VSS Coral Springs, LLC d/b/a Vape and Smoke Shop, DAB TB8725 (2024)

INITIAL DECISION

The Center for Tobacco Products (CTP) seeks to impose a $19,192 civil money penalty against Respondent, VSS Coral Springs, LLC d/b/a Vape and Smoke Shop, 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.

Respondent admits the allegations in the Complaint and argues that the civil money penalty is too high.  For the reasons discussed below, I find Respondent violated the provisions of 21 U.S.C. § 331(c) and conclude that a civil money penalty in the amount of $15,000 is appropriate.

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I. Background and Procedural History

On June 13, 2023, CTP issued a Warning Letter notifying Respondent that on May 5, 2023, an FDA inspector observed an ENDS product offered for sale, specifically an Elfbar Watermelon Nana Ice ENDS product, that lacked the required marketing authorization, at Respondent’s establishment.  Civil Remedies Division (CRD) Docket (Dkt.) Entry No. 19h (CTP Ex. 7 at 1).

On August 13, 2023, FDA-Commissioned Officer Marcus Wesker inspected Respondent’s business.  CRD Dkt. Entry No. 19c (CTP Ex. 2 ¶ 5).  During the inspection, Inspector Wesker observed, “that the establishment sold FDA-regulated tobacco products and had a sales display containing tobacco products, including an Elfbar Cuba Cigar Electronic Nicotine Delivery System (‘ENDS’) products, available for sale.”  Id. ¶ 7.

Inspector Wesker took photographs at the store of the external signage, the tobacco products observed, including the Elfbar Cuban Cigar ENDS product, and the placement of the products within the establishment.  Id.

On September 25, 2023, CTP served an Administrative Complaint on Respondent by United Parcel Service at 923 North University Drive, Coral Springs, Florida 33071, and filed a copy of the Complaint with the Food and Drug Administration’s (FDA’s) Division of Dockets Management, as provided in 21 C.F.R. §§ 17.5 and 17.7.  See CRD Dkt. Entry Nos. 1, 1b.

On October 20, 2023, Respondent electronically filed a Request for Extension seeking additional time to review the case and file its answer.  CRD Dkt. Entry No. 3.  On October 23, 2023, the Administrative Law Judge assigned to this case at that time issued an Order granting Respondent’s extension request and setting the new answer deadline for November 24, 2023.  CRD Dkt. Entry No. 4.  On November 23, 2023, Respondent filed its answer admitting the allegations and offering its defenses; specifically asserting that it removed all Elfbar products from its shelves, but one box was inadvertently left on the top shelf, and that no Elfbar products were sold after the inspection on August 13, 2023.  CRD Dkt. Entry No. 4 (Answer).

On January 24, 2024, a Pre-Hearing Order (PHO) was issued, establishing deadlines for discovery and the parties’ pre-hearing exchanges.  CRD Dkt. Entry No. 8.  On February 22, 2024, CTP filed a Joint Status Report stating that the parties were unable to reach a settlement.  CRD Dkt. Entry No. 9.

On March 13, 2024, CTP filed a Motion to Compel Discovery with supporting documents, and an Unopposed Motion to Extend Deadlines.  CRD Dkt. Entry Nos. 10, 10a, 10b, 11.  On March 14, 2024, the assigned Administrative Law Judge issued an

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Order giving Respondent until March 25, 2024, to respond to CTP’s Motion to Compel Discovery and extended the parties’ exchange deadlines as CTP requested.  CRD Dkt. Entry No. 12.

On March 25, 2024, Respondent filed a Request for Extension requesting additional time to respond to CTP’s Motion to Compel Discovery and a Notice of Appearance for Respondent’s counsel.  CRD Dkt. Entry Nos. 13, 14.  On March 26, 2024, the assigned Administrative Law Judge issued an Order granting Respondent’s extension request and giving Respondent until April 8, 2024 to respond to CTP’s Motion to Compel Discovery.  CRD Dkt. Entry No. 15.  On April 10, 2024, the assigned Administrative Law Judge granted CTP’s Motion to Compel Discovery, as Respondent failed to file a response to CTP’s Motion to Compel Discovery.  CRD Dkt. Entry No. 16.  On April 15, 2024, Respondent filed its Response to Complainant’s Request for Production of Documents.  CRD Dkt. Entry No. 17.

On May 15, 2024, CTP timely filed its pre-hearing exchange, consisting of its Informal Pre-Hearing Brief (CTP PH Brief), a List of Proposed Witnesses and Exhibits, and seven proposed exhibits (CTP Exhibits (Exs.) 1-7).  CRD Dkt. Entry Nos. 19, 19a-h.  On March 22, 2024, this case was administratively transferred to me as the presiding officer.  CRD Dkt. Entry No. 20.  On June 17, 2024, Respondent filed its Witness and Exhibits List, accompanied by three proposed exhibits (R. Exs. 1-3).  CRD Dkt. Entry No. 21.  Respondent did not file a pre-hearing brief.

On July 2, 2024, I held a pre-hearing conference (PHC) via Microsoft Teams.  At the PHC, we discussed the allegations in the Complaint, Respondent’s Answer, the issues to be decided in this case, the burdens of proof, the purpose of conducting a hearing in this case, the procedural history, the administrative record, the parties’ pre-hearing exchanges and proposed witnesses, and the requirements of filing and receiving documents electronically through DAB’s electronic filing system.  Respondent raised no objections to the admission of CTP’s proffered Exhibits 1-7 (CRD Dkt. Entry Nos. 19b-h).  CTP raised no objections to the admission of Respondent’s proffered Exhibits 1-3 (CRD Dkt. Entry No. 21 at 3-66).  Further, Respondent’s counsel stated that he did not wish to cross-examine CTP’s proposed witnesses.  Since Respondent did not wish to cross-examine CTP’s witnesses and waived his right to a hearing, I informed the parties that I would proceed to decide this case based on the evidence in the record.

On July 8, 2024, I issued an order summarizing the PHC, admitting CTP and Respondent’s exhibits into evidence as CTP Exhibits 1-7 and Respondent Exhibits 1-3, respectively, and setting a due date of August 7, 2024, for the parties to file their final briefs.  CRD Dkt. Entry No. 25.  On August 7, 2024, Respondent filed its Brief.  CRD Dkt. Entry No. 26 (R. Brief).  On August 8, 2024, CTP filed a Notice of Waiver of Final Brief.  CRD Dkt. Entry No. 27.

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The administrative record is now complete, and this matter is ready for a decision.  21 C.F.R. § 17.41; 21 C.F.R. § 17.45(c).  I will now decide this case based on the evidence in the administrative record.  21 C.F.R. § 17.19(b)(11), (17).

II. Issues

1. Whether the allegations in the complaint are true, and, if so, whether Respondent's actions identified in the complaint violated the law;
2. Whether any affirmative defenses are meritorious; and
3. If Respondent is liable for penalties or assessments, the appropriate amount of any such penalties or assessments, considering any mitigating or aggravating factors that I find in this case.

III. Applicable Law and Industry Guidance

In 2009, Congress enacted the Family Smoking Prevention and Tobacco Control Act (TCA) to regulate tobacco products.  21 U.S.C. §§ 387 et.  The TCA regulates the selling of any “new tobacco product” without authorization from the FDA.  21 U.S.C. § 387j(a); 21 U.S.C. § 387a(b) (delegating the FDA the authority to determine what constitutes new tobacco products).  A new tobacco product is any tobacco product that was not commercially marketed in the United States as of February 15, 2007.  21 U.S.C. § 387j(a)(1).

The TCA requires new tobacco products to have a premarket authorization.  21 U.S.C. § 387j(a)(2).  To obtain premarket authorization, manufacturers of new tobacco products are required to submit a premarket tobacco application (PMTA) to the FDA for approval to sell their products.  21 U.S.C. § 387j(b)(1).  Alternatively, the product manufacturer may submit a substantial equivalence report, in response to which the FDA may issue an order finding the product is substantially equivalent to a predicate tobacco product.  21 U.S.C. § 387e(j).  Or, the product manufacturer may submit a report, in response to which the Secretary may issue an exemption order.  21 U.S.C. § 387e(j)(3).

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).  Under the Act, “[a] tobacco product shall be deemed to be misbranded if, in the case of any tobacco product sold or offered for sale in any State, it is sold or distributed in violation of regulations prescribed under section 387f(d).”  Under 21 U.S.C. § 387c(a)(6), a new tobacco product is misbranded if a “notice or other information respecting it was not provided as required” under the substantial equivalence or substantial equivalence exemption pathway, including a substantial equivalence report or an abbreviated report.  21 U.S.C. § 387c(a)(6).

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A tobacco product is adulterated if it has not obtained the required premarket authorization.  21 U.S.C. § 387b(6)(A).  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).  The FDA may seek a civil money penalty from “any person who violates a requirement of this chapter which relates to tobacco products.”  21 U.S.C. § 333(f)(9)(A).  Civil money penalties are set by 21 U.S.C. § 333 and 21 C.F.R. § 17.2.

IV. Findings of Fact and Conclusions of Law

CTP alleges that Respondent received in interstate commerce and offered for sale on August 13, 2023, an Elfbar Cuba Cigar ENDS product in violation of 21 U.S.C. § 331(c) Complaint ¶¶ 15, 19.  In its Answer, Respondent admitted having one box of Elfbar ENDS products but asserts that it “removed the Elf Bar product from the shelves and have not been selling them for a few months now . . . [t]here was only 1 flavor found on the shelve[sic] when the inspector came which was a pure oversight by one of the team members and we were not aware nor we sold these to the customers.  It was just sitting on the shelve[sic] . . .[i]t was unintentional and never sold them.”  Answer at 1.

Regarding the regulation and manufacturing of the Elfbar ENDS product, CTP submitted a signed declaration from James Bowling, Deputy Division Director for the Division of Enforcement and Manufacturing in the Office of Compliance and Enforcement, CTP, FDA.  CTP Ex. 1.  Mr. Bowling has personal knowledge of CTP’s tobacco record keeping, registration process, and new tobacco product premarket authorization requirements.  Id. ¶ 3.  Mr. Bowling confirmed that a search of the Tobacco Registration and Product Listing Module Next Generation did not reveal any registered establishments containing the name “Elfbar” or any listed product named “Elfbar Cuba Cigar” in Florida or elsewhere in the United States.  Id. ¶ 6.

Additionally, Mr. Bowling confirms that the Elfbar Cuba Cigar ENDS product observed for sale during the August 13, 2023 inspection is manufactured in China by Guangdong Qisitech Co., Ltd.  Id. ¶ 7.  Mr. Bowling confirmed that Guangdong Qisitech Co., Ltd. does not have any registered tobacco production facilities in the state of Florida.  Id. ¶ 10.  Further, Mr. Bowling confirms that Elfbar Cuba Cigar ENDS products were not commercially marketed in the United States as of February 15, 2007.  Id. ¶ 12.  The FDA did not have any record of a Substantial Equivalence Order or an abbreviated report requesting a Found-Exempt Order.  Id. ¶¶ 13-14.

Lastly, Respondent did not object to Mr. Bowling’s declaration or wish to cross-examine him.  Therefore, I find Mr. Bowling’s statements about the Elfbar Cuba Cigar ENDS products and its manufacturer Guangdong Qisitech Co., Ltd. to be credible on the issue of whether the ENDS product had marketing authorization or if the manufacturer was registered for business in the United States for its new tobacco products.  I also find that

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the Elfbar Cuba Cigar ENDS products are adulterated and misbranded as its manufacturer Guangdong Qisitech Co., Ltd. did not obtain the FDA’s required premarket authorization.  Mr. Bowling’s declaration also supports a finding that the unauthorized product was received via interstate commerce, as the product manufacturer, Guangdong Qisitech Co., Ltd. is based in China, a foreign country.  Id. ¶ 7.

Regarding Respondent’s possession of the unauthorized ENDS product, CTP submits the signed declaration of Inspector Marcus Wesker.  CTP Ex. 2.  Inspector Wesker is an FDA-commissioned officer with the state of Florida who performs tobacco compliance inspections required under the FDA’s Tobacco Retail Inspection Contract.  Id. ¶ 3.  Inspector Wesker’s declaration states that on August 13, 2023, Inspector Wesker visited Respondent’s business establishment to conduct a compliance check.  Id. ¶ 5.  During the inspection, Inspector Wesker observed a sales display containing Elfbar Cuba Cigar ENDS products available for sale.  Id. ¶ 7.  Photographs were taken by Inspector Wesker of the business establishment and the unauthorized products.  Id.  The inspection was recorded in the FDA’s record system and a Narrative Report was created.  Id. ¶ 8.  Respondent did not object to Inspector Wesker’s declaration or wish to cross-examine him.  Therefore, I find Inspector Wesker’s statements regarding what he observed during the August 13, 2023 inspection of Respondent’s business establishment to be credible.

Considering the above alleged facts as true, I find that CTP has demonstrated by a preponderance of the evidence that Respondent possessed the Elfbar Cuba Cigar ENDS product observed by FDA-commissioned Inspector Wesker on August 13, 2023.  Consequently, Respondent violated the prohibition against receiving and offering for sale a new tobacco product that was adulterated and misbranded because the Elfbar Cuban Cigar ENDS products lacked the required FDA marketing authorization order, substantially equivalent order, or a found exempt order.  21 U.S.C. § 331(c); see also 21 U.S.C. § 387b(6)(A); 21 U.S.C. § 387j(a)(2)(A); 21 U.S.C. § 387e(j)(3)(A).

V. Civil money penalty

Having determined that Respondent is liable under the Act, I conclude that I have the authority to impose a civil money penalty under 21 U.S.C. 333(f)(9)(A).  In its Complaint, CTP seeks to impose the penalty amount of $19,192 against Respondent.  Complaint at 1.  In its pre-hearing brief, CTP asserted that a $19,192 civil money penalty is appropriate.  CTP PH Brief at 8-11.  Respondent argues that the civil money penalty is too high and should be reduced “because the violation . . . was inadvertent and there was a good faith effort to comply with the statute.”  R. Brief at 2.  Respondent further states: “[u]pon receipt of the warning letter … [Respondent] took immediate action to remove all unauthorized vape products from the store. Unfortunately, one box was accidentally left behind on the top shelf.”  Id.  Respondent further asserts that “none of the products

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from the remaining box were ever sold, demonstrating the absence of intent to distribute unauthorized products and emphasizing that no harm was done . . . .”  Id.

In determining whether a $19,192 civil money penalty is appropriate, I must consider any aggravating or mitigating circumstances and the factors listed in the Act.  21 C.F.R. § 17.34(a)-(b).  Specifically, 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); 21 C.F.R. § 17.45(b)(1)-(3).  Respondent must prove any mitigating factors by a preponderance of the evidence.  21 C.F.R. § 17.33(c).  For the following reasons, I find that Respondent has demonstrated by a preponderance of the evidence mitigating circumstances to support a reduced CMP, and conclude that a $15,000 CMP is appropriate based on the administrative record, applicable law, and aggravating and mitigating circumstances in this case.

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

The TCA was enacted for the purpose of authorizing regulation of tobacco products for the “protection of the public health.”  21 U.S.C. § 387f(d).  On June 13, 2023, a Warning Letter was issued informing Respondent that its establishment was unlawfully marketing a new tobacco product lacking the statutorily required premarket authorization, which was subject to enforcement action by the FDA.  CTP Ex 7.  The Warning Letter referenced a May 5, 2023 inspection, where the establishment offered for sale Elfbar Watermelon Nana Ice ENDS product.  Id. at 1.  The Warning Letter also states: “[t]he listed violation causes the ENDS product you offer for sale or distribution in the United States to be ‘adulterated’ and ‘misbranded’ under Sections 902 and 903 of the FD&C Act” (emphasis added).  Id. at 2.

Respondent argues it attempted to remove all unauthorized vape products from its shelf and inadvertently left one box of Elfbar Cuban Cigar ENDS product on display.  Answer.  However, Respondent’s continued marketing and selling of this “new tobacco product” demonstrates it did not comply with federal tobacco law, which is serious in nature and demands a proportional civil money penalty amount.

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

Respondent states that its sales “have been continuously dropping this year compared to the last year and we are only 3 years into this business and still trying to establish ourselves as a strong business unit.”  Answer at 1.  Respondent also states, “[w]e are a very small business and this penalty will put financial hardship on us.”  Id. at 2.I am

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sympathetic to Respondent’s statements but I am limited by the evidence documented in the record.

Respondent provided documentation from its state sales tax returns for 2022 and 2023, and its federal tax returns for 2021 and 2022.  R. Exs. 1-2.  Respondent did not provide its federal tax return for 2023, the violation inspection year.  Respondent also provided screenshots that purportedly show a comparison of sales from 2022 and 2023.  R. Ex. 3. Pursuant to Respondent’s 2022 federal tax return, filed in March 2023, Respondent’s 2022 gross profit was $188,604 and after deductions, its ordinary business income was -$41,546.  R. Ex 2 at 44, lines 3 and 22.  CTP did not object to Respondent’s exhibits, but does assert that these documents alone are not sufficient to establish Respondents inability to pay the civil money penalty.  CTP PH Brief at 10.  Thus, I have considered Respondent’s financial documentation and determined that, at least as of March 2023, Respondent’s ability to pay a civil money penalty was limited.

C. History of Prior Violations

There is no indication in the record of any prior violations of section 331(c) of the Act resulting in a civil money penalty.  However, Respondent did receive a Warning Letter dated June 13, 2023, advising that it was in violation of federal law for selling a new tobacco product without premarketing authorization.  Thus, Respondent was on notice of the need for a premarket authorization for its products and the possibility of future compliance inspections.  CTP therefore proffers Respondent’s repeated violation supports a penalty of $19,192.

I agree with CTP that the warning letter demonstrates a prior violation.  However, I disagree with CTP’s contentions that this Respondent’s repeated violation in this case was based on an unwillingness or inability to comply with the law.  Respondent acted immediately upon receipt of CTP’s warning letter to remedy the violation identified in the letter.  Therefore, I find that the history of violations in this case is not as significant as CTP contends.

D. Degree of Culpability

The June 13, 2023 Warning Letter provided Respondent with written notice that it was in violation of federal law that could result in a fine.  In a subsequent inspection on August 13, 2023, Respondent was observed offering an Elfbar ENDS product for sale.  Based on my finding that Respondent committed the violation alleged in the Complaint, I hold the Respondent fully culpable for offering for sale new tobacco products that were adulterated and misbranded, in violation of the Act.  The Act places a heavy burden on retailers who choose to sell tobacco products because of their highly dangerous and addictive nature.  See 21 U.S.C. § 387 note (Findings and Purpose).  Although I find

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Respondent took remedial action upon receipt of the warning letter, these actions do not absolve Respondent of its responsibility as a retailer of tobacco products.

E. Additional Mitigating Factors

Finally, Respondent asserts that the civil money penalty is an excessive fine prohibited by the Eighth Amendment to the United States Constitution.  R. Brief at 3-5.  The FDA’s authority to impose a civil money penalty arises from the Act.  21 U.S.C. § 333(f)(9)(A).  In this proceeding, my authority does not encompass finding Federal statues or regulations invalid or unconstitutional.  See J. Peaceful, L.C. d/b/a Town Market, DAB No. 2742, at 15 (2016), 2016 WL 8732004 (H.H.S. Oct. 21, 2016) (quoting 21 C.F.R. § 17.19(c) (“presiding officer does not have the authority to find Federal statutes or regulations invalid”)); see also Zoom Mini Mart, Inc., DAB No. 2894, at 17 (2018).  Thus, in the case presently before me, Respondent’s arguments that the civil money penalty runs afoul of the Excessive Fines Clause are inapposite.

For these reasons, after considering the evidence, applicable law, and aggravating and mitigating circumstances in this case, I find that a reduced penalty amount of $15,000 is appropriate under 21 U.S.C. § 333(f)(5)(B), (f)(5)(C), and (f)(9).

VI. Conclusion

For the reasons set forth above, I impose a reduced civil money penalty in the amount of $15,000 against Respondent, VSS Coral Springs, LLC d/b/a Vape and Smoke Shop, for its violation of the Act, 21 U.S.C. § 331(c), by receiving via interstate commerce adulterated and misbranded tobacco products and offering the products for sale.  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.