty of $20,678 is warranted and so order one imposed.