All American Gas Plus Inc. d/b/a All American Gas, DAB No. 3188 (2025)

REMAND OF ADMINISTRATIVE LAW JUDGE DECISION

All American Gas Plus Inc. d/b/a All American Gas (Respondent) appeals an Order Imposing Sanctions and Initial Decision and Default Judgment (ALJ Decision) of the Administrative Law Judge (ALJ) concluding that Respondent violated the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq., and imposing a No-Tobacco-Sale-Order (NTSO) for 30 days.  The ALJ struck Respondent’s Answer to the Center for Tobacco Products (CTP) Complaint and entered default judgment against Respondent as a sanction for Respondent’s failure to attend a scheduled pre-hearing conference and failure to respond to an Order to Show Cause.  ALJ Decision at 2, 4-5. 

As explained below, we conclude that the ALJ erred in striking Respondent’s answer and entering default judgment.  We therefore vacate the decision and remand the case to the ALJ for further proceedings consistent with this decision.

Legal Background

The regulations applicable to this matter authorize ALJs to impose sanctions on any party for: 

(1)   Failing to comply with an order, subpoena, rule, or procedure governing the proceeding;
(2)   Failing to prosecute or defend an action; or
(3)   Engaging in other misconduct that interferes with the speedy, orderly, or fair conduct of the hearing.

21 C.F.R. § 17.35(a)(1) – (3).  Any sanction imposed, however, “shall reasonably relate to the severity and nature of the failure or misconduct.”  Id. § 17.35(b).

The applicable regulations also authorize ALJs to impose specific sanctions for particular failures or misconduct.  When, for example, a party “fails to comply with a discovery order,” the ALJ may, among other sanctions, “[s]trike any part of the pleadings or other

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submissions of the party failing to comply” with the discovery request.  21 C.F.R. § 17.35(c)(3).   

A respondent dissatisfied with an ALJ decision may appeal that decision (which the regulations refer to as the “initial decision”) to the Departmental Appeals Board (Board).  21 C.F.R. §§ 17.45, 17.47.  The Board “may decline to review the case, affirm the initial decision or decision granting summary decision (with or without an opinion), or reverse the initial decision or decision granting summary decision, or increase, reduce, reverse, or remand any civil money penalty determined by” the ALJ.  Id. § 17.47(j).

Case Background

CTP, through its May 7, 2024 Complaint, sought a 30-day NTSO against Respondent, alleging that Respondent sold tobacco products to an underage purchaser and failed to verify the purchaser’s age by photo identification.  Complaint at 1-2, 5-6.  Respondent denied CTP’s allegations, stating that they “always check ID” and do not “allow our employees to sell tobacco without checking [purchaser] ID.”  Respondent’s Pre-Hearing Brief at 4.

By a November 21, 2024 Order, the ALJ informed the parties that a pre-hearing conference was scheduled for December 4, 2024.  CRD Dkt. Entry 20; ALJ Decision at 3.  The pre-hearing conference was held as scheduled, and though counsel for CTP appeared, Respondent failed to appear.  ALJ Decision at 3-4.  Afterwards, the ALJ issued an Order to Show Cause, which stated that failure to respond “may result in sanctions including, but not limited to, striking the Answer, and issuing an Initial Decision and Default Judgment against the opposing party.”  Order to Show Cause; ALJ Decision at 3 (emphasis in original).

More than ten days after the deadline to respond to the Order to Show Cause, Respondent emailed the attorney advisor assigned to the case, asserting an “issue with the time zones” that precluded it from appearing at the pre-hearing conference.  CRD Dkt. Entry No. 22; ALJ Decision at 5.  The ALJ did “not find Respondent’s explanation for failing to appear to be persuasive because it was explicitly informed of the time zone” in the Order scheduling the pre-hearing conference and by email three days before the conference in response to Respondent’s inquiry about the time zone.  ALJ Decision at 5; see also CRD Dkt. Entry No. 22.

In the ALJ Decision, the ALJ described the procedural history and the basis for the sanction before issuing a Default Judgment.  ALJ Decision at 4-6.  The ALJ found “that Respondent ha[d] abandoned its defense of this case and failed to show cause for its repeated failure to comply with [the ALJ’s] orders and directives[.]”  Id. at 4.  The ALJ held “that Respondent’s actions are sufficiently egregious to warrant striking its Answer

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and issuing a decision by default, without further proceedings.”  Id. at 5 (citing inter alia 21 C.F.R. § 17.35(c)(3).)

The ALJ found, based solely on CTP’s Complaint following the sanction, that Respondent had repeatedly violated the prohibition against selling regulated tobacco products to underage purchasers and repeatedly violated the requirement to verify purchaser age through photo identification.  Id. at 5, 8.  Thus, the ALJ concluded that the repeated violations “merit a [NTSO]” and imposed a 30-day NTSO on Respondent.  Id. at 9.

Discussion

The standard of review on an ALJ’s imposition of a sanction under 21 C.F.R. § 17.35 is whether the ALJ committed an abuse of discretion.  Joshua Ranjit Inc. d/b/a 7-Eleven 10326, DAB No. 2758, at 7 (2017).  “Under an ‘abuse of discretion’ standard, ‘the reviewer may not simply substitute his or her judgment for that of the person exercising discretion.’”  Id. (quoting Vincent Baratta, M.D., DAB No. 1172, at 9 n.5 (1990)).  “Instead, the reviewing body considers only whether the decision maker has articulated a reasonable basis for the decision under review.”  Id. (citing River East Econ. Revitalization Corp., DAB No. 2087, at 9 (2007)).

There is no dispute that Respondent failed to appear at the scheduled pre-hearing conference and failed to respond to the Order to Show Cause.  These failures by a party may warrant an appropriate sanction.  The ALJ, however, did not articulate a reasonable basis for striking Respondent’s answer.  In striking Respondent’s answer, the ALJ did not show that the sanction was “reasonably relate[d] to the severity and nature of the failure or misconduct.”  See 21 C.F.R. § 17.35(b).  

The ALJ cited an inapplicable basis for the imposition of the sanction.  In striking Respondent’s answer, the ALJ cited 21 C.F.R. § 17.35(c)(3), which provides that “when a party fails to comply with a discovery order” the ALJ may “[s]trike any part of the pleadings or other submissions of the party failing to comply with such request.”  See ALJ Decision at 2, 5; 21 C.F.R. § 17.35(c)(3) (emphasis added).  However, the record does not reflect that the ALJ’s sanction was based on Respondent’s failure to comply with a discovery order.  The record indicates that Respondent’s earlier failure to comply with a discovery request was resolved when Respondent timely filed documents in response to an August 29, 2024 discovery order.  See ALJ Decision at 2-3; CRD Dkt. Entry Nos. 12, 14.   

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The Board has “recognize[d] . . . that striking [a] Respondent’s answer is a relatively harsh remedy[.]”  KKNJ, Inc. d/b/a Tobacco Hut 12, DAB No. 2678, at 11 (2016).¹  The imposition of such a harsh remedy must comply with the requirements of section 17.35(b).  Furthermore, an ALJ’s prior warning that a sanction may occur as the result of particular conduct does not, by itself, create a basis for the sanction.  While 21 C.F.R. § 17.35(a) grants the ALJ authority to impose sanctions on a party for various failures or misconduct, the striking of Respondent’s answer for failing to appear at a scheduled pre-hearing conference (and failure to respond to the subsequent Order to Show Cause) does not “reasonably relate to the severity and nature of the failure or misconduct.”  See 21 C.F.R. § 17.35(b).  We find the ALJ did not articulate a reasonable basis for striking Respondent’s answer and, therefore, vacate the sanction imposed and the resulting Default Judgment.

Conclusion

Because the ALJ committed an abuse of discretion in striking Respondent’s answer and issuing a Default Judgment, the Board vacates the ALJ Decision and remands this matter to the ALJ for further proceedings consistent with this decision.

Endnotes

¹  The ALJ stated that “Respondent’s actions are sufficiently egregious to warrant striking the Answer and issuing a decision by default, without further proceedings” and cites to the Board’s holding in KKNJ “that the ALJ did not abuse her discretion in sanctioning Respondent’s ongoing failure to comply with the ALJ’s directions.” ALJ Decision at 5.  However, the sanction to strike the respondent’s answer in KKNJ was imposed due to the respondent’s failure to comply with the ALJ’s discovery order.  See id. at 8-9.