Valero D and M Corp. d/b/a Valero, DAB TB10088 (2025)

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

The Food and Drug Administration (FDA), Center for Tobacco Products (CTP or Complainant) began this case by serving a Complaint on Respondent, Valero D and M Corp. d/b/a Valero, and filing a copy of the Complaint with the Departmental Appeals Board (DAB), Civil Remedies Division (CRD).  The Complaint alleges that Respondent's staff sold regulated tobacco products to underage purchasers and failed to verify that the purchasers were 21 years of age or older, thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R. Part 1140.  CTP seeks a civil money penalty of $6,892 against the Respondent for at least five violations of the tobacco regulations within a 36-month period.  Respondent timely requested a hearing by filing an Answer to the Complaint.  However, during the course of this administrative proceeding, Respondent failed to comply with orders and procedures governing this proceeding and failed to defend its actions, which interfered with the speedy, orderly, or fair conduct of this proceeding.

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21 C.F.R. § 17.35(a).

Currently, Complainant's Status Report and Motion to Impose Sanctions (Motion to Impose Sanctions) is pending before me.  CTP's Motion to Impose Sanctions requests that I strike Respondent's Answer as a sanction for failing to comply with CTP's discovery requests and issue a default judgment against Respondent.  After careful consideration, pursuant to 21 C.F.R. §§ 17.35(a) and 17.35(c)(3), I grant CTP's Motion to Impose Sanctions, strike Respondent's Answer, and issue an Initial Decision and Default Judgment imposing a civil money penalty of $6,892.

I.  Background and Procedural History

On November 27, 2024, CTP served the Complaint and supporting documents on Respondent by United Parcel Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7.  CRD Docket (Dkt.) Entry Numbers (Nos.) 1, 1a-1b.  On December 26, 2024, Respondent registered for the DAB Electronic Filing System (DAB E-File) and timely filed an Answer to CTP's Complaint.  CRD Dkt. Entry No. 3.  In its Answer, Respondent did not address the allegations in the Complaint but stated that it would like to settle the case as soon as possible.  Id.  Based on these representations, I inferred that the parties may not intend to proceed to a hearing and issued an Acknowledgment and Status Report Order (ASRO) on January 2, 2025.  CRD Dkt. Entry No. 4.

However, on March 3, 2025, counsel for CTP filed a Notice of Entry of Appearance, and a Status Report, stating that "[t]he parties have been unable to reach a settlement in this case.  CTP remains willing to engage in settlement discussions but, absent an executed settlement agreement, intends to proceed to a hearing."  CRD Dkt. Entry Nos. 5, 6.

Consequently, on March 5, 2025, I issued an Acknowledgment and Pre-Hearing Order (APHO) that set deadlines for the parties' filings and exchanges, including a schedule for discovery.  CRD Dkt. Entry No. 7.  Specifically, I directed that a party receiving a discovery request must provide the requested documents within 30 days of the request.  Id. ¶ 4; see 21 C.F.R. § 17.23(a).  Also, I warned that I may impose sanctions if a party failed to comply with any order, including the APHO.  CRD Dkt. Entry No. 7 ¶ 21.

On April 4, 2025, CTP filed a Motion to Extend Deadlines, stating that "[o]n April 1, 2025, FDA experienced a significant reduction in force (RIF), including in FDA's Center for Tobacco Product's [CTP's] Office of Compliance and Enforcement, the office that supports all tobacco-related administrative cases[,]" Complainant "is still evaluating the impact the RIF may have on CTP's immediate operations[,] . . . [and Complainant] is requesting a 30-calendar day extension of all pending deadlines in this matter."  CRD Dkt. Entry No. 8.

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On April 7, 2025, I granted CTP's Motion to Extend Deadlines, and all pending deadlines were extended by 30 days.  CRD Dkt. Entry No. 9.

On May 9, 2025, CTP filed Complainant's Status Report and Motion to Extend Deadlines, requesting that the deadlines to be extended by an additional 30 days, citing that "CTP continues to experience limited capacity directly related to the Reduction in Force, mentioned in its April 4, 2025 Motion."  CRD Dkt. Entry No. 10 at 1.  In a May 14, 2025, Order, I granted CTP's extension request, extending all deadlines in the case by an additional 30 days.  CRD Dkt. Entry No. 11.

On June 9, 2025, CTP filed a Joint Status Report, stating that "[t]he parties intend to engage in further settlement discussions.  CTP will notify the Departmental Appeals Board if the parties agree to a settlement and Respondent fulfills the terms of the settlement agreement."  CRD Dkt. Entry No. 12 at 1.

On July 15, 2025, CTP filed a Motion to Compel Discovery stating that Respondent failed to respond to CTP's Request for Production of Documents (RFP), which had been served on June 10, 2025.  CRD Dkt. Entry No. 13 at 1; see also id. at CRD Dkt. Entry Nos.13a, 13b (CTP Exhibits A and B).  In its Motion, CTP requested that I issue an order "compelling Respondent to respond to CTP's Request for Production of Documents in its entirety."  CRD Dkt. Entry No. 13 at 2.  Contemporaneously, CTP filed a Motion to Extend Deadlines, requesting that the deadlines for the parties' pre-hearing exchanges also be extended by 30 days.  CRD Dkt. Entry No. 14 at 2.

By Order dated July 15, 2025, I informed Respondent of its July 31, 2025, deadline to file a response to CTP's Motion to Compel Discovery and warned that if Respondent failed to respond, "I may grant CTP's motion in its entirety."  CRD Dkt. Entry No. 15 at 1; see also 21 C.F.R. § 17.32(c); CRD Dkt. Entry No. 7 ¶ 20.  Additionally, I extended the pre-hearing exchange deadlines by 30 days.  CRD Dkt. Entry No. 15 at 2.  CTP's pre-hearing exchange deadline was extended until August 29, 2025, and Respondent's pre-hearing exchange deadline was extended until September 19, 2025.  Id.  Respondent did not respond to my July 15, 2025, Order.

On August 8, 2025, I issued an Order Granting Complainant's Motion to Compel Discovery.  CRD Dkt. Entry No. 16.  Additionally, I ordered Respondent to produce documents responsive to CTP's discovery requests by August 22, 2025, and warned Respondent that:

. . . [F]ailure to comply with this Order may result in sanctions, including the issuance of an Initial Decision and Default Judgment finding Respondent liable for the violations listed in the Complaint and imposing a civil money penalty.

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CRD Dkt. Entry No. 16 at 3.  I also extended CTP's and Respondent's pre-hearing exchange deadlines by an additional fourteen days, to September 12, 2025, and October 3, 2025, respectively.  Id.
On August 25, 2025, CTP filed Complainant's Motion to Impose Sanctions and a Motion to Stay Deadlines, respectively.  CRD Dkt. Entry Nos. 17, 18.  CTP's Motion to Impose Sanctions advised that Respondent failed to produce responsive documents in compliance with my August 8, 2025, Order Granting Complainant's Motion to Compel Discovery.  CRD Dkt. Entry No. 17 at 1-2.  CTP argued that sanctions against Respondent are an appropriate remedy because "it is unlikely more time or additional orders . . . will change the status quo."  Id. at 2.  Specifically, CTP asked that I strike Respondent's Answer as a sanction and issue an Initial Decision and Default Judgment finding Respondent liable for the violations listed in the Complaint and imposing a $6,892 civil money penalty.  Id at 2-3.  CTP's Motion to Stay Deadlines "requests that any deadlines . . . be stayed until resolution of CTP's Motion to Impose Sanctions."  CRD Dkt. Entry No. 18 at 1.

By Order of August 29, 2025, I informed Respondent of its September 12, 2025, deadline to file a response to CTP's Motion to Impose Sanctions and warned Respondent that if it failed to file a response, "I may grant CTP's motion in its entirety."  CRD Dkt. Entry No. 19 at 3.  I also stayed the parties' respective pre-hearing exchange deadlines pending my ruling on CTP's Motion to Impose Sanctions.  Id.  To date, Respondent has not responded to CTP's Motion to Impose Sanctions or my August 29, 2025, Order.

II.  Striking Respondent's Answer

I may sanction a party for:

(1)  Failing to comply with an order, subpoena, rule, or procedure governing the proceeding;
(2)  Failing to prosecute or defend an action; or
(3)  Engaging in other misconduct that interferes with the speedy, orderly, or fair conduct of the hearing.

21 C.F.R. § 17.35(a).  "When a party fails to comply with a discovery order," I may draw an inference in favor of the opposing party; may prohibit the non-complying party from introducing or relying on evidence related to the discovery request; and may "[s]trike any part of the pleadings or other submissions of the party failing to comply with [the discovery] request."  21 C.F.R. § 17.35(c).  Any sanction "shall reasonably relate to the severity and nature of the failure or misconduct."  21 C.F.R. § 17.35(b).

I conclude that sanctions against Respondent are warranted under 21 C.F.R. § 17.35(a)(1).  Respondent repeatedly failed to comply with the following orders and directives governing these proceedings:

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• paragraph 4 of the APHO and the regulation at 21 C.F.R. § 17.23(a) when Respondent failed to respond to CTP's Request for Production of Documents within 30 days; and
• the August 8, 2025, Order Granting Complainant's Motion to Compel Discovery when Respondent failed to submit (or indicate that it did not have) documents responsive to CTP's Request for Production of Documents by August 22, 2025.

Additionally, I conclude that sanctions against Respondent are warranted under 21 C.F.R. § 17.35(a)(2) because Respondent also failed to defend this action.  Not only did Respondent fail to respond to CTP's discovery request, but it also failed to respond to the ensuing motions and orders necessitated by its initial failure to respond to CTP's discovery request.  21 C.F.R. § 17.32(c); see also CRD Dkt. Entry No. 7 ¶ 20 (ordering that "a party must answer a motion within 15 days from the date of receipt unless I provide otherwise").  Specifically, Respondent did not file responses to:

• CTP's Motion to Compel Discovery and the August 8, 2025, Order; and
• CTP's Motion to Impose Sanctions and the August 29, 2025, Order.

Respondent's failure to fulfill its discovery obligations and to respond to CTP's various motions suggests that Respondent has abandoned its defense of this case.

Further, I find that Respondent's failure to comply with the orders, regulations governing discovery, and other procedures in this case has delayed the hearing process.  See 21 C.F.R. § 17.35(a)(3).  To provide ample opportunity for Respondent to respond to CTP's Motion to Compel Discovery and for the parties to prepare their respective pre-hearing exchanges, my July 15, 2025, Order extended the pre-hearing deadlines set in the May 14, 2025, Order Granting Complainant's Second Motion to Extend Deadlines by 30 days.  CRD Docket Entry No. 15 at 2.  Likewise, my August 8, 2025, Order Granting Complainant's Motion to Compel Discovery extended the pre-hearing deadlines set in the July 15, 2025, Order by an additional 14 days to afford Respondent sufficient time to respond to CTP's discovery request and for the parties to prepare their respective pre-hearing exchanges.  CRD Docket Entry No. 16 at 3.  Subsequently, all deadlines were stayed by my August 29, 2025, Order to give Respondent an opportunity to file a response to CTP's Motion to Impose Sanctions.  CRD Docket Entry No. 19 at 3.

In the absence of any explanation from Respondent, I find that Respondent failed to comply with multiple judicial orders and directives governing this proceeding, failed to defend its case, and, as a result, interfered with the speedy, orderly, or fair conduct of this proceeding.  I find no basis to excuse Respondent's repeated failure to comply with the various orders and regulations in this administrative proceeding.  Therefore, I conclude

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that Respondent's conduct establishes a basis for sanctions, pursuant to 21 C.F.R. § 17.35, and that sanctions are warranted.

The harshness of the sanctions I impose must reasonably relate to the nature and severity of the misconduct or failure to comply.  21 C.F.R. § 17.35(b).  Here, Respondent failed to comply with the discovery regulations governing this proceeding.  See 21 C.F.R. § 17.23(a).  Respondent also failed to comply with multiple Orders regarding discovery and other administrative procedures, despite my explicit warnings that its failure could result in sanctions.  See CRD Dkt. Entry Nos. 7 (APHO) at ¶¶ 4, 20-21; 15 (July 15, 2025, Order) at 1; 16 (August 8, 2025, Order Granting Complainant's Motion to Compel Discovery) at 3; 19 (August 29, 2025, Order Granting Motion to Stay Deadlines Pending a Ruling on CTP's Motion to Impose Sanctions) at 3.  For example, I specified in my July 15, 2025, Order that "I may grant CTP's motion [to compel discovery] in its entirety" and in my August 8, 2025, Order Granting Complainant's Motion to Compel Discovery that Respondent's "failure to comply with [the] Order may result in sanctions, including the issuance of an Initial Decision and Default Judgment finding Respondent liable for the violations listed in the Complaint and imposing a civil money penalty."  CRD Dkt. No. 15 at 1; CRD Dkt. No. 16 at 3.  Respondent also failed to defend this action, despite my Orders expressly informing Respondent of the opportunity to request a protective order for CTP's discovery requests and to file responses to CTP's Motion to Compel Discovery and Motion to Impose Sanctions.  See CRD Dkt. Entry Nos. 7 ¶¶ 4, 20; 15 at 1; 19 at 3.  As explained above, Respondent's repeated misconduct interfered with the speedy, orderly, or fair conduct of this proceeding.

I find that Respondent's actions are sufficiently egregious to warrant striking its Answer and issuing a decision by default without further proceedings.  21 C.F.R. § 17.35(b), (c)(3).  Although striking an answer is a harsh sanction, the Departmental Appeals Board has repeatedly held in similar circumstances involving a respondent's repeated failure to comply with discovery and procedural orders that "the ALJ determination to impose sanctions was not an abuse of discretion, and the sanction imposed was reasonably related to the nature and severity of Respondent's noncompliance."  Carolina Cigar of Delray, LLC d/b/a Carolina Cigar, DAB No. 3134, at 11 (2024) (citing Joshua Ranjit, Inc. d/b/a 7-Eleven 10326, DAB No. 2758, at 1, 8-11; KKNJ, Inc. d/b/a Tobacco Hut 12, DAB No. 2678, at 8-11 (2016); Retail LLC d/b/a Super Buy Rite, DAB No. 2660, at 10-14 (2015)).  Accordingly, I grant CTP's Motion to Impose Sanctions and strike Respondent's Answer from the administrative record.  21 C.F.R. §§ 17.35(a)(1)-(3), (b), (c)(3).

III.  Default Decision

Striking Respondent's Answer leaves the Complaint unanswered.  Therefore, I am required to issue an initial decision by default, provided that the Complaint is sufficient to justify a penalty.  21 C.F.R. § 17.11(a).  Pursuant to 21 C.F.R. § 17.11(a), I must "assume

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the facts alleged in the [C]omplaint to be true" and, if those facts establish liability under the Act, issue a default judgment imposing the "maximum amount of penalties provided for by law for the violations alleged" or the civil money penalty "amount asked for in the complaint, whichever is smaller."  Id.

1. Liability

First, I must determine whether the allegations in the Complaint establish violations of the Act.  Specifically, CTP alleges the following facts in its Complaint:

• Respondent owns Valero, an establishment that receives and sells tobacco products after shipment in interstate commerce and is located at 7045 Northwest 27th Avenue, Miami, Florida 33147.  Complaint ¶¶ 11-12.
• On June 27, 2023, CTP initiated the first civil money penalty action, CRD Docket Number T-23-2695, FDA Docket Number FDA-2023-H-2594, against Respondent for violations of the Act and 21 C.F.R. Part 1140.  Specifically, CTP alleged two violations for selling tobacco products to an underage purchaser on December 21, 2021, and February 5, 2023, and two violations for failing to verify the age of a person purchasing tobacco products with photographic identification on those same dates.  Complaint ¶ 15.
• The first civil money penalty action concluded when Respondent "admitted all of the allegations in the Complaint and paid the agreed upon penalty."  Further, "Respondent expressly waived its right to contest such violations in subsequent actions."  Complaint ¶ 16.
• During a subsequent inspection of Respondent's establishment on September 8, 2024, at approximately 5:30 PM, an FDA-commissioned inspector documented that "a person younger than 21 years of age was able to purchase  a Black & Mild Original cigar . . . [.]"  The inspector also documented that "the underage purchaser's age was not verified before the sale . . . ."  Complaint ¶ 13.

These facts establish that Respondent is liable under the Act.  The Act prohibits misbranding of a tobacco product.  21 U.S.C. § 331(k).  A tobacco product is misbranded if distributed or offered for sale in any state in violation of regulations issued under section 906(d) of the Act.  21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).  The Secretary of the U.S. Department of Health and Human Services issued the regulations at 21 C.F.R. Part 1140 under section 906(d) of the Act.  21 U.S.C. § 387a-1; see 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010); 81 Fed. Reg. 28,974, 28,975-76 (May 10, 2016); 89 Fed. Reg. 70,483, 70,485 (Aug. 30, 2024).  Section 906(d)(5) of the Act and 21 C.F.R. § 1140.14(b)(2)(i), respectively, prohibits the sale of regulated

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tobacco products to any person younger than 21 years of age, and requires retailers to verify, by means of photographic identification containing a purchaser's date of birth, that no regulated tobacco product purchaser is younger than 21 years of age.

Taking the above alleged facts as true, Respondent violated the prohibition against selling regulated tobacco products to persons younger than 21 years of age on December 21, 2021, and February 5, 2023.  Act § 906(d)(5).  On those same dates, Respondent also violated the requirement that retailers verify, by means of photo identification containing a purchaser's date of birth, that no regulated tobacco product purchasers are younger than 21 years of age.  Id.; 21 C.F.R. § 1140.14(b)(2)(i).  Subsequently, Respondent violated the prohibition against selling regulated tobacco products to a person younger than 21 years of age on September 8, 2024.  Act § 906(d)(5).  On that same date, Respondent also violated the requirement that retailers verify, by means of photo identification containing a purchaser's date of birth, that no regulated tobacco product purchaser is younger than 21 years of age.  Id.; 21 C.F.R. § 1140.14(b)(2)(i).  All violations observed during the initial failed inspection are counted as a single violation, and each separate violation observed during subsequent failed inspections count as a discrete violation.  Orton Motor, Inc., d/b/a Orton's Bagley v. U.S. Dep't of Health & Human Serv., 884 F.3d 1205 (D.C. Cir. 2018).  Respondent had an initial failed inspection on December 21, 2021, which counted as a single violation, and the violations on February 5, 2023, counted as separate violations.  Accordingly, Respondent had three violations from the first civil money penalty action and two additional violations on September 8, 2024, from the current civil money penalty action.  Therefore, Respondent's actions constitute five violations of law within a 36-month period that merit a civil money penalty.

2. Penalties

The Act establishes two schedules of civil money penalties, depending on whether retailers have implemented a training program that complies with FDA standards.  21 U.S.C. § 333 note (Guidance) (quoting Tobacco Control Act § 103(q)(2)(A)-(B)); see also 45 C.F.R. § 102.3 (Table 1 to § 102.3—Civil Monetary Penalty Authorities Administered by HHS).  Until FDA promulgates regulations establishing standards for approved retailer training programs, CTP has decided to seek penalties using the lower schedule for all retailers.  U.S. Food & Drug Admin., Tobacco Retailer Trainer Programs (Revised): Guidance for Industry (August 2018) at 18, https://www.fda.gov/media/79013/download [https://www.fda.gov/regulatory-information/search-fda-guidance-documents/tobacco-retailer-training-programs] (non-binding guidance document containing various recommendations for retailer training programs).  The civil money penalty schedules are adjusted annually for inflation.

When issuing a default judgment and initial decision, I must impose the smaller amount of either the maximum CMP provided for by law for the violations alleged or the amount asked for in the Complaint.  21 C.F.R. § 17.11(a)(1)-(2).  For penalties assessed on or

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after August 8, 2024, the maximum civil money penalty for a fifth violation of Section 906(d)(5) of the Act or of the 21 C.F.R. Part 1140 regulations within a 36-month period is $7,115.  89 Fed. Reg. 64,815, 64,818 (Aug. 8, 2024); see also 21 C.F.R. § 17.2, 45 C.F.R. § 102.3.  CTP has requested a civil money penalty of $6,892 in its Complaint.  Accordingly, awarding the smaller amount of $6,892 requested in the Complaint is appropriate.  Therefore, I find that a civil money penalty of $6,892 is warranted and so order one imposed.

IV.  Conclusion

Pursuant to 21 C.F.R. § 17.35(a)(1)-(3), (b) and (c)(3), I grant Complainant's Motion to Impose Sanctions, strike Respondent's Answer, and enter a default judgment and initial decision imposing a civil money penalty of $6,892 against Respondent for committing five violations of the Act and 21 C.F.R. Part 1140 regulations within a 36-month period.  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.