Debwany Incorporated d/b/a Let’s Stop and Shop/Citgo, DAB 3219

FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION

Debwany Incorporated (Respondent) operates a store in Louisiana that sells electronic nicotine delivery system (ENDS) products.  The Center for Tobacco Products (CTP) of the Food and Drug Administration (FDA) filed a complaint against Respondent, seeking a civil money penalty of $19,192 for violating the Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. § 331(c), by receiving in interstate commerce and delivering or proffering for delivery ENDS products lacking the required premarketing authorization.  Respondent admitted to violating the FDCA but denied receiving any warning letter from CTP.  Respondent also asserted that it immediately removed all offending products from its store upon receiving a separate state-issued notice and before CTP filed its complaint.  Following a hearing, an Administrative Law Judge (ALJ) determined that Respondent violated the FDCA and imposed the maximum civil money penalty of $19,192.  Debwany Inc. d/b/a Let’s Stop and Shop/Citgo, DAB TB9499 (2024) (ALJ Decision).  The ALJ, however, rejected CTP’s allegation that Respondent had a history of prior violations and did not find that Respondent received a warning letter from CTP.  

Respondent appeals, arguing that the ALJ erred by imposing the maximum civil money penalty despite unrebutted evidence that Respondent never received a warning letter from CTP and immediately removed all offending ENDS products when Respondent received a state-issued notice.  As explained below, we summarily affirm the ALJ’s conclusion that Respondent violated the FDCA; however, we reduce the penalty amount because the ALJ erred by imposing the maximum civil money penalty.  We find that a civil money penalty in the amount of $13,000 is appropriate based on the record evidence and the statutory factors under 21 U.S.C. § 333(f)(5)(B).

Legal Background

In 2009, Congress amended the FDCA, 21 U.S.C. § 301, et seq., through the enactment of the Family Smoking Prevention and Tobacco Control Act (TCA).  See Pub. L. No. 111-31, 123 Stat. 1776 (2009).  The amendments provided the FDA with primary regulatory authority over the manufacture, marketing, and distribution of tobacco 

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products.  Id. § 3(1).  Accordingly, the FDCA, as amended, empowers FDA to set standards for tobacco products (21 U.S.C. § 387g); restrict sales and distribution (id. § 387f(d)(1)); and regulate manufacturing (id. § 387f(e)). 

“Tobacco product” is broadly defined to mean “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.”  21 U.S.C. § 321(rr).  In 2016, FDA issued a final rule concluding that the statutory definition of “tobacco product” includes ENDS products (such as e-cigarettes), as well as their components or parts (such as e-liquids with nicotine).  See Deeming Tobacco Products To Be Subject to the Federal Food, Drug, and Cosmetic Act, 81 Fed. Reg. 28,973, 28,975-76, 28,982 (May 10, 2016).  As relevant here, the FDCA extends to and imposes additional requirements for “new tobacco products,” that is, tobacco products that were not commercially marketed in the United States as of February 15, 2007.  21 U.S.C. § 387j(a)(1) (defining “new tobacco product”).

A new tobacco product (including e-cigarettes) may not be introduced into interstate commerce without FDA authorization.  See 21 U.S.C. § 387j(a)(2)(A).  FDA may grant such authorization in three ways.  First, based on FDA’s review of a premarket tobacco product application, FDA may issue an order finding that the marketing of the new tobacco product would be “appropriate for the protection of the public health.”  Id. § 387j(c)(1)(A)(i), (2)(A).1  Second, based on FDA’s review of a substantial equivalence report (SE report), FDA may issue an order 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.  Id. §§ 387j(a)(2)(A)(i), 387e(j).  Third, based on FDA’s review of an exemption request and “abbreviated report,” FDA may issue an order finding an exemption.  Id. §§ 387j(a)(2)(A)(ii), 387e(j)(1), (3)(A); 21 C.F.R. § 1107.1.

A new tobacco product is “adulterated” if it is required to have, but does not have, a required premarketing authorization order.  21 U.S.C. § 387b(6)(A).  A new tobacco product is “misbranded” if a report required under section 387e(j) (i.e., an SE report or abbreviated report) for that product was not submitted to FDA.  Id. § 387c(a)(6).  It is a violation of the FDCA to receive adulterated or misbranded tobacco products in interstate commerce and to deliver or proffer delivery thereof for pay or otherwise.  Id. § 331(c).

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The FDCA authorizes civil money penalties against any person who violates a requirement of the FDCA relating to tobacco products.  21 U.S.C. § 333(f)(9)(A).  At the time of the violation here (August 2023), retailers of tobacco products were subject to a civil money penalty of up to $19,192 for each FDCA violation, not to exceed $1,279,448 for all violations adjudicated in a single proceeding.  21 U.S.C. § 333(f)(9)(A); 21 C.F.R. § 17.2; 45 C.F.R. § 102.3 (eff. Mar. 17, 2022).

To impose a penalty against a tobacco retailer, CTP (the FDA component “with principal jurisdiction over the matter”) must serve an administrative complaint on the respondent and file a copy of the complaint with FDA’s Division of Dockets Management.  21 C.F.R. § 17.5.  The respondent may request a hearing by filing an answer.  Id. § 17.9(a).  Cases are assigned to an ALJ, who conducts the hearing and issues an “initial decision” with findings, conclusions, and any penalty based on the record developed before the ALJ.  Id. §§ 17.5(d), 17.19, 17.45(a).  “In order to prevail, [CTP] must prove respondent’s liability and the appropriateness of the penalty . . . by a preponderance of the evidence.”  21 C.F.R. § 17.33(b) (emphasis added).  “The respondent must prove any affirmative defenses and any mitigating factors by a preponderance of the evidence.”  Id. § 17.33(c). 

In determining the penalty amount, the ALJ “shall evaluate any circumstances that mitigate or aggravate the violation and shall articulate in their opinions the reasons that support the penalties and assessments imposed.”  21 C.F.R. § 17.34(a).  The ALJ shall consider the factors identified in the statute under which the penalty is assessed, including the nature, gravity, and extent of violations, ability to pay, effect on business, prior violations, and degree of culpability.  See 21 U.S.C. § 333(f)(5)(B); 21 C.F.R. § 17.34(b). 

Either party may appeal an ALJ’s initial decision 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 any civil money penalty determined by the ALJ.  Id. § 17.47(j).

Case Background

A. CTP filed an administrative complaint seeking the maximum penalty based, in part, on Respondent’s alleged failure to correct prior violations.

In November 2023, CTP filed a complaint against Respondent, seeking a civil money penalty in the amount of $19,192 for receiving in interstate commerce and delivering or proffering for delivery ENDS products lacking the required premarketing authorization.  Compl. ¶ 1.  The complaint alleged that Respondent operates an establishment in Louisiana that receives tobacco products, including ENDS products, in interstate commerce and delivers or proffers delivery of such products for pay or otherwise.  Id. ¶¶ 14-15.  The complaint alleged that in June 2023, CTP issued a warning letter to Respondent stating that certain ENDS products that Respondent sells are adulterated and misbranded because they lack the required FDA authorization.  Id. ¶ 21.  According to the 

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complaint, Respondent was warned that the failure to correct such violations may result in a civil money penalty or other regulatory action.  Id. ¶ 22. 

The complaint further alleged that in August 2023, an FDA-commissioned inspector observed that Respondent was again offering for sale at its establishment certain ENDS products (Elfbar Rainbow Cloudz and Elfbar Blueberry Energize); these products were “new tobacco products” not commercially marketed in the United States as of February 2007; and these products lacked the required FDA marketing authorization order, a substantial equivalence order, or a found-exempt order.  Id. ¶¶ 16-19.  The complaint alleged that Respondent violated the FDCA, 21 U.S.C. § 331(c), because Respondent received “adulterated and misbranded ENDS products in interstate commerce and delivered or proffered delivery thereof for pay or otherwise.”  Id. ¶ 20.

Respondent filed an answer, admitting that it received and offered for sale the ENDS products identified in the complaint but denying knowledge that the products lacked authorization at the time they were “displayed and sold.”  Answer ¶¶ 16-20.  As for the warning letter issued by CTP in June 2023, Respondent denied any “knowledge of the receipt of the letter” and denied “any knowledge of the content of the letter.”  Id. ¶¶ 21-22.  As a further defense, Respondent stated that it had “no personal knowledge of any FDA ‘warning letter’” and explained that when Respondent received a warning notice from the Louisiana Office of Alcohol and Tobacco Control, on or about October 1, 2023, Respondent immediately removed all unauthorized ENDS products from its store and has not offered such products for sale since.  Id. at pp. 3-4.  Regarding the penalty amount, Respondent stated that it is “too high” because Respondent did not receive the alleged June 2023 warning letter and, if it had, Respondent would have removed the offending products as it did when it received the state-issued notice on or about October 1, 2023.  Id. at p. 4.

B. Both parties submitted evidence and arguments relevant to assessing the appropriate civil money penalty.

CTP filed its pre-hearing brief with eight exhibits (CTP Exs. 1-8), including written direct testimony of the Deputy Division Director for the Division of Enforcement and Manufacturing (CTP Ex. 1), written direct testimony of the FDA-commissioned officer who inspected Respondent’s establishment in August 2023 (CTP Ex. 2), and a copy of the warning letter that CTP “issued” in June 2023 (CTP Ex. 7).  In its pre-hearing brief, CTP relied on Respondent’s alleged receipt of the June 2023 warning letter to support the $19,192 civil money penalty.  CTP Pre-Hr’g Br. at 8-12 (analyzing the statutory factors under 21 U.S.C. § 333(f)(5)(B)).  Regarding the nature, circumstances, extent and gravity of the violations, CTP pointed to the June 2023 warning letter to show that Respondent’s “violations on August 15, 2023, are particularly serious because the August 2023 violations occurred despite earlier warnings from FDA.”  Id. at 9.  CTP argued that the June 2023 warning letter demonstrated Respondent’s “repeated violations” and its 

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“unwillingness or inability to correct the violations,” such that a penalty is “necessary in order for Respondent to grasp the seriousness and importance of the requirements governing the sale of tobacco products.”  Id. at 10. 

Regarding Respondent’s alleged history of prior violations, CTP again relied on the June 2023 warning letter, stating: 

• As noted above, Respondent has a history of violating the [FDCA’s] requirements relating to tobacco products.  That Respondent continued to receive in interstate commerce and offer for sale new tobacco products that lacked the required premarket authorization or exemption demonstrated an unwillingness or inability to comply with federal tobacco laws and regulations.  Given Respondent’s violation history, a penalty of $19,192 is appropriate.

Id. at 11-12 (record citation omitted). 

Finally, regarding Respondent’s degree of culpability, CTP again pointed to the June 2023 warning letter, stating:  “CTP has previously reminded Respondent about its responsibilities under the law, directed Respondent to resources to help ensure compliance with the law, and notified Respondent that a future violation could result in a civil money penalty, seizure, and/or injunction.”  Id. at 12 (citing CTP Ex. 7).  Thus, Respondent asserted, “a civil money penalty of $19,192 is appropriate.”  Id.

Respondent subsequently filed its pre-hearing brief (Resp’t Pre-Hr’g Br.), initially without written direct testimony or exhibits.  The ALJ allowed Respondent to file eight exhibits out of time, including written direct testimony of Respondent’s owner (R. Ex. 8), written direct testimony of an employee (R. Ex. 1), and a copy of the state-issued notice regarding unauthorized ENDS products (R. Ex. 3).  In its pre-hearing brief, Respondent admitted that it sold the adulterated and misbranded ENDS products identified in the complaint until October 2023.  Resp’t Pre-Hr’g Br. at 3 (“Respondent did sell the Elf Bar/EB/Ends products at issue here, until October, 2023”), 4 (“Respondent cannot deny the Elf Bar/EB/Ends products were on Respondent’s shelves on August 15, 2023, because Respondent did not receive the FDA ‘warning letter’ in June and did not remove the products until the State warning letter on October 1, 2023.”).  Respondent argued that a penalty of $19,192 (the maximum allowed) is not appropriate because, among other things, no CTP warning letter “was received at the store and [Respondent’s owner] had no information until the State letter was received, at which time [its owner] acted immediately” to remove the offending ENDS products.  Id. at 5.      

Respondent submitted written direct testimony from an employee, who testified under penalty of perjury that she was the only employee working on the day the warning letter was “supposed to have been delivered,” she never received the warning letter, she did not 

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sign for the warning letter, and she never would have accepted the warning letter without giving it to her employer.  R. Ex. 1, at ¶¶ 1-4 (referring to CTP Ex. 7).  Respondent also submitted written direct testimony from its owner, who testified under penalty of perjury that he “did not ever see the warning letter from the FDA.”  R. Ex. 8, at ¶ g.  The owner further testified that the day he received the state-issued notice (R. Ex. 3) on or about October 1, 2023, he immediately acted to remove the unauthorized ENDS products from the store and has not offered such products for sale since then.  Id. at ¶¶ f-h.  Respondent’s owner provided further testimony that his ability to pay the penalty amount “is of no moment” because CTP “rests it[s] case” on Respondent’s alleged “history of violating the [FDCA’s] requirements . . . by relying on the June 2023 Warning Letter of which I never received.”  Id. at ¶ k.

C. The ALJ held a hearing and permitted further briefing.

The ALJ held a hearing on December 10, 2024, to allow Respondent’s counsel to cross-examine the FDA-commissioned officer who inspected Respondent’s establishment in August 2023.  Tr. at 9.  The ALJ noted that “Respondent is not challenging the violation but contends that the penalty is not appropriate.”  Id. at 7.  The ALJ admitted into evidence all of the exhibits proffered by the parties without objection.  Id. at 8.  CTP declined the opportunity to cross-examine Respondent’s witnesses. 

Following the hearing, the ALJ allowed the parties to submit post-hearing briefing.  In its post-hearing brief, CTP acknowledged Respondent’s argument and evidence about not receiving the June 2023 warning letter and noted that the letter “is dated June 13, 2023, making it highly unlikely that UPS delivered it to Respondent’s establishment on that day.”  CTP Post-Hr’g Br. at 3.  In a footnote, CTP stated that it “did not enter the UPS Delivery Notification for the Warning Letter into evidence in this matter, but it has said document and can produce it if the ALJ so orders.”  Id. at 3, n.2.  CTP was not “ordered” to produce the purported delivery receipt and did not introduce it into evidence.   

In its post-hearing brief, Respondent again denied receipt of the June 2023 warning letter and also denied that the letter established a prior FDCA violation absent corroborating evidence.  Resp’t Post-Hr’g Br. at 10 (“[CTP] offers no reports, no photographs, no evidence of the May inspection.”); see also CTP Ex. 7, at 1 (noting that warning letter resulted from an inspection of Respondent’s establishment on May 27, 2023).  Regarding the penalty amount, Respondent again argued that “Respondent’s immediate reaction” to the state-issued notice in October 2023 (before CTP’s complaint was filed and served) “should be a strong mitigating factor against any [penalty].”  Id. at 13.   

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D. The ALJ determined that Respondent violated the FDCA and imposed the maximum civil money penalty.

The ALJ found that Respondent received adulterated and misbranded ENDS products (Elfbar Rainbow Cloudz and Elfbar Blueberry Energize) in interstate commerce and delivered or proffered delivery of those products for pay or otherwise on August 15, 2023, in violation of 21 U.S.C. § 331(c).  ALJ Decision at 6-8 (finding that the ENDS products identified in the complaint lacked the required FDA marketing authorization order, a substantial equivalence order, or a found-exempt order).  The ALJ based that finding on the uncontested written direct testimony of CTP’s Deputy Division Director for the Division of Enforcement and Manufacturing, and the written direct testimony of the FDA-commissioned officer who inspected Respondent’s establishment in August 2023, as well as photographs, reports, and other documents.  Id.       

Having concluded that Respondent violated the FDCA, the ALJ then determined the penalty amount, acknowledging the need to consider aggravating and mitigating factors, including the statutory factors under the FDCA.  Id. at 10 (citing 21 C.F.R. § 17.34(a), (b)).  The statutory factors, the ALJ noted, include “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.”  Id. (quoting 21 U.S.C. § 333(f)(5)(B)).  

As to the nature, circumstances, extent, and gravity of the violations, the ALJ found that Respondent “is in the business of receiving and selling highly regulated and dangerous products” and “is solely responsible for ensuring all tobacco products in its possession and offered for sale comply with the federal tobacco regulations.”  Id. at 10-11.  The ALJ dismissed Respondent’s contention that it had already removed all unauthorized products by the time CTP served its complaint, stating that “[w]hether Respondent’s establishment had illegal tobacco products on its shelves after the [August 2023] inspection, or at the time Respondent was served with the Complaint, does not absolve Respondent of its violation on August 15, 2023.”  Id. at 10.  The ALJ further agreed with CTP’s assertion that “ignorance of the law is not a defense to liability” and found that “Respondent’s lack of knowledge regarding federal law does not mitigate Respondent’s liability.”  Id. at 11.  Thus, the ALJ found that “the nature, circumstances, extent, and gravity of the violation does not constitute a mitigating factor.”  Id.  

As to Respondent’s ability to pay and the effect on Respondent’s ability to do business, the ALJ found that Respondent failed to offer “sufficient evidence . . . that paying the [penalty] would affect its ability to continue its business” and “failed to submit evidence of its complete financial situation.”  Id. at 11.  The ALJ therefore found that Respondent 

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did not establish either an inability to pay or inability to continue its business as mitigating factors.  Id.2

As to Respondent’s history of prior violations, the ALJ found “no indication in the record of any prior violations of 21 U.S.C. § 331(c) resulting in a [penalty].”  Id. at 11.  The ALJ pointed out that the June 2023 warning letter was not a final agency determination, did not result in any penalty, and provided no opportunity for Respondent to request a hearing or otherwise dispute the alleged violations.  Id. at 12 (citing CTP Ex. 7, at 3).3  The ALJ therefore rejected CTP’s contention that the warning letter established a history of prior violations.  Id. (“I disagree with CTP that the Warning Letter, on its own, demonstrates a history of prior violations.”).  While the ALJ acknowledged Respondent’s assertion that it never received the June 2023 warning letter, the ALJ made no finding about whether Respondent, in fact, received the warning letter.  Id. at 12 & n.3 (stating that no delivery notice was offered into evidence by either party and declining to “consider any facts related to the delivery notice”).  The ALJ did not explain why CTP’s failure to prove a history of prior violations would not warrant a downward adjustment of the maximum penalty sought by CTP.

As to Respondent’s degree of culpability, the ALJ found Respondent “fully culpable” for its FDCA violation on August 15, 2023.  Id. at 12.  While acknowledging Respondent no longer sells Elfbar products and asserts “confusion regarding state and federal law,” the ALJ found such things do not “release[] Respondent from its responsibility as a retailer of tobacco products.”  Id.

The ALJ rejected Respondent’s policy arguments regarding the FDA’s processes for new tobacco products and its “challenges in trying to comply with the” FDCA.  Id. at 12-13.  The ALJ also declined to consider Respondent’s immediate response to the state-issued notice as a mitigating factor.  Id. at 13.  The ALJ concluded that a maximum penalty in the amount of $19,192 is appropriate.  Id.      

Standard of Review

The standard of review on a disputed issue of fact is whether the ALJ’s 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. 

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Analysis

Respondent argues that the ALJ erred by imposing the maximum civil money penalty despite unrebutted evidence that:  (i) Respondent did not receive the June 2023 warning letter; and (ii) Respondent immediately took steps to remove all unauthorized ENDS products in response to a state-issued notice received on or about October 1, 2023 (more than a month before CTP’s complaint was filed).  Appeal Br. at 1-2.  Respondent asks that the Board set aside or reduce the civil money penalty.  Id. at 1.  

CTP concedes that the ALJ “found in favor of Respondent” on the issue of whether the June 2023 warning letter established a history of prior violations and does not challenge that finding.  CTP Br. at 5.  CTP argues, however, that “there is no legal requirement that CTP send a Warning Letter before bringing a civil money penalty case for the violations at issue here.”  Id.  Despite failing to establish that Respondent had a history of prior violations, CTP asserts that “[t]he ALJ correctly found that Respondent was ‘fully culpable’ for offering for sale adulterated and misbranded tobacco products during the August 15, 2023, inspection, regardless of whether [Respondent] received the Warning Letter.”  Id. at 6 (“[I]t is ‘a well-settled legal principle that ignorance of the law is not a defense to liability, even in the context of civil liability.’” (citations omitted)).  To find otherwise, according to CTP, “would encourage ignorance on the part of retailers and place an undue burden on the FDA to provide specific notice in advance of enforcement action.”  Id.  As to the evidence that Respondent immediately took steps to remove all offending ENDS products from its shelves after receiving a state-issued notice in early October 2023, CTP argued that such evidence is “entirely irrelevant” and “does not absolve Respondent of its violation on August 15, 2023.”  Id. at 8.

I. We summarily affirm the ALJ’s conclusion that Respondent violated the FDCA.

Respondent does not challenge the ALJ’s determination regarding its violation of the FDCA in August 2023.  Accordingly, we summarily affirm the ALJ’s conclusion that Respondent violated the FDCA, 21 U.S.C. § 331(c), by receiving in interstate commerce and delivering or proffering for delivery ENDS products lacking the required FDA marketing authorization order, a substantial equivalence order, or a found-exempt order.  ALJ Decision at 6-8; see also Sana Ventures LLC d/b/a Space City Food Mart, DAB No. 3169, at 7 (2025) (summarily affirming ALJ’s findings and conclusions concerning FDCA violation absent specific exceptions in notice of appeal); Smokers Haven 3 LLC d/b/a Smoker’s Haven, DAB No. 3164, at 5 (2024) (same); Leung’s, Inc. d/b/a El Faro Supermarket, DAB No. 3025, at 9 (2020) (same).  

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II. We reduce the civil money penalty because the ALJ erred by imposing the maximum penalty amount.

Based on this record, the ALJ erred by imposing the maximum penalty of $19,192 despite finding that Respondent had no history of prior violations and despite unrebutted evidence that Respondent did not receive the June 2023 warning letter.  The ALJ also erred by not taking into account uncontested evidence that Respondent immediately removed all unauthorized ENDS products from its store after receiving a state-issued notice on or about October 1, 2023.  While this evidence certainly does not “absolve” Respondent of liability for violating the FDCA in August 2023, such evidence is relevant to determining the appropriate penalty amount under 21 U.S.C. § 333(f)(5)(B).  For the reasons explained below, we reverse the ALJ’s imposition of a civil money penalty in the amount of $19,192 and reduce the penalty to $13,000.

Under the applicable regulations, CTP has the burden of establishing, by a preponderance of the evidence, both Respondent’s “liability and the appropriateness of the penalty” under the FDCA.  21 C.F.R. § 17.33(b).  Respondent did not challenge its liability under the FDCA but presented evidence relevant to determining the appropriate penalty amount.  In determining the appropriate penalty amount, the ALJ was required to “take into account” the nature, circumstances, extent, and gravity of the violation, ability to pay, effect on business, prior violations, degree of culpability, and any other matter that justice may require.  21 U.S.C. § 333(f)(5)(B); 21 C.F.R. § 17.34(b).

Before the ALJ, CTP relied on Respondent’s alleged receipt of the June 2023 warning letter (CTP Ex. 7) to support the maximum civil money penalty sought in the complaint.  CTP Pre-Hr’g Br. at 8-12.  Relying on the warning letter, CTP argued that the nature, extent, and gravity of Respondent’s August 2023 violation was “particularly serious” because that violation occurred “despite earlier warnings.”  Id. at 9-10 (arguing that the warning letter demonstrated Respondent’s “repeated violations” and its “unwillingness or inability to correct the violations”).  CTP further relied on the warning letter to establish that Respondent had a history of prior violations and a high degree of culpability for the August 2023 violation.  Id. at 11-12 (arguing that a maximum penalty is appropriate given Respondent’s history of prior violations and culpability having been previously reminded of its legal responsibilities under the FDCA in the warning letter).

These assertions by CTP are consistent with its past practices and the assessment of civil money penalties for tobacco-related violations under the FDCA.  Indeed, evidence that a tobacco retailer ignored a warning letter or failed to correct violations in response to a warning letter constitutes an aggravating factor that may warrant the imposition of a substantial civil money penalty.  See, e.g., Drive Thru Vapors, LLC, DAB No. 3168, at 12 (2025) (affirming ALJ’s unchallenged finding that retailer’s receipt of a warning letter showed history and culpability in support of a maximum penalty); D and A Bus. Invs. LLC d/b/a T.H.C. Smokes, DAB No. 3166, at 11-12 (2024) (affirming maximum penalty

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where retailer continued selling adulterated and misbranded ENDS products despite prior receipt of warning letter); Smokers Haven 3 LLC d/b/a Smoker’s Haven, DAB No. 3146, at 7 (2024) (“[T]he ALJ appropriately considered, as an aggravating factor, [retailer’s] failure to change its business practices after the warning letter.”).

Respondent, however, consistently asserted and provided unrebutted written direct testimony that it never received the June 2023 warning letter.  Answer at 3-4; R. Ex. 1 (employee testimony); R. Ex. 8 (owner testimony).  CTP acknowledged Respondent’s argument and evidence but submitted no evidence that Respondent received the warning letter.  CTP Post-Hr’g Br. at 3, n.2.  The ALJ made no finding about Respondent’s receipt of the warning letter, noting only that neither party offered a “delivery notice” into evidence.  ALJ Decision at 12, n.3 (“I decline to consider any facts related to the delivery notice.”).  The ALJ further found that the warning letter does not, by itself, establish a history of prior violations, and CTP does not challenge that finding.  Id. at 12.  Notwithstanding CTP’s reliance on the warning letter to justify the maximum penalty sought in the complaint, the ALJ gave no consideration to unrebutted evidence that Respondent did not receive the warning letter in evaluating the factors under 21 U.S.C. § 333(f)(5)(B).  See id. at 10-13.  We find this was a legal error for several reasons.

1. A. The ALJ found that Respondent had no history of prior violations.

Having found that the record did not establish Respondent had any history of FDCA violations, the ALJ erred by not taking into account the lack of prior violations in determining the appropriate penalty.  The FDCA and its implementing regulations require consideration of the statutory factors under 21 U.S.C. § 333(f)(5)(B), including “any history of prior such violations,” in determining the appropriate penalty amount.  See 21 C.F.R. §§ 17.33(a), 17.34(a)-(b).  Respondent’s alleged “violation history” was one of the primary reasons CTP gave for seeking a maximum civil money penalty.  CTP Pre-Hrg’g Br. at 11-12 (“Given Respondent’s violation history, a penalty of $19,192 is appropriate.”).  Yet “arguments by counsel are not evidence,” Atty’s Parti Expo, Inc., DAB No. 2925, at 8 (2019), and the ALJ found no such “history of prior violations” was proven, ALJ Decision at 12.  Regardless of whether Respondent’s lack of prior violations is viewed as a “mitigating factor” (i.e., a first offense) or the absence of an “aggravating factor,” the ALJ erred by making no corresponding adjustment to the penalty amount. 

We further find that the ALJ erred by not explaining any other basis for imposing the maximum penalty despite rejecting CTP’s allegations about Respondent’s violation history.  ALJs are required to “evaluate any circumstances that mitigate or aggravate the violation and shall articulate in their opinions the reasons that support the penalties and assessments imposed.”  21 C.F.R. § 17.34(a).  Nothing in the ALJ’s discussion of the penalty amount, or in the record, suggests that a maximum penalty is warranted despite the ALJ’s finding of no history of any prior tobacco violations in the record. 

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1. B. The ALJ erred by giving insufficient consideration to Respondent’s lack of receipt of the June 2023 warning letter and immediate response to the state-issued notice in October 2023.

CTP failed to establish that Respondent received the June 2023 warning letter.  Respondent presented unrebutted evidence that it did not receive the warning letter, and despite having the opportunity to do so, CTP presented no evidence that Respondent received the letter.  Moreover, the ALJ made no finding that Respondent received the warning letter.  This is significant because CTP relied on Respondent’s alleged receipt of the warning letter to justify the maximum civil money penalty sought in the complaint.  As CTP argued before the ALJ, Respondent’s receipt of the warning letter (if proven) is relevant to assessing the extent and gravity of the August 2023 violation and Respondent’s degree of culpability.  CTP Pre-Hr’g Br. at 9-10, 12.

Here, CTP’s failure to establish Respondent’s receipt of the June 2023 warning letter undermines its assertion that Respondent violated the FDCA in August 2023 “despite earlier warnings from FDA,” and cuts against CTP’s assertion that Respondent is unwilling or unable to comply with federal law.  Id. at 9-10.  It also diminishes CTP’s argument of the alleged necessity of imposing a $19,192 penalty “in order for Respondent to grasp the seriousness and importance” of complying with FDCA requirements.  Id. at 10. 

The ALJ acknowledged that Respondent denied receiving the warning letter but overlooked the issue’s relevance to determining the appropriate penalty amount, noting only that “Respondent’s lack of knowledge regarding federal law does not mitigate Respondent’s liability.”  ALJ Decision at 11 (emphasis added).  The issue, however, is not Respondent’s liability but the appropriateness of the civil money penalty based on the statutory factors under 21 U.S.C. § 333(f)(5)(B).  The ALJ erred by not considering Respondent’s lack of receipt of the June 2023 warning letter in evaluating the extent and gravity of Respondent’s August 2023 violation and its degree of culpability.

Finally, the unrebutted evidence that Respondent immediately removed all unauthorized ENDS products from its store after receiving a state-issued notice on or about October 1, 2023, further contravenes CTP’s assertion that Respondent was unable or unwilling to comply with the FDCA.  While the ALJ found such evidence to be irrelevant because it does not “absolve” Respondent of its August 2023 violation, ALJ Decision at 10, the issue (again) is not Respondent’s liability.  We agree that such evidence does not excuse Respondent’s August 2023 violation or diminish the serious nature of the violation; however, the evidence is relevant to assessing the extent and gravity of that violation and Respondent’s degree of culpability.  Here, CTP did not show that Respondent disregarded a warning or was a repeat offender of the FDCA.  The unrebutted evidence of Respondent’s prompt removal of offending ENDS products upon receipt of the state-issued notice demonstrates both an ability and willingness to correct its violations and 

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come into compliance with federal law.  The ALJ erred by declining to consider such evidence in determining the penalty imposed.   

Conclusion

We summarily affirm the ALJ’s conclusion that Respondent violated the FDCA.  We reverse the ALJ’s imposition of a civil money penalty in the amount of $19,192 and reduce the penalty amount to $13,000 for the reasons explained above.