D and A Business Investments LLC d/b/a T.H.C. Smokes, DAB No. 3166 (2024)

FINAL DECISION ON REVIEW OF ADMINISTRATIVE LAW JUDGE DECISION

D and A Business Investments LLC d/b/a T.H.C. Smokes (Respondent) appeals the August 1, 2024 initial decision (Initial Decision) of an Administrative Law Judge (ALJ). D and A Business Investments LLC d/b/a T.H.C. Smokes, DAB TB8350 (2024). The Initial Decision imposed a $19,192 civil money penalty (CMP) against Respondent for receiving in interstate commerce an electronic nicotine delivery system (ENDS) product that lacked the premarketing authorization required under the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and offering such product for sale in violation of the Act, id. at 331(c). The ALJ issued the decision on the written record after both parties waived their rights to a hearing. The ALJ concluded that the evidence of record supported the allegations in the Complaint and provided a basis for assessing a $19,192 CMP. For the reasons explained below, the Board affirms the Initial Decision because it is supported by substantial evidence and free of legal error.

Legal Background

To protect public health, the Act imposes restrictions on the sale, distribution, and use of tobacco products. See 21 U.S.C. §§ 301, 331(c), 387a(a)-(b), 387c(a)(6), 387f(a). A “tobacco product” is “any product made or derived from tobacco, or containing nicotine from any source, that is intended for human consumption, including any component, part, or accessory of a tobacco product,” or “newly deemed products” such as electronic nicotine delivery systems (including e-cigarettes), e-liquids, and pipe tobacco. See 21 U.S.C. §321(rr); see also Consolidated Appropriations Act, 2022, Pub. L. No. 117-103, Division P, Subtitle B; 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 Warning Statements for Tobacco Products, 81 Fed. Reg. 28,974 (May 10, 2016), available at https://federalregister.gov/a/2016-10685. The Act prohibits the “receipt in interstate commerce of any...tobacco product...that is adulterated or misbranded, and the delivery or proffered delivery thereof for pay or otherwise.” 21 U.S.C. § 331(c). This prohibition extends to “new

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tobacco product[s],” defined as any tobacco product “that was not commercially marketed in the United States as of February 15, 2007[,]” or any “modifi[ed] . . . tobacco product... commercially marketed in the United States after February 15, 2007.” Id. § 387j(a)(1) (defining “new tobacco product”).

A “new tobacco product” may not be introduced into interstate commerce without FDA authorization. 21 U.S.C. § 387j(a)(2)(A). FDA may grant such authorization in three ways: issuing a Marketing Granted Order after FDA review of a premarket tobacco product application finding that the marketing of the new tobacco product would be “appropriate for the protection of the public health”; issuing a Substantial Equivalence (SE) order after FDA review of an SE report, determining that the new tobacco product is “substantially equivalent” to a tobacco product commercially marketed in the United States as of February 15, 2007, or a tobacco product marketed after that date but which FDA previously determined to be substantially equivalent; or issuing an exemption order after FDA review of an exemption request and “abbreviated report.” See 21 U.S.C. §§ 387j(c)(1)(A)(i), (2)(A); 387j(a)(2)(A)(i), 387e(j); 387j(a)(2)(A)(ii), 387e(j)(1), (3)(A); see also 21 C.F.R. § 1107.1.

A new tobacco product is “adulterated” if it is required to have premarket review and does not have a Marketing Granted Order (MGO) permitting marketing of the new tobacco product in effect under section387j(c)(1)(A)(i). 21 U.S.C. § 387b(6)(A). A new tobacco product is “misbranded” if a report required under section387e(j) was not submitted to FDA. Id. § 387c(a)(6).

The Act authorizes CMPs against “any person who violates a requirement of [the Act] which relates to tobacco products.” 21 U.S.C. § 333(f)(9)(A). The implementing regulations concerning CMPs, in 21 C.F.R. Part 17 and 45 C.F.R. § 102.3, establish a schedule of maximum CMP amounts. See 21 C.F.R. § 17.2 (citing 45 C.F.R. § 102.3 (table)).

To impose a CMP, the Center for Tobacco Products (CTP) serves the complaint on the “respondent” (the person or entity alleged to have committed the pertinent violation(s)) and files a copy with the FDA Dockets Management Staff. See 21 C.F.R. §§ 17.3(b), 17.5, 17.7. The respondent may then request a hearing, which proceeds before a “presiding officer” who is a qualified ALJ, by filing an answer to the complaint. Id. §§ 17.3(c), 17.5, 17.7, 17.9, 17.19(a). A respondent’s answer admits or denies each of the allegations; states any defenses; states the respondent’s contentions as to why the penalties should be less than the requested amount; and identifies counsel, if any. Id. § 17.9.

The ALJ must “conduct a hearing on the record to determine whether the respondent is liable for a [CMP] and, if so, the appropriate amount of any such [CMP] considering any aggravating or mitigating factors.” Id. § 17.33(a). CTP must prove the respondent’s

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liability and the appropriateness of the CMP, and the respondent also must prove any affirmative defenses and mitigating factors, by a preponderance of the evidence. Id. § 17.33(b), (c). The ALJ issues a decision (which the regulations refer to as the “initial decision”) based only on the administrative record. Id. §17.45(a).

Either party “may appeal an initial decision” by filing a notice of appeal with the Board. 21 C.F.R. §§ 17.45(d), 17.47(a). A notice of appeal “must identify specific exceptions to the initial decision, must support each exception with citations to the record, and must explain the basis for each exception.” Id. § 17.47(c). The Board “will consider only those issues raised before the presiding officer [i.e., the ALJ], except that the appellee may make any argument based on the record in support of the initial decision or decision granting summary decision.” Id. § 17.47(g). The Board may decline to review, affirm, or reverse the initial decision, “or increase, reduce, reverse, or remand any [CMP] determined” by the ALJ. Id. § 17.47(j).

Case Background¹

A. The Complaint

In a warning letter dated May 25, 2023, received by Respondent the following day, CTP informed Respondent that a March 7, 2023 inspection found the establishment in violation of the Act because it offered for sale ENDS products (specifically Puff Bar Pomegranate and Puff Plus Guava Ice) that were “adulterated” (lacked the required marketing authorization), and “misbranded” (had no substantially equivalent determination or exempt order). Initial Decision at 5-6; CTP Complaint (Compl.) ¶ 20; CTP Exs. 7, at 1; Ex. 8. The warning letter also stated that if Respondent failed to correct these violations, a CMP action or other regulatory action by the FDA could occur; that it was Respondent’s responsibility to comply with the law; and the letter was not intended as an exhaustive list of violations. Initial Decision at 6; Compl. ¶ 21; CMS Ex. 7, at 3.

On October 28, 2023, CTP served a Complaint on Respondent, seeking to impose a CMP of $19,192 for allegedly violating 21 U.S.C. § 331(c) by receiving an adulterated and misbranded ENDS product in interstate commerce and offering that product for sale. Initial Decision at 1-2; Compl. ¶¶ 1, 12, 16-19, 24; USPS Certified Mail Delivery Notification. CTP alleged that on August 23, 2023, an FDA-commissioned inspector conducted an inspection of Respondent’s establishment and observed an Elfbar Clear ENDS product for sale at Respondent’s establishment. Compl. ¶ 15. Additionally, CTP alleged Respondent’s ENDS product was a “new tobacco product” because the product was not commercially marketed in the United States as of February 15, 2007. Id. ¶ 16. CTP further alleged that Respondent’s ENDS product was “adulterated” under 21 U.S.C.

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§ 387b(6)(A) because it did not have an MGO in effect, and that the product was “misbranded” under 21 U.S.C. § 387c(a)(6) because neither an SE report nor an abbreviated report has been submitted for Respondent’s ENDS product. Id. ¶¶ 17, 18.

The Complaint stated that Respondent must respond to this Complaint; Respondent has the right to request a hearing by filing an Answer within 30 days after service of the Complaint; and failure to file an Answer may result in a default order imposing the proposed CMP. Id. ¶ 22. The Complaint also informed Respondent that it “has the right, but is not required, to retain counsel for representation.” Id. ¶ 23.

B. The Answer

Respondent’s owner timely filed an Answer with one attachment dated November 15, 2023. See D&A’s Response letter (Answer); Invoice for Vape purchase. CTP notified the Departmental Appeals Board (DAB) Civil Remedies Division (CRD) via e-mail that it received the Answer on November 25, 2023, and forwarded the Answer and attachment to DAB CRD on November 28, 2023. See CRD Dkt. Entries 3, 6.

Respondent affirmed the establishment does business under the name T.H.C. Smokes and is located at 3230 East Union Hills Drive, Suite 115, Phoenix, AZ 85050. Answer ¶ 1. Respondent further affirmed the August 23, 2023 inspection involving the Elfbar Clear ENDS product, adding “a stipulation” that the same inspector was involved in the March 2023 inspection involving a different ENDS product (Puff Bars). Id. ¶ 3. Respondent also indicated that at the time of the initial inspection, the current disputed ENDS products were being sold and “the FDA inspector allowed Respondent to continue to sell unapproved ENDS products for months afterward. Subsequent to that inspection, Respondent had no reason to believe that any other product[s] offered for sale . . . were unapproved.” Id. Respondent did not dispute the ENDS products were “adulterated misbranded new tobacco products,” or that it received the warning letter in May 2023. Id. ¶¶ 4, 6.

Respondent denied receiving the ENDS products through interstate commerce, asserting that they were purchased through intrastate commerce through a distributor legally licensed by the state of Arizona, and that Respondent “had no reason to believe that these ENDS products were not in compliance with FDA rules and regulations...[and] reasonably relied upon said distributor to market and sell only approved ENDS products.” Id. ¶¶ 2, 5; see also Invoice for Vape purchase (dated May 25, 2023, from SiK KreationZ LLC with an address in Tempe, AZ, showing Respondent’s owner purchased various ENDS products). Respondent disputed the content of the warning letter, again relying on the fact that the inspector did not notify Respondent that “said product” [Elfbar ENDS product] was in violation. Answer ¶ 7. Finally, Respondent

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disputed the amount requested in penalties:

Pursuant to FDA guidelines; the first offense shall be a warning, the second offense...a fine of $500, the third offense...a fine of $1,000, the fourth offense...a fine of $2,500 and the fifth offense...a fine of $5,000. Since this ENDS product should have been flagged by the inspector in their initial visit in March of 2023, this should have been part of what was the initial warning sent on May 25, 2023 regarding the Elfbar ENDS products. At worst, this would constitute a second violation and warrant a $500 fine, not a fine of $19,192.

Id. ¶ 8. Respondent requested the Court set aside and dismiss the Complaint or substantially decrease the monetary penalties requested. Id. at 3.

C. ALJ Proceedings

The ALJ issued an Acknowledgment and Pre-Hearing Order (APHO) that listed the issues and burdens of proof and addressed a variety of issues, including the deadline for a status report (January 3, 2024) and discovery (requests due no later than January 3, 2024), and set the deadline for the parties’ pre-hearing exchanges (CTPs brief due no later than February 23, 2024; Respondent’s brief due no later than March 15, 2024). APHO at 1-5. Respondent obtained counsel after the pre-hearing order was issued, and the ALJ extended the filing deadlines. See Order Granting Motion to Extend Deadlines.

CTP timely filed its pre-hearing exchange, consisting of an Informal Brief of Complainant, Complainant’s List of Proposed Witnesses and Exhibits, and eight proposed exhibits, including the written direct testimony of two proposed witnesses, James Bowling, Deputy Director, Division of Enforcement and Manufacturing, Office of Compliance and Enforcement, CTP, FDA, and Diane H. Burkett, FDA-commissioned officer with the state of Arizona. Initial Decision at 2. Respondent timely filed its pre-hearing exchange, consisting of its Pre-Hearing Brief, Legal Addendum to Respondent’s Brief (Addendum), Exhibit List, and one exhibit. Id.²

The ALJ held a telephonic prehearing conference, neither party objected to the proffered exhibits and Respondent’s counsel did not wish to cross-examine CTP’s witnesses. Id. The ALJ provided an opportunity for both sides to file written briefs, but neither did so.

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The ALJ decided the case based on the written record. Id. at 3.

D. Initial Decision

The ALJ identified the issues as:

1. Whether the allegations in the complaint are true, and, if so, whether Respondent’s actions identified in the complaint violated the law;
2. Whether any affirmative defenses are meritorious; and
3. If Respondent is liable for penalties or assessments, the appropriate amount of any such penalties or assessments, considering any mitigating or aggravating factors [found] in this case. 21 C.F.R. § 17.45.

Initial Decision at 3.

The ALJ considered CTP’s written direct testimony of James Bowling, the Deputy Director, Division of Enforcement and Manufacturing, Office of Compliance and Enforcement, CTP, FDA, and Diane Burkett, the commissioned officer who performed the inspection of Respondent’s establishment on August 23, 2023. Initial Decision at 4 (citing CTP Exs. 1-2). Diane Burkett testified that during the inspection on August 23, 2023, “ENDS” products were available for sale. Id. (citing CTP Ex. 2 ¶¶ 4-6). James Bowling testified that the Elfbar Clear ENDS product observed during the August 23, 2023 inspection was manufactured in China; confirmed that the Elfbar Clear ENDS products were not commercially marketed in the U.S. as of February 15, 2007, and on the date of the inspection, there was no record of this product having an authorized FDA premarket authorization order, a substantial equivalence order, or a found-exempt order in effect, and no request had been filed for either an SE order or an abbreviated report requesting a found-exempt order. Id. (citing CTP Ex. 1 ¶¶ 7, 13-15).

The ALJ found Respondent admitted it had ENDS products available for sale on August 23, 2023; that the products were “new tobacco products” which did not have an MGO in effect and were therefore “adulterated”; and that neither an SE report nor an abbreviated report had been submitted for Respondent’s ENDS product and that they were therefore “misbranded.” Id. at 4 (citing Answer ¶ 4). The ALJ further acknowledged that Respondent challenged that the products were received through interstate commerce by asserting they were purchased through intrastate commerce. Initial Decision at 5. The ALJ noted Respondent’s arguments: “[s]ince the ENDS products were purchased through a legally licensed . . . Arizona[] distributor, Respondent had no reason to believe that these ENDS products were not in compliance with FDA rules and regulations”; “[n]or are there any allegations that [Respondent] shipped the Elf Bar product (or anything else) in interstate commerce”; there is “no allegation that Respondent sells

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[ENDS] product outside the state of Arizon[a],” and it “has not committed any ‘prohibited acts that can lead to liability.’” Id. (citing Answer ¶¶ 2-3; Addendum at 2). The ALJ also acknowledged that Respondent challenged CTP’s authority to impose a CMP (based on challenging the applicability of section331(k)). Initial Decision at 5.

The ALJ held that the ENDS product offered for sale at Respondent’s establishment on August 23, 2023, “was manufactured in China and therefore had previously traveled in interstate commerce before the Respondent’s receipt and delivery or proffered delivery of such tobacco products for pay or otherwise.” Initial Decision at 4 (citing 21 U.S.C. § 331(c) and United States v. Sullivan, 332 U.S. 689, 696 (1948) (holding 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 ultimate consumer”)). The ALJ further found that while Respondent admitted the allegation but argued its products were not sold across state lines, Respondent did not object to the testimony of CTP’s witnesses, choose to cross-examine them, or offer evidence to rebut their testimony that the products had traveled in interstate commerce. Initial Decision at 5. Finally, the ALJ found Respondent failed to offer any affirmative defenses and considered Respondent’s arguments but found them “to be unpersuasive.” Id.

E. Board Proceedings

On appeal, Respondent asserts the ALJ has no constitutional authority to adjudicate a CMP and the Complaint must be dismissed. Resp. Br. at 1. Respondent argues “[t]he statutory and regulatory scheme that purports to allow the FDA’s claim to be adjudicated in an agency administrative court is unconstitutional.” Id. at 1-2 (citing Securities and Exchange Commission v. Jarkesy, 144 S. Ct. 2117 (2024)). Respondent further asserts that the statutes and regulations under which FDA seeks to penalize it are “indistinguishable from those at issue in Jarkesy.” Id. at 4. Respondent acknowledges “that FDA regulations purport to limit an ALJ’s authority to ‘find Federal statutes or regulations invalid,’” (citing 21 C.F.R. § 17.47(c))³, but states to the extent that the Board “interprets this regulation to prohibit the relief sought, that regulation is itself inconsistent with the oath of office federal employees take, found at 5 U.S.C. § 3331, which provides that government employees must ‘support and defend’ the U.S. Constitution and ‘bear true faith and allegiance’ to it.” Id. at 5.

Alternatively, Respondent asserts the Act does not authorize enforcement under the facts here, and the penalty is excessive. Id. Respondent reiterates its argument raised before the ALJ, that it reasonably believed that the products it was purchasing from the in-state distributor were authorized for sale. Id. Finally, Respondent asserts some leniency is appropriate given that Respondent did not manufacture or introduce the product into the U.S., and it is simply a retailer who purchased products seemingly legal from a reputable [in-state] distributor. Id. Respondent asserts the ALJ did not consider this point. Id.

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CTP contends that the Board should decline to review Respondent’s argument that FDA’s CMP scheme is unlawful under Jarkesy as it was not raised before the ALJ, arguing while the Jarkesy decision was issued after the prehearing conference in this case, it was more than 30 days prior to the ALJ’s issuance of the initial decision and therefore is not properly before the Board. CTP Br. at 5. Additionally, CTP asserts that Respondent acknowledges that neither an ALJ nor the Board are empowered to ignore or overturn applicable statutes or regulations, citing to 21 C.F.R. § 17.19(c), and “offers only a circular and general reply that agency employees cannot act inconsistently with the Constitution or be compelled to do so,” concluding “Respondent’s Jarkesy argument does not undermine the Initial Decision because the ALJ could not have found the civil money penalty scheme to be unlawful.” Id. at 6. Regarding Respondent’s assertion that the penalty is excessive, CTP asserts Respondent “fails to provide any mitigating information that establishes why the penalty amount imposed was too high,” but merely contends “some leniency is appropriate.” Id. at 6, 7 (citing 21 C.F.R. § 17.33(c) and Korangy Radiology Assocs., P.A., DAB No. 1996 (2005)). CTP concludes by asserting that the ALJ properly considered the appropriate factors required in evaluating a CMP amount, the ALJ’s factual determinations were supported by substantial evidence on the whole record, and Respondent offers nothing on appeal to undermine the ALJ’s determinations. Id. at 8.

Standard of Review

The Board’s standard of review on a disputed issue of fact is whether the initial decision is supported by substantial evidence on the whole record. 21 C.F.R. § 17.47(k). The standard of review on a disputed issue of law is whether the initial decision is erroneous. Id.

Analysis

A. We reject Respondent’s argument that the Board must dismiss the Complaint or set aside the ALJ Initial Decision based on Jarkesy.

Respondent’s primary argument is that denying its appeal based on “FDA regulations [that] purport to limit an ALJ’s authority to ‘find Federal statutes or regulations invalid,’” i.e., 21 C.F.R. § 17.19(c), is unconstitutional and conflicts with a federal employee’s oath to support and defend the Constitution. Resp. Br. at 5 (citing 5 U.S.C. § 3331). Respondent, however, has not cited any authority, nor are we aware of any, holding that the oath of office compels the Board to decline to follow an applicable statute and implementing regulations based on a party’s reading of a Court decision involving a different statute and implementing regulations that pointedly did not consider or address the statute and implementing regulations at issue in this case.

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Jarkesy arose from “an enforcement action” by the Securities and Exchange Commission (SEC) pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Jarkesy, 144 S. Ct. at 2124-26. The SEC brought an enforcement action seeking CMPs from an investment advisor company and its individual manager for alleged securities fraud, and the SEC elected to proceed before an ALJ, rather than by jury trial, which the Securities and Exchange Act of 1934 also permitted. Id. at 2124, 2140. The Supreme Court addressed the question “whether the Seventh Amendment permits the SEC to compel respondents to defend themselves before the agency rather than before a jury in federal court,” and concluded that “[t]he Seventh Amendment...applies and a jury is required.” Id. at 2125, 2127.

Respondent’s argument that Jarkesy is applicable to this case is mistaken. Jarkesy did not hold that every agency’s attempt to impose and enforce CMPs necessarily is, like the SEC’s action, “a common law suit in all but name” that “must be adjudicated in Article III courts.” Id. at 2136. On the contrary, the Court acknowledged the long-established “public rights exception,” under which “Congress may assign [a] matter for decision to an agency without a jury, consistent with the Seventh Amendment,” and extensively discussed the Court’s precedents applying that exception. Id. at 2131-34.

The Supreme Court did not decide, or even address, the constitutionality of the Act and its implementing regulations concerning imposition and enforcement of CMPs for violations of a requirement of the Act which relates to tobacco products. It is not the Board’s role to invalidate any part of the Act, or its complex implementing regulations, by extrapolation from the Supreme Court’s reasoning in Jarkesy. Instead, the Board “must follow applicable statutes and regulations,” which we do in this case. See The Oaks, DAB No. 3160, at 28 (2024) (citations omitted). We cannot anticipate how federal courts may apply the reasoning of Jarkesy in different circumstances, including in the context of the statutory and regulatory regime governing imposition of CMPs upon tobacco retailers, like Respondent, that CTP asserts violated the restrictions on certain tobacco product sales. Accordingly, we deny Respondent’s request to set aside the Initial Decision or dismiss the Complaint.

B. The ALJ’s determination that Respondent violated

The ALJ found that CTP met its burden of proof by a preponderance of the evidence, and that Respondent’s evidence and argument in rebuttal were unpersuasive. See Initial Decision at 4-5. “The Board defers to an ALJ’s findings regarding witness credibility and the weight assigned to a party’s evidence unless there is compelling reason to do otherwise.” Duffy and Associates, Inc., DAB No. 3114, at 7 (2023) (citing Madison-Food-Mart-Inc., DAB No. 3058, at 7 (2022)). Respondent has offered no reason, and we find none, to reject the ALJ’s credibility determinations and weighing of the evidence in

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this case.

Before the Board, Respondent reiterates its argument raised before the ALJ, asserting the Act does not authorize enforcement under the facts here, and that it reasonably believed that the products it was purchasing from the in-state distributor were authorized for sale. Resp. Br. at 5.

The ALJ found the ENDS product offered for sale at Respondent’s establishment on August 23, 2023, was manufactured in China and therefore had previously traveled in interstate commerce before Respondent’s receipt and delivery or proffered delivery of such tobacco products for pay or otherwise. Initial Decision at 4 (citing 21 U.S.C. § 331(c) and Sullivan at 696 (holding 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 ultimate consumer”)). Respondent does not dispute the ALJ’s finding that the ENDS product had previously traveled in interstate commerce, but instead contends that it reasonably believed that the products that it was purchasing from the in-state distributor were authorized for sale. As noted above, the ALJ did consider Respondent’s arguments, but found them unpersuasive. Initial Decision at 5, 6. Specifically, the ALJ found Respondent did not offer any affirmative defenses or mitigating factors. Id. at 7. Respondent does not assert this finding was an error of law.

As a retailer, Respondent is required to comply with federal laws and regulations governing the sale of tobacco products. See Act; see also 21 C.F.R. Part 1140. The warning letter sent to Respondent in May 2023 expressly indicated that “ENDS products” are subject to the same laws and regulations and referenced the website where Respondent could review the requirements of the Act and implementing regulations, as well as a website containing a list of products that had received the requisite premarket authorization which would allow them to be held for sale. See Warning Letter, dated May 25, 2023, at 2-6. The warning letter further informed Respondent to take “prompt action to address the violation,” and informed that “we will periodically inspect your establishment... to assess your compliance with all applicable laws and regulations....” Id. at 3. Finally, while the warning letter addressed a violation involving Puff Bar Pomegranate and Puff Plus Guava Ice ENDS products, it also clearly indicated “[t]he violation indicated in this letter may not be a complete list of violations at the establishment.” Id.

Even if prior to receipt of the warning letter Respondent believed any ENDS products it possessed were authorized for sale, in part due to relying on “the distributor to market and sell only approved ENDS products,” that belief was not reasonable after receipt of the warning letter. There is no evidence that Respondent’s owner made any effort to validate that belief after receiving the warning letter. Respondent offered no evidence it reviewed the list of products on the FDA website that had received premarket authorization at any time, or that it took any other actions to ensure it was complying

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with the tobacco laws and regulations.

Accordingly, the ALJ’s conclusion that Respondent violated 21 U.S.C. § 331(c) is supported by substantial evidence, and free of legal error because the ALJ’s interpretation and application of the statute and implementing regulations is consistent with its plain language and regulatory context.

C. No basis exists to disturb the ALJ’s finding that the CMP is appropriate.

Respondent asserts that the CMP is excessive, arguing “some leniency is appropriate” because it is simply a retailer who reasonably believed the products it purchased from a licensed distributor were authorized for sale, and it did not manufacture or introduce the product into the United States. Resp. Br. at 5. Respondent further asserts that the ALJ’s analysis did not consider these arguments. Id. We disagree.

After consideration of the statutory factors — the nature, circumstances, extent and gravity of the violation or 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 — the ALJ concluded that a $19,192 CMP (the amount proposed by CTP) was “appropriate...in this case.” Initial Decision at 5-7.

While Respondent does not specifically repeat the arguments from its Answer, we consider them in our review. Respondent asserted that “FDA allowed [it] to continue to sell unapproved ENDS products for months [after the March 2023 inspection]” and “[s]ubsequent to that inspection, Respondent had no reason to believe that any other product[s] offered for sale in the establishment were unapproved.” Answer ¶ 3. Contrary to Respondent’s assertion, the ALJ considered these arguments and found them not persuasive. See Initial Decision at 5.

As we discussed above, the warning letter explicitly informed Respondent that the initial violation may not be a complete list of violations at the time of the inspection. Respondent’s Answer to the Complaint acknowledged that the Elfbar products at issue in the Complaint were among those held for sale in its establishment at the time of the March 2023 inspection. See Answer ¶ 3. Additionally, Respondent submitted evidence that it purchased additional ENDS products (including Elfbar products) in June, after receipt of the warning letter, as shown in the “Invoice for Vape purchase.” The record does not indicate if the Puff products identified in the March inspection were purchased from the same distributor as the ELF products purchased in June. Even if they were not, the record establishes that after receiving the warning letter that another ENDS product violated the Act, Respondent purchased additional ENDS products, and held them for sale. Consequently, Respondent’s assertion that it had “no reason to believe” any other product offered for sale was unapproved” is solely a result of Respondent’s failure to

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verify whether those ENDS products had received premarket authorization.

Finally, there is no merit to Respondent’s argument that “FDA allowed [it] to continue to sell unapproved ENDS products for months[.]” See Answer ¶ 3. Respondent alone is responsible for complying with the law. The fact that there was not a subsequent inspection until the one at issue in this case does not equate to the FDA allowing Respondent to continue to violate the tobacco laws and regulations. Respondent is culpable for the violation, and the resulting imposition of a CMP.

Respondent does not assert ALJ error or abuse of discretion as to how the ALJ assessed the reasonableness of the CMP, but rather only asserts it is excessive. Resp. Br. at 5. The ALJ properly considered the statutory factors and concluded that a CMP in the amount of $19,192 was appropriate. We, like the ALJ, find Respondent did not offer any affirmative defenses or mitigating factors, and affirm the ALJ’s determination that the CMP was reasonable.

Conclusion

For the foregoing reasons, we affirm the Initial Decision.

Endnotes

¹ The facts stated here are taken from the Initial Decision and the administrative record. We make no new findings of fact, and the facts stated are undisputed unless we indicate otherwise.

² The Addendum primarily focused on rebutting Respondent’s interpretation that the basis for the Complaint was a violation of section331(k) of the Act, although acknowledging that this provision is “nowhere cited” in the Complaint. See Addendum at 1-3. However, the Complaint clearly articulates the basis of the violation was section 331(c) of the Act. See Compl. ¶ 4. We need not address the arguments regarding section331(k).

³ Respondent mistakenly cites to 21 C.F.R. § 17.47, whereas the correct citation is 21 C.F.R. § 17.19(c).