Cali Steam LLC d/b/a Cali Steam, DAB TB9383 (2025)

INITIAL DECISION

Found:

1. Respondent violated 21 U.S.C. § 301 et seq., specifically 21 U.S.C. § 331(a), as charged in the Complaint;
2. Respondent committed at least one violation as set forth hereinafter; and
3. Respondent is hereby assessed a civil penalty in the amount of $16,000.

Glossary:

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I.  JURISDICTION

             I have jurisdiction to hear this case pursuant to my appointment by the Secretary of Health and Human Services and my authority under the Administrative Procedure Act (5 U.S.C. §§ 554-556), 5 U.S.C.A. § 3106, 21 U.S.C. § 333(f)(5), 5 C.F.R. §§ 930.201 et seq. and 21 C.F.R. Part 17.2

II.  PROCEDURAL BACKGROUND

             The Center for Tobacco Products (CTP/Complainant) filed a Complaint on August 16, 2024, against Cali Steam LLC d/b/a Cali Steam (Respondent or Cali Steam), an online establishment which is accessible at the URL: https://calisteam.com.  Civil Remedies Division (CRD) Docket (Dkt.) Entry No. 1 ¶ 14 (Complaint), 1a (Cover Letter), 1b (Proof of Service).  The Complaint alleges that Respondent introduced or delivered for introduction into interstate commerce an adulterated and misbranded tobacco product, thereby violating the Federal Food, Drug, and Cosmetic Act (FDCA or the Act), 21 U.S.C. § 331(a).  CRD Dkt. Entry No. 1 ¶¶ 1, 23.

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             Respondent was served with process on August 16, 2024, by United Parcel Service.  CRD Dkt. Entry No. 1b; see also CRD Dkt. Entry No. 2.  On September 11, 2024, Michael DiNapoli, the owner of Respondent's online establishment, registered for the Departmental Appeals Board (DAB) electronic filing system (E-File), and timely filed Respondent's Answer to the Complaint, including an attachment supplementing its Answer.  CRD Dkt. Entry No. 4 (Answer).  In its Answer, Respondent denies the allegations in the Complaint, while asserting that "Cali Steam LLC, acknowledges that it is engaged in the sale of e-liquid products, as described in the Complaint.  However, Respondent respectfully contests the assertion that these products were sold without the proper premarket authorization."  Id. at 1, 5.  In its Answer, Respondent also contests the civil money penalty (CMP) proposed by CTP, asserting that the $20,678 penalty "is egregious given the past and current financial status of [Respondent's] company."  Id. at 2, 6.

             On September 17, 2024, I issued a Pre-Hearing Order (PHO) which established deadlines for discovery and the parties' pre-hearing exchanges.  CRD Dkt. Entry No. 5 (PHO).  The PHO directed the parties to file their respective pre-hearing exchanges by December 16, 2024.  Id. ¶ 4.  On December 16, 2024, CTP filed its pre-hearing exchange consisting of a pre-hearing brief, a list of proposed witnesses, and ten proposed exhibits. CRD Dkt. Entry Nos. 6, 6a-6k.  CTP included the written direct testimony of three proposed witnesses: James Bowling, Deputy Director, Division of Enforcement and Manufacturing, Office of Compliance and Enforcement, CTP, FDA; Kouros Kangarli, Consumer Safety Officer for the Division of Promotion, Advertising, and Labeling

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             (DPAL) in the Office of Compliance and Enforcement, CTP, FDA; and Dara D. Hackett, Regulatory Counsel for DPAL in the Office of Compliance and Enforcement, CTP, FDA. CRD Dkt. Entry Nos. 6b, 6c, 6d.  Respondent did not file a pre-hearing exchange.

             On January 13, 2025, I issued an order scheduling a telephone hearing for February 19, 2025, at 2:00 PM Eastern Time.  CRD Dkt. Entry No. 7 (Order Scheduling Hearing).  The Order directed the parties to file any motions, such as motions to exclude or objections to CTP's proposed exhibits, and to indicate which witnesses, if any, they wish to cross-examine by January 24, 2025.  Id. at 1-2.  The Order Scheduling Hearing also informed the parties that if Respondent chooses not to cross-examine any of CTP's witnesses, I would cancel the February 19, 2025 hearing and issue a written decision on the record.  Id. at 2.

             On February 5, 2025, after the parties did not file any motions or objections, and Respondent did not indicate which, if any, of CTP's witnesses that Respondent intended to cross‑examine at the scheduled hearing, I issued an Order cancelling the hearing.  CRD Dkt. Entry No. 8 (Order Cancelling Hearing).  My Order Cancelling Hearing also gave CTP until February 14, 2025, to move by written motion to admit its proposed exhibits into evidence.  Id. at 2.

             On February 6, 2025, Mr. DiNapoli sent an email correspondence to the attorney advisor assigned to assist me with this case, copying counsel for CTP, requesting information on resetting Respondent's DAB E-File password.  See CRD Dkt. Entry No. 9 at 1.  On February 12, 2025, the attorney advisor responded to Mr. DiNapoli informing

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him that his password reset request had been forwarded to the DAB E-File administrator, and that he would receive a password reset email.  See id. at 1.

             On February 13, 2025, CTP moved to admit its ten proposed exhibits into evidence.  CRD Dkt. Entry No. 10 (Complainant's Motion to Admit Evidence).

             On February 14, 2025, Mr. DiNapoli sent an email correspondence to the attorney advisor requesting "a [m]ore [s]implified [e]xplanation of the [c]urrent [p]roceedings[,]" and a "[s]ettlement [c]onference or [a]lternative [r]esolution."  See CRD Dkt. Entry No. 11 at 1-2.  On that same date, the attorney advisor responded to Mr. DiNapoli's email, copying CTP's counsel, offering to call Mr. DiNapoli in order to assist him "with understanding the current procedural posture of the proceedings."  Id. at 1.  The attorney advisor's email also referred Mr. DiNapoli to my September 17, 2024 Pre-Hearing Order for more information regarding the filing of any requests or motions in the case.  Id.  On February 18, 2025, the attorney advisor called Mr. DiNapoli on the phone.  See CRD Dkt. Entry No. 12.

             On  February 18, 2025, Mr. DiNapoli filed a letter stating that "[he] was unable to access the required electronic portal due to a lost password, which prevented [him] from retrieving relevant case documents and participating in the proceedings.  Despite attempts to recover access, [he] was unsuccessful in regaining entry in time for the scheduled hearing."  CRD Dkt. Entry No. 13 (Respondent's February 18, 2025 Filing).  In the letter, Mr. DiNapoli also stated that "[he] [is] currently proceeding without legal counsel, [and] [that he] would like to formally acknowledge and accept the exhibits submitted in the case."  Id.

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             On February 21, 2025, after considering Respondent's February 18, 2025 Filing, I issued an Order finding that Respondent's inability to access the DAB E-File system established good cause to accept Respondent's untimely response to my January 13, 2025 Order Scheduling Hearing.  See CRD Dkt. Entry No. 14 at 2.  Thus, absent objection from Respondent, I admitted CTP's Exs. 1-10 into the administrative record.  Id.  In addition, my February 21, 2025 Order stated:

If Respondent wishes to cross-examine any of CTP's witnesses, I will issue an Order rescheduling the hearing in this case.  However, if Respondent does not wish to cross-examine any of CTP's witnesses, I will not reschedule a hearing and will proceed to a written decision on the record.

By no later than March 3, 2025, Respondent is instructed to file a response indicating which, if any, of CTP's witnesses Respondent wishes to cross-examine at the hearing.

Id. at 3 (emphasis in original).

             My February 21, 2025 Order also stated, "[w]ith regard to Respondent's request for settlement negotiations, pursuant to 21 C.F.R. § 17.15(b), ‘any time prior to a final decision by the entity deciding any appeal agree to a settlement of all or a part of the matter,'" and provided CTP's direct contact.  Id.

             On March 26, 2025, after Respondent did not indicate which, if any, of CTP's witnesses Respondent wished to cross-examine at the hearing, I issued an Order establishing a schedule for submission of final briefs (Order Scheduling Final Briefs), which gave the parties until April 25, 2025 to submit final written briefs on the merits of the case, and until May 12, 2025 to submit responsive briefs.  CRD Dkt. Entry No. 15.

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             On April 25, 2025, counsel for CTP filed its Notice of Waiver of Final Brief. CRD Dkt. Entry No. 17.  On that same date, Respondent filed a "correspondence [that] serves as [its] Final Brief," and a copy of email correspondence between Respondent and CTP regarding settlement negotiations in March and April of 2025.  CRD Dkt. Entry Nos. 18, 18a.

             As the Administrative Law Judge adjudicating this matter, I do not have the authority to compel the parties to finalize a settlement agreement.

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

III.  BURDEN OF PROOF

             As the petitioning party, CTP, has the burden to prove, by a preponderance of the evidence, that Respondent is liable and that the proffered penalty is appropriate.  21 C.F.R. § 17.33.

IV.  LAW

             21 U.S.C. § 301 et seq., specifically 21 U.S.C. § 331(a), 21 U.S.C. § 387b(6)(A), 21 U.S.C. § 387c(a)(6), and 21 U.S.C. § 387j(a)(2)(A).

V.  ISSUE

             Did Respondent violate 21 U.S.C. § 301 et seq., specifically 21 U.S.C. § 331(a), as alleged in the Complaint?

VI.  ALLEGATIONS

1. Complainant's Recitation of the Facts

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             In its Complaint, CTP alleged that Respondent manufactures tobacco products and sells them through its online establishment that does business under the name Cali Steam, which is accessible at the URL: https://calisteam.com.  Complaint ¶ 14.

             CTP's Complaint further alleged that on November 10, 2022, CTP issued a Warning Letter to Respondent, stating that the new tobacco products that Respondent "manufactures, sells and/or distributes are adulterated and misbranded because they lack the required FDA marketing authorization order."  Id. ¶ 15.

             During an inspection of Cali Steam at the URL: https://calisteam.com on February 16, 2024, an FDA‑commissioned inspector observed Respondent's Cali Steam Blu Razz 6mg 70VG/30PG 60ml e-liquid product, Cali Steam Carnival 6mg 70VG/30PG 60ml e-liquid product, and Cali Steam Toucan 6mg 70VG/30PG 60ml e-liquid product for sale through its online establishment.  Id. ¶ 16.  According to the Complaint, during the inspection, FDA was able to purchase Respondent's e-liquid products.  Id.  Respondent shipped the products from California to FDA in Maryland.  Id. ¶ 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.  Id. ¶ 18.

             Respondent's e-liquid products do not have a substantial equivalence (SE) order or a found-exempt order in effect and are, thus, required by 21 U.S.C. § 387j(a) to have premarket review.  Id. ¶ 19.

             Respondent submitted a premarket tobacco product application (PMTA) to FDA for certain of its e-liquid products, and on August 9, 2021, FDA issued a Refuse to File (RTF) Letter for Respondent's e-liquid products.  Id. ¶ 20.

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             Respondent's e-liquid products do not have a Marketing Granted Order (MGO) permitting marketing of a new tobacco product under 21 U.S.C. § 387j(c)(1)(A)(i) and are therefore adulterated under 21 U.S.C. § 387b(6)(A).  Id. ¶ 21.

             Respondent neither submitted an SE report nor an abbreviated report for Respondent's e-liquid products, and the products are, therefore, misbranded under 21 U.S.C. § 387c(a)(6).  Id. ¶ 22.

             Respondent introduced or delivered for introduction into interstate commerce, or caused the introduction or delivery for introduction into interstate commerce of, its adulterated and misbranded tobacco products, in violation of 21 U.S.C. § 331(a). Id. ¶ 23.

2. Respondent's Recitation of the Facts

             In its Answer, Respondent denies the allegations in the Complaint, and "contests the assertion that [Respondent's e-liquid products] were sold without the proper premarket authorization."  CRD Dkt. Entry No. 4 at 1, 5.  In its Answer, Respondent further contends that:

Cali Steam LLC filed its [PMTA] in accordance with the [FDCA] and was under the impression that the application was still under review.  At no point did Cali Steam LLC receive a Refuse to File [] letter, nor was there any request for product samples, which, according to Respondent's understanding, would have been the next procedural step in the PMTA process.

Based on this understanding, Respondent believed that the application was still pending and awaiting further instructions or clarification from the FDA.  As such, the continued sale of e-liquid products was conducted under the good faith assumption that the products were still in the review process and compliant with FDA regulations.

Id. at 5.

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In its Answer, Respondent also states:

[W]e acknowledge the seriousness of the allegations presented by the Center for Tobacco Products (CTP). However, we respectfully request a reconsideration of the penalty amount on the grounds that the amount assessed is egregious given the past and current financial status of our company.

Id. at 6.

VII.  FAMILY SMOKING PREVENTION AND TOBACCO CONTROL ACT

             The "relevant statute" in this case is actually a combination of statutes and regulations:  The Family Smoking Prevention and Tobacco Control Act, Pub. L. No. 111 31, 123 Stat. 1776 (2009) (TCA), amended the FDCA and created a new subchapter of the Act that dealt exclusively with tobacco products, 21 U.S.C. §§ 387-387u, and it also modified other parts of the FDCA explicitly to include tobacco products among the regulated products whose misbranding can give rise to civil, and in some cases criminal, liability.  The 2009 amendments to the FDCA contained within the TCA also charged the Secretary of Health and Human Services with, among other things, creating regulations to govern tobacco sales.

             As of August 8, 2016, pursuant to 21 U.S.C. §§ 387a and 387f(d) (Section 906(d) of the Act), FDA revised the definition of tobacco products to incorporate additional products, subject to regulation under the Act.  These products include, but are not limited to, electronic nicotine delivery systems (including e-cigarettes), e-liquids, and pipe tobacco.  See Final Rule, Deeming Tobacco Products To Be Subject to the Federal Food, Drug, and Cosmetic Act, as Amended by the Family Smoking Prevention and Tobacco Control Act; Restrictions on the Sale and Distribution of Tobacco Products and Required

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Warning Statements for Tobacco Products, 8 Fed. Reg. 28,974 (May 10, 2016), available at https://federalregister.gov/a/2016-10685 (hereafter "Deeming Regulation").

             The TCA prohibits the sale of any "new tobacco product" without authorization from the FDA.  21 U.S.C. § 387(j)(a); 21 U.S.C. § 387a(b) (delegating the FDA the authority to determine what constitutes new tobacco products).  A new tobacco product is any tobacco product that was not commercially marketed in the United States as of February 15, 2007.  21 U.S.C. § 387j(a)(1).  The Secretary's regulations on tobacco products appear in Part 1140 of Title 21, Code of Federal Regulations (CFR).

             The TCA requires new tobacco products to have a premarket authorization in effect.  21 U.S.C. § 387j(a)(2).  To obtain premarket authorization, manufacturers of new tobacco products are required to submit a PMTA to the FDA for approval to sell their products.  21 U.S.C. § 387j(b)(1).  Alternatively, the product manufacturer may submit a substantial equivalence report, in response to which the FDA may issue an order finding the product is substantially equivalent to a predicate tobacco product.  21 U.S.C. § 387e(j).  Or, the product manufacturer may submit a report, in response to which the Secretary may issue an exemption order.  21 U.S.C. § 387e(j)(3).

             The TCA directs FDA to review PMTAs to determine whether "permitting such tobacco product to be marketed would be appropriate for the protection of the public health."  21 U.S.C. § 387j(c)(2)(A).  Absent an approval from the FDA, the new tobacco products are considered adulterated and misbranded if they lack the required FDA marketing authorization order, substantial equivalence order, or an exemption order.  21

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U.S.C. §§ 387b(6) and 387c(6).

             Under the FDCA, "[a] tobacco product shall be deemed to be misbranded if, in the case of any tobacco product sold or offered for sale in any State, it is sold or distributed in violation of regulations prescribed under section 387f(d)."  Under 21 U.S.C. § 387c(a)(6), a new tobacco product is misbranded if a "notice or other information respecting it was not provided as required" under the substantial equivalence or substantial equivalence exemption pathway, including a substantial equivalence report or an abbreviated report. 21 U.S.C. § 387c(a)(6).  Section 387 a-1 directed FDA to re-issue, with some modifications, regulations previously passed in 1996.  21 U.S.C. § 387 a-1(a) (2012).

             Under the FDCA, a tobacco product is adulterated if it has not obtained the required premarket authorization.  21 U.S.C. § 387b(6)(A).  Thus, when a manufacturer does not submit a PMTA for its e-liquid products, or when a manufacturer submits a PMTA for its e-liquid products and receives a denial order or FDA issues a Refuse to File Letter, the e-liquid products are being adulterated.  21 U.S.C. § 387b(6)(A).  The adulterated and misbranded e-liquid products in turn violate the FDCA.

             The FDCA prohibits the introduction or delivery for introduction into interstate commerce of adulterated and misbranded tobacco products.  21 U.S.C. § 331(a).  The FDA may seek a civil money penalty from "any person who violates a requirement of this chapter which relates to tobacco products."  21 U.S.C. § 333(f)(9)(A) (2012). Penalties are set by 21 U.S.C. § 333 note and 21 C.F.R. § 17.2.

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VIII.  LIABILITY

             CTP alleges that Respondent introduced or delivered for introduction into interstate commerce, or caused the introduction or delivery for introduction into interstate commerce of adulterated and misbranded tobacco products, in violation of 21 U.S.C. § 331(a), on February 16, 2024.  Complaint ¶¶ 16, 23.

             In its Answer, Respondent denies liability asserting that it "filed its PMTA in accordance with the [FDCA] and was under the impression that the application was still under review."  CRD Dkt. Entry No. 4 at 5.  Respondent further asserts that "[a]t no point did Cali Steam LLC receive a Refuse to File [] letter," and that "Respondent believed that the application was still pending and awaiting further instructions or clarification from the FDA.  As such, the continued sale of e-liquid products was conducted under the good faith assumption that the products were still in the review process and compliant with FDA regulations."  Id.

             CTP's case against Respondent relies on the written direct testimony of James Bowling, Deputy Director, Division of Enforcement and Manufacturing, Office of Compliance and Enforcement, CTP, FDA, Kouros Kangarli, Consumer Safety Officer for DPAL in the Office of Compliance and Enforcement, CTP, FDA, and Dara D. Hackett, Regulatory Counsel for DPAL in the Office of Compliance and Enforcement, CTP, FDA. CTP Exs. 1, 2, 3.

             Regarding the unauthorized e-liquid products, CTP submitted the sworn declaration Deputy Director James Bowling.  CTP Ex. 1.  In his official capacity, Deputy Director Bowling has personal knowledge of CTP's tobacco record keeping, registration

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process, and new tobacco product premarket authorization requirements.  Id. ¶ 3.  Deputy Director Bowling confirmed that a search of the Tobacco Registration and Product Listing Module Next Generation (TRLM NG) revealed a registered establishment containing the name Cali Steam, and listed e-liquid products named: Cali Steam Blu Razz 6mg 70VG/30PG; Cali Steam Carnival 6mg 70VG/30PG; and Cali Steam Toucan 6mg 70VG/30PG in California.  Id. ¶ 6.

             Additionally, Deputy Director Bowling confirmed that the Cali Steam Blu Razz 6mg 70VG/30PG e-liquid products, Cali Steam Carnival 6mg 70VG/30PG 60ml e-liquid products, and Cali Steam Toucan 6mg 70VG/30PG 60ml e-liquid products, that were shipped to CTP to fulfill the order placed during the February 16, 2024 investigation of Cali Steam at the URL https://calisteam.com, are made in California.  Id. ¶ 7.  Further, Deputy Director Bowling confirmed that the Cali Steam Blu Razz 6mg 70VG/30PG e-liquid products, Cali Steam Carnival 6mg 70VG/30PG 60ml e-liquid products, and Cali Steam Toucan 6mg 70VG/30PG 60ml e-liquid products were not commercially marketed in the United States as of February 15, 2007.  Id. ¶ 9.  According to Deputy Director Bowling's sworn testimony, as of "February 16, 2024, the day on which FDA observed the Cali Steam Blue Razz 6mg 70VG/30PG e-liquid product (both 30 and 60 ml), Cali Steam Carnival 6mg 70VG/30PG 60ml e-liquid product, and Cali Steam Toucan 6mg 70VG/30PG 60ml e-liquid product being offered for sale at Cali Steam at the URL https://calisteam.com," FDA did not have any record of an FDA Marketing Granted Order in effect for the e-liquid products at issue, nor a Substantial Equivalence Order or an abbreviated report requesting a Found-Exempt Order.  Id. ¶¶ 10-11.

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             Respondent did not object to Deputy Director Bowling's declaration or wish to cross-examine him at a hearing.  Therefore, I find Deputy Director Bowling's statements about Respondent's e-liquid products credible with respect to the question of whether the e-liquid products had marketing authorization.  Further, I find Respondent's contentions that it "believed that [its] application was still pending and awaiting further instructions or clarification from the FDA," and that Respondent "continued sale of [the] e-liquid products was conducted under the good faith assumption that the products were still in the review process and compliant with FDA regulations" do not absolve Respondent of its liability.  See CRD Dkt. Entry 4 at 5.  Respondent concedes that it did not have a Marketing Granting Order in effect with regard to the e-liquid products submitted under its PMTA.  Id.  Thus, I find that the Cali Steam Blu Razz 6mg 70VG/30PG e-liquid products, Cali Steam Carnival 6mg 70VG/30PG 60ml e-liquid products, and Cali Steam Toucan 6mg 70VG/30PG 60ml e-liquid products are adulterated and misbranded as Respondent did not obtain FDA's required premarket authorization.

             Deputy Director Bowling's declaration also supports a finding that Respondent's unauthorized e-liquid products were introduced into interstate commerce, as they were made in California and shipped to FDA in Maryland.  Id. ¶ 7; CTP Ex. 3 ¶¶ 6, 7.

             Regarding the purchasing of Respondent's e-liquid products by FDA, CTP relies on the sworn declaration of Consumer Safety Officer Kouros Kangarli.  CTP Ex. 2.  In the declaration, Consumer Safety Officer Kangarli testifies that on February 16, 2024, at approximately 1:57 PM, he conducted a controlled online purchase investigation of Cali Steam at the URL https://calisteam.com under Controlled Purchase Assignment Number

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58.  Id. ¶ 5.  Consumer Safety Officer Kangarli testified that he directly observed and supervised Undercover Purchaser (UP) A during the controlled online purchase investigation.  Id.  Consumer Safety Officer Kangarli testified that he observed UP A purchase a Cali Steam Blu Razz 6mg 70VG/30PG 60ml e-liquid product, Cali Steam Carnival 6mg 70VG/30PG 60ml e-liquid product, and Cali Steam Toucan 6mg 70VG/30PG 60ml e-liquid product directly from the establishment's website and that the website generated a receipt to the purchaser after the purchase.  Id. ¶ 6.  Consumer Safety Officer Kangarli recorded the investigation as it was occurring and created an Investigator Controlled Purchase Narrative Report.  Id. ¶ 7; see CTP Exs. 4, 5.

             Regarding FDA's processing of Respondent's e-liquid products after purchase and delivery to FDA's Headquarters in Silver Spring, Maryland, CTP relies on the sworn declaration of Regulatory Counsel Dara D. Hackett.  CTP Ex. 3.  In the declaration, Regulatory Counsel Hackett testifies that, on February 20, 2024, she processed evidence from a controlled online purchase from Cali Steam at the URL https://calisteam.com.  Id. ¶ 6.  Regulatory Counsel Hackett testified that she opened the Controlled Purchase Assignment Number 58 package, mailed by Respondent Cali Steam at the URL https://calisteam.com to an address in Maryland, and observed that the tobacco product inside the package were two Cali Steam Blu Razz 6mg 70VG/30PG 30ml e-liquid products,3 a Cali Steam Carnival 6mg 70VG/30PG 60 ml e-liquid product, and a Cali

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Steam Toucan 6mg 70VG/30PG 30ml e-liquid product.  Id. ¶ 7.  Regulatory Counsel Hackett testified that she labeled the Cali Steam Blu Razz 6mg 70VG/30PG 30ml e-liquid products, the Cali Steam Carnival 6mg 70VG/30PG 60ml e-liquid product, and the Cali Steam Toucan 6mg 70VG/30PG 60ml e-liquid product, then placed the e-liquid products, a signed copy of the CTP Inventory Sheet of Evidence and the outer mail packaging, into an FDA evidence bag and sealed the evidence bag.  Id.  Regulatory Counsel Hackett testified that the evidence bag was then placed into a locked cabinet, which is designated for controlled online purchase investigation evidence storage at FDA Headquarters in Silver Spring, Maryland, where it remained as of the date of Regulatory Counsel Hackett's declaration.  Id.  Regulatory Counsel Hackett took photographs during the evidence collection process for Controlled Purchase Assignment Number 58.  Id. ¶ 8; see CTP Ex. 6.

             Respondent did not object to the declarations of Consumer Safety Officer Kangarli or Regulatory Counsel Hackett.  In addition, Respondent did not wish to cross-examine Consumer Safety Officer Kangarli or Regulatory Counsel Hackett at a hearing. Therefore, I find each of their statements regarding Controlled Purchase Assignment Number 58 to be credible.

             I find that the uncontroverted testimony of Deputy Division Director James Bowling, Consumer Safety Officer Kangarli, and Regulatory Counsel Hackett, as well as the corroborating evidence submitted by CTP, establishes that Respondent introduced or delivered for introduction into interstate commerce an adulterated and misbranded tobacco product, thereby violating the Act.  21 U.S.C. § 331(a).  Specifically, the

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evidence shows that Respondent, which operated an online establishment on February 16, 2024 in California at URL: https://calisteam.com, introduced or delivered for introduction into interstate commerce its Cali Steam Blu Razz 6mg 70VG/30PG 30ml e-liquid products, the Cali Steam Carnival 6mg 70VG/30PG 60ml e-liquid product, and the Cali Steam Toucan 6mg 70VG/30PG 60ml e-liquid product when Respondent processed FDA's undercover inspection purchase and shipped the e-liquid products from California to FDA in Maryland on February 16, 2024.  21 U.S.C. § 331(a); see CTP Exs. 2-6.  I find that the Cali Steam Blu Razz 6mg 70VG/30PG 30ml e-liquid products, the Cali Steam Carnival 6mg 70VG/30PG 60ml e-liquid product, and the Cali Steam Toucan 6mg 70VG/30PG 60ml e-liquid product manufactured and sold by Respondent were adulterated because they lacked the FDA premarketing authorization and were not exempt from this requirement.  21 U.S.C. §§ 387j(a)(2)(A), 387e(j)(3)(A); see CTP Ex. 1. I also find Respondent's e-liquid products were misbranded under 21 U.S.C. § 387c(a)(6) because there was no substantially equivalent determination as required by 21 U.S.C. § 387e(j).  See CTP Ex. 1.  Therefore, I conclude Respondent's actions constitute violations of the FDCA that warrant the imposition of a CMP.

IX.  PENALTY

             There being liability under the relevant statute, I must now determine the amount of penalty to impose.  Pursuant to 21 U.S.C. § 333(f)(9), Respondent is liable for a civil money penalty not to exceed the amounts listed in FDA's civil money penalty regulations at 21 C.F.R. § 17.2.  In its Complaint, CTP sought to impose the maximum penalty amount of $20,678 against Respondent for violating the Act.  Complaint ¶ 1.

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             Since I found that CTP met its burden by a preponderance of the evidence and concluded that Respondent committed violation of the FDCA, the next step is to determine the amount of the civil money penalty.  When making that determination, I am required to take into account "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).

1. The Nature, Circumstances, Extent, and Gravity of the Violation

             The TCA 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 argues Respondent's violation is particularly serious because CTP previously issued a warning letter to Respondent on November 10, 2022, citing Respondent for offering for sale new tobacco products that lacked the required marketing authorization order, specifically Blu Razz, Carnival, and Toucan e-liquid products, the same e-liquid products that Complainant purchased during the February 16, 2024 inspection.  CRD Dkt. Entry No. 6 at 11; see also CTP Ex. 7.  The November 10, 2022 warning letter explained the sale of such products is prohibited and warned Respondent to take action to correct the violations.  CTP Ex. 7 at 2.

             In its pre-hearing brief, CTP notes that the warning letter specifically advised

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Respondent that future violations could result in enforcement action, "including, but not limited to, civil money penalties, seizure, and/or injunction by FDA."  CRD Dkt. Entry No. 6 at 11.  CTP also notes the warning letter 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.  On December 5, 2022, Respondent responded to the November 10, 2022 warning letter stating "[w]e weren't aware that we didn't meet the threshold determination of whether the application contains sufficient information to permit a substantive review, nor that the FDA refused to review our PMTA due to the criteria in § 1114.27(b)(1)."  CTP Ex. 8 at 2.  On October 19, 2023, CTP issued an Inadequate Warning Letter Response to Respondent, stating that Respondent "has not adequately addressed the violations identified in the Warning Letter." CTP Ex. 9 at 2; CRD Dkt. Entry No. 6 at 12.  CTP contends that by continuing to sell prohibited e-liquid products after receiving the warning letter, Respondent has demonstrated an "unwillingness or inability to correct the violations."  Id. at 12.

             In its final brief, Respondent's contends that it "immediately ceased sales of the cited e-liquid products and removed the products from [Respondent's] online platform." CRD Dkt, Entry No. 18 at 1 (emphasis in original).  Respondent's assertion is controverted by the November 10, 2022 warning letter that warned Respondent was selling what appears to be the same unauthorized e-liquid products that are the subject of the current Complaint.  See CTP Ex. 7 at 2; Complaint ¶ 16.  However, in its Answer, Respondent has "acknowledged the seriousness of the allegations."  CRD Dkt. Entry No.

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4 at 6.  I find that Respondent's continued marketing and selling of its unauthorized e-liquid products demonstrates it did not comply with federal tobacco law, which is serious in nature and demands a proportional civil money penalty amount.

2. Respondent's Ability to Pay and Effect on Ability to do Business

             In its Answer Respondent states "[a]s a result of these financial challenges, we are unable to sustain operations and are in the process of declaring bankruptcy and/or delaying repayment of financial obligations. With the discontinuation of all Cali Steam vape juice sales and disposed inventory we have yet to calculate the losses that will incur."  CRD Dkt. Entry No. 4 at 7.  In its final brief, Respondent further asserts "[t]he business has suffered severe financial hardship, exacerbated by the loss of the tobacco-related product line.  This enforcement action, if resulting in a full penalty, could push our small business into complete closure."  CRD Dkt. Entry No. 18.  However, I am confined by the evidence in the administrative record.  Thus, given that Respondent did not file a pre-hearing exchange, nor did Respondent submit any documentary evidence corroborating its claim of an inability to pay the proposed CMP,4 I do not find ability to pay and effect on ability to do business mitigating factors.

3. History of Prior Violations

             There is no indication in the record of any prior violations of section 331(a) of the

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FDCA resulting in a CMP.  However, CTP argues that Respondent "has a history of violating the Act's requirements" based on the November 10, 2022, warning letter.  CRD Dkt. Entry No. 6 at 13.  CTP contends a CMP 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 warning letter helps to establish the nature, circumstances, extent, and gravity of the violation.  However, I do not agree with CTP that the warning letter also establishes a significant history of prior violations. Respondent did not have the opportunity to request a hearing or otherwise dispute the violations alleged in the November 10, 2022 warning letter.

             In sum, this is Respondent's first violation resulting in a CMP.  Further, in its final brief, Respondent asserts that "Cali Steam LLC is no longer operating in the tobacco product space."  CRD Dkt. Entry No. 18 (emphasis in original).  As a result, I find that Respondent does not have a significant history of prior violations or a substantial likelihood of committing future violations, which is a mitigating factor that supports a reduction in the 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 FDCA.  The FDCA places a heavy burden on manufactures and retailers who choose to sell prohibited tobacco products because of their highly dangerous and addictive nature.  See 21 U.S.C. § 387

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note.  Although Respondent asserts that "Cali Steam LLC is no longer operating in the tobacco product space," I find that Respondent is not absolved of its culpability in violating the FDCA.  Id.

5. Other Matters as Justice May Require

             The FDCA gives me discretion to consider any other evidence or arguments to mitigate the amount of the CMP.  See 21 U.S.C. § 333(f)(5)(B).  As noted above, CTP is requesting the maximum penalty amount permitted by the regulations.  See 45 C.F.R. § 102.3 (2022); 87 Fed. Reg. 15,100, 15,103 (March 17, 2022).  In assessing the appropriateness of CTP's request, I find that justice requires me to consider the full range of available penalties in light of the specific facts and circumstances of the case, separate and apart from the factors discussed above.  In doing so, I note that the overall purpose of a CMP is to promote compliance with the law and deter future violations.  Therefore, a CMP should be significant, but not overly punitive.

             Here, the administrative record reflects Respondent is a manufacturer and retailer of tobacco products with no history of prior violations resulting in a CMP.  In addition, Respondent has participated in these proceedings, appears to be taking this matter very seriously, and is no longer in the business of selling unauthorized e-liquid products.  See CRD Dkt. Entry No. 18.  However, as a manufacturer and retailer engaged in the sale of tobacco products, Respondent should have fully complied with FDA's November 10, 2022 warning letter.  Further, CTP previously warned Respondent about the potential consequences of continuing to offer unauthorized new tobacco products.  See CTP Ex. 7.

             After weighing these factors and evaluating the entire administrative record, I find

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that imposing the maximum penalty would be overly punitive and would not serve the interests of justice.  However, I also find that Respondent's conduct was serious and warrants a proportional penalty.  Therefore, I conclude that reducing the amount, but still imposing a substantial CMP of $16,000 is appropriate in this case under 21 U.S.C. §§ 333(f)(5)(B), (f)(5)(C), and (f)(9).

X.  CONCLUSION

             Respondent introduced or delivered for introduction into interstate commerce adulterated and misbranded tobacco products, in violation of 21 U.S.C.§ 331(a), as set forth in the Complaint.  Respondent is liable for a civil money penalty of $16,000.  See 21 C.F.R. § 17.2.

             WHEREFORE, evidence having read and considered it be and is hereby ORDERED as follows:

1. I find Respondent has been served with process herein and is subject to this forum.
2. I find and conclude that the evidentiary facts, by a preponderance of the evidence standard, support a finding Respondent violated 21 U.S.C. § 331(a) on February 16, 2024.
3. I assess a monetary penalty in the amount of $16,000.