KLA Inc. d/b/a Broadway Express Mart / Xpress Gas, DAB TB9229 (2025)

ORDER IMPOSING SANCTIONS AND INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint) against Respondent, KLA Inc. d/b/a Broadway Express Mart / Xpress Gas, alleging facts and legal authority sufficient to justify imposing a civil money penalty of $6,892.  CTP began this case by serving a Complaint on Respondent and filing a copy of the Complaint with the Food and Drug Administration’s (FDA) Division of Dockets Management.  The Complaint alleges that Respondent’s staff impermissibly 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, Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140.  CTP seeks a civil money penalty of $6,892.

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Respondent, through counsel, filed a timely Answer to CTP’s 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. 21 C.F.R.§ 17.35(a).  Accordingly, pursuant to 21 C.F.R. § 17.35(c)(3), I strike Respondent’s Answer and issue this decision of default judgment.

I. Procedural History

On July 8, 2024, CTP served the Complaint on Respondent, located at 306 Broadway, Providence, Rhode Island 02903, by United Parcel Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7.  Civil Remedies Division (CRD) Docket (Dkt.) Entry Nos. 1 (Complaint), 1b (Proof of Service).  On July 29, 2024, Respondent’s counsel (Counsel) registered for the Departmental Appeals Board (DAB) Electronic filing system and filed a Notice of Appearance along with its timely filed Answer.  CRD Dkt. Entry Nos. 3, 3a (Answer).

On July 31, 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. 4.  Among other things, the APHO ordered CTP to file its pre-hearing exchange by October 25, 2024, and Respondent to file its pre-hearing exchange by November 15, 2024.  Id. ¶ 6a-b.  Further, the APHO warned the parties that:

I may impose sanctions including, but not limited to, dismissal of the complaint or answer, if a party fails to comply with any order (including this order), fails to prosecute or defend its case, or engages in misconduct that interferes with the speedy, orderly, or fair conduct of this hearing.

Id. ¶ 21, citing 21 C.F.R. § 17.35.

On August 30, 2024, CTP filed a Joint Status Report, stating that the parties intended to engage in further settlement discussions.  CRD Dkt. Entry No. 6.

On September 11, 2024, Counsel for Respondent filed Respondent’s Response to Request for Production and four supporting documents.   CRD Dkt. Entry Nos. 7, 7a-7d.

On October 25, 2024, CTP timely filed its pre-hearing exchange, consisting of a pre-hearing brief, a list of proposed witnesses and exhibits, and thirteen proposed exhibits (CTP Exhibits (Exs.) 1-13), including the written direct testimony of two proposed witnesses, James Bowling, CTP Deputy Division Director for the Division of Enforcement and Manufacturing (“DEM”) in the Office of Compliance and Enforcement (CTP Ex. 3), and Inspector Matthew Higgins (CTP Ex. 4).  Respondent did not file a pre-hearing exchange.

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On November 25, 2024, the attorney advisor assisting me with this case emailed the parties to schedule a pre-hearing conference in this case and offered February 11, 2025 at 11:00 AM Eastern Time or 1:00 PM Eastern Time as the proposed date and times for the pre-hearing conference.  CRD Dkt. Entry No. 9.  On November 26, 2024, CTP responded that it was available on the proposed date and at both times offered; Counsel for Respondent was then specifically asked for his preference of time on the proposed date.  CRD Dkt. Entry No. 10.  Counsel for Respondent responded “11:00 is better for me.”  Id. at 1.

On November 26, 2024, I issued an Order Scheduling Pre-Hearing Conference (PHC).  CRD Dkt. Entry No. 11.  I informed the parties that the PHC was scheduled for Tuesday, February 11, 2025, at 11:00 AM Eastern Time, and provided the procedures to attend the telephonic conference.  Id.  

On February 11, 2025, I held the pre-hearing conference as scheduled.  Counsel for CTP appeared at the pre-hearing conference.  However, Counsel for Respondent failed to appear as ordered.  

On February 11, 2025, I issued an Order to Show Cause for Failure to Appear at Pre-Hearing Conference (OSC), giving Respondent’s Counsel until February 21, 2025,1 to show cause for Respondent’s failure to appear at the February 11, 2025 pre-hearing conference.  CRD Dkt. Entry No. 12.  I warned Respondent that:

failure to respond 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.  21 C.F.R. § 17.35(a).

Id. at 2.

To date, Counsel has failed to respond to the OSC.

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  

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• of the hearing. 

21 C.F.R. § 17.35(a).

Respondent failed to comply with the following orders and procedures governing this proceeding:

• Respondent failed to comply with paragraph 6.b. of my July 31, 2024 APHO when it failed to file its pre-hearing exchange by November 15, 2024;
• Respondent failed to comply with my November 26, 2024 Order Scheduling Pre-Hearing Conference, requiring both parties to appear at the pre-hearing conference; and
• Respondent failed to comply with my February 11, 2025 OSC requiring Respondent to show cause for its failure to appear at the February 11, 2025 pre-hearing conference; 

Respondent also failed to defend its action. 21 C.F.R. § 17.35(a)(2). Specifically:

• Respondent failed to file a pre-hearing exchange as directed by my APHO;
• Respondent failed to appear at the scheduled pre-hearing conference; and
• Respondent failed to respond to my OSC. 

This leads me to conclude that Respondent has abandoned its defense of this case.  In the absence of any explanation from Respondent, I find no basis to excuse Respondent’s repeated failure to comply with various orders in this administrative proceeding. Despite explicit warnings that failure to comply with my Orders could result in sanctions, Respondent has not complied with three Orders.  CRD Dkt. Entry No. 4 ¶ 6.b.; CRD Dkt. Entry No. 11 at 1-2; CRD Dkt. Entry No. 12 at 1.

Accordingly, I find that Respondent failed to comply with the orders and procedures governing this proceeding, failed to defend its case, and, as a result, engaged in a pattern of misconduct that interfered with the speedy, orderly, and fair conduct of the hearing.

The harshness of 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).  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); see also KKNJ, Inc. d/b/a Tobacco Hut 12, DAB No. 2678 at 10 (2016) (concluding that “the ALJ [Administrative Law Judge] did not abuse her discretion in sanctioning Respondent’s ongoing failure to comply with the ALJ’s directions by striking Respondent’s answer to the Complaint.”).

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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 am required to “assume the facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the Act, issue a default judgment and impose a civil money penalty.  Accordingly, 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 Broadway Express Mart / Xpress Gas, an establishment that sells tobacco products and is located at 306 Broadway, Providence, Rhode Island 02903.  Complaint ¶¶ 11-12.
• On April 11, 2023, CTP initiated a prior civil money penalty action, CRD Docket  T-23-1724, FDA Docket FDA-2023-H-1364, against Respondent for violations of the Act, three2 of which occurred during the 36-month period relevant in the current Complaint.  Complaint ¶ 15.
• The previous action concluded when Respondent admitted all of the allegations in the Complaint and paid the agreed upon monetary penalty.  Further, “Respondent expressly waived its right to contest such violations in subsequent actions.”  Complaint ¶ 16.
• An FDA-commissioned inspector conducted a subsequent inspection of Respondent’s establishment on April 12, 2024, at approximately 10:27 AM, during which “a person younger than 21 years of age was able to purchase a package of two Garcia y Vega Game Blue cigars . . . .”  Additionally, “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 sold or distributed 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. pt. 1140 under section 906(d) of the Act.  21 U.S.C. § 387a-1; see also 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. 

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Reg. 70,483, 70,485 (Aug. 30, 2024).  Under section 906(d)(5) of the Act, no retailer may sell regulated tobacco products to any person younger than 21 years of age and retailers must verify, by means of photographic identification containing a purchaser’s date of birth, that no regulated tobacco product purchasers are 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 February 18, 2022, January 7, 2023, and April 12, 2024.  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).  Therefore, Respondent’s actions constitute violations of law that merit a civil money penalty.

CTP has requested a civil money penalty of $6,892, which is a permissible penalty for five violations of the regulations found at 21 C.F.R. pt. 1140 within a 36-month period.  21 C.F.R. § 17.2.  Therefore, I find that a civil money penalty of $6,892 is warranted and so order one imposed.