ABE Petroleum Inc. d/b/a Sunoco / Tobacco Depot, DAB TB8775 (2024)

INITIAL DECISION

The Center for Tobacco Products (CTP) seeks a $19,192 civil money penalty against ABE Petroleum Inc. d/b/a Sunoco / Tobacco Depot (Respondent or Sunoco / Tobacco Depot), for violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq.  Specifically, CTP seeks to impose a $19,192 civil money penalty against Respondent 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 Act.  For the reasons discussed below, I find Respondent liable for the violations alleged, and conclude that a CMP of $19,192 is appropriate.

I. Background and Procedural History

CTP began this case by serving an administrative complaint (Complaint) on Respondent Sunoco / Tobacco Depot, at its establishment located at 1285 North Church Avenue, Mulberry, Florida 33860, by United Parcel Service, and by filing a copy of the complaint

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with the Food and Drug Administration’s (FDA’s) Division of Dockets Management. Civil Remedies Division (CRD) Docket (Dkt.) Entry Nos. 1, 1b.

On October 17, 2023, Respondent filed a timely Answer to CTP’s Complaint.  CRD Dkt. Entry No. 3 (Answer).  On November 7, 2023, I issued an Acknowledgement and Pre-Hearing Order (APHO) in which I established, among other things, deadlines for discovery and the parties’ pre-hearing exchanges.  CRD Dkt. Entry No. 4.

On December 5, 2023, CTP filed a Joint Status Report stating that the parties were unable to reach a settlement in this case.  CRD Dkt. Entry No. 5.

On January 4, 2024, Respondent through counsel filed an Unopposed Motion for Extension of Case Deadlines (R’s Unopposed Motion), seeking a 30-day extension of the deadline for responding to CTP’s request for production of documents.  CRD Dkt. Entry No. 7.  Respondent’s Unopposed Motion also sought extension of the pre-hearing exchange deadlines.  Id.  I issued an Order granting Respondent’s Unopposed Motion and extended the deadline for its response to CTP’s request for production to February 5, 2024.  My Order also extended the pre-hearing exchange deadlines.  CRD Dkt. Entry No. 8.

On February 16, 2024, CTP filed a Motion to Compel Discovery asserting that Respondent did not respond to its discovery request as required by my APHO and regulations.  CRD Dkt. Entry No. 9.  Also, on February 16, 2024, CTP filed a Motion to Extend Deadlines.  CRD Dkt. Entry No. 10.

On February 21, 2024, I issued an Order extending the parties’ pre-hearing exchange deadlines and set a deadline for March 6, 2024, for Respondent to respond to CTP’s Motion to Compel Discovery.  CRD Dkt. Entry No. 11.  On March 6, 2024, Respondent filed its Response to Motion to Compel Discovery.  CRD Dkt. Entry No. 12.  On March 12, 2024, I issued an Order finding CTP’s Motion to Compel documents moot by Respondent providing the requested documents.  CRD Dkt. Entry No. 13.

CTP timely filed its pre-hearing exchange, which consisted of a pre-hearing brief (CTP’s Br.), a list of proposed witnesses and exhibits, and eight proposed exhibits (CTP Exs. 1-8), including the written direct testimony of two proposed witnesses, James Bowling, Deputy Director, Division of Enforcement and Manufacturing, Office of Compliance and Enforcement, CTP, FDA (CTP Ex. 1), and FDA-commissioned Inspector Deja Sparkman (CTP Ex. 2).  CRD Dkt. Entry Nos. 14, 14a-14i.  Derek Usman, counsel for Respondent, did not submit an informal brief or any evidence, including the written direct testimony of any witnesses.

On May 29, 2024, I held a virtual pre-hearing conference in this case.  CRD Dkt. Entry No. 17 (Order Following Pre-Hearing Conference).  During the pre-hearing conference,

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we discussed the procedural history of the case and the issues before me.  We also discussed the parties’ exchange and witnesses, and the availability of the witnesses.  I explained that the purpose of a formal hearing is to allow for the cross examination of the other parties’ witnesses.  CTP submitted sworn testimony from its witnesses, Deputy Division Director Bowling and Inspector Sparkman, as well as a pre-hearing brief, and proposed exhibits (Exs.) CTP Ex. 1 through CTP Ex. 8.  See CRD Dkt. Entry Nos. 14, 14a-14i.  I noted the absence of Respondent’s pre-hearing submission from the record. Respondent’s counsel affirmed that there were no exhibits or witnesses to be presented by Respondent at a hearing.  On questioning, Mr. Usman further stated that there were no objections to the proposed exhibits filed by CTP.  Therefore, I admitted into evidence CTP Exhibits 1 through 8.  Further, during the PHC, Respondent’s counsel advised of his intent to cross-examine only Inspector Sparkman at the hearing.  See CRD Dkt. Entry No. 19 at 1, fn.1.  Lastly, the parties were directed to confer and advise this office by June 7, 2024 of the proposed date and time for a hearing.  CRD Dkt. Entry No. 17.  On June 5, 2024, I issued an Order scheduling a virtual hearing in this case for July 18, 2024, at 1:00 PM Eastern Time.  CRD Dkt. Entry No. 19.

Following the PHC, on June 5, 2024, Respondent’s counsel filed an Unopposed Motion to Reconsider Order (Motion to Reconsider).  CRD Dkt. Entry No. 20.  In the Motion to Reconsider, counsel asked that I amend the APHO to allow Respondent to submit documents not previously provided during the pre-hearing exchange process.  Id. at 1. Counsel for Respondent asserted:

Respondent produced the documents in its response to [CTP’s] discovery requests on March 6, 2024 . . . good cause exists because Respondent misunderstood the requirements of the Order and its interplay with the statutory requirements for exchange of different forms of evidence for multiple hearings, including the pre-hearing conference.

Id. at 1-2.  That same day, I issued an Order which declined to amend the APHO, and ultimately denied Respondent’s Motion to Reconsider, noting counsel’s failure to supplement its pre-hearing exchange, in accordance with paragraph 13 of the APHO. CRD Dkt. Entry No. 21 at 2.

Subsequently, on June 24, 2024, Respondent’s counsel filed an Unopposed Motion for Untimely Filing of Hearing Exhibit (Unopposed Motion).  CRD Dkt. Entry No. 22. Specifically, counsel sought to file out of time a one-page document identified as Respondent’s proposed Exhibit 1.  See id. at 1, 4.  Counsel asserted, in part, that the proposed exhibit was previously provided to CTP during the discovery process; however, the document was not filed with this tribunal during pre-hearing exchange.  Id. at 1-2. Counsel further stated, “inclusion of the Exhibit will facilitate settlement and conserve judicial resources.”  Id. at 2.  On June 25, 2024, I granted counsel’s Unopposed Motion and accepted Respondent’s proposed Exhibit 1 as part of the administrative record.  CRD

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Dkt. Entry No. 23.  My Order also afforded CTP an opportunity to supplement its pre-hearing exchange, if needed.  Id.  CTP did not file a supplemental pre-hearing exchange.

On July 18, 2024, I conducted a hearing in this case.  During the hearing, I admitted Respondent’s Exhibit 1 (R’s Ex. 1) into evidence.  Hearing Transcript (Tr.) at 6. Respondent’s counsel conducted cross-examination of Inspector Sparkman.  Tr. at 7-11. CTP conducted re-direct examination of Inspector Sparkman.  Tr. at 11.

On August 8, 2024, the hearing transcript was received and uploaded to the DAB E-File system, and the parties were advised of its availability.  CRD Dkt. Entry No. 24.  On that same date, I issued an Order setting deadlines for the parties’ simultaneous post-hearing brief submissions.  I also gave the parties until September 9, 2024, to file any corrections to the transcript.  CRD Dkt. Entry No. 25.  On September 24, 2024, Respondent’s counsel submitted his post-hearing brief (R’s Post-Hearing Br.).  CRD Dkt. Entry No. 26.  CTP did not file a post-hearing brief.

Accordingly, the record is now closed, and I will decide this case based on the evidence in the administrative record.  21 C.F.R. §§ 17.41, 17.45(c); see also id. at §§ 17.19(b)(11), (17).

II. Issues

• Whether Respondent violated 21 U.S.C. § 331(c) of the Act, as alleged in the Complaint; and if so,
• Whether the CMP of $19,192 that CTP seeks is an appropriate amount in violation of 21 U.S.C. § 333(f)(9); and if so,
• Whether the $19,192 civil money penalty amount sought by CTP should be reduced, considering any aggravating and mitigating factors.

III. Analysis

To prevail, CTP must prove Respondent’s liability by a preponderance of the evidence. The United States Supreme Court has described the preponderance of the evidence standard as requiring that the trier-of-fact believe that the existence of a fact is more probable than not before finding in favor of the party that had the burden to persuade the judge of the fact’s existence.  In re Winship, 397 U.S. 358, 371-72 (1970); Concrete Pipe and Prods. of Cal., Inc. v. Constr. Laborers, 508 U.S. 602, 622 (1993).

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

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burden to prove any affirmative defenses and any mitigating factors by a preponderance of the evidence.  21 C.F.R. § 17.33(c).

CTP seeks a civil money penalty against Respondent pursuant to the authority conferred by the Act and implementing regulations at Part 21 of the Code of Federal Regulations. 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).  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).

A “new tobacco product” is exempt from this premarket authorization requirement only if there is a substantial equivalence (SE) or a found exempt order (found-exempt order) in effect for such product.  21 U.S.C. §§ 387j(a)(2)(A), 387e(j)(3)(A).  Absent an approval from the FDA, the new tobacco products are considered adulterated and misbranded if they lack the required FDA marketing authorization order (Marketing Granted Order or MGO), substantial equivalence order, or an exemption order.  21 U.S.C. §§ 387b(6) and 387c(6).

The FDA, through CTP, has the authority to seek civil money penalties from any person who violates the Act’s requirements as they relate to the sale of tobacco products.  21 U.S.C. § 333(f)(9)(A).  Retailers who violate a requirement of the Act that relates to tobacco products may incur a civil money penalty up to the maximum amounts provided for by law, $19,192 for each such violation, not to exceed $1,279,448 for all violations adjudicated in a single proceeding. 21 U.S.C. § 333(f)(9)(A); 21 C.F.R. § 17.2; 45 C.F.R. § 102.3.

As detailed below, I find that based on the evidence of record, CTP’s imposed civil money penalty amount of $19,192, for Respondent’s violation on August 15, 2023, is appropriate,

A. Violation of 21 U.S.C. § 331(c) of the Act

CTP alleges that Respondent violated section 331(c) of the Act by holding for sale a new tobacco product that lacked premarket review or marketing granted order.  Complaint ¶¶ 16, 17, and 18.  Specifically, CTP alleges that Respondent received adulterated and misbranded ENDS products in interstate commerce and delivered or proffered delivery thereof for pay or otherwise, in violation of section 331(c).  Complaint, ¶ 19.

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Initially, Respondent argued that it was not aware of a problem with the ENDS product at issue because the owner had been out ill at the time of the initial inspection and warning letter.  It asserted that, had it been aware of this, it would have removed the products at issue immediately.  CRD Dkt. Entry No. 3.  However, in its post-hearing brief, Respondent’s counsel did not dispute the allegation of receiving in interstate commerce an ENDS product that lacked the premarketing authorization required under the Act and offered such product for sale.  Counsel does contest the $19,192 CMP sought by CTP and presents arguments as to Respondent’s ability to pay the CMP.  CRD Dkt. Entry No. 26.

In resolving the issues raised in this case, it is first necessary to establish that the Elf Bar product in question was a new tobacco product that is adulterated and misbranded because it lacked FDA authorization, a substantial equivalence or found exempt order. CTP’s case against Respondent relies heavily on the testimony of Deputy Division Director James Bowling and Inspector Deja Sparkman.  CTP Exs. 1, 2.  According to the Declaration of Deputy Division Director Bowling, the Elfbar Pineapple Coconut ENDS product was not commercially marked in the United States as of February 15, 2007.  CTP Ex. 1 at 4 ¶ 12.  Mr. Bowling further confirmed that, on August 15, 2023, the day on which the inspector observed the Elfbar Pineapple Coconut Ice ENDS product in Respondent’s establishment, there was no record in the FDA’s data base of an FDA marketing granted order, a substantial equivalence order, or a found-exempt order for the Elfbar Pineapple Coconut Ice ENDS product.  Id. at 4 ¶¶ 13, 14.  Finally, Mr. Bowling stated that the Elfbar Pineapple Coconut Ice ENDS product was manufactured in China by a company that did not have any registered production facilities in Florida.  Id. at 3 ¶ 10.

Respondent has not offered any evidence to counter the statements made by Mr. Bowling. As a result, I first find that the Elfbar Pineapple Coconut Ice ENDS product was a new tobacco product because it was not commercially marketed in the United States as of February 15, 2007.  21 U.S.C. § 387j(a)(1).  As a “new” tobacco product, the Elfbar product in question did not have a marketing granted order or a substantial equivalence or found exempt order in effect.  I further find that the Elfbar product in question traveled in interstate commerce since it traveled in “commerce between any State or Territory and any place outside thereof.”  21 U.S.C. § 321(b).  With these findings, the Elfbar Pineapple Coconut Ice ENDS product, which was received by Respondent in interstate commerce, was adulterated and misbranded, pursuant to the provisions of 21 U.S.C. §§ 387b(6)(A) and 387c(a)(6).  Thus, the final question for resolution is whether Respondent “delivered or proffered delivery thereof for pay or otherwise” the Elfbar Pineapple Coconut Ice ENDS product, in violation of 21 U.S.C. § 331(c).

In her Declaration, Inspector Sparkman stated that during the inspection on August 15, 2023, she “observed that the establishment sold FDA-regulated tobacco products and had a sales display containing tobacco products, including an Elfbar Pineapple Coconut ENDS product, available for sale.”  CTP Ex. 2 at 2 ¶ 6.  Inspector Sparkman further

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stated in her Declaration that she took photographs of the establishment, including the tobacco products, and that CTP Exhibit 7 was a true and accurate copy of the photographs she took during the inspection.  Id.  At the hearing, Inspector Sparkman confirmed that, during the inspection conducted of Respondent’s establishment, she asked for and photographed the Elfbar product on display.  Tr. at 8-9.  The physical evidence is consistent with the testimony of Inspector Sparkman.  The photographs referenced by Inspector Sparkman reveal the Elfbar product on a shelf bearing a price tag of $24.99. CTP Ex. 7 at 7.

Respondent has not offered any evidence to counter the testimony of Inspector Sparkman. Josemon Thathamkulan, Respondent’s owner, initially asserted that he had been out of his store at the time of the initial inspection in May 2023 recovering from a stroke and was unaware of the inspection and the warning letter.  He stated that he would have removed the problem products had he known about this at the time, but subsequently removed the products in question following the second inspection.  Respondent further argued that since he purchased the products in question from a licensed wholesaler, CTP should fine the wholesaler and not him.  CRD Dkt. Entry No. 3.

I have considered Respondent’s arguments but do not find that they, in any way, negate the evidence presented by CTP.  Even though no evidence was presented to corroborate Mr. Thathamkulam’s allegations, I have no reason to question his statements about being out of the store while he recovered from a stroke.  However, even accepting his statements at face value, the fact remains that, after receiving a written warning in bold print stating “FDA Warning Letter Regarding Tobacco Retailer Inspection Violation,” his business continued to sell a product after being notified the product was “marketed unlawfully.”  See CTP Ex. 8 at 1, 2 (original emphasis).

Respondent also argued that CTP should look to the wholesalers, rather than the retailers who purchase products on the assumption that the products are legal.  CRD Dkt. Entry No. 3 at 4.  While this argument is an interesting one, section 331(c) is clearly directed at retail businesses who receive adulterated and misbranded tobacco products in interstate commerce and offer such products for sale.  Thus, I have no authority to look beyond the intent of Congress in including section 331(c) in the Act.  Moreover, the regulations at 21 C.F.R. § 17.19(c) specifically indicate that I have no authority to find Federal statutes or regulations invalid.

At the hearing, Respondent appeared to suggest that, on August 15, 2023, the inspector somehow targeted its retail establishment.  See Tr. at 9.  However, Inspector Sparkman testified that she receives assignments for specific inspections through emails from CTP and this inspection was assigned to her to inspect for Elfbar products.  Tr. at 9, 11.  Thus, there is no evidence to support any targeting or disparate treatment of Respondent by CTP.

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In the absence of any evidence to the contrary, I find that, on August 15, 2023, Respondent “delivered or proffered delivery thereof for pay or otherwise” the Elfbar Pineapple Coconut Ice ENDS product, in violation of 21 U.S.C. § 331(c).

B. Civil Money Penalty

Having determined that Respondent held for sale an adulterated and misbranded tobacco product, I have the authority to impose a CMP under the provisions of 21 U.S.C. § 333(f)(9)(A).  In its Complaint, CTP sought to impose the penalty amount of $19,192 against Respondent for selling a new tobacco product that lacked the required premarketing authorization.  Complaint ¶ 1.  Respondent offers mitigating circumstances and argues those circumstances should “preclude the imposition of the harshest penalty in the form of the maximum penalty of $19,192 for a first-time, single violation.”  R’s Post-Hearing Br. at 1.

In determining whether a $19,192 CMP is appropriate, I must consider any aggravating or mitigating circumstances.  21 C.F.R. §§ 17.34(a), 17.45(b)(3).  I am also required to take into account “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).  Respondent bears the burden to prove the existence of certain considerations, or mitigating factors, relevant to determining the CMP, by a preponderance of the evidence. 

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

Respondent held for sale a tobacco product that was adulterated and misbranded.  To hold such a product for sale is a serious offense that threatens public health.  The Family Smoking Prevention and Tobacco Control Act (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).  Respondent was in the business of selling this highly regulated and dangerous product1.  In a written warning dated June 15, 2023, Respondent was notified that during an inspection on May 30, 2023, it offered for sale Elfbar Beach Day and Elfbar Watermelon Bubble Gum ENDS products that lacked the required marketing authorization.  CTP Ex. 8 at 1.

In the Answer, Josemon Thathamkulan, the owner of Respondent’s establishment, stated that he had a stroke in March 2023 and was not present in the establishment at the time of the initial May 2023 inspection or the warning letter.  He stated that the inexperienced person he left in charge during his illness did not maintain good records and never told

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him about the inspection or the warning letter.  CRD Dkt. Entry No. 3 at 4.  I have no reason to doubt the statements made by Mr. Thathamkulam and I am sympathetic to the health problem he has identified.  However, even assuming his statements as true, Respondent left an “inexperienced” individual to manage a business selling “inherently dangerous” products while apparently disregarding the warning that it was in violation of federal law, and therefore, continued to offer for sale the specified Elfbar product.  This is not consistent with a serious attempt to comply with federal tobacco law and demands a proportional CMP.

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

Respondent argues that the $19,192 CMP would have a significant impact on the business’s finances.  CRD Dkt. Entry No. 3 at 4.  In support of its assertions, Respondent submitted an Income Statement for year ending December 31, 2023, which shows a net loss of $271 for ABE Petroleum.  R. Ex. 1.  Respondent further argued that it would be deemed a “very small businesses[sic],” defined as averaging less than $1,000,000 per year in sold and unsold products during the preceding three-year calendar period.  Respondent concluded that such status would merit a reduction in the CMP under the Small Business Regulatory Enforcement Fairness Act of 1996.  R’s Post-Hearing Br. at 2.

In evaluating this factor, I note at the outset that a formal tax return for the business would have been a more persuasive document since it would reflect what the business reported to the Internal Revenue Service.  Moreover, the “Income Statement” is confusing since it cites identical amounts for “Current Month” and “Year to Date.”  See CRD Dkt. Entry No. 22 at 4.  So, unless an entire year’s worth of business was conducted in December 2023, which would appear unlikely, this document is not found to be persuasive on the question of the current ability to pay.  Moreover, while the legal nature of Respondent’s business was never provided for the record, the business is identified as ABE Petroleum Inc., suggesting it is structured as a corporation.  Corporate records could have provided additional information on corporate assets, including real property and capital reserve funds, and the financial status of the corporation.  None of this was provided for the record.

While Respondent has argued it would be entitled to a reduced CMP as a “very small business,” it has provided no evidence to establish that status, assuming those provisions would apply to this proceeding.  The “Income Statement” for 2023, standing alone, would certainly not document the three years of sold and unsold products reportedly required to establish this status.  Accordingly, I cannot find that Respondent has established an inability to pay.

In considering the effects of the CMP on Respondent’s ability to continue to do business, I note that Respondent has not provided any evidence that it cannot continue in business

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after paying the CMP.  There is no indication it cannot and does not remain in business selling products that are legally on the market.

3. History of Prior Violations

Respondent has asserted that it “does not have a history of prior violations for the resale of tobacco products.”  R’s Post-Hearing Br. at 3.  However, the business received a Warning Letter dated June 15, 2023 that it was “observed to be in violation of federal tobacco laws and regulations.”  CTP Ex. 8 at 1.  While Respondent asserts that the owner did not receive the warning letter because he was recovering from a stroke and was not informed of such by the cashier, there is no evidence that the letter was not received by the business, ABE Petroleum Inc.2  Thus, there was a prior violation, even though it did not result in a CMP.

4. Degree of Culpability

ABE Petroleum Inc. did receive written notice that it was in violation of federal law for offering for sale an Elfbar Beach Day and Watermelon Bubble Gum ENDS products, tobacco products lacking premarket authorization.  In response to this warning letter, it did not take action to remove Elfbar products it carried from the shelves, despite being referred to a CTP website for guidance on these products.  CTP Ex. 8 at 3-4.  As a result, the degree of culpability of the business is high.

5. Additional Mitigating Factors and Other Matters as Justice May Require

Mitigation is an affirmative defense for which Respondent bears the burden of proof by a preponderance of the evidence.  21 C.F.R. § 17.33(c).  Based on the arguments presented by Respondent and its counsel, I do not find any mitigating factors which would justify reducing the penalty that CTP determined to impose.

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IV. Conclusion

For these reasons, I enter judgment in the amount of $19,192 against Respondent, ABE Petroleum Inc. d/b/a Sunoco / Tobacco Depot, 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 in its establishment.  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.