7899 Watson Inc. d/b/a Liquor Express, DAB TB8838 (2024)

INITIAL DECISION

The Center for Tobacco Products (CTP) seeks to impose a $20,678 civil money penalty (CMP) against Respondent, 7899 Watson Inc. d/b/a Liquor Express.  CTP alleges that Respondent received in interstate commerce an electronic nicotine delivery system (ENDS) product that lacked the premarketing authorization required under the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 387j, and offered such product for sale, in violation of 21 U.S.C. § 331(c).  For the reasons discussed below, I find Respondent violated the Act as alleged by CTP and that a reduced CMP of $10,339 is appropriate.

I. Background

CTP began this matter by serving an Administrative Complaint on Respondent at 7899 Watson Road, Saint Louis, Missouri 63119, by United Parcel Service, and by filing a copy of the Complaint with the Food and Drug Administration’s (FDA) Division of Dockets Management.  Civil Remedies Division (CRD) Docket (Dkt.) Entry Nos. 1, 1b. On March 25, 2024, Respondent, through counsel, timely filed its Answer, denying the allegations set forth in paragraphs fourteen through twenty-one of the Complaint, raising 

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defenses, and disputing the appropriateness of the CMP.  CRD Dkt. Entry No. 6 at 1-2.  On March 26, 2024, I 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. 7.  On April 25, 2024, CTP filed a Joint Status Report indicating that the parties intended to engage in further settlement discussions and that CTP would notify the Departmental Appeals Board if the parties agreed to a settlement and Respondent fulfilled the terms of the settlement agreement.  CRD Dkt. Entry No. 8 at 1.

On May 6, 2024, CTP filed a Motion for a Protective Order and one exhibit.  CRD Dkt. Entry Nos. 10-10a.  In its Motion for a Protective Order, CTP asserted that responding to Respondent’s requests for production of documents in their entirety would require CTP to produce documents that are irrelevant, exempt from disclosure, and otherwise privileged.  CRD Dkt. Entry No. 10 at 1.  On May 7, 2024, I issued an Order giving Respondent fifteen days from receipt of CTP’s Memorandum in Support of Complainant’s Motion for a Protective Order to file a response to CTP’s Motion for a Protective Order.  See CRD Dkt. Entry No. 11 at 2.  On May 28, 2024, CTP filed its Memorandum and four exhibits.  CRD Dkt. Entry Nos. 12-12d.  On June 14, 2024, Respondent filed its Memorandum in Opposition to Complainant’s Motion for a Protective Order and one exhibit.  CRD Dkt. Entry Nos. 15-16.

On June 17, 2024, CTP timely filed its pre-hearing exchange, consisting of an Informal Brief of Complainant, Complainant’s List of Proposed Witnesses and Exhibits, and seven proposed exhibits, including CTP’s corrected Exhibit 1[1] (CTP Exhibits (Exs.) 1-7).  CRD Dkt. Entry Nos. 17-17h, 18.  CTP’s pre-hearing exchange included the written direct testimony of two proposed witnesses, James Bowling, Deputy Division Director, Division of Enforcement and Manufacturing in the Office of Compliance and Enforcement (CTP Ex. 1), and Kevin Weaver, an FDA-commissioned officer with the state of Missouri (CTP Ex. 2).  CRD Dkt. Entry Nos. 17c, 18.

On June 20, 2024, CTP filed its Reply to Respondent’s Opposition to Complainant’s Motion for a Protective Order and six exhibits.  CRD Dkt. Entry Nos. 19-19f.  On July 3, 2024, I issued an Order Granting Complainant’s Motion for a Protective Order regarding Respondent’s Requests for Production of Documents Nos. 1, 3, 4-6, and CTP’s CMP Review Memo.  See CRD Dkt. Entry No. 20.  I ordered that CTP was not required to produce documents responsive to those requests, other than the documents that had already been produced by CTP during discovery.  Id. at 8-9.

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On July 8, 2024, Respondent timely filed its pre-hearing exchange, consisting of an Informal Brief of Respondent, Respondent’s List of Proposed Witnesses and Exhibits, and five exhibits (R. Exs. 1-5).  CRD Dkt. Entry Nos. 21-21f.  Respondent’s pre-hearing exchange included the written direct testimony of two witnesses, Jignesh Patel, a Majority Owner/Operator of Liquor Express (R. Ex. 4), and Paul Patel, a Minority Owner of Liquor Express (R. Ex. 5).  CRD Dkt. Entry Nos. 21e-2f.

On August 14, 2024, I held a telephone pre-hearing conference (PHC) in this case.  See CRD Dkt. Entry No. 25.  During the PHC, absent objection from Respondent, I admitted CTP’s seven proposed exhibits into the administrative record.  Id. at 2.  Also, absent objection from CTP, I admitted Respondent’s five proposed exhibits into the administrative record.  Id.

At the PHC, both parties confirmed that neither wished to cross-examine the opposing parties’ proposed witnesses.  Id. at 2.  I therefore found an oral hearing to be unnecessary in this case, but permitted the parties an opportunity to submit final briefs.  See id.

On September 16, 2024, CTP timely filed a Notice of Waiver of Final Brief.  CRD Dkt. Entry No. 26.  On that same date, Respondent timely filed its final Brief of Respondent and six exhibits.  CRD Dkt. Entry Nos. 27-27f.  On October 1, 2024, CTP timely filed its Complainant’s Response to Respondent’s Final Brief (CTP’s Response) and two exhibits.  CRD Dkt. Entry Nos. 28-28b.  Neither party has objected to the exhibits submitted by the opposing party during the final briefing period: therefore, I admit Respondent’s exhibits into the administrative record as R. FB Exs. 1-6 and I admit CTP’s exhibits into the administrative record as CTP Resp. Exs. 1-2.

The administrative record is now complete and closed, and this matter is ready for a decision.  21 C.F.R. §§ 17.41, 45.  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 Respondent received in interstate commerce an ENDS product that lacked the premarketing authorization required under the Act, specifically an Esco Bars Pink Lemonade ENDS product, and offered such product for sale on August 14, 2023, in violation of 21 U.S.C. § 331(c);
2. Whether the affirmative defenses asserted by Respondent are meritorious; and
3. If Respondent is liable, whether the $20,678 civil money penalty is appropriate, considering any mitigating or aggravating factors that I find in this case.  21 C.F.R. § 17.45(b). 

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III. Findings of Fact and Conclusions of Law

1. CTP has demonstrated by a preponderance of the evidence that Respondent received an adulterated and misbranded ENDS product in interstate commerce and delivered or proffered that product for sale on August 14, 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.  CTP has the burden to prove Respondent’s liability and the appropriateness of the penalty by a preponderance of the evidence.  21 C.F.R. § 17.33(b).  Respondent has the burden to prove any affirmative defenses and any mitigating factors by a preponderance of the evidence.  21 C.F.R. § 17.33(c).

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 Division Director James Bowling, Division of Enforcement and Manufacturing in the Office of Compliance and Enforcement, CTP, FDA, and Inspector Kevin Weaver, FDA-commissioned officer in the state of Missouri.  CTP Exs. 1 and 2.  Inspector Weaver testified that during the inspection on August 14, 2023, at approximately 10:29 AM, Esco Bars Pink Lemonade ENDS products were available for sale at Respondent’s establishment.  CTP. Ex. 2 at 2.  See also CTP Exs. 3-6 (Inspector Weaver’s narrative report, inspection details, photographs and notice of inspection dated August 14, 2023).

Deputy Division Director Bowling testified that the ENDS product observed for sale during the August 14, 2023, inspection was manufactured in China, which is outside of 

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the state in which Respondent operates.  CTP Ex. 1 ¶ 6.  Deputy Division Director Bowling further testified that he:

 . . . can confirm that the Esco Bars Pink Lemonade ENDS products were not commercially marketed in the United States as of February 15, 2007 . . . that on August 14, 2024,² the day on which FDA observed the Esco Bars Pink Lemonade ENDS product being offered for sale at Liquor Express, that 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), . . . a report requesting a substantial equivalence order under 21 U.S.C. §387e(j) [had not been requested for this product] . . . . the Esco Bars Pink Lemonade 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 . . . an abbreviated report requesting a found-exempt order for such product(s) under 21 U.S.C. § 387e(j)(1) [had not been submitted.] 

CTP Ex. 1 ¶¶ 11-13.

In its Answer, Respondent initially denied the allegations set forth in paragraphs fourteen through twenty-one of the Complaint.  See CRD Dkt. Entry No. at 1.  Respondent denied the allegations that it received in interstate commerce an ENDS product that lacks the premarketing authorization required under the Act, specifically an Esco Bars Pink Lemonade ENDS product, and offered such product for sale on August 14, 2023, in violation of 21 U.S.C. § 331(c).  Id.  Respondent also raised a number of defenses and contested the proposed CMP as too high.  Id. at 2.  Thereafter, in its final Brief of Respondent, it stated that “Respondent admits that on August 14, 2023, Respondent had on its shelves for sale [an] Esco Bars Pink Lemonade ENDS product.”  CRD Dkt. Entry No. 27 at 4.

Thus, Respondent has not disputed any of the statements made by Inspector Weaver or Deputy Division Director Bowling.  Respondent does not specifically deny that the Esco Bars Pink Lemonade ENDS product observed by Inspector Weaver was at its establishment and being proffered for sale on August 14, 2023.  Rather, Respondent argues that it did not have specific knowledge of the nature of the ENDS product

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observed by Inspector Weaver on August 14, 2023 as it relates to the allegations made in the Complaint, that Respondent believed that it was in compliance with the law when it removed the specific tobacco products mentioned in the June 8, 2023 Warning Letter (Warning Letter), and that Respondent relied upon the representations of its wholesale distributor as to the legality of specific ENDS products.  See CRD Dkt. Entry Nos. 6 at 2, 27 at 3, 4, 7.

Based on the uncontested testimony of Inspector Weaver and Deputy Division Director Bowling, as well as the supporting evidence submitted by CTP, I find that the Esco Bars Pink Lemonade ENDS product offered for sale at Respondent’s establishment on August 14, 2023, previously traveled in interstate commerce before Respondent’s receipt and delivery or proffered delivery of such tobacco product for pay or otherwise.  See 21 U.S.C. § 331(c); see also United States v. Sullivan, 332 U.S. 689, 696 (1948), 92 L. Ed. 297, 303 (holding that the Act applies “to articles from the moment of their introduction into interstate commerce all the way to the moment of their delivery to the ultimate consumer”).  I find that the Esco Bars Pink Lemonade ENDS product was adulterated because it lacked the required FDA marketing authorization and was 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), the product was also misbranded because there was no substantially equivalent determination as required by 21 U.S.C. § 387e(j).  Therefore, I find that Respondent’s actions constitute a violation of law.

2. Respondent has not demonstrated by a preponderance of the evidence that its lack of specific knowledge regarding the ENDS product that it offered for sale at its establishment on August 14, 2023, is a meritorious affirmative defense or a factor that should mitigate its liability. 

In its final Brief of Respondent, Respondent states that “Respondent did not have specific knowledge of the nature of the item as it relates to allegations made by Complainant.”  CRD Dkt. Entry No. 27 at 4.  When a retailer decides to sale regulated tobacco products, the retailer is obligated to ensure that the products it sells are authorized.  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).  There is no dispute that Respondent was in the business of selling highly regulated and dangerous products.  See 21 U.S.C. § 387 note.  In offering regulated tobacco products to the public, Respondent assumed a duty to know the legal status of the regulated tobacco products that it offered for sale to the public at its establishment.  Further, although this is a civil case, it is a well-settled legal principle that ignorance of the law generally is not a defense to liability.  See Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 581 (2010); see also Ratzlaf v. United States, 510 U.S. 135, 149 (1994) (ignorance of the law is generally not a valid criminal defense).  I find that Respondent’s alleged lack of specific knowledge of the 

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nature of the ENDS product that it sold is not a meritorious affirmative defense nor a factor that should mitigate Respondent’s liability.

3. Respondent has not demonstrated by a preponderance of the evidence that its belief that it fully complied with the law by removing only the Elfbar Grape Energy and Esco Bars Cotton Candy ENDS products, specifically identified in the Warning Letter, is a meritorious affirmative defense or a factor that should mitigate its liability. 

In its Informal brief of Respondent, Respondent argues that it “relied upon the Warning Letter to inform them of the problem products and did away with them immediately upon discovery of the issue.”  CRD Dkt. Entry No. 21 at 3.  Respondent further argues that “[b]ased on their understanding of the Warning Letter, Respondent’s owners truly intended to comply with, and honestly believed they were complying with, the applicable rules and regulations.”  CRD Dkt. Entry 27 at 7.  Respondent asserts that “[a]s a result they removed the specific products brought to their attention in the Warning Letter[.]”  Id.  As a business that sells regulated tobacco products, Respondent is obligated to ensure compliance with the applicable law.  The Warning Letter clearly states that “[a]ll new tobacco products on the market without the statutorily required premarket authorization are marketed unlawfully and are subject to enforcement action at FDA's discretion.”  CTP Ex. 7 at 3.  In addition, the Warning Letter provided a link to “a list of products that received marketing granted orders[.]”  Id.  Therefore, I find that Respondent’s belief that it fully complied with the law by removing only the Elfbar Grape Energy and Esco Bars Cotton Candy ENDS products specifically identified in the text of the Warning Letter is not a meritorious affirmative defense or a factor that should mitigate Respondent’s liability.  

4. Respondent has not demonstrated by a preponderance of the evidence that its reliance upon the wholesale distributors that it receives ENDS products from in order to ensure compliance with the applicable statues and regulations is a meritorious affirmative defense or a factor that should mitigate its liability. 

In its Answer, Respondent argues, as a defense, that “it relied upon its wholesalers to provide products in compliance with current rules.”  CRD Dkt. Entry No. 6 at 2.  In its Final Brief of Respondent, Respondent reiterates its argument that it “relied on its wholesalers to provide it with products that were in compliance with all applicable laws in the normal course of their business relationship when they made their regular purchases.”  CRD Dkt. Entry No. 27 at 7.  However, at a minimum, it is Respondent’s responsibility to ensure compliance with the laws that regulate the tobacco products that it sells to the public.  Further, Respondent fails to cite any binding or persuasive legal precedent that would support the claim that a retailer’s reliance upon its wholesale distributors of ENDS products in order to ensure compliance with applicable law absolves it of liability.  Therefore, I find that Respondent has not met its burden of 

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proving that its reliance upon the wholesale distributors that it receives ENDS products from in order to ensure compliance with the applicable statues and regulations is a meritorious affirmative defense or a factor that should mitigate Respondent’s liability.

5. 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 in interstate commerce and offering for sale a new tobacco product that was adulterated and misbranded, and that Respondent has not proven by a preponderance of the evidence that the affirmative defenses it asserts are meritorious with regard to liability or factors that should mitigate its liability in this case.  21 U.S.C. § 331(c); 21 C.F.R. § 17.33(c).  Pursuant to 21 U.S.C. § 333(f)(9), Respondent Liquor Express is liable for a civil money penalty not to exceed the amounts listed in 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 $20,678 against Respondent.  CRD Dkt. Entry No. 1 ¶ 1.  In its Answer and subsequent briefs, Respondent contends that the CMP sought by CTP is too high because CTP is allegedly seeking the maximum penalty allowed for the violation alleged in the Complaint, that Respondent believed that it was acting in compliance with the law based on its actions following the Warning Letter and its ownership’s understanding of the language in the letter, that Respondent relied on its wholesale distributors to provide it with products in compliance with laws and regulations, and that Respondent’s business cannot survive imposition of the CMP sought by CTP.  See CRD Dkt. Entry Nos. 6, 21, 27.

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).

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

In its Informal Brief of Complainant, CTP asserts that Respondent’s violations are serious in nature as they contravene FDA’s efforts to protect the public health from the multitude of adverse health effects associated with tobacco use.  CRD Dkt. Entry No. 17 at 8.  CTP specifically refers to the Warning Letter it issued to Respondent on June 8, 2023, citing Respondent for offering for sale tobacco products, specifically Elfbar Grape Energy and Esco Bars Cotton Candy ENDS products, that lacked the required marketing authorization order.  Id.; CTP Ex. 7 at 1-2.  CTP states that the Warning Letter notified 

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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 violation indicated in [the] letter may not be a complete list of violations at the establishment.”  Id. at 8-9; CTP Ex. 7 at 3.  Finally, CTP asserts that the Warning Letter referred Respondent to the FDA website, which included information to help tobacco retailers understand and comply with FDA tobacco laws and regulations.  Id. at 9; CTP Ex. 7 at 3-4.

In its Informal Brief of Respondent and Final Brief of Respondent, Respondent argues that “Respondent was dealt the maximum penalty allowed on a first offense[,]” and that CTP is seeking the “harshest penalty available[,]” a remedy that “is inconsistent with CTP guidelines, which inherently incorporate a system of progressive punishment.”  CRD Dkt. Entry Nos. 21 at 3, 27 at 10.  Respondent also argues that “progressive penalties are at the heart of other tobacco violations.”  CRD Dkt. Entry No. 27 at 11.

In its Response to Respondent’s Final Brief, CTP explains that Respondent’s argument relies upon the progressive penalty schedule set forth in TCA § 103(q)(2), which is applicable to violations of restrictions promulgated under section 906(d) of the Act.  See CRD Dkt. Entry No. 28 at 6; TCA § 103(q)(2).  CTP further explains that the progressive increase in the civil money penalty amount referenced by Respondent and detailed in CTP’s Guidance for FDA and Tobacco Retailers, Civil Money Penalties and No-Tobacco-Sale Orders for Tobacco Retailers (Guidance Document) also only applies to retailer violations of section 906(d)(5) of the Act.  See CRD Dkt. Entry No. 28 at 6; CRD Dkt. Entry No. 27 at 10; Ctr. for Tobacco Prods., Food & Drug Admin., U.S. Dep’t of Health & Human Servs., Guidance for FDA and Tobacco Retailers, Civil Money Penalties and No-Tobacco-Sale Orders for Tobacco Retailers (Revised August 2023), available at: https://www.fda.gov/media/80888/download.

Here, I have determined that Respondent violated 21 U.S.C. § 331(c) of the Act.  Therefore, the progressive schedule set forth in TCA § 103(q)(2) is inapplicable to the violations alleged in this case.  21 U.S.C. § 331(c); TCA § 103(q)(2).  Pursuant to 21 U.S.C. § 333(f)(9)(A) and 21 C.F.R. § 17.2, a CMP of up to $20,678 is permissible for a violation of 21 U.S.C. § 331(c) of the Act.  See also 45 C.F.R. § 102.3.  Respondent’s violation of selling an unauthorized ENDS product is indeed serious.

According to the testimony of Jignesh Patel, a Part Owner/Operator of Liquor Express, Respondent removed the newly identified ENDS product from its shelves, as it had done with the ENDS products specifically identified in the Warning Letter.  See R. Ex. 4 ¶¶ 6-8; CRD Dkt. Entry No. 27 at 6.  Thus, I find that Respondent’s actions in effort to come into compliance, though imperfect, constitute a mitigating factor.

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

In its Final Brief of Respondent, Respondent argues that “the maximum civil monetary penalty would undoubtedly affect Respondent’s ability to survive, if not outright kill it. Respondent’s ownership would be forced to close the business, or even consider filing for bankruptcy.”  CRD Dkt. Entry No. 27 at 9.  According to Respondent’s 2023 federal tax return, its total assets were valued at $1,079,482.00.  See R. Ex. 1 at 1.  However, Respondent’s total income for the year was $149,775.00 and its total deductions were $224,470.00.  Therefore, according to its 2023 federal tax return, Respondent’s ordinary business income for 2023 was -$74,695.00.  Id.  In his Declaration, under penalty of perjury, Jignesh Patel testified that Respondent’s “business didn’t even make money last year.  It lost a huge amount of money.”  R. Ex. 4 ¶ 11.  In addition, Paul Patel, a Part Owner of Liquor Express, testified, under penalty of perjury, in his Declaration that “[i]f we are given a penalty like the one in the FDA letter the store will go out of business.”  R. Ex. 5 ¶ 10.

CTP argues that Respondent’s 2023 and 2022 tax returns alone are insufficient to establish Respondent’s ability to pay the $20,678 CMP.  See CRD Dkt. Entry Nos. 17 at 9, 28 at 7 (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 income and 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. at 9-10.

Based on my review of the evidence, I determine that the CMP that CTP seeks can affect Respondent’s ability to pay the CMP.  The direct testimony of Jignesh Patel and Paul Patel regarding the harm that the full $20,678 CMP will cause Respondent’s business is supported by Respondent’s 2022 and 2023 tax returns.  See R. Exs. 1, 4, 5.  I find that while the supporting evidence is limited, this evidence coupled with the unrebutted testimony of Jignesh Patel and Paul Patel demonstrates that the impact of a $20,678 CMP would result in a significantly negative effect on Respondent’s ability to do business, and is a mitigating factor.

1. 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 the June 8, 2023 Warning Letter stating that it had previously violated the law and that it nevertheless continued to receive in interstate commerce and offer for sale a new tobacco product that lacked the required premarket authorization, which shows an unwillingness or inability to comply with the law.  CRD Dkt. Entry Nos. 17 at 10, 28 at 7.  CTP therefore asserts that Respondent’s continued lack of compliance supports a penalty of $20,678.  Id.

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In its Final Brief, Respondent argues that “[t]he only evidence that Complainant can cite regarding prior violations is the singular Warning Letter itself, which only serves to highlight Respondent’s attempt at compliance based on the specific item mentioned.  Had Respondent failed to comply with the Warning Letter, Complainant would have been able to point to that item on their shelves at the time of the second visit to the store.”  CRD Dkt. Entry No. 27 at 8.

Respondent’s attempt to remedy the violations in the Warning Letter is considered a mitigating circumstance.  The Warning Letter specified that the Elfbar Grape Energy and Esco Bars Cotton Candy ENDS products lacked premarket authorization.  CTP’s Ex. 7 at 1.  However, in the current Complaint, CTP is seeking a CMP for Respondent’s offering for sale an Esco Bars Pink Lemonade ENDS product, which is a different flavor from the ENDS products identified in the Warning Letter.  CRD Dkt. Entry No. 1, ¶ 14.  Indeed, it was Respondent’s responsibility as a retailer of regulated tobacco products to review the complete list of products that received marketing granted orders, as provided at the link in CTP’s Warning Letter.  CTP Ex. 7 at 1, 3.  However, though insufficient, Respondent did attempt to come into compliance upon receiving the Warning Letter by removing the identified products.  Moreover, in Jignesh Patel’s Declaration, he stated that he removed the products identified in the Warning Letter from Respondent’s shelves at his own cost.  R. Ex. 4 ¶ 7.  Therefore, despite the serious nature of the violations, I find that 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.

1. iv. Degree of Culpability

Based on my finding that Respondent committed the violation alleged in the Complaint, I hold Respondent fully culpable for offering for sale a new tobacco product that was adulterated and misbranded, in violation of the Act.  As discussed previously, Respondent’s alleged reliance upon its wholesale distributors does not mitigate Respondent’s liability nor its culpability.  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 took remedial action upon receipt of the Warning Letter, these actions do not absolve Respondent of its responsibility as a retailer of tobacco products.

1. 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 undisputed statements in the Declarations of Respondent’s owners and the supporting evidence, as discussed above, I find the proposed penalty amount of $20,678 will place a significant financial strain on Respondent’s ability to continue to its business.  However, having found the 

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Respondent violated the law, to ensure that justice is served, the CMP should ensure future compliance with the Act and tobacco regulations.

For these reasons, after considering the record evidence, applicable law, and aggravating and mitigating circumstances in this case, I find that a reduced penalty amount of $10,339 is appropriate under 21 U.S.C. §§ 333(f)(5)(B), (f)(5)(C), and (f)(9).

IV. Conclusion

For the reasons set forth above, I impose a reduced civil money penalty against Respondent 7899 Watson Inc. d/b/a Liquor Express in the amount of $10,339 for receiving in interstate commerce an ENDS product that lack the premarketing authorization required under the Act, and offering such product for sale.  Pursuant to 21 C.F.R. § 17.45(d), this decision becomes final and binding upon both parties after 30 days of the date of its issuance.