Farmers Cooperative Company d/b/a Farmers Cooperative, DAB TB4918 (2020)

INITIAL DECISION

The Food and Drug Administration's Center for Tobacco Products (CTP) seeks to impose an $11,410 civil money penalty against Respondent, Farmers Cooperative Company d/b/a Farmers Cooperative, 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 seven times within a 48-month period. Specifically, CTP alleges that Respondent violated the Act when it sold regulated tobacco products to minors and failed to verify, by means of photo identification containing a date of birth, that purchasers were 18 years of age or older. For the reasons discussed below, I find Respondent liable for the violations alleged in the complaint, but conclude that reducing the civil money penalty from $11,410 to $8,910, is appropriate.

I. Background

CTP began this case by serving an administrative complaint on Respondent at its establishment located at 1398 Center Road, Wright, Minnesota 55798, and by filing a

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copy of the complaint with the Food and Drug Administration's (FDA) Division of Dockets Management. Respondent timely filed an Answer to CTP's complaint. On July 30, 2019, I issued an Acknowledgement and Pre-Hearing Order (APHO) in which I set a schedule of pre-hearing exchanges and deadlines for submissions.

CTP timely filed its pre-hearing exchange, consisting of a pre-hearing brief, list of proposed witnesses and exhibits, and 15 exhibits (CTP Exs. 1-15), and the written direct testimony of two proposed witnesses, CTP's Senior Regulatory Counsel Laurie Sternberg (CTP Ex. 5) and FDA-commissioned Inspector Christopher Donald (CTP Ex. 6). Respondent did not file a pre-hearing exchange, submit evidence, or propose any witnesses.

On December 19, 2019, I conducted a pre-hearing conference. During the prehearing conference, Respondent asked that I consider seven pages of documentary evidence Respondent submitted with its answer. Counsel for CTP consented to the late submission. I identified the proposed evidence as Respondent's Exhibits 1 through 7 (Docket Entry No. 3 at 4-10). As neither party objected to the admission of the opposing party's proposed evidence, I admitted CTP Exhibits 1-15 and Respondent's Exhibits 1-7 into evidence. Respondent declined to cross-examine either of CTP's proposed witnesses. The parties waived their right to a hearing and consented to a decision on the written record.

I permitted the parties to file final briefs. Respondent timely submitted its informal brief (R. Final Br.). CTP had submitted a brief in the submitted exchange materials and did not file any additional argument by the final briefing deadline.

II. Issues

(1) Whether Respondent sold a regulated tobacco product to a minor and failed to verify the age of the purchaser on April 8, 2019, in violation of 21 C.F.R. § 1140.14(a)(1) and (a)(2)(i); and if so,
(2) Whether the civil money penalty amount of $11,410 is appropriate.

III. Analysis, Findings of Fact, and Conclusions of Law

A. Violations

CTP seeks a civil money penalty 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). 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. § 331(f)(9).

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The sale of a regulated tobacco product to an individual under the age of 18 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 regulated tobacco product purchaser is younger than 18 years of age is also a violation of implementing regulations. 21 C.F.R. § 1140.14(a)(2)(i).

1. Prior Violations

This is the third civil money penalty action brought against Respondent for violating the Act's requirements. CTP Exs. 1, 3; Complaint ¶ 9; see CRD Docket Numbers T-17-3814, T-17-6555. The prior actions alleged Respondent sold a regulated tobacco product to a minor on January 4, 2016, December 27, 2016, and August 23, 2017, in violation of 21 C.F.R. § 1140.14(a)(1); and on the same dates, failed to verify photographic identification of the regulated tobacco product purchaser in violation of 21 C.F.R. § 1140.14(a)(2)(i).

Both prior actions resulted in settlement and concluded after Respondent admitted to at least five violations1 of the regulations and paid an agreed upon penalty. CTP Exs. 2, 4. In settlement, Respondent expressly waived its right to contest these violations in subsequent actions. Id. These violations are now administratively final.

2. Current Violations

I now turn to whether the remaining allegations in the complaint are true, and, if so, whether Respondent's actions constitute a violation of law. 21 C.F.R. § 17.45(b). Specifically, I must determine whether on April 8, 2019, at approximately 12:08 PM, Respondent: sold a package of Marlboro cigarettes to a minor and failed to verify the age of the purchaser by means of photographic identification containing the bearer's date of birth.

CTP has the burden of proving Respondent's liability by a preponderance of the evidence. 21 C.F.R. § 17.33(b). It is Respondent's burden to prove any affirmative defenses also by a preponderance of the evidence. 21 C.F.R. § 17.33(c). As detailed below, I find that based on the evidence of record, it is more likely than not that, on the date and time in question, Respondent sold regulated tobacco products to a minor and failed to verify the minor's identification before the sale in violation of 21 C.F.R. § 1140.14(a)(1) and (a)(2)(i).

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CTP's case against Respondent rests on the testimony of Inspector Christopher Donald, who conducted the inspection at issue, and supported by corroborating evidence including contemporaneous notes and photographs. CTP Exs. 5-11, 15. Inspector Donald is an FDA-commissioned officer with the state of Minnesota, whose duties include determining whether retail outlets unlawfully sell regulated tobacco products to minors through undercover buy inspections. CTP Ex. 6 at 1-2. Inspector Donald testified that he conducted such an inspection of Respondent's establishment on April 8, 2019, at approximately 12:08 PM, during which he observed Respondent's clerk sell a package of cigarettes to the undercover minor. Id. at 2-3. He observed the minor did not present any identification prior to the sale. Id. at 3.

Inspector Donald testified that, prior to the inspection at issue, he verified that the minor did not carry his or her birth certificate that included the minor's true age. Inspector Donald also verified that the minor did not have any tobacco products in the minor's possession prior to entering the store. CTP Ex. 6 at 2-3. Inspector Donald parked his car near Respondent's establishment, where he and the minor exited the vehicle. Id. at 3. The inspector entered Respondent's establishment and the minor followed thereafter. Id. Inspector Donald testified that he took a position in the store behind the minor from which he had a clear, unobstructed view of the sales counter and the minor. Id. From this location, Inspector Donald observed the minor purchase a package of cigarettes from an employee at the establishment. Id. Additionally, Inspector Donald observed that the minor did not present any identification to the employee prior to the sale and that the employee did not provide the minor a sales receipt following the transaction. Id.

Inspector Donald testified that after the purchase, he and the minor returned to the vehicle, where the minor immediately handed the inspector the package of cigarettes. CTP Ex. 6 at 3. Inspector Donald identified that package as Marlboro cigarettes. After moving to a nearby safe location, Inspector Donald testified that he labeled the cigarettes as evidence, photographed all the panels of the package, and processed the evidence in accordance with standard procedures. Id. Inspector Donald also contemporaneously recorded the inspection in the FDA's Tobacco Inspection Management System (TIMS) and created a Narrative Report. Id. CTP corroborated Inspector Donald's testimony by offering as evidence photographs that the inspector made of the cigarettes on the date in question. CTP Exs. 10-11. CTP further corroborated Inspector Donald's account by submitting a copy of his contemporaneously recorded TIMS report and Narrative Report. CTP Exs. 7-8.

I found Inspector Donald's testimony to be honest and believable. Inspector Donald testified credibly and comprehensively about his observations during the April 8, 2019, inspection where he observed Respondent's staff sell a package of cigarettes to a minor and that prior to the purchase, the minor did not present identification. CTP Ex. 6 at 2-3. His testimony was supported by contemporaneous records and supporting evidence. CTP Exs. 7-11.

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Respondent concedes that CTP has shown that the violations asserted in the complaint occurred. R. Final Br. at 2. It is Respondent's position that it should not be held responsible for the actions of its staff. Specifically, Respondent argues that the violations "were committed by part time employees who had little invested" in Respondent's establishment. Id. at 1. Respondent states that, due to financial restraints, these employees were unsupervised, and that the inspector must be targeting the store at times when it is known that only part-time employees will be working without supervision. Respondent additionally states that there are signs posted that identification must be provided to purchase tobacco. Id. at 1-2.

Respondent's arguments are irrelevant to the issue of whether Respondent is responsible for an improper sale made by its employee. An employee of Respondent, performing the duties of their employment, made an improper sale and did not ask for identification prior to making the sale. Respondent is responsible for such actions of its employee. When a retailer chooses to sell an inherently dangerous regulated tobacco product, that retailer must abide by those regulations. Furthermore, posting signage does not indemnify a business from liability. It may provide other benefit to the store, such as tempering customers who are upset when asked to present photographic identification, but it does not shelter the retailer from responsibility when its employee fails to do so.

CTP has the burden of proving Respondent's liability by a preponderance of the evidence. 21 C.F.R. § 17.33. I find that CTP has provided sufficient evidence to support its allegation that Respondent sold regulated tobacco products to a minor and failed to verify that the minor was of sufficient age through photographic identification on April 8, 2019, in violation of 21 C.F.R. § 1140.14(a)(1) and 1140.14(a)(2)(i).

The facts, as outlined above, establish that Respondent's actions constitute violations of law, and I conclude that Respondent is liable under the Act. Accordingly, CTP is entitled to a civil money penalty from Respondent. 21 U.S.C. § 333(f)(9).

B. Civil Money Penalty

I have found that Respondent committed at least seven violations of the Act and its implementing regulations within a 48-month period. In its Complaint, CTP sought the maximum penalty amount, $11,410, against Respondent. Complaint ¶ 1. Respondent asks that I lower the penalty to a nominal amount. R. Final Br. at 2- 4. Accordingly, I now turn to whether an $11,410 civil money penalty is appropriate.

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1. Determining Amount of Civil Money Penalty

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.

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

I found that Respondent committed four violations for selling regulated tobacco products to minors, and four violations for failing to verify, by means of photo identification containing a date of birth, that the purchaser was 18 years of age or older. Each violation was serious because it contravened federal laws enacted to protect minors from the adverse health effects associated with tobacco use. 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.

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

Respondent asserts that the $11,410 penalty sought "almost certainly lead to the closing" of the establishment (R. Final Br. at 4) and submits income statements for years ending May 31, 2017 (R. Ex. 6), May 31, 2018 (R. Ex. 6), and May 31, 2019 (R. Ex. 7), in support of its position. However, Respondent has not presented evidence sufficient to demonstrate that it does not have the ability to pay the civil money penalty sought.

c. History of Prior Violations

The current action is the third civil money penalty action that CTP has brought against Respondent. Respondent sold regulated tobacco products to minors on January 4, 2016, December 27, 2016, August 23, 2017, and April 8, 2019. On the same dates, Respondent failed to verify that the purchaser was over 18 years of age through photographic identification. Respondent's continued unwillingness or inability to comply with the federal tobacco regulations calls for a more severe penalty.

d. Degree of Culpability

I find Respondent fully culpable for all violations of the Act and its implementing regulations.

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e. Other Matters as Justice May Require

Sales of tobacco products to minors are unlawful because younger individuals are more susceptible to making decisions that will endanger their lives down the road. Retailers who choose to sell such a highly dangerous and addictive product bear a heavy burden to assure that they make their sales in compliance with law.

In this case, Respondent has taken steps to help assure compliance in the future. Specifically, Respondent has submitted evidence that it purchased a new Point of Sale (POS) system. The POS system, while not bought primarily for tobacco sales, does require the sales clerk to enter a date of birth prior to a sale of tobacco products and reduce the likelihood of a sale of tobacco products to minors in the future. See R. Ex. 4.

Accordingly, I conclude that a portion of the cost of that system, in the amount of $2,500, is an appropriate reduction of the civil money penalty.

2. Penalty

Based on the foregoing reasoning, I find a penalty amount of $8,910 appropriate under 21 U.S.C. § 333(f)(5)(B) and (f)(9).

IV. Conclusion

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $8,910 against Respondent, Farmers Cooperative Company d/b/a Farmers Cooperative, for at least seven violations of 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, within a 48-month period. Pursuant to 21 C.F.R. § 17.45(d), this order becomes final and binding upon both parties after 30 days of the date of its issuance.

1. In accordance with FDA guidance, CTP counted the violations identified during the initial inspection as a single violation, and subsequent violations individually. See Orton Motor, Inc. d/b/a Orton's Bagley v. U.S. Dep't of Health & Human Servs., 884 F.3d 1205 (D.C. Cir. 2018).
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