Tang and Cheng, LLC d/b/a Arco, DAB TB9235 (2025)

INITIAL DECISION

The Center for Tobacco Products (CTP) seeks to impose a No-Tobacco-Sale Order (NTSO) for a 30 consecutive day period against Tang and Cheng, LLC d/b/a Arco (Respondent) for repeatedly violating Section 906(d)(5) of the Federal Food, Drug, and Cosmetic Act ("Act") (21 U.S.C. § 387(d)(5)) and particular FDA tobacco regulations promulgated under Section 906(d) of the Act (21 U.S.C. § 387f(d)), which are codified in 21 C.F.R. Part 1140.  CTP argues that Respondent committed five repeated violations of Section 906(d)(5) of the Act and particular FDA tobacco regulations within the 36-month period that included January 5, 2022 to October 25, 2023.

For the reasons discussed below, I find Respondent violated the Act, as alleged by CTP, and that an NTSO for a 21 consecutive day period to be appropriate under 21 U.S.C. § 333(f)(8).

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I.  Background and Procedural History

CTP began this matter by serving an Administrative Complaint on Respondent at 1403 Northwest Sammamish Road, Issaquah, Washington 98027 by United Postal Service and by filing a copy of the Complaint with the FDA's Division of Dockets Management. Civil Remedies Division (CRD) Docket (Dkt.) Entry Numbers (Nos.) 1 (NTSO Complaint), 1b (NTSO Proof of Delivery).

On April 24, 2024, Respondent timely filed an Answer.  CRD Dkt. Entry No. 3 (Answer).  In its Answer, Respondent admitted the allegations but offered defenses and stated that the penalty was inappropriate.  Id. ¶¶ 1-3.  Respondent stated:

I agree that 2 former employees neglected to ask for or verify age during visits in 2022 and 2023. Both employees no longer work for us. All remaining employees have been verbally counseled and training has been refreshed .  .  .  Our registers now force verification by inputing (sic) a date of birth and scanning valid ID .  .  .  Our store is enrolled in a 3rd party program (www.wecard.org), that visits twice a month to ensure employees are asking for ID .  .  .  Since [we enrolled in the We Card program] .  .  .  we have a 100% score in passing visits and have reports to verify this.

Id.

On April 25, 2024, based on Respondent's admission of the allegations in its Answer, the previously assigned Administrative Law Judge, Marla Y. Johnson,1 inferred that the parties may not have intended to proceed to a hearing in this case, and issued an Acknowledgment and Status Report Order instructing the parties to file a joint status report by June 25, 2024.  CRD Dkt. Entry No. 4 at 1-2.

On June 24, 2024, CTP timely filed a Joint Status Report stating that the parties had been unable to reach a settlement in this case.  CRD Dkt. Entry No. 5.

On July 1, 2024, Judge Johnson issued a Pre-Hearing Order (PHO), providing the parties with instructions regarding how the case would proceed.  CRD Dkt. Entry No. 6.  The PHO instructed CTP to file its pre-hearing exchange by September 27, 2024 and for Respondent to file its pre-hearing exchange by October 18, 2024.  Id. ¶ 4.

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On July 10, 2024, Respondent filed its pre-hearing brief and three documents  CRD Dkt. Entry Nos. 7, 7a-7c.  From September 10-17, 2024, Respondent filed an additional 24 documents labeled P. Ex. 1 through P. Ex. 9 and P. Ex. 11 through P. Ex. 21.  CRD Dkt. Entry Nos. 9, 9a-9k, 11-12, 13-21, CRD Dkt. Entry No. 12, 12 a-12b, and 13-21. Respondent did not submit written direct testimony of any proposed witness.

On September 27, 2024, CTP timely filed its pre-hearing exchange consisting of an informal brief, a proposed witness and exhibits list, and 16 proposed exhibits.  CRD Dkt. Entry Nos. 22, 22a-q.  CTP's exchange included the written testimony of one witness: Shae Mathews, FDA-commissioned officer with the State of Washington (CTP Ex. 5). Id. at 22f.

On December 12, 2024, the parties appeared at a video pre-hearing conference (PHC) in this case.  See CRD Dkt. Entry No. 26.  At the PHC, we discussed the procedural history of the case and the issues before me.  I explained that the purpose of a formal hearing was to allow for the cross-examination of any witnesses whose sworn testimony was provided in the prehearing exchanges.  Id. at 1-2.  I also noted that Respondent had not submitted a Respondent Ex. 10 and had also submitted with its pre-hearing brief, two additional documents that were not submitted with its pre-hearing exchange; these additional filings were not labeled or resubmitted as proposed exhibits.  Id. at 1.  Respondent advised that they had intended to file a P. Ex. 10 and the two additional documents as exhibits with their original pre-hearing exchange filing.  Id.  I explained that under the provisions of the PHO, if Respondent wished to supplement its pre-hearing exchange, it must file a motion with the proposed supplement and provide a showing of good cause for the late submission.  Id.  Respondent was notified that it must submit any such motions with the proposed supplement no later than January 2, 2025.  Id.  I advised that CTP would also be given an opportunity to respond to the motion and to supplement its pre-hearing exchange in response by January 17, 2025.  Id.

The purpose of the hearing is to provide the parties an opportunity to cross-examine witnesses whose direct testimony has been submitted in the other parties' pre-hearing exchanges.  21 C.F.R. § 17.37(a)-(b).  At the PHC, Respondent advised that it did not intend to cross-examine CTP's witness and waived its right to hearing, agreeing to a decision on the written record.  See CRD Dkt. Entry No. 26 at 2.  Since Respondent did not request to cross examine CTP's proposed witness and did not submit any proposed witnesses, there was no basis for a hearing in this case.  Id.

Respondent also did not object to the admission of CTP's proposed exhibits.  Id.  CTP's counsel advised that it waived its right to hearing, agreeing to a decision on the written record, and did not object to the admission of Respondent's proposed exhibits.  Id. As

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there were no objections to either party's proposed exhibits, I admitted CTP Exs. 1-16 and Respondent's Exs. P. Ex. 1 through P. Ex. 9 and P. Ex. 11 through P. Ex. 21 into the record.2  CRD Dkt. Entry No. 26 at 2.

On December 30, 2024, Respondent filed its first Motion to Supplement Pre-Hearing Exchange along with six proposed exhibits.  CRD Dkt. Entry Nos. 27, 27a-27f.  On January 1, 2025, Respondent filed a second Motion to Supplement Pre-Hearing Exchange with seven additional proposed exhibits.  CRD Dkt. Entry Nos. 28, 28a-b, 29, 29a, 30, 30a, 31.  On January 13, 2025, CTP indicated that it did not object to the admission of Respondent's new evidence.  See CRD Dkt. Entry No. 32.

In Respondent's Motions to Supplement Pre-Hearing Exchange, Respondent asserted that these submissions would give the court "a full and complete record upon which to decide the issue."  See CRD Dkt. Entry Nos. 27 at 1 and 28 at 1.  These statements are presumed to be Respondent's statement of good cause to supplement its pre-hearing exchange. CTP had no objections to the admission of Respondent's proposed exhibits.  See CRD Dkt. Entry No. 32.  As a result, Respondent's proposed exhibits P. Exs. 1 through 26 are admitted into the record.

On January 22, 2025, CTP filed Complainant's Notice of Waiver of Final Brief.  CRD Dkt. Entry No. 33.  On February 14, 2025, Respondent filed its Closing Brief.  CRD Dkt. Entry No. 34.

Accordingly, the record is now closed, and I will decide this case based on the evidence in the administrative record.  21 C.F.R. §§ 17.41, 17.45(c); see also id. at §§ 17.19(b)(11), (17).

I will consider the full administrative record in deciding this case.  The administrative record contains exhibits and other evidence admitted as well as all documents and requests filed in this proceeding.  21 C.F.R. § 17.41(b).

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II.  Analysis

A.  Violations

CTP seeks an NTSO for a 30 consecutive day period against Respondent for repeatedly violating Section 906(d)(5) of the Federal Food, Drug, and Cosmetic Act and the implementing regulations at Part 21 of the Code of Federal Regulations.  21 U.S.C. § 333(f)(8) provides that "if the Secretary finds that a person has committed repeated violations of § 387f(d)(5) of this title or of restrictions promulgated under § 387f(d) of this title at a particular retail outlet then the Secretary may impose an NTSO on that person prohibiting the sale of tobacco products in that outlet."  The term "repeated violations" is defined in 21 U.S.C. § 333(f)(8) as "at least 5 violations of particular requirements over a 36-month period at a particular retail outlet."

The sale of regulated tobacco products to a person under 21 years of age is a violation of the implementing regulations.  21 C.F.R. §§ 1140.14(a)(1), 1140.14(b)(1).3  The failure to verify, by means of photo identification containing the bearer's date of birth, that no regulated tobacco product purchaser is under 21 years of age is also a violation of the implementing regulations.  21 C.F.R. §§ 1140.14(a)(2)(i), 1140.14(b)(2)(i).

1. Prior Violations

This is the fourth civil money penalty action CTP has brought against Respondent. See Complaint ¶¶ 9-12.

CTP initiated its first CMP action on July 1, 2015 against Respondent, alleging that on June 24, 2014 and March 5, 2015,4 Respondent violated 21 C.F.R. § 1140.14(a) / § 1140.14(a)(1) and 21 C.F.R. § 1140.14(b)(1) / § 1140.14(a)(2)(i) by selling cigarettes or smokeless tobacco to a minor and failing to verify the age of a person purchasing cigarettes or smokeless tobacco by means of photographic identification containing the bearer's date of birth.

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CTP initiated its second CMP action on May 26, 2016 against Respondent, alleging that on November 19, 2015, Respondent violated 21 C.F.R. § 1140.14(a) / § 1140.14(a)(1) by selling cigarettes or smokeless tobacco to a minor.5

CTP filed its third CMP action on December 16, 2022 against Respondent, alleging that on January 5, 2022 and October 4, 2022, Respondent violated Section 906(d)(5) of the Act and 21 C.F.R. § 1140.14(b)(1) / § 1140.14(a)(2)(i) by selling tobacco products to a person under 21 years of age and failing to verify the age of a person purchasing cigarettes or smokeless tobacco by means of photographic identification containing the bearer's date of birth.

In settling the prior complaints, Respondent expressly waived its right to contest these violations in subsequent actions.  See Complaint ¶¶ 9-12.  These actions are now administratively final.

2. Current Violation

I now must determine whether the remaining allegations in the Complaint are true and, if so, whether Respondent's actions constitute a violation of law.  21 C.F.R. § 17.45(b).  Accordingly, I must determine:

• Whether, on October 25, 2023, at approximately 11:29 AM, a person under 21 years of age was able to purchase a package of Marlboro 100's cigarettes at Respondent's establishment, in violation of Section 906(d)(5) of the Act; and, if so,
• Whether Respondent failed to verify the age of a person purchasing cigarettes or smokeless tobacco by means of photographic identification containing the bearer's date of birth, as required by 21 C.F.R. § 1140.14(b)(1) / § 1140.14(a)(2)(i); and, if so; and
• Whether the NTSO for a 30 consecutive day period sought by CTP is appropriate, considering any aggravating and mitigating factors.

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B.  Analysis

As indicated above, CTP alleges that, on October 25, 2023, Respondent sold a tobacco product to a person under 21 years of age, and failed to verify the age of that person by means of a photographic identification containing the bearer's date of birth.  Complaint ¶ 7.  Respondent does not deny these allegations but asserts that they were committed by two employees who are no longer employed with its business.  See CRD Dkt. Entry Nos. 7, 7a.  Instead, Respondent argues that the NTSO is not appropriate because of mitigating factors in the form of multiple steps Respondent has taken to prevent the future sale of tobacco products to underage purchasers.  See CRD Dkt. Entry No. 7a at 1.

Although Respondent does not contest the allegations in the Complaint, I must still determine whether the allegations in the Complaint are true, and, if so, whether Respondent's actions identified in the Complaint violated the law.  20 C.F.R. § 17.45(b)(1).

As support for the allegations in the Complaint, CTP submitted the Declaration of Inspector Shae Mathews (Declaration), who conducted the inspection of Respondent's business on October 25, 2023.  See CTP Ex. 5 ¶ 7.  In the Declaration, Inspector Mathews stated they accompanied an underage purchaser into the establishment and had a clear, unobstructed view of an employee selling a tobacco product, specifically a package of cigarettes, directly to the underage purchaser.  CTP Ex. 5 ¶ 8; October 2023 Narrative Report; CTP Ex. 6 ¶¶ 11, 12.  CTP also submitted a copy of a driver's license, establishing that the underage purchaser was 18 years old at the time of the inspection. CTP Ex. 8.

Inspector Mathews also observed that the underage purchaser did not provide any identification to the employee before the purchase.  CTP Ex. 5 ¶ 8.  Inspector Mathews confirmed that the underage purchaser possessed their true and accurate photographic identification showing their actual date of birth, which was under the age of 21.  Id. ¶ 7; October 2023 Narrative Report; CTP Ex. 6 ¶¶ 11, 12.  After the inspection, Inspector Mathews stated they immediately returned to the vehicle, at which time the underaged purchaser handed them a package of Marlboro 100's cigarettes, which was labeled, photographed, and processed as evidence, in accordance with standard procedures at the time of the inspection.  CTP Ex. 5 ¶ 9.

As noted above, Respondent does not contest Inspector Mathews' statements and did not request to cross-examine this witness.  I find Inspector Mathews' statements, supported by corroborating evidence, to be credible and entitled to great weight.  I find that CTP has provided sufficient evidence to support its allegations that Respondent sold a package of

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Marlboro 100's cigarettes to an underage purchaser on October 25, 2023, in violation of Section 906(d)(5) of the Act and failed to verify the age of a person purchasing cigarettes or smokeless tobacco by means of photographic identification containing the bearer's date of birth, as required by 21 C.F.R. § 1140.14(b)(1) / § 1140.14(a)(2)(i).  I further find that Respondent failed to provide evidence to rebut CTP's allegations.

Accordingly, I find that CTP has met its burden to establish Respondent's liability under the Act for the violations of 21 U.S.C. § 387f(d) and 21 C.F.R. §§ 1140.14(b)(1), 1140.14(a)(2)(i) on October 25, 2023.

As noted above, CTP may seek an NTSO when it finds five or more repeated violations of the applicable regulations over a 36-month period.  21 U.S.C. § 333(f)(8).  In this case, CTP counted repeated violations that occurred within the 36-month period from January 5, 2022 through October 25, 2023.  See Complaint ¶¶  1, 7, 10-12, 13; CTP Exs. 1-4, 6.

Accordingly, as outlined above, Respondent has repeatedly violated the relevant regulatory requirements at least five times within a 36-month period.  See Complaint ¶¶ 7, 9-12.

III.  Penalty

I now turn to whether a 30 consecutive day period NTSO is appropriate in this case.  The Act establishes the factors that must be considered in deciding on the length of an NTSO, but it does not specify the NTSO duration.

Remedies for violations of the regulatory requirements may consist of civil money penalties and NTSOs.  NTSOs are authorized at 21 U.S.C. § 333(f)(8).  This section allows for the imposition of an NTSO against an establishment which has committed "repeated violations" of restrictions on the sale of tobacco products.  The term "repeated violations" is defined to mean "at least 5 violations of particular requirements over a 36-month period at a particular retail outlet .  .  .  . "  21 U.S.C. § 333.

When determining the appropriate amount of a CMP, I must consider any aggravating or mitigating circumstances and the factors listed in the Act.  21 C.F.R. § 17.34(a)-(b). Specifically, I am required to 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); 21 C.F.R. § 17.34; 21 C.F.R. § 17.45(b)(1)-(3); see also Kat Party Store, Inc. d/b/a Mr. Grocer Liquor Store, DAB No. 509 at 2 (Nov. 2016).

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

Respondent has failed to comply with the Act and its implementing regulations on five occasions within a 36-month period and admitted to earlier violations on June 24, 2014, March 5, 2015, and November 19, 2015.  Complaint ¶¶ 1, 7, 9-12.  The repeated inability of Respondent to comply with federal tobacco regulations, even after three previous civil money penalty actions, is serious in nature and the period to be covered by an NTSO should be established accordingly.  This violation history is not consistent with a serious attempt to comply with federal tobacco law and demands a proportional response.

2. Effect on Respondent's Ability to Do Business

In its Pre-Hearing Brief, Respondent argued that a prolonged NTSO would force it to reduce staff, many of whom are low-income earners, and Respondent would never recover from the loss of business that would result from the NTSO.  CRD. Dkt. No. 7a at 3.   Respondent states that the sale of tobacco products constitutes of approximately 24% of store sales.  Id. at 2.  In its Final Brief, Respondent again asserted that a 30 consecutive day period NTSO "would be detrimental and harm this small business, causing a permanent loss of current customers, loss of sales of peripheral items such as drinks, snacks and even fuel."  CRD Dkt. Entry No. 34 at 2.  However, Respondent has provided no evidence to support any of these allegations nor any evidence of its current financial situation.

I have no doubt that imposing an NTSO will negatively affect Respondent's business and will likely do so to a significant degree.  However, given the ongoing violations of federal tobacco law by Respondent over a 9-year period, as discussed above, this remedy becomes necessary to ensure future compliance.  Moreover, Respondent acknowledges that it sells items other than tobacco products, including drinks, snacks, and gasoline.  Id. This is consistent with photographs showing that Respondent apparently also sells gasoline, alcohol (P. Ex. 9 at 2, P. 14 at 1), hot and cold items (P. Ex. 17), and popsicles (P. Ex. 20).  Although Respondent has not provided any evidence to support its statement that tobacco sales comprise 24% of total store sales, taking Respondent at its word, the business is still left with 76% of its retail sales that would be unaffected by an NTSO.

Absent evidence in the record to the contrary, I conclude that the NTSO will not have a substantial effect on Respondent's ability to do business.

3. History of Prior Violations

As noted, Respondent has a long history of violations of the Act's requirements involving tobacco products.  From June 24, 2014 through October 25, 2023, Respondent has

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repeatedly violated the prohibition against selling regulated tobacco products to underaged purchasers and failing to verify, by means of photo identification containing a purchaser's date of birth which includes five repeated violations within the 36-month period from January 5, 2022 to October 25, 2023.  Complaint ¶¶ 1, 7, 9-12.

Respondent's continued unwillingness or inability to comply with the federal tobacco regulations calls for a more severe penalty.

4. Degree of Culpability

Respondent previously acknowledged liability for its prior violations of the tobacco regulations following the prior CMP actions.  Complaint ¶¶ 9-12; CTP Exs. 1-4.  On October 25, 2023, Respondent again violated the prohibition against selling tobacco products to an underage purchaser, and again failed to verify the age of a person purchasing cigarettes or smokeless tobacco by means of photographic identification containing the bearer's date of birth. Compliant ¶ 7.  As a result, the degree of culpability of the business is high, which demands a proportional response.

5. Additional Mitigating Factors and Other Such Matters as Justice May Require

Mitigation is an affirmative defense for which Respondent bears the burden of proof. Respondent must prove any affirmative defenses and any mitigating factors by a preponderance of the evidence.  21 C.F.R. § 17.33(c).  Respondent asserts that it has taken measures to prevent sales to underage purchasers, including training employees in verifying identification and age, implementing a forced verification system in the store's registers, and enrolling in a third-party ID check program.  CRD Dkt. Entry No. 3 at 2.

Respondent argues that it signed up for the "WE CARD" program in January 2023 and maintains a 100% passing score.  Id.  In its Final Brief, Respondent also indicated it required offending employees to contribute to the imposed penalty, initiated online training for cashiers, and implemented a bonus system for employees who passed mystery shops.  CRD Dkt. Entry No. 34 at 2.  While these measures did not prevent the October 25, 2023 violations, Respondent has made extensive efforts to improve its compliance with federal law governing sales of tobacco products to underage individuals. See P. Exs. 1-21.  As a result, while the repeated violations merit an NTSO, Respondent has established mitigating factors which support a reduction in the NTSO to a 21 consecutive day period.

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For these reasons, after considering the record evidence, applicable law, and mitigating circumstances in this case, and after full evaluation of the relevant factors, I find that a reduced penalty is appropriate in this case and impose a 21 consecutive day period NTSO penalty.  21 U.S.C. §§ 387f(d); 21 C.F.R. § 17.45(b)(1)-(3).

IV.  Conclusion

For the reasons detailed above, I impose a No-Tobacco-Sale Order against Respondent Tang and Cheng, LLC d/b/a Arco, for a period of 21 consecutive days.  During this period of time, Respondent shall stop selling cigarettes, cigarette tobacco, roll-your-own tobacco, smokeless tobacco, and covered tobacco products regulated under the Federal Food, Drug, and Cosmetic Act.  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.