S & S Mehta, Inc. d/b/a Chevron, DAB TB8991 (2025)

INITIAL DECISION

The Center for Tobacco Products (CTP) seeks a $20,678 civil money penalty (CMP) against Respondent, S & S Mehta, Inc. d/b/a Chevron, at 3735 North Interstate 35, Austin, Texas 78722. Specifically, CTP alleges that Respondent received in interstate commerce an electronic nicotine delivery system (ENDS) product that lacks the premarketing authorization required under the Federal Food, Drug, and Cosmetic Act (Act) and offered such product for sale, in violation of 21 U.S.C. § 331(c). For the reasons discussed below, I find that Respondent violated the provisions of 21 U.S.C. § 331(c) and conclude that a reduced CMP in the amount of $16,542 is appropriate.

I. Background and Procedural History

CTP began this matter by serving an Administrative Complaint on Respondent at 3735 North Interstate 35, Austin, Texas 78722 by United Parcel Service (UPS), 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

Page 2

(Complaint), 1b (Delivery Notification). On February 20, 2024, Respondent requested an extension of time to answer the complaint, which I granted. CRD Dkt. Entry Nos. 6, 7.

On March 22, 2024, Respondent timely filed its answer to the complaint. CRD Dkt. Entry No. 8. In its answer, Respondent disputed allegations that it received the subject ENDS product in interstate commerce and asserted a defense on that basis. Id. Respondent also stated that it removed “all alleged ENDS products,” and claimed the requested penalty amount was too high. Id. at 2.

On April 2, 2024, I issued an Acknowledgment and Pre-Hearing Order (APHO) establishing deadlines for discovery and the parties’ pre-hearing exchanges. CRD Dkt. Entry No. 9. On May 1, 2024, CTP and Respondent each filed a status report stating that the parties were unable to reach a settlement. CRD Dkt. Entry Nos. 11, 12.

On May 1, 2024, Respondent served document requests on CTP. CRD Dkt. Entry No 10. CTP subsequently moved for a protective order, seeking to limit the disclosure of certain documents potentially responsive to those requests. CRD Dkt. Entry Nos. 13, 14. Specifically, CTP objected to producing documents involving other cases and investigations and asserted privilege with respect to its CMP Review Memo in this case, an internal memo concerning the enforcement action against Respondent. CRD Dkt. Entry No. 14 at 7, 9-10. CTP also argued that Respondent’s requests for documents that CTP intended to rely on at the hearing were premature, and stated any such documents would be produced as part of CTP’s pre-hearing exchange. Id. at 7.

Respondent did not file a response to CTP’s motion for protective order. See CRD Dkt. Entry No. 17. Accordingly, based on the representations made in the motion, I granted the motion in part and issued a protective order limiting CTP’s document production to case-specific documents and non-privileged materials. CRD Dkt. Entry No. 20. Based on CTP’s representation that it would produce all documents it intended to rely on at the hearing with its pre-hearing exchange, I denied that portion of the motion as moot. See CRD Dkt. Entry No. 20 at 6.

On June 21, 2024, CTP timely filed its pre-hearing exchange, consisting of a pre-hearing brief (CTP Br.), a list of proposed witnesses and exhibits, and seven proposed exhibits (CTP Exhibits (Exs.) 1-7). CRD Dkt. Entry Nos. 18, 18a-h. The exhibits included 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 Inspector Velda M. Escamilla, an FDA-commissioned officer with the state of Texas (CTP Ex. 2). CRD Dkt. Entry Nos. 18b, 18c.

On July 11, 2024, Respondent timely filed its pre-hearing exchange, consisting of a pre-hearing brief (R. Br.), a list of proposed witnesses and exhibits, and nine proposed

Page 3

exhibits (R. Exs. 1-9). CRD Dkt. Entry No. 19, 19a-19j. The exhibits included an affidavit from Respondent’s owner, Sunil Mehta (R. Ex. 9). CRD Dkt. Entry No. 19j.

On August 27, 2024, I held a telephonic pre-hearing conference (PHC) with the parties to discuss various procedural and evidentiary matters. See CRD Dkt. Entry No. 23 (Order Following PHC). During the PHC, Respondent verbally requested leave to amend R. Ex. 2 on the grounds that Respondent inadvertently filed the wrong document. CTP stated it had no objections, so I granted the request. Id. at 2.1 Both parties then asserted competing objections to various other proposed exhibits and testimony. Id. at 2-3. Respondent also requested leave to amend the affidavit Sunil Mehta (R. Ex. 9), which CTP opposed. Id. at 2. Rather than ruling on the objections and request to amend at the PHC, I instructed the parties to meet and confer within 10 days of the PHC to discuss and attempt to resolve any evidentiary issues. Id. at 3. I stated that if the parties were unable to reach a resolution, I would give them an opportunity to address any remaining issues in writing. Id.

At the PHC, I also explained the purpose of a hearing and asked the parties whether a hearing was necessary in this case. Id. at 3. After some discussion, both parties agreed that they did not intend to cross-examine the opposing party’s proposed witnesses. Id. Therefore, I advised the parties that the case would be decided based on the written record. Id. I stated that I would issue a final briefing schedule after the various evidentiary issues were resolved. Id.

On August 29, 2024, I issued an order summarizing the issues discussed at the PHC. See CRD Dkt. Entry No. 23. I also directed the parties to file a joint status report by September 9, 2024, summarizing the results of their discussions regarding the evidentiary issues raised at the PHC. Id. at 3-4. I provided instructions and deadlines for addressing those issues in the event the parties were unable to reach a resolution. Id. at 4.

On September 9, 2024, the parties filed a joint status report stating they resolved all outstanding evidentiary issues and were prepared to move forward with final briefing. CRD Dkt. Entry No. 24. Specifically, the joint status report stated: (a) CTP consents to Respondent’s request to amend the affidavit of Sunil Mehta (R. Ex. 9); (b) CTP has no objections to Respondent’s exhibits 1-9, including amended exhibits; and (c) Respondent has no objections to CTP’s exhibits 1-7. Id. A copy of Respondent’s amended Exhibit 9 was filed simultaneously with the joint status report. CRD Dkt. Entry No. 24a.

On September 25, 2024, based on the representations made in the joint status report, I issued an order admitting the parties’ proposed exhibits into the administrative record. CRD Dkt. No. 25. Specifically, I admitted CTP’s proposed exhibits into the record as

Page 4

CTP Exs. 1-7, and Respondent’s proposed exhibits into the record as R. Exs. 1-9, with amended exhibits 2 and 9 replacing the originally numbered exhibits. Id. I also established deadlines of October 25, 2024 for filing final briefs and November 8, 2024 for responses. Id.

Both parties filed final briefs prior to the October 25, 2024 deadline (R. Final Br. and CTP Final Br., respectively). See CRD Dkt. Entry Nos. 26, 27. Further, on November 8, 2024, Respondent filed a reply to CTP’s final brief (R. Reply Br.). CRD Dkt. Entry No. 28. CTP did not file a reply to Respondent’s final brief.

The administrative record is now closed, and this case is ready for a decision based on the written record. 21 C.F.R. § 17.41; 21 C.F.R. § 17.45(c); 21 C.F.R. § 17.19(b)(11), (17).

II. Evidence

CTP submitted the following exhibits with its pre-hearing exchange, which were admitted into the record on September 25, 2024:

• CTP Ex. 1: Declaration of James Bowling
• CTP Ex. 2: Declaration of Velda M. Escamilla
• CTP Ex. 3: August 2023 Narrative Report
• CTP Ex. 4: August 2023 TIMS Assignment Form
• CTP Ex. 5: August 2023 Photographs of Esco Bars ENDS Product
• CTP Ex. 6: August 2023 Form FDA 482
• CTP Ex. 7: June 2023 Warning Letter

Respondent submitted the following nine exhibits, including amended exhibits 2 and 9, which were admitted into the record on September 25, 2024:

• R. Ex. 1: January 22, 2024 Complaint filed by CTP
• R. Ex. 2: Purchase Receipt from Xpress Plus Distribution (admitted version located at CRD Dkt. Entry No. 22)
• R. Ex. 3: Corporate Formation Documents
• R. Ex. 4: June 2023 Warning Letter from CTP
• R. Ex. 5: Respondent’s Undated Response Letter to June 2023 Warning Letter
• R. Ex. 6: CTP’s August 2023 Reply to Respondent’s Undated Response Letter
• R. Ex. 7: 2022 Tax Return
• R. Ex. 8: 2023 Tax Return
• R. Ex. 9: Affidavit of Sunil Mehta (admitted version located at CRD Dkt. Entry No. 24a)

Page 5

Respondent also submitted nine exhibits with its final brief, which appear to be duplicates of its previously admitted exhibits. See CRD Dkt. Entry Nos. 26a-26i. Further, CTP’s final brief includes four exhibits consisting of prior court and administrative decisions. See CRD Dkt. Entry Nos. 27a-27d. Given that these additional exhibits were filed after the pre-hearing exchange deadline, I decline to enter them into them into the administrative record as evidence. I may, however, consider the decisions attached to CTP’s final brief as legal authority, to the extent applicable.

III. Issues

1. Whether Respondent received in interstate commerce ENDS products that lack the premarketing authorization required under the Act, specifically an Esco Bars Peachy Mango Pineapple Ice ENDS product, and offered such product for sale on August 24, 2023, in violation of 21 U.S.C. § 331(c); and if so,
2. Whether the $20,678 CMP proposed by CTP is appropriate, considering any mitigating or aggravating factors that I find in this case. 21 C.F.R. § 17.45.

IV. Findings of Fact and Conclusions of Law

1. CTP has demonstrated by a preponderance of the evidence that Respondent received adulterated and misbranded ENDS products in interstate commerce and offered those products for sale 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. The burden is on CTP to prove Respondent’s liability and the appropriateness of the penalty by a preponderance of the evidence. 21 C.F.R. § 17.33(b). The burden is on Respondent to prove any affirmative defenses or 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 (MGO) unless it has a substantial

Page 6

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 Inspector Velda M. Escamilla, FDA-commissioned officer with the state of Texas, and James Bowling, Deputy Director, Division of Enforcement and Manufacturing, Office of Compliance and Enforcement, CTP, FDA. CTP Exs. 1, 2. Inspector Escamilla testified that during an inspection on August 24, 2023, at approximately 11:07 AM, Inspector Escamilla observed an Esco Bars Peachy Mango Pineapple ENDS product available for sale at Respondent’s establishment. CTP Ex. 2 at 2, ¶¶ 4, 6; see also CTP Exs. 3-6 (narrative report, inspection results, photographs, and notice of inspection dated August 24, 2023).

Deputy Director Bowling testified that the Esco Bars Peachy Mango Pineapple Ice ENDS product observed during the August 24, 2023 inspection was manufactured in China, which is outside the state in which Respondent operates. CTP Ex. 1 at 2, ¶ 6. Deputy Director Bowling further testified that the Esco Bars Peachy Mango Pineapple Ice ENDS product was not commercially marketed in the United States as of February 15, 2007, and that on August 24, 2023, there were no records of the product having an authorized FDA premarket authorization order in effect under 21 U.S.C. § 387j(1)(A)(i). Id. at 3, ¶¶ 10-11. Finally, Deputy Director Bowling testified that there was no record of the product having a substantial equivalence order in effect under 21 U.S.C. § 387j(a)(2)(A)(i) nor had a report requesting a substantial equivalence order been submitted under 21 U.S.C. § 387e(j); and the product did not have a found-exempt order in effect under 21 U.S.C. § 387e(j)(3)(A) nor had an abbreviated report requesting a found-exempt order been submitted. Id. at 3-4, ¶¶ 11-12.

Respondent does not dispute that the ENDS product in this case was adulterated and misbranded, nor does it dispute offering the product for sale. Instead, Respondent claims it should not be found liable under the Act because “the ENDS product in question was not received in interstate commerce.” R. Final Br. at 2; see also Answer at 1, R. Br. at 2, R. Reply Br. at 2-4. Specifically, Respondent contends that because the product was purchased from a supplier in Texas, the state where Respondent operates, “interstate commerce is not involved.” Answer at 1; see also R. Br. at 2, R. Final Br. at 2-4; R. Ex. 2. According to Respondent, to establish receipt in interstate commerce, federal case law requires CTP to show Respondent “‘actually transported’” the product across state lines or within the state as part of the “‘flow of commerce.’” R. Final Br. at 2 (quoting Vallejo v. Garda CL Southwest, Inc., 56 F. Supp. 3d 862, 870 (S.D. Tex. 2014)). Respondent claims that as a retailer locally selling goods obtained from an intrastate supplier, it never

Page 7

“engage[d] in interstate commerce,” even if the goods previously traveled interstate. Id. at 2-3 (citing various federal court cases).

I do not find Respondent’s arguments persuasive. As a threshold matter, Respondent’s reliance on Vallejo and the other cases cited in its brief is misplaced. As CTP points out, none of the cases cited by Respondent addressed the meaning of “interstate commerce” under the Act. Further, Respondent conflates the phrase “receipt in interstate commerce,” which is the relevant language in the Act, with the phrase “engaged in interstate commerce,” which is the statutory language at issue in every case cited in its brief. See United States v. Am. Bldg. Maint. Indus., 422 U.S. 271 (1975) (interpreting phrase “engaged in commerce” in the Clayton Act); Immediato v. Postmates, Inc., 54 F.4th 67 (1st Cir. 2022) (interpreting phrase “engaged in foreign or interstate commerce” in the Federal Arbitration Act); Vallejo, 56 F. Supp. 3d at 870 (interpreting phrase “engages in interstate commerce” in the Motor Carrier Act); Elite Sub-Zero Repair v. Great Plains Appliance Parts, Inc., 2023 U.S. Dist. LEXIS 195755 (W.D. Tex. 2023) (Clayton Act). The phrase “engaged in interstate commerce” is a “term of art,” which has specific meaning when used in a federal statute. Immediato, 54 F.4th at 76. As that phrase appears nowhere in the Act, the cases cited by Respondent are inapposite.

Under the Act, the relevant inquiry is whether Respondent received the subject ENDS product in interstate commerce. See 21 U.S.C. § 331(c). Unlike the word “engage,” which suggests active participation, the words “receipt” and “receive” mean to take possession of an item. See RECEIPT, RECEIVE, Black’s Law Dictionary (12th ed. 2024). Further, the Supreme Court has held 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 consumer.” United States v. Sullivan, 332 U.S. 689, 696 (1948).2 Thus, the Act applies if Respondent took possession of the ENDS product after it traveled in interstate commerce, regardless of whether Respondent participated in the interstate journey. Accepting Respondent’s arguments to the contrary would create a loophole where parties could avoid liability under the Act by obtaining prohibited items from a local intermediary.

Page 8

Respondent contends that even if I follow the holding in Sullivan, I should still decline to impose liability because CTP failed to establish a “chain of custody” showing the subject ENDS product even traveled in interstate commerce. R. Reply Br. at 3-4. However, nothing in the Act requires CTP to establish a “chain of custody” to prove a product traveled in interstate commerce. Indeed, such a requirement would obligate CTP to somehow track every transaction involving a prohibited product from manufacturing to final delivery, making enforcement of the Act near impossible. Moreover, the concept of a “chain of custody,” which concerns the movement and documentation of evidence while under a party’s control, has no application to CTP in this case because the product was never within CTP’s custody or control. See CHAIN OF CUSTODY, Black’s Law Dictionary (12th ed. 2024). Therefore, I disagree with Respondent and find CTP is not required to establish a “chain of custody” as a prerequisite to liability.

As detailed above, Deputy Director Bowling testified that Esco Bars Peachy Mango Pineapple Ice ENDS products are manufactured in China. CTP Ex. 1 at 2, ¶ 6. Further, CTP submitted photographs of the product’s label, showing the product was “Made in China.” CTP Ex. 5 at 6. Respondent has not provided any evidence to the contrary and, in fact, acknowledges it has “no knowledge” of the product’s origin. R. Final Br. at 3-4. Respondent also admits it took possession of the product in Texas. Id. at 3. Because the evidence shows the product was manufactured in China and received in Texas, I find that the product must have traveled in interstate commerce prior to its receipt. Therefore, I conclude that Respondent received the product in interstate commerce within the meaning of the Act.

In sum, based on the uncontroverted testimony of Inspector Escamilla and Deputy Director Bowling, as well as the supporting evidence submitted by CTP, I find that the Esco Bars Peachy Mango Pineapple Ice ENDS product observed at Respondent’s establishment on August 24, 2023, was received in interstate commerce and delivered or proffered for delivery by Respondent for pay or otherwise. See 21 U.S.C. § 331(c); see also Sullivan, 332 U.S. at 696. The ENDS product was adulterated because it lacked the required FDA marketing authorization and was not exempt from that requirement. 21 U.S.C. §§ 387j(a)(2)(A), 387e(j)(3)(A). In addition, the product was misbranded under 21 U.S.C. § 387c(a)(6) because no substantially equivalent report was made. See 21 U.S.C. § 387e(j). Therefore, I conclude that Respondent violated the Act and is subject to a CMP. See 21 U.S.C. §§ 331(c), 333(f)(9).

2. Respondent has demonstrated by a preponderance of the evidence that mitigating circumstances support a reduced CMP of $16,542.

I have determined Respondent violated the prohibition against receiving and offering for sale a new tobacco product that was adulterated and misbranded. 21 U.S.C. § 331(c). Pursuant to 21 U.S.C. § 333(f)(9), Respondent is liable for a CMP not to exceed the amounts listed in FDA’s CMP regulations at 21 C.F.R. § 17.2; see also 45 C.F.R.

Page 9

§ 102.3. 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), (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).

Here, CTP is proposing a CMP in the amount of $20,678, which is the maximum penalty permitted by the regulations. CRD Dkt. Entry No. 1, ¶ 1; 21 C.F.R. § 17.33(a); 45 C.F.R. § 102.3 (2022); 87 Fed. Reg. 15,100, 15,103 (March 17, 2022). For the reasons stated below, after considering the aggravating and mitigating factors and the underlying facts and circumstances of this case, I conclude that a reduced CMP of $16,542 is appropriate. 21 C.F.R. §§ 17.33(a), (c); 17.34(a)-(c).

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

The Family Smoking Prevention and Tobacco Control Act 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 a highly regulated and dangerous product. See generally 21 U.S.C. § 387 note (Findings and Purpose).

CTP contends the violation in this case is particularly serious because CTP previously issued a warning letter to Respondent on June 5, 2023, directing it to stop selling prohibited ENDS products in violation of the Act. CTP Br. at 8; see also CTP Ex. 7. Specifically, the warning letter notified Respondent that during an inspection on May 13, 2023, an FDA inspector observed Respondent offering for sale “an Esco Bars Strawberry Cream ENDS product” which lacked premarket authorization under the Act. CTP Ex. 7 at 1. The letter explained that the sale of such products is prohibited and warned Respondent to take action to correct the violation. Id. The warning letter further stated that “all 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.” Id. at 3. The letter explained that future violations could result in enforcement action, including but not limited to, a “civil money penalty, no-tobacco-sale order, seizure, and/or injunction.” Id. CTP contends that by continuing to sell prohibited ENDS products after receiving the letter, Respondent demonstrated an “unwillingness or inability to correct the violations . . . .” CTP Br. at 9.

Respondent does not deny receiving the warning letter, but argues that it “made every effort” to comply with the warning letter and that any noncompliance was unintentional. R. Final Br. at 5. In support of this claim, Respondent points to its June 10, 2023 response to the warning letter, which stated that “all ESCO BAR products” had been

Page 10

removed from its store and that Respondent had “reviewed the FDA website” to ensure it was in compliance with the law. R. Ex. 3. Respondent argues that although CTP subsequently deemed its response to the warning letter inadequate, CTP failed to explain why it was inadequate and failed to provide any details on what Respondent needed to do to comply with the law. R. Final Br. at 5. According to Respondent, without sufficient guidance from CTP, it took steps it believed were appropriate and any violation that followed was “merely a mistake.” Id.

After considering the parties’ arguments and reviewing the record, I am not convinced that the violation in this case was a simple mistake. As an initial matter, Respondent’s claim that CTP deemed its response to the warning letter inadequate without any explanation or guidance is not supported by the record. The evidence shows that CTP, by letter dated August 10, 2023, explained the response was inadequate “because it did not provide an adequate plan for correcting the listed violations and preventing future violations.” R. Ex. 4. CTP further explained that “[r]etailers may not sell any new tobacco products that lack the required marketing authorization.” Id. (emphasis in original). CTP also directed Respondent to a list of authorized ENDS products, identified relevant sections of the Act and other available resources, and invited Respondent to contact CTP if it had “any further questions about this matter.” Id.3 Thus, contrary to Respondent’s position, I find that CTP provided more than enough information for Respondent to understand its obligations under the Act and even provided Respondent with an opportunity to request further guidance.

Moreover, even if Respondent’s position were supported by the facts, a supposed lack of guidance from CTP would not excuse or mitigate the violation in this case. As a retailer that has chosen to sell highly regulated tobacco products, Respondent has a duty to ensure it understands and complies with the applicable legal and regulatory requirements. Respondent cannot shift that burden to CTP or minimize its responsibility by claiming CTP failed to tell it what to do. Thus, regardless of the level of guidance provided by CTP, I find that Respondent’s purported ignorance of its obligations under the Act does not constitute a mitigating circumstance.

Finally, Respondent’s June 10, 2023 response to the warning letter does not help its case. The response plainly stated that “all ESCO BAR products” were removed from Respondent’s store, demonstrating that Respondent understood Esco Bars ENDS products were prohibited. R. Ex. 3. Yet the violation in this case, which occurred less than three months later, involved an Esco Bars ENDS product. See CTP Ex. 5. Further, the photographs taken during the inspection showed a full display of Esco Bars ENDS products in Respondent’s store. Id. In other words, Respondent continued selling a product it knew was prohibited under the Act, despite previously representing to CTP that those products were removed from its store. Respondent contends it “houses hundreds of

Page 11

products” and the failure to remove the ESCO Bars product display was an “inadvertent mistake,” but given the clear language in the response letter, I do not find this purported excuse compelling. R. Reply Br. at 5-6. Under the circumstances, I find that the evidence demonstrates a willful disregard for the law and does not support Respondent’s claim that the violation was “merely a mistake.”

In sum, I find that CTP has shown by a preponderance of the evidence that Respondent continued selling unauthorized ENDs products in violation of the Act, even after being previously warned about similar conduct and the potential consequences, and even after representing that the specific product at issue in this case had been removed from its store. Based on these findings, I conclude that CTP has demonstrated aggravating circumstances which support the imposition of a substantial CMP in this case.

2. Ability to Pay and Effect on Ability to Continue to Do Business

Respondent argues that the penalty amount proposed by CTP is unreasonable and will negatively impact its ability to continue doing business. R. Final Br. at 6.4 In support of this argument, Respondent submitted its 2022 and 2023 tax returns, which show gross profits of $330,858, and a total income of $366,282 for 2022, and gross profits of $333,437, and a total income of $368,775 for 2023. R. Exs. 7, 8.

I find that Respondent’s submissions, which show a relatively sizeable business income, do not demonstrate an inability to pay the proposed penalty. I also note that Respondent has not provided profit and loss statements, bank statements, reports of its assets and liabilities, or any similar documentation demonstrating that Respondent is unable to pay the proposed penalty. Thus, I find that Respondent has not established mitigating circumstances with respect to the “ability to pay” factor.

Moreover, beyond largely conclusory assertions and arguments, Respondent has failed to clearly establish that the proposed penalty would negatively impact its ability to continue doing business. Nevertheless, considering Respondent’s statements, the supporting evidence, and the circumstances of this case, I acknowledge that the proposed penalty amount is substantial, even for a healthy business, and that imposing the full penalty amount might have a negative impact on Respondent’s continued business operations. Thus, while I find Respondent’s evidence lacking, I do find that a minor reduction in the penalty amount is warranted on this basis.

Page 12

3. 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. However, CTP argues that Respondent “has a history of violating the Act’s requirements” based on the previously discussed June 5, 2023 warning letter. CTP Br. at 10. CTP contends the maximum penalty of $20,678 is appropriate in this case because Respondent’s history demonstrates an “unwillingness or inability” to comply with the law. Id.

As discussed above, I have already found that the circumstances surrounding the warning letter constitute an aggravating factor which supports a substantial penalty in this case. However, the warning letter was not a final agency determination and did not result in any penalties imposed against Respondent. See CTP Ex. 7 at 3 (“Please note that this warning letter does not constitute final agency action....”). Moreover, Respondent did not have the opportunity to request a hearing or otherwise dispute the violations alleged in the letter. Id. As a result, I do not agree with CTP that the warning letter establishes a significant history of prior violations.

Instead, I find that this is Respondent’s first violation resulting in a CMP. As a result, I conclude that Respondent does not have a significant history of prior violations, which is mitigating factor that supports a reduction in the proposed penalty amount.

4. Degree of Culpability

Based on my finding that Respondent committed the violation alleged in the Complaint, I find Respondent fully culpable for offering for sale new tobacco products that were adulterated and misbranded, in violation of the Act. The Act places a heavy burden on retailers who choose to sell prohibited tobacco products because of their highly dangerous and addictive nature. See 21 U.S.C. § 387 note. As discussed above, I find no merit in Respondent’s arguments that the violation in this case was “merely a mistake” or that CTP’s alleged failure to provide adequate guidance is partially to blame for its conduct.

5. Penalty Determination

As discussed above, I find that Respondent has no history of prior violations resulting in a CMP and imposing the maximum penalty might have a negative impact on its continued business operations. At the same time, as a retailer engaged in the sale of tobacco products, Respondent should have been familiar with the applicable law and known which products it was permitted to sell. Moreover, the record shows that Respondent continued selling prohibited ENDS products even after being warned by CTP and representing that it removed those products from its store, showing a willful disregard for the law. In addition, by downplaying its conduct and claiming the violation

Page 13

was, at least in part, due to CTP’s supposed failure to provide adequate guidance, I find that Respondent has failed to take full accountability for its actions.

After weighing these competing factors, I find that imposing the full amount of the penalty proposed by CTP would be overly punitive and would not serve the interests of justice. However, I also find that the violation in this case was quite serious, particularly given the circumstances surrounding the warning letter, and that a substantial penalty is appropriate to deter future violations and promote compliance with the Act. Therefore, I conclude that a relatively modest reduction in the proposed penalty amount is appropriate under the circumstances.

Based on the record evidence, the applicable law, and the aggravating and mitigating circumstances in this case, I find that a twenty percent reduction in the proposed penalty amount is warranted. Therefore, I conclude a reduced penalty of $16,542 is appropriate under 21 U.S.C. §§ 333(f)(5)(B), (f)(5)(C), and (f)(9).

V. Conclusion

For the reasons stated above, I impose a civil money penalty against Respondent, S & S Mehta, Inc. d/b/a Chevron, in the amount of $16,542 for receiving in interstate commerce an ENDS product that lacks the premarketing authorization required under the Act and offering such product for sale. Pursuant to 21 C.F.R. § 17.45(d), this order becomes final and binding upon both parties after 30 days of the date of its issuance.