Train Smoke LLC d/b/a Train Smoke Vapor Shoppe, DAB No. 3201 (2025)

FINAL DECISION ON REVIEW OF ADMINISTRATIVE LAW JUDGE DECISION

Train Smoke LLC d/b/a Train Smoke Vapor Shoppe (Respondent) appeals the initial decision of an Administrative Law Judge (ALJ) imposing a civil money penalty (penalty) against Respondent for violating the Federal Food, Drug, and Cosmetic Act (FDC Act).  Train Smoke LLC d/b/a Train Smoke Vapor Shoppe, DAB TB9232 (2025) (Initial Decision).  The Center for Tobacco Products (CTP) of the Food and Drug Administration (FDA) alleged that Respondent violated the FDC Act by impermissibly receiving in interstate commerce, and offering for sale, an electronic nicotine delivery system (ENDS) product lacking the required premarketing authorization.  CTP sought a penalty of $20,678.  After determining that Respondent committed the violation alleged, the ALJ imposed a reduced penalty of $15,000.  As explained below, we affirm the Initial Decision because it is supported by substantial evidence and free of legal error.

Legal Background

The FDC Act (Title 21, Chapter 9 of the United States Code) prohibits receiving in interstate commerce “any food, drug, device, tobacco product, or cosmetic that is adulterated or misbranded, and the delivery or proffered delivery thereof for pay or otherwise.”  See 21 U.S.C. §§ 301, 331(c).  The FDC Act defines a “tobacco product” as “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.”  Id. § 321(rr).  ENDS products “meet the statutory definition of ‘tobacco products’” and are regulated under the FDC Act.  Deeming Tobacco Products To Be Subject to the FDC 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. 28,973, 28,976 (May 10, 2016).

A “new tobacco product,” meaning a tobacco product “that was not commercially marketed in the United States as of February 15, 2007,” requires FDA authorization prior to marketing.  21 U.S.C.§ 387j(a)(1)-(2).  FDA may grant such authorization in three ways, which CTP in this case calls the “premarket tobacco product application” pathway,

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the “substantial equivalence (‘SE’) pathway,” and the “SE exemption pathway.”  Informal Br. of Complainant (CTP Br. to ALJ) at 5.  Authorization by the premarket application pathway occurs when the FDA reviews a premarket application, determines the product meets criteria including being appropriate for protecting the public health, and issues an order authorizing the new product’s introduction or delivery into interstate commerce.  21 U.S.C. § 387j(c).  Authorization by the SE pathway occurs when a manufacturer submits an appropriate report and the FDA issues an order that the new tobacco product is compliant with the FDC Act and “substantially equivalent” to a tobacco product marketed in the United States as of (generally) February 15, 2007.  Id. § 387j(a)(2)(A)(i); see also id. § 387j(a)(2)(B) (concerning specified post-February 15, 2007 products).  Authorization by the SE exemption pathway occurs when the FDA orders a “modified” tobacco product exempt after determining, among other things, that its modification is “minor.”  Id. §§ 387j(a)(2)(A)(ii), 387e(j)(3)(A); 21 C.F.R. § 1107.1.  A new tobacco product lacking FDA authorization under the premarket application pathway is “adulterated”; a new tobacco product lacking FDA authorization under either the SE or SE exemption pathway is “misbranded.”  21 U.S.C. §§ 387b(6)(A), 3 87c(a)(6).

“[A]ny person who violates a requirement of [the FDC Act] which relates to tobacco products shall be liable to the United States for a civil penalty.”  21 U.S.C. § 333(f)(9)(A).  “In determining the amount of a civil penalty . . . the Secretary shall take into account” specified factors.  Id. § 333(f)(5)(B).

To impose a penalty on a tobacco retailer, CTP files an administrative complaint with the FDA and serves a copy on the retailer.  See 21 C.F.R. § 17.5(a).  The retailer then may request a hearing before an ALJ by filing an answer to the complaint.  Id. § 17.9(a).  The ALJ issues an “initial decision” based “only on the administrative record.”  Id. § 17.45(a).  A retailer dissatisfied with an ALJ’s initial decision may appeal it to the Board.  Id. § 17.47(a).  The Board may decline review, affirm, or reverse the initial decision, and may increase, reduce, reverse, or remand a penalty determined by the ALJ.  Id. § 17.47(j).

Case Background

I. CTP’s Complaint and proceedings before the ALJ

In January 2024 CTP filed and served a complaint seeking a $20,678 penalty against Respondent, a business operating in Arkansas, for alleged violation of 21 U.S.C.

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§ 331(c).  Initial Decision at 1-2; Complaint at 4, 6.  CTP alleged that Respondent received tobacco products in interstate commerce and offered them for sale.  Initial Decision at 5; Complaint at 1-4.  CTP alleged that it issued a warning letter on June 13, 2023, notifying Respondent that it was selling adulterated and misbranded new tobacco products and that failure to correct any violations of the FDC Act might result in a penalty or other regulatory action.  Complaint at 4; CTP Ex. 6.  CTP further alleged that on August 11, 2023, an inspector for the FDA observed that an adulterated and misbranded “Esco Bars Fruit Medley ENDS product” was “for sale at Respondent’s establishment.”  Complaint at 4.

In a timely Answer, Respondent stated that it was “not contesting the importance of regulation nor the necessity of compliance” but was “requesting a reconsideration of the penalty in the context of” Respondent’s immediate corrective actions, enhanced compliance measures, and financial hardship.  Answer at 1-2.  In subsequent briefing, Respondent acknowledged that on August 11, 2023, it offered for sale new tobacco products that had no FDA marketing authorization order or SE finding in effect and were not otherwise exempt from the premarket authorization requirement.  Pre-Hr’g Br. of Resp. at 4-5.  Respondent argued the penalty was inappropriate to “the severity of the violation,” especially given Respondent’s efforts at correction, the “lack of accessible ways to stay compliant,” and Respondent’s status as “a small, family business” that would “almost certainly” close if it had to pay the full penalty.  Id. at 6-7.  When responding to pre-hearing discovery requests from CTP, Respondent included its 2023 Form 8879-PE (E-File Authorization for Form 1065), showing gross receipts, gross profit, and ordinary business income.  Doc. Req. Resp. (July 1, 2024) at 3.

CTP submitted briefing and seven exhibits to support its position that Respondent violated the FDC Act and the requested penalty amount was appropriate.  CTP Br. to ALJ; CTP Exs. 1-7.  CTP’s evidence included testimonial declarations from a Deputy Division Director in CTP’s Office of Compliance and Enforcement and from an FDA-commissioned Inspector.  CTP Exs. 1, 2.  CTP claimed a $20,678 penalty was warranted “because the August 11, 2023 violation occurred despite earlier warnings from FDA” and due to Respondent’s “repeated violations,” failure to submit “evidence as to its business income and assets,” and “history of violating” the FDC Act’s tobacco product requirements.  CTP Br. to ALJ at 8-10.

II. The ALJ’s Initial Decision

The ALJ admitted all exhibits without objection and decided the case on the full administrative record without a hearing.  Order (Nov. 7, 2024) at 1; Order Canceling Hr’g & Setting Final Briefing Schedule (Dec. 17, 2024).  The ALJ found the administrative record, including Respondent’s answer, CTP’s documentary evidence, and written testimony from two witnesses for CTP, showed that each element of a violation of 21 U.S.C. § 331(c) was established.  Specifically, the ALJ found that “Respondent admitted

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selling the Esco Bars Fruit Medley ENDS product,” and CTP credibly proved the product was received via interstate commerce (from China) and was adulterated and misbranded because it lacked the FDA’s required premarket authorization.  Initial Decision at 6-7; CTP Ex. 1, at 3-4, ¶¶ 9-13.

Having found Respondent violated the Act, the ALJ concluded that a penalty was authorized and applied prescribed statutory factors to determine the appropriate penalty amount.  Initial Decision at 7-10.  The ALJ concluded “that a $15,000 civil money penalty is appropriate based upon the record evidence, applicable law, and aggravating and mitigating circumstances in this case.”  Id. at 8.

III. Respondent’s appeal to the Board

Respondent filed a timely letter of appeal (Appeal) with the Board.  Respondent asks “that the penalty be reconsidered and rescinded” and offers “to provide any further information or documentation needed to support this appeal.”  Appeal at 2.

CTP filed a timely Memorandum in Opposition to Respondent’s Appeal (CTP Br.).  Arguing that “Respondent has failed to identify any errors” by the ALJ, CTP asks “that the Board affirm the ALJ’s Initial Decision finding Respondent liable for violations of the Act and assessing a $15,000 civil money penalty against Respondent.”  CTP Br. at 3, 5.

Standard of Review

Our “standard of review on a disputed issue of fact is whether the initial decision is supported by substantial evidence on the whole record,” and our “standard of review on a disputed issue of law is whether the initial decision is erroneous.”  21 C.F.R. § 17.47(k).

Analysis

Before the Board, Respondent raises three arguments.  First is an assertion that the Initial Decision was largely favorable to Respondent, and seemingly “the penalty was upheld solely on the grounds that [Respondent] did not sufficiently demonstrate an inability to pay.”  Appeal at 1.  Second, Respondent claims that any lack of financial evidence resulted from following the advice of an FDA representative and from a “lack of legal experience, not any intent to obscure the truth.”  Id.  Third, Respondent contends that, given the mitigating factors the ALJ recognized, and because Respondent’s “business permanently closed on February 28, 2025, eliminating any potential for future violations,” any “justification for the penalty no longer stands.”  Id. at 2.

CTP responds that “[t]he ALJ’s finding of liability is supported by substantial and uncontested evidence that the Respondent received adulterated and misbranded ENDS

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products in interstate commerce and offered such products for sale at its establishment in violation of the law.”  CTP Br. at 3-4.  CTP argues that “[e]ven if, as Respondent now asserts without evidence, an FDA representative had provided erroneous guidance regarding the financial documentation needed to support Respondent’s inability to pay, such oral advice is not enough to justify a penalty reduction.”  Id. at 5.  CTP states that Respondent told the ALJ of the planned March 31, 2025 closing of its business and the ALJ ruled that “Respondent violated the Act” but a penalty of $15,000 was appropriate.  Id. at 3.

I. Respondent violated the FDC Act.

The ALJ determined that “Respondent violated the provisions of 21 U.S.C. § 331(c)” by “receiving and offering for sale a new tobacco product that was adulterated and misbranded” because it lacked the required FDA authorization; Respondent specifies no legal or factual error in that determination and the Board perceives none.  See Initial Decision at 1, 7.  Respondent claims the ALJ’s “ruling appears to favor our stance on the underlying issue,” Appeal at 1, but Respondent does not identify, support, or explain any “specific exceptions” to the ALJ’s initial determination of liability, see 21 C.F.R. § 17.47(c).  Respondent has admitted to “displaying the product(s) in question,” Appeal at 1, and CTP accurately summarizes that Respondent “does not rebut that the violative products were on the shelves and offered for sale,” CTP Br. at 4.  Respondent maintains that it “had no intention of engaging in unauthorized business practices” and believed it had “remedied the violation” flagged in the warning letter.  Appeal at 1.  However, Respondent’s claims that it broke the law unintentionally cannot erase the violation.  “Each manufacturer, distributor, importer, and retailer is responsible for ensuring that the cigarettes, smokeless tobacco, or covered tobacco products it manufactures, labels, advertises, packages, distributes, imports, sells, or otherwise holds for sale comply with all applicable requirements” in governing regulations.  21 C.F.R. § 1140.10 (emphasis added).  The required FDA authorization is not an empty formality, because a stated purpose of tobacco product regulation is “to reduce the life-threatening consequences associated with tobacco use.”  See id. § 1140.2.

II. There is no basis to disturb the reduced penalty that the ALJ imposed.

ALJs must “refer to the factors identified in the statute under which the penalty is assessed for purposes of determining the amount of penalty,” 21 C.F.R. § 17.34, and the ALJ did so.  The statutory factors are “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.”  21 U.S.C. § 333(f)(5)(B).

The ALJ found two statutory factors were mitigating.  First, “despite the serious nature of the violations,” the ALJ found “the Respondent’s attempt to comply with law, although

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insufficient to relieve it of liability, is a mitigating factor” warranting reduction of the penalty.  Initial Decision at 9.  Furthermore, the ALJ found “that the history of violations in this case is not significant as CTP contends.”  Id. at 10.

However, the ALJ found no other factors were mitigating.  The ALJ acknowledged Respondent’s representations that it was a small family business facing significant financial hardship and that paying the full penalty likely would lead to closure of the business in March 2025.  Initial Decision at 9.  The ALJ observed that Respondent’s evidence included a tax form showing its “gross profit and ordinary business income,” but “Respondent did not include its complete tax return or any other evidence to support its inability to pay the civil money penalty.”  Id.  Being “limited to the evidence in the record,” the ALJ found “that Respondent has not established that it is unable to pay the civil money penalty” and thus no financial factor was mitigating.  Id.  Finally, the ALJ also did not find Respondent’s degree of culpability mitigating because “Respondent’s lack of awareness does not absolve it of its responsibility” for violating the law.  Id. at 10.

The ALJ thus “conclude[d] that a $15,000 civil money penalty is appropriate based upon the record evidence, applicable law, and aggravating and mitigating circumstances in this case.”  Initial Decision at 8.  CTP “believes it demonstrated the appropriateness of the penalty it initially sought and disagrees with the ALJ’s decision” to reduce the penalty to $15,000 but CTP “is not appealing this decision.”  CTP Br. at 1.

Before the Board, Respondent seeks further reduction or complete rescission of the penalty, but identifies no error in the ALJ’s analysis.  Respondent argues that the ALJ seemingly imposed the $15,000 penalty “solely on the grounds that we did not sufficiently demonstrate an inability to pay.”  Appeal at 1.  However, Respondent overlooks the ALJ’s separate finding that, given the FDC Act’s recognition of the “highly dangerous and addictive nature” of tobacco products, Respondent also had a “[d]egree of culpability” that was not mitigating.  Initial Decision at 10.

Respondent asserts that it followed “in good faith” an FDA representative’s suggestion “to submit our tax returns, specifically a page showing business income or loss,” but no evidence backs up that assertion, and even if proven it would make no difference for several reasons.  See Appeal at 1.  First, the ALJ found Respondent did not submit “its complete tax return,” but only “its 2023 Form 8879-PE,” an e-filing authorization that contained only “someof the information” from Respondent’s full return.  Initial Decision at 9.  Second, CTP’s pre-hearing brief filed on July 29, 2024, stated that one year’s tax documentation “is insufficient alone to establish” Respondent’s inability to pay the penalty and “Respondent should provide evidence as to its business income and assets,” such as proof of its cash reserves or other potential funding sources.  CTP Br. to ALJ at 9.  Respondent could have included such supplemental documentation in its own pre-hearing exchange, which was due three weeks later, on August 19, 2024.  See Pre-Hr’g Order at 4 (setting parties’ pre-hearing exchange filing deadlines).  However, Respondent did not do

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so.  In any event, Respondent’s reliance on alleged advice from the FDA is essentially an equitable estoppel argument that is legally and factually unavailable in this case.  See Shesh Narayan LLC, DAB No. 3137, at 11 (2024) (“To the extent that Respondent is trying to assert a claim of equitable estoppel, Respondent has not provided any authority showing that the equitable remedy of estoppel is even available in this administrative case, and the record evidence does not support the elements of such a claim in any event.”); Auto Valet, Inc., DAB No. 2915, at 8 (2018) (summarizing that, even if equitable estoppel remedy were available, proof would require showing of “affirmative misconduct” by government).

We do not agree with Respondent that its closure has removed any justification for the penalty.  See Appeal at 2.  On January 7, 2025, Respondent’s final brief to the ALJ stated that Respondent’s “very small,” three-person business “was not profitable for the entirety of the year 2024 and is still on a downward trend,” so “we will be closing our business on March 31st, 2025.”  P. Final Br. to ALJ.  The ALJ acknowledged and considered Respondent’s planned closure when assessing, per 21 U.S.C. § 333(f)(5)(B), Respondent’s “ability to continue to do business.”  Initial Decision at 9.  Respondent offers no compelling reason to reject the ALJ’s assessment, so we defer to the ALJ’s assessment of the evidence concerning that factor.  See 1701 Express, Inc., DAB No. 2979, at 9 (2019) (“It is well-settled that the Board defers to the ALJ’s assessment of the evidence, including credibility to be accorded to witness testimony, absent a compelling reason for not doing so.”), aff’d, 836 F. App’x 366 (6th Cir. 2020).

Finally, we decline Respondent’s offer to “provide any additional financial records” and “any further information or documentation needed to support this appeal.”  Appeal at 1-2.  The Board generally “will consider only those issues raised before the [ALJ].”  21 C.F.R. § 17.47(g).  The Board can remand a case to the ALJ to consider new evidence, but only if the party proffering it “demonstrates to the satisfaction of the [Board]” that the evidence “is relevant and material and that there were reasonable grounds for the failure to adduce such evidence” before the ALJ.  Id. § 17.47(i).  Even if Respondent could supply further evidence relevant to the legal factors for determining the penalty amount, Respondent has not demonstrated to our satisfaction that there were reasonable grounds for not producing that evidence before the ALJ.  See Sana Ventures LLC, DAB No. 3169, at 8-9 (2025) (holding, where respondent was newly “attempting to show lack of means to pay” the penalty but the attempt was “late without apparent excuse,” that “the Board is not obliged to consider a remand to the ALJ”).  Respondent pleads its “naivety throughout this proceeding” and “lack of legal experience.”  Appeal at 1.  However, Respondent’s decision to proceed without legal counsel (or “pro se”) is not among the statutory factors in 21 U.S.C. § 333(f)(5)(B) that can mitigate the penalty amount, and provides no basis to disturb the ALJ’s Initial Decision.  See Cape Tobacco Inc., DAB No. 3091, at 5-6 (2023) (acknowledging that “Respondent appears before the Board pro se,” but finding “no basis to disturb the ALJ’s findings,” conclusions, or judgment against the respondent and in favor of CTP).

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In closing, we are sympathetic to Respondent’s requests for leniency, but the record shows no basis for further reducing or rescinding the penalty.  FDA civil money penalties serve remedial, not punitive, purposes.  Orton Motor Co., DAB No. 2717, at 21, 23 (2016), aff’d, 884 F.3d 1205 (D.C. Cir. 2018).  The remedial purposes include “motivating compliance” by purveyors of tobacco products “and protecting the public health.”  Id. at 21.  The ALJ already significantly lowered Respondent’s penalty to $15,000 from the $20,678 that CTP originally sought, thus reducing by over 25% Respondent’s financial liability for violating the FDC Act.  We are unpersuaded that a lower penalty is justified under the statutory factors or would be consistent with the remedial purposes of FDA penalties.  Respondent has shown no error in the Initial Decision, and no justification for a remand to consider additional evidence.

Conclusion

We affirm the Initial Decision.