Daniel Koshy d/b/a 7-Eleven 11321, DAB TB4815 (2020)

INITIAL DECISION

The Center for Tobacco Products (CTP) seeks to impose a civil money penalty (CMP) against Respondent, Daniel Koshy d/b/a 7-Eleven 11321, located at 2915 Springfield Road, Broomall, Pennsylvania 19008. The complaint seeks an $11,410 civil money penalty from Respondent 7-Eleven 11321 for violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R. pt. 1140, at least six times within a 48-month period.

The complaint alleges CTP previously initiated a civil money penalty action against Respondent 7-Eleven 11321. The prior action concluded after an Initial Decision was entered against Respondent 7-Eleven 11321 for at least five violations1 of the Act. Specifically, Respondent was found to have sold regulated tobacco products to minors

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and failed to verify, by means of photo identification containing a date of birth, that purchasers were 18 years of age or older. The complaint further alleges that Respondent 7-Eleven 11321 subsequently committed two additional violations of the Act. Specifically, that Respondent sold regulated tobacco products to a minor and failed to verify, by means of photo identification containing a date of birth, that the purchaser was 18 years of age or older, thereby violating the Act. Therefore, CTP seeks an $11,410 civil money penalty against Respondent 7-Eleven 11321 for a total of six violations within a 48-month period.

Procedural History

CTP began this case by serving an administrative complaint on March 5, 2019, seeking an $11,410 civil money penalty on Respondent 7-Eleven 11321, at 2915 Springfield Road, Broomall, Pennsylvania 19008, and by filing a copy of the complaint with the Food and Drug Administration's (FDA) Division of Dockets Management. On March 31, 2019, Respondent timely filed a request for an extension of time in which to file an answer. By Order dated April 4, 2019, I granted Respondent's request and extended the answer deadline to May 6, 2019. Subsequently, Respondent timely answered CTP's complaint. In its answer, Respondent admitted the allegations, but contested the civil money penalty. Respondent's Answer (Answer) at 1-2 (CRD Docket Nos. 5-5a).

On May 13, 2019, I issued an Acknowledgment and Pre-Hearing Order (APHO), which established the procedure and deadlines in this case. Among other things, the APHO set a deadline of August 5, 2019 for CTP's pre-hearing exchange submission, and a deadline of August 26, 2019 for Respondent's submission of its pre-hearing exchange.

CTP filed its pre-hearing exchange on August 5, 2019. CTP's pre-hearing exchange included 15 numbered exhibits (CTP Exs. 1-15) and declarations of two witnesses, including Inspector Theresa McClain. On August 27, 2019, Respondent filed a request for a one-month extension in which to file its pre-hearing exchange. Specifically, in a two-line request, Respondent stated:

I would like to request an extension of one month on this case, as I am currently struggling with some health issues and have not had a chance to review the received documents yet.

CRD Docket No. 11. On August 30, 2019, I issued an Order denying Respondent's request for an extension and scheduling a pre-hearing telephone conference. With regard to the request for an extension, I concluded that in accordance with the regulations at 21 C.F.R. § 17.25(a), (b)(2) and § 17.19(b)(17), Respondent failed to demonstrate "extraordinary circumstances" for its untimely request for an extension. My Order then scheduled a pre-hearing telephone conference for September 13, 2019, at 11:00 AM Eastern Time. CRD Docket No. 12.

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On September 13, 2019, I held a pre-hearing conference call in this case. Respondent did not appear at the pre-hearing conference call, or provide any response to the Order that scheduled the pre-hearing conference call. Respondent was ordered to show cause for its failure to appear at the pre-hearing conference no later than September 30, 2019. On September 29, 2019, Respondent filed a response to the Order to Show Cause. Respondent asserted that due to a shortage of employees during the scheduled time for the pre-hearing conference call, he was unable to get coverage of his establishment in order to participate in the conference call. CRD Docket Nos. 14-16. Based on Respondent's representation, by Order dated October 8, 2019, I rescheduled the pre-hearing telephone conference for October 31, 2019 at 11:00 AM Eastern Time.

On October 31, 2019, I held the prehearing conference call in this case. During the pre-hearing conference call, the parties agreed that an administrative hearing was not required and consented to a decision based on the administrative record. I admitted the CTP's proposed exhibits into the record as there was no objection to any of the proposed exhibits by Respondent. Following the prehearing conference, I gave the parties until December 5, 2019, to simultaneously submit final briefs. On December 5, 2019, each party filed a final submission.

Accordingly, the record is now closed and I am issuing a decision on the record in this case.

Issues

1. Whether Respondent sold cigarettes to a minor on December 11, 2018, and failed to verify, by means of photo identification containing a date of birth, that the purchaser was 18 years of age or older, in violation of 21 C.F.R. § 1140.14(a)(1) and 21 C.F.R. § 1140.14(a)(2)(i).
2. Whether the civil money penalty of $11,410 that CTP seeks is an appropriate amount, pursuant to the provisions of 21 C.F.R. § 17.33(a).

Analysis

In order to prevail, CTP must prove Respondent's liability by a preponderance of the evidence. The U.S. Supreme Court has described the preponderance of the evidence standard as requiring that the trier-of-fact believe that the existence of a fact is more probable than not before finding in favor of the party that had the burden to persuade the judge of the fact's existence. In re Winship, 397 U.S. 358, 371-72 (1970); Concrete Pipe and Prods. of Cal., Inc. v. Constr. Laborers, 508 U.S. 602, 622 (1993).

CTP has the burden to prove Respondent's liability and appropriateness of the penalty by a preponderance of the evidence. 21 C.F.R. § 17.33(b). Respondent has the burden to

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prove any affirmative defenses and any mitigating factors likewise by a preponderance of the evidence. 21 C.F.R. § 17.33(c).

I. Violations

CTP determined to impose a CMP against Respondent pursuant to the authority conferred by the Act and implementing regulations at Part 21 of the Code of Federal Regulations. The Act prohibits the misbranding of tobacco products while they are held for sale after shipment in interstate commerce. 21 U.S.C. § 331(k). A tobacco product is misbranded if distributed or offered for sale in any state in violation of regulations issued under section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). FDA and its agency, CTP, may seek civil money penalties from any person who violates the Act's requirements as they relate to the sale of tobacco products. 21 U.S.C. § 331(f)(9).

The sale of cigarettes to an individual who is under the age of 18 years is a violation of implementing regulations. 21 C.F.R. § 1140.14(a)(1). The failure to verify, by means of photo identification containing the bearer's date of birth, that no cigarette purchaser is younger than 18 years of age is also a violation of implementing regulations. 21 C.F.R. § 1140.14(a)(2)(i).

In the case presently before me, at approximately 10:58 AM on December 11, 2018, an FDA-commissioned inspector conducted an inspection of 7-Eleven 11321, located at 2915 Springfield Road, Broomall, Pennsylvania 19008. CTP alleged that during the inspection, Respondent committed violations of selling cigarettes to a minor, in violation of 21 C.F.R.§ 1140.14(a)(1), and failing to verify the age of the purchaser by means of photographic identification containing the bearer's date of birth, in violation of 21 C.F.R. § 1140.14(a)(2)(i). Specifically, a person younger than 18 years of age was able to purchase a package of Newport Box 100s cigarettes. Complaint ¶ 7.

In support of the December 11, 2018 allegations, CTP submitted evidence including the declaration of Inspector Theresa McClain who conducted the inspection at issue, Inspector McClain's narrative report of the alleged incident, and photographs of the package of Newport Box 100s cigarettes allegedly purchased on December 11, 2018. CTP Exs. 6, 8, 10-11.

In her declaration, Inspector McClain stated that, at approximately 10:58 AM on December 11, 2018, she conducted a follow-up undercover buy (UB) compliance check inspection at Respondent's location, 2915 Springfield Road, Broomall, Pennsylvania 19008. CTP Ex. 6, at 2 ¶ 7. Inspector McClain further stated:

During the inspection, I parked my car near the 7-Eleven 11321 and Minor A and I exited the vehicle. I watched Minor A enter 7-Eleven 11321, and I entered the establishment moments after Minor A. From my location, I had

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a clear, unobstructed view of the sales counter and Minor A. During the inspection, I observed Minor A purchase a package of cigarettes from an employee at the establishment. Prior to the purchase, I observed that Minor A did not present any identification to the employee. The employee did not provide Minor A a receipt after the purchase.

Id. at 3 ¶ 8. Inspector McClain declared that after the inspection, she and Minor A returned to the car where she immediately retrieved the package of cigarettes from Minor A, which she observed were Newport cigarettes. Id. ¶ 9. Inspector McClain stated that she then labeled the cigarettes as evidence, photographed all of the panels of the package, and processed the evidence with standard procedures at the time of the inspection. Id.

On its face, this evidence is more than sufficient to prove that Respondent violated the law on December 11, 2018. In fact, Respondent's owner, Daniel Koshy, admitted to the alleged violations in his Answer (CRD Docket No. 5) and Final Response (CRD Docket No. 19). Therefore, I find that Respondent violated the regulations on December 11, 2018. 21 C.F.R. § 1140.14(a)(1); 21 C.F.R. § 1140.14(a)(2)(i). Respondent had four violations from the previous civil money penalty action and two additional violations on December 11, 2018. Therefore, Respondent's actions constitute six violations of law within a 48-month period.

II. Civil Money Penalty

I have found that Respondent committed six violations of the Act and its implementing regulations within a 48-month period. The FDA, and its CTP, may seek civil money penalties from any person who violates the Act's requirements as they relate to the sale of tobacco products. 21 U.S.C. § 333(f)(9). In its complaint, CTP sought to impose the maximum penalty amount, $11,410, against Respondent. Complaint ¶ 1. Accordingly, I now turn to whether an $11,410 civil money penalty is appropriate.

When determining the amount of a civil money penalty, I am required to take into account "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); see also 21 C.F.R. § 17.34.

i. Nature, Circumstances, Extent, and Gravity of the Violations

Respondent has failed to comply with the Act and its implementing regulations on six occasions. The repeated inability of Respondent to comply with federal tobacco regulations is serious in nature and the civil money penalty amount should be set accordingly.

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ii. Respondent's Ability to Pay and Effect on Ability to Do Business

Respondent's owner, Daniel Koshy, argued that he does not have the money to pay the full penalty amount due to low annual income and significant loan debt. Answer (CRD Docket No. 5) at 1; Respondent's Final Response (CRD Docket No. 19) at 4. To demonstrate his inability to pay the $11,410 civil money penalty sought by CTP, Respondent submitted a copy of his 2018 Schedule C federal income tax form (CRD Docket No. 5, at 4), and a copy of the balance statement from one of his bank loans (CRD Docket No. 19, at 9). First and foremost, while this documentation is included in the administrative record, Respondent's submissions were not identified by Respondent as exhibits or admitted as evidence into the record.2 Therefore, I will not consider such documentation as evidence in support of Respondent's position. However, that being said, I will note that the submitted documentation shows only Respondent's liabilities and do not provide a complete economic snapshot as it pertains to his inability to pay the CMP sought by CTP. For an informed deliberation on this issue, documentation of Respondent's assets as well as his liabilities should have been provided for my consideration. In the absence of any supportive evidence, I do not find Respondent's contention of inability to pay the penalty amount to be credible.

iii. History of Prior Violations

As noted, Respondent has six times violated the prohibition against selling tobacco products to persons younger than 18 years of age, and failing to verify, by means of photo identification containing a purchaser's date of birth, that no tobacco product purchasers are younger than 18 years of age. 21 C.F.R. § 1140.14(a)(1); 21 C.F.R § 1140.14(a)(2)(i). Respondent's continued unwillingness or inability to comply with the federal tobacco regulations calls for a more severe penalty.

iv. Degree of Culpability

Respondent is culpable for six violations of the Act and its implementing regulations.

v. Matters as Justice May Require/Additional Mitigating Factors

Mitigation is an affirmative defense for which Respondent bears the burden of proof. Respondent must prove any affirmative defenses and any mitigating factors by a

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preponderance of the evidence. 21 C.F.R. § 17.33(c). Respondent has not presented any mitigating factors that have been admitted into evidence.

vi. Penalty

Based on the foregoing reasoning, I find a penalty amount of $11,410 to be appropriate under 21 U.S.C. §§ 303(f)(5)(B) and 333(f)(9).

Conclusion

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $11,410 against Respondent, Daniel Koshy d/b/a 7-Eleven 11321, for six violations of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R. pt. 1140, within a 48-month period. Pursuant to 21 C.F.R. § 17.11(b), this order becomes final and binding upon both parties after 30 days of the date of its issuance.

1. CTP did not include violations that occurred outside the relevant timeframe for this complaint. The violation previously alleged on April 2, 2014 falls outside of the timeframe in the instant action.
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2. During the October 31, 2019 pre-hearing telephone conference, I noted the absence of Respondent's pre-hearing submission from the record. "Mr. Koshy affirmed that there were no witnesses or exhibits to be presented by Respondent . . . ."  See November 4, 2019 Order Following Pre-Hearing Conference (CRD Docket No. 18) at 2 (emphasis added).
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