FreedomsmokeUSA International, Inc. d/b/a Freedom Smoke USA, DAB TB8861 (2025)

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

On March 12, 2024, the Center for Tobacco Products (CTP) served a Complaint on FreedomsmokeUSA International, Inc. d/b/a Freedom Smoke USA (Respondent), at 4570 East Broadway Boulevard, Tucson, Arizona 85711.  A copy of the complaint was also filed with the Food and Drug Administration’s (FDA) Division of Dockets Management on March 12, 2024.  CTP seeks to impose a $19,192 civil money penalty against Respondent for impermissibly manufacturing, selling, and/or distributing new tobacco products that lacked the required premarketing authorization, thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. §§ 301 et seq.

Respondent, through counsel, timely filed an answer to the complaint.  Since filing the answer, however, Respondent has repeatedly disregarded my orders and instructions and

Page 2

has been non-responsive to CTP’s requests.  Respondent failed to respond to CTP’s request for production of documents, failed to respond to CTP’s motion to compel discovery, failed to comply with my order granting CTP’s motion to compel discovery, and failed to respond to the present Motion to Impose Sanctions.  Further, Respondent’s counsel has withdrawn its appearance in this case, citing a breakdown in communication with Respondent.

Currently before me is CTP’s Motion to Impose Sanctions, which requests that I impose sanctions against Respondent for failing to respond to CTP’s discovery requests and for ignoring my order granting CTP’s motion to compel.  As a proposed sanction, CTP asks me to strike Respondent’s answer and issue a default judgment against Respondent pursuant to 21 C.F.R. § 17.35(c)(3).  For the reasons stated below, I find that the requested sanctions are warranted and appropriate under the circumstances.  Accordingly, I grant CTP’s Motion to Impose Sanctions, strike Respondent’s answer, and issue this decision of default judgment imposing the requested civil money penalty against Respondent.

I.     Procedural History

On March 12, 2024, CTP served an administrative complaint on Respondent by United Parcel Service, in accordance with 21 C.F.R. §§ 17.5 and 17.7.  See Civil Remedies Division (CRD) Docket (Dkt.) Entry No. 1b.  On April 12, 2024, Respondent filed a request for an extension of time to answer the complaint, which I granted.  CRD Dkt. Entry Nos. 3, 4.  On May 10, 2024, Respondent’s counsel entered a notice of appearance and timely filed Respondent’s answer to the complaint.  CRD Dkt. Entry No. 5, 5a.

On May 14, 2024, I issued an Acknowledgment and Pre-Hearing Order (APHO), establishing deadlines for the parties to complete discovery and file pre-hearing exchanges. CRD Dkt. Entry No. 6 (APHO).  With respect to discovery, the APHO stated that a party produce any requested documents no later than 30 days after receiving a request for documents from the opposing party.  APHO ¶ 4; see also 21 C.F.R. § 17.23(a).  In the APHO, I also warned that I may impose sanctions against a party, up to and including dismissal of the Complaint or answer, for failing to comply with any order in this case, failing to prosecute or defend its case, or engaging in misconduct that “interferes with the speedy, orderly, or fair conduct of the hearing.”  APHO ¶ 21; see also 21 C.F.R. § 17.35.

On July 18, 2024, CTP filed a motion to compel discovery, stating it served document requests on Respondent on June 13, 2024, but Respondent failed to respond.  CRD Dkt. Entry No. 8 at 1.  On the same date, CTP also requested a 30-day extension of all deadlines in this case.  CRD Dkt. Entry No. 9 at 2.

On July 22, 2024, I issued an Order advising Respondent that it had until August 14, 2024, to respond to CTP’s motion to compel discovery.  CRD Dkt. Entry No. 10.  I also held the parties’ pre-hearing exchange deadlines in abeyance pending the resolution of the motion. CRD Dkt. Entry No. 10 at 2.

Page 3

Respondent did not file a response to CTP’s motion to compel discovery.  Accordingly, on August 19, 2024, based on the representations made in the motion, I granted CTP’s motion to compel discovery and ordered Respondent to comply with CTP’s request for production of documents by August 29, 2024.  CRD Dkt. Entry No. 12.  I warned:

Failure to do so 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.

Id. at 1-2.

On September 11, 2024, CTP filed the present Motion to Impose Sanctions.  CRD Dkt. Entry No. 13.  In the motion, CTP states Respondent failed to comply with my August 19, 2024 Order granting CTP’s motion to compel and has not produced any documents in response to CTP’s discovery requests.  Id. at 1.  CTP asks that I strike Respondent’s answer as a sanction for Respondent’s repeated non-compliance and non-responsiveness.  Id. at 2. CTP further asks that I issue an Initial Decision and Default Judgment finding Respondent liable for the violations listed in the complaint and imposing a $19,192 civil money penalty.  Id.  CTP filed a separate motion asking me to stay all deadlines pending resolution of its Motion for Sanctions.  CRD Dkt. Entry No. 14.

On September 12, 2024, I issued an Order giving Respondent until September 26, 2024, to file a response to CTP’s Motion to Impose Sanctions.  CRD Dkt. Entry No. 15 at 2.  I also granted CTP’s request to stay all deadlines pending resolution of the Motion.  Id.

On September 12, 2024, Respondent’s counsel filed a motion labeled as a “Motion to Withdraw and Motion to Continue.”  CRD Dkt. Entry No. 16.  In the motion, Respondent’s counsel requested permission to withdraw its appearance due to a “breakdown in communication” with Respondent.  Id. at 1.  Specifically, counsel stated communication with Respondent “had suffered to the extent that it is no longer possible for counsel to continue to represent Respondent.”  Id.  Respondent’s counsel also requested that Respondent “be afforded time … to obtain new counsel in this matter.”  Id. at 2.  The motion did not specify a timeframe or date certain for a proposed continuance, nor did it contain any arguments in support of a continuance.

On September 17, 2024, I issued an order granting Respondent’s counsel’s motion to withdraw, but giving CTP until September 27, 2024, to respond to the motion to continue. CRD Dkt. Entry No. 17 at 2.  In addition, I stayed the deadline for Respondent to respond to CTP’s Motion to Impose Sanctions pending resolution of the motion to continue.  Id. Given the withdrawal of Respondent’s counsel, I also directed Respondent to either register for the DAB E Filing System or request a waiver from the e-filing requirement.  Id.

On September 23, 2024, CTP filed an opposition to Respondent’s motion for a

Page 4

continuance.  CRD Dkt. Entry No. 18.  In the opposition, CTP argued that Respondent has been non-responsive throughout these proceedings even while represented by counsel, and noted Respondent has failed to demonstrate it was undertaking any effort to obtain new counsel or that a change in attorney would alter Respondent’s conduct.  Id.

On October 3, 2024, I issued an Order denying Respondent’s motion for a continuance and set a new deadline of October 14, 2024, for Respondent to respond to CTP’s motion for sanctions.  CRD Dkt. Entry No. 19 at 2.  I also again ordered Respondent to either register for the DAB E-Filing System or request a waiver from the e-filing requirement.  Id.; see also CRD Dkt. Entry No. 6 at ¶ 2.

To date, Respondent has not produced any documents in response to CTP’s discovery requests or otherwise complied with my Order granting CTP’s motion to compel.  In addition, Respondent has not filed a response to CTP’s Motion to Impose Sanctions or complied with my instructions to register for the DAB E-Filing System following the withdrawal of its counsel.

II.    Motion to Impose Sanctions

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).

Here, Respondent failed, and continues to fail, to comply with multiple orders and rules, including:

• the requirements in 21 C.F.R. § 17.23(a) and paragraph 4 of the APHO, by failing to respond to CTP’s Request for the Production of Documents within 30 days;
• my August 19, 2024 Order granting CTP’s motion to compel, by failing to produce documents responsive to CTP’s Request for the Production of Documents by August 29, 2024; and
• my September 17, 2024 and October 3, 2024 Orders, by failing to register for DAB E-File or request a waiver following the withdrawal of its counsel.

Additionally, Respondent has failed to defend this action, as demonstrated by the following actions:

Page 5

• Respondent did not file a response to CTP’s Motion to Compel Discovery, as permitted by the regulations and my July 22, 2024 Order;
• Respondent did not file a response to CTP’s Motion to Impose Sanctions, as permitted by the regulations and my October 3, 2024 Order; and
• Respondent failed to take any action in this case following the withdrawal of its counsel.

In sum, I find that Respondent failed to comply with orders and procedures governing this proceeding, failed to defend this action, and, as a result, interfered with the speedy, orderly, and fair conduct of this proceeding.  Therefore, I conclude that Respondent’s conduct establishes a basis for sanctions pursuant to 21 C.F.R. § 17.35, and that sanctions are warranted under the circumstances.

The sanctions I impose must 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 a regulatory requirement and multiple orders, despite being warned that such conduct may result in sanctions.  See, e.g., CRD Dkt. Entry No. 10; see also APHO ¶ 21.  Further, Respondent failed to respond to multiple motions, including the present motion for sanctions.  In addition, Respondent’s own counsel withdrew its appearance in this case, citing a breakdown in communication with Respondent.  CRD Dkt. Entry No. 16.  Respondent took no action following its counsel’s withdrawal, which suggests Respondent has abandoned its defense and is not interested in continuing to participate in these proceedings.

Respondent’s conduct has caused unnecessary delays and disruptions, interfered with CTP’s ability to prosecute its case, and hindered my ability to conduct a hearing or issue a decision on the merits.  Based on the severity and ongoing nature of the conduct, I find that the appropriate sanction is to strike Respondent’s answer to the complaint.  21 C.F.R. § 17.35(b), (c)(3); see also KKNJ, Inc. d/b/a Tobacco Hut 12, DAB No. 2678 at 10-11 (2016) (administrative law judge committed no abuse of discretion in striking answer for noncompliance with discovery order).  While I recognize that this is a relatively harsh remedy, I conclude that a lesser sanction would not effectively address Respondent’s noncompliance and failure to defend its case.  Therefore, CTP’s Motion to Impose Sanctions is GRANTED and Respondent’s answer to the complaint is hereby STRICKEN from the record.

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).  Accordingly, I must determine whether the allegations in the complaint establish violations of the Act.

For the purposes of this decision, I assume the facts alleged in the complaint to be true,

Page 6

pursuant to the provisions of 21 C.F.R. § 17.11(a).  Specifically, CTP alleges the following facts in its complaint:

• Respondent manufactures tobacco products and sells them through its online establishment that does business under the name Freedom Smoke USA, located at 4570 East Broadway Boulevard, Tucson, Arizona 85711.  Complaint ¶ 14.
• On February 11, 2022, and September 14, 2022, although there is no statutory requirement for FDA to do so, CTP issued warning letters to Respondent, stating that, among other things, the new tobacco products that Respondent manufactures, sells, and/or distributes are adulterated and misbranded because they lacked the required FDA marketing authorization order.  Complaint ¶ 16.
• On August 29 and 30, 2023, an FDA-commissioned inspector conducted inspections of Freedom Smoke USA, located at 4570 East Broadway Boulevard, Tucson, Arizona 85711.  During this inspection, the inspector observed components used to make e-liquid products that Respondent sells at its establishment.  Complaint ¶ 17.
• Respondent’s e-liquid products are “new tobacco products” because they were not commercially marketed in the United States as of February 15, 2007.  Complaint ¶ 18.  Respondent’s e-liquid products do not have a substantial equivalence order or found-exempt order in effect.  Accordingly, they are required by 21 U.S.C.§ 387j(a) to have premarket review.  Complaint ¶ 19.
• Respondent did not submit a premarket tobacco product application to FDA for its e-liquid products.  Complaint ¶ 20.
• Respondent’s e-liquid product does not have an order permitting marketing ofthe new tobacco product in effect under 21 U.S.C. 387j(c)(1)(A)(i) and it is therefore, adulterated under 21 U.S.C. § 387b(6)(A).  Complaint ¶ 21.
• Neither a substantial equivalence report nor an abbreviated report has been submitted for Respondent’s e-liquid products, and they are, therefore, misbranded under 21 U.S.C. § 387c(a)(6).  Complaint ¶ 22.
• Respondent’s failure to obtain the required premarket authorization for its new tobacco products causes them to become adulterated and misbranded while they are held for sale after shipment of one or more of their components in interstate commerce, in violation of 21 U.S.C. § 331(k).  Complaint ¶ 23.

These facts establish Respondent’s liability under the Act.  The Act prohibits adulterating or misbranding of a regulated tobacco product while it is held for sale after shipment of one

Page 7

or more of its components in interstate commerce. 21 U.S.C. § 331(k). 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).  Respondent’s new tobacco products were not commercially marketed in the United States as of February 15, 2007, and Respondent’s new tobacco products did not have an order permitting marketing of a new tobacco product under 21 U.S.C. § 387j(c)(1)(A)(i).  Thus, Respondent’s new tobacco products lacked the required premarketing authorization and is adulterated. 21 U.S.C. § 387b(6)(A).

A “new tobacco product” is exempt from this premarket authorization requirement only if there is a substantial equivalence or a found exempt order in effect for such product.  21 U.S.C. §§ 387j(a)(2)(A), 387e(j)(3)(A).  Neither a substantial equivalence report nor an abbreviated report was submitted for Respondent’s new tobacco products making them misbranded under 21 U.S.C. § 387c(a)(6).  As a result, Respondent impermissibly adulterated or misbranded new tobacco products are in violation of 21 U.S.C. § 331(k). See also 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).

Taking the above alleged facts as true, on August 29 and 30, 2023, Respondent violated the Act’s prohibition against adulterating or misbranding a regulated tobacco product while it is held for sale after shipment of one or more of its components in interstate commerce.  21 U.S.C. 331(k); see also 21 U.S.C. § 387b(6)(A), 21 U.S.C. §§ 387j(a)(2)(A), 387e(j)(3)(A). Therefore, Respondent’s actions constitute violations of law that warrant a civil money penalty.

CTP has requested a civil money penalty of $19,192, which is a permissible penalty under 21 C.F.R. § 17.2 and 21 U.S.C. § 333(f)(9)(A).  See also 45 C.F.R. § 102.3.  Therefore, I find that a civil money penalty of $19,192 is warranted and impose a penalty in that amount against Respondent.

Page 8

Order

For the reasons stated above, I enter default judgment and impose a civil money penalty against Respondent, FreedomsmokeUSA International, Inc. d/b/a Freedom Smoke USA in the amount of $19,192.  Pursuant to 21 C.F.R. § 17.11(b), this order becomes final and binding upon both parties after 30 days of the date of its issuance.