Charlottesville Smoke Shop LLC d/b/a Tobacco Kingdom Vapor and Cigars, DAB TB8696 (2024)

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

The Center for Tobacco Products (CTP) began this matter by serving an Administrative Complaint (Complaint) on Respondent, Charlottesville Smoke Shop LLC d/b/a Tobacco Kingdom Vapor and Cigars, at 1403 Emmet Street North, Charlottesville, Virginia 22903, and by 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 electronic nicotine delivery system (ENDS) products that lack the required premarketing authorization and offering such products 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 this administrative proceeding, Respondent failed to comply with multiple judicial 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).

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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.  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 February 9, 2024, 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 Nos. 1 (Complaint), No. 1b (Proof of Service).  On March 9, 2024, Respondent filed a timely request for extension of time to file an answer.¹  CRD Dkt. Entry No. 3.  On March 11, 2024, I issued an Order granting Respondent’s request for extension of time and gave Respondent until April 10, 2024, to file its answer.  On April 10, 2024, Respondent filed a timely Answer to CTP’s Complaint.  See CRD Dkt. Entry No. 5.²  On April 11, 2024, I issued an Acknowledgment and Pre-Hearing Order (APHO) setting deadlines for the parties’ filings and exchanges, including a schedule for discovery.  CRD Dkt. Entry No. 6.  The APHO informed that a party receiving a discovery request must provide the requested documents within 30 days of the request.  Id.; APHO ¶ 4; see also 21 C.F.R. § 17.23(a).  The APHO 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.

APHO ¶ 21.

On May 14, 2024, in compliance with the APHO, CTP filed a timely joint status report.  See APHO at 3; CRD Dkt. Entry No. 7.  The status report indicated that the parties had been unable to reach a settlement, CTP remained willing to engage in settlement

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discussions but intended to proceed to a hearing, and that CTP attempted to contact Respondent who authorized CTP to file the report.  Id.

On June 18, 2024, CTP filed a Motion to Compel (Motion to Compel), asserting that Respondent had not responded to CTP’s discovery request as required by the APHO and the regulations.  CRD Dkt. Entry No. 8.  On that same date, CTP also filed an Unopposed Motion to Extend Deadlines requesting a 30-day extension of “any deadlines, including the July 5, 2024, due date for CTP’s pre-hearing exchange . . . .”  CRD Dkt. Entry No. 9 at 2.

On June 20, 2024, I issued an Order advising Respondent that it had until July 3, 2024, to file a response to CTP’s Motion to Compel.  CRD Dkt. Entry No. 10.  I also warned that if Respondent failed to respond, “I may grant CTP’s motion in its entirety.”  Id.; see also APHO ¶¶ 20-21; 21 C.F.R. § 17.32(c).  In my Order, I also extended the pre‑hearing exchange deadlines as the parties requested.  CRD Dkt. Entry No. 10 at 2.

On July 3, 2024, Respondent, through its representative,³ filed a response to CTP’s Motion to Compel.  In its filing, Respondent asserted that it promptly acted in compliance with the FDA’s initial warning letter, that the warning letter was misleading, and that it operated in good faith based on the information provided by the FDA.  CRD Dkt. Entry No. 11.  Respondent failed to state any reason for why it had not complied with CTP’s Request for the Production of Documents.

On July 8, 2024, I issued an Order granting CTP’s Motion to Compel and ordered Respondent to produce documents responsive to CTP’s Request for Production of Documents by July 19, 2024.  I warned:

Respondent’s failure to comply may result in sanctions, which may include striking its filings and issuing an Initial Decision and Default Judgment finding Respondent liable for the violations listed in the Complaint and imposing a civil money penalty.  21 C.F.R. § 17.35.

CRD Dkt. Entry No. 12 at 2.

On July 29, 2024, CTP filed a Status Report and Motion to Impose Sanctions.  CRD Dkt. Entry No. 13.  CTP advised that Respondent had not complied with my APHO or my July 8, 2024, Order granting CTP’s Motion to Compel.  Id. at 1-2.  CTP argued that sanctions against Respondent for its repeated non-compliance are an appropriate remedy.

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Id.  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 imposing a $20,678 civil money penalty.  Id. at 2-3.  On July 29, 2024, CTP also filed a Motion to Stay Deadlines.  CRD Dkt. Entry No. 14.

On July 29, 2024, I issued an Order giving Respondent until August 13, 2024, to file a response to CTP’s Motion to Impose Sanctions.  CRD Dkt. Entry No. 15.  My July 29, 2024, Order also stayed the parties’ pre-hearing exchange deadlines.  Id. at 2.

On August 19, 2024, Respondent filed an unopposed request for an extension.  CRD Dkt. Entry No. 16.  On August 20, 2024, I accepted  Respondent’s request as unopposed and granted Respondent’s request for an extension to properly respond to CTP’s Motion to Impose Sanctions and ordered Respondent to file a response by August 27, 2024.  CRD Dkt. Entry No. 17.  I again warned:

Respondent is again warned that failure to timely respond may result in my granting CTP’s motion in its entirety.  No further extensions will be granted.

CRD Dkt. Entry No. 17 at 2

On August 21, 2024, counsel for Respondent filed a Notice of Appearance.  On September 11, 2024, Respondent’s counsel filed a Notice of Withdrawal.

To date, Respondent has not filed a response to CTP’s Motion to Impose Sanctions or my August 19, 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 failed to comply with 21 C.F.R. § 17.23(a) and paragraph 4 of the APHO, when it failed to respond to CTP’s Request for RFP within 30 days ;and

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• Respondent failed to comply with my July 8, 2024, Order, when it failed to submit documents responsive to CTP’s Request for the Production of Documents by July 19, 2024.

Respondent also failed to defend its action despite my June 20, 2024, and my July 29, 2024, Orders informing Respondent of such opportunities and warning of the consequences.  21 C.F.R. § 17.35(a)(2).  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.

Therefore, 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 its case, and, as a result, interfered with the speedy, orderly, and fair conduct of this proceeding.  Respondent’s failure to fulfill its discovery obligations suggest that it has abandoned its defense in this case.  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 regulatory requirements and two judicial orders, despite my explicit warnings that its failure to do so could result in sanctions.  See CRD Dkt. Entry Nos. 10 at 1-2; 12 at 1-2; 15 at 1-2; see also APHO ¶ 21.  Respondent’s repeated misconduct interfered with the speedy, orderly, or fair conduct of this proceeding.  Accordingly, 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).  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:

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• Respondent owns Tobacco Kingdom Vapor and Cigars, located at 1403 Emmet Street North, Charlottesville, Virginia 22903.  The establishment receives tobacco products, including Elfbar Peach Ice and Elfbar Blue Razz Ice 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 September 22, 2023, CTP informed Respondent that the new tobacco products that Respondent sells and/or distributes are adulterated 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 Peach Ice and Elfbar Blue Razz Ice ENDS products for sale at Respondent’s establishment.  Complaint ¶ 15.
• Respondent’s ENDS products are “new tobacco products” because they were 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

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“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 a new tobacco product that was adulterated and misbranded.  21 U.S.C. § 331(c).  On December 9, 2023, Respondent offered for sale 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 have 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.

ORDER

For these reasons, I enter default judgment in the amount of $20,678 against Respondent, Charlottesville Smoke Shop LLC d/b/a Tobacco Kingdom Vapor and Cigars.  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 Respondent filed a second submission labeled answer but was entitled “FDA_Complaints_Letters,” which was a copy of the Cover Letter and Guidance Establishing Procedures Respondent received from CTP and CRD.  CRD Dkt. Entry No. 3a.

² Respondent again filed a second submission labeled answer but was entitled “FDA_Complaints_Letters,” which was a copy of the Cover Letter and Guidance Establishing Procedures Respondent received from CTP and CRD.  CRD Dkt. Entry No. 5a.

³ Counsel for Respondent filed two pleadings as a representative of Respondent prior to filing a Notice of Appearance on August 21, 2024, and subsequently filed a Notice of Withdrawal of Counsel on September 11, 2024.  CRD Dkt. Entry Nos. 11, 16, 18, 19.