Varahi Maa Inc.d/b/a Boulevard Stop, DAB TB8733 (2024)

INITIAL DECISION

The Center for Tobacco Products (CTP) seeks to impose a $19,192 civil money penalty (CMP) against Respondent, Varahi Maa Inc. d/b/a Boulevard Stop. CTP alleges that Respondent received in interstate commerce an electronic nicotine delivery system (ENDS) product that lacks the premarketing authorization required under the Federal Food, Drug, and Cosmetic Act (Act) and offered such product for sale, in violation of 21 U.S.C. § 331(c). Therefore, CTP seeks a $19,192 CMP against Respondent. For the reasons discussed below, I find that Respondent violated the Act as alleged by CTP, and that a reduced CMP of $16,314 is appropriate.

I. Background

CTP began this matter by serving an Administrative Complaint on Respondent at 5444 Virginia Beach Boulevard, Suite 101, Virginia Beach, Virginia 23462 by United States Postal Service (USPS), and by filing a copy of the Complaint with the Food and Drug

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Administration’s (FDA) Division of Dockets Management. Civil Remedies Division (CRD) Docket (Dkt.) Entry Nos. 1 (Complaint), 1b (USPS Tracking Proof of Service).

On December 18, 2023, Respondent registered for the Departmental Appeals Board (DAB) E-filing system and filed a timely request for an extension of time within which to file an answer. CRD Dkt. Entry No. 3. On that same date, I issued an Order Granting Respondent’s Request for Extension of Time. CRD Dkt. Entry No. 4. On January 19, 2024, Respondent filed its second request for an extension of time. CRD Dkt. Entry No. 5. On that same date, I issued an Order Denying Respondent’s Second Request for Extension of Time. CRD Dkt. Entry No. 6.

On January 25, 2024, Respondent filed its timely Answer, and a financial Balance Sheet for Varahi Maa Inc., as of December 31, 2023. CRD Dkt. Entry Nos. 8 (Answer), 7 (Balance Sheet). In its Answer, Respondent admitted all of the allegations set forth in CTP’s Complaint, did not assert any defenses, and disputed the appropriateness of the CMP sought by CTP. CRD Dkt. Entry No. 8 at 4-5.

On February 5, 2024, I issued an Acknowledgment and Pre-Hearing Order acknowledging receipt of Respondent’s Answer and Balance Sheet and establishing procedural deadlines for this case. CRD Dkt. Entry No. 9 (APHO).

On March 1, 2024, Respondent prematurely filed its pre-hearing exchange consisting of the Pre-Hearing Brief of Respondent, and the unmarked Declaration of Maneklal Patel, Owner of Respondent’s establishment. CRD Dkt. Entry Nos. 10 (Pre-Hearing Brief of Respondent), 11 (Declaration of Maneklal Patel).

On April 26, 2024, CTP timely filed its pre-hearing exchange consisting of the Informal Brief of Complainant, Complainant’s List of Proposed Witnesses and Exhibits, and seven proposed exhibits. CRD Dkt. Entry Nos. 13-13h. CTP’s exchange included the written direct testimony of two proposed witnesses: 1) James Bowling, Deputy Division Director for the Division of Enforcement and Manufacturing in the Office of Compliance and Enforcement, CTP Exhibit (Ex.) 1; and 2) Courtney Sewell, FDA-commissioned officer in the Commonwealth of Virginia, CTP Ex. 2. CRD Dkt. Entry Nos. 13b-13c.

On July 8, 2024, I conducted the pre-hearing conference (PHC) in this case. During the PHC, I explained the issues before me, the parties’ respective burdens of proof, and we discussed the parties’ pre-hearing exchange submissions. CRD Dkt. Entry No. 18 (Order Following PHC) at 1-3. I asked Respondent if he objected to the admission of CTP’s seven exhibits into the record, and Respondent stated that he did not object. Id. at 2. However, given that Respondent is unrepresented by counsel, I decided to provide Respondent with an opportunity to file any written objections to CTP’s exhibits by July 22, 2024, and I also provided CTP with a response deadline of August 6, 2024. Id. at 3. I marked Respondent’s Balance Sheet as R. Ex. 1, and the Declaration of Mr. Maneklal

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Patel as R. Ex. 2. Id. at 2-3. I asked CTP’s counsel if it objected to the admission of Respondent’s two exhibits into the record, and CTP’s counsel stated that it did not object. Id. at 3. During the PHC, I explained the purpose of a hearing and both parties stated that neither intended to cross-examine the opposing parties’ proposed witness(es). Id. Accordingly, during the PHC, I explained to the parties that I will decide this case based on the written administrative record. Id.; 21 C.F.R. § 17.45(a).

My July 10, 2024 Order Following PHC, established a September 5, 2024 deadline for the parties to file simultaneous final briefs. CRD Dkt. Entry No. 18 at 3.

Respondent has not filed any written objections to CTP’s seven exhibits, nor has Respondent filed a final brief, as permitted.

On September 5, 2024, CTP filed its Notice of Waiver of Final Brief. CRD Dkt. Entry No. 19.

There being no objections to either parties’ documentary evidence, I hereby admit CTP Exs. 1-7, and R. Exs. 1-2 into the record.

The administrative record is now complete and closed, and this matter is ready for a decision. I will consider the full administrative record in deciding this case. 21 C.F.R. §§ 17.41(b), 45(a).

II. Issues

1. Whether Respondent received in interstate commerce an ENDS product that lacks the premarketing authorization required under the Act, specifically an Elfbar Honeydew Pineapple Orange ENDS product, and offered such product for sale on August 12, 2023, in violation of 21 U.S.C. § 331(c); and, if so,

2. Whether the $19,192 civil money penalty is appropriate, considering any mitigating or aggravating factors that I find in this case. 21 C.F.R. § 17.45.

III. Findings of Fact and Conclusions of Law

1. CTP has demonstrated by a preponderance of the evidence that the Respondent received an adulterated and misbranded ENDS product in interstate commerce and delivered or proffered such product for sale on August 12, 2023, in violation of the Act.

CTP seeks to impose a CMP against Respondent pursuant to the authority conferred by the Act and implementing regulations at Part 21 of the Code of Federal Regulations.

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CTP has the burden to prove the Respondent’s liability and the appropriateness of the penalty by a preponderance of the evidence. 21 C.F.R. § 17.33(b).

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 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).

CTP’s case against Respondent relies on the written direct testimony of Deputy Director James Bowling, Office of Compliance and Enforcement, CTP, FDA, and Inspector Courtney Sewell, FDA-commissioned officer in the Commonwealth of Virginia. CTP Exs. 1 and 2. Inspector Sewell testified that during the inspection on August 12, 2023, at approximately 11:56 AM, an Elfbar Honeydew Pineapple Orange ENDS product was available for sale at Respondent’s establishment. CTP. Ex. at 2, ¶¶ 5, 7. See also CTP Exs. 3-6 (Inspector Sewell’s narrative report, inspection details, photographs and notice of inspection dated August 12, 2023).

Deputy Director Bowling testified that the ENDS product observed for sale during the August 12, 2023, inspection was manufactured in China, which is outside of the state in which Respondent operates. CTP Ex. 1, ¶ 7. Deputy Director Bowling further testified that he:

. . . can confirm that Elfbar Honeydew Pineapple Orange ENDS products were not commercially marketed in the United States as of February 15, 2007 that on August 12, 2023, the day on which FDA observed the Elfbar Honeydew Pineapple Orange ENDS product being offered for sale at Boulevard Stop, there was no record of this product having an FDA marketing granted order in effect under 21 U.S.C. § 387j(c)(1)(A)(i) . . . . 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

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Elfbar Honeydew Pineapple Orange ENDS product had not submitted a report requesting a substantial equivalence order under 21 U.S.C. § 387e(j). . . . the Elfbar Honeydew Pineapple Orange 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 Honeydew Pineapple Orange ENDS product had not submitted an abbreviated report requesting a found-exempt order for such product under 21 U.S.C. § 387e(j)(1).

CTP Ex. 1, ¶¶ 12-14.

In its Answer, Respondent admitted the allegations set forth in the Complaint, and thus conceded the factual allegations raised therein. CRD Dkt. Entry No. 8, at 4. Also, in its Answer, Respondent did not assert any defenses. Id. at 5. Further, at the PHC, Respondent reiterated its admission of liability, as set forth in its Answer to the Complaint, but contested the proposed $19,192 civil money penalty as being too high. See CRD Dkt. Entry No. 18, at 2.

Thus, Respondent has not disputed any of the statements made by Inspector Sewell or Deputy Director Bowling, and Respondent does not deny that the Elfbar Honeydew Pineapple Orange ENDS product observed by Inspector Sewell was at its establishment and being proffered for sale. Therefore, Respondent’s actions constitute violations of law that merit a CMP.

2. Respondent has demonstrated by a preponderance of the evidence mitigating circumstances to support a reduced CMP.

I have determined that 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). Pursuant to 21 U.S.C. § 333(f)(9), Respondent Boulevard Stop is liable for a civil money penalty not to exceed the amounts listed in the FDA’s CMP regulations at 21 C.F.R. § 17.2; see also 45 C.F.R. § 102.3.

In its Complaint, CTP seeks to impose a CMP amount of $19,192 against Respondent. CRD Dkt. Entry No. 1, ¶ 1. In its Answer, Informal Brief of Respondent, and the Declaration of Mr. Maneklal Patel, Respondent contends that the CMP sought by CTP is too high. CRD Dkt. Entry Nos. 8, 10-11. Respondent specifically states: that it cannot afford to pay the CMP and remain in business; once notified of the unauthorized tobacco products, it immediately removed those products from its shelves; and Respondent had only purchased the business and inventory in March 2023, had no other complaints and was in full compliance with the rules and regulations of Virginia. Id.

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When determining the appropriate amount of a CMP, I am required to consider any “circumstances that mitigate or aggravate the violation” and “the factors identified in the statute under which the penalty is assessed . . . .” 21 C.F.R. §§ 17.34(a); 17.34(b). Specifically, I must consider “the nature, circumstances, extent and gravity of the 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).

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

CTP contends that Respondent’s violations are serious in nature as they contravene the FDA’s efforts to protect the public health from the multitude of adverse health effects associated with tobacco use. CRD Dkt. Entry No. 13 at 9. (Informal Brief of Complainant). CTP specifically refers to a Warning Letter it issued to Respondent on June 15, 2023, citing Respondent for offering for sale a tobacco product, specifically an Elfbar Beach Day ENDS product that lacked the required marketing authorization. Id.; CTP Ex. 7 at 1-2. CTP states that the Warning Letter notified Respondent that future violations may lead to enforcement action, including, but not limited to, civil money penalties, seizure, and/or injunction by FDA and advised Respondent that “[t]he violations indicated in this letter may not be a complete list of violations at the establishment.” CRD Dkt. Entry No. 13 at 9; CTP Ex. 7 at 2. Finally, CTP states the Warning Letter referred the Respondent to an FDA website, which included information to help tobacco retailers understand and comply with FDA tobacco laws and regulations. Id.

In its Pre-Hearing Brief, Respondent asserts that “once notified [that the] products were not allowed[,] they were removed immediately.” CRD Dkt. Entry No. 10 at 6. Further, in his Declaration, Mr. Maneklal Patel, the owner of Respondent’s establishment, testifies under penalty of perjury that “once [he] was notified by the Inspection Officer of the products not allowed to be sold, they were immediately taken off the shelves and not sold.” R. Ex. 2 at 2.

Although, as Respondent concedes in its Pre-Hearing Brief, it “should have researched [the] products” included in its 2023 purchase of the establishment, there is evidence in the record indicating that Respondent attempted to come into compliance by removing the identified unauthorized product. CRD Dkt. Entry No. 10 at 6; see also R. Ex. 2 at 2. Thus, I find that Respondent’s action of removing the identified unauthorized ENDS product and attempting to come into compliance with the law constitutes a mitigating circumstance.

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

In its Answer, Respondent argues that the CMP sought by CTP is “too [h]igh,” and that Respondent “can’t afford [the] penalty.” CRD Dkt. Entry No. 8 at 5. In its Pre-Hearing Brief of Respondent, Respondent claims that “the penalty [CTP seeks to] impose would close [Respondent’s] business,” and that Respondent “is willing to pay some type of penalty but [does] not believe the penalty CTP is trying to impose is appropriate.” CRD Dkt. Entry No. 10 at 6. In Mr. Patel’s direct testimony, Mr. Patel testifies that the CMP sought by CTP “would hurt [his] business.” R. Ex. 2, at 2. With its Answer, Respondent also submitted a financial Balance Sheet, itemizing Respondent’s assets, and liabilities as of December 31, 2023. See CRD Dkt. Entry No. 7. According to Respondent’s Balance Sheet, as of December 31, 2023, Respondent’s total assets were valued at $234,196.65, Respondent’s total liabilities were $141,538.31, and Respondent’s total equity is listed as being valued at $92,658.34. Id. Therefore, the difference between Respondent’s total assets and total liabilities as of December 31, 2023 is $92,658.34. Id.

CTP argues that Respondent’s Balance Sheet is insufficient alone to establish Respondent’s ability to pay the $19,192 penalty. See CRD Dkt. Entry No. 13 at 10 (citing Joy and Evergreen Petro, Inc. d/b/a Sunoco, DAB No. CR4698, 2016 WL 8650385 at *2 (H.H.S. Sept. 6, 2016). CTP further argues that in order to establish inability to pay the penalty, Respondent should have provided additional evidence as to its business assets, such as, “proof as to its cash reserves, its credit worthiness, or other potential sources of capital, all of which are highly relevant to the issue of ability to pay a penalty.” Id.

Based on my review of the evidence, the CMP that CTP seeks can affect Respondent’s ability to pay the CMP. The direct testimony of Mr. Patel regarding the harm that the full $19,192 CMP will cause his business is supported by Respondent’s Balance Sheet. See R. Exs. 1, 2 at 2. While the supporting evidence is limited, this evidence coupled with the unrebutted testimony of Mr. Patel, demonstrates that the impact of a $19,192 CMP would result in a significantly negative effect on Respondent’s ability to do business, and is a mitigating factor.

iii. 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 CMP. CTP notes, however, that Respondent received a warning letter that it had previously violated the law and that it nevertheless continued to receive in interstate commerce and offer for sale new tobacco products that lacked the required premarket authorization, which shows an unwillingness or inability to comply with the law. CRD Dkt. Entry No. 13 at 10-11. CTP therefore proffers that Respondent’s repeated violations support a penalty of $19,192. Id. at 11.

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I agree with CTP that the Warning Letter demonstrates an alleged prior violation. However, I disagree with CTP’s contentions that Respondent’s repeated violations in this case were based on an unwillingness or inability to comply with the law. In the Declaration of Mr. Maneklal Patel, he testified that he had purchased the store in March 2023 – only two months prior to receiving the Warning Letter – and that, “once [he] was notified by the Inspection Officer of the products not allowed to be sold, they were immediately taken off the shelves and not sold[,] which at the time of the inspection they were present and removed.” R. Ex. 2 at 2.

Although it is unclear as to whether Mr. Patel’s testimony refers to the removal of the unauthorized ENDS products identified during the May 21, 2023 inspection that prompted the June 15, 2023 Warning Letter, or if Mr. Patel’s testimony refers to the August 12, 2023 inspection that gave rise to the Complaint, CTP has not challenged the testimony of Mr. Patel. Further, the June 15, 2023 Warning Letter specified that the Elfbar Beach Day ENDS product lacked premarket authorization, and provided a link to a list of products that received marketing granted orders. CTP Ex. 7 at 1, 3. However, in the current Complaint, CTP is seeking a CMP for Respondent’s possession of an Elfbar Honeydew Pineapple Orange ENDS product, which is a different flavor from the ENDS product expressly identified in the text of the June 15, 2023 Warning Letter. Compare CTP Ex. 7, CRD Dkt. Entry No. 1, ¶ 15. I find that Respondent’s attempt to remedy its alleged prior violations and come into compliance with the law, although insufficient, should be considered a mitigating circumstance. Therefore, despite the serious nature of the violations, I find the Respondent’s attempt to comply with the law, although insufficient to relieve it of liability, is a mitigating factor and the CMP amount should be reduced accordingly.

iv. Degree of Culpability

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 the Respondent admitted its liability and took remedial action to rectify its noncompliance, these actions do not absolve Respondent of its responsibility as a retailer of tobacco products.

v. Other Matters as Justice May Require

The Act gives me discretion to consider any other evidence or arguments to mitigate the amount of the CMP. 21 U.S.C. § 333(f)(5)(B). Based on the evidence in the record, I find the proposed penalty amount of $19,192 will place a significant financial strain on the Respondent. However, having found the Respondent violated the law, to ensure that

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justice is served, the CMP should ensure future compliance with the Act and tobacco regulations.

For these reasons, after considering the evidence in the record, applicable law, and aggravating and mitigating circumstances in this case, I find that a reduced penalty amount of $16,314 is appropriate under 21 U.S.C. §§ 333(f)(5)(B), (f)(5)(C), and (f)(9).

IV. Conclusion

I impose a reduced civil money penalty against Respondent, Varahi Maa Inc. d/b/a Boulevard Stop, in the amount of $16,314 for receiving in interstate commerce an ENDS product that lacks the premarketing authorization required under the Act, and offering such product for sale. Pursuant to 21 C.F.R. §§ 17.11(b), 17.45(d), this decision becomes final and binding upon both parties after 30 days of the date of its issuance.